Q3 2023 Marqeta Inc Earnings Call

Speaker 1: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Marquetta 3rd Quarter 2023 Earnings Conference Call. At this time, lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will open the lines for your questions.

Good afternoon, ladies and gentlemen, and thank you for standing by welcome to the Martin <unk> third quarter 2023 earnings Conference call.

If time lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, we will open the lines for your questions.

As a reminder, this conference call is being recorded.

Speaker 1: I'd now like to turn the call over to Stacey Feinerman, Vice President of Investor Relations. Thank you.

I'd now like to turn the call over to Stacy vitamin Vice President of Investor Relations. Thank you you may begin.

Speaker 2: Thanks, operator. Before we begin, I would like to remind everyone that today's call may contain forward looking statements.

Thanks, operator, before we begin I would like to remind everyone that today's call may contain forward looking statements, including statements regarding anticipated future financial and operating results and future changes in or developments regarding accounting treatment. Among others. These forward looking statements are subject to numerous.

Speaker 2: including statements regarding anticipated future financial and operating results and future changes in or developments regarding accounting treatment, among others.

Speaker 2: These forward-looking statements are subject to numerous risks and uncertainties, including the risk that our accounting treatment may be subject to further changes or developments, as well as those set forth in our filings with the SEC, which are available on our investor relations website, including our annual report on Form 10-K for the period ended December 31st, 2022, and our subsequent periodic filings with the SEC.

Risks and uncertainties, including the risk that our accounting treatment may be subject to further changes or developments as well as 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 31st 2022.

And our subsequent periodic filings with the SEC.

Speaker 2: Actual results may differ materially from any forward-looking statements we make today.

Actual results may differ materially from any forward looking statements we make today.

Speaker 2: 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.

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 reconcile.

Speaker 2: 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. A reconciliation of forward-looking non-gap guidance

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.

Reconciliation of forward looking non-GAAP guidance.

Speaker 2: is not available without reasonable effort due to the challenges and impracticality with estimating some of the items such as share-based compensation expense, depreciation and amortization expense, and payroll tax expense, the effect of which could be significant.

He is not available without reasonable effort due to the challenges and impracticality with estimating some of the items such as share based compensation expense depreciation and amortization expense and payroll tax expense, the effective which could be significant.

Hosting todays call are Simon cloth, Marquette as CEO and Mike Miller attached Marquette as Chief financial officer with that I'd like to turn the call over to Simon to begin.

Speaker 2: Hosting today's call are Simon Koloff, Marquette's CEO , and Mike Miletic, Marquette's Chief Financial Officer. With that, I'd like to turn the call over to Simon to begin.

Speaker 3: Thank you, Stacey, and thank you, everyone, for joining our third quarter 2023 earnings call. We had a strong quarter. Our third quarter net revenue, gross profit, and operating expenses were all better than our expectations, resulting in an adjusted EBITDA of negative $2 million.

Thank you Stacey.

Thank you everyone for joining our third quarter 2023 earnings call, we had a strong quarter, our third quarter net revenue gross profit and operating expenses were all better than our expectation, resulting in an adjusted EBITDA of negative $2 million.

Speaker 3: Our results over the past few quarters have shown that we can scale the company while maintaining expense discipline.

Our results over the past few quarters have shown that we can scale the company, while maintaining expense discipline.

Speaker 3: We're continuing to innovate and expand our solutions with the recent launch of our credit platform, as well as deepening our relationship with our customers and capturing new ones.

We're continuing to innovate and expand our solutions with the recent launch of our credit platform as well as deepening our relationship with our customers and capturing new ones.

Speaker 3: This morning, we announced another expansion of our partnership with Block. And, as we will discuss, we saw our business continue to build momentum, signing new embedded finance customers, and expanding with our current customer base. Let me start with

This morning, we announced another expansion of our partnership with block and as we will discuss we saw our business continued to build momentum.

Signing new embedded finance customers.

Spending with our current customer base.

Let me start with our financial performance.

Speaker 3: Total processing volume, or TPV, was $57 billion, an increase of 33% compared to the same quarter of 2022.

It'll processing volume <unk> PV was 57 billion, an increase of 33% compared to the same quarter of 2022.

Speaker 3: This was the third consecutive quarter where our TPV exceeded $50 billion.

This was the third consecutive quarter, where our PPV exceeded 50 billion are net revenue of $109 million in the quarter contracted 43% year over year, including negative six eight percentage points from the accounting change related to cash out.

Speaker 3: Our net revenue of $109 million in the quarter contracted 43% year-over-year, including negative 60 percentage points from the accounting change related to Cash App. And our gross profit of $73 million contracted 9% versus Q3 2022, primarily due to the Cash App renewal pricing.

And our gross profit of 73 million contracted 9% versus Q3 2022, primarily due to the cash app renewal pricing.

Speaker 3: Mike will discuss this in more detail later on.

We'll discuss this in more detail later on the call.

Speaker 3: Our non-GAAP-adjusted operating expenses were $75 million, a 20% decrease versus Q3 2022 due to our restructuring and cost-cutting initiative, resulting in a negative $2 million in adjusted EBITDA for the quarter.

Our non-GAAP adjusted operating expenses were $75 million as 20% decrease versus Q3, 2022, due to our restructuring and cost cutting initiatives, resulting in a negative $2 million and adjusted EBITDA for the quarter.

As we've done in the last few quarters, we continue to grow our business and enhance our platform while increasing efficiency.

Speaker 3: As we've done in the last few quarters, we continue to grow our business and enhance our platform while increasing efficiency.

Speaker 3: At the Money 2020 conference, we unveiled our new credit platform.

At the money 2020 confident we unveiled our new credit platform, which much like our debit and prepaid offerings offers a full stack solution with issuer processing and program management. We believe that this puts us in a highly advantages position.

Speaker 3: which much like our debit and prepaid offerings offers a full stack solution with issuer processing and program management.

Speaker 3: We believe that this puts us in a highly advantageous position, allowing us to offer a more modern credit product than legacy competitors, and one with greater product breadth and scale than many modern competitors.

Allowing us to offer a more modern credit product the legacy competitors and one with greater product breadth and scale that many modern competitors.

Speaker 4: There are multiple benefits to this type of end-to-end solution.

There are multiple benefits to this type of end to end solution.

Speaker 3: Launching a credit card has historically been a complicated and cumbersome process and our new platform means that our customers have a one-stop shop from design to launch and scale and can work directly with us rather than several different providers. This reduces complexity for our customers and speeds up the time to market significance.

Launching a credit card has historically been a complicated and cumbersome process and our new platform means that our customers have a one stop shop from design to launch and scale and can work directly with us rather than several different providers.

This reduces complexity for our customers.

And speeds up the time to market significantly.

Further with that offering customers can own and customize the experience and embed the card within their brands our ability to offer a configurable and flexible solutions enables our customer to build highly differentiated program with truly personalized.

Speaker 3: Further, with our offering, customers can own and customize the experience and embed the card within their brand.

Speaker 4: our ability to offer configurable and flexible solutions.

Speaker 3: enables our customers to build highly differentiated programs with truly personalized rewards and spend control.

Rewards and spend controls instead of offering the same cookie cutter reward for every consumer our customers can now personalized rewards to reflect individual needs. This helps them build credit cards that re imagine customer loyalty and engagement.

Speaker 3: Instead of offering the same cookie-cutter reward for every consumer, our customers can now personalize rewards to reflect individual needs.

Speaker 3: This helps them build credit cards that reimagine customer loyalty and engagement.

Best of all because the offering is truly embedded the card holder only interacts with our card program rather than being sent to a bank experience there are simply not familiar with.

The initial interest in this product has been very promising and we are deeply engaged with several prospects.

Speaker 4: The initial interest in this product has been very promising, and we're deeply engaged with several prospects.

Speaker 3: While many equate credit with consumer co-brand offerings, which is undoubtedly a large portion of credit, we also see strong demand for commercial use cases.

While many Kuwait credit with consumer co brand offerings, which is undoubtedly a large portion of credit. We also see strong demand for commercial use cases.

Speaker 3: Commercial use cases can drive loyalty, customer engagement, and enable businesses to run more efficiently.

Virtual use cases can drive loyalty customer engagement and enable businesses to run more efficiently.

Speaker 3: customers building commercial card programs can choose from flexible funding models for their cardholders, such as net 30 charge cards, receivable purchase, and revolving credit to allow them to take control of their business financial health and access capital more efficiently.

Customers building commercial card programs can choose from flexible funding models for their cardholders, such as net 30 charge cards receivable purchase and revolving credit to allow them to take control of their business financial health and access capital more efficiently.

Speaker 3: Following our renewal news last quarter, we continue to deepen our relationship across Block's ecosystem and are pleased to announce multiple updates to our long-standing relationship.

Following our renewal news last quarter, we continued to deepen our relationship across blocks ecosystem and are pleased to announce multiple updates to our long standing relationship.

First we renewed our agreement for the square debit card for five years to run through June 2028.

Speaker 3: First, we renewed our agreement for the square debit card for five years to run through June , 2028.

Speaker 3: Second, in parallel, we extended our deal with Cash App so that that deal also extends through June 2028.

Second in parallel we extended our deal with cash App. So that that deal also extends through June 2028. Finally, we agreed with block then mark <unk> will be the default provider of issuing processing and related services in current or future.

Speaker 3: Finally, we agreed with Block that Marquera will be the default provider of issuing, processing, and related services in current or future markets outside of the U.S. where Block may decide to enter and Marquera is able to provide issuing and processing services.

Your markets outside of the U S, where block may decide to enter and Marc Cadieux is able to provide issuing and processing services.

Speaker 3: We believe this extension demonstrates the value that Block sees in our platform, especially our ability to support dynamic use cases for both consumer and commercial card programs globally.

We believe this extension demonstrates the value that block season, our platform, especially our ability to support dynamic use cases, but both consumer and commercial card programs globally.

In addition to these meaningful announcements, we continue to execute day in and out supporting new and existing customers with our ability to offer payment expertise flexibility control and scale, which creates a meaningful differentiation between ourselves and others.

Speaker 3: In addition to these meaningful announcements, we continue to execute day in and day out, supporting new and existing customers with our ability to offer payment expertise, flexibility, control, and scale, which creates a meaningful differentiation between ourselves and others in the space.

