Q3 2022 Marqeta Inc Earnings Call

[music].

Yes.

Good afternoon, ladies and gentlemen, thank you for standing by.

Welcome to the market, our third quarter 2022 earnings conference call.

As a reminder, this conference call is being recorded.

I would now like to turn the conference elbow to Stacy Feit, Vice President of Investor Relations to begin please.

Please go ahead.

Thanks, operator, before we begin I would like to remind everyone that today's call may contain forward looking statements. These forward looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations web site, including our annual report.

On Form 10-K for the period ended December 31 2021.

Our subsequent periodic filings with the SEC actual results may differ materially from any forward looking statements. We make today. These forward looking statements speak only as of the time of this call and the company does not assume any obligation or intent to update them, except as required by law.

In addition, today's call includes non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures reconciliations to the most directly comparable GAAP measures can be found in today's earnings press release or earnings release supplemental material.

All of which are available on our Investor Relations website.

Hosting todays call are Jason Gardner Marquette, its founder and CEO and Mike Miletich, Marquette as Chief Financial Officer.

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

Thank you Stacy good afternoon, everyone and thank you for joining us for <unk> third quarter of 2022 earnings call I'll start with a brief overview of our results for the quarter.

Total processing volume or PPV was $42 billion in the quarter.

Representing a 54% year over year increase continuing the rate of growth we saw in the first half of this year.

Our TPB PPV for the first nine months of 2022 was $120 billion exceeding our PPV for the entire 2021 fiscal year of $111 billion.

Our net revenue of $192 million in the quarter represents a 46% increase from the previous year growth was strong across multiple verticals in both our managed by <unk> and powered by market of customers, particularly in digital banking and expense management block.

Block accounted for 72, 5% of our net revenue up from 69% in the second quarter as the cash App card continues to grow active users and drive engagement on the platform specifically the cash app users that also have a cash app card with 35% in the quarter.

Up from 31% at the end of the year and a direct deposit inflows were $2 billion in September up 65% year over year, which helps fuel card spending. These are both products that mark had it provides the cash app.

As we look ahead at the many opportunities for Mercado the tread trend toward embedded finance is undoubtedly one of the biggest according to Bain capital the value of embedded finance transactions is expected to reach seven trillion dollars by 2026, our leading cloud native highly configurable.

We'll API first platform is well positioned to power this trend.

We enable our customers to create seamless and customized digital experiences for their users without the limitations and compromises that legacy financial platforms have imposed on innovators in the past.

We can serve a wide range of companies looking to expand into financial services and existing financial institutions looking to increase customer engagement through innovation Marchetta has momentum and we succeed by ability our ability to rapidly expand our platform's functionality to fuel continued.

Both.

A testament to our strength and providing a flexible infrastructure for companies that look to offer embedded financed is our recent partnership with one the independent fintech startup backed by Walmart and Ribbit capital.

<unk> has chosen <unk> to enable the delivery of products that help customers get paid.

<unk> save and grow their money, specifically, we will start by powering the one the one card and marchetta, we'll look to support them as they expand to other products and services.

Connecting payments with investing as an excellent use of embedded finance we are doing exactly this as part of our work with stash stashes focused on helping Americans and best including small dollar amounts to build long term wealth.

<unk> is supporting the company with their stash stock back debit mastercard, enabling their customers to earn stock on almost every swipe of their debit card.

Back in debit Mastercard built on our recently launched dash core as it is.

As a proprietary infrastructure platform of which market. It is a key piece, which enables stash to unlock innovation and financial technology, including banking and in the future new capabilities in credit savings lending and more this launch will help stash more easily welcomed new customers.

Millions of everyday Americans, who want to build long term wealth.

We also power the embedded finance evolution by enabling well established financial institutions to offer their current customer base digitally enabled services to more effectively compete with new bank offerings. This quarter, we began our partnership with Raiffeisen Central Bank, a leading banking network operate.

Throughout Europe to help power their digital banking brand <unk> digital bank, the companys customers when a simple digital solution. So they turned to market as global modern issuing card platform to enable raiffeisen digital banks customers to access their accounts across devices you will initially rollout this.

Pollution in two countries, Poland, and Romania, with our single stack solution <unk> will enable to expand that rollout across Europe over time.

We are pleased with our four were mentum to power, new embedded finance customers and we have been offering many of these capabilities for quite some time.

Our expertise and scale means our customers place significant trust in our platform to power their business.

We expect these relationships the last many years into the future in fact this quarter, we renewed many key customers across different verticals included Lydia and financial services in Florida in the buy now pay later or be NPL space, we continue to build upon our market leading position and our track record of innovating in that.

NPL space one of the earliest examples of embedded finance, we recently signed a deal with scholar PE.

Italy first Unicorn the company as a leading the NPL provider in southern Europe , and soft market has expertise to modernize and simplify their offering.

Whereas previously merchants had to be trained on how to use the scale of PE and customers had to set up a new profile on the spot market. This solution will allow scholar pay to seamlessly expand their network and allow customers to pay using a single use virtual card.

So recently signed a Canadian expansion deal with a firm one of our longstanding customers.

To maximize the opportunities embedded finance, we've expanded our key banking services that our customers can use moderately archived for banking a portfolio of banking products that represents a significant expansion of our platform capabilities.

Banking is a natural evolution from our modern card issuing platform as our customers and prospects look to provide a comprehensive package of innovative digital banking features and card offerings.

Marquette at for banking provides our customers with a suite of bank account and money movement features offered through market as bank partners, including demand deposit accounts direct deposit with early pay.

<unk> cash flows and fee free Atms, Bill pay and instant funding capabilities. These offerings are modular meaning customers can choose the features that best supports our businesses and easily fit those building blocks into their product offerings because of our innovative products come built into our monarch card issuing platform.

They create a seamless user experience on a modern platform that operates at a significant scale. We will continue to release additional market for banking features and products in the future.

Martin a card issuing product, allowing for fine tuned control by enabling individual customer our transaction level decisions. We brought the same level of control to the early pay feature which can give account holders access to certain payments up to two days earlier than the <unk> settlement date or cut as early pay feature.

<unk> of our customers with a new level of control.

By deciding on a transaction by transaction basis.

Deposits qualify for this better but.

The ability to leverage best in class modern card issuing and banking capabilities side by side is an attractive proposition for our customers looking to offer embedded finance. These are modern card issuing platform alongside mark headed for banking our customer Coinbase for example can achieve a level of engagement that benefits every.

Part of their business by adding a car to the coin based platform. They didn't can increase engagement by adding a deposit accounts of their customer can easily fund that can create a more comprehensive customer experience.

International expansion is another big opportunity for Mercado and we've experienced significant momentum in Europe in recent quarters, many potential European customers have specific preferences concerning how data is handled so we now offer data residency for our European customers were restored the most sensitive elements.

Our customers' data on European data services, we can now meet the high data residency standards adopted by many European businesses. For example, this was key to our opportunity with Raiffeisen Bank. This ability also bodes well for future business prospects, creating a playbook for offering data residency.

In new geographies, we believe we are very well positioned to capitalize on embedded finance, we have been leaders in the embedded finance space for many years, we have numerous strong customer relationships and be NPL Neo bank and expansion management verticals. In addition, our Marquette F for banking launch.

Enhanced capabilities to support our customers looking to provide embedded finance therefore investors should expect to hear more about this trend from Marquette and future announcements with that I will turn the call over to Mike for a deeper dive into our financials.

Thank you Jason good afternoon, everybody.

<unk> continued to deliver very strong performance in Q3 with CTV growth of 54% and net revenue growth of 46%.

<unk> eight point growth premium versus net revenue was almost entirely driven by our powered by marchetta customers, whose TBD continues to grow over 200%.

The strong net net net revenue growth was broad based with 20 of our top 30 customers growing at least 40% in the quarter, but led by cash up in particular fueled by their strong active user growth.

Our gross profit margin was 42%, while adjusted EBITDA margin was negative 7%.

Our adjusted expenses included an unusually large charge tied to an international processing indemnification costs that negatively impacted our adjusted EBITDA margin by three percentage points.

Net revenue was more than $10 million higher than we expected, mostly due to cash up outperformance favorable mix within the <unk> on demand delivery vertical and stronger than anticipated powered by powered by Marcelo T D. <unk>.

Gross profit was over $80 million and was about $2 million higher than we expected fueled by the revenue upside however.

Change in our expected business mix resulted in our gross profit margin being more than one point lower than we expected as the revenue outperformance did not translate proportionately to gross profit.

Although block drove 72, 5% of our net revenue in the quarter their share of our gross profit is more than 15 points lower than their share of net revenue.

Adjusted EBITDA was also about 2 million better than we expected driven by the gross profit upside, which combined with the stronger net revenue resulted in the adjusted EBITDA margin being more than one point better than expected.

Q3, <unk> was over 42 billion growing 54%, which is in line with our growth rate in the first two quarters of the year.

This consistent growth is a testament to our ability to grow at scale as the year over year growth in TV dollars has increased by about $1 billion each quarter. This year as we grow over a sequentially increasing base. In fact in Q3, we had over 30 days, where we processed over $500 million in volume.

<unk> to less than 20 days in Q2.

Let me share a few TBD performance highlights by vertical.

Growth in the financial services vertical accelerated more than 10 points from Q2, but it's still but it still grew a little slower than the overall company.

Within this vertical spend growth and less discretionary categories continued to significantly outpace growth in all other categories.

On demand delivery growth was similar to last quarter due to continued increases in consumer demand and our customers expansion into new merchant categories.

Lending, including buy now pay later grew strongly although Q3 growth was a little slower than our overall TBD.

Growth in this vertical slowed versus Q2 due to customer's tightening their credit requirements increasingly tougher comps from the previous year.

One customer migrating a portion of their volume within one of their programs.

