Q4 2021 Marqeta Inc Earnings Call

Good afternoon, ladies and gentlemen, thank you for standing by and welcome to the Markel <unk> fourth quarter 2021 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 Stacey Feinerman.

This 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.

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 quarterly period ended September 32021, and our subsequent periodic filings with the SEC.

<unk>.

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.

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 the Investor Relations website.

Hosting todays call are Jason Gardner, Mark had its founder and CEO and Mike Miller pitch, Mark Harris, Chief Financial Officer.

I'd like to turn the call over to Jason to begin.

Thank you Stacey. Thank you everyone for joining us for Mark has fourth quarter of 2021 earnings call. We are excited to share our strong fourth quarter and full year results as well as our plans for 2022.

I'd like to begin with our fourth quarter results. We ended the year in a position of strength with financial results that serve as a true reflection of everything <unk> accomplished in 2021 as.

As a result of our strong execution and continued customer focus of all of our tenants across the world.

Total processing volume or PPV with $33 billion in the fourth quarter of <unk>.

76% increase compared to the same quarter of 2020 and acceleration from the 60% growth rate in the third quarter. This represents the achievement of a significant milestone in December we saw our <unk> for the first year crossed the 100 billion dollar threshold for the first time.

As we processed $111 billion for all of 2021.

This demonstrates our ability to provide modern infrastructure that enables fast growing companies to deliver innovative high volume car programs globally.

Our net revenue of $155 million in the quarter was 76% increase from the previous year, representing an acceleration from the 56% growth rate in the third quarter. We saw significant outperformance from the buy now pay later vertical as this mode of payment was extreme.

Really popular during the holidays, we witnessed another decline in our block concentration from 68% of total net revenue in the third quarter to 63% in the fourth quarter of 2021.

Our phenomenal fourth quarter is a testament to the outstanding growth Arcata has demonstrated over the last three years as our TPB grew over 400% from 2019 to 2021 much of this growth was fueled by digital commerce Disruptors that grew significantly due to shifts in consumer behavior during the pandemic.

Our platform and products helped make much of this growth possible, enabling our customers to offer experiences that have changed commerce in remarkable ways.

Our ability to help our customers scale successfully admit this unprecedented growth has earned us valuable trusts.

With 2022 underway, we are starting to see some stabilization regarding the pandemic. It is clear that the new commerce experiences like on demand delivery and find out pay later are here to stay and customers Trust in financial services. After by Neo banks is increasingly on par with our trust in typical financial.

<unk> These commerce experiences play tube market strengths we.

We have already built trusted relationships with companies that have become household names like coroner and cash app that have a track record of expanding on our platform for the next set of Disruptors looking for a trusted partner who can help them scale. This serves as a proof point importantly, we have a foothold into larger five.

Marcus by Goldman Sachs, JP, Morgan and now city that need a technology partner to deliver solutions consumers once as.

As we look forward to the remainder of 2022 remarkable growth we took part in during the pandemic required significant focus to help our customers scale as a result, our newer solutions like credit and digital banking did not get as much focus as we would have liked because of how fast our existing customers. We're growing we began to see.

Ignicolist ramp up hiring for these efforts towards the latter part of 2021, our approach in 2022 will be more balanced between fueling our existing customers success and building for the future. Therefore, our focus areas in 2022 will be threefold.

We will continue to fuel our customer's success, while we are focused on broadening our base our existing customers still represent market as core and a significant source of future growth. These customers can tap into our moderate card issuing expertise that allows them to build customized.

In contemporary payment solutions, when paired with our platforms agility and scale. Our dollar based net revenue retention rate of 175% for 2021 demonstrates how our customers growing our platform, let me share two examples.

After a competitive process <unk>, a bill Dot Com company began using <unk> in late 2020, Dv wasn't hyper growth mode and it was important for the company to have a card issuing partner that can help them build best in class products and do so at scale.

Once on board the market a platform did he was able to ramp quickly as a result did he rapidly added new customers to their program and extended their service to even more businesses and cardholders.

<unk> is one of the reasons, we have seen the expense management vertical gain such significant traction approaching $2 billion in PPV. This quarter. In contrast, the second was insignificant a year ago.

After launching with Florida, and the U S in 2018 and supporting its launch in Australia, and New Zealand in 2020 in 2021 corner chose to extend its partnership with Mark headed into 13, New European markets last November .

Florida is a digital disruptor experiencing tremendous market traction in the last few years and marchetta has provided vital support to their growth trajectory globally.

As a result of their success on our platform in the U S and APAC. The company recently expanded its partnership with <unk> by moving over volume from another provider.

I have seen firsthand, how they've been able to quickly make program improvements are launched new card products, often with a complex market and environment working with Mark This expansion, especially in European markets for corner has a long track record of success is a testament to the maturity of our European.

<unk> business and the strength of our partnership.

We will continue to build a resilient and reliable global platform.

2021, PPV of $111 billion represents more than 50 times growth in four years, however to truly connect the world through global money movement and unlock the potential in front of US we must be thinking more extensively about the breadth and depth of what our.

Our platform can support eight.

Eight months into his role our CTO Randy churn has already made significant strides towards building our scale and resiliency to handle the next wave of growth.

Proactive capacity planning with our customers organizing our internal teams around a mandate to scale and new key infrastructure developments have huge impacts on the degree to which we can scale car program.

We expanded our platform globally by adding local network certification and card issuance capabilities in three new markets, the Philippines, Thailand, and Singapore, the Philippines, and Thailand are large high growth markets for digital payments adoption is still well below 50% and younger populations urbanize.

<unk> steadily.

Some of our credit platform is enabled in 39 countries with more countries to come later this year. The geographic expansion is an integral part of our roadmap as we want to allow our customers to build once and launch anywhere.

We will broaden our business in three ways the customers we serve the solutions, we offer and the verticals we support.

To truly diversify our business, we need to target large customers focusing on additional credit.

Digital banking and money movement offerings.

Established financial institutions represent a large portion of the total issuer processing volume worldwide.

While making significant inroads will likely take time these customers are essential to achieving our goals of connecting the world through global money movement, and achieving durable long term growth.

We are thrilled about our new partnership with Citi and their commercial cards team.

He plans to use market is unique to <unk> as a service capabilities the power mobile wallet provisioning and more than 40 markets worldwide.

This modern card issuing platform will integrate with city's existing systems and enable cities global commercial cardholder base to seamlessly provision corporate plastic cards and virtual cards into mobile wallets city recognized as Mark had his leadership and car <unk> and the impact this can have on their commercial card holders.

Especially against the backdrop of rapid change in payment preferences post pandemic, we see this as an opening step of what we hope is a long and fruitful partnerships.

As discussed last quarter, we see partnerships as an efficient way to broaden our product offerings. Our partnership with the first National Bank of Omaha F&B expands.

<unk> expands our credit ecosystem allows market as customers to launch in design and embedded credit card program quickly.

By partnering with F&B BOE, we combined <unk> decades of deep experience and credit card programs with the flexibility and control of Mark Hurd as modern card issuing platform.

Similar to our partnership with reserve F&B will handle program management capabilities at the same time, our Kettle will act as the issuer processor, bringing the technology that allows customers to create customized card experiences lacking in credit.

Our recent partnership with flat underscores our desire to move beyond moderate card issuing into enabling global money movement.

This partnership will simplify ACTH transfers, allowing customers to seamlessly and securely authenticate their bank account and fund their accounts to power more immediate cart shopping.

As a result developers building on the Mark had a platform quickly and easily authenticate users bank accounts versus the traditional cumbersome process.

<unk> worked with over 12000 financial institutions. This scale combined with its commitment to information security makes him a perfect partner from our Canada.

I am excited about our progress in 2021.

Shelly how we ended the year on such a solid foundation with over $500 million in yearly revenue. We are capitalizing on the changes in consumer preferences to ensure the performance of the business for years to come Mike will touch on our growth and additional investment in his remarks, which.

It brings me to the vital role of CFO .

I wanted to take a moment to recognize the work of our outgoing CFO Trophy trip led Marquette us through a very successful IPO and two major fundraising rounds as partnership and friendship have been important to me as a CEO and our company as a whole I wish him every success for his next chapter I am also thrilled with.

Welcome Mike Miller, as our new incoming CFO will Shepherd us into the next phase of our growth with that I will turn the call over to Mike to discuss our results and outlook for 2022.

Thank you, Jason although I know many of you on the call today I'm excited to speak with you in my new capacity as a CFO Mark after joining the company two weeks ago, Walmart, Canada has already reached significant scale with over $110 billion in ppb. In 2021, there is still a massive opportunity to support innovative partners, who are meeting evolving consumer needs.

And digital Commerce and global money movement.

I look forward to partnering with Jason the executive team and all of our employees to help the disruptor scale and those that scale become more disruptive.

<unk> delivered a very strong quarter to close out our first fiscal year as a public company with both TBD and net revenue growth accelerating to 76%.

Net revenue of $155 million and adjusted EBITDA positive $1 million were meaningfully better than we expected primarily for two reasons.

One stronger holiday and overall consumer spending drove the majority of the upside benefiting that the NPL and digital banking verticals in particular.

And two higher card network incentives as a result of reaching a new performance tier.

So let's dive into the Q4, TPB, which was $33 billion growing 76% accelerating 16 points from Q3 <unk>.

The NPL benefited from the increased consumer spend during the holiday season growing over 50% sequentially versus Q3.

Digital banking growth accelerated 15 points versus Q3 in line with the overall TBD acceleration.

Newer clients and growing verticals increased their contribution to our growth as we continue to diversify our customer base.

Our top five customers continued to perform well with TPG growth over 50% in Q4, while the remaining customers grew over 200%.

As further evidence of our growing diversification newer customers, who joined our platform. Since 2019 grew three times faster than customers, who joined the platform prior to 2019.

The growth of these newer customers and outperformance from the NPL vertical or a big reason why we saw another significant decline in our top customer concentration, which Jason highlighted earlier.

Net revenue growth of 76% was consistent with TPG growth and accelerated two points versus Q3.

The net revenue take rate declined less than one day versus Q3 purely due to changes in the mix of volume in fact Q4 take rate improved versus Q3 within several of our large verticals.

Gross profit grew 108% on a year over year basis over 30 points faster than revenue.

Gross profit margin of 49% improved four points versus Q3 for two reasons each contributing approximately two points.

First incentive.

We amended one of our card network incentive agreements in Q2, and we hit a new volumes here in Q4 that resulted in a higher incentive being applied to volume over the past three quarters.

Therefore, the three quarter catch up benefit was booked in Q4, which may be impacted more significant these.

These incentive agreements are a testament to our strategic relationships and strong alignment with network partners as well as the powerful operating leverage that can be achieved in our business as we scale.

The second factor was volume mix the holiday season had a <unk> mix that provided more favorable gross profit.

Our GAAP net loss was $37 million driven mostly by continued investment in people and technology that are fueling the growth of our business and the scaling of our platform.

On a non-GAAP basis, adjusted EBITDA for the quarter was positive $1 million, which exceeded our expectations by roughly $10 million entirely due to higher gross profit.

To quickly summarize full year 2021 performance TVD of 111 billion in net revenue of $517 million delivered robust growth of 85% and 78% respectively.