In this space.

Speaker 3: Last quarter we highlighted how we were converting prospective customers that were starting to reach scale with other providers. In many instances these were customers where we initially bid for their business but they opted to work with another provider.

Last quarter, we highlighted how we were converting prospective customers that we're starting to reach scale with other providers in many instances. These are our customers, where we initially bit for their business, but they opted to work with another provider.

Speaker 3: This trend continued into the third quarter. One win we are excited about is an expense management platform focused on the marketing industry that initially looked at us two years ago before choosing another modern platform.

This strength continued into the third quarter.

One when we are excited about is in expense management platform focused on the marketing industry that initially look at US two years ago before choosing another modern platform.

Speaker 4: They started to see product market fit and strong traction, and as a result, needed more service, which they were promised but have yet to materialize. They also felt the spend controls and analytics were pretty basic, which did not work for a company whose business depended on providing their end customers with actionable analytics and insights.

They started to see product market fit and strong traction and as a result needed more service, which they were promised but have yet to materialize. They also felt the spend controls and analytics, where creative basis, which did not work for a company whose business dependent on providing the end customers with actionable.

Analytics and insights.

Speaker 3: As a result, they re-engaged with Marketa. In addition to access to better analytics and customer service, they found our solutions easier to utilize.

As a result, they are engaged with <unk>. In addition to access to better analytics and customer service. They found our solutions easier to utilize.

As we will discuss during our Investor day at the end of this week.

Speaker 4: As we will discuss during our investor day at the end of this week, the breadth and depth of our platform resonates with customers who are looking to provide multiple solutions rather than just point products.

And depth of our platform resonates with customers, who are looking to provide multiple solutions.

Rather than just point products.

Speaker 4: This is especially true when it comes to our program management office.

This is especially true when it comes to our program management offering.

Speaker 3: During the quarter, we signed a deal with a marketplace offering financial management tools. The customer approached Marketa about launching a demand deposit account tied to their debit card for their user base, offering cash back to help repay student debt.

During the quarter, we signed a deal with a marketplace offering financial management tools, the customer approach Mark ghetto about launching a demand deposit accounts tied to their debit card for their user base offering cashback to help repay student debt.

Speaker 3: Marketa was the provider of choice given our money movement offering, our experience in modern card issuing, our superior service, and the quality of our API.

Mark that it was the provider of choice given our money movement offering our expedience and modern card issuing our superior service and the quality of our API.

Speaker 3: While the customer was initially interested in a powered bimarkera construct, they realized the benefits of using a managed bimarkera solution to ensure a successful program launch. As a result, the customer ultimately decided to use our program management capabilities and signed on for additional services, such as dispute management and interactive voice response.

While the customer who was initially interested in are powered by my marked at a construct they realize the benefits of using our managed by Mark EDA solution to ensure a successful program launch as a result, the customer ultimately decided to use our program management capabilities and signed on for <unk>.

Additional services, such as dispute management and interactive voice response.

Speaker 3: Another topic we will discuss at length during our investor day is the embedded finance opportunity and how the platform is uniquely positioned to benefit.

Another topic, we will discuss at length during our Investor day is the embedded finance opportunity and how the platform is uniquely positioned to benefit.

Speaker 4: Two examples of embedded finance deals we signed in the quarter are companies looking to use embedded finance to create a better customer experience and keep funds within the ecosystem.

Two examples of embedded finance deals we signed in the quarter are companies looking to use embedded finance to create a better customer experience and keep funds within the ecosystem.

Speaker 3: One example is a logistics company that will have the ability to offer a Marketa virtual card with instant refund disbursement to encourage re-spending at their e-commerce partner's website when items are returned.

One example is the logistics company that will have the ability to offer a marchetta virtual card with instant refund disbursements to encourage re spending at the E. Commerce partners website when items are returned.

Speaker 4: Another e-commerce example is a company that provides software for contractors to manage supplies.

Another ecommerce example is a company that provides software FERC contractors do manage supply.

Speaker 3: offering their vendors to be paid via a virtual card so that the payment comes in faster than checks or ACA.

Offering their vendors to be paid via virtual card. So that the payment comes in faster than checks or ACTH.

Speaker 3: In addition to these new exciting customers with differentiated use cases, we continue to innovate with our existing customer base.

In addition to these new exciting customers with differentiated use cases, we continue to innovate with our existing customer base.

Mark get us early innovations in solutions, such as such as instant issuance.

Speaker 3: Marketa's early innovations in solutions, such as instant issuance, allowed us to be an early beneficiary in buy now, pay later, as our solution enabled significant merchant acceptance growth in the space.

Loud us to be an early beneficiary in buy now pay later as our solution enabled significant merchant acceptance growth in this space How's.

Speaker 3: However, as offerings proliferated, major BNPL providers added new products to keep up with the changing needs of consumers and merchants alike.

However.

As offerings proliferated major B and B NPL providers added new products to key up to keep up with the changing needs of consumers and merchants alike.

Speaker 3: While our initial BNPL solution required a virtual card at the point of sale, providers wanted to extend their relationship with their end customers across all purchasing behaviors. As a result, many BNPL providers introduced Pay Anywhere solutions for use across multiple merchants, giving consumers the option of paying an installment rather than an evolving balance.

While our initial the NPL solution required the virtual card at the point of sale providers wanted to extend their relationship with their customers across all purchasing behaviors. As a result, many be NPL providers introduce pay anywhere solution.

For use across multiple merchants, giving consumers the option of paying an installment rather than at evolving balance.

Speaker 3: This new use case has shown tremendous growth and the multiple programs we have that use this contract cost us, accounted for approximately 10% of our buy now, pay later volume.

This new use case has shown tremendous growth and the multiple programs. We have that use this contract construct accounted for approximately 10% of our buy now pay later volume.

Speaker 3: This is particularly remarkable as many of these programs have only been live for just a few quarters.

This is particularly marketable as many of these programs have only been live for just a few quarters.

Speaker 3: Not only are these programs growing in popularity, but they also have better take rates than commercial virtual cards.

Not only are these programs growing in popularity, but they also have better take rates than commercial virtual cards.

Speaker 3: This shift comes at a critical time from a competitive basis for Marketa, with instance issuance commoditizing as competitors are catching up to the technology we offered years ago.

This shift comes at a critical time from a competitive basis for Mercado.

With instant issuance commoditizing as competitors are catching up to the technology, we offered years ago.

Speaker 3: However, the shift to these new BMPL programs require the ability to offer a consumer card, which Marquera is uniquely positioned to do, as consumer offerings are increasingly more complex than commercial.

However, the shift to these new <unk> programs require the ability to offer our consumer card, which mark Gara is uniquely positioned to do as consumer offerings are increasingly more complex than commercial.

Speaker 3: As a result, we have maintained an advantage or moat in the NPL given the breadth of our platform.

The result, we have maintained an advantage or mode in the NPL given the breadth of our platform.

In summary, the addition of credits and a long term relationship with block positions us well.

Speaker 3: In summary, the addition of credits and our long-term relationship with Block positions us

Speaker 3: well as we reset the company in 2023 and look to build from a new strong baseline.

Well as we reset the company in 2023 and look to build from a new strong baseline.

Speaker 3: In addition to these considerable accomplishments, we continue executing for our existing and new customers.

In addition to these do these considerable accomplishments, we continue executing for our existing and new customers.

Speaker 3: Combined, we expect these efforts will enable Marketa to reignite steady growth in 2024 after we have lapped the cash app renewal.

Combined we expect these efforts will enable marchetta to re ignite steady growth in 2024. After we have lapped the cash app renewal.

Speaker 3: I will pause there as we plan to discuss the opportunity ahead of us in great detail in just a few days at our investor day. With that, I'll turn it over to Mike for his prepared remarks.

I will pause there as we plan to discuss the opportunity ahead of us.

US in great detail in just a few days.

At our Investor day, with that I'll turn it over to Mike for his prepared remarks.

Speaker 5: Thanks so much, Simon, and good afternoon, everybody. As expected, third quarter net revenue and gross profit growth contracted due to the cash app renewal that was signed last quarter. However, our Q3 results were better than expected, particularly our adjusted EBITDA as a result of the continued execution on efficiency initiatives and timing of some expenses that will shift into Q4.

Thanks, so much Simon and good afternoon everybody.

As expected third quarter net revenue and gross profit growth contracted due to the cash up renewal that was signed last quarter. However.

However, our Q3 results were better than expected, particularly our adjusted EBITDA as a result of the continued execution on efficiency initiatives and timing of some expenses that will shift into Q4.

The revenue contraction was lower than anticipated, mostly due to business mix differences that impacted the change in cash App revenue presentation as part of the new contract.

Speaker 5: The revenue contraction was lower than anticipated, mostly due to business mixed differences that impacted the change in Cash App revenue presentation as part of the new contract. I will get into more detail in a few minutes.

I will get into more detail in a few minutes.

Q3, <unk> was 57 billion growing 33% year over year, and exceeding 50 billion for the third quarter in a row across a diverse portfolio of use cases, putting us on track to deliver over $200 billion in <unk> for the full year.

Speaker 5: Q3 TPB was $57 billion, growing 33% year over year, and exceeding $50 billion for the third quarter in a row across a diverse portfolio of use cases, putting us on track to deliver over $200 billion in TPB for the full year.

Speaker 5: The financial services vertical, which is a little over half of our TPV, continues to perform well, but did slow a few points from Q2 as the vertical faced tougher comps from the acceleration last year in Q3.

The financial services vertical, which is a little over half of our CTV continues to perform well, but did slow a few points from Q2 as the vertical face tougher comps from the acceleration last year in Q3.

Speaker 5: Sparsely offsetting those tough comps was the rapid ramp of accelerated wage access, which delivered 2x the volume versus Q2, and there was little volume last year, as this is a newer use case for Marketa.

Partially offsetting those tough comps with the rapid ramp of accelerated wage access which delivered two X the volume versus Q2, and there was little volume last year. As this is a newer use case from our cutoff.

Speaker 5: Lending, including buy now pay later growth, accelerated more than 20 points from Q2, and is now growing faster than the total company growth, primarily for two reasons.

Lending, including buy now pay later growth accelerated more than 20 points from Q2 and is now growing faster than the total company growth primarily for two reasons.