Expense management, TBD nearly tripled year over year.

Year over year increase in dollars was greater in Q3 than it was in Q2, but the rising comps last year. It did slow the growth rate in Q3 versus the prior quarter.

Spending continued to be helped by the rebound in travel.

Non discretionary spend categories, such as supermarkets drugstores fuel and utilities remained approximately one third of TPB this quarter.

More discretionary categories, such as retail travel entertainment and home improvement remained approximately one six of our Q3 TPB and continued to grow more than 10 points faster than other categories.

Net revenue was $192 million growing 46% this quarter, our net revenue take rate was one bps lower than last quarter and three bps lower than Q3 2021, mostly due to the growth of our powered by Mark EDA business.

Whose share of our total TPB increased two points versus last quarter and has doubled since Q3 last year.

As a reminder, in our powered by our Kettle business, we primarily have a processing relationship with our customer and therefore, the net revenue take rate is lower than our managed by Markel a business, where we serve as the card program manager.

Although the net revenue take rate is lower the gross profit take rate is similar to several verticals and are managed by mark out of business.

Q3, gross profit was over $80 million growing 36% in.

In Q3 last year, we finalized a key network contracts, which resulted in a catch up incentive payment without that payment or gross profit growth would have been over four points higher this quarter.

Gross margin was 42% on par with the Q2 margin and lower than the comparable quarter last year due to the timing of incentive payments and less favorable business mix.

Q3, adjusted operating expenses were $94 million growing 46%.

As I noted earlier. This includes an unusually large item tied to international processing indemnification costs.

This item contributed nine points to the growth of our Q3 adjusted operating expenses.

Our expense growth has steadily slowed each quarter this year.

As we identify efficiencies and the incremental year over year investment required to fuel our growth shrinks as the base of resources with inmarsat or expense.

We expect this to continue even as we invest in future growth opportunities.

Excluding the unusually large item roughly three quarters of the adjusted expense growth continues to be directed towards technology and product resources and investment focus on broadening our capabilities and increasing our platform's resiliency reliability and scalability.

Q3, adjusted EBITDA was negative $14 million, resulting in an adjusted EBITDA margin of negative 7%. The indemnification cost included in adjusted EBITDA negatively impacted our margin by three points.

Interest income was $7 million triple the Q2 amount driven by rising interest rates.

Q3, GAAP net loss was $53 5 million.

Late in the quarter on September 14th our board of directors authorized a share repurchase program of up to $100 million in Q3, we repurchased 196 million shares.

For $13 9 million at an average price of $7.05 per share.

Yeah.

Now, let's shift to our perspective on the fourth quarter.

At the time, we provided second half guidance back in August we expected that the tailwind that drove our first half upside would continue, albeit with tougher comparable especially in the fourth quarter. We also surfaced our concerns that customers signed since mid 2021, as well as crypto customers might ramp their businesses more slowly as they cut back on marketing dollar.

And investments in growth for the most part these expectations have proven true how.

However in August we also highlighted that given that many of our customers are leaders within their verticals it was possible or larger customers my thrive in this environment for.

For the most part in Q3 that proved to be the case across each of our four major verticals, particularly financial services.

Based on our performance in Q3 and October we are increasing our expectations for Q4.

We now expect Q4 net revenue growth to be between 29 and 31%.

Remember last year, there was a surge in holiday spending, particularly in the NPL and the expense management vertical was ramping rapidly which makes for a tough comp and not something we expect to repeat itself. This year given the current macroeconomic environment.

Q4, gross profit margin is expected to be 42% to 43% as our business mix shifts.

Toward large customers, who have better economics with us and the outsized growth of our financial services vertical which carries a lower margin than other verticals.

This is a seven this is a several million dollar increase in our Q4 gross profit expectation since August .

Year over year expense growth will continue to slow.

Therefore, we now expect Q4, adjusted EBITDA margin to be negative, 5% to 6% improvement.

The improvement in adjusted EBITDA expectations. Since August was driven by higher gross profit as well as lower expenses due to realize efficiencies and targeted hiring.

Our expectations for the full year of 2022 have improved significantly as a result of our outperformance in Q3 and our raised expectations in Q4.

We now expect 2022 net revenue growth to be 44 to 45 44, 5% gross profit margin to be 42, 5% to 43% and adjusted EBITDA margin is expected to be negative six to six 5%.

The opportunities from our Canada power the embedded finance evolution for both Disrupters incumbents in the U S Europe and beyond are a mess.

As we move into the last quarter of 2022 market is on a great trajectory as we continue to diversify and scale the business.

TBD in the first nine months of the year has already surpassed our total volume in 2021 growing over 50% each quarter and 'twenty two.

Our net revenue and take rate remained steady this year as we continue to add value for our customers with highly configurable platform with expanded capabilities and robust program management solutions.

Gross profit margins remained right in the middle of our stated long term range of 40% to 45%, reflecting our operating leverage as we expand.

We continue to invest thoughtfully and with discipline and new capabilities and resiliency, while finding efficiencies as the business scales, which reflects our commitment to improving our adjusted EBITDA margin as we grow and ultimately achieve our long term target of over 20%.

I will now turn it back over to the operator for questions.

Thank you.

Ladies and gentlemen at this time, we will be conducting a question and answer session.

If you would like to ask a question. Please press star one on the telephone keypad.

A confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue.

All participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock piece.

Ladies and gentlemen, we request you to restrict to one question Paul participant.

One moment, please while we poll for questions.

Our first question comes from the line of Tien thing hung from J P. Morgan. Please go ahead.

Thank you so much thanks for going through all the detail actually wanted to ask on Makena for banking, if you don't mind.

Jason just curious how ready that is.

For for commercial applications are you primarily going to pursue de novo opportunities or is there an opportunity to work with existing players there.

Just trying to get a better sense of how quickly that can ramp up.

Hey, Tien tsin. Thanks for the question. So it's both Mark Eddie for banking really just simply represents a natural extension expansion of modern card issuing.

And we believe company to some degree will be financial services companies I've said that many times in the past and Thats actually what embedded finance is.

These are large companies such as retail tech companies and one integrated platform with card issuing as a way to monetize as well as other services to provide stickiness and engagement and so we approach. These products and features very barquette away, which is modular in nature customers get to pick and choose the building blocks with.

They need for their business and again. This is an extension of our modern card issuing platform. So whether it's <unk> DDA to facilitate spending on a card that basically drives funding onto the card and then we obviously generates interchange as part of those those cars being used so you take modern card issuing you marry that with banking as a service allowance.

For this sort of fine tuning control that a transaction level and then we've added extra features in there like early pay which gave account holders access to their payroll up to two days earlier and all of this can be designed on a transaction by transaction basis, which deposits qualify for this.

Benefit and a lot of times you see these programs were just at a program level. So now we can get down to a specifically the user so we're far from done and the additional list of features and functions. We plan to provide like we're continually building so youre going to hear a lot more about this and then we would also look to acquire potentially banking as a service functionality. If you find it there.

<unk> fit.

Both opportunistic and strategic but I.

I can turn it over to Mike He has anything to add yes, I think just from a financial perspective right.

Right now these capabilities are really done with the aim to increase card spend and support our customers. We look at this as really a great incremental business to our current business.

So the goal is really to increase our win rate with customers by providing this holistic solution from us rather than our customer having to use multiple providers.

But that said the even the small amounts that we may make today that will be growing over time as more customers adopt this.

That will be highly accretive with these capabilities once they're built.

So just a little bit more revenue on the same transaction or the same volume with a very low marginal cost. So as it does expand overtime, we expect it to be very helpful financially.

So if you don't mind me just clarifying what the quick follow up just with the with the with win which is a good one which is a nice win sorry.

On the card side right I suppose there could be opportunity then to promote inflows in other types of <unk>.

Cash movement, there could be an opportunity to expand that and obviously generate better outcomes for the one card is that one way to think about it as an example, yes, that's definitely a way to think about it so the way our customers work, obviously that theyre de novo products, they get them up and running they learned about their customer base customer base and the features and functions that they need because they're already integrated.

Onto the platform I think we talked a lot about how you integrate once into marchetta you can launch in every geography that we're operating in and then you can actually create the features they will add those features over time, so that they can better not only drive engagement for their customers or their users, but obviously drive revenue for their business.

Great.

Thank you so much.

Thank you.

Our next question comes from the line of Darrin Peller from Wolfe Research. Please go ahead.

Yeah.

Hey, guys. It's great to see these results can we just touch on <unk>.

Outside of block the other verticals seems like you have pretty good strength continuing in areas like expense management.

And certainly in areas like on demand delivery, even still despite the size of the comps and so maybe just touch on a little more of what Youre seeing there and we can get into a little more detail you guys have done a great job being vertical centric and really differentiating on an industry basis to the wind business are you seeing anything change on that front competitively in that or anything else.

Thanks, guys.

Thanks Darrin.

No we're not seeing anything change I mean things are actually very stable.

And like an on demand delivery I'll start there.

That is our most mature vertical the growth was it was very consistent with last quarter end and as I mentioned in my remarks, what we're really seeing fueling the growth as our customers expanding into new areas. So it's almost like a.

They are increasing their acceptance if you will particularly in drugstores convenience stores.

Retail, which is really help improve prove engagement and then on top of that from a revenue perspective. It outperformed because we had a favorable business mix that improved the interchange relative to the customer revenue share.

About the different factors that can implement influence interchange.

The way the mix of spending happen this quarter, it was sort of accretive to our revenue versus the volume growth.

On the expense management side.

<unk>.

That area of the business is just growing incredibly incredibly fast. So it's now in the mid teens of our TPB as I mentioned, it's double the share from last year, and we have six customers who have TPB over $100 million.

It's just.

An area that is growing very fast as businesses look to to get more efficient and they want their employees also to have a little bit of a more user friendly and flexible experience in and Thats really what's fueling our success there.