Gross profit grew 97% with a gross profit margin of 45%, which is on the high end of our long term target range of 40% to 45% due to improved scale and favorable network incentives.

Adjusted EBITDA was negative $13 million equating to a negative 2% adjusted EBITDA margin. We ended the year with over $1 7 billion in available liquidity in cash and marketable securities.

Now, let me move on to 2022.

First let me share some of the key assumptions in forming our Q1 guidance that was noted in our press release.

We expect Q1 net revenue growth to be between 48% to 50%.

Take rates should be relatively similar to last quarter. Therefore, the lower growth compared to Q4 'twenty one is related to volume growth, mostly due to two factors.

Q1 is facing tougher comps due to the government stimulus in the first quarter of 2021 and to a much smaller degree the beginning of the ramp in the NPL volume.

Our sequential net revenue growth last year from Q4, <unk> to Q1, 'twenty, one was 22% compared to an average of 15% growth from Q4 to Q1 in 2019 and 2020.

This tough comp is partially offset by the tax season, returning to April this year, where the benefits of tax refunds are split across Q1, and Q2 versus last year. When the benefit was mostly in Q2.

Also January got off to a bit of a slower start omicron likely impacted volume in many of our verticals with the exception of on demand delivery, which drive there as more people stay at home.

We did pick up in February as the Omicron wave passed with February volume comfortably exceeding January despite having three fewer days.

Q1, gross profit margin should be in the 43% to 44% range, which is consistent with the first three quarters of 2021.

This is lower than Q4, 'twenty, one which benefited from the catch up incentives and favorable volume mix during the holiday season.

We expect the Q1 adjusted EBITDA margin to be negative, 89% due to elevated investment levels to drive long term sustainably high net revenue growth.

I will talk more about our investment priorities for 2022 in a minute.

Amid the current economic uncertainty I did want to share some preliminary thoughts on 2022, and we'll plan to share more next quarter onetime completely settled in here at Markel.

It remains to be seen whether Russia's invasion of Ukraine will have any broader implications that may impact our business.

Similar to previous years, we expect the majority of our growth to come from our largest customers, which are spread across the digital banking on demand delivery, the NPL and expense management verticals.

Our newer customers are growing several multiples faster than our top customers and therefore growing in share, but even our largest customers keep growing at a strong pace as evidenced by our high revenue retention of 175% in 2021.

Our business massively expanded during COVID-19 .

<unk> 2021, net revenue was more than three five times 2019 net revenue.

<unk> accelerated consumer adoption and usage of newer commerce experiences such as on demand delivery and the NPL, where mark Herder was an early innovator and market leader supporting many of the top companies in those categories.

The increased shift to digital payments. During Covid has also led to increases in consumers using digital bank for Neo bank offerings, which tend to provide great digital user experiences.

This is a market where <unk> established early leadership.

As a result, we are growing off a much larger base of business in 2022.

The pandemic recovery is now well underway and consumers new commerce habits are sticking and stabilizing.

Therefore, we expect our net revenue growth to be at least mid <unk> for full year 2022.

To put the change in scale during the pandemic into context, let me share. One fact, we expect our year over year revenue growth in dollars in 2022 to be larger than our total net revenue just three years ago in 2019.

Systems with the scaling over time net revenue will grow the fastest in Q1 stepped down several points sequentially in both Q2 and Q3 before a larger step down in Q4 as we lap the incredible quarter. We just finished.

Also note that blocks acquisition of after pay who is also a meaningful client for US means we don't expect to make progress on our block concentration as we as we add after pay performance to block starting in Q1 2022.

If we were to normalize for the acquisition and combine the companies for past years, we do expect a minor reduction in our concentration.

We expect 2022 TBD to grow faster than net revenue at over 40% with take rates declining slightly on a year over year basis on par with the decline in 2021 as customers who grow on our platform enjoy a better pricing.

This was partially offset within gross profit by achieving better pricing from our card network and bank partners.

We expect our gross profit margin to be in the low to mid forties.

<unk> with our long term guidance of 40% to 45% on an annual basis.

Network incentives can be inconsistent as we just saw in Q4 'twenty. One so let me share a few more details to help with the quarterly cadence.

Our incentives operate on a contract here that runs from April through March, which means volume tiers reset in Q2 of each year.

This means Q2 will typically be a lower gross profit margin quarter generally at the bottom of our long term range, while Q3 into Q1 of the following year typically benefit from growing cumulative volumes.

If we hit certain volume milestones in an individual quarter can be above the long term range.

Based on our client pipeline and because of the time it takes to onboard and ramp new clients, we need to invest in advance of the revenue to best position us for success. Therefore, we expect the adjusted EBITDA margin to be negative high single digits in 2022, and relatively consistent with each quarter, except Q2 will be a few points lower due to the lower gross.

Profit margin.

While the investments we make in 2022 will result in negative EBITDA in the short term.

We are looking to achieve sustainably rapid growth, while also being committed to our path to profitability.

In the long run we remain confident the business will operate at a 20% plus adjusted EBITDA margin. Once we have captured more of the immense market opportunity.

We began stepping up our level of investment as we progress through 2021 as it became clear our revenue and gross profit were scaling rapidly.

We plan to stay on that investment cadence through 2022.

The investment is mostly directed towards technology and product primarily through hiring in those areas as well as increasing software and services to support our platform.

The primary focus of the investment is new capabilities in digital banking and credit international expansion and platform scale.

Once the volume is captured our unit economics are very attractive due to low marginal operating costs with the ability to generate positive EBITDA as we did in this most recent quarter.

To close Marchetta, just completed a fantastic year, surpassing $500 million and net revenue looking ahead, we have a wealth of opportunities ahead of us, including new products geographies and verticals all while our existing customers thrive on our platform. We believe our differentiated offering will continue to be the destination for disruptors as digital commerce and global money.

<unk> rapidly evolve fueling strong growth for many years to come.

I will now turn the call back over to Stacy and the operator for questions.

At this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate.

Indicate your line is in the question queue.

You May press star two if you'd like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please while we poll for questions.

Our first question is from Sanjay suck Ronny with K BW. Please proceed with your question.

Thanks, Good morning, sorry, good afternoon, and congrats Mike.

Maybe a question about the investments in tech and product as we think about.

The different channels that Mark hit it can grow into can you help us think about where internationally that will come from.

Yes. Thank you for your question Sanjay I mean, we've as we've talked about Mark modern card issue becomes a global phenomenon. We're actively working to attack the large addressable market. A couple of things that we're doing is I think number one is we're constantly assessing where our customers are looking to launch.

What markets they want to launch in and hold the most immediate potential for our technology. So as we've talked about we earned 39 countries today.

We recently announced a Singapore, Thailand, the Philippines and we.

We'll look to set up an APAC hub probably in Singapore.

As we go international we found that bought our card issuing is a global phenomenon and if we talk about what a rallying cry. This year is for market is to connect the world through global money movement, our customers truly come to us to unlock value not just here in the U S, Canada, Europe and Asia, but in many countries.

It is in continents, where theyre looking to really bring their business and we will continue to focus on the verticals that have done really well for us like buy now pay later digital banking expense management and many others. So we're really excited about the process. We've made to date as Mike talked about we did $517 million of net revenue, which is a solid solid foundation.

And look forward to updating you with new market announcements international partnerships in future quarters.

Great and just a follow up on the NPL obviously.

<unk> seen tremendous growth for you guys and as an industry, but as we go into 2022 it is difficult comps.

Theres, probably a little bit more competition on the margin for those types of loans from the incumbents and perhaps even shifting merchant preferences I guess, when we think about the growth potential of the Npls. Specifically for you guys is it that youre just expanding inside your existing relationships or where should we expect some pressure on growth.

So when we started we started working in buy now pay later about five years ago. When I was at money 2020 in Europe . We ran what this company Internet, Florida, which today is a household name, but at the time, we really don't know.

What they specifically did we heard this concept called buy now pay later, we what we do and we've been really successful at this is we've actually built purpose for specific vertical so now Florida.

Affirm schedule, which analysis by ZIP after pay which is now part of block it really speaks to the strength and competitive position for marketing platform. So I'll start there.

I don't pay later continues to be an important and significant growth driver for Marquette at well over 10% of PPV and some other highlights.

A launch partner for Mastercard, New installments program, we're working with Cecil and their deal with target the amount partnership bringing buy now pay later to <unk>, we're powering figures new fig figure pay product.

Which is a digital payments account with native be NPL functionality. So what we're finding is as a couple of growth growth vectors, there's international which we're enabling them to take advantage of more and more merchants on the platform.

New obviously geographies new technologies, we see where now customers are getting into <unk>, they're getting to actual physical card products and are coming to market to do that so I wouldn't look at buy now pay later functionality in it.

Single focus is adjust virtual cards, there's many different car types were looking to build on our platform as they begin to diversify their businesses in the coming quarters.

Great. Thank you very much.

Our next question is from Mike <unk> with Goldman Sachs. Please proceed with your question.

Hey, good afternoon. Thank you very much for the question.

I appreciate all the detail when you talked about PPD performance by vertical I was just wondering if you could talk a little bit about some of the assumptions as you think about the 40% PPV growth in 2022.

Any any qualitative or quantitative detail will be very helpful. Thank you.

Yes. Thank you for your question.

It really is.

More of the same just with tougher comparisons obviously, even Sunday just pointed out in the previous question I mean, the NPL had explosive growth during 2021 as the base is bigger the growth will slow a little bit, but but we still.

I think most of our growth is going to be fueled by the primary use cases with everything roughly comparable to 2021 with just maybe a little bit of a slower rate and thats in digital banking the NPL expense management.

Being some of the big ones. So I would say the mix of the business, we're not expecting to fundamentally change a lot. It just.

Tougher comps spring in the growth rate down a little bit.

Great. Thank you that's very helpful.

I just wanted to ask a housekeeping question.

Mix benefit to gross margins in the fourth quarter could you just give a little bit more detail around that.

Should we see.

A sequential improvement from that mix every fourth quarter. Thank you.

Yes, I mean I guess it's.

Hard to say to predict the future exactly so I don't know if I can answer the second part of your question, but if you think about interchange dynamics right.

Predicated on all different scenarios in terms of what type of card is being used is it consumer commercial credit debit prepaid.

What type of merchant is being used at what's the size of the ticket. So there is a lot of those factors will ultimately end up impacting whats the rate that applies and then and then on top of that we have different types of agreements with our customers in terms of.

How do we work with them in terms of how much we share with them versus how much is kept here at <unk>. So those are kind of all the different levers and variables that play into that number and so what happens what happened at least in this case and the holiday season is really the the type of spend in terms of where it was directed in terms of merchants.

And the types of products that were used is what drove the benefit for us.

Great. Thank you for all the lots really appreciate it.

Yes.

Our next question is from Ramsey El <unk> with Barclays. Please proceed with your question Hi, Thanks, So much for taking my question. This evening I wanted to ask about the city partnership.

And if you could describe sort of the path from a project like this kind of into a deeper issuance relationship at a large bank likes like city, what challenges kind of stand in your way to sort of moving a little deeper and to an organization like this.