Speaker 5: First, we lapped the partial loss of one Klarna program this quarter. Second, the rapid consumer adoption of several of our BMPL customers' Pay Anywhere solutions, which deliver their BMPL value proposition on a card that can be used at any card accepting merchant.

We lapped the partial loss of one client program this quarter.

The rapid consumer adoption of several of our <unk> customers pay anywhere solutions, which deliver there'll be NPL value proposition on a card that can be used at any card accepting merchant.

On demand delivery growth accelerated this quarter due to consumer adoption of new services and merchant segments.

Speaker 5: On-demand delivery growth accelerated this quarter due to consumer adoption of new services and merchant segments.

Speaker 5: Expense management growth decelerated this quarter due to increasingly tougher comps as this vertical matures.

Expense management growth decelerated this quarter due to increasingly tougher comps as this vertical matures.

Speaker 5: Q3 net revenue was $109 million, a contraction of 43% year over year, including a 70 percentage point decline due to the cash app renewal.

Q3, net revenue was $109 million, a contraction of 43% year over year, including a 70 percentage point decline due to the catch up renewal.

Speaker 5: The bulk of that cash app renewal impact is the 60 percentage point growth headwind driven by the revenue presentation change related to the cost associated with cash app's primary payment network volume.

The bulk of that cash App renewal impact is the 60 percentage point growth headwind driven by the revenue presentation change related to the costs associated with cash app's primary payment network volume.

Speaker 5: This revenue presentation impact on growth was several points lower than we expected due to nuances within Cash App TPV, particularly a greater mix of volume on non-primary networks.

This revenue presentation impact on growth with several points lower than we expected due to nuances within cash App PPV, particularly a greater mix of volume on non primary networks.

Speaker 5: We attribute this makeshift to changes in Reg II that went into effect in July .

We attribute this mix shift to changes in <unk> that went into effect in July.

Speaker 5: Because this non-primary network volume still adheres to the prior revenue recognition.

Because this non primary network volumes, so adheres to the prior revenue recognition and.

Speaker 5: It led to higher revenues, but do not necessarily translate into higher gross profit, a circumstance that we have discussed in the past.

It led to higher revenues that do not necessarily translate into higher gross profit.

A circumstance that we have discussed in the past.

Speaker 5: As expected, the cash app renewal pricing drove an additional 10-point impact to net revenue growth in the quarter. Excluding the cash app renewal, net revenue growth was strong, driven by strength across the business, particularly on-demand delivery and powered by Marketa.

As expected the cash App renewal pricing drove an additional 10 point impact to net revenue growth in the quarter excluding.

Excluding the catch up renewal net revenue growth was strong driven by strength across the business, particularly on the on demand delivery and powered by markup.

Block net revenue concentration was 50% in Q3 decreasing 28 points from Q2 as a result of the cash app contract renewal.

Speaker 5: The lock net revenue concentration was 50% in Q3, decreasing 28 points from Q2 as a result of the cash-app contract renewal. Are net revenue taker-

Our net revenue take rate was 19 basis points.

Speaker 5: Excluding cash up the net revenue take rate was consistent with the prior quarter and several bits higher than our total company take

Excluding cash up the net revenue take rate was consistent with the prior quarter and several bits higher than our total company take rate.

Q3, gross profit was $73 million contracting, 9%, a little better than we expected. The gross profit contraction is primarily result of three factors first the cash up renewal lowered growth by mid twenties percentage points.

Speaker 5: Q3 gross profit was $73 million, contracting 9%, a little better than we expected. The gross profit contraction is primarily a result of three factors.

Speaker 5: First, the cash app renewal lowered growth by mid-20s percentage points.

Speaker 5: Remember, the change in cash-up revenue presentation has no impact on gross profit. Therefore, this impact is solely driven by the renewal price.

Remember the change in cash App revenue presentation has no impact on gross profit. Therefore, this impacted solely driven by the renewal pricing.

Second we renewed approximately 50% of our non block PPV between Q2 'twenty two in Q1 'twenty three.

Although the effects are starting to dissipate and we will fully lap. This in Q2 'twenty for these renewals did lower growth by low to mid single digits. This quarter.

Lastly, we lost four visa incentives on two of our customers at the start of 2023 lowering growth by low to mid single digits.

Speaker 5: Lastly, we lost full VISA incentives on two of our customers at the start of 2023, lowering growth by low to mid-single digits. This impact is a little lower than previous quarters due to the volume fluctuations in those customers last year, and we expect to fully lap this impact in Q1 2024.

This impact is a little lower than previous quarters due to the volume fluctuations in those customers last year and we expect to fully lap this impact in Q1 24.

We believe each one of these gross profit impacts were discrete situations that impacted us all at once we do not expect to see impacts of this magnitude in the future due to changes in how we approach customer deals and contractual language starting late last year.

Speaker 5: We believe each one of these gross profit impacts were discrete situations that impacted us all at once. We do not expect to see impacts of this magnitude in the future due to changes in how we approach customer deals in contractual language, starting late last year. Our gross profit take rate

Our gross profit take rate was 13 basis points.

Speaker 5: The gross profit take rate outside of Cash App increased one point from last quarter and is several bits higher than our total company gross profit take rate.

The gross profit take rate outside of cash App increased one point from last quarter and as several bits higher than our total company gross profit take rate.

Speaker 5: Gross profit margin was 67% lower than anticipated because of the smaller impact of the cash out net revenue presentation change, which caused net revenue to be higher but did not flow through to gross profit. Our projections on gross profit and the gross profit take rate were accurate. Therefore, the margin difference is mostly driven by the denominator.

Gross profit margin was 67% lower than anticipated because of the smaller impact of the cash up net revenue presentation change, which caused net revenue to be higher but did not flow through to gross profit.

Our projections on gross profit and the gross profit take rate were accurate.

Therefore, the margin difference is mostly driven by the denominator.

Q3, adjusted operating expenses were $75 million, a decrease of 11% from last quarter and a 20% decrease year over year. Despite an approximately one point of inorganic growth driven by the inclusion of power.

Speaker 5: Q3 adjusted operating expenses were $75 million, a decrease of 11% from last quarter, and a 20% decrease year over year, despite an approximately one point of inorganic growth driven by the inclusion of power.

Speaker 5: These declines are primarily driven by the real life savings from our restructuring in late May and efficiency initiatives targeting our technology and professional services expenses.

These declines are primarily driven by the realized savings from our restructuring in late may and efficiency initiatives targeting our technology and professional services expenses.

Speaker 5: These cost rationalizations have not impacted our platform uptime or performance despite our fast-growing volume.

These cost rationalizations have not impacted our platform uptime or performance.

Our fast growing volume.

Speaker 5: Adjusted operating expenses were almost 10 million lower than we expected for three reasons, two of which are timing related.

Adjusted operating expenses for almost $10 million lower than we expected for three reasons two of which are timing related.

Speaker 5: We have diligently curtailed our technology and professional services expenses achieving larger benefits than we initially anticipated.

We have diligently curtailed our technology and professional services expenses, achieving larger benefit than we initially anticipated.

Speaker 5: A few of our planned third-party expenditures, such as support to execute volume migrations from other processors and program management enhancements, were delayed in Q3. Therefore, we expect $2 to $3 million of expense to shift to Q4.

A few of our planned third party expenditures such as support to execute volume migrations from other processors and program management enhancements were delayed in Q3, therefore, we expect $2 million to $3 million of expense to shift to Q4.

Speaker 5: Finally, when we reduced our workforce by approximately 20% in May, we also intended to hire in a few priority areas. As a result, we plan to end the year with a net reduction of just over 15% of our pre-restructuring headcount plan.

Finally, when we reduced our workforce by approximately 20% in May we also intended to hire in a few priority areas.

As a result, we plan to end the year with a net reduction of just over 15% of our pre restructuring head count plan.

Speaker 5: However, as we thoughtfully consider these additions and work to set up an office in a lower cost jurisdiction. Some of these hires are being delayed through the middle of next year.

However, as we thoughtfully consider these additions and work to set up an office in a lower cost jurisdictions. Some of these hires are being delayed through the middle of next year.

Q3, adjusted EBITDA was negative $2 million a margin of negative 2%. This result was better than we expected driven mostly by cost management successes.

Speaker 5: Q3 adjusted EBITDA was negative $2 million, a margin of negative 2%. This result was better than we expected, driven mostly by cost management successes.

Speaker 5: Interest income was $15 million, driven by elevated interest rates.

Interest income was $15 million driven by elevated interest rates.

Speaker 5: The Q3 gap net loss was $55 million, including a $16 million non-cash post-combination expense related to the power acquisition.

The Q3, GAAP net loss was $55 million, including a $16 million noncash post combination expense related to the power acquisition.

Speaker 5: During Q2, we announced a stock buyback of $200 million. As of Q3 quarter end, we purchased 21.6 million shares for an average price of $5.19 for $112 million. We ended the quarter with $1.3 billion of cash in short-term investment.

During Q2, we announced the stock buyback of $200 million.

As of Q3 quarter end, we purchased $21 6 million shares for an average price of $5 19.

For $112 million.

We ended the quarter with $1 3 billion of cash and short term investments.

Speaker 5: As we look ahead to Q4, setting all the block renewals aside, the underlying performance of the business has been performing well throughout the year.

As we look ahead to Q4 setting all the block renewals aside the underlying performance of the business has been performing well throughout the year.

Speaker 5: With the Square and Cash App business now secured through June of 2028, and with the potential for additional growth from new programs as the default provider, we have a solid foundation from which to build. Although the Square renewal aligns the volumes and price tiering with the Cash App contract, which will reduce gross profit growth by approximately three percentage points in Q4, it does not come with the revenue accounting impact of the Cash App renewal.

With the square cash App business now secured through June of 2028, and with the potential for additional growth from new programs as the default provider, we have a solid foundation from which to build.

Although the square renewal aligns the volumes and price sharing with the cash up contract, which will reduce gross profit growth by approximately three percentage points in Q4. It does not come with the revenue accounting impact of the catch up renewal we.

Speaker 5: We expect the cash up renewal impacts on revenue and gross profit in Q4 to be in line with Q3, which is low 70s percentage points for revenue and mid 20s percentage points for gross profit.

We expect the cash up renewal impacts on revenue and gross profit in Q4 to be in line with Q3, which is low 70 percentage points for revenue and mid twenties percentage points for gross profit.