Okay, no signs of change it sounds like.

No.

That's great to hear and in fact, as I mentioned to Dan just to reiterate our expense management growth in dollars or TPG growth in dollars was actually even more than it was in Q2. So the it's accelerating in terms of the spend on a year over year basis, but because of the you know the year over year comparison is also.

Growing really fast the growth is coming down, but it's still.

Almost tripled versus last year.

That's really great. Thanks, Mike.

Mhm.

Thank you.

Our next question comes from the line of Timothy Chiodo from Credit Suisse. Please go ahead.

Great. Thank you for taking the question you sort of alluded to this a little bit earlier, and Mike, but I wanted to dig into it if we could get maybe just a range I know it'll be hard to put an absolute number on it it's early stages and there'll be sort of a range of products, but generally speaking it sounds like mark kind of banking will be a higher gross margin in terms of gross profit as a percentage of revenue it will be a higher gross margin.

And as for you could you just put some directional numbers around that compared to current total company gross margins how much higher this could be or maybe even just talk about sort of as a percentage of volume and how it might compare to the current core business, which is clearly much more tied to interchange.

Yeah, So you're right, we expect it to be significantly higher margin than our than our current business a lot of these services might.

Might be charged on a per user basis or a per transaction basis. So it really is just incremental.

Revenue.

And and potentially cost of revenue for the existing transactions and volume are getting already and so we do expect us to be and even in the cases, where we provided today you know we have some customers using some of these services and it is a much higher gross margin.

No.

It won't necessarily be a.

A huge <unk>.

Revenue growth driver directly as I sort of read irritated reiterated earlier I think it's much more about making our overall value proposition much more compelling and improving our win rate, but in terms of.

Within that incremental revenue, we get it does come at a higher much higher margin and therefore, it is very beneficial for us on the bottom line.

Excellent. Thank you Mike and then the brief follow up also on marketing for banking safe to say that the closest competitor to this offering would be along the lines of services that are offered by Galileo or would it be similar to some of the offerings within fiserv and F. I asked or maybe just others that you could just mentioned that could maybe just contextualize what this looks like.

And if those are reasonable competitors to think about.

Amongst others.

Yes, those are reasonable competitors. If you think about I mean, we're all in the business of global money movement, and a little Bobby Global money movement from our kind of began with modern card issuing and obviously, we consider ourselves certainly the leader in that.

We created that category and have obviously done really well in it over time, what we find is that our customers want to move money in many different ways and we've created a very mark had a way which is the native apr's are created we obviously out of credit so that we'd talked about that a lot lately.

And a number of different companies have created thats like the ones that you've mentioned theres, probably more out there as well.

We look at it from a position of Palomar kind of works with our customers the ability to.

Natively integrate with these API is into the platform once.

Launch in many geographies many other ways to move money sort of certainly outside of the United States will be will be coming so our strategy in how we approach the market with our prospects for making our customers. Even more successful is how we differentiate ourselves from other other competitors.

Thank you Jason I appreciate both of us.

Welcome.

Thank you.

Our next question comes from the line of Ramsey El <unk> from Barclays. Please go ahead.

Hi, guys. Thanks for taking my question. This evening and I wanted to actually follow up on Tim's question and just again on Mark headed for banking ask how the sales pipeline is developing and more specifically if you could comment on the cross sell opportunities and whether the genesis of the offering with sort of meeting the demand that youre seeing in your existing <unk>.

Customer base are more sort of a product suite that you think might meet an unmet unmet need in the sort of external marketplace.

Yeah. So so we have a number of announcements to make in the coming quarters. We recently announced certainly today was the deals with one and we've also talked about Uber and the card. There. We have a decent addition, recent renewals like Lithia, we've talked about Florida theres more to come on that front exciting deals in the pipeline for <unk>.

Credit.

Especially in international we talked about our growth within the EU.

And we also like we haven't mentioned was discussions with large <unk>, obviously, those sales cycles take long but.

We've talked about with the <unk> bank, we're getting to many other parts of that so if we think about that as finance, it's exciting because we believe many companies are going to become financial services companies in that financial services that are in those companies is essentially.

<unk> finance or what we call market for banking. So again, our strategy has always been platform centric and then the modularity of that the ability to add lots of different features and functions that a customer can pull off the shelf.

Integrate quickly and obviously create a better experience for their customers. So we believe and have believed for a long time, we think embedded financed with something we've certainly been around or have worked in for some time, whether we're supporting someone's core business with a card or we are their core business for the card and again. This is just expanding our feature.

And functions around global money movement to make sure that we're capturing many opportunities to move money around the world and specifically move money into cars, where our customer generates.

Revenue from from interchange and obviously, we've talked about in the past here, which is that their success is our success. So we're just excited about how do we create a great strategy around the stickiness of our platform and their ability to succeed.

Ramsey like one of the thing we want to try to get in front of us.

Is if a customer says.

We have a very differentiated card issuing capability.

But.

I really would rather use one platform, so maybe I'm willing to sacrifice a little functionality on the card side, because I want some of these other.

Other banking like services and so what we really want to do is take that off the table and say well we can provide a holistic solution for you.

And while we're building those we are building things that are very Marquette alike in terms of their flexibility and Configurable City. But also then you can get our world class card card processing capabilities in a bundle.

Got it alright, thanks, so much appreciate it.

Thank you.

Our next question comes from the line of James Faucette from Morgan Stanley . Please go ahead.

Thank you very much I wanted to follow up a little bit on the <unk>.

Competition question, but.

Clearly.

You have a biggest customer that.

You'd like to renew when you can just wondering if you can get an update on that and kind of what you're seeing from the internal efforts both from them as well as other customers and potential customers.

Thinking about those as potential competitors.

And if anything is changing in an.

The landscape or what you need to do versus internally developed solution.

Yes, so I'll start with with block and as we've talked about in the past we have 18 months I think at this point still left on the agreement will share something as soon as possible.

When.

Black decides they want to go build something new they build it with us.

We obviously enjoy that we invested an incredible amounts going through our platform.

Both in tech and product that our customers like block benefit.

So when there is more to share that we will definitely share it.

And then around the competition piece.

Our strategy has been working really well and I think as we've seen as of late where the economy is beginning to change.

And a market leader.

As Mike had mentioned.

We are part of our strategy is to not only land and expand within verticals, but really target the top companies in that space and we've done really well with our strategy, which is in the past you've talked about starting with commerce disruptors moving into digital banks moving into Tech Giants, and then moving into large financial.

Institutions, we see different types of obviously competitors, we see ones like the pieces of the world that operate with large financial institutions, we see smaller players that maybe up starts from the last two to three years that are really just starting to get traction, but we feel like our strategy has worked really well we continue to execute against that.

We continue to land and expand not only.

Large opportunities like one because we built the trust within the market, but then again, whether it's embedded finance are kind of her banking, we're finding that our customers don't want to go to other vendors to get technology, they want to stick stick with us and use the other pieces that we have like the DDA accounts or the H feature so.

We continue to.

Renewal for new our customers, we continue to land new customers and we will continue that strategy as time goes on.

Thanks, Patrick.

Thank you <unk>.

Question comes from the line of oven.

Right.

From Citi. Please go ahead.

Thank you.

And congratulations.

Congratulations on the good quarter.

Okay.

Hoping you could kind of pulled back.

The.

Sort of the delays in outlook can you kind of walk through.

The factors maybe is it possible to size I rank order them.

Sorry, Ashwin can you.

Size of the rank order what about our outlook.

The factors that led to the change in the outlook.

Oh sure yes.

Yeah. So.

So yes, theres a few things. So one is that we are last quarter. One of the key things. We said, we thought newer customers of ours, who are ramping and then particularly everything thats going on the crypto space that those customers just may not.

Invest behind those programs nearly as aggressively as they may have planned to do in the beginning of 2022 and that's largely did play out but what we also speculated was it could be that the bigger players who have scale already would then step in.

And capitalize on the fact that there maybe it wasn't as much competition in the market as they have grown accustomed to over the last 12 to 18 months and so a lot of it was just the just performance strong performance by our largest customers.

<unk> being of course.

Doing incredibly well, but just generally speaking that's what we're seeing and so as we looked at that performance. In Q3. We're really then just translating that to Q4. The only difference from a growth perspective is just the incredible holiday season that we had last year. If you. If you look at the kind of growth that we saw just.

Across the economy, and retail spending and particularly in the NPL.

That's just not something we feel we'll replicate again and so the growth rate is coming down, but that's not necessarily representative of the kind of performance that we expect to see just because we are kind of a lapping.

At least once in a decade alike.

Today season that we had last year.

Got it so obviously, you're just basically taking the same factors that had a peak.

TQ into full queue, and that's really what it what it seems like.

That's right.

Yeah. The second question was the you know if we have a downturn.

Would you expect vastly different trends in sort of powered by versus managed by US is it a macro preference element to how clients view those options.

Well, so we power a wide range of business models across both consumer and commercial and as we've talked about our net revenue isn't overly indexed into discretionary spending.

We have fixed the volume on our platform is for highly discretionary items. These are things like large electronics are travel home improvement, but people still need to spend money on things like groceries gas and other essentials. So.

Our volume growth is largely driven by customers displacing other forms of payment and in some cases changes in the way people pay was accelerated by the pandemic may decelerate because of the potential for ascension or some say we're in a recession now.

But there is expense management and corporate card these newer banks and consumers buy now pay later versus other forms of revolving credit so.

We don't know what to expect but we feel like we're not kind of overly indexed on one versus the other and I think specifically ashwin in terms of the power bi versus managed by dynamics.

We.

Add incredible sort of turnkey solution that are managed by offering for customers that they value and because we're doing it at scale I think a lot of customers.