Okay. Thanks Ramsey, yes.

Winning the business of large <unk> is a major strategic initiative for <unk> and as we've talked about in the past I mean, we really have this DNA DNA match with Commerce Disruptors. We then went into large digital banks like cash app and linear in France.

Then went to large tech giants like Uber, and Google and we always have been focusing on sort of a long game within within larger five so.

As we talked about in my opening remarks, we're excited to announce the city deal in their commercial car team. So what theyre doing is in 40 markets.

Using our <unk> as a service capabilities the power of the mobile wallet provisioning.

And obviously city recognizes market is leadership in <unk> and we see this deal is really just the beginning of what we hope is a long term partnership.

Larger fights typically don't move fast nor do they make decisions quickly our girl with these program is truly is over time just to get a foot in the door and then expand our relationship as you referred to like more more issuance.

As we've seen these are these are very large from a technology perspective.

<unk> environments, so bringing us into that is something thats pretty significant for US and then we are there to really prove our relationship prove our technology prove our services. So we can expand throughout and beyond two organization as a service. So we help them in areas, where they can help them be more innovative and we want to see.

Value, where we're really adding to their business and obviously trusting us. So so while making inroads will take time. These customers are absolutely critical to achieving our goal of building out more durable long term growth.

Okay.

And on the higher card network incentive I'm just curious.

How should we think about the cadence of those types of opportunities to re negotiate those contracts, which is to say can you go back and kind of renegotiate. It at will as you grow or are there sort of fixed contract timeline that when those expire as the time that you go back and kind of take another bite at the Apple in terms of renegotiating those fees.

Yes, yes, I would say, it's it's a little bit of both right. You can't just there are contract terms and timeline. So it's not like you can go back at anytime you want, but but obviously as the business grows and you try to do more things together new card programs. There is always ways too.

To look for additional opportunities for US and then of course as the business. If it continues to grow as rapidly as we expect then you can end up doing early early renewals and changes as you see fit so I would say, it's a little bit of both.

There are obviously, a terms have been agreed to but there.

There is always ways too.

To look at those and as we get into new opportunities see if we can work.

Work the economics that we have with our both our network and bank partners.

Thanks, Mike I guess, you would know better than most so I appreciate your answers.

Indeed.

Yeah.

Our next question is from Dan <unk> with Mizuho. Please proceed with your question.

Hey.

Thanks, and congrats Mike.

Results.

Can you, maybe and sorry, if I missed this can you give us some more specifics I think last quarter you gave about.

The growth of the top five versus not top five from a TPP perspective.

Yes, so what we said was in terms of the.

The top five that they grew over 50% in Q4, and then the remaining customers grew over 200%.

And then just Dan any other way we also look at it in terms of as we're looking to diversify our customer base. The other one that we shared was just that our customers that have come onto the platform. Since 2019 grew more than three times faster than the customers who came on board prior to that time.

Got it so not as specific of a number is the last quarter right I think last quarter.

Sure.

Some number.

Until the time that over 200%.

Yes, I guess I can't specify but.

Yes, I guess, maybe I'll have to take the blame for that one and then Dan if we're being like okay perfect.

Yes, no worries no worries.

And then.

On on plan.

I mean, it looks like it's definitely helps you diversify away from the reliance on debit cards.

What are you.

What are you seeing in terms of the opportunity there with the partnership.

I'm, sorry, Dan which partnership.

Yes.

Does is plaid.

<unk> is working with 12000 banks and it makes it really easy for our customers to leverage Plaid through Mark had a platform to go build better experiences so far.

Our business is truly predicated on money and money out so money in is ACTH.

And money out as required which is predominantly where we make our revenue. So what this does is it actually shortening time to market significantly for customers to bring.

More dollars.

Into market as platform, so instead of a consumer knowing what their routing number an account number is now they just need their user name and password.

For their bank account to begin bringing money into market as ecosystem through our customers.

Got it.

Nice quarter, you get great results.

Thank you.

Yeah.

Our next question is from Tien Tsin Huang with Jpmorgan. Please proceed with your question.

Hey, everyone. Thanks, great results as well from my side and welcome to.

The call Mike Good to hear from me I just wanted to ask on the disability I know.

Sanjay and others asked about buy now pay later it seemed like that carried a lot of growth in 'twenty, one on demand delivery as it goes in 2020.

And a big contributor and what about in 'twenty, two what verticals do you think will step up and sort of carry the load here and I'm curious.

Banking as a service might rank as an example, four four.

Could you put any growth this year.

Yeah, I'll start with this heightened Jim you're going to see alright, good to hear from you Marc Hedrick customers cared deeply about global money movement, where they can really use specific tool to solve a business need to unlock value.

So as we think about the specific verticals like find out pay later expense management on demand delivery.

Digital banking I mean, these are the areas in the new verticals that we're looking to enter into where that methodology is the same so.

We wake up every morning here thinking about how do we connect the world through global money movement, and it really comes down to solving a business need us within a specific vertical we still see growth in our core verticals. Our business has been growing significantly over the years, Mike talked about some.

Specific data in regards to simple volume on our platform within these verticals and all.

Our methodology our strategy is really identify those verticals early bill.

Build technology, that's pretty unique and help our customers really really spread their wings. So if I look at the strategy for the year in.

In regards to where we're headed.

International So our customers looking to build more globally.

Adding new features and functionalities to specific verticals. So as they begin to grow and go into new areas of the market, we look to support them with our technology and then really fuel our existing customers success in areas like the Bill Dot Com acquisition of <unk>, making sure that Debbie has what they need.

And then connecting that strategy to build dot com. So as we look to broaden our market broaden our.

Our revenue opportunities.

Core areas that I've talked about its commerce, disruptors, where are the new verticals, we can enter and having a DNA match and seeing continued growth, especially.

Especially in buy now pay later as we saw in the fourth quarter.

When we go into digital banking more capabilities there.

Block for instance, cash App launched teen card last year.

And then going into large tech Giants and then the large <unk> as we begin to move up market, especially lending companies like city.

In regards to <unk> as a service and launching that in 40 markets.

We're really excited about more we're going to be talking about in the future around <unk>, but really focusing on the core four areas of where we've been able to really grow landing new verticals and then helping our customers expand.

Got it that's very clear adjacent so it's just my follow up to that maybe on the expense side and the hiring I think you are.

Wrote down here that you guys ramped up your hiring in credit and digital banking so.

Do you feel good about the prospects of hiring the people, especially internationally too.

To do what you just laid out from a people perspective.

Everyone's asking what war for talent.

A theme on there sorry.

Figured I'd ask it here too.

Yes. The war for talent is not just mark had a problem.

It's a global phenomenon, it's for all of Us and engineering talent, specifically and product talent specifically.

Its tough I mean, it's very competitive out in the market. So as we look to build more within credit I mean, 50% of consumers in United States hold credit cards credit card credit is pretty nascent in other parts of the world, but we're going to see it grow we know that.

Asia is going to become the largest card market in the world in the coming years. So we continue to focus and build and add new features and functions in these areas as I talked about around credit.

'twenty, one was really the year, where were investing pretty heavily within credit towards the end of the year. We saw just the scale of our customers and really investing into that but a lot more to come and credit a lot more to come in digital banking not from our banking as a service perspective, but more of all the core functionality is that build together.

So our customers are coming to us they want to build on our platform. Once and then build globally. So we look to add more and more features that they can take advantage of it within our platform.

Got it okay, well then thank you.

You're welcome.

Our next question is from Andrew Jeffrey with Truest. Please proceed with your question.

Hi, good afternoon.

You're taking a question.

Yeah.

I wanted to ask a little bit more.

The expansion and diversification of your business is really exciting.

But particularly when I when I look at block and the acquisition of after pay.

Can you talk a little bit about the potential for that customer actually and I'm talking about cash app in particular, accelerating and maybe even comprising a larger portion of your revenue in 'twenty, two and maybe into 'twenty. Three I just think if block is truly successful in knitting together, those two ecosystems and driving greater engagement it feels like.

That could be an underappreciated growth driver for mark kind of how youre thinking about that.

Yes, that's a good point.

As we've seen after pay is a great customer of Mark Hurd.

The acquisition by cash App makes sense to really grow their ecosystem bring more opportunities to their cardholders.

Cardholders and then we see even with.

Block or a cash up acquiring credit karma.

Tax prep services, you see them diversifying and obviously that drives more volume into the platform and then drives more volume out of the platform.

And our customers our success is our customer success. So we'll see that grow we.

It's a good question about like if they really execute can they grow more volume on the platform.

For us we hope so I mean, thats, how we make money.

Our success is.

Our success again so.

If they're able to do that then that's fabulous they win their customers win and so do we and our shareholders. So.

Our goal is to give them everything they need to be successful that relationship we have with blocks, specifically cash up square card and now the <unk> card is obviously very very important to us and it's been very successful for both companies over the years.

Okay, Yes, I look forward to see how that plays out.

And then just.

Just a little more clarity around plaid perhaps.

Can you talk about the Kpis and that business is that going to be predominantly.

Is that predominantly be in interchange driven business. It sounds like maybe there is some.

Some SaaS component to that relationship I'm, just trying to understand exactly how that.

Impairs with the issuing business.

Yes, they did two core things for US number one is to help us accelerate our go to market strategy, and then bolster banking and money movement offerings for us.

Most consumers know their user name and password for their bank not necessarily their routing number an account number and the fact that <unk> worked with 12000 financial institutions and they are committed to both information security Cocainize account verification process is just far more secure.

And that allows us to get more money in faster onto our platform through our customers and then we make money through interchange. So they arent connected in some way sort of directly connected because the more volume that ACTH delivers from banks onto our platform and the more money that is spent.

On cards, obviously generates more interchange for us. So this is about how do we speed up the not only the age verification process, but how do we make it really easy for our customers to build better experiences for their customers on our platform.

Got it that's helpful sorry, I'm, a little remedial so I appreciate it.

Okay. Thank you think about this.

How's us to really diversify our product offerings and bring more extensibility two of our platform to our customers and just make it easier for them to make money.

Yeah makes sense. Thank you.

Welcome.

Our next question is from Andrew Baum with S. NBC Nikko. Please proceed with your question.

Hey, guys. Thanks for taking my question and nice set of results here. The first one is.

More of a technical point I see that there's some investments in due diligence around potential acquisitions. So can you give us a sense of what you guys are looking at or what kind of solutions that you'd like to kind of bring into the platform that could help.

The offering.

Yes, I'll start with our goal is to maintain our first fewer managed by by leaning into product and tech.

We are a product led company, which means the product is at the center of our customer roadmap and our customer experience and our customer journey. So how we think about that is where can we unlock value for our customers. We recently added to our corporate development team as we plan to become more active.

Both strategically and Opportunistically look at M&A to launch new products and verticals, we definitely view M&A as a way to get to market more quickly and where we don't have a core competency.

And also obviously expanding globally, our business is pretty pretty unique in that card issuing processing.

As Marty card issuing is a global phenomenon, but it's different in every single country. So as we go into a country, especially countries, where we see great opportunities both in card growth and other payment type growth not only for mark.