Speaker 5: We also expect the business outside of block to perform on a similar trajectory as Q3. Our expectations for Q4.

We also expect the business outside of block to perform on a similar trajectory as Q3.

Our expectations for Q4 are as follows.

Speaker 5: Net revenue is expected to contract between 45 and 47 percent. The few points of deceleration from Q3 is mostly due to the square renewal.

Net revenue is expected to contract between 45% and 47%.

The few points of deceleration from Q3 is mostly due to the square renewal growth.

Speaker 5: Gross profit is expected to contract between 8% and 10% in line with Q3. The square renewal growth headwind of approximately three percentage points is offset by less drag from non-block renewals and additional incentives as we reach a new tier. Our gross margin.

Gross profit as expected contracts between eight and 10% in line with Q3.

The square renewal growth headwind of approximately three percentage points is offset by less drag from non block renewals and additional incentives as we reach a new tier.

Our gross margin should be in the high <unk>.

Speaker 5: With the success of our efficiency efforts today, we expect adjusted operating expense to decline by about 10% year over year, including the timing shift from Q3 in higher technology costs that come with elevated volumes during the holiday season.

With the success of our efficiency efforts to date, we expect adjusted operating expense to decline by about 10% year over year, including the timing shift from Q3 and higher technology costs that come with elevated volumes during the holiday season.

Speaker 5: Therefore, adjusted EBITDA margin is expected to be negative three to four percent on an organic basis, excluding the one point negative margin impact of the power acquisition.

Therefore, adjusted EBITDA margin is expected to be negative, 3% to 4% on an organic basis, excluding the one point negative margin impact of the power acquisition.

Speaker 5: A lower adjusted EBITDA versus Q3 is consistent with the $2 to $3 million expense timing shift into Q4.

The lower adjusted EBITDA versus Q3 is consistent with the $2 million to $3 million expense timing shift into Q4.

Speaker 5: Therefore, our expectations for full year 2023 performance are consistent with what we shared last quarter, except for a better adjusted EBITDA margin driven by our expense discipline.

Therefore, our expectations for full year 2023 performance are consistent with what we shared last quarter, except for a better adjusted EBITDA margin driven by our expense discipline.

Speaker 5: Net revenue is expected to contract by low double digits percentage with an approximately high 30s percentage point decline due to the cash app renewal, mostly due to the change in accounting treatment.

Net revenue is expected to contract by low double digits percentage within approximately high <unk> percentage point decline due to the cash up renewal, mostly due to the change in accounting treatment.

Speaker 5: Gross profit growth is expected to be positive low single digit.

Gross profit growth is expected to be positive low single digit.

Speaker 5: Adjusted EBITDA margin is expected to be negative low single digits on an organic basis including the one point negative margin impact of the power acquisition.

Adjusted EBITDA margin is expected to be negative low single digits on an organic basis, including the one point negative margin impact of the power acquisition.

Speaker 5: To wrap up, we delivered a strong Q3 and have now renewed over 75% of our TPV in the last six quarters, positioning the company for long-term success.

To wrap up we delivered a strong Q3 and have now renewed over 75% of our <unk> in the last six quarters positioning the company for long term success.

Speaker 5: This is our first quarter incorporating the cash-up renewal in our results, which established a new baseline that sets us up to drive sustained, long-term, profitable growth as our sales bookings continue to show growth and momentum. Despite the renewal headwinds on growth, we believe our efficiency initiatives will put us close to adjusted EBITDA break-even as we exit 2023.

This is our first quarter incorporating the catch up renewal in our results, which established a new baseline that sets us up to drive sustained long term profitable growth as our sales bookings continue to show growth and momentum.

Despite the renewal headwinds on growth, we believe our efficiency initiatives initiatives will put us close to adjusted EBITDA breakeven as we exit 2023.

Speaker 5: Before we turn it over to Q&A, we understand the longer-term trajectory of the business is of great interest to everyone, and our Investor Day materials will be available at 1.30 Pacific time on Thursday, November 9th on our Investor Relations website. We think you will find the 110 minutes of content helpful. As such, we ask that questions today be limited to Q3 results and 2023 as a whole. Thank you.

Before we turn it over to Q&A, we understand the longer term trajectory of the business is of great interest to everyone in our Investor day materials will be available at $1 30 Pacific time on Thursday November nine on our Investor Relations website we.

We think you will find the 110 minutes of content helpful.

As such we ask that questions today be limited to Q3 results and 2023 as a whole.

Thank you.

Now it's time to take questions. Thank.

Speaker 1: You will now be conducting a question and answer session. In the interest of time, we ask that you please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Thank you we will now be conducting a question and answer session in the interest of time, we ask that you. Please limit yourself to one question and one follow up.

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

Confirmation tone will indicate your line is in the question queue. You May press star two if you'd like you will be a question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys, one moment. Please poll for your questions.

Speaker 1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please.

Our first question comes from the line of Tien Tsin Huang with Jpmorgan. Please proceed with your question.

Speaker 1: Our first question comes from the line of Tenjin Wong with J.P. Morgan.

Yeah.

Speaker 6: Thanks, appreciate all the detail and I'll ask maybe for you Mike just on the clarification for the gross margin coming in

Hi, Thanks.

All the detail and I'll ask maybe for you Mike just on the clarification for the gross margin coming in at.

Speaker 6: 67% versus the low 70s guys. So that is, that's, just understand it correctly here, that's just the reg ii effect.

67% versus the low seven these guys so that is that.

Just to understand the likelihood that thats, just the Greg I effects chain.

Speaker 6: change in the gross revenue that you assumed. Is there anything else in there that surprised and is that high 60s the right figure it sounds like now from a baselining standpoint? I think that's what she said for the fourth quarter. Sorry for the clarification.

Change in the gross revenue that you assumed.

Is there anything else in there that surprised us that high <unk> the right figure it sounds like now from a baseline standpoint, I think that's what you said for the fourth quarter sorry for the clarification.

Speaker 5: Yeah, no, thanks, Sinjin. No, that's correct. So, our gross profit came in as expected, just a little bit better. And so, our ability to predict the gross profit impact from the cash app renewal was very accurate. What we didn't quite get right when we talked to you three months ago was the revenue impact from the cash app deal. And that's because

Yes, no. Thanks engine now Thats correct. So our gross profit came in as expected just a little bit better.

And so our ability to predict the gross profit impact from the cash App renewal was was very accurate.

We didn't quite get right when we talked to you three months ago was the.

The revenue impact from the cash out deal and Thats because.

Speaker 5: The new revenue treatment only applies to the volume on the primary network.

The new revenue treatment only applies to the volume on the primary network.

Speaker 5: And the old revenue accounting that we've talked about many times can lead to higher revenue, but not necessarily translate to gross profit still applies for all the volume that's on different networks than the primary network.

And the old revenue accounting that we've talked about many times can lead to higher revenue, but not necessarily translate to gross profit still applies for all the volume on the that's on different networks in the primary network.

Speaker 5: So what we didn't quite project accurately is when the new REGI changes went into effect in July , we saw more volume shift to other networks, which then lifted the revenue in a way that didn't translate to gross profit. And so it lowered the margin, but it's really purely from the denominator.

So what we didn't quite project accurately is when the new Reg changes went into effect in July we saw more volume shifts to other networks, which then lifted the revenue in a way that didn't translate to gross profit and so it lowered the margin, but our it's really purely from the denominator.

Speaker 5: So, yes, what we said for Q4 was that our margins should be in the high 60s, and that, assuming the REG-II changes that we've started to see is sort of, you know, is more of the steady state of what we should expect going forward, then that would be the margins that we anticipate.

So.

So yes, what we said for Q4 was that our margins should be in the high <unk> and not assuming the <unk> changes that we've started to see it as sort of.

As more of the steady state of what we should expect going forward, then that would be the margins that we anticipate.

Speaker 6: Understood. Thank you. That's a lot of nerdy payment stuff there, but I think I got it. On the operating expenses, if you don't mind me asking on that as a follow-up, is there any change from a hiring perspective and needs on the developer side, given some of the wins and the changes on block, everything else? It sounds like it was just a timing issue with the hirings getting pushed to the middle of next year. I just wanted to make sure that

Understood. Thank you, that's a London nerdy payments up there, but I think I got it.

On the on the on the operating expenses. If you don't mind me asking on that as a follow up.

So is there any change from a hiring perspective and needs on the developer side, given some of the wins and the changes on block everything else. It sounds like it was just a timing issue with with the hiring getting pushed to the middle of next year I just wanted to make sure that.

Thank you.

Speaker 5: That's right. So it doesn't it doesn't change the number of people we need. It's really that we're trying to be very thoughtful as we plan what our priorities are going to be, you know, what types of skills and talents that we need to add. And so we're just trying to be very thoughtful about that. And then we're also in the process of setting up a low cost jurisdiction office somewhere. So we also want to take the time to incorporate that into our hiring plan. So.

Right. So it doesn't it doesn't change the number of people we need it's really that we're trying to be very thoughtful as we planned what our priorities are going to be what types of skills and talents that we need to add and so we're just trying to be very thoughtful about that and then we're also in the process of setting up a low cost jurisdiction.

Office somewhere so we also want to take the time to incorporate that into our hiring plans. So <unk>.

Speaker 5: Originally when we executed the restructuring in May, we thought we would add those people by the end of this year. And it's now clear that that's not what's gonna happen and it's gonna move into the next several quarters and we should probably have all that headcount filled by the middle of next year.

Originally when we executed the restructuring in May we thought we would add those people by the end of this year and it's now clear that that's not what's going to happen and it's going to move into the next several quarters and we should probably have all of that head count filled by the middle of next year.

Speaker 5: So that's one big factor. And then the other was some of the expenses that we have with third parties who are helping us with very specific initiatives such as.

So that's one big factor and then the other was some of the expenses that we have with third parties, who are helping us with very specific initiatives such as we've contracted with someone to help us migrate volume from another processor to try to make that as seamless and painless for our new customer.

Speaker 5: We've contracted with someone to help us migrate volume from another processor to try to make that as seamless and painless for our new customer. That is something that just got delayed a little bit, and so we do expect 2 to 3 million of expense that we originally expected to hit us in Q3 is now going to be a Q4 expense item.

