Q4 2023 Marqeta Inc Earnings Call

Okay.

Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Marqeta fourth quarter 2023 earnings conference call. At this time, the lines have been placed on mute to prevent any background noise.

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

Welcome to the market, our fourth quarter 2023 earnings conference call.

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

Operator: After the speakers' remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. I would now like to turn the call over to Stacey Finerman, Vice President of Investor Relations. Thank you, and you may begin.

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

As a reminder, this conference call is being recorded.

I would not have to turn the conference over to Stacey Solomon Vice President of Investor Relations. Thank you and you may begin.

Stacey Finerman: Thanks, operator. Before we begin, I would like to remind everyone that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations website, including our annual report on Form 10-K for the period ended December 31, 2022, and our subsequent periodic filings with the SEC. Consequently, actual results may differ materially from any forward-looking statements we make today.

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

And on Form 10-K for the period ended December 31, 2022, and our subsequent periodic filings with the SEC.

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

Stacey Finerman: 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.

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.

Stacey Finerman: Reconciliations to the most directly comparable GAAP measures can be found in today's earnings press release or earnings release supplemental materials, which are available on our Investor Relations website. Hosting today's call are Simon Khalaf, Marqeta's CEO, and Mike Milotich, Marqeta's Chief Financial Officer. With that, I'd like to turn over the call to Simon to begin.

Conciliation to the most directly comparable GAAP measures can be found in today's earnings press release or earnings release supplemental materials, which are available on our investor Relations website.

Hosting todays call are Simon cool off our cat as CEO, and Mike Miletich, Mark Hurd as Chief Financial Officer.

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

Simon Khalaf: Thank you, Stacey, and everyone for joining us for Marqueta's fourth quarter 2023 earnings call. Last fiscal year was a transformative year for Marqueta, and I'm excited about the foundation laid for the future of our company. I'll briefly touch on our results for the fourth quarter and full year 23 before sharing exciting developments at Marqeta. The last time we spoke was after we released our Investor Day materials, which detailed the changes we made throughout 2023 and the opportunity ahead of us in 2024 and beyond. This most recent quarter demonstrates the focused effort made during 2023 is starting to pay off and has set Marqueta on a new trajectory. This path will lead to sustainable growth, profitability, innovation, and a great ability to capitalize on the fast-growing embedded finance market. Total processing volume, or TPD, in the quarter was $62 billion, an increase of 33% compared to the same quarter of 2022.

Thank you Stacey and everyone for joining us for <unk> fourth quarter 2023 earnings call.

Last fiscal year was a transformative year for Marc Carroll and I am excited about the foundation laid for the future of our company.

I'll briefly touch on our results for the fourth quarter and full year 'twenty three before sharing exciting developments at Markel.

The last time, we spoke was after we release, our Investor day materials, which detailed the changes we made throughout 2023 and the opportunity ahead of us in 2024 and beyond.

This most recent quarter demonstrates the focused effort made during 'twenty two 'twenty three is starting to pay off and as Seth Mark on a new trajectory. This path will lead to sustainable growth profitability innovation and a great ability to capitalize.

Just on the fast growing embedded finance market.

Total processing volume or TBD in the quarter was 62 billion, an increase of 33% compared to the same quarter of 2022.

Simon Khalaf: Our net revenue of $119 million in the quarter contracted 42% year-over-year, which included a decrease of 59 percentage points from the revenue presentation change related to our cash app contract renewal. Our gross profit of $83 million contracted by 4% versus Q4 2022, primarily due to the Cash App renewal pricing. Our gross margin for the fourth quarter was 70%. Our non-GAAP-adjusted operating expenses were $80 million, a 16% decrease versus Q4 2022 due to our restructuring, operational efficiencies, and delayed investments, resulting in a positive adjusted EBITDA of $3 million for the quarter and a full year. TPV was $222 billion, an increase of 34% compared to the previous year. The full-year net revenue was $676 million, representing a 10% contraction from the previous year.

Revenue of $119 million in the quarter contracted 42% year over year, which included a decrease of 59 percentage points from the revenue presentation change related to our cash app contract renewal.

Our gross profit of 83 million contracted by 4% versus Q4, 2022, primarily due to the cash app and oil pricing our gross margin for the fourth quarter was 70%.

Our non-GAAP adjusted operating expenses were $80 million, a 16% decrease versus Q4 2022 due to our restructuring operational efficiencies and delayed investments, resulting in a positive adjusted EBITDA of $3 million in the quarter.

On a full year basis <unk>.

<unk> was 222 billion, an increase of 34% compared to the previous year.

Full year net revenue was 676 million, representing a 10% contraction from the previous year.

Simon Khalaf: This includes a 31 percentage point decline related to the revenue presentation change resulting from the cash app renewal. Gross profit for the full year was $330 million, a 3% increase compared to 2022. Gross profit was negatively impacted primarily by several renewals, particularly cash out, and changes in our visa incentives at the start of the year.

This includes a 31 percentage point decline related to the revenue presentation change, resulting from the cash app renewable.

Gross profit for the full year was $330 million at 3% increase compared to 2022.

Gross profit was negatively impacted primarily by several renewals, particularly cash out and changes in our visa incentives at the start of the year.

Simon Khalaf: I'm thrilled with these financial results and thankful to all the Marquetans who have made this possible. Outside our pure financial performance, we've delivered on product innovation, sales growth, and operational efficiency. In 2023, we greatly enhanced our credit platform; we added credit program management capabilities with the acquisition of power, and quickly executed the integration to launch a unified modern credit office. The two commercial deals we recently signed are characterized by their ability to bring an embedded experience to their end customers. This was made possible by Marqueta's flexible platform.

I'm thrilled with these financial results and thankful to all Mark captains, who have made this possible.

Outside our pure financial performance, we've delivered on product innovation sales growth and operational efficiencies.

In 2023, we greatly enhanced our credit platform.

We added credit program management capabilities with the acquisition of power and quickly executed the integration to launch a unified modern credit offering the two commercial deals. We recently signed are characterized by their ability to bring an embedded experience to their end customers.

Made possible by Mark get us flexible platform.

Simon Khalaf: The first deal we signed was with International Travel Solutions, or ITF. ITS is a successful travel management company with a substantial customer base. ITF plans to use the Marqeta credit platform to build an unsecured credit card for its end-users.

The first deal we signed was with international travel solutions or Ics.

<unk> is a successful travel management company with a substantial customer base.

<unk> plans to use them or credit.

Credit platform to build an unsecured credit card foot its end users.

Simon Khalaf: ITF chose us because of our established reputation in modern card issuing, not to mention our ability to offer solutions with a significant amount of customization and control, which is critical to travel management. With our partnership, ITS can launch and innovate faster to meet the ever-changing demands of its travel partners. Additionally, ITS can personalize its offering to its partners, allowing them to run their business more effectively by providing more robust controls over their traveling. For example, ITS expects to enable carbon impact tracking to help partners make conscious decisions and provide dynamic rewards to enable more customized incentives. We also signed another commercial credit deal, albeit for a very different use. AffiniPay, a leader in online payment and software solutions for professionals, will partner with Marqueta to launch its planned LawPay Visa credit card embedded within the MyCase platform.

<unk> chose us because of our established reputation and modern card issuing not to mention our ability to offer solutions with a significant amount of customization and control, which is critical to travel management.

With our partnership <unk> launch and innovate faster to meet the ever changing demands of its travel partners.

Additionally, icf's can personalize its offering to its partners, allowing them to run their business more effectively by providing more robust controls over that if travel expenses for example, Ics expects to enable carbon impact tracking to help partners make conscious decisions and provide.

Dynamic rewards to enable more customized incentives.

We also signed another commercial credit deal, albeit for very different use case, a fannie Mae as either an online payment and software solutions for professionals with partnering with <unk> to launch its planned lop, a visa credit card embedded within the <unk> platform.

Simon Khalaf: The first comprehensive solution in the industry that helps law firms pay, track, and manage firm and client expenses. AffinityPay selected us because of our trusted platform for building card program management at scale that is dynamic, flexible, and tailored to customer needs. By partnering with Marqeta, myCASE SmartSpan users will have a comprehensive, easy-to-use platform that gives them access to real-time card issuing, transaction data, and spend controls for their credit card office.