And the local companies in that specific either whether it's a continent of our country, but also for our customers. So we will look to really M&A to either fill gaps on our roadmap or to accelerate our product roadmap.

And if I would just add one thing to that.

More of the more reasonable valuations in the space are certainly helpful and we have a strong balance sheet. So we'll be disciplined about it but we certainly.

I think there are there could be opportunities for us to accelerate our plans as Jason said.

Yes, it probably could be a good.

New talent acquisition lever as well my phone got it.

Thinking about the.

The partners added post 2019 is there a good way that we can dimensionalize the growth in that debt.

Part of your business and what I'm trying to get at is is <unk>.

You have a lot of these new partnerships and relationships coming on.

I would assume that you kind of slow to ramp those up to their to their full run rate I guess, what inning are we in on some of the new things that you have coming out and maybe call. It like a wallet share gain type metric with your existing partners in that world.

So I've talked about this in the past and drilling Mike would appreciate this is a unique thing about visa and Mastercard interconnected every merchant in the world.

Whether online or offline that wants to accept payment cards, so that solves or what mark had a solid from auto card issuing is really is that last mile.

We have seen a lot of customers and very well known names of customers come on our platform and these were verticals that even five years ago, we werent really using.

As household terms like on demand delivery or a buy now pay later later or even expense management and we've identified those verticals early we think theres a number of other verticals out there as companies begin to grow while servicing the existing verticals, which is how do we help.

A customer like a firm.

Spread their wings throughout the world and shorten the time to market for bringing merchants onto onto their platform, whether online or offline. So I don't know if theres a way too and we don't we obviously don't break out specific verticals and.

In regards to their growth.

I think if we the numbers Mike threw out about 2019 around our growth of three five times.

Net revenue in 2021, and 2019 as we've seen a successful those verticals now we've gotten tailwind from the pandemic as consumer choice really changed in regards to not only how they order groceries and food.

But how they actually shop now there's a number of other verticals out there where both monitored card issuing and other payment types are really important not just here in the U S. But other places international so.

We've talked about this in the past and I think I've talked about it.

In the beginning here, we process less than 1% of the <unk> volume in the U S.

<unk>, which is six trillion dollars and then far less than that globally, which is 30 trillion. So if you think about where we're at today to your point still very early innings in regards to not only the growth that we believe will happen on our platform.

But the growth internationally, both on existing customers, new customers and new verticals.

And then I guess, maybe if I could.

But.

Sorry, I was just going to add one thing I think we still would expect to for the growth to continue to accelerate from those newer cohorts. So it does take.

Maybe a year or hopefully less to get onto the platform and then it takes several quarters to ramp up so.

We still see a lot of growth from those newer customers. Obviously, they are growing really fast and contributing more and more but there is still more to come.

Got it thanks, Mike and Doug Congratulations on the new role.

Thank you.

Our next question is from Bob Napoli with William Blair. Please proceed with your question. Thank.

Thank you good afternoon.

Welcome Mike to the call year, they're one month and you deliver a phenomenal quarter.

Scott.

A few weeks.

Hi.

And a lot of great questions have been asked.

I'm really intrigued by the.

By the partnership with Plaid and open banking and is there and it seems like is that a global.

The relationship with Plaid is a lot going on in open banking in Europe .

I mean is this will this enable you get deeper into open banking.

Is it channel will probably be a channel partner as well I guess.

They're a channel partner today for just the U S right now.

But yes, I've actually I've done Zach for many many years, we've talked about probably a number of times that we're going to work together. We finally found a way to work together, which is how do we create a much better customer experience for our customers.

And we're also big believers in open banking.

As we see both neo banks, becoming sort of on par with existing large financial institutions. This allows our platform to help those companies build more products and extending their wings and our goal is to obviously spread more international I've talked about before a company named Lydia.

Which is a digital bank based out of France, using us so as we can bring more <unk> technology to other parts of the world and the 39 countries that we operate in we'll certainly do that.

Thank you and I'd like to know, which new verticals, you're going to invest in before you and tell the world. So I can invest in some of those companies privately.

But.

If you look at you as you look at your pipeline today.

New business, how does it look versus what kind of like the mix is there more international more new verticals or.

How do you see the size of the pipeline versus of new business. I mean, you guys have just had a steady stream of announcements since your IPO.

But.

How does that pipeline look today and how is it different from maybe a year ago or a couple of years ago.

Well, it's different in that well so let me let me talk about three different vectors, one vector as our existing customers and where they want to go.

And maybe some of the new things that they want to build so we're building out new features new functionality to do that number two is where are we building out in specific verticals like credit.

And where can our platform based on new customers or existing customers. This is either through a partnership with F&B O. Our partnership with reserve to help those companies scale and grow and then third is really the international focus I think and we made these mistakes in the very early days.

When we went to Europe , we brought our U S playbook, and we were told pretty pretty clearly that youre playbook doesn't apply here. So when we go into new countries, we find different modalities of payments being used and we find that both customers that are in that specific area that want to use us and user.

Technology, but we also discover basically new modalities.

Like account to account transfer for instance that something hey should we be looking at this and potentially using it within our platform again, our goal is to really unlock value.

And by bringing tools to both customers and prospects.

To help them build more so going back to the pipeline again theres a different different ways. We can go and look at this I think number one is were less than 1% of the card market in the U S. Much less than that internationally. So the vectors of growth are pretty significant.

Great.

Thank you I appreciate it.

Okay.

Our next.

Question is from Ashwin <unk> with Citi. Please proceed with your question.

Okay.

Hey, guys.

Mike.

Good results and Mike welcome.

Yes.

I guess, let me start with <unk>.

What did I think Lee.

<unk> about sort of net revenue retention in 2022.

Two.

Obviously.

Robust level that you guys have.

And then the maybe.

Related question from a margin perspective is your visibility into.

Into into full year gross margins given mix et cetera.

Yes, I can I can take that one I think that.

If you look at the revenue retention that we've had right in 2020, the number was 200% and a lot of that was fueled by on demand delivery rate was was booming at that time.

<unk> thousand 21 more be NPL.

Related and then some additional ramp in digital banking for example.

And so we still think if you look at our client base and the way that Theyre, expanding and then theyre, even diversifying as Jason mentioned earlier when talking about the NPL sort of there'll be different flavors of <unk> and different ways to approach it to continue to expand that offering and so we still feel.

That that number will come down just like revenue growth come down as the base gets larger and larger.

But we still have.

An existing customer base, that's growing incredibly quickly.

Looking to expand in new geographies is as Jason has also mentioned and diversify their offerings. So they are all things that we're helping them with so we see this as something where.

This rate retention.

Our retention rate.

Main quite high I mean.

Likely will come down as the base gets bigger, but it's still a very high number.

Compared to most companies would enjoy.

And then your second question in terms of our visibility on the gross profit margin, yes, I mean, I think that it's harder to.

Projecting.

In the short term because you don't know sort of what the mix of our volume is going to be but if you look out over a longer period of time like in this case sharing what we expect for all of 2022, then than a lot of those shorter term impacts.

Move away and Youre getting a much bigger mix of volume that you as a little bit more predictable so.

It's there still could be some variability there, but when we look at the size of our business the behavior that we've seen to date and where we expect our customers to expand we feel like we have a reasonable ability to to projected in and then obviously as each quarter goes by we will share details as things change.

Got it.

Really appreciate the cadence comments that you had could you just to put a finer point on it.

As I think of Q1 versus Q2 could you quantify the tax impact and looking further out.

True up impact from network incentives versus upside in <unk>, because I think the latter Mike Keith might discontinue to up obviously one time.

In nature.

Yes, So I think if you if you look at the tax impacts.

It's hard to know exactly when people will file and get their refunds, but.

We are already starting to see that earlier than what we had seen last year. So.

Right now I guess, our assumption is it will roughly be split between the two quarters.

Some of it will come in in late February and March.

Some people won't file until the deadline right and so then you get the benefits of that and more April and early may. So that's that's what we're expecting but it's.

It's really I guess, what we've assumed is maybe what I should say.

But it's a really hard thing to know because it really is based on how quickly people will determine decided to file.

Got it.

Thank you.

Our next question is from Josh Beck with Keybanc capital markets. Please proceed with your question.

Hi, This is Alex on for Josh. Thanks for taking the question I wanted to check back in around the crypto vertical I may have missed it I don't think we heard anything in the prepared remarks.

Would just appreciate any thoughts around the fourth quarter momentum and kind of what you're excited about in this vertical looking into 'twenty two.

Thanks, Alex.

So as we talked about in our last quarter was our platform acts as a gateway between Fiat and crypto currencies for partners like Coinbase back fold shake pay and we're seeing a lot of incoming interest about this capability, even because we see pretty large swings in the price of crypto number types of <unk>.

Though in the market.

This isn't a market of platform crypto of innovators now enabled our customers to make these fiat purchases and we're now finding that they are wanting to consumers are finding that this is a nice product to have especially holders of crypto for instance, coinbase users can swipe a market of powered card at the point of sale and we send it off.

Organization for notification of coin base to check the user's crypto balanced one.

Once they approve coinbase sells a crypto Fiat and funded the transaction all of this happens in real time.

Creating a seamless experience for both users who spend their funds directly from their wallet with having the transfer funds. So we don't we don't break out specifically, how each customer is doing.

We'll say as we are seeing significant traction from these customers revenues from these customers is now in the millions, whereas last year it was almost nonexistent.

And much like we did for verticals like on demand delivery and buy now pay later, they're using our <unk> funding. Our just in time funding technology to go build this so we're excited about the vertical we're investing more in it.

As we see demand increase and as we've heard in the last couple of days.

President Biden, signing in order to look more and more at regulation on somebody who thinks.

That regulation in the crypto market is actually important and in some ways. It is going to unlock more value for companies like Mark had on our customers.

Great I appreciate all the thoughts there maybe just lastly, with respect to the Citi relationship.

Do you view this as more or less representative of the kind of size and scope of the opportunities in the pipeline just kind of thinking about the initial land opportunity.

Yes.

Okay.

These answers this is yes.

Just to put a finer point on that I mean, we've talked about.

During the road show in the last few quarters.

Large financial institutions is an important part of our strategy.

We are in the <unk> business, we powered this DNA match earlier with Commerce, Disruptors, where they needed picture surplus shovels to go build their businesses now we've attracted different types of companies, especially now in the large financial institution space, where they're wondering hey, how do we use mark head of technology to help us.

Build new features new functionality and new businesses. So it's something that is a strategic imperative for us and something that we will be focusing on and talking about more in the future.

Perfect. Thanks, guys.

Youre welcome.

We have reached the end of the question and answer session and I will now turn the call over to Jason Gardner for closing remarks.

Thank you Kyle.

Thank you Mike.

Two weeks on the job joining us for Q4 of 'twenty. One earnings also thanks to Stacey. Thank you to everyone that asked questions. Thank you for everyone joining the call.

Have a great two.

2022, we very much look forward to talking about our Q1 of 'twenty two results.

And we will let you know sometime in the future when thats going to happen. So thank you again and stay safe take care everybody Bye bye.

This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation everyone else has left to come.

It looks like no one else is going to join this call.

Goodbye.

[music].

Yes.

Yeah.

Yeah.