It is something that just got delayed a little bit and so we do expect $2 million to $3 million of expense that we originally expected to hit us in Q3 is now going to be a Q4 expense item.

Speaker 6: Thanks for going through that. Again, look forward to the Investor Day content.

Okay. Thanks for going through that again, we're fortunate and distribute content.

Thanks, Susan.

Speaker 1: Your next question comes from the line of Timothy Chiodo with UBS. Please proceed with your question.

Our next question comes from the line of Timothy Chiodo with UBS. Please proceed with your question.

Great. Thank you for taking the question. This one is somewhat related to the cash have comments around <unk>, but more broadly across your portfolio would you be able to describe the rough percentage of volumes that might have shifted to the secondary or alternative debit networks and roughly or directionally.

Speaker 7: Great. Thank you for taking the question. This one is somewhat related to the Cash Hub comments around REG-II, but more broadly across your portfolio, would you be able to describe the rough percentage of volumes that might have shifted to the secondary or alternative debit networks? And roughly or directionally, what kind of an interchange impact does that have in terms of the revenue pool that you would be able to...

What kind of an interchange impact does that have in terms of the revenue pool that you would be able to share and in other words, how much lower on average would you say the interchange is for some of those secondary debit networks.

Speaker 7: In other words, how much lower, on average, would you say the interchange is for some of those secondary debit networks?

Speaker 5: Yeah, yeah, so thanks for your question, Tim. Unfortunately, I can't tell you the exact volume that that shifted.

Yeah, Yeah. So.

Thanks for your question, Tim Unfortunately, I can't tell you the exact volume that shifted.

Speaker 5: So, I think that that's not necessarily our place to share with you, but it wasn't a.

I think that Thats.

Not necessarily our place to to share with you, but it wasn't a.

Speaker 5: you know, a massive change, but keep in mind, if you, if you think back to prior quarters, right, we've talked a lot about that in the block business, you know, our margin was in the, you know, sort of high twenties percentage points, which gives you a sense that the, the revenue take rates, you know, were about four X, what they were in gross profit. So it doesn't take a huge shift, uh, a volume to make a material difference to the revenue, given how different that take rate is compared to.

A massive change but keep in mind. If you if you think back to prior quarters right. We've talked a lot about that in the block of business in our margin was in the sort of high 20 percentage points, which gives you a sense of.

The revenue take rates were about Forex, what they were in gross profit. So it doesn't take a huge shift.

Volume to make a material difference to the revenue given how different that take rate is compared to what's happening on now the the primary network, where we essentially are just making the fees associated with the service that we provide.

Speaker 5: what's happening on now the primary network where we essentially are just.

Speaker 5: making the fees associated with the service that we provide.

Speaker 5: to Cash App and it's not impacted by Interchange at all. So, that's really what the dynamic is. In terms of your question on what happens with Interchange, you know, it varies a lot, particularly on the ticket side. So, Tim, which volume moves there is also quite impactful, just given how varied the Interchange rate is.

To cash App and it has not impact.

Impacted by interchange at all so.

So that's really what the dynamic is in terms of your question on what happens with interchange it varies a lot, particularly on the ticket size so Tim.

Which volume moves there is also wide quite impactful just given how varied the interchange rates are.

Speaker 5: So, you know, it makes some impact, but, you know, that's not as big of a factor as just the difference in the way our revenue works is what drove the impact to our P&L.

No.

It makes some impact but.

That's not that's not as big of a factor as just the difference in the way. Our revenue works is is what drove the impact to our P&L.

Speaker 7: Perfect. Thank you, Mike. And sticking with... I appreciate that. That's more than fair. And sticking with the theme of keeping it more to current quarter and numbers, just a quick clarifier. I apologize if I missed this, but on the cash app portion of the contract extending one additional year through June 2028, did that come with any incremental pricing confessions on the cash app side or was that sort of same as before when we...

Perfect. Thank you, Mike and sticking with I appreciate that thats more than Sir and sticking with the theme of keeping it more to current quarter end numbers, just a quick clarifier I apologize if I missed this but on the cash app portion of the contract extending one additional years through June 2028 did that come with any.

Incremental pricing concessions on the cash app side or was that sort of.

Same as before when we talk about a few months back.

Speaker 3: Hey Tim, it's Simon. There was no further concessions, so it's the exact same term.

Hey, Tim mid Simon there was no further concessions so it's the exact same terms.

Perfect. Thanks, so much. Thank you so much time.

Speaker 5: Sorry, the only thing is just the change that we made is we're now going to be applying the square volumes together with Cash App to flow through those tiers. So there would be, I guess, some sort of indirect benefit to Cash App over time. But the bulk of the impact is really for the benefit of the square debit card.

Sorry, the only thing I would just.

The changes that we've made is we're now all.

We're going to be applying the square volumes together with cash app to flow through those tiers. So it's.

So there'll be I guess, some sort of indirect benefit to cash up overtime, but.

The bulk of the impact is really for the benefit of the square debit card.

Thank you. Our next question comes from the line of Darrin Peller with Wolfe Research. Please proceed with your question.

Speaker 1: Our next question comes from the line of Darren Peller with Wolf Research. Please.

Speaker 8: Hey guys, thanks. You know, maybe we could hone in on the couple of the categories that you've seen some really good newer growth in, and so whether it's early wage access.

Hey, guys. Thanks.

Maybe we could hone in on the couple of the categories that you've seen some really good newer growth in and so whether it's early wage access.

Speaker 8: or the newer part of BMPL, just helping, you know, provide access to merchants that don't otherwise take your debit plus, et cetera.

Or the newer part of the Mpls is helping provide access to merchants that don't otherwise, taking debit cost et cetera I.

Speaker 8: I guess, first of all, just how much of that really been contributing overall now to the numbers and then really as an add on to that. I mean, I don't think I heard the bookings any bookings commentary around this time around the way we did last couple. So maybe just some, some comments on what we're seeing right now in terms of, you know, you had strong bookings the last couple of quarters. I know has that continued and I guess what category?

I guess first of all just how much of that really been contributing overall now to the numbers and then really as an add on to that.

I don't think I heard the bookings any bookings commentary around this time around the way. We did last couple so maybe just some comments on what we're seeing right now in terms of you had strong bookings the last couple of quarters I know.

Has that continued and I guess what categories. Thanks, guys.

Speaker 5: So I'll take the first one and then I'll pass it over to Simon and talk about booking. So in terms of the newer use cases that we're seeing, particularly the accelerated wage access and sort of the new, I guess, consumer-focused BMPL offerings, I would say they are still relatively small but are growing fast enough to make a difference. So like on accelerated wage access, for example, as I mentioned, the financial services vertical is by far our largest, over half of our PPV, and we did have a tougher comp there that we had a lap.

Yeah. Thanks, Dan So I'll take the first one and then I'll pass it over to Simon to talk about bookings. So in terms of the newer use cases that we're saying, particularly the accelerated wage access and sort of the new I guess <unk>.

Consumer focused the MPL offerings I would say they are still relatively small but are growing fast enough to make a difference. So like an accelerated wage assets. For example, as I mentioned the financial services vertical is by far our largest over half of our PPV and we did have a tougher comp.

There that we had to lap, but that was mostly offset that drag we got from the tougher comp was mostly offset by the rapid growth of the accelerated wage access use case, just comparing Q3 to Q2.

Speaker 5: But that was, you know, mostly offset that that drag we got from the tougher comp was mostly offset by.

Speaker 5: the rapid growth of the accelerated wage access use case just comparing Q3 to Q2. It was up 2x.

It was up two X. So so it's still relatively small, but growing fast enough to at least offset some slowdown we're seeing in our largest part of the business in financial services and then in buy now pay later again, it's growing really fast. It is now just under 10% of our BNP LTV.

Speaker 5: So it's still relatively small, but growing fast enough to at least offset some slowdown we're seeing in our largest part of the business in financial services.

Speaker 5: And then in buy now, pay later, again, it's growing really fast. It is now just under 10% of our BNPL TPV. So it's still relatively small. But again, that 10% has happened just in the last few quarters. So it's growing really fast. And so it's contributing, but it's it'd be probably more meaningful, both use cases in the next several quarters.

So it's still relatively small, but again that 10% has happened just in the last few quarters. So it's growing really fast and so.

It's contributing but it's it would be probably more meaningful both use cases in the next several quarters.

Speaker 3: On the booking side, the trend that started, I'd say, late in 2022 has continued. So it was a strong quarter, and I'll give you some stats, kind of 60% was in North America, about 40% outside the U.S.

On the bookings side the trend that started I'd say late in 2000 <unk> thousand for Q4 2000, sorry in 'twenty two.

And that's continued.

So it was a strong quarter and give you some stats kind of 60% was in North America about 40% outside the U S.

Speaker 3: It was actually even 50-50 between expansions and new programs, and the other interesting thing is about 20% of the deals were actually flip deals, so wins from the competition. So all in all, like I say, since October 2022 to date, we've seen very strong.

Was actually even 50 50 between expansions and new program and the other interesting things about 20% of the deals were actually flip deals so wins from the competition. So all in all like I say Syn <unk>.

<unk> 2022 to date, we've seen very strong bookings.

Speaker 8: great to hear and just one quick follow-up would be around anything you're seeing weakness in so some of the sub verticals mostly macroeconomically I guess is really the question I mean we're thinking expense management as a category we've seen some cracks in so just as an example but anything you're seeing that's worth calling

That's great to hear and just one quick follow up would be around anything youre seeing weakness and so some of the sub verticals, mostly macroeconomically I guess is really the question I mean, we're thinking expense management as a category we are seeing some cracks and so.

Just as an example, but anything youre seeing thats worth calling out for us to keep an eye on.

Yeah.

Yes, I would say, yes, the only thing we're seeing.

Speaker 5: Yeah, I would say, yeah, the only thing we're seeing, you know, when we look at and I know, you know, several of our payment peers have talked about this, you know, in, in October , our, our TBV growth was like a little bit slower than, than Q3 and in September , not a lot, but a little bit, and we're seeing it across.

When we look at and I know several of our payment peers have talked about this.

In October our TVD growth was like a little bit slower than than Q3 and in September not a lot, but a little bit and we're seeing it across.

Speaker 5: We typically break in all the CEN categories into sort of high, medium, and low discretionary, like how much of it is really discretionary. And we're seeing it's full across all three. So it's not in a particular area. It's pretty broad based. But what I would say, Darren, is like when you look at our TPV.