Just look at it and say that the cost the amount of investment I would need to make to have those capabilities at the level of service that market. It provides.

I actually have a.

Good price right it would be more expensive for me to do that investment so.

Just because of the economy may be shifting we don't necessarily think that gets customers thinking more about a powered by structure because that would require significant investment and knowhow for them to put in place versus the what the solution we can deliver at scale.

Thank you.

Thank you.

Our next question comes from the line of Rena Kumar.

From UBS. Please go ahead.

Good afternoon, and thanks for all that helpful details on your call.

Any thoughts on when we could hear an update on your contract with block and you know and can you discuss how your conversations are progressing a proof point. Thank you.

Yes, thanks, Ron So we've talked a block every day, we obviously power a lot of products across the portfolio both in cash App.

Square card on the merchant side. So there's a lot of conversations we have on a regular basis and they certainly have adopted a lot of our platform.

Not only across card issuing and processing, but also across embedded banking and mark out of for banking.

So as I mentioned, it's about 18 months from the renewal about April 2024, I believe is the.

The contract is up.

And again I'm not going to comment on the discussions.

Regarding the renewal and as soon as we have an update.

We'll absolutely be talking about it.

We won't hold that hold on you were promised that we brought us.

Got it thank you.

All of the detail.

Yes.

Thank you.

Our next question comes from the line of Josh Beck from Keybanc. Please go ahead.

Thanks for taking the question.

To ask just about the level of visibility that you have at this point looking forward into next year, obviously, a lot of your growth I believe in any given year is from existing customers and it seems like you've dialed in certainly the growth rates.

Within some of the verticals and obviously you have a pretty good handle on expansion plans at a customer level. So curious on how you would characterize just the visibility and obviously the macro is uncertainty for everybody and then just with respect to the kind of embedded Q4 opex levels.

How we should think about that.

Jumping point poor investment plans in future years would be super helpful.

Kevin Kevin I think the in terms of your first question I think we're in very regular dialogue with our customers about what they're thinking because for many of them, where we really arkle aspect of the service, they're providing or how they monetize their service and so we're in quite regular dialogue with them.

How are they thinking about things.

How are they managing their own business and what are the implications for us. So I would say we have fairly good visibility in that sense. However, as you know right now in this environment.

It's very it's very unclear right about what things might be like in three to six months. So we can get their perspective on how they're doing their business planning, but they pretty consistently say.

We'll see.

And we're going to try to remain as nimble as possible. So we certainly are aligned with our customers, but that doesn't mean, we have a crystal ball.

In terms of the.

The opex or the expense levels for Q4, and what that means for next year.

There's a couple of things that impact our expenses in Q4. So one is just I guess two weeks ago. Now we were at money 2020, that's a big event for us that drives a lot of pipeline conversations.

<unk> engaged with a lot of new prospects and so that's we all spend a ton on marketing, but that's one of our major items and so that's something that happened in Q4.

Also.

As our volumes go up.

Recently with the holiday season, we do have a number of expenses that go up just related to R. R.

<unk>.

Cloud costs in some of our other kind of data and platform tools that are more variable in nature, so as the transaction.

Crowds pick up then we will have some additional costs and then we still are hiring.

In particularly in very selective ways for our key growth areas and so we are going to have.

A decent jumping off point for next year and our plan is to be fairly cautious as we proceed from an investment front into 2023 at least initially.

The level of uncertainty and then well.

We'll try to.

Make adjustments as we go through the year once it's a little more clear what might happen from an economic perspective.

Very helpful context, Thanks, Mike.

Mhm.

Thank you.

Our next question comes from the line of Mike <unk> from Goldman Sachs. Please go ahead.

Hey, good afternoon. Thank you for the question I just have two.

First I was just wondering if you could give us a little bit of color around TPB performance in the quarter by any top customer cohorts, whether that's top 510 or 20, and then second just on the fourth quarter.

<unk> outlook.

Is there anything you could talk about as it relates to industry vertical.

What may be accelerating or decelerating and perhaps you can remind us if there are any notable tough comps or anything like that that we should be aware of thank you very much.

Yes, sure so in terms of.

Performance I would say.

By cohort I would say our top five customers are non top five customers are still growing at a premium.

Two our top five customers, although it's maybe the gap isn't quite as big as its been in quarters past as I said, what we're seeing is some call it smaller customers or maybe investing a little less than some of the larger customers are capitalizing on that so that gap has closed a little bit, but our non top five customers are still growing faster.

Another way to look at it is another way we look at it as our new customers and how they are ramping and if we look at our customers that we.

We signed in 2019 or later, so we've only been on the platform. A couple of years. They are growing about four times faster than customers, who had been on the platform for longer.

And that growth is well over 100%. So we still have a lot of.

Newer customers on the platform growing quite quite quickly and and.

And that's obviously, helping to sustain our growth even as I mentioned on the call, even though our base keeps getting bigger and bigger we've been able to sustain that CTV growth in terms of on a vertical basis for Q4. The there are really two areas or three actually of our verticals that have significant lapping I would say the one that really.

It doesn't is the on demand delivery.

<unk> has been a more mature business for us in this time so.

Not huge differences in growth expected.

But the NPL.

Certainly has a very tough comp.

I think we've said last year, our Q4 be NPL volume was bigger than our whole first half of 2021 volumes. So the pickup was incredible and so that has a very tough comp.

Other one is just because of the strong holiday season, some of our customers in financial services, who support more everyday spending also saw a big acceleration in their growth and so again.

Our point of view I guess this is unlikely to be as strong as the holiday season, we had last year and so if you just even look at consumer confidence and sentiment.

And so that also will have a tough comp and then finally on expense management that was a relatively new vertical for us in 2021, and so the the growth was incredible and it was growing literally several 100 percentage points.

And so that growth is also coming down but as I said, even in Q3, it's still growing the business still like tripled year over year. So the growth is still going to be very healthy but not.

Not four five acts like we've seen in previous quarters.

Excellent. Thank you for all that detail that's very helpful.

Yes.

Thank you.

Next question comes from the line of Andrew about.

S. VC Nikko Securities. Please go ahead.

Hey, thanks for the time.

I wanted to touch upon.

<unk> EBITDA margin performance in the quarter.

Mike you called out some targeted hiring and various efficiencies just trying to get a sense of.

Some of the headlines we've seen around Silicon valley is presenting a more favorable.

No hiring environment for you today than perhaps you were you're operating in and just say no.

Six to nine months ago.

Yes Im translate.

Yes, there is no doubt.

That's something we we think will be beneficial to us I think if you I think we've talked about this before one of the big.

Big advantages we've had this year is actually back in kind of late late February early March we adjusted our plan so even only a couple of months in.

For the year, we changed our plans because you could see some of the macro warning signs at that time, and we decided to proceed with caution and so I think maybe where we benefited as we dial things back our plans already early in the year and there may be other tech and Fintech companies that Youre hearing.

Now doing les offset maybe kind of kept their foot on the gas for the first half of the year and then are now realizing that maybe.

It wasn't mistake. So we did we did get in front of it and we are hiring I would say you're right certainly the.

The level of competition for key talent is is on the decline.

And with some of the layoffs that are getting announced it seems like Theres a few a week now.

For major tech companies that is something that we're hoping to.

To take advantage and capitalize on that by being able to bring in some super talented people that maybe were would've been very difficult to get just a.

Six to 12 months ago.

Yes, I mean, that's a minimum.

Our governor on compensation growth.

In the near to medium term.

I agree and I think also what we would expect to see us.

Which is quite helpful is is.

And lower attrition, we obviously a lot of people like to hire we've got a lot of very talented people here, who have been a big part of the innovation that we've achieved over the last few years and so there's a lot of a lot of competitors, who would like that knowhow and that experience and so that's also something we expect to be a huge benefit if if we.

Can.

Better retain our key talent that will certainly help us in 2023.

That's great I appreciate the additional color.

Thank you.

Our next question comes from the line of Bob Napoli from William Blair. Please go ahead.

Great. Thank you and good afternoon, Jason like teen.

This numbers.

Jason I was wondering if you could give.

An update on your search I guess for a permanent CEO looks like because I mean, it seems like you're pretty pretty engaged still.

Still.

At this point and then just any thoughts on.

Your credit platform is that an area, we're likely to see an acquisition. Thank you.

Yes. Thank you I am very engaged on a day by day business I Love. This company had been running it for over 12 years.

In regards to the to the CEO search so we've met a lot of different candidates over the past few months.

<unk> been working close with the board and the executive team to meet a broad base of candidates from lots of different backgrounds.

And I'm really searching again for someone to the next CEO to lead the company from one to Infinity letter from zero to one and I certainly understand the market wants me to move quickly, but we want to hire the best person and we will do that at some point. So regarding the search I will have some for sure when we have it.

Regarding credit so absolutely.

We are looking at a number of different companies.

In the credit space. We think this is definitely the future of Mercado as we've been investing pretty significantly.

Started the journey in credit about four years ago, we now see customers up and running and using it like Green light.

We're excited about that partnership and their ability to succeed we see this more and more and there's been a lot of companies that have been started really over the last probably four to five years.

So we have been looking at a lot of different businesses in regards to.

What's the best talent, what's the best platform, how does it fit within our values and how we build software.

And technology, and making sure that has a good DNA fit.

With our value and our quality.

Our people.

So more to announce but I think we have a lot of different options right now in the market that we're taking a look at and as soon as we have something that we wanted to zero in on and if we can find a successful path forward, we'll certainly announce it.

Thank you Jason.

Okay.

Thank you.

Ladies and gentlemen, we have reached the end of the question answer session.

I would now like to turn the conference to Jason Gardner founder and CEO for closing comments.

Well. Thank you everyone for joining us for <unk> third quarter of 2022 earnings call have a great rest of the year happy holidays and look forward to speaking with you all in 2023 take care.