The first comprehensive solution in the industry that helps law firms PE track and manage firm and client expenses.

<unk> selected us because of our trusted platform for building card program management at scale that are dynamic flexible and tailored to customer needs.

By partnering with Mark that up Mike is smart spend users will have a comprehensive easy to use platform that gives them access to real darn card issuing transaction data and spend controls to their credit card offering.

Simon Khalaf: This helps cardholders stay on top of business expenses and access capital easily, all from a single dashboard. Smartspend will be rolled out to other Affinity Pay products, KSphere, and LawPay at the end of 2024 and beginning of 2025. Let me talk about the progress we made in our go-to-market approach. As we've previously discussed, we have overhauled our go-to-market operation to better capitalize on the embedded finance opportunities. These changes included reorganizing the sales force, realigning our compensation structure, and shifting the focus of the sales organization more towards full solution selling, such as accelerated wage access, F&B credit, as well as co-branding.

This help cardholders stay on top of business expenses and access capital easily all from a single dashboard.

Smart spend will be rolled out to other affinity product case sphere and law pay in the end of 'twenty 'twenty four and beginning 2025.

Let me talk about the progress we've made in our go to market approach.

As we've previously discussed we have overhauled our go to market operations to better capitalize on the embedded finance opportunities.

These changes included reorganizing the sales force.

Aligning our compensation structure and shifting the focus of the sales organization more towards full solution selling such as accelerated wage axis F&B credit as well as co brands.

Simon Khalaf: These changes resulted in bookings growth of over 50% in 2023 compared to 2022. Specifically, in the fourth quarter, we saw another solid slate of bookings, generally in line with the makeup of what we saw during the year. Expansion deals with existing customers came in at approximately 60% of total bookings. Although most bookings came from North America, 20% of the deals came from Europe, and predominantly from net new customers, which bodes well for the future of that geography for Marqeta.

These changes resulted in bookings growth of over 50% in 2023 compared to 2022.

Specifically in the fourth quarter, we capture another solid slate of bookings generally in line with the makeup of what we saw during the year <unk>.

Expansion deals with existing customers came in at approximately approximately 60% of total bookings.

Although most bookings came from North America, 20% of the deals came from Europe.

And predominantly from net new customers, which bodes well for the future of that geography form our cabinet.

Simon Khalaf: Like previous course orders, we also won multiple deals through flipping volumes from our competitors as customers sought out Marqeta's proven scale, flexibility, and expertise in modern card issuing, which was lacking through their current providers. In addition to growing our bookings, we also made great strides in accelerating the time to launch for new programs signed to convert these bookings into revenue and gross profits faster. On average, the time between close and launch in Q4 of this year was about 100 days better than the previous year. This was achieved without adding significant resources by focusing on solutions architecture and using pre-configured card constructs.

Like previous course orders. We also won multiple deals through flipping volumes from our competitors as customers sought out mark get us proven scale flexibility and expertise in modern card issuing which was lacking through their current provider.

In addition to growing our bookings we also made great strides and accelerating the time to launch for new programs signed to convert these bookings into revenue and gross profit faster.

On average the time between close and launch in Q4 of this year was about 100 days better than the previous year.

This was achieved without adding significant resources by focusing on solutions architecture, and using pre configured reconfigured card construct in other words, while we designed innovative solutions for our customers. We also rely on our expertise to create a plan that will be.

Simon Khalaf: In other words, while we design innovative solutions for our customers, we also rely on our expertise to create a plan that will be approved by other members of the payment ecosystem, such as banks and national banks. Moving back to products, another area where we invested in 2023 was our reliability and continued ability to scale. The results from this investment can be seen in our transaction success rate metrics for the 2023 holiday season, which increased by three basis points. This is remarkable when one considers that on our peak day in 2023, our platform saw over 40 million authorizations, up 66% compared to the peak day in 2022.

Approved by other members of the payment ecosystem, such as banks and networks.

Moving back to product.

Other area, where we invested in 2023, what's our reliability and continued ability to scale.

The results from this investment can be seen in our transaction success rate metrics for the 2023 holiday season, which increased by three basis points. This is remarkable when one considers that on our peak day in 2023, our platform saw over 40 million authorizations up 60%.

6% compared to the peak day in 2022.

Simon Khalaf: This improvement occurred simultaneously with efficiency initiatives that right-sized our technology spending but also increased investment in multi-region authorization, demonstrating that we are focusing on the right things when considering the reliability of our platform. In summary, in 2023, we focused on building a solid foundation for a growing and profitable business in the long run. We went broad, building out our platform and reorienting our sales teams to a proven and winning solution. In 2024, we plan to accelerate what we started and return to strong revenue and gross profit growth as we bring to life new and exciting solutions with our FinTech customers and prospective embedded finance customers. Our ability to offer credit, debit, banking, and risk solutions at scale positions us well to unlock the massive embedded finance opportunity that's ahead of us. We've only just begun to execute on the strong foundation we have built. With that, I'll turn it over to Mike for a more detailed look at our results for the quarter, the full year, and our financial outlook for 2024. Thank you, Simon. And good afternoon, everyone.

This improvement occurred simultaneously with efficiency initiatives that rightsize, our technology spending, but also increased investment on multi region authorization demonstrating that we are focusing on the right efforts when considering when considering the reliability of our platform.

In summary in 'twenty two 'twenty three we focus on building a solid foundation for a growing and profitable business in the long run we went broad building out our platform and Reorienting, our sales teams to a proven and winning solutions.

In 2024, we plan to accelerate while we started and the returned to strong revenue and gross profit growth as we bring to life, new and exciting solutions with our fintech customers and prospective embedded finance customers.

Our ability to offer credit debit banking and risk solutions at scale positions us well to unlock the massive embedded finance opportunity. That's ahead of US we've only just begun to execute over the strong foundation, we have built with that I will turn it over to Mike.

For a more for a more detailed look at our results for the quarter, the full year and financial outlook for 2024.

Thank you Simon and good afternoon, everyone as.

Michael Milotich: As expected, and consistent with last quarter, net revenue and gross profit contracted due to the cash app renewal, with the majority of the renewal impact on revenue resulting from the revenue presentation change. Q4 was a strong finish to the year, with TPV growth of 33% and better than expected results for net revenue, gross profit, and expense, driving positive adjusted EBITDA. Net revenue and gross profit outperformed due to stronger-than-expected TPV growth, particularly in BNPL, on-demand delivery, and accelerated wage access, as well as higher network incentives. Continued execution of efficiency initiatives, such as streamlining technology spend as well as delays in planned investments, coupled with higher gross profit, led to $3 million of adjusted EBITDA in the quarter. I will share the Q4 highlights before spending more time detailing our expectations for 2024. Q4 TPV was $62 billion, growing 33% for the third straight quarter. Non-block TPV grew approximately 10 points faster than block growth.

As expected and consistent with last quarter net revenue and gross profit contracted due to the catch up renewal with the majority of the renewal impact on revenue, resulting from the revenue presentation change.

Q4 was a strong finish to the year with TPG growth of 33% and better than expected results for net revenue gross profit and expense driving positive adjusted EBITDA.

Net revenue and gross profit outperformed due to stronger than expected TBD growth, particularly in the NPL on demand delivery and accelerated wage access as well as higher network incentives.

Continued execution of efficiency initiatives, such as streamlining technology spend as well as delays in planned investments coupled with higher gross profit led to $3 million of adjusted EBITDA in the quarter.

I'll share the Q4 highlights before spending more time detailing our expectations for 2024.

Q4, <unk> was 62 billion growing 33% for the third straight quarter <unk>.

One block PPV grew approximately 10 points faster than block growth.

Michael Milotich: The financial services vertical continues to grow a little faster than the overall company, helped by the rapid ramping of accelerated wage access TPV, which now contributes about 3% of total company TPV. Lending, including Buy Now Pay Later, grew several points faster than the overall company due to a strong holiday season and the continued adoption of our BNPL customers' Pay Anywhere card solution. On-demand delivery continues to grow in the double digits due to consumer adoption of new services and merchant segments, as well as geographic expansion. Spence Management growth re-accelerated this quarter, but it is growing a little slower than the overall company as this vertical matures. Q4 net revenue was $119 million, a 42% contraction year-over-year.