[music].

Yes.

[music].

[music].

[music].

Good afternoon, ladies and gentlemen, thank you for standing by and welcome to the Marquette off fourth quarter 2021 earnings Conference call. At this time lines have been placed on mute to prevent any background noise. After the speakers.

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 Stacy <unk>, 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.

Forward looking statements are subject to numerous risks and uncertainties.

Putting 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 quarterly period ended September 30th 2021, 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 at the time of this call and the company does not assume any obligation or intent to update them, except as required by law.

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 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 the Investor Relations website.

Hosting todays call are Jason Gardner.

Cut its founder and CEO and Mike Miller attach 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 Mark has fourth quarter of 2021 earnings call. We are excited to share our strong fourth quarter and full year results as well as our plans for 2022.

I'd like to begin with our fourth quarter results. We ended the year in a position of strength with financial results that serve as a true reflection of everything <unk> accomplished in 2021.

As a result of our strong execution and continued customer focus of all of our tenants across the world.

Total processing volume or <unk> was $33 billion in the fourth quarter.

76% increase compared to the same quarter of 2020 and acceleration from the 60% growth rate in the third quarter.

This represents the achievement of a significant milestone in December we saw our <unk> for the first year crossed the $100 billion threshold for the first time as we processed a $111 billion for all of 2021.

This demonstrates our ability to provide modern infrastructure that enables fast growing companies to deliver innovative high volume car programs globally.

Our net revenue of $155 million in the quarter with a 76% increase from the previous year, representing an acceleration from the 56% growth rate in the third quarter. We saw significant outperformance from the buy now pay later vertical as this mode of payment was extra.

Really popular during the holidays.

Witnessed another decline in our block concentration from 68% of total net revenue in the third quarter to 63% in the fourth quarter of 2021.

Our phenomenal fourth quarter is a testament to the outstanding growth Arcata has demonstrated over the last three years as our TPB grew over 400% from 2019 to 2021 much of this growth was fueled by digital commerce Disruptors that grew significantly due to shifts in consumer behavior during the pandemic.

Nick.

Our platform and products helped make much of this growth possible, enabling our customers to offer experiences that have changed commerce in remarkable ways.

Our ability to help our customers scale successfully admit this unprecedented growth has earned us valuable trust.

With 2022 underway, we are starting to see some stabilization regarding the pandemic. It is clear that the new commerce experiences like on demand delivery and find out pay later are here to stay and customers Trust in financial services. After by Neo banks is increasingly on par with our trust in typical financial.

Situtions These commerce experiences play tube market had strengths.

We have already built trusted relationships with companies that have become household names like coroner and cash app that have a track record of expanding on our platform for the next set of Disruptors looking for a trusted partner, who can help them scale. It serves as a proof point importantly, we have a foothold into larger five.

Like Marcus by Goldman Sachs, JP, Morgan and now city that need a technology partner to deliver solutions consumers what's.

As we look forward to the remainder of 2022 remarkable growth we took part in during the pandemic required significant focus to help our customer scale as a result, our newer solutions like credit and digital banking did not get as much focus as we would have liked because of how fast our existing customers. We're growing we began to.

Significantly ramp up hiring for these efforts towards the latter part of 2021, our approach in 2022 will be more balanced between fueling our existing customer success and building for the future. Therefore, our focus areas in 2022 will be threefold.

We will.

<unk> continued to fuel our customer's success, while we are focused on broadening our base our existing customers still represent <unk> core and a significant source of future growth.

These customers can tap into our moderate card issuing expertise that allows them to build customized and contemporary payment solutions when paired with our platforms agility and scale.

Our dollar based net revenue retention rate of 175% for 2021 demonstrates how our customers growing our platform, let me share two examples.

After a competitive process Debbie <unk> Dot Com company began using <unk> in late 2020, Dv wasn't hyper growth mode and it was important for the company to have a card issuing partner that can help them build best in class products and do so at scale.

What's the board the market a platform did he was able to ramp quickly as a result did he rapidly added new customers to their program extended their service to even more businesses and cardholders.

<unk> is one of the reasons, we have seen the expense management vertical gains such significant traction approaching $2 billion in PPV. This quarter. In contrast, the second was insignificant a year ago.

After launching with Florida, and the U S in 2018 and supporting its launch in Australia, and New Zealand in 2020 in 2021 corner chose to extend this partnership with Mark header into 13, New European markets last November .

Florida is a digital disruptor experiencing tremendous market traction in the last few years and marchetta has provided vital support to their growth trajectory globally.

As a result of their success on our platform in the U S and APAC. The company recently expanded its partnership with <unk> by moving over volume from another provider.

And I have seen firsthand, how they've been able to quickly make program improvements are launched new card products, often with a complex market and environment working with Mark This expansion, especially in European markets for Florida has a long track record of success is a testament to the maturity of our European.

Business and the strength of our partnerships.

We will continue to build a resilient and reliable global platform.

2021, PPV of $111 billion represents more than 50 times growth in four years, however to truly connect the world through global money movement and unlock the potential in front of US we must be thinking more extensively about the breadth and depth of what our.

Platform can support.

Eight months into his role our CTO Randy churn has already made significant strides towards building our scale and resiliency to handle the next wave of growth.

Proactive capacity planning with our customers organizing our internal teams around the mandates of scale and new key infrastructure developments have huge impacts on the degrees to which we can scale car programs.

We expanded our platform globally by adding local network certification and card issuance capabilities in three new markets, the Philippines, Thailand, and Singapore, the Philippines, and Thailand are large high growth markets for digital payments adoption is still well below 50% and younger populations urbanize.

<unk> steadily.

The market up platform has enabled in 39 countries with more countries to come later this year. The geographic expansion is an integral part of our roadmap as we want to allow our customers to build once and launch anywhere.

We will broaden our business in three ways the customers we serve the solutions, we offer and the verticals we support.

To truly diversify our business, we need to target large customers focusing on additional credit digital banking and money movement offerings.

Established financial institutions represent a large portion of the total issuer processing volume worldwide.

While making significant inroads will likely take time these customers are essential to achieving our goals of connecting the world through global money movement, and achieving durable long term growth.

We are thrilled about our new partnership with Citi and their commercial card scheme.

Any plans to use market as unique <unk> as a service capabilities the power of mobile wallet provisioning and more than 40 markets worldwide.

This modern card issuing platform will integrate with city's existing systems and enable cities global commercial cardholder base to seamlessly provision corporate plastic cards and virtual cards into mobile wallets city recognized as Mark had his leadership and car <unk> and the impact this can have on their commercial card holders.

Especially against the backdrop of rapid change in payment preferences post pandemic, we see this as an opening step of what we hope is a long and fruitful partnerships.

As discussed last quarter, we see partnerships as an efficient way to broaden our product offering our partnership with the first national Bank of Omaha F&B expands.

<unk> expands our credit ecosystem allows market as customers to launch in design and embedded credit card program quickly.

By partnering with F&B. So we combined F&B decades of deep experience and credit card programs with the flexibility and control of Mark Hurd as modern card issuing platform.

Similar to our partnership with reserve F&B will handle program management capabilities at the same time, our Kettle will act as the issuer processor, bringing the technology that allows customers to create customized card experiences lacking in credit.

Our recent partnership with flat underscores our desire to move beyond moderate card issuing into enabling global body movement.

This partnership will simplify ACTH transfers, allowing customers to seamlessly and securely authenticate their bank account and fund their accounts the power more immediate cart shopping.

As a result developers building on the Mark had a platform quickly and easily authenticate users bank accounts versus the traditional cumbersome ACTH process.

<unk> worked with over 12000 financial institutions. This scale combined with its commitment to information security makes him a perfect partner from our Canada.

I am excited about our progress in 2021.

Shelly how we ended the year on such a solid foundation with over $500 million in yearly revenue. We are capitalizing on the changes in consumer preferences to ensure the performance of the business for years to come Mike will touch on our growth and additional investment in his remarks, which.

It brings me to the vital role of CFO .

I wanted to take a moment to recognize the work of our outgoing CFO Trophy trip led Mark had asked for a very successful IPO and two major fundraising rounds as partnership and friendship have been important to me as a CEO and our company as a whole I wish him every success for his next chapter I am also thrilled with.

Welcome Mike Miller, as our new incoming CFO will Shepherd us into the next phase of our growth with that I will turn the call over to Mike to discuss our results and outlook for 2022.

Thank you, Jason although I know many of you on the call today I'm excited to speak with you in my new capacity as a CFO Mark after joining the company two weeks ago, Walmart, Canada has already reached significant scale with over $110 billion in ppb. In 2021, there is still a massive opportunity to support innovative partners, who are meeting evolving consumer needs.

And digital Commerce and global money movement.

I look forward to partnering with Jason the executive team and all of our employees to help the disruptor scale and those that scale become more disruptive.

<unk> delivered a very strong quarter to close out our first fiscal year as a public company with both TPB net revenue growth accelerating to 76%.

Net revenue of $155 million and adjusted EBITDA positive $1 million were meaningfully better than we expected primarily for two reasons.

One stronger holiday and overall consumer spending drove the majority of the upside benefiting that the NPL and digital banking verticals in particular.

And two higher card network incentives as a result of reaching a new performance tier.

So let's dive into the Q4, TPB, which was $33 billion growing 76% accelerating 16 points from Q3 <unk>.

The NPL benefited from the increased consumer spend during the holiday season growing over 50% sequentially versus Q3.

Digital banking growth accelerated 15 points versus Q3 in line with the overall TBD acceleration.

Newer clients and growing verticals to increase their contribution to our growth as we continue to diversify our customer base.

Our top five customers continued to perform well with TPG growth over 50% in Q4, while the remaining customers grew over 200%.

As further evidence of our growing diversification newer customers, who joined our platform. Since 2019 grew three times faster than customers, who joined the platform prior to 2019.

The growth of these newer customers and outperformance from the NPL vertical or a big reason why we saw another significant decline in our top customer concentration, which Jason highlighted earlier.

Net revenue growth of 76% was consistent with TPG growth and accelerated two points versus Q3.

The net revenue take rate declined less than one day versus Q3 purely due to changes in the mix of volume in fact Q4 take rate improved versus Q3 within several of our large verticals.

Gross profit grew 108% on a year over year basis over 30 points faster than revenue.

Gross profit margin of 49% improved four points versus Q3 for two reasons each contributing approximately two points.

First incentive.

We amended one of our card network incentive agreements in Q2, and we hit a new volumes here in Q4 that resulted in a higher incentive being applied to volume over the past three quarters.

Therefore, the three quarter catch up benefit was booked in Q4, which may be impacted more significant these.

These incentive agreements are a testament to our strategic relationships and strong alignment with network partners as well as the powerful operating leverage that can be achieved in our business as we scale.

The second factor was volume ex the holiday season had a TPB mix that provided more favorable gross profit.

Our GAAP net loss was $37 million driven mostly by continued investment in people and technology that are fueling the growth of our business and the scaling of our platform.

On a non-GAAP basis, adjusted EBITDA for the quarter was positive $1 million, which exceeded our expectations by roughly $10 million entirely due to higher gross profit.