Thank you. Thank you.

The conference off market Op, Inc. Has now concluded. Thank you for your participation you may now disconnect your lines.

Yes.

[noise].

[noise] [noise].

[noise].

Oh.

[music].

[music].

Good afternoon, ladies and gentlemen.

Thank you for standing by.

Welcome to the market, though third quarter 2022 earnings conference call.

As a reminder, this conference call is being recorded.

I would now like to turn the conference Volvo Stacy Feit, Vice President of Investor Relations to begin.

Please go ahead.

Thanks, operator, before we begin I would like to remind everyone that today's call may contain forward looking statements. These forward looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations web site, including our annual report.

Art on Form 10-K for the period ended December 31, 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 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 our Investor Relations website.

Hosting todays call are Jason Gardner Marquette, its founder and CEO and Mike Miletich Marchetti, Chief Financial Officer.

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

Thank you Stacy good afternoon, everyone and thank you for joining us for <unk> third quarter of 2022 earnings call I'll start with a brief overview of our results for the quarter.

Total processing volume RTP fee was $42 billion in the quarter.

Representing a 54% year over year increase continuing the rate of growth we saw in the first half of this year.

Our TPB PPV for the first nine months of 2022 was $120 billion exceeding our PPV for the entire 2021 fiscal year of $111 billion.

Our net revenue of $192 million in the quarter represents a 46% increase from the previous year growth was strong across multiple verticals in both our managed by <unk> and powered by market of customers, particularly in digital banking and expense management blocker.

Block accounted for 72, 5% of our net revenue up from 69% in the second quarter as the cash App card continues to grow active users and drive engagement on the platform specifically the cash app users that also have a cash app card with 35% in the quarter.

Up from 31% at the end of the year and a direct deposit inflows were $2 billion in September up 65% year over year, which helps fuel card spending. These are both products that mark had a provides to cash out.

As we look ahead at the many opportunities for Mercado the tread trend toward embedded finance is undoubtedly one of the biggest according to Bain capital the value of embedded finance transactions is expected to reach seven trillion by 2026, our leading cloud native highly configurable.

Full API first platform is well positioned to power this trend.

We enable our customers to create seamless and customized digital experiences for their users without the limitations and compromises that legacy financial platforms have imposed on innovators in the past.

We can serve a wide range of companies looking to expand into financial services and existing financial institutions looking to increase customer engagement through innovation Marchetta has momentum and we succeed by ability our ability to rapidly expand our platform's functionality to fuel continued.

Both.

A testament to our strength and providing a flexible infrastructure for companies that look to offer embedded financed is our recent partnership with one the independent fintech startup backed by Walmart and Ribbit capital.

One has chosen <unk> to enable the delivery of products that help customers get paid.

<unk> save and grow their money, specifically, we will start by powering the one they're one card and marchetta, we'll look to support them as they expand to other products and services.

Connecting payments with investing as an excellent use of embedded finance we are doing exactly this as part of our work with stash stash is focused on helping Americans and best including small dollar amounts to build long term wealth.

<unk> is supporting the company with their stash stock back debit mastercard, enabling their customers to earn stock on almost every swipe of their debit card.

Back in debit Mastercard built on our recently launched dash core as it is.

As a proprietary infrastructure platform of which market. It is a key piece, which enables stash to unlock innovation and financial technology, including banking and in the future new capabilities and credit savings lending and more this launch will help stash more easily welcome new customers.

Millions of everyday Americans, who want to build long term wealth.

We also power the embedded finance evolution by enabling well established financial institutions to offer their current customer base digitally enabled services to more effectively compete with new bank offerings. This quarter, we began our partnership with Raiffeisen Central Bank, a leading banking network operate.

Throughout Europe to help power their digital banking brand <unk> digital bank, the company's customers when a simple digital solution. So they turned to market as global modern issuing card platform to enable <unk> digital bank customers to access their accounts across devices. We will initially rollout this.

Solution into countries, Poland, and Romania, with our single stack solution Raiffeisen will enable to expand that rollout across Europe over time.

We are pleased with our for momentum to power, new embedded finance customers and we have been offering many of these capabilities for quite some time.

Our expertise and scale it means our customers place significant trust in our platform to power their business.

We expect these relationships the last many years into the future in fact this quarter, we renewed many key customers across different verticals included Lithia and financial services and Florida in the buy now pay later, our <unk> space, we continue to build upon our market leading position and our track record of innovating in that.

NPL space one of the earliest examples of embedded finance, we recently signed a deal with scholar PE, Italy's first Unicorn the company as a leading the NPL provider in southern Europe , and soft market has expertise to modernize and simplify their offering.

Whereas previously merchants had to be trained on how to use <unk> and customers had to set up a new profile on the spot market <unk> solution will allow scholar paid to seamlessly expand their network and allow customers to pay using a single use virtual card. We also recently signed a Canadian expansion deal with a firm.

One of our longstanding customers.

To maximize the opportunities embedded finance, we've expanded our key banking services that our customers can use moderately archived for banking a portfolio of banking products that represents a significant expansion of our platform capabilities.

For banking is a natural evolution from our modern card issuing platform as our customers and prospects look to provide a comprehensive package of innovative digital banking features and card offerings.

<unk> banking provides our customers with a suite of bank account and money movement features offered through a market as bank partners, including demand deposit accounts direct deposit with early pay.

<unk> cash flows and fee free Atms, Bill pay and instant funding capabilities. These offerings are modular meaning customers can choose the features the best support their businesses and easily fit those building blocks into their product offerings, because our innovative products come built into our monarch card issuing platform.

They create a seamless user experience on a modern platform that operates at a significant scale. We will continue to release additional market for banking features and products in the future.

Our modern a card issuing product, allowing for fine tuned control by enabling individual customer our transaction level decisions. We brought the same level of control to the early pay feature which can give account holders access to certain payments up to two days earlier than the <unk> settlement date or cut as early pay feature.

<unk> of our customers with a new level of control.

By deciding on a transaction by transaction basis.

Deposits qualify for this benefit.

The ability to leverage best in class monarch card issuing and banking capabilities side by side is an attractive proposition for our customers looking to offer embedded finance. These are modern card issuing platform alongside mark headed for banking our customer Coinbase for example can achieve a level of engagement that benefits every.

Part of their business by adding a car to the coin based platform bidding can increase engagement by adding a deposit account to their customer can easily fund that can create a more comprehensive customer experience.

International expansion is another big opportunity for Mercado and we've experienced significant momentum in Europe in recent quarters, many potential European customers have specific preferences concerning how data is handled so we now offer data residency for our European customers were restored the most sensitive elements.

Our customers' data on European data services, we can now meet the high data residency standards adopted by many European businesses. For example, this was key to our opportunity with Raiffeisen Bank. This ability also bodes well for future business prospects, creating a playbook for offering data residency.

In new geographies, we believe we are very well positioned to capitalize on embedded finance, we have been leaders in the embedded finance space for many years, we have numerous strong customer relationships and be NPL Neo bank and expense management verticals. In addition.

Our Marquette F for banking launch gives us enhanced capabilities to support our customers looking to provide embedded finance. Therefore investors should expect to hear more about this trend from Marquette and future announcements with that I will turn the call over to Mike for a deeper dive into our financials.

Thank you Jason good afternoon, everybody.

<unk> continued to deliver very strong performance in Q3 with CTV growth of 54% and net revenue growth of 46%.

<unk> eight point growth premium versus net revenue was almost entirely driven by our powered by marchetta customers, whose TBD continues to grow over 200%.

The strong net net net revenue growth was broad based with 20 of our top 30 customers growing at least 40% in the quarter, but led by cash App in particular fueled by their strong active user growth.

Our gross profit margin was 42%, while adjusted EBITDA margin was negative 7% or.

Our adjusted expenses included an unusually large charge tied to an international processing indemnification costs that negatively impacted our adjusted EBITDA margin by three percentage points.

Net revenue was more than $10 million higher than we expected, mostly due to cash up outperformance favorable mix within the on demand delivery vertical and stronger than anticipated powered by powered by <unk> TBD.

Gross profit was over $80 million and was about $2 million higher than we expected fueled by the revenue upside however.

Change in our expected business mix resulted in our gross profit margin being more than one point lower than we expected as the revenue outperformance did not translate proportionately into gross profit.

Although block drove 72, 5% of our net revenue in the quarter.

<unk> share of our gross profit is more than 15 points lower than their share of net revenue.

Adjusted EBITDA was also about $2 million better than we expected driven by the gross profit upside.

Which combined with a stronger net revenue resulted in the adjusted EBITDA margin being more than one point better than expected.

Q3, <unk> was over 42 billion growing 54%, which is in line with our growth rate in the first two quarters of the year.

This consistent growth is a testament to our ability to grow at scale as the year over year growth in TV dollars has.

<unk> by about $1 billion each quarter. This year as we grow over of sequentially increasing base. In fact in Q3, we had over 30 days, where we processed over $500 million in volume compared to less than 20 days in Q2.

Let me share a few TBD performance highlights by vertical.

Both in the financial services vertical accelerated more than 10 points from Q2, but it's still but it still grew a little slower than the overall company.

Within this vertical spend growth and less discretionary categories continued to significantly outpace growth in all other categories.

On demand delivery growth was similar to last quarter due to continued increases in consumer demand and our customers expansion into new merchant categories.

Lending, including buy now pay later grew strongly although Q3 growth was a little slower than our overall TBD.

Growth in this vertical slowed versus Q2 due to customer's tightening their credit requirements.

Increasingly tougher comps from the previous year.

One customer migrating a portion of their volume within one of their programs.

Expense management, TBD, nearly tripled year over year the.

The year over year increase in dollars was greater in Q3 than it was in Q2.

But the rising comps last year did slow the growth rate in Q3 versus the prior quarter spin.