The financial services vertical continues to grow a little faster than the overall company helped by the rapid ramping of accelerated wage access TPB, which now contributes about 3% of total company TBD Len.

Lending, including buy now pay later grew several points faster than the overall company due to a strong holiday season, and the continued adoption of our <unk> customers pay anywhere card solutions.

On demand delivery continues to grow in the double digits due to consumer adoption of new services and merchant segments as well as geographic expansion.

Expense management growth re accelerated this quarter, but is growing a little slower than the overall company as this vertical matures.

Q4, net revenue was $119 million, a contraction of 42% year over year. The key drivers of our net revenue growth are as follows the.

Michael Milotich: The key drivers of our net revenue growth are as follows. The most significant impact was the 59-point growth headwind related solely to the revenue presentation change resulting from the cash app renewal. As we've described previously, this change in revenue presentation is related to the cost associated with Cash App's primary payment network volume. Previously, the bank and network fees associated with the primary network volume were included in net revenue and cost of revenue.

The most significant impact was the 59 point growth headwind related solely to the revenue presentation change, resulting from the cash up renewal.

As we've described previously this change in revenue presentation is related to the costs associated with cash App's primary payment network volume previously the bank in network fees associated with the primary network volume were included in net revenue and cost of revenue starting in Q3 2023. These costs are netted against revenue.

Michael Milotich: Starting in Q3 2023, these costs will be netted against revenue, and there will be an additional 10 percentage point decline in net revenue growth due to the cash app renewal price. Non-block revenue growth accelerated by more than five points as we began to lap prior-year renewals and newer, faster-growing solutions such as BNPL, Pay Anywhere cards, and Accelerated Wage Access increased in their contribution. Block net revenue concentration was 51% in Q4, increasing one point from Q3 due to seasonality. Our net revenue take rate remains unchanged from last quarter at 19 bps.

There was an additional 10 percentage point decline in net revenue growth due to the cash app renewal pricing.

Non block revenue growth accelerated by more than five points as we begin to lap prior year renewals and newer faster growing solutions, such as B NPL pay anywhere cards and accelerated wage access increase in their contribution.

Block net revenue concentration was 51% in Q4, increasing one point from Q3 due to seasonality.

Our net revenue take rate remains unchanged from last quarter at 19 bps, excluding cash app. The net revenue take rate has remained consistent over the last three quarters. Despite the lower take rate powered by marchetta TPB growing faster than managed by.

Michael Milotich: Excluding Cash App, the net revenue take rate has remained consistent over the last three quarters, despite the lower take rate powered by Marqeta TPV growing faster than managed by, as we continue to move beyond the period of heavy renewal activity. Q4 gross profit was $83 million, contracting 4%.

As we continue to move beyond the period of heavy renewal activity.

Q4, gross profit was $83 million contracting 4% similar to net revenue gross profit growth excluding block also accelerated by more than five points.

Michael Milotich: Similar to net revenue, gross profit growth, excluding block, also accelerated by more than five points. However, three factors continue to weigh on gross profit growth. First, the cash app renewal lowered growth by mid-20 percentage points.

Three factors continue to weigh on gross profit growth first the catch up renewal lowered growth by mid 20 percentage points.

Michael Milotich: As a reminder, the Cash App Revenue Presentation change does not impact gross profit. Second, non-block renewals between Q2 2022 and Q1 2023 lowered growth by low to mid single digits. These customers represented approximately 50% of our non-block TPV, and the effects of these renewals will be fully lapped in Q2 2024. Lastly, we lost full visa incentives for two of our customers at the start of 2023, lowering growth by low to mid single digits each quarter until we lapped this impact in Q1 2024. Our gross profit take rate was 13 bps, consistent with last quarter. However, the gross profit take rate outside of Cash App increased one point from last quarter due to higher network consensus. As expected, the gross profit margin was 70%. Q4 adjusted operating expenses were $80 million, a decrease of 16% year-over-year due to realized savings from our restructuring in late May, as well as efficiency initiatives in our technology and professional service expenses. These savings were achieved without sacrificing innovation, compliance, or platform resiliency.

As a reminder, the cash App revenue presentation change does not impact gross profit.

Second non block renewals between Q2 2022 in Q1 2023 lowered growth by low to mid single digits. These customers represented approximately 50% of our non block TPB and the effects of these renewals will be fully lapped in Q2 2024.

Lastly, we last fall these incentives for two of our customers at the start of 2023 lowering growth by low to mid single digits each quarter until we lap this impact in Q1 of 'twenty four.

Our gross profit take rate was 13 bps consistent with last quarter. The gross profit take rate outside of cash App increased one point from last quarter due to higher network incentives.

As expected the gross profit margin was 70%.

Q4, adjusted operating expenses were $80 million, a decrease of 16% year over year due to realize savings from our restructuring in late may as well as efficiency initiatives in our technology and professional service expenses.

These savings were achieved without sacrificing innovation compliance or platform resiliency.

On a sequential basis expenses grew 7% quarter over quarter, largely due to an increase in professional services, which tend to increase in Q4 due to the timing of audit fees as well as product and security assessments.

Q4, adjusted operating expenses were over $3 million lower than we expected, mostly due to investment timing delays, particularly hiring as we just recently established an office location in Poland.

Michael Milotich: On a sequential basis, expenses grew 7% quarter over quarter, largely due to an increase in professional services, which tend to increase in Q4 due to the timing of audit fees, as well as product and security assessments. Q4 adjusted operating expenses were over $3 million lower than we expected, mostly due to investment timing delays, particularly hiring, as we just recently established an office location in Poland, which we intend to utilize for a significant portion of our headcount growth. In Q4, Adjusted EBITDA was positive $3 million, a margin of 3%. Interest income was $15 million, driven by elevated interest rates. The Q4 gap net loss was $40 million, including a $10 million non-cash post-combination expense related to the power acquisition.

Which we intend to utilize for a significant portion of our head count growth.

Q4, adjusted EBITDA was positive 3 million a margin of 3%.

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

Q4, GAAP net loss was $40 million, including a $10 million noncash post combination expense related to the power acquisition.

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

As of the Q4 quarter end, we purchased 31 3 million shares for an average price of $5 36.

For $168 million.

We ended the quarter with 1.25 billion of cash and short term investments.

The full year 2023, net revenue decrease of 10%.

And gross profit growth of 3% do not necessarily reflect the strength of our underlying business due to the change in the cash app revenue presentation and heavy renewal activity.

Michael Milotich: During Q2, we announced a buyback of $200 million. As of Q4 quarter end, we purchased 31.3 million shares for an average price of $5.36 for $168 million. We ended the quarter with $1.25 billion of cash and short-term investments.

2023 was a transformative year for marchetta, putting the growth on putting the company on a path to sustainable growth profitability and innovation.

<unk> grew 34% and our adjusted EBITDA was negative $2 million as we restructured our cost base and focused on efficiency, while securing over 80% of our TPB and renewals over the past seven quarters.

Michael Milotich: The full year 2023 net revenue decrease of 10% and gross profit growth of 3% did not necessarily reflect the strength of our underlying business due to the change in the cash app revenue presentation and heavy renewal activity. 2023 was a transformative year for Marqueta, putting the company on a path to sustainable growth, profitability, and innovation.

We were free free cash flow positive for the year.

Now, let's transition to our expectations for 2024.

Let me quickly provide the full year of 2024 expectations before diving into more details on the first and second half.

I will also call out any changes to the 2024 financial targets, we shared at Investor Day, a few months ago.

Full year 2024, net revenue is expected to contract $20 to 24% as the change in cash App revenue presentation weighs on growth in the first half.

Michael Milotich: TPV grew 34%, and our adjusted EBITDA was negative $2 million as we restructured our cost base and focused on efficiency, while securing over 80% of our TPV in renewals over the past seven quarters. We were free cash flow positive for the year. Now, let's transition to our expectations for 2024.

2024, gross profit growth is expected to grow 6% to 9%, which equates to a gross profit margin in the high <unk>.