To quickly summarize full year 2021 performance TVD of 111 billion in net revenue of $517 million delivered robust growth of 85% and 78% respectively.

Gross profit grew 97% with a gross profit margin of 45%, which is on the high end of our long term target range of 40% to 45% due to improved scale and favorable network incentives.

Adjusted EBITDA was negative $13 million equating to a negative 2% adjusted EBITDA margin. We ended the year with over $1 7 billion in available liquidity in cash and marketable securities.

Now, let me move on to 2022.

First let me share some of the key assumptions informing our Q1 guidance that was noted in our press release.

We expect Q1 net revenue growth to be between 48% to 50%.

Take rates should be relatively similar to last quarter. Therefore, the lower growth compared to Q4 'twenty one is related to volume growth, mostly due to two factors.

Q1 is facing tougher comps due to the government stimulus in the first quarter of 2021 and to a much smaller degree the beginning of the ramp in the NPL volume.

Our sequential net revenue growth last year from Q4, <unk> Q1, 'twenty, one was 22% compared to an average of 15% growth from Q4 to Q1 in 2019 and 2020.

This tough comp is partially offset by the tax season, returning to April this year, where the benefits of tax refunds are split across Q1, and Q2 versus last year. When the benefit was mostly in Q2.

Also January got off to a bit of a slower start omicron likely impacted volume in many of our verticals with the exception of on demand delivery, which thrived as more people stay at home.

We did pick up in February as the Omicron wave passed with February volume comfortably exceeding January despite having three fewer days.

Q1, gross profit margin should be in the 43% to 44% range, which is consistent with the first three quarters of 2021.

This is lower than Q4, 'twenty, one which benefited from the catch up incentives and favorable volume mix during the holiday season.

We expect the Q1 adjusted EBITDA margin to be negative, 89% due to elevated investment levels to drive long term sustainably high net revenue growth.

I will talk more about our investment priorities for 2022 in a minute.

Amid the current economic uncertainty I did want to share some preliminary thoughts on 2022, and we'll plan to share more next quarter onetime completely settled in here at Markel.

It remains to be seen whether Russia's invasion of Ukraine will have any broader implications that may impact our business.

Similar to previous years, we expect the majority of our growth to come from our largest customers, which are spread across the digital banking on demand delivery, the NPL and expense management verticals.

Our newer customers are growing several multiples faster than our top customers and therefore growing in share, but even our largest customers keep growing at a strong pace as evidenced by our high revenue retention of 175% in 2021.

Our business massively expanded during COVID-19 .

<unk> 2021, net revenue was more than three five times 2019 net revenue.

<unk> accelerated consumer adoption and usage of newer commerce experiences such as on demand delivery and the NPL, where marchetta was an early innovator and market leader supporting many of the top companies in those categories.

The increased shift to digital payments. During Covid has also led to increases in consumers using digital bank for Neo bank offerings, which tend to provide great digital user experiences.

This is a market where <unk> established early leadership.

As a result, we are growing off a much larger base of business in 2022.

The pandemic recovery is now well underway and consumers new commerce habits are sticking and stabilizing.

Therefore, we expect our net revenue growth to be at least mid <unk> for full year 2022.

To put the change in scale during the pandemic into context, let me share. One fact, we expect our year over year revenue growth in dollars in 2022 to be larger than our total net revenue just three years ago in 2019.

Systems with the scaling over time net revenue will grow the fastest in Q1 stepped down several points sequentially in both Q2 and Q3 before a larger step down in Q4 as we lap the incredible quarter. We just finished.

Also note that blocks acquisition of after pay who is also a meaningful client for US means we don't expect to make progress on our block concentration as we as we add after pay performance to block starting in Q1 2022.

If we were to normalize for the acquisition and combine the companies for past years, we do expect a minor reduction in our concentration.

We expect 2022 TBD to grow faster than net revenue at over 40% with take rates declining slightly on a year over year basis on par with the decline in 2021 as customers who grow on our platform enjoyed better pricing.

This was partially offset within gross profit by achieving better pricing from our card network and bank partners.

We expect our gross profit margin to be in the low to mid forties.

With our long term guidance of 40% to 45% on an annual basis.

Network incentives can be inconsistent as we just saw in Q4 'twenty. One so let me share a few more details to help with the quarterly cadence.

Our incentives operate on a contract here that runs from April through March, which means volume tiers reset in Q2 of each year.

This means Q2 will typically be a lower gross profit margin quarter generally at the bottom of our long term range, while Q3 into Q1 of the following year typically benefit from growing cumulative volumes.

If we hit certain volume milestones in an individual quarter can be above the long term range.

Based on our client pipeline and because of the time it takes to onboard and ramp new clients, we need to invest in advance of the revenue to best position us for success. Therefore, we expect the adjusted EBITDA margin to be negative high single digits in 2022 and relatively consistent with each quarter.

Q2 will be a few points lower due to the lower gross profit margin.

While the investments we make in 2022 will result in negative EBITDA in the short term.

We are looking to achieve sustainably rapid growth, while also being committed to our path to profitability.

In the long run we remain confident the business will operate at a 20% plus adjusted EBITDA margin. Once we have captured more of the immense market opportunity.

We began stepping up our level of investment as we progress through 2021 as it became clear our revenue and gross profit were scaling rapidly.

We plan to stay on that investment cadence through 2022.

The investment is mostly directed towards technology and product primarily through hiring in those areas as well as increasing software and services to support our platform.

The primary focus of the investment is new capabilities in digital banking and credit international expansion and platform scale.

Once the volume is captured our unit economics are very attractive due to low marginal operating costs with the ability to generate positive EBITDA as we did in this most recent quarter.

To close Marchetta, just completed a fantastic year, surpassing $500 million and net revenue looking ahead, we have a wealth of opportunities ahead of us, including new products geographies and verticals all while our existing customers thrive on our platform. We believe our differentiated offering will continue to be the destination for disruptors as digital commerce and global money.

<unk> rapidly evolve fueling strong growth for many years to come.

I will now turn the call back over to Stacy and the operator for questions.

At this time, we will be conducting a question and answer session. If you'd 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.

You May press star two if you'd like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please while we poll for questions.

Okay.

Yeah.

Our first question is from Sanjay <unk> with K BW. Please proceed with your question.

Thanks, Good morning, sorry, good afternoon, and congrats Mike.

Maybe a question about the investments in tech and product as we think about.

The different channels that Mark hit it can grow into can you help us think about where internationally that will come from.

Okay.

Thank you for your question Sanjay.

We've as we've talked about Mark modern card issue becomes a global phenomenon and we're actively working to attack the large addressable market. A couple of things that we're doing is I think number one is we're constantly assessing where our customers are looking to launch.

What markets they want to launch in and hold the most immediate potential for our technology. So as we've talked about we earned 39 countries today.

We recently announced Singapore, Thailand, the Philippines and we.

We'll look to set up an APAC hub probably in Singapore.

As we go international we found that bought our card issuing is a global phenomenon and if we talk about what a rallying cry. This year is for market is to connect the world through global money movement, our customers truly come to us to unlock value not just here in the U S, Canada, Europe and Asia, but in many countries.

It is in continents, where theyre looking to really bring their business and we will continue to focus on the verticals that have done really well for us like buy now pay later digital banking expense management and many others. So we're really excited about the process. We've made to date as Mike talked about we did $517 million in net revenue, which is a solid solid foundation.

And look forward to updating you with with new market announcements international partnerships in future quarters.

Great and just a follow up on the NPL obviously.

<unk> seen tremendous growth for you guys and as an industry, but as we go into 2022 it is difficult comps.

Theres, probably a little bit more competition on the margin for those types of loans from the incumbents and perhaps even shifting merchant preferences I guess, when we think about the growth potential of the Npls. Specifically for you guys is it that youre just expanding inside your existing relationships or are should we expect some pressure on growth.

So when we started we started working in buy now pay later about five years ago. When I was at money 2020 in Europe . We remember what this company became Chlor Ine, which today is a household name, but at the time, we really don't know.

What they specifically did we heard this concept called buy now pay later, what we do and we've been really successful at this is we've actually built purpose for specific vertical so now Florida.

Affirm schedule, which announces buying zip after pay which is now part of block really speaks to the strength and competitive position for market as platforms. So I'll start there.

I don't pay later continues to be an important and significant growth driver for Marquette at well over 10% of PPV and some other highlights.

A launch partner for Mastercard's, New installments program, we're working with <unk> and their deal with target the amount partnership bringing buy now pay later to <unk>, we're powering figures new fig figure pay product, which is a digital payments account with native BNP all functionality. So what we're finding is a couple of growth second growth vectors.

International.

Which we're enabling them to take advantage of more and more merchants on the platform.

New obviously geographies new technologies, we see we're now.

Customers are getting into two organizations are getting to actual physical card products and are coming to market to do that so I wouldn't look at buy now pay later functionality in it.

<unk> single focus is adjust virtual cards. There is many different car types were looking to build on our platform as they begin to diversify their businesses in the coming quarters.

Great. Thank you very much.

Our next question is from Mike <unk> with Goldman Sachs. Please proceed with your question.

Hey, good afternoon. Thank you very much for the question.

I appreciate all the detail when you talked about PPD performance by vertical I was just wondering if you could talk a little bit about some of the assumptions as you think about the 40% <unk> growth in 2022.

Any any qualitative or quantitative detail will be very helpful. Thank you.

Yes. Thank you for your question.

It really is.

More of the same just with tougher comparisons obviously, even Sanjay just pointed out in the previous question I mean, the NPL had explosive growth during 2021 as the base is bigger the growth will slow a little bit, but but we still.

Most of our growth is going to be fueled by the primary use cases with <unk>.

Roughly comparable to 2021 with just maybe a little bit of a slower rate and thats in digital banking the NPL expense management.

Being some of the big ones. So I would say the mix of the business, we're not expecting to fundamentally change a lot. It just.

Tougher comps spring in the growth rate down a little bit.

Great. Thank you that's very helpful.

Just wanted to ask a housekeeping question.

The mix benefit to gross margins in the fourth quarter could you just give a little bit more detail around that and should we see.

A sequential improvement from that mix every fourth quarter. Thank you.

Yes, I mean, I guess, it's hard to say to predict the future exactly so I don't know if I can answer the second part of your question, but if you think about interchange dynamics right.

Predicated on all different scenarios in terms of.

What type of card is being used is it consumer commercial credit debit prepaid.

What type of merchant is being used at what's the size of the ticket. So there is a lot of those factors will ultimately end up impacting whats the rate that applies and then and then on top of that we have different types of agreements with our customers in terms of.

How do we work with them in terms of how much we share with them versus how much is kept here at <unk>. So those are kind of all the different levers and variables that play into that number and so what happens what happened at least in this case and the holiday season is really the the type of spend in terms of where it was directed in terms of merchants.

And the types of products that were used is what drove the benefit for us.

Great. Thank you for all the lots really appreciate it.

Okay.

Our next question is from Ramsey El <unk> with Barclays. Please proceed with your question Hi, Thanks, So much for taking my question. This evening I wanted to ask about the city partnership.

And if you could describe sort of the path from a project like this kind of into a deeper issuance relationship at a large bank likes like city, what challenges kind of stand in your way to sort of moving a little deeper.