Spending continued to be helped by the rebound in travel.

Non discretionary spend categories, such as supermarkets drug stores fuel and utilities remained approximately one third of PPV this quarter.

More discretionary categories, such as retail travel entertainment and home improvement remained approximately one sixth of our Q3, TPB and continued to grow more than 10 points faster than other categories.

Net revenue was $192 million growing 46% this quarter, our net revenue take rate was one bps lower than last quarter and three bps lower than Q3 of 2021, mostly due to the growth of our powered by Mark header business.

Share of our total TPB increased two points versus last quarter and has doubled since Q3 last year.

As a reminder, in our powered by market a business, we primarily have a processing relationship with our customer and therefore, the net revenue take rate is lower than in our managed by Markel business, where we serve as the card program manager.

Although the net revenue take rate is lower the gross profit take rate is similar to several verticals and are managed by mark out of business.

Q3, gross profit was over $80 million growing 36% in.

In Q3 last year, we finalized the key network contracts, which resulted in a catch up incentive payment without that payment or gross profit growth would have been over four points higher this quarter.

Gross margin was 42% on par with the Q2 margin and lower than the comparable quarter last year due to the timing of incentive payments and less favorable business mix.

Q3, adjusted operating expenses were $94 million growing 46%.

As I noted earlier. This includes an unusually large items tied to international processing indemnification costs.

This item contributed nine points to the growth of our Q3 adjusted operating expenses.

Our expense growth has steadily slowed each quarter this year.

As we identify efficiencies and the incremental year over year investments required to fuel our growth strengths as the base of resources within <unk> expense.

We expect this to continue even as we invest in future growth opportunities.

Excluding the unusually large item roughly three quarters of the adjusted expense growth continues to be directed towards technology and product resources and investment focus on broadening our capabilities and increasing our platform's resiliency reliability and scalability.

Q3, adjusted EBITDA was negative $14 million, resulting in an adjusted EBITDA margin of negative 7%. The indemnification costs included in adjusted EBITDA negatively impacted our margin by three points.

Interest income was $7 million triple the Q2 amount driven by rising interest rates and.

Q3, GAAP net loss was $53 5 million.

Late in the quarter on September 14th our board of directors authorized a share repurchase program of up to $100 million in Q3, we repurchased $1 96 million shares for.

<unk> $13 9 million at an average price of $7 five per share.

Now, let's shift to our perspective on the fourth quarter.

At the time, we provided second half guidance back in August we expected that the tailwind that drove our first half upside would continue, albeit with tougher comparable especially in the fourth quarter. We also surfaced our concerns that customers signed since mid 2021.

Well as crypto customers might ramp their businesses more slowly as they cut back on marketing dollars and investments in growth for the most part these expectations have proven true.

However in August we also highlighted that given that many of our customers are leaders within their verticals it was possible or larger customers my thrive in this environment.

For the most part in Q3 that proved to be the case across each of our four major verticals, particularly financial services.

Based on our performance in Q3 and October we are increasing our expectations for Q4.

We now expect Q4 net revenue growth to be between 29% and 31%.

Remember last year, there was a surge in holiday spending, particularly in the NPL and the expense management vertical was ramping rapidly which makes for a tough comp and not something we expect to repeat itself. This year given the current macroeconomic environment.

Q4, gross profit margin is expected to be 42% to 43%.

As our business mix shifts.

Toward large customers, who have better economics with us and the outsized growth of our financial services vertical which carries a lower margin than other verticals.

This is a seven this is a several million dollar increase in our Q4 gross profit expectation since August .

Year over year expense growth will continue to slow. Therefore, we now expect Q4, adjusted EBITDA margin to be negative 5% to 6%.

The improvement in adjusted EBITDA expectations. Since August is driven by higher gross profit as well as lower expenses due to realize efficiencies and targeted hiring.

Our expectations for the full year of 2022 have improved significantly as a result of our outperformance in Q3 and our raised expectations in Q4.

We now expect 2022 net revenue growth to be 44 to 45 44, 5% gross profit margin to be 42, 5% to 43% and adjusted EBITDA margin is expected to be negative six to six 5%.

The opportunities from our Canada power the embedded finance evolution for both Disrupters and incumbents in the U S Europe and beyond are immense.

As we move into the last quarter of 2022 market is on a great trajectory as we continue to diversify and scale the business.

<unk> in the first nine months of the year has already surpassed our total volume in 2021 growing over 50% each quarter and 'twenty two.

Our net revenue take rate remained steady this year as we continue to add value for our customers with highly configurable platform with expanded capabilities and robust program management solutions.

Gross profit margins remained right in the middle of our stated long term range of 40% to 45%, reflecting our operating leverage as we expand.

We continue to invest thoughtfully and with discipline and new capabilities and resiliency, while finding efficiencies as the business scales, which reflects our commitment to improving our adjusted EBITDA margin as we grow and ultimately achieve our long term target of over 20%.

I will now turn it back over to the operator for questions.

Thank you.

Ladies and gentlemen at this time, we will be conducting a question and answer session.

I would like to ask a question. Please press star one on the telephone keypad a.

A confirmation tone will indicate your line is in the question queue.

You May press Star two if you will.

Like to remove your question from the queue.

All participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock Keith.

Ladies and gentlemen, we request you to restrict to one question Bob participant.

One moment, please while we poll for questions.

Our first question comes from the line of Tien thing hung from JP Morgan. Please go ahead.

Thank you so much thanks for going through all the detail actually wanted to ask on Mckenna for banking, if you don't mind.

Jason just curious how ready that is.

For commercial applications are you primarily going to pursue de novo opportunities or is there an opportunity to work with existing players there.

Just trying to get a better sense of how quickly that can ramp up.

Hey, Tien tsin, thanks for the question.

It's both Marc Hedrick for banking really just simply represents a natural extension expansion of modern card issuing.

And we believe company to some degree will be financial curve as those companies I've said that many times in the past and Thats actually what embedded finance is.

These are large companies such as retail tech companies and one.

Integrated platform with card issuing as a way to monetize as well as other services to provide stickiness and engagement and so we approached these products and features very barquette away, which is modular in nature customers get to pick and choose the building blocks, what they need for their business and again. This is an extension of our modern card issuing platform so weather.

It's <unk> DDA to facilitate spending on a card that basically drives funding onto the card and then we obviously generate interchange as part of those those card is being used so you take modern card issuing you marry that with banking as a service allowance for this sort of fine tune control at a transaction level and then we've added extra fees.

And they're like early pay which gave account holders access to their payroll up to two days earlier and all of this can be designed on a transaction by transaction basis, which deposits qualify for this.

Benefit and a lot of times you see these programs, where it's just at a program level. So now we can get down to a specifically the user so we're far from done and the additional list of features and functions. We plan to provide like we're continually building so youre going to hear a lot more about this and then we would also look to acquire potentially banking as a service functionality. If you find it there.

<unk>.

Opportunistic and strategic but I.

I can turn it over to Mike He has anything to add yes, I think just from a financial perspective right.

Right now these capabilities are really done with the aim to increase card spend and support our customers. We look at this as really a great incremental business to our current business.

So the goal is really to increase our win rate with customers by providing this holistic solution from us rather than our customer having to use multiple providers.

But that said the even the small amounts that we may make today that will be growing over time as more customers adopt this.

That will be highly accretive with these capabilities once they are built.

So just a little bit more revenue on the same transaction or the same volume with a very low marginal cost. So as it does expand overtime, we expect it to be very helpful financially.

So if you don't mind me just clarifying what the quick follow up just with the with the with win which is a good one which is a nice win sorry.

On the card side right I suppose there could be opportunity then to promote inflows in other types of <unk>.

Cash movement, there could be an opportunity to expand that and obviously generate better outcomes for the one card is that one way to think about it as an example.

It's definitely a way to think about it so the way our customers work, obviously that theyre de novo products, they get them up and running they learned about their customer base customer base and the features and functions that they need because they are already integrated into the platform and can we talk a lot about how you integrate once into marchetta you can launch in every geography that we're operating in and then you can actually create the feature.

<unk> they will add those features over time, so that they can better not only drive engagement for their customers or their users, but obviously drive revenue for their business.

Great.

Thank you so much.

Thank you.

Our next question comes from the line of Darrin Peller from Wolfe Research. Please go ahead.

Hey, guys. It's great to see these results can we just touch on.

Outside of block the other verticals seems like you have pretty good strength continuing in areas like expense management.

And certainly in areas like on demand delivery, even still despite the size of the comps and so maybe just touch on a little more of what Youre seeing there and if we can get into a little more detail you guys have done a great job being vertical centric and really differentiating on an industry basis to the wind business are you seeing anything change on that front competitively in that or anything else.

Thanks, guys.

Thanks Darrin.

No we're not seeing anything change I mean things are actually very stable.

And like an on demand delivery I'll start there.

That is our most mature vertical the growth was it was very consistent with last quarter and as I mentioned in my remarks, what we're really seeing fueling the growth as our customers expanding into new areas. So it's almost like.

They are increasing their acceptance if you will particularly in drugstores convenience stores.

Retail, which is really help improve prove engagement and then on top of that from a revenue perspective. It outperformed because we had a favorable business mix that improved the interchange relative to the customer revenue share.

About the different factors that can implement influence interchange.

The way the mix of spending happen this quarter, it was sort of accretive to our revenue versus the volume growth.

On the expense management side.

<unk>.

That area of the business is just growing incredibly incredibly fast. So it's now in the mid teens of our TPB as I mentioned at the double the share from last year, and we have six customers, who have <unk> over $100 million.

It's just.

An area that is growing very fast as businesses look to to get more efficient and they want their employees also to have a little bit of a more user friendly and flexible experience in and Thats really what's fueling our success there.

Okay. So no signs of change it sounds like.

Now.