Adjusted operating expenses are expected to grow in the mid to high single digits. As we continue to operate with a strong investment discipline and focus on achieving economies of scale.

Therefore, we expect full year 2024, adjusted EBITDA to be around breakeven or said differently and adjusted EBITDA margin of around zero percent.

Michael Milotich: Let me quickly provide full-year 2024 expectations before diving into more details on the first and second half. I will also call out any changes to the 2024 financial targets we shared at Investor Day a few months ago. Full year 2024 net revenue is expected to contract 20 to 24% as the change in cash tap revenue presentation weighs on growth in the first half. 2024 gross profit growth is expected to grow 69%, which equates to gross profit margin in the high 60s. Adjusted operating expenses are expected to grow in the mid to high single digits as we continue to operate with a strong investment discipline and focus on achieving economies of scale.

Because of the details I'll describe in a minute we expect to be adjusted EBITDA positive in three out of the four quarters in 2020 for.

This expectation is a little better than what we shared at our Investor day in November as a result of efficiency initiatives.

Before I get into the more granular detail, let me first start by providing important context for 2024.

We have assumed the overall macroeconomic environment remains consistent with recent trends, we have yet to see meaningful changes in the spend patterns on our consumer and commercial cards in the past several months. Therefore, we assume the current trajectory persists.

Our financial performance will be meaningfully different than the first and second half of 2024, primarily for two reasons first the lapping of the effects of the catch up renewal will dissipate at the start of Q3.

Second the revitalization and strength of our sales bookings since Q4 of 2022 should lead to a fair amount of new business launching and ramping on our platform throughout the year.

Michael Milotich: Therefore, we expect full-year 2024 Adjusted EBITDA to be around break-even, or said differently, an Adjusted EBITDA margin of around 0%. Because of the details I'll describe in a minute, we expect to be Adjusted EBITDA positive in three out of the four quarters in 2024. This expectation is a little better than what we shared at our Investor Day in November as a result of the Efficiency Initiative. Before I get into the more granular detail, let me first start by providing important context for 2024. We have assumed the overall macroeconomic environment remains consistent with recent trends. However, we have yet to see meaningful changes in the spend patterns on our consumer and commercial cards in the past several months.

The contribution of these bookings to net revenue and gross profit will increase each quarter further accentuating the difference in our first and second half growth rates.

Adjusted expense growth will also be meaningfully different than the first and second half of 2024 due to our restructuring executed at the end of May 2023.

Our expense base was meaningfully different in the first five months of 2023 than it was in the last seven months.

The difference was further exacerbated by the fact that we did not reinvest some of the savings and new initiatives and focus areas as quickly as we intended as we referred to in my Q4 of 2023 comments. Therefore, our second half 2023 adjusted expenses are unusually low.

Now, let's turn to the first half of 2024.

Michael Milotich: Therefore, assuming the current trajectory persists, our financial performance will be meaningfully different in the first and second half of 2024, primarily for two reasons. First, the lapping of the effects of the cash-up renewal will dissipate at the start of Q3. Second, the revitalization and strength of our sales bookings since Q4 of 2022 should lead to a fair amount of new business launching and ramping on our platform throughout the year. The contribution of these bookings to net revenue and gross profit will increase each quarter, further accentuating the difference in our first and second half growth rates. Adjusted expense growth will also be meaningfully different in the first and second halves of 2024 due to our restructuring executed at the end of May 2023.

For Q1, 2024, we expect net revenue to contract between 45, and 48%, including a 65 to 70 percentage point negative impact of the catch up renewal, mostly due to the revenue presentation change consistent with what we've seen in the last two quarters.

We expect Q2 net revenue to contract in the same range as expected. This is a few points lower in the second half of 2023 due to the unfavorable business mix and slower growth from a few of our customers without much contribution from new program launches at this point.

Q1, gross profit is expected to contract between eight and 10% with a gross profit margin in the high <unk> we.

We expect gross profit to contract in the same same range in Q2. However.

However, the Q2 gross margin will be approximately seven points lower than Q1, as our network incentive tiers reset in April with our two largest network partners.

The first half growth gross profit constant contraction is now expected to be a little worse than what we shared at our November investor day, due to unfavorable business mix and revised expectations for the timing of when some key customers will achieve certain price tiers based on their T. P V trajectory.

Michael Milotich: Our expense base was meaningfully different in the first five months of 2023 than it was in the last seven months. The difference was further exacerbated by the fact that we did not reinvest some of the savings in new initiatives and focus areas as quickly as we intended, as referred to in my Q4 2023 comments. Therefore, our second half 2023 adjusted expenses are unusually low.

Q1, adjusted operating expenses are expected to shrink in the mid teens similar to Q4, 'twenty three but with some ramp in hiring results from the delays I discussed earlier.

In contrast, we expect Q2 adjusted operating expenses to grow in the mid single digits in.

Michael Milotich: Now let's turn to the first half of 2024. For Q1 2024, we expect net revenue to contract between 45 and 48%, including a 65 to 70 percentage point negative impact of the cash up renewal, mostly due to the revenue presentation change, consistent with what we have seen in the last two quarters. We expect Q2 net revenue to contract in the same range. As expected, this is a few points lower than the second half of 2023 due to the unfavorable business mix and slower growth from a few of our customers without much contribution from new program launches at this point. Q1 gross profit is expected to contract between 8 and 10% with a gross profit margin in the high 60s. We expect gross profit to contract in the same range in Q2.

In Q2, we will begin to lap our restructuring from last May and we will incur additional costs from our reinvestment and hiring as well as investments in platform resiliency to support our scale customers.

Therefore, Q1 adjusted operating.

Sorry, therefore, our Q1 adjusted EBITDA margin is expected to be in the zero to positive 2% range. This is better than what we shared at Investor day due to our investment delays and increased efficiencies we realized in Q4 'twenty three.

We expect Q2 to be our only negative adjusted EBITDA quarter with a margin in the negative 79% range due to a combination of the resetting of our network incentives weighing on gross profit and additional investment needed to support our growth.

In the second half of 'twenty four our business performance metrics are expected to improve significantly after lapping almost all of the major renewal activity, particularly cash app.

We expect net revenue growth in the second half of 2024 to Reaccelerate to 23% to 26% primarily driven by three factors.

First lap into cash App revenue presentation change.

Michael Milotich: However, the Q2 gross margin will be approximately seven points lower than Q1 as our network incentive tiers reset in April with our two largest network partners. The first-half gross profit contraction is now expected to be a little worse than what we shared at our November Investor Day due to an unfavorable business mix and revised expectations for the timing of when some key customers will achieve certain price tiers based on their TPV trajectory. Q1 adjusted operating expenses are expected to shrink in the mid-teens, similar to Q4-23, but with some ramp-up in hiring results from the delays I discussed earlier.

Second realizing existing customers growth as we lap all the elevated renewal activity and third benefiting from the ramping new programs as we progress through the year.

Second half 2024 gross profit growth is also expected to be in the 23% to 26% range consistent with net revenue.

This second half gross profit growth is expected to be a little higher than what we shared with you at Investor day due to positive business mix and expected shifts in a couple of existing program contracts, where we currently incur excessive network fees.

Second half 2024, adjusted operating expenses are expected to grow in the high teens as we continue to invest in growth initiatives and resiliency combined with the fact that we'd grow over the unusually low expenses in 2020 as our post restructuring reinvestment was delayed.

Michael Milotich: In contrast, we expect Q2 adjusted operating expenses to grow in the mid-single digits. In Q2, we'll begin to lap our restructuring from last May, and we will incur additional costs from our reinvestment in hiring, as well as investments in platform resiliency to support our scaled customers. Therefore, our Q1 adjusted EBITDA margin is expected to be in the 0 to positive 2% range.

Therefore, we expect second half 2024, adjusted EBITDA to be positive, 1% to 3% margin a little higher than what we shared at Investor day due to higher gross profit.

In conclusion, we are exiting 2023 with great business momentum and a solid foundation to deliver sustainable growth profitability and innovation in 2024 and beyond.

Our excitement and confidence is primarily driven by three factors.