We typically break and all the spend categories into sort of high medium and low discretionary like how how much of it is really discretionary and we're seeing it slow across all three so it's not in a particular area.

Pretty broad based but what I would say Darrin is like when you look at our TPB.

Speaker 5: a monthly growth since March, so that's about seven months, you know, we've been moving within about a five-point band, so it's been pretty tight, and we go, we've gone up three times sequentially, we've gone down four times, so it's kind of been bouncing around in a pretty tight band, so what we're seeing in October is really just a continuation of the trends we've seen before. There's nothing that really concerns us at this point, but obviously we're monitoring it closely.

Monthly growth since March so that's about seven months.

Then moving within about a five point band so it's been pretty tight and we go we've gone up three times sequentially. We've gone down four times. So it's kind of been bouncing around in a pretty tight band. So what we're seeing in October is really just a continuation of the trends. We've seen before there is nothing that really concerns us at this point, but obviously we're monitoring it closely.

Yes.

Alright very helpful guys. Thank you.

Thank you. Our next question comes from the line of Ramsey El <unk> with Barclays. Please proceed with your question Hi.

Speaker 1: Our next question comes from the line of Ramsey Ellisall with Barclays. Please proceed with your question.

Hi, Thanks for taking my question and terrific results. This evening.

Speaker 7: I wanted to follow up on Darren's question and ask about kind of trends you're seeing or updated thinking on bookings conversion. Are you starting to see some of the sort of bookings momentum that you've experienced, you know, flow through to revenues? Should we expect, what should we expect in terms of conversion trends going forward?

I wanted to follow up on <unk> question, and ask about kind of trends youre seeing or updated thinking on bookings conversion are you are you starting to see some of the sort of bookings bookings momentum that you've experienced flow through to revenues should we expect which we expect in terms of conversion trend.

And going forward.

Speaker 3: Thanks, Ramzi, for the for the question. It usually, I say, it usually takes

Thanks Ramsey.

The question.

I usually say.

Say it usually takes.

Speaker 4: about 18 months for deals to start contributing materially to revenue. Usually it's 6 to 12 months.

About 18 months.

For deals to start.

Contributing materially to revenue.

Is it a six to 12 months to launch.

Speaker 3: and 12 months to fully ramp. So, we're starting to...

And 12 months to fully ramp so we're starting to see.

Speaker 3: the launch, but I would say it won't be until the tail end of 2024 and 2025 in which we'll see the material impact.

The launch, but I would say it wont be until the tail end of 'twenty, 'twenty, four and 2025, and which we'll see the material impact of the new deals that we started closing in Q4.

Speaker 3: of the new deals that we started closing in Q4 2022. I mean, we're all focused on delivery and we've made great progress, especially separating commercial from consumer because commercial moves a little bit faster, but I would stick to, it will be tail end of 2023, sorry, 24 and 25 before we see the material impact.

2022.

All focused on delivery and we've made great progress, especially separating commercial from consumer because commercial moves a little bit faster, but I would stick to it will be tail end up 2023, sorry, 'twenty four and 'twenty five before we see the material impact.

And then we will discuss this a lot more kind of the formula and gone out of the process at Investor Day, We've got a lengthy section on that because we understand that.

Speaker 3: And then we will discuss this a lot more, kind of the formula and kind of the process at Investor Day. We've got a lengthy section on that because we understand that everybody is expecting to see how and when the bookings will convert into growth.

Everybody is expecting to see how and when that bookings will convert into gross profit.

Yes.

Speaker 7: Got it. Okay. And one follow-up from me. You mentioned a rapid ramp of accelerated wage access.

Got it Okay and one follow up for me you mentioned, a rapid ramp of accelerated wage access.

Speaker 7: And that is not an opportunity that candidly I thought of in the context of Marquette before, I'm not sure why not, but maybe you could talk a little bit about that broader opportunity and the degree to which that could turn into a material sort of flow for you.

And that is not an opportunity that candidly I thought of in the context of Mark Hurd It before I'm not sure why not but maybe you could talk a little bit about that broader opportunity.

And the degree to which that could turn into a material sort of flow for you guys.

Speaker 3: Yeah, it's actually a very important segment for us, and we will discuss it specifically at investor day, since this is an area of growth. But let me give you a preview. So the construct that Marketa has built is actually very unique to us.

Yes, it's actually a very important.

Segment for Us and we will discuss it specifically at Investor day since this is.

An area of growth, but let me kind of give you a preview.

The construct that Mark <unk> has built is actually very unique to us.

Speaker 3: So a lot of time you have, if somebody wants their wages earlier than their employer or labor marketplace delivers, usually you have a lender that comes in and steps in and offers effectively a loan to an employee. That's not how we implement.

So a lot of time, you have if somebody wants their wages earlier than their employer or labor marketplace deliveries, usually you have a lender that comes in and stops in and offers effectively alone to an employee that's not how we.

<unk>. So we actually have done something unique in which the balance sheet of the employer or the marketplace is deployed.

Speaker 4: And so, we actually have done something unique in which the balance...

Speaker 3: of the employer or the marketplace is deployed.

Speaker 3: And what happens when, let's say, an employee checks out or blocks out?

And what happens when let's say an employee checks out or blocks out then the ledger moves the money does not move until the consumer or the employee goes in spend so effectively deploying the working capital of large employers.

Speaker 3: then the ledger moves, the money does not move until the consumer or the employee goes and spends.

Speaker 3: So with effectively deploying the working capital of large employers on behalf of the employees without incurring significant or increasing their debt stack, that's why we are seeing kind of like

On behalf of the employees without incurring significant.

Or increasing their debt stack, that's why we are seeing kind of like <unk>.

Speaker 3: many, some large employers adopt our solution because you're not actually bringing in a lender at high interest rates. So it's good for the employer because they're getting the loyalty of the employee, good for the employee because they get paid immediately, and I think it's good for the ecosystem because you're not actually pulling in expensive working capital.

Many some large employers adopt our solution because you are not actually bringing in a lender at high interest rates. So it's good for the employees because they are getting the loyalty of the employee good for the employees because they get paid immediately and I think it's good for that.

Ecosystem, because youre not actually pulling in expense of working capital.

Fantastic and good day.

Speaker 5: It is very good for market. That's right. That's right. Essentially, the employer doesn't have to essentially can continue to earn interest on the funds until they're spent. And then, of course.

It is very good for market that's.

Essentially how the employer doesn't have to essentially can continue to earn interest on the funds until their spend and then of course there.

Speaker 3: as the issuer of the card, then there's economics for them when the employee spends. So it's a really elegant solution and we have a few customers live on it and the adoption has been impressive. The last thing I'd say is you are effectively converting an expense, which is fatal, into income, into revenue, because the employer participates in the interchange economics.

Be assured the card then theres economics for them when the when the employee spend so it's a really elegant solution and we have a few customers live on it and it's the adoption has been impressive.

The last thing I'd say is you are.

Effectively converting an expense, which is fatal into income into revenue because they they yesterday the employer participates and interchange economics.

Steve Super helpful. Thank you.

Thank you our question comes from the line of Sanjay <unk> with <unk>. Please proceed with your question.

Speaker 9: Thank you. Mike, sorry if I missed this, but how much of gross profit was blocked in the third quarter? And also, how should we think about the block contribution as a result of the square seller renewal? Is there any impact there?

Thank you.

Mike Sorry, if I missed this but how much of gross profit was block in the third quarter and also should we think.

How should we think about the block contribution as a result of this.

The square seller renewal is there any impact there.

Speaker 5: So on your first question, so the gross profit concentration from blocks did go down about five percentage points, and so it's now in the 40s. So it is lower than our revenue concentration as it's been in the past, so that's the impact of that.

So on your first question. So the gross profit concentration from block did go down.

About five percentage points and so it's now in the in.

In the <unk>. So it is lower than our revenue concentration as it's been.

In the past so that.

The impact of that.

Speaker 5: The block concentration post the square debit card deal, yeah, I mean, it will go down a little bit as we gave them a little bit of a better pricing, but we think that the combination of, obviously, extending the relationship for five years, but also being named as their default provider for additional programs that could come in the future, positions us well to work together to drive growth. Absolutely.

The block concentration post the square debit card deal, yes, I mean, it will it will go down a little bit as we gave them.

A little bit of a better pricing, but we think that the combination of obviously extending the relationship for for five years, but also <unk>.

Named as their default provider for additional programs that could come in the future.

Positions us well to work together to drive growth.

Absolutely congrats on that.

I think yes, sorry, it's under there's one more thing I mean, I think I've said before as.

Speaker 5: I think, yeah, sorry, Sundar, just one more thing. I mean, I think I've said before, you know, as much as we, of course, want our concentrate, our block concentration to go down, we do think there's incredible opportunities that, you know, the two companies can do together. So, you know, that we'll see how it plays out in the coming years.

As much as we of course want our concentrated block concentration to go down we do think there is incredible opportunities.

Few companies can do together so.

We'll see how it plays out in the coming years.

Great and just a follow up on this discussion.

Speaker 9: Right. And just to follow up on this REG-II discussion, like how should we think about the impact of Marketa as a whole from REG-II, right? Like, I mean, is volume moving away to a secondary network?

How should we think about the impact from our Canada as a whole from Reg II.

Volume moving away to a secondary network.

Isn't that the medium.

Speaker 9: I mean, isn't that dilutive, or do you make up for it somewhere? I'm just trying to think about, you know, if it had happened more over the course of the next few quarters.

Do you make up for it.

Think about what could happen more over the course of the next few quarters.

Speaker 5: Yeah, so I think one is at our investor day, I have a kind of a slide specific about this, about our different revenue models. I think you all will be surprised to see now how much of our

Yes, So I think one is.

Our Investor day, I have a kind of a slide specific about this about our different revenue models I think I think you all will be surprised to see now how much of our.

Speaker 5: revenue is really tied to revenue models that are influenced by interchange. The majority of our revenue no longer is impacted by interchange, where we're pricing our offering as a pure fee for service. And so for the most part, we don't feel the impact of that shift Sanjay, because it typically is not gonna affect the revenue that we're making with some of the evolution in the way we've been moving our pricing structure with customers. Okay.