That's great to hear and in fact, as I mentioned to Dan just to reiterate our expense management growth in dollars or TPG growth in dollars was actually even more than it was in Q2. So the it's accelerating in terms of the spend on a year over year basis, but because the the year over year comparison is also.

Growing really fast the growth is coming down, but it's still.

Almost tripled versus last year.

That's really great. Thanks, Mike.

Okay.

Thank you.

Our next question comes from the line of Timothy Chiodo from Credit Suisse. Please go ahead.

Great. Thank you for taking the question you sort of alluded to this a little bit earlier, Mike, but I wanted to dig into it if we could get maybe a range I know it'll be hard to put an absolute number on it it's early stages and there'll be sort of a range of products, but generally speaking it sounds like mark kind of banking will be a higher gross margin in terms of gross profit as a percentage of revenue it will be a higher gross margin.

For you could you just put some directional numbers around that compared to current total company gross margins how much higher this could be or maybe even just talk about sort of as a percentage of volume and how it might compare to the current core business, which is clearly much more tied to interchange.

Yeah, So you're right, we expect it to be significantly higher margin than our than our current business a lot of these services might.

Might be charged on a per user basis or a per transaction basis. So it really is just incremental.

Revenue.

And potentially cost of revenue for the existing transactions and volume are getting already and so we do expect this to be and even in the cases, where we provided today, we have some customers using some of these services and it is a much higher gross margin so.

It won't necessarily be.

A huge revenue growth driver directly as I sort of read irritated reiterated earlier I think it's much more about making our overall value proposition much more compelling and improving our win rate, but in terms of within that incremental revenue. We get it does come at a higher much higher margin and therefore it is very bad.

Official for us on the bottom line.

Excellent. Thank you Mike and then the brief follow up also on marketing for banking safe to say that the closest competitor to this offering would be along the lines of services that are offered by Galileo and would it be similar to some of the offerings within <unk> or maybe just others that you could just mentioned that could maybe just contextualize what this looks like.

And if those are reasonable competitors to think about.

Amongst others.

Yes, those are reasonable competitors. If you think about I mean, we're all in the business of global money movement and global Bobby Global money movement from our kind of began with modern card issuing and obviously, we consider ourselves certainly the leader in that we created that category and have obviously done really well in it over time, what we find.

Is that our customers want to move money in many different ways and we've created a very marked way, which is the native Apis are created we obviously out of credit so that we'd talked about that a lot lately.

And a number of different companies have created thats like the ones that you've mentioned theres, probably more out there as well.

We look at it from a position of how <unk> works with our customers the ability to.

Natively integrate with these API is into the platform once.

Launch in many geographies many other ways to move money sort of certainly outside of the United States will be will be coming so our strategy in how we approach the market with our prospects for making our customers. Even more successful is how we differentiate ourselves from other other competitors.

Thank you Jason I appreciate both of us.

Welcome.

Thank you.

Our next question comes from the line of Ramsey El <unk> from Barclays. Please go ahead.

Hi, Thanks for taking my question. This evening and I wanted to actually follow up on Tim's question and just again on Mark headed for banking ask how the sales pipeline is developing and more specifically if you could comment on the cross sell opportunities and whether the genesis of the offering with sort of meeting the demand that youre seeing in your existing <unk>.

Customer base are more sort of a product suite that you think might meet an unmet unmet need in the sort of external marketplace.

Yes. So so we have a number of announcements to make in the coming quarters. We recently announced certainly today was the deals with one and we've also talked about Uber and the card. There. We have a decent addition, recent renewals like Lithia, we've talked about Florida theres more to come on that front exciting deals in the pipeline for <unk>.

Credit.

Especially in international we've talked about our growth within the EU.

And we'd also like I haven't mentioned was discussions with large <unk>, obviously, those sales cycles take long but.

We've talked about with the <unk> bank, we're getting to many other parts of that so if we think about that is.

Finance is exciting because we believe many companies are going to become financial services companies in that financial services that are in those companies is essentially.

<unk> finance or what we call market for banking. So again, our strategy has always been platform centric and then the modularity of that the ability to add lots of different features and functions that a customer can pull off the shelf.

Integrate quickly and obviously create a better experience for their customers. So we believe and have believed for a long time, we think embedded financed with something we've certainly been around or have worked in for some time, whether we're supporting someone's core business with a card or we are their core business for the card and again. This is just expanding our feature.

And functions around global money movement to make sure that we're capturing many opportunities to move money around the world and specifically move money into cars, where our customer generates.

Revenue from from interchange and obviously, we've talked about in the past year, which is up their success is our success. So we're just excited about how do we create a great strategy around the stickiness of our platform and their ability to succeed.

Yes, I think Ramsey like one of the thing we want to try to get in front of us.

Is if a customer says.

Look we have a very differentiated card issuing capability.

But.

I really would rather use one platform, so maybe I'm willing to sacrifice a little functionality on the card side, because I want some of these other.

Other banking like services and so what we really want to do is take that off the table and say well we can provide a holistic solution for you.

And while we are building those we are building things that are very marquette alike in terms of their flexibility and Configurable City. But also then you can get our world class card card processing capabilities in a bundle.

Got it alright, thanks, so much appreciate it.

Thank you.

Our next question comes from the line of James Faucette from Morgan Stanley . Please go ahead.

Thank you very much I wanted to follow up a little bit on the <unk>.

Competition question, but.

Clearly.

You have a biggest customer that.

You'd like to renew when you can just wondering if you can get an update on that and kind of what youre seeing from the internal efforts both from them as well as other customers and potential customers.

Thinking about those as potential competitors.

And if anything is changing in.

The landscape or what you need to do versus internally developed solutions.

Yes, so I'll start with <unk>.

Block and as we've talked about in the past we have 18 months I think at this point still left on the agreement we will share something as soon as possible.

When.

Black decides they want to go build something new they build it with us.

Obviously enjoy that we invested an incredible amounts going through our platform.

Both in tech and product that our customers like block benefit.

When there is more to share that we will definitely share it.

And then around the competition piece.

Our strategy has been working really well and I think as we've seen as of late where the economy is beginning to change.

And a market leader.

As Mike had mentioned we are part of our strategy is to not only land and expand within verticals, but really target the top companies in that space and we've done really well with our strategy, which is in the past you've talked about starting with commerce disruptors moving into digital banks moving into Tech Giants and then moving into large.

Financial institutions, we see different types of obviously competitors, we see ones like the pieces of the world that operate with large financial institutions. We see smaller players that may be up starts from the last two to three years that are really just starting to get traction, but we feel like our strategy has worked really well we continue.

To execute against that.

The land and expand not only.

Large opportunities like one because we built the trust within the market, but then again, whether it's embedded finance are kind of her banking, we're finding that our customers don't want to go to other vendors to get technology, they want to stick stick with us and use the other pieces that we have like the DDA accounts or the H feature so.

Obviously, we continue to.

To renewal for new our customers, we continue to land new customers and we will continue that strategy as time goes on.

Thanks, Patrick.

Thank you.

Next question comes from the line of <unk> <unk>.

Got it.

From Citi. Please go ahead.

Thank you.

<unk>.

Congratulations on the good quarter.

Okay.

Hoping you could kind of pulled back.

The.

Sort of the delays in outlook can you kind of walk through.

The factors maybe is it possible to size I rank order them.

Sorry, Ashwin can you.

Size of the rank order what about our outlook.

The factors that led to the change in the outlook.

Oh sure yes.

Yeah. So so.

So yes, theres a few things so one is that.

Last quarter, one of the key things, we said, we thought newer customers of ours, who are ramping and then particularly everything thats going on the crypto space that those customers just may not.

Invest behind those programs nearly as aggressively as they may have planned to do it in the beginning of 2022 and that's largely did play out but what we also speculated was it could be that the bigger players who have scale already would then step in.

And capitalize on the fact that there maybe it wasn't as much competition in the market as they have grown accustomed to over the last 12 to 18 months and so a lot of it was just the just performance strong performance by our largest customers.

Block being of course.

Doing incredibly well, but just generally speaking that's what we're seeing and so as we looked at that performance. In Q3. We're really then just translating that to Q4. The only difference from a growth perspective is just the incredible holiday season that we had last year. If you. If you look at the kind of growth that we saw.

Just across the economy, and retail spending and particularly in the NPL.

That's just not something we feel we'll replicate again and so the growth rate is coming down, but that's not necessarily representative of the kind of performance that we expect to see just because we are kind of lapping.

At least once in a decade like holiday season that we had last year.

Got it.

You're just basically taking the same factors that helped TQ into <unk> and that's really what it what it seems like.

That's right.

The second question was the you know.

If we have a downturn.

Would you expect vastly different trends in sort of powered by <unk> is managed by is it a macro preference element to how clients view those options.

Well, so we power a wide range of business models across both consumer and commercial.

And as we've talked about our net revenue isn't overly indexed into discretionary spending rough.

Roughly a fix the volume on our platform is for highly discretionary items. These are things like large electronics.

Our travel home improvement, but people still need to spend money on things like groceries gas and other essentials. So our volume growth is largely driven by customers displacing other forms of payment and in some cases changes in the way people pay was accelerated by the pandemic may decelerate because of the potential for ascension.

Or some say we're in a recession now.

But there is expense management and corporate card these newer banks and consumers buy now pay later versus other forms of revolving credit so we.

We don't know what to expect but we feel like we're not kind of overly indexed on one versus the other and I think specifically ashwin in terms of the power bi versus managed by dynamics.

We.

Added incredible sort of turnkey solution that are managed by offering for customers that they value and because we're doing it at scale I think a lot of customers.

Just look at it and say that the cost the amount of investment I would need to make to have those capabilities at the level of service that Mark hit it provides.

Actually a good price right it would be more expensive for me to do that investment so.