First by renewing over 80% of our T V. In the last seven quarters, most of which are in contracts of at least four years, we have secured our attractive customer base and opened up potential cross selling opportunities as we continue to expand our platform capabilities.

Michael Milotich: This is better than what we shared at Investor Day due to our investment delays and increased efficiencies we realized in Q4'23. We expect Q2 to be our only negative adjusted EBITDA quarter with a margin in the negative to 79% range due to a combination of the resetting of our network incentives weighing on gross profit and additional investment needed to support our growth. In the second half of 2024, our business performance metrics are expected to improve significantly after lapping almost all of the major renewal activity, particularly cash out. We expect net revenue growth in the second half of 2024 to reaccelerate to 23 to 26%, primarily driven by three factors. First, the cash up revenue presentation change.

This was short term pain for long term gain.

We are starting to get contributions from ramping new use cases, such as the NPL pay anywhere cards and accelerated wage access.

As we move through 2024, this will be combined with ramping new cohorts that result from our improved sales performance that delivered over 50% bookings growth in 2023.

Third we are getting early customer traction with our new credit capabilities, signing our first two customers to leverage our fully modern scaled issuer credit credit platform for innovators. Although this won't meaningfully contribute much to the 2024 P&L credit will be a meaningful driver of future growth.

Fourth <unk> differentiated platform in terms of both breadth and depth of our capabilities gives us an outsized market opportunity as many fintech continue to thrive combined with the continued emergence of embedded finance use cases.

Michael Milotich: Second, realizing existing customers' growth as we lap all the elevated renewal activity. And third, benefiting from the ramping new programs as we progress through the year. Second half 2024 gross profit growth is also expected to be in the 23 to 26% range, consistent with net revenue.

Lastly, we have achieved and more efficient cost structure, while maintaining compliance security and innovation that will power profitable growth for years to come.

Starting in the second half of 2020 for our business and financial metrics are expected to reflect this momentum as we returned to growth. We are excited to share our progress with you in the coming quarters.

Michael Milotich: This second half gross profit growth is expected to be a little higher than what we shared with you at Investor Day due to positive business mix and expected shifts in a couple of existing program constructs where we currently incur excessive network. Second half 2024 adjusted operating expenses are expected to grow in the high teens as we continue to invest in growth initiatives and resiliency, combined with the fact that we grow over the unusually low expenses in 2020 as our post-restructuring Therefore, we expect second half 2024 Jesse Bidad to be positive 1% to 3% margin, a little higher than what we shared at Investor Day due to higher gross profit. In conclusion, we are exiting 2023 with great business momentum and a solid foundation to deliver sustainable growth, profitability, and innovation in 2024 and beyond. Our excitement and confidence are primarily driven by three factors. First, by renewing over 80% of our TPV in the last seven quarters, most of which are in contracts for at least four years, we have secured our attractive customer base and opened up potential cross-selling opportunities as we continue to expand our platform capabilities. This was short-term pain for long-term gain.

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

Thank you very much ladies and gentlemen at this time, we will be conducting a question and answer session.

If you'd like to ask a question. Please press star and then one on your telephone keypad.

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

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

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

We do request that you limit to one question and then rejoin the queue.

Our first question is from Timothy Chiodo of UBS. Please go ahead.

Great. Thank you for taking the question I wanted to touch on accelerated wage access a little bit. So you had the two large customers to start with the Uber and also the one app one app, becoming the default for all Walmart employees as new employees have come on and others have rolled off or left the company can you just talk a little bit.

The traction that youre seeing with the offering with that one large customer and related you had mentioned that there were others coming down the pike in terms of your pipeline for accelerated wage access could you just give a brief update on what that looks like now a few months later.

Hey, Tim Simon here, Thanks for the question.

R&D is extremely excited about accelerated wage access so.

The trend is extremely healthy and accelerated wage axis is now up about 3% of our processing volume.

Michael Milotich: Second, we are starting to get contributions from ramping new use cases such as BNPL, Pay Anywhere Cards, and the Accelerated Wage Act. As we move through 2024, this will be combined with ramping new cohorts that result from our improved sales performance that delivered over 50% bookings growth in 2023. Third, we are getting early customer traction with our new credit capabilities, signing our first two customers to leverage our fully modern, scaled issuer credit platform for innovators. Although this won't meaningfully contribute much to the 2024 P&L, credit will be a meaningful driver of future growth.

Up from an insignificant number in 2022, so I.

I mean to put that in perspective, you're looking at about an annualized $7 billion.

That is running through the Marquette a pipe that's a massive achievement, we can't comment specifically on an individual customers.

But the trend is extremely healthy and it's always our pipeline.

I mean at the end of the day look I mean, our solution is cannot be win win win win.

Our approach actually benefit.

The actual employer that has a contingent workforce.

They can retain the working capital.

Michael Milotich: Fourth, Marqeta's differentiated platform in terms of both breadth and depth of our capabilities gives us an outsized market opportunity as many fintechs continue to thrive combined with the continued emergence of embedded finance use cases. Lastly, we have achieved a more efficient cost structure while maintaining compliance, security, and innovation that will power profitable growth for years to come. Starting in the second half of 2024, our business and financial metrics are expected to reflect this momentum as we return to growth. We are excited to share our progress with you in the coming quarters. I'll now turn it back over to the operator for questions. Thank you very much.

But at the same time give accelerated wage access to their contingent and of course, the associates or the contingent workforce gets paid instantaneously and we save the employer money. So they actually make money so you're taking effectivity in expense line and moving it in.

Into a revenue potential that could be returned to the contingencies in terms of rewards and discounts. So I mean that win win win gives it gives us.

Ironically in accelerator and we're extremely excited about it.

Thank you very much.

Next question is from Brian <unk> of Barclays. Please go ahead.

Hi, Thanks for taking my question this afternoon.

It was great to hear you signing some credit deals.

Can you comment on on the credit pipeline and just signals you're picking up in the marketplace in general about the demand environment for Ford credit and maybe even to put a little nuance on it in the context of the sort of embedded finance use case that it seems like you're winning.

Operator: Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the questioning queue. You may press star and then 2 if you would like to remove your question from the queue.

Yeah. Thanks Ramsey.

For the question the pipeline is extremely healthy as we stated many times, we actually did expect the consumer credit demand to be high while we were positively surprised by is the SMB credit.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing start. We do request that you limit yourself to one question and then rejoin the queue. Our first question is from Timothy Chiodo of UBS. Please go ahead.

And especially from I'd say aggregators or platforms that have established relationship with Smbs and have great per view and visibility into the performance of these smbs and can help with getting them credit because they they know.

Timothy Chiodo: Great, thank you for taking the question. I wanted to touch on accelerated wage access a little bit. So you have the two large customers to start with Uber and also OneApp. OneApp with it becoming the default for all Walmart employees as new employees have come on and others have rolled off or left the company.

<unk>, what the revenues are going to be so they can diminish the risk.

I would say across the board our credit pipeline is extremely healthy and I would say that the vast majority is in the embedded finance, whether it is commercial or consumer I mean, that's that's the space we're playing in.

Simon Khalaf: Can you just talk a little bit about the traction that you're seeing with the offering with that one large customer? And related, you had mentioned that there were others coming down the pike in terms of your pipeline for accelerated wage access. Could you just give a brief update on what that looks like now a few months later? Hey Tim, Simon here.

So there could be biased because that's what we are we're actually chasing but also from a demand perspective, I would say between F&B credit and a new.

Modern day co brand I think there is plenty of innovations to simply drive user engagement and changed online commerce and not just payments. So we're very excited about that.

Simon Khalaf: Thanks for the question. So, the trend is extremely healthy, and accelerated wage access is now about 3% of our processing volume, up from an insignificant number in 2022. So, to put that in perspective, you're looking at about an annualized $7 billion of pay that is running through the Marqueta pipes. That's a massive achievement.

Thank you. The next question is from Tien Tsin Huang of Jpmorgan. Please go ahead.

Thank you so much really really strong bookings with the.

Was up 50% I believe that I'm, just curious does that.

Include any wins with the potential for clients to become maybe top 10 them down the road just a little bit more context on that type of stuff that youre, adding in and also just your confidence in your ability to replenish that.