Revenue is really tied to revenue models that are influenced by interchanged. The majority of our revenue no longer is impacted by interchange where we're pricing our our offering as a pure fee for service and so for the most part we don't feel the impacts of that shifts Sanjay because.

It typically is not going to affect.

The revenue that we're making with some of the evolution in the way we've been moving our pricing structure with customers.

Okay.

Thank you.

Thank you. Our next question comes from the line of Ashwin <unk> with Citi. Please proceed with your question.

Thank you.

Speaker 10: Hey, Mike, I want to pick up on that last comment, the fee-for-service comment with regards to revenue models.

Hey, Mike I wanted to pick up on that last comment the fee for service comment with regards to.

Revenue models.

<unk>.

Speaker 10: Does that basically imply you're moving more and more to transaction-based, not really volume-based? And kind of where I was going with that was to connect that comment with what you indicated with regards to TPV. And should there be an economic slowdown, slower volumes that's going to affect you maybe less than it might have previously? Is that sort of a...

Does that basically imply youre moving more and more to transaction based.

Not really volume based and kind of where I was putting that that was.

To connect that comment.

You indicated with regards to PPV.

And should there be an economic slowdown slower volumes.

That's going to affect two may be less.

Less than it might have previously is that sort of.

Speaker 5: Frankly, I think of it. Yeah, I would say yeah, thanks for the question. I would say that just just because it's for service doesn't necessarily mean it's it's per transaction. There's still a lot of our customers that we're charging them bits on volume.

Thank you.

Yes, I would say.

Yes. Thanks for the question Ashwin I would say that.

Because of this fee for service doesn't necessarily mean, it's per transaction. There is still a lot of our customers that we're charging them bps on volume.

Speaker 5: It's just that we say we're going to charge you bits on volume and we'll essentially give you all the interchange.

Just that we say, we're going to charge you bps on volume and will essentially give you all the interchange.

Speaker 5: And then we have the costs that we have to pay the bank and the network.

And then we have the costs that we have to pay the bank in the network. So.

Speaker 5: So it can be per transaction or BIPS on volume. I would say the per transaction is a more common structure in Europe , for example. And in some of our powered by Marquetta customers, but I would say that particularly on the managed by Marquetta customers that use this revenue model, it's almost always still BIPS on volume. So we have...

So it can be per transaction orbitz on volume I would say the per transaction is a more common structure in Europe for example.

And in some of our powered powered by Mark header cut.

Customers, but I would say that particularly on the managed by market our customers that use this revenue model, it's almost always still bps on volumes. So we have.

Speaker 5: I guess the upside that comes with growth and spending.

I guess the upside that comes with growth in spending.

Speaker 10: Understood. Okay. And, you know, continuing along the same vein as you sort of think of OPEX categories where you have flexibility versus not in the short run to potentially ride out volume weakness, how should we think of the near-term flexibility that is in the model?

Understood Okay.

And.

Continuing along the same vein as you sort of think of Opex.

Opex categories, where you have flexibility or is this not in the short run.

To potentially write out.

Volume weakness.

Hi.

How should we think of.

The near term flexibility that that is in the model today.

Yes, I think again, something we'll go into extensively at Investor day.

Speaker 5: Yeah, I think again, something we'll go into extensively at an investor day. The, if you look at our expenses, they're very concentrated about 85% is driven by personnel and our technology costs, which is really our cloud and staff tools that we utilize to run our platform. So I would say,

If you look at our expenses, they're very concentrated about 85% is driven by personnel and our technology cost, which is really our cloud and SaaS tools that we utilize to run our platform. So I would say.

So some of that will flex, particularly on the technology side will flex with differences in volume over time. So some of those costs are variable in nature, but the biggest lever for us 70% of our expenses are personnel related so.

Speaker 5: So, some of that will flex, particularly on the technology side, will flex with differences in volume over time, so some of those costs are variable in nature, but the biggest lever for us, 70% of our expenses are personnel related, so, you know, if, you know, that would be the, if we were going to really slow down our expense growth, you know, that is, you know, we would slow down our hiring, for example.

<unk>.

That would be the if we were going to really slow down our expense growth that is.

Would slow down our hiring for example.

Understood got it thanks.

Thank you. Our next question comes from the line of Bryan Keane with Deutsche Bank. Please proceed with your question.

Speaker 1: Your next question comes from the line of Brian Kane with Deutsche Bank.

Speaker 8: Hey, guys, thanks for taking the questions. Just thinking about overall TPV growth in Mike for the fourth quarter, sounds like it moderated a little on October . Does that take the growth rate down maybe from prior expectations? And then just thinking the underlying gross profit growth in fourth quarter, X, X block entirely. How did that trend versus expectations and now with your guidance?

Hey, guys. Thanks for taking the questions.

Just thinking about overall PPV growth and Mike for the fourth quarter. It sounds like it moderated a little October does that take the growth rate down maybe from prior expectations and then.

Just thinking the underlying gross profit growth in fourth quarter X X block entirely how did that trend versus expectations and now with your guidance.

Yes, so on the <unk> side I would say.

Speaker 5: Yeah, so on the TV side, I would say this is all kind of consistent with our expectations. I would say when we.

This is all kind of consistent with our expectations I would say when we.

Speaker 5: You know, I would say, as you all know, the last couple of months, there's been there's been talk as we get later in the year, there could be some softness. So that's always something that we had sort of accounted for in our, in our planning and forecasting. So I would say what we're seeing in October is not necessarily a big surprise and is is in line with what we are thinking.

I would say as you all know the last couple of months Theres been Theres been talk as we get later in the year there could be some softness so that's always something that we had sort of accounted for in our in our planning and forecasting. So I would say what we're seeing in October is not necessarily a big surprise and is in line with what we were thinking.

Speaker 5: The underlying gross profit growth in Q4 is still quite strong. In fact, you know, as I mentioned, our gross profit growth will be the same as Q3 and that's with us absorbing the three percentage point impact from the square renewal. So, you know, and that's being just offset by.

The underlying gross profit growth in Q4 is still quite strong and in fact as I mentioned, we are gross profit growth will be the same as Q3 and thats with us absorbing the three percentage point impact from the from the square.

Renewal so.

And thats being just offset by stronger performance elsewhere in a little bit higher incentives. So the underlying growth of the business outside of the block is actually quite good and if you think about the impacts that I shared earlier related to the renewals, we've done and the visa impact those impacts I'm, giving you all.

Speaker 5: stronger performance elsewhere and a little bit higher incentive. So the underlying growth of the business outside of block is actually quite good. And if you think about the impacts that I shared earlier related to the renewals we've done.

Speaker 5: and the Visa impact. Those impacts I'm giving you are at the total company level. When you think about that block makes up about half our business, the impacts on the non-blocks.

At the total company level. When you think about that block makes up about half of our business. The impacts on the non block are about twice as big so the drag on our gross profit we see from the heavier renewal activity and the visa incentives has more than 10 percentage points and so without that our non block gross profit will be growing in the double digit.

Speaker 5: are about twice as big. So the drag on our gross profit we see from the heavy renewal activity and the visa incentives is more than 10 percentage points.

Speaker 5: And so, you know, without that, our non block rose profit would be growing in the double digits.

<unk>.

Speaker 5: So as we, as those impacts start to dissipate in the coming couple of quarters, combined with the tailwinds that should start to cook in, you know,

So as we as those impacts start to dissipate in the coming couple of quarters combined with the tailwind that should start to cooking.

Come in with bookings as Simon talked about we expect that to start ramping as we move through 2024, we expect that that non block business to start performing quite well.

Speaker 5: come in with bookings, as Simon talked about, we expect that to start ramping as we move through 2024. You know, we expect that non-block business to start performing quite well.

Speaker 7: Got it. Helpful. And then just an update on when the rollout of the credit product will start hitting the P&L and having more of a material impact.

Got it helpful. And then just an update on when the rollout of the credit product will start hitting the P&L and having more of a material impact.

Speaker 3: Sure, it's Simon. Thanks for the question. So we do anticipate that we will take a couple of programs live in the first half of 2024. So we are very close, but we will not launch them until the first half, but will not materially impact our revenue until these program brands. So tail end of 24 and 24.

Sure.

Simon Thanks for the question. So we do anticipate that we will.

We'll take a couple of programs live.

In the first half of 'twenty 'twenty four.

So we are very close, but we will not launch them until the first half.

But we will not materially impact our revenue until these program ramps. So tail end up 'twenty four and 'twenty five.

Speaker 3: But we will we will go live with a couple of programs in the first half of 2024.

But we will we will go live with a couple of programs.

In the first half of 2024.

Okay. Thanks for the update.

Thanks, Brian.

Speaker 1: Thank you. Our next question comes from the line of Chris Kennedy with William Blair. Please proceed with your question.

Thank you. Our next question comes from the line of Chris Kennedy with William Blair. Please proceed with your question.

Speaker 7: Good afternoon. Thanks for taking the question. Can you give us an update on your international business?

Good afternoon. Thanks for taking the questions can you give us an update on your international business.

Speaker 3: Absolutely, I can give you that. And thank you for the question, Chris. So the volume outside the US.

Absolutely I can give you that then thank you for the question Chris So.

Volume in outside the U S is actually growing faster than the U S. It's 60% year over year.

Speaker 3: is actually growing faster than the U.S. It's 60% year over year, so it's a smaller base.

So it's a smaller base.

Speaker 3: And I'd say that there's a couple of things. I mean, we are certified to operate in more than 40 countries.

And I'd say that there is a couple of things I mean, we are certified to operate in more than 40 countries.

Speaker 3: And we do have customers that are U.S. based and expanding in international markets.

And we do have cusp.

Customers of that are U S based and expanding international markets.

Speaker 3: And we also are live and launched in Brazil. So we do expect the international business to continue to grow. And I would say the last thing I'd say is about 40 to like low 40% of our business.

And we also are live and launched in Brazil. So we do expect the international business.

To continue.

To grow and I would say the last thing I'd say is about 42 like low 40% of our bookings in Q3 were outside the United States. So that is a good indicator to the continued growth.

Speaker 3: in Q3 were outside the United States. So that is a good indicator to that continued growth.

Speaker 7: Great, thanks for the additional detail and then just one follow up. Can you can you talk about kind of the revenue mix? And maybe we'll learn about this on Thursday.

Great. Thanks for the additional detail and then just one follow up can you.