And to an organization like this.

Thanks, Ramsey, yes, it's winning new business of large advisors is a major strategic initiative for Mecca and as we've talked about in the past I mean, we really had this DNA DNA match with Commerce Disruptors. We then went into large digital banks like cash App and Lydia in France.

We then went to large tech giants like Uber, and Google and we always have been focusing on sort of a long game within within larger five so.

As we talked about in my opening remarks, we're excited to announce the city deal in their commercial car team. So what theyre doing is in 40 markets.

Using our <unk> as a service capabilities the power of the mobile wallet provisioning and.

And obviously city recognizes market is leadership in <unk> and we see this deal is really just the beginning of what we hope is a long term partnership.

<unk> typically don't move fast nor do they make decisions quickly our girl with these program is truly is over time just to get a foot in the door and then expand our relationship as you referred to like more more issuance as.

As we've seen these are these are very large from a technology perspective complex environments. So bringing us into that is something thats pretty significant for us and then we're there to really prove our relationship prove our technology prove our services. So we can expand.

Throughout and beyond two organizations as a service so we help them in areas, where they can help them be more innovative and we want to see value, where we're really adding to their business and obviously trusting us so while making inroads will take time. These customers are absolutely critical to achieving our goal of building out more durable long term growth.

Okay.

And on the higher card network incentives I'm just curious.

How should we think about the cadence.

Those types of opportunities to renegotiate those contracts, which is to say can you go back and kind of renegotiate. It at will as you grow or are there sort of fixed contract timeline that when those expire as the time that you go back and kind of take another bite at the Apple in terms of renegotiating those fees.

Yes, yes, I would say, it's it's a little bit of both right. You can't just there are contract terms and timeline so.

It's not like you can go back at anytime you want, but but obviously as the business grows and you try to do more things together new card programs. There is always ways too.

To look for additional opportunities for US and then of course as the business. If it continues to grow as rapidly as we expect then you can end up doing early early renewals and changes as you see fit so I would say, it's a little bit of both.

They're obviously terms that have been agreed to but.

There is always ways too.

To look at those and as we get into new opportunities see if we can work.

Work the economics that we have with our both our networking bank partners.

Thanks, Mike I guess, you would know better than most so I appreciate your answers.

Indeed.

Our next question is from Dan <unk> with Mizuho. Please proceed with your question.

Hey.

Thanks, and congrats Mike.

Great results.

Can you, maybe and sorry, if I missed it can you give us some more specifics I think last quarter, you gave about sort of the.

The growth of the top five versus not top five from a TPP perspective.

Yes, so what we said was in terms of the.

The top five that they grew over 50% in Q4, and then the remaining customers grew over 200%.

And then just Dan the other way we also look at it in terms of as we're looking to diversify our customer base. The other one that we shared was just that our customers that have come on to the platform. Since 2019 grew more than three times faster than the customers who came on board prior to that time.

Got it so not as specific of a number is the last quarter right I think last quarter.

Thank you Sir.

Some number.

Until that time.

Over 200%.

Yes, I guess I can't specify but.

Yes, I guess, maybe I'll have to take the blame for that one and then Dan if we're being left okay perfect.

Yeah, Yeah, no worries.

And then.

On on plan I mean, it looks like it's definitely helps you diversify away from the reliance on debit cards.

What are you.

What are you seeing in terms of.

The opportunity there with the partnership.

I'm sorry, Dan what's your partnership.

Yes.

Does this plan.

Is working with 12000 banks and it makes it really easy for our customers to leverage Plaid through marketing platform to go build better experiences. So.

Our business is truly predicated on money and money out so money in is <unk> and.

And money out as required which is predominantly where we make our revenues. So what this does is it actually shortening time to market significantly for customers to bring.

More.

<unk>.

Into market as platform, so instead of a consumer.

Knowing what their routing number an account number is now they just need their user name and password.

For their bank account to begin bringing money into market as ecosystem through our customers.

Got it. Thank you nice quarter, you get great results.

Thank you.

Our next question is from Tien Tsin Huang with Jpmorgan. Please proceed with your question.

Hey, everyone. Thanks, great results as well from my side too.

To the call Mike Good to hear from me I just wanted to ask on the visibility I know.

Sanjay and others asked about buy now pay later it seemed like that carried a lot of growth in 'twenty, one on demand delivery as it goes in 2020.

And a big contributor and what about in 'twenty, two what verticals do you think we'll step up and sort of carry the load here and I'm curious.

Banking as a service might rank as an example, four four.

Could you put any growth this year.

Yeah, I'll start with this high Tien tsin, good alright, good to hear from you Mark credit customers cared deeply about global money movement, where they can really use specific tool to solve a business need to unlock value.

So as we think about the specific verticals like find out pay later expense management on demand delivery.

Digital banking I mean, these are the areas in the new verticals that we're looking to enter into where that methodology is the same so.

We wake up every morning here thinking about how do we connect the world through global money movement. It really comes down to solving a business need us within a specific vertical we still see growth in our core verticals. Our business has been growing significantly over the years, Mike talked about some.

Specific data in regards to simple volume on our platform within these verticals.

Our methodology our strategy, it's really identify those verticals early.

Build technology, that's pretty unique and help our customers really really spread their wings. So if I look at the strategy for the year.

In regards to where we're headed.

International So our customers looking to build more globally.

Adding new features and functionalities to specific verticals. So as they begin to grow and go into new areas of the market, we look to support them with our technology and then really fuel our existing customers success in areas like the.

The Bill Dot Com acquisition of <unk>, making sure that Debbie has what they need and then connecting that strategy to build dot com.

As we look to broaden our market broaden our our revenue opportunities.

Those core areas that I've talked about its commerce, disruptors, where are the new verticals, we can enter and having a DNA match and seeing continued growth.

Especially in buy now pay later as we saw in the fourth quarter.

Then we go into digital banking more capabilities. There we had blocked for instance, cash App launched teen card last year.

And then going into large tech Giants and then the large <unk> as we begin to move up market, especially lending companies like city.

In regards to <unk> service in launching that in 40 markets.

We're really excited about more we're going to be talking about in the future around <unk>, but really focusing on the core four areas of where we've been able to really grow landing new verticals and then helping our customers expand.

Got it that's very clear adjacent so just as my follow up to that maybe on the expense side and the hiring I think you are.

Wrote down here that you guys ramped up hiring in credit and digital banking so.

Do you feel good about the prospects of hiring the people, especially internationally too.

To do what you just laid out from a people perspective.

Everyone's asking about war for talent.

A theme on there sorry.

They'll figured I'd ask it here too.

Yes. The war for talent is not just mark had a problem.

It's a global phenomenon, it's for all of us.

Engineering talent, specifically and product talent specifically.

Is tough I mean, it's very competitive out in the market. So as we look to build more within credit I mean, 50% of consumers in United States hold credit cards credit card credit is pretty nascent in other parts of the world, but we're going to see it grow we know that.

Asia is going to become the largest car market in the world in the coming years. So we continue to focus and build and add new features and functions in these areas as I talked about around credit.

120, <unk> was really the year, where were investing pretty heavily within credit towards the end of the year. We saw just the scale of our customers and really investing into that but a lot more to come and credit a lot more to come in digital banking not from our banking as a service perspective, but more of all the core functionality is that build together.

So our customers are coming to us they want to build on Mark had a platform once and then build globally. So we'd look to add more and more features that they can take advantage of within our platform.

Got it.

Well then thank you.

Welcome.

Our next question is from Andrew Jeffrey with Truest. Please proceed with your question.

Hi, good afternoon.

You're taking a question.

Yes.

I wanted to ask a little bit more on.

The expansion and diversification of your business is really exciting.

But particularly when I when I look at block and the acquisition of after pay.

Can you talk a little bit about the potential for that customer actually and I'm thinking about cash app in particular, accelerating and maybe even comprising a larger portion of your revenue in 'twenty, two and maybe into 'twenty. Three I just think if block is truly successful in knitting together, those two ecosystems and driving greater engagement it feels like.

That could be an underappreciated growth driver for Mark how are you thinking about that.

Yes.

Yes, that's a good point.

As we've seen after pay is a great customer of Mark Hurd.

The acquisition by cash App makes sense.

Really grow their ecosystem bring more opportunities to there.

Cardholders and then we see even with.

Block or a cash up acquiring credit karma.

Tax prep services, you'll see them diversifying and obviously that drives more volume into the platform and then drives more volume out of the platform and our customers. Our success is our customer success. So we'll see that grow.

<unk>.

It's a good question about like if they really execute can they grow more volume on the platform for US is we hope so I mean, thats, how we make money.

Our success is.

Our success again so.

If they're able to do that then thats fabulous they win their customers win and so do we and our shareholders. So.

Sure.

Our goal is to give them everything they need to be successful.

That relationship we have with blocks, specifically cash App square acquired and now the <unk> card is obviously very very important to us than it is.

Been very successful for both companies over the years.

Okay, Yes, I look forward to see how that plays out.

And then just.

Just a little more clarity around Plaid, perhaps can you talk about the kpis and that business is that going to be predominantly.

Is that predominantly be in the interchange driven business. It sounds like maybe there is some.

Some SaaS component to that relationship I'm, just trying to understand exactly how that.

Impairs with the issuing business.

Yes, they did two core things for US number one is to help us accelerate our go to market strategy, and then bolster banking and money movement offerings for us.

Most consumers know their user name and password for their bank not necessarily their routing number an account number and the fact that <unk> worked with 12000 financial institutions and Theyre committed to both information security token is the account verification process is just far more secure.

And that allows us to get more money in faster onto our platform through our customers and then we make money through interchange. So they arent connected in some way sort of directly connected because the more volume that ACTH delivers from banks onto our platform and the more money that is spent.

On cards, obviously generates more interchange for us. So this is about how do we speed up.

Not only the age verification process, but how do we make it really easy for our customers to build better experiences for their customers on our platform.

Got it that's helpful. Sorry, I'm, a little remedial. So I appreciate it that's okay. I mean, you think about this this allows us to really diversify our product offerings and bring more extensibility two of our platform to our customers and just make it easier for them to make money.

Yeah makes sense. Thank you.

Welcome.

Our next question is from Andrew Bell with S. NBC Nikko. Please proceed with your question.

Hey, guys. Thanks for taking my question and nice set of results here the first one.

More of a technical point I see that there's some investments in due diligence around potential acquisitions. So could you give us a sense of what you guys are looking at or what kind of solutions that you'd like to kind of bring into the platform that could help.

The offering.

Yes, I'll start with our goal is to maintain our first mover advantage by leaning into product and tech.

We are a product led company, which means the product is at the center of our customer roadmap and our customer experience and our customer journey. So how we think about that is where can we unlock value for our customers. We recently added to our corporate development team as we plan to become more active.

Both strategically and Opportunistically look at M&A to launch new products and verticals, we definitely view M&A as a way to get to market more quickly and where we don't have a core competency.

Then also obviously expanding globally, our business is pretty pretty unique in that card issuing processing.

As Marty card issuing is a global phenomenon, but it's different in every single country. So as we go into a country, especially countries, where we see great opportunities both in card growth and other payment type growth not only for Marquette and the local companies in that specific either whether it's a continental country.