Simon Khalaf: We can comment specifically on individual customers, but the trend is extremely healthy, and so is our pipeline. I mean, at the end of the day, look. I mean, our solution is kind of a win-win-win. Our approach actually benefits the actual employer that has a contingent workforce because they can retain the working capital but, at the same time, give accelerated wage access to their contingent workforce. And, of course, the associates or the contingent workforce gets paid instantaneously, and we save the employer money.

That pipeline and backlog are there large deals out there to win versus 90 days ago.

Yes.

Hey, Tien tsin its Simon here. Thanks for the question I mean, let me start with your last our ability to replenish the pipeline is actually very strong we haven't drained the pipeline or accelerated.

Artificially accelerated any deals quite the contrary our pipeline is actually growing very efficiently in terms of the customers. We have closed absolutely I mean all of them.

Simon Khalaf: So, they actually make money. So, you're taking, effectively, an expense line and moving it into a revenue potential that could be returned to the contingency in terms of rewards and discounts. So, I mean, that win-win-win gives us, ironically, an accelerator, and we're extremely excited about it. Thank you very much. The next question is from Ramsey Arasol of Barclays. Please go ahead.

Could could be big it takes time I mean, you understand this industry it takes time to ramp.

But all of them have great potential.

And transformative potential I mean, not at each one of them, but there is definitely quite a few that were very excited about.

Ramsey Clark El: Hi, thanks for taking my questions. It was great to hear you signing some credit deals. Can you comment on the credit pipeline and just signals you're picking up in the marketplace in general about the demand environment for credit? And maybe even put a little nuance on it in the context of a sort of embedded finance use case that it seems like you're winning? Yeah, thanks, Ramsey, for the question. The pipeline is extremely healthy. As we stated many times, we actually didn't expect consumer credit demand to be high.

And ability to capitalize on the pipeline.

We do have an aggressive plan.

We feel comfortable about it.

Thank you.

Next question is from Darrin Peller of Wolfe Research. Please go ahead.

Hey, Thanks, a couple of things number one it looks like when we see the.

All the adjustments that would sort of normalize for gross profit a bridge to normalized gross profit growth were coming out to the well into the high 20.

Percent growth and I know, there's obviously some element of cadence as the year progresses as your second quarter starts off with incentive rebuild et cetera, but maybe just talk about that nuance to make sure. We're in the right ballpark first and second of all.

Simon Khalaf: What we were positively surprised by was the SMB credit demand. And especially from, I'd say, aggregators or platforms that have established relationships with SMBs can have a great view and visibility into the performance of these SMBs and can help with getting them credit because they know what the revenues are going to be, so they can diminish the risk. So I would say across the board, our credit pipeline is extremely healthy, and I would say that the vast majority is in embedded finance, whether it is commercial or consumer. I mean, that's the space we're playing in.

You talked about the second half being a little bit better Mike So any more color on what's gone well there would be great.

Yes so.

The first question I would say, it's probably it's probably more closer to mid Twenty's. A word we were negative 4% unadjusted basis as you'd mentioned were negative 4% in our reported results.

You know the cash App is mid twenties, and then visa and.

Simon Khalaf: So there could be some bias because that's what we're actually chasing. But also, from a demand perspective, I would say between SMB credit and new— modern day co-brand, I think there's plenty of innovations to simply drive user engagement and change online commerce and not just payments. So we're very excited about that. Thank you. The next question is from Tianxin Huang of J.P. Morgan. Please go ahead. Thank you

Incentives and renewals are both kind of low to low to mid so it kind of puts you a low to mid single digits that is so it's a it's a total impact of say around 30, 30% plus or minus which puts you kind of an adjusted basis in the mid twenty's percent growth, which is now what we're sort of saying we expect our second half to be.

Is in that 23% to 26% gross profit growth range in the second half of 2024 once we've lapped most of these things.

The biggest.

Tianxin Huang: Really, really strong bookings with what was a 50% increase, I believe. I'm just curious, is that... include any wins with the potential for clients to become maybe top 10 down down the road, just a little bit more context on the type of stuff that you're adding and also just your confidence in your ability to replenish that pipeline and backlog. Are there large deals out there to win versus 90 days ago? Thanks. Hey, Tenzin. Simon here.

I guess benefit we're getting compared to what we knew a few months ago. When we had investor day is some of it is a little bit of business mix as you know in our in our business between all the different use cases in and is it physical or virtual card and is powered by managed by like we have lots of different gross profit take rates on our volume and there is a little bit of positive mix.

There, but I'd say the bigger factor is that we have a couple of programs right now where we feel we incur sort of excessive network costs and we're always working with our customers to try to optimize.

How their program is operating both for their benefit and of course ours as well and this can take the form of how they're looking at declines and are they really optimized based on the way. Their program is set up are they incurring sort of unnecessary costs or the same thing can happen in cross border how exactly as their programs set up.

Simon Khalaf: Thanks for the question. I mean, let me start with your last one. Our ability to replenish the pipeline is actually very strong. We haven't drained the pipeline or accelerated or artificially accelerated any of them. Quite the contrary. Our pipeline is actually growing very efficiently. In terms of the customers, we have closed absolutely every deal. I mean, all of them could be big.

For cross border and as you know those come with much higher fees associated with them and so are there changes that can be made and we've identified some changes for a couple of our programs that are in flight right now that we expect to be fully in place for our benefit in the second half.

Simon Khalaf: It takes time. I mean, you understand this industry. It takes time to ramp up. But all of them have great potential and transformative potential. I mean, not each one of them, but there's definitely quite a few that we're very excited about. And in terms of the ability to capitalize on the pipeline, we do have an aggressive plan, but we feel comfortable about it.

These kinds of things are always.

Opportunities you're hunting for but you don't really count on and then there are a lot like how flips I would say how would we think about flips. We're always of course going after flip volume, but you don't count on flip volume when youre projecting business into the future. So that's really what's driving the upside in the second half and.

Simon Khalaf: Thank you. The next question is from Darrin Peller of Wolf Research. Please go ahead.

Darrin David Peller: Guys, hey, thanks. You know, a couple of things. Number one, it looks like when we see all the adjustments that would sort of normalize gross profit, a bridge to normalize gross profit growth, we're coming out to, you know, well into the high 20s. I know there's obviously some element of cadence as the year progresses, as your second quarter starts off with an incentive rebuild, et cetera. But maybe just talk about that nuance, make sure we're in the right ballpark first. And second of all, you talked about the second half being a little bit better.

That's a great win because it's really a structural benefit for our for those programs and therefore, our P&L.

Yeah.

Thank you. Our next question is from Bryan Keane of Deutsche Bank. Please go ahead.

Hey, guys I just wanted to ask about the bookings ramp it sounded like Simon you've closed some of the time to ramp.

Can you talk about that as the bookings the 50% growth in bookings.

Kind of unfold in 2024, and do we still expect kind of a $20 million in revenue and 24 $50 million and 25 and $1 50, and 26 from these bookings just trying to get the cadence down correctly and the ramp times.

Hi, Brian Thanks for the question Yeah.

So about right I'd say, we are on track to.

Michael Milotich: So any more color on what's gone well there would be great. Yeah, so, the first question I would say it's probably it's probably more closer to the mid 20s, and we were negative 4% on an adjusted basis. As you mentioned, we were negative 4% in our reported results. The cash app is in the mid-20s, and then visa incentives and renewals are both kind of low to mid. So it kind of puts you in the low to mid single digits, that is.

Deliveries of the the number that we cannot back at Investor day, So the 2015 and $1 50, So I mean, we'd always working to accelerate dose.

But I think that that's the right range. So we're very comfortable with these numbers.

Okay.

Thank you the.

Our next question is from James Faucette.

Morgan Stanley. Please go ahead.

Great. Thank you so much I just wanted to ask.

Quickly on on the.

Long term FY opportunity maybe.

Michael Milotich: So it's a total impact of, say, around 30, 30% plus or minus, which puts you kind of on an adjusted basis in the mid 20s percent growth, which is now what we're sort of saying we expect the second half to be in that 23 to 26% gross profit growth range in the second half of 2024 once we've lapped most of these things. The biggest benefit we're getting compared to what we knew a few months ago when we had Investor Day is that some of it is a little bit of business mix. As you know, in our business, between all the different use cases, and is it a physical or virtual card, and is it powered by, managed by, etc., we have lots of different gross profit take rates on our volume. And there's a little bit of a positive mix in there too.