Can you talk about kind of the revenue mix and maybe we'll learn about this on Thursday.

Speaker 7: from the managed-by-Marketa versus the powered-by-Marketa model. Thank you.

From the managed by Merck, Canada versus the powered by Mark had a model. Thank you.

Speaker 5: Yes, so I don't, I don't want to steal from the anticipation on Thursday. Yes, there will be, we will talk about that in the investor day presentation. So, I think when you, when you look at the important thing, I just, the 1 thing, I guess, I'll say, related to your question is when it, when it comes to management.

Yes, so I don't I don't want to steal.

Steel from the anticipation on Thursday, yes, there will be we will talk about that in the Investor day presentation. So I think when you. When you look at the important thing I just the one thing I guess I will say.

To your question is.

When it comes to manage by the important thing is really to look at.

Speaker 5: The important thing is really to look at, it's a smaller impact of revenue, a much bigger impact to gross profit because we don't have the bank and network fees associated with that volume. So, although the price itself is relatively low compared to managed buy, when you start looking at the gross profit take rate, so the gross profit we make for every dollar of volume, it becomes much closer to our managed buy business. And so, you know, we still really like that business a lot because it can scale quite well and be very creative. Right.

It's a smaller impact of revenue a much bigger impact to gross profit because we don't have the banking network fees associated.

With that volume so although the price itself is relatively low compared to manage by when you start looking at the gross profit take rate. So the gross profit we make for every dollar of volume it becomes much closer to our managed by business and so.

We still really like that business a lot because.

It can scale quite well and be very accretive.

Great. Thanks for taking the questions look forward to Thursday.

Thank you.

Speaker 11: Thank you.

Thank you our final question comes from the line of James.

Speaker 1: Our final question comes from the line of James Buffett with Morgan.

With Morgan Stanley. Please proceed with your question.

Speaker 12: Hi, this is Meryl Thomas on for James. I wanted to ask about some of your embedded finance customers and the growth within those relationships. Just how have you seen those customers, I guess, grow in size or scope since you first went out with the RFP? I just wanted to get a better understanding for the existing customer growth there.

Hi, This is Mel Thomas on for James.

I wanted to ask about some of your embedded finance customers.

Within those relationships.

Have you seen the customers I guess, Kevin just since you first went out with the RFP.

Just wanted to get a better understanding for the existing customers out there.

Speaker 3: Sure, thanks for the question. So we're very bullish on the embedded finance market.

Sure. Thanks for the question. So the we are.

Very bullish on the embedded finance market and I'd say there is many reasons for that one is the diverse use cases, so we see traction across many dimensions. The first one is and I think we've talked about it as the accelerated wage access that seems like a.

Speaker 3: And I'd say there's many reasons for that. One is the diverse use cases. So we see traction across many dimensions. The first one is, and I think we've talked about it, is the accelerated wage access. That seems like a use case that can cross multiple industry verticals and also can spill over from traditional employment to labor marketplaces.

Use case that came across multiple industry verticals and also Ken spillover from traditional employment to labor marketplaces.

Speaker 3: The second one is bonus sale lending. I mean, BNPL kind of demonstrated the way, and many, I say, large retailers kind of want to do it on their own.

The second one is a point of sale lending I mean, <unk> kind of demonstrated.

The way.

And many.

Say large retailers kind of want to do it on their own that can translate into into solutions using Marc Kenneth.

Speaker 3: that can translate into solutions using Marketa.

Speaker 3: Co-brands are something like your traditional co-brands that are fully integrated into the experience versus honestly using another app and a brand you're not familiar with is something that is very interesting and last but not least is supplier payments.

Co brands are something like your traditional co brands that are fully integrated into into the experience versus.

Honestly using another app and <unk>.

And our brands Youre not familiar with.

Is is something that is very interesting and last but not least is supplier payments.

Speaker 3: that are fully integrated into the workflow or the software or the operations.

That are fully integrated into the workflow or the software or the operations that companies use in order to.

Speaker 3: that companies use in order to pay their suppliers. We've seen many examples, I'd say, that are aligned with a line of business.

To pay their suppliers, we've seen many examples I would say that are aligned with a line of business. So one example, I can give you is like.

Speaker 3: So one example I can give you is like we've got somebody who's focused on marketing automation and advertising and be able to use expense management to pay their suppliers. So there is diverse use cases.

We've got somebody who is focused on marketing automation and advertising and be able to use the expense management.

To pay their suppliers. So there is diverse use cases.

Speaker 3: And we kind of see the excitement around all these. And we'll talk more about it at length.

And we kind of see the excitement.

Around all of these and we will talk more about it at length in our Investor day materials.

Speaker 3: in our investor day materials.

Okay. Thank you for your time.

Sure. Thank you.

Speaker 1: Thank you. We have reached the end of our question and answer session. This does conclude today's telecom.

Thank you we have reached the end of our question and answer session. This does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

Speaker 1: connect your lines at this time. Thank you for your participation and have a wonderful day.

Okay.

Okay.

Okay.

[music].

Speaker 1: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Marquette 3rd Quarter 2023 Earnings Conference Call.

Good afternoon, ladies and gentlemen, and thank you for standing by welcome to the Martin <unk> third quarter 2023 earnings Conference call.

Speaker 1: At this time, lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will open the lines for your questions.

At this time lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded I would now.

Speaker 1: I'd now like to turn the call over to Stacey Feinerman, Vice President of Investor Relations. Thank you.

I'd like to turn the call over to Stacey vitamin Vice President of Investor Relations. Thank you you may begin.

Thanks, operator, before we begin I would like to remind everyone that today's call may contain forward looking statements, including statements regarding anticipated future financial and operating results and future changes in or developments regarding accounting treatment. Among others. These forward looking statements are subject to <unk>.

Speaker 2: Thanks, operator. Before we begin, I would like to remind everyone that today's call may contain forward looking statements, including statements regarding anticipated future financial and operating results and future changes in or developments regarding accounting treatment, among others.

Speaker 2: These forward-looking statements are subject to numerous risks and uncertainties, including the risk that our accounting treatment may be subject to further changes or developments, as well as those set forth in our filings with the SEC, which are available on our investor relations website, including our annual report on Form 10-K for the period ended December 31st, 2022, and our subsequent periodic filings with the SEC.

Risks and uncertainties, including the risk that our accounting treatment may be subject to further changes or developments as well as 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 2022.

<unk> and our subsequent periodic filings with the SEC actual results may differ materially from any forward looking statements we make today.

Speaker 2: Actual results may differ materially from any forward-looking statements we make today.

Speaker 2: 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.

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.

Speaker 2: 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. A reconciliation of forward-looking non-gap guidance

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.

A reconciliation of forward looking non-GAAP guidance.

Speaker 2: is not available without reasonable effort due to the challenges and impracticality with estimating some of the items, such as share-based compensation expense, depreciation and amortization expense, and payroll tax expense, the effect of which could be significant.

Is not available without reasonable effort due to the challenges in practicality with estimating some of the items such as share based compensation expense depreciation and amortization expense and payroll tax expense the effect of which could be significant.

Speaker 2: Hosting today's call are Simon Kolas, Marquette's CEO , and Mike Miletic, Marquette's Chief Financial Officer. With that, I'd like to turn the call over to Simon to begin.

Hosting todays call are Simon Klos, Mark <unk>, CEO, and Mike Mill attached Marquette as Chief Financial officer with that I'd like to turn the call over to Simon to begin.

Speaker 4: Thank you, Stacy. And thank you, everyone, for joining our third quarter 2023 earnings call. We had a strong quarter. Our third quarter net revenue, gross profit, and operating expenses were all better than our expectations, resulting in an adjusted EBITDA of negative $2 million.

Thank you Stacey.

And thank you everyone for joining our third quarter 2023 earnings call, we had a strong quarter, our third quarter net revenue gross profit and operating expenses were all better than our expectations, resulting in an adjusted EBITDA of negative $2 million.

Speaker 3: Our results over the past few quarters have shown that we can scale the company while maintaining expense discipline.

Our results over the past few quarters have shown that we can scale the company, while maintaining expense discipline.

Speaker 4: We're continuing to innovate and expand our solutions with the recent launch of our credit platform, as well as deepening our relationship with our customers and capturing new ones.

We're continuing to innovate and expand our solutions with the recent launch of our credit platform as well as deepening our relationship with our customers and capturing new ones.

Speaker 3: This morning, we announced another expansion of our partnership with Block and as we will discuss, we saw our business continue to build momentum, signing new embedded finance customers and expanding with our current customer base. Let me start with

This morning, we announced another expansion of our partnership with block and as we will discuss we saw our business continued to build momentum.

Signing new embedded finance customers.

Expanding with our current customer base.

Let me start with our financial performance.

Speaker 3: Total processing volume, or TPV, was $57 billion, an increase of 33% compared to the same quarter of 2022.

Total processing volume for CTV was 57 billion, an increase of 33% compared to the same quarter of 2022.

Speaker 3: This was the third consecutive quarter where our TPV exceeded $50 billion.

This was the third consecutive quarter, where our PPV exceeded 50 billion are net revenue of $109 million in the quarter.

Speaker 3: Our net revenue of $109 million in the quarter contracted 43% year-over-year, including negative 60 percentage points from the accounting change related to Cash App. And our gross profit of $73 million contracted 9% versus Q3 2022, primarily due to the Cash App renewal pricing.

<unk> grew 43% year over year, including negative six percentage point from the accounting change related to cash app.

And our gross profit of 73 million contracted 9% versus Q3 2022, primarily due to the cash app renewal pricing.

Speaker 3: Mike will discuss this in more detail later on.

Mike will discuss this in more detail later on the call.

Speaker 3: Our non-GAAP-adjusted operating expenses were $75 million, a 20% decrease versus Q3 2022 due to our restructuring and cost-cutting initiative, resulting in a negative $2 million in adjusted EBITDA for the quarter.

Our non-GAAP adjusted operating expenses were $75 million as 20% decrease versus Q3, 2022, due to our restructuring and cost cutting initiatives, resulting in a negative $2 million and adjusted EBITDA for the quarter.

Speaker 3: As we've done in the last few quarters, we continue to grow our business and enhance our platform while increasing our revenue.

As we've done in the last few quarters, we continue to grow our business and enhance our platform while.