But also for our customers. So we will look to really M&A to either fill gaps on our roadmap or to accelerate our product roadmap.

And if I would just add one thing to that.

More of the more reasonable valuations in this space are certainly helpful and we have a strong balance sheet. So we'll be disciplined about it but we certainly.

I think there are there could be opportunities for us to accelerate our plans as Jason said.

Yes, it probably could be a good.

Newtown acquisition lever as well Mike.

Got it.

Thinking about the.

The partners added post 2019 is there a good way that we can dimensionalize the growth in that debt.

Part of your business and what I'm trying to get at is is you have a lot of these new partnerships and relationships coming on.

I would assume that you are kind of slow to ramp those up to their full run rate I guess, what inning are we in.

Some of the new things that you have coming out and maybe call. It like a wallet share gain type metric with your existing partners in that world.

So I've talked about this in the past and certainly Mike would appreciate this is a unique thing about visa and Mastercard. They are interconnected every merchant in the world.

Whether online or offline that wants to accept payment cards, so that solves or what mark had a solid stream on a card issuing is really is that last mile.

And we have seen a lot of.

Customers and very well known names of customers come on our platform and these were verticals that even five years ago, we werent really using an <unk>.

Household terms like on demand delivery or buy now pay later later or even expense management and we've identified those verticals early we think theres a number of other verticals out there as companies begin to grow while servicing the existing verticals, which is how do we help.

A customer like a firm.

Spread their wings throughout the world and shorten the time to market for bringing merchants onto onto their platform and whether online or offline. So I don't know if theres a way too and we don't we obviously don't break out specific verticals and.

In regards to their growth.

I think if we the numbers Mike threw out about 2019 around our growth of three five times.

Net revenue in 2021 and 2019 as we've seen a successful the vertical now we've gotten tailwind from the pandemic as consumer choice really changed in regards to not only how they order groceries and food.

But how they actually shop now there's a number of other verticals out there where both modern card issuing and other payment types are really important.

Here in the U S, but other places internationally so.

We've talked about this in the past and I think I've talked about it in the beginning here, we reprocess less than 1% of the card volume in the U S.

That's which is six trillion dollars and then far less than that globally, which is 30 trillion. So if you think about where we're at today and to your point still very early innings in regards to not only the growth that we believe will happen on our platform.

But the growth internationally, both on existing customers, new customers and new verticals.

And then I guess, maybe if I will.

Got it.

Sorry, I was just going to add one thing I think we still would expect to for the growth to continue to accelerate from those newer cohorts. So it does take.

Maybe a year or hopefully less to get onto the platform and then it takes several quarters to ramp up so.

We still see a lot of growth from those newer customers. Obviously, they are growing really fast and contributing more and more but there is still more to come.

Got it thanks, Mike and Doug Congratulations on the new role.

Thank you.

Our next question is from Bob Napoli with William Blair. Please proceed with your question.

Thank you good afternoon.

Welcome Mike to the call. We are there one month and you deliver a phenomenal quarter.

Scott.

A few weeks.

A lot of great questions have been asked.

I'm really intrigued by the.

By the partnership with Plaid and open banking and is there and it seems like is that a global.

The relationship with Plaid is a lot going on in open banking in Europe .

I mean is this will this enable you get deeper into open banking.

Ed.

Is it channel will probably be a channel partner as well I guess.

They're a channel partner today for just the U S right now.

But yes, I've actually I've done Zach for many many years, we've talked about probably a number of times that we're going to work together. We finally found a way to work together, which is how do we create a much better customer experience for our customers.

And we're also big believers in open banking.

As we see both neo banks, becoming sort of on par with with existing large financial institutions. This allows our platform to help those companies build more products and extending their wings and our goal is to obviously spread more international and I've talked about before a company named Lydia.

Which is a digital bank based out of France, using us so as we can bring more <unk> technology to other parts of the world and the 39 countries that we operate in we'll certainly do that.

Thank you and I'd like to know, which new verticals, you're going to invest in before you and tell the world. So I can invest in some of those companies privately.

Sure.

Yeah.

But.

If you look at you as you look at your pipeline today.

New business, how does it look versus what kind of like the mix is there more international more new verticals or.

How do you the size of the pipeline versus of new business. I mean, you guys have just had a steady stream of announcements since your IPO.

But.

How does that pipeline look today and how is it different from maybe a year ago or a couple of years ago.

Well, it's different in that well.

Let me talk about three different vectors, one vector as our existing customers and where they want to go.

And maybe some of the new things that they want to build so we're building out new features new functionality to do that.

Two is where are we building out in specific verticals like credit.

And where can our platform based on new customers or existing customers. This is either through a partnership with F&B O. Our partnership with reserve to help those companies scale and grow and then third is really.

The international focus I think and we made these mistakes in the very early days of when we went to Europe , we brought our U S. Playbook and we were told pretty pretty clearly that youre playbook doesn't apply here. So when we go into new countries, we find different modalities of payments being used and we find.

Both of those customers that are in that specific area that want to use us and use our technology, but we also discover basically new modalities.

Like account to account transfer for instance that there's something hey should we be looking at this and potentially using it within our platform.

Our goal is to really unlock value.

By bringing tools to both customers and prospects.

Help them build more so going back to the pipeline again theres a different different ways. We can go and look at this I think number one is were less than 1% of the card market in the U S. Much less than that internationally. So the vectors of growth are pretty significant.

Thank you I appreciate it youre.

You're welcome.

Our next question is from Ashwin <unk> with Citi. Please proceed with your question.

Okay.

Hey, guys.

Mike.

Good results and Mike welcome.

I guess, let me start with.

What we did.

<unk> about sort of net revenue retention in 2022.

Obviously, you're right.

Bust level that you guys have.

And then the maybe.

A related question from a margin perspective is your visibility into.

Into into full year gross margins given mix et cetera.

Yes, I can I can take that one I can take that.

If you look at the revenue retention that we've had right in 2020, the number was 200% and a lot of that was fueled by on demand delivery rate was was booming at that time.

121 more be NPL.

Related and then some additional ramp in digital banking for example.

And so we still think that if you look at our client base and the way that Theyre, expanding and then theyre, even diversifying as Jason mentioned earlier when talking about the NPL sort of there'll be different flavors of BNP L and different ways to approach it to continue to expand that offering and so we still feel.

That that number will come down just like revenue growth to come down as the base gets larger and larger.

But we still have.

An existing customer base, that's growing incredibly quickly.

Looking to expand into new geographies as adjacent as also mentioned and diversify their offerings. So they are all things that we're helping them with so we see this as something where.

This rate.

Our retention rate.

Remain quite high.

Likely will come down as the base gets bigger, but it's still a very high number.

Compared to most companies would enjoy.

And then your second question in terms of our visibility on the gross profit margin, yes, I mean, I think that it's harder to.

Projecting.

In the short term because you don't know sort of what the mix of our volume is going to be but if you look out over a longer period of time like in this case sharing what we expect for all of 2022, then than a lot of those shorter term impacts.

Move away and Youre getting a much bigger mix of volume that you as a little bit more predictable so.

It's there still could be some variability there, but when we look at the size of our of our business. The behavior that we've seen to date and where we expect our customers to expand we feel like we have a reasonable ability to to projected in and then obviously as each quarter goes by we will share details as things change.

Got it.

Really appreciate the cadence comments that you had could you just to put a finer point on it.

As I think of Q1 versus Q2 could you quantify the tax impact and looking further out.

True up impact from network incentives versus upside due to be NPL, because I think the latter Mike Keith might discontinue to up obviously one time.

In nature.

Yes, So I think if you if you look at the tax impacts.

It is hard to know exactly when people will file and get their refunds, but.

We are already starting to see that earlier than what we had seen last year. So.

Right now I guess, our assumption is it will roughly be split between the two quarters.

Some of it will come in in late February and March.

Some people won't file until the deadline right and so then you get the benefits of that and more April and early may. So that's that's what we're expecting but it's.

No.

It's really I guess, what we've assumed is maybe what I should say.

But it's a really hard thing to know because it really is based on how quickly people will determine decided to file.

Got it.

Thank you.

Our next question is from Josh Beck with Keybanc capital markets. Please proceed with your question.

Hi, This is Alex on for Josh. Thanks for taking the question I wanted to check back in around the crypto vertical I may have missed it I don't think we heard anything in the prepared remarks.

Just appreciate any thoughts around fourth quarter momentum and kind of what you're excited about in this vertical looking into 'twenty two.

Thanks, Alex.

So as we've talked about in our <unk>.

Last quarter was our platform acts as a gateway between Fiat and crypto currencies for partners like Coinbase back fold shake pay.

And we're seeing a lot of incoming interest about this capability, even because we see pretty large swings in the price of crypto a number of types of crypto in the market.

Yes, Mark had a platform crypto of innovators now enable their customers to make these fiat purchases and we're now finding that they are wanting to consumers are finding that this is a nice product to have especially holders of crypto.

Instance, coinbase users can swipe a market of powered card at the point of sale and we send an authorization for notification at coinbase to check the user's crypto balance once they approve coinbase sells a crypto Fiat and funded the transaction all of this happens in real time, and really creating a seamless experience for corn based users spend their funds directly from their wallet battalion.

The transfer of funds. So we don't we don't break out specifically, how each customer is doing.

I will say is we are seeing significant traction from these customers revenue from these customers is now in the millions, whereas last year it was almost nonexistent.

And much like we did for verticals like on demand delivery and buy now pay later, they're using our <unk> funding or just some time finding technology to go build this so we're excited about the vertical we're investing more in it.

As we see demand increasing and as we've heard in the last couple of days.

President Biden, signing in order to look more and more regulation on somebody who thinks.

That regulation in the crypto market is actually an important and in some ways. It is going to unlock more value for companies like Mark had on our customers.

Great I appreciate all the thoughts there maybe just lastly, with respect to the Citi relationship.

Do you view this as more or less representative of the kind of size and scope of the opportunities in the pipeline just kind of thinking about the initial land opportunity.

Yes.

Okay.

These answers.

Yes.

Just to put a finer point on that I mean, we've talked about.

During the road show in the last few quarters.

Large financial institutions is an important part of our strategy.

We are in the <unk> business, we powered this DNA match earlier with Commerce, Disruptors, where they needed picture Sabo shovels to go build their businesses now we've attracted different types of companies, especially now in the large financial institution space, where they're wondering hey, how do we use mark head of technology to help us.

Build new features new functionality and new businesses. So if.

It's something that is a strategic imperative for us and something that we will be focusing on and talking about more in the future.

Perfect. Thanks, guys Youre welcome.

No.

We have reached the end of the question and answer session and I will now turn the call over to Jason Gardner for closing remarks.

Thank you Kyle.

Thank you Mike.

Two weeks on the job joining us for Q4 of 'twenty. One earnings also thanks to Stacey. Thank you to everyone that asked questions. Thank you for everyone joining the call.

Have a great two.

2022, we very much look forward to talking about our Q1 of 'twenty two results.

We'll let you know sometime in the future when thats going to happen. So thank you again and stay safe take care everybody Bye bye.

This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.