Yes, there are smaller.

Novo.

From the top 10 banks, how long do you think it will take for those tech stacks to catch up such that adoption of Marquette It becomes easier just trying to think about.

Growing penetration into more of that broader market.

Jamie Thanks for the question Simon here, So we're still on the same timeline.

There is definitely a lot of conversations with larger <unk>.

But I do believe we're still on the same trajectory.

The majority of the growth we will witness over the next two years will be from Fintech and embedded finance customers.

But as as I'd say those players take share either de novo or take spending share. It it's going to be extremely hard for the financial institutions not to look at.

And say hey, what's going on here and we expect that trend to start materializing exactly what we've got in that 20 526 timeframe.

Michael Milotich: But I would say that the bigger factor is that we have a couple of programs right now where we feel we incur sort of excessive network costs. And we're always working with our customers to try to optimize how their program is operating, both for their benefit and, of course, ours as well. And this can take the form of how they're looking at declines and are they really optimized based on the way their program is set up? Are they incurring any sort of unnecessary costs? Or the same thing can happen in cross-border. How exactly is their program set up for cross-border?

And I guess just to add one thing James for that I think that we fully expect that the initial opportunities are likely to come on the commercial side as well because if you look at what's happening with some of the more modern kind of expense management and corporate card issuing platform several of those companies have gotten to be quite big.

And and starting to capture larger and larger accounts and so we believe that there is a little more activity within large banks on the commercial side too.

Sort of counter.

Counteract the impacts that might be seeing from those those companies there's less of that so far on the consumer side.

We hope to I guess propagate that in the future with people coming on board and doing some modern co brands with our new credit capabilities, but we would expect the initial traction is much more likely to be in commercial and consumer with large <unk>.

Michael Milotich: And as you know, those come with much higher fees associated with them, and so there are changes that can be made. And we've identified some changes for a couple of our programs that are in flight right now that we expect to be fully in place for our benefit in the second half. These kinds of things are always opportunities you're hunting for, but you don't really count on them. They're a lot like how flips, I would say, how we think about flips.

Okay.

Thank you. The next question is from Andrew <unk> of Wells Fargo. Please go ahead.

Hey, Thank you for taking the question I know you don't guide to it per se, but we wanted to give us a sense on how we should be thinking about TPG growth in take rate dynamics. Here then the 'twenty four I know you've mentioned in the past that because of your enhanced data capabilities that your ability to forecast CBB significantly.

Michael Milotich: We're always, of course, going after flip volume, but you don't count on flip volume when you're projecting business into the future. So that's really what's driving the upside in the second half, and that's a great win because it's really a structural benefit for those programs and, therefore, our P&L. Thank you. The next question is from Bryan Keane of Deutsche Bank. Please go ahead. Hey guys, I just want to ask about the bookings ramp. It sounds like Simon, you've closed off some of the time to ramp.

<unk> better than it has been in the past so any thoughts around there would be helpful.

Sure Andrew So our <unk> growth, we expect it to be about 30%.

Throughout 2024, and it'll be relatively consistent.

Each quarter. So just to give you a little sense. If we grew in Q4, 33%. It was relatively consistent each month October was a little lighter November a little stronger.

But in January our TBB growth was very similar to the December growth rate. It was only one point lower and February through the first three weeks is looking very similar to January and of course, we'll get the benefit of leap year at the end of the month. So I would say that the trajectory of TPB growth is sort of in that low <unk>.

Bryan Connell Keane: Can you talk about that as the bookings, the 50% growth in bookings kind of unfold in 2024? And do we still expect kind of the 20 million in revenue in 24, 50 million in 25 and 150 in 26 from these bookings just trying to get the cadence down correctly at the ramp time? Yeah, hi Brian.

<unk> range, so far and that and we expect about 30% growth for the year. So it'll all be kind of in that same area of around 30% plus or minus from a take rate perspective, I think we're starting to see stability right. We as we've said we have 80% of our over 80% of our TBD.

Simon Khalaf: Thanks for the question. Yeah, it's about right. I'd say we are on track to deliver the number that we kind of pegged at Investor Day, so the 2050 and 150. So I mean, we're always working to accelerate those. But I think that's the right range.

We have renewed recently and so as I sort of called out if you exclude cash app, which of course, we're still lapping our take rate on revenue has been consistent excluding cash up for three straight quarters on the gross profit side, it's actually ticked up in Q4 compared to Q3, when you exclude cash app.

Simon Khalaf: So we're very comfortable with these numbers. Thank you. The next question then is from James Faucette of Mormon Family.

Which just has to do with a lot more incentives happening in the fourth quarter compared to Q3. So.

James Eugene Faucette: Please go ahead. Great, Thank you so much. I just wanted to ask quickly on the long-term FI opportunity, I think there's some opportunity to win some of the NOVO at some of the top 10 banks. How long do you think it will take for those tech stacks to catch up such that adoption of Marqueta becomes easier? Just trying to think about ongoing penetration into more of that broader market. James, yeah, thanks for the question. Simon here. So we're still on the same timeline?

We expect take rate stability for the most part.

There'll always be some a little bit of renewal activity, but we will also have new customers ramping who arent nearly as deep into their pricing tiers as our existing customers. So we expect relative stability on that 30% TBD growth.

Thank you. The next question is from of Mizuho. Please go ahead.

Oh, Hey, guys great results. Thank you for taking my question.

I think Simon you mentioned that you had.

Simon Khalaf: There's definitely a lot of conversations with large financial institutions, but I do believe we're still on the same trajectory. The majority of the growth we will witness over the next two years will be from fintechs and embedded finance customers. But as those players take share, either de novo or take a spending share, it is going to be extremely hard for the financial institutions not to look and say, hey, what's going on here?

Flipped.

Volumes from your competitors in your prepared remarks.

Without naming specific names can you give us a flavor of sort of the.

Types of competitors that you're winning share from thank you.

Sure. Thanks for the question, Yes, I mean.

I'd say, there's two flavors.

One flavor is taking share from legacy are the others is I'd say the flight to quality.

As folks who have probably chosen and alternative processor because.

Michael Milotich: And we expect that trend to start materializing exactly what we've got in the 2025-2026 timeframe. I guess just to add one thing, James, to that. I think that we fully expect that the initial opportunities are likely to come on the commercial side as well, because if you look at what's happening with some of the more modern sort of expense management and corporate card issuing platforms, several of those companies have gotten to be quite big and are starting to capture, you know, larger and larger accounts. And so we believe that, you know, there's a little more activity within large banks on the commercial side to, you know, sort of counteract the impacts that might be seen from those companies. There's less of that so far on the consumer side.

They were cheaper than Marquette out, but then as they scaled up and they realized or stability or multiple nines and as that business scaled.

Looking for a partner that can take them to the next stage. So I think it's a mix also mix of.

Taking incumbents out and also taking less stable.

Processors.

And just to add a little bit to that Dan I would say the in Q4 of our bookings about 10%, where flips and and that's actually on the low side for each quarter of the year. So each quarter in 2023 at least 10% of our bookings.

We're flip so I think there's.

A good amount of activity of our Simon was saying people who may be a couple of years ago made a different choice. We are a contender for the business and we didn't get it in and now they're sort of realizing some of the benefits of in terms of our expertise to help them.

Andrew Thomas Bauch: You know, we hope to, I guess, propagate that in the future with people coming on board and doing some modern co-brands with our new credit capabilities. But we would expect, you know, the initial traction is much more likely to be in commercial than it is in consumer with large FIs. Thank you. The next question is from Andrew Bauch of Wells Fargo. Please go ahead.

Scale and grow their platform.

Also the reliability, we provide them and so I think that's really what's helping us.

Thank you the next question.

From Craig Maurer of Ft Partners. Please go ahead.

Yeah, Hi, thanks for taking the question.

Wanted to come back to buy now pay later for a second do you expect.