Just because of the economy may be shifting we don't necessarily think that gets customers thinking more about a powered by structure because that would require significant investment and knowhow for them to put in place versus the what the solution we can deliver at scale.

Thank you.

Thank you.

Our next question comes from the line of Rena Kumar.

Tom.

Please go ahead.

Good afternoon, and thanks for all of the helpful details on your call.

Any thoughts on when we could hear an update on your contract with block.

And can you discuss how your conversations are progressing a proof point. Thank you.

Yes, thanks, Ron So we've talked a block every day.

Power a lot of products across the portfolio both in cash App.

Square card on the merchant side. So there's a lot of conversations we have on a regular basis and they certainly have adopted a lot of our platform.

Not only across card issuing and processing, but also across embedded banking and mark out of for banking.

So as I mentioned, it's about 18 months from the renewal about April of 'twenty 'twenty four I believe is the time the contract is up.

And again I'm not going to comment on the discussions.

Regarding the renewal and as soon as we have an update.

We'll absolutely be talking about it.

We won't hold that hold on you were promised that we brought us.

Hey, guys.

Got it. Thank you appreciate all the detail.

Yes.

Thank you.

Our next question comes from the line of Josh Beck from Keybanc. Please go ahead.

Thanks for taking the question.

Ask just about the level of visibility that you have at this point looking forward into next year, obviously, a lot of your growth I believe in any given year is from existing customers and it seems like you've dialed in certainly the growth rates.

Some of the verticals and obviously you have a pretty good handle on expansion plans at a customer level. So curious on how you would characterize just the visibility and obviously the macro is an uncertainty for everybody and then just with respect to the kind of embedded Q4 opex levels.

How we should think about that is it.

<unk> four investment plans in the future years would be super helpful.

Kevin.

Think in terms of your first question I think we're in very regular dialogue with our customers about what they're thinking because for many of them, where we really our goal aspect of.

The service, they're providing or how they monetize their service and so we're in quite regular dialogue with them about.

How are they thinking about things.

How are they managing their own business and what are the implications for us. So I would say we have fairly good visibility in that sense. However, as you know right now in this environment.

It's very it's very unclear right about what things might be like in three to six months. So we can get their perspective on how they're doing their business planning, but they pretty consistently say.

We'll see.

And we're going to try to remain as nimble as possible. So we certainly are aligned with our customers, but that doesn't mean, we have a crystal ball.

In terms of.

The.

Opex or the expense levels for Q4, and what that means for next year.

There's a couple of things that impact our expenses in Q4. So one is just I guess two weeks ago. Now we were at money 2020, that's a big event for us that drives a lot of pipeline conversations.

<unk> engaged with a lot of new prospects and so that's a.

We all spend a ton on marketing, but thats one of our major items and so that's something that happened in Q4.

Also.

As our volumes go up.

Recently with the holiday season, we do have a number of expenses that go up just related to our.

<unk>.

Cloud costs in some of our other kind of data and platform tools that are more variable in nature, so as the transaction.

Crowds pick up then we will have some additional costs and then we still are hiring.

In particularly in very selective ways for our key growth areas and so we are going to have.

A decent jumping off point for next year and our plan is to be fairly cautious as we proceed from an investment front into 2023 at least initially.

The level of uncertainty and then we will.

We'll try to.

Make adjustments as we go through the year once it's a little more clear what might happen from an economic perspective.

Very helpful context, Thanks, Mike.

Mhm.

Thank you.

Our next question comes from the line of Mike <unk> from Goldman Sachs. Please go ahead.

Hey, good afternoon. Thank you for the question I just have two.

First I was just wondering if you could give us a little bit of color around TPB performance in the quarter by any top customer cohorts, whether that's top 510 or 20, and then second just on the fourth quarter.

Key PV outlook.

Is there anything you could talk about as it relates to industry vertical.

What may be accelerating or decelerating and perhaps you can remind us if there are any notable tough comps or anything like that that we should be aware of thank you very much.

Yes, sure so in terms of.

Performance I would say.

By cohort I would say our top five customers are non top five customers are still growing at a premium.

Two our top five customers, although it's maybe the gap isn't quite as big as its been in quarters past as I said, what we're seeing is some call it smaller customers or maybe investing a little less than some of the larger customers are capitalizing on that so that gap has closed a little bit, but our non top five customers are still growing faster.

Another way to look at it is another way we look at it as our new customers and how they are ramping and if we look at our customers that we.

We signed in 2019 or later, so we've only been on the platform. A couple of years. They are growing about four times faster than customers, who had been on the platform for longer.

And that growth is well over 100%. So we still have a lot of.

Newer customers on the platform growing quite quite quickly and and.

And that's obviously, helping to sustain our growth even as I mentioned on the call, even though our base keeps getting bigger and bigger we've been able to sustain that CTV growth in terms of on a vertical basis for Q4. The there are really two areas or three actually of our verticals that have significant lapping I would say the one that really.

Doesn't is the on demand delivery.

<unk> has been a more mature business for us in this time so.

Not huge differences in growth expected.

But the NPL.

Certainly has a very tough comp.

I think we've said last year, our Q4 be NPL volume was bigger than our whole first half of 2021 volumes. So the pickup was incredible and so that has a very tough comp.

Other one is just because of the strong holiday season, some of our customers in financial services, who support more everyday spending also saw a big acceleration in their growth and so again.

Our point of view I guess.

This is unlikely to be as strong as the holiday season, we had last year and so if you just even look at consumer confidence and sentiment.

And so that also will have a tough comp and then finally on expense management that was a relatively new vertical for us in 2021, and so the the growth was incredible and it was growing literally several 100 percentage points and.

So that growth is also coming down, but as I said, even in Q3, it's still growing the business still like tripled year over year. So the growth is still going to be very healthy but not.

Not four five acts like we've seen in previous quarters.

Excellent. Thank you for all that detail that's very helpful.

Yep.

Thank you.

Our next question comes from the line of Andrew Vouch from SM BC Nikko Securities. Please go ahead.

Hey, thanks for the time.

Wanted to touch upon the adjusted EBITDA margin performance in the quarter.

Mike you called out some targeted hiring and various efficiencies just trying to get a sense of.

Some of the headlines we've seen around Silicon valley is presenting a more favorable.

Hiring environment for you today than perhaps you were you're operating in and just say no.

Six to nine months ago, and how that can translate.

Yes, there is no doubt.

That.

That's something we we think will be beneficial to us I think if you.

We've talked about this before one of the.

Big advantages we've had this year is actually back in kind of late late February early March we adjusted our plan so even only a couple of months in.

For the year, we changed our plans because you could see some of the macro warning signs at that time, and we decided to proceed with caution and so I think maybe where we benefited as we dial things back our plans already early in the year and there may be other tech and Fintech companies that Youre hearing.

Now doing les offset maybe kind of kept their foot on the gas for the first half of the year and then are now realizing that maybe.

Wasn't mistake. So we did we did get in front of it and we are hiring I would say you're right certainly the.

The level of competition for key talent is is on the decline.

And with some of the layoffs that are getting announced it seems like Theres a few week now.

For major tech companies that is something that we're hoping to.

To take advantage and capitalize on that by being able to bring in some super talented people that maybe were would've been very difficult to get just.

Six to 12 months ago.

Yes, I mean, that's a minimum.

Our governor on compensation growth.

In the near to medium term.

I agree and I think also what we would expect to see us.

Which is quite helpful is is a lower attrition.

Obviously, a lot of people like to hire we've got a lot of very talented people here, who have been a big part of the innovation that we've achieved over the last few years and so there's a lot of a lot of competitors, who would like that knowhow and that experience and so that's also something we expect to be a huge benefit if if we can.

Better retain our key talent that will certainly help us in 2023.

That's great I appreciate the additional color.

Thank you.

Our next question comes from the line of Bob Napoli from William Blair. Please go ahead.

Great. Thank you good afternoon, Jason Mike <unk>.

Nice numbers.

Jason I was wondering if you could give.

Now an update on your search for permanent CEO it looks like because I mean, it seems like you are pretty pretty engaged still.

Still.

At this point and then just any thoughts on.

Your credit platform is that an area, we're likely to see an acquisition. Thank you.

Yes. Thank you I am very engaged on a day by day business I Love. This company I have been running it for over 12 years.

In regards to the to the CEO search so we've met a lot of different candidates over the past few months.

<unk> been working close with the board and the executive team to meet a broad base of candidates from lots of different backgrounds.

And I'm really searching again for someone to the next CEO to lead the company from one to Infinity letter from zero to one and I certainly understand the market wants me to move quickly, but we want to hire the best person and we will do that at some point. So regarding the search I will have some of the share when we have it.

Regarding credit so absolutely.

We are looking at a number of different companies.

In the credit space. We think this is definitely the future of Mercado as we've been investing pretty significantly.

Started the journey in credit about four years ago, we now see customers up and running and using it like Green light.

We're excited about that partnership and their ability to succeed we see this more and more and there's been a lot of companies that have been started really over the last probably four to five years.

So we have been looking at a lot of different businesses in regards to.

What's the best talent, what's the best platform, how does it fit within our values and how we build software.

And technology, and making sure that has a good DNA fit.

With our value and our quality.

Our people.

So more to announce but I think we have a lot of different options right now in the market that we're taking a look at it and as soon as we have something that we wanted to zero in on and if we can find a successful path forward, we'll certainly announce it.

Thank you Jason.

Okay.

Thank you.

Ladies and gentlemen, we have reached the end of the question answer session.

I would now like to turn the conference to Jason Gardner founder and CEO for closing comments.

Well. Thank you everyone for joining us for <unk> third quarter of 2022 earnings call have a great rest of the year happy holidays and look forward to speaking with you all in 2023 take care.

Thank you. Thank you.

The conference off market Op, Inc. Has now concluded. Thank you for your participation you may now disconnect your lines.