Michael Milotich: Hey, thank you for taking the question. I know you don't guide to it per se, but we want to get a sense of how we should be thinking about TPV growth and how to take rate dynamics here at the end of 24. I know you've mentioned in the past that because of your enhanced data capabilities, your ability to forecast TPV is significantly better than it has been in the past. So any thoughts around that would be helpful.

That blocks, new cash App strategy to drive more adoption using buy now pay later will cause any inflection in volume.

We do expect I mean, there's no question that the buy now pay later market is here to stay and we're seeing two type of distribution.

Or buy now pay later solutions, one is integration with with the merchants and the other one is integration with a payment vehicle and we.

Michael Milotich: Sure, Andrew. So our TP growth is expected to be about 30% throughout 2024. And it'll be relatively consistent each quarter. So just to give you a little sense, like we grew in Q4 by 33%. It was relatively consistent each month, you know, October was a little lighter, November a little stronger. But in January, our TPV growth was very similar to the December growth rate. It was only one point lower.

We are seeing.

I'd say higher engagement.

Consumer engagement with integrating buy now pay later into a payment vehicle or a card so across the Marquette a platform and that's where mark <unk> has a higher moat. So in terms of cash App specifically of course, I mean cash app is widely distributed.

Highly engaging product so having buy now pay later in it.

Michael Milotich: And February, through the first three weeks, is looking very similar to January. And, of course, we'll get the benefit of leap year at the end of the month. So I'd say the trajectory of TPV growth is sort of in that low-30s range so far. And we expect about 30% growth for the year. So it'll all be kind of in that same area of around 30%, plus or minus.

Which is also powered by Mark Kara.

It's definitely a solution. We are excited about it makes sense for the consumers. It makes sense for the distribution of buy now pay later and it's a segment that cash app.

It is well penetrated in yes, I mean, if you think about Craig that there's over 23 million active cash App card users every month so.

Michael Milotich: From a take rate perspective, I think we're starting to see stability, right? We, as we've said, have 80% of our, over 80% of our TPV, we've renewed recently. And so, as I sort of called out, if you exclude cash app, which of course, we're still lapping, our take rate on revenue has been consistent, excluding cash app for three straight quarters. On the gross profit side, it actually ticked up in Q4 compared to Q3 when you exclude cash app, which just has to do with a lot more incentives happening in the fourth quarter compared to Q3. So, you know, we expect take rate stability for the most part.

Although after pay has been successful for them and for our business. That's an incredible installed base. So what they talked about on their call last week. You know makes it makes a lot of sense to us.

Okay.

Thank you.

The next question is from Chris Kennedy with William Blair. Please go ahead.

Good afternoon. Thanks for taking the question can you provide an update on your on the regulatory environment for banking as a service and embedded finance and kind of how you view that.

That operating environment. Thank you.

Thanks, Chris.

I would say there is no changes there is not much that we can talk about either positive or negative I would say that the environment is it remains healthy.

Dan Dolev: You know, there'll always be some, a little bit of renewal activity, but we'll also have new customers ramping who aren't nearly as deep into their pricing tiers as our existing customers. So we expect relative stability on that 30% TPV growth. Thank you. The next question is from Dan Dolev of Mizzou Hall. Please go ahead.

The great news about a lot of what's going on in embedded finance.

Is <unk>.

Solutions that are catering to the Unbanked and Underbanked.

There's no question that buy now pay later has opened the credit box.

Simon Khalaf: Oh, guys, great results. Thank you for taking my question. I think, Simon, you mentioned that you flipped volumes from your competitors and your prepared remarks. Like, you know, without naming specific names, can you give us a flavor of sorts of the types of competitors that you're winning share from? Thank you. Sure, thanks for the question. Yes, I mean, I say there are two flavors.

And provided what is effectively lending without the 29% APR. So that's definitely helping the community and same thing with Smbs, they're kind of like the forgotten entity.

So I do.

There is a lot of goodness that is happening.

With with these solutions so I do.

We're comfortable with the regulatory environment. The second thing I'd say is as a company we are.

Simon Khalaf: One flavor is taking share from legacy. The other is, I'd say, the flight to quality. There are folks who probably chose an alternate processor because they were cheaper than Marqeta, but then as they scaled up and realized our stability, our multiple nines, and as their business scaled, they're looking for a partner that can take them to the next stage. So I'd say it's a mix, a healthy mix of taking incumbents out and also taking less stable processors. And just to add a little bit to that, Dan, I would say that in Q4 of our bookings, about 10% were flips. And that's actually on the low side for each quarter of the year.

<unk> invested in program management, and we've invested in compliance with invested in a lot of these services because number one we take it very seriously and the second thing is that when we target the brands, especially in embedded finance. The last thing we want is bring them regulatory travel so I think we.

We've taken this very seriously as a as a platform and I think as you may be referred to Chris I mean, some of the announcements out there about SaaS platforms in some of the banks to do business with the more of those announcements.

There is definitely a component of a flight to quality, which we think we are the beneficiaries of just given our scale and the level of investment and we were one of the first movers in this space. So.

Michael Milotich: So each quarter in 2023, at least 10% of our bookings were flips. So I think there's a good amount of activity of, as Simon was saying, people who maybe a couple of years ago made a different choice. We were a contender for the business, and we didn't get it.

We think that.

Although it's on.

It's unfortunate.

That theres some disruption in the marketplace like that I think generally speaking, we're we're definitely more of a beneficiary.

Michael Milotich: And now they're sort of realizing some of the benefits in terms of our expertise to help them scale and grow their platform, also the reliability we provide. And so I think that's really what's helping us. Thank you. The next question is from Craig Maurer of FT Partners. Please go ahead.

Something that hurts us.

Thank you.

Next question is from Cathy Chan of Bank of America. Please go ahead.

Hi, I am just two quick questions for me. So first I wanted to ask about the competitive landscape. There's obviously been some headlines around corner on block with Audi and are you seeing the competitive landscape evolving our intensifying among existing clients and then just a quick clarifying question.

Craig Jared Maurer: Yeah, hi, thanks for taking the question. I wanted to come back to Buy Now Pay Later for a second. Do you expect that Block's new cash app strategy to drive more adoption using Buy Now Pay Later will cause any inflection in volume? There's no question that the buy-now-pay-later market is here to stay, and we're seeing two types of distribution for buy-now-pay-later solutions. One is integration with merchants, and the other one is integration with the payment vehicle.

Did you guys disclose the impact or was there any API II in the quarter and if there's anything assumed in the one quarter and the first quarter or the 2024 guide. Thank you.

Thank you for the question I'll take the first one and I'll toss the second one to.

Mike.

In terms of the competitive landscape.

I would say it is more favorable.

Simon Khalaf: And we're seeing, I would say, higher engagement, consumer engagement, with integrating buy-now-pay-later into a payment vehicle or a card across the Marqueta platform, and that's where Marqueta has a higher moat. So in terms of cash apps specifically, of course. I mean, cash is widely distributed.

It used to be because the majority of the growth we are seeing is in.

Areas.

Is that Mark <unk> has a much higher moat.

In the one time.

I'd say the one time.

Virtual commercial parts space.

Yes, there is competition, but most of our customers.

Simon Khalaf: It's a highly engaging product, so having buy-now-pay-later in it, which is also powered by Marqueta, is definitely a solution we're excited about. It makes sense for consumers. It makes sense for the distribution of buy-now-pay-later. And it's a segment that Cash App is well penetrated in. Yeah, I mean, if you think about Craig that, you know, there are over 23 million active Cash App card users every month.

Buy from us or a partner with us on more than that so the growth is coming from areas, where our moat is higher.

So I think we're comfortable there in terms of in terms of the competitive landscape now that doesn't mean, we're not mindful of competition on the country with respected it keeps everybody honest and it keeps us innovating.

Michael Milotich: So, you know, although Afterpay has been successful for them and for our business, you know, that's an incredible installed base. So, you know, what they talked about on their call last week makes a lot of sense to us. Thank you. The next question is from Chris Kennedy of Woodham Blair. Please go ahead.

And on your second question on rig II, nothing really too.

Nothing really of note to point out I think last quarter. We did have something because we were a little surprised by the changes that went into effect.

And the degree to which the mix of volume changed which is very relevant for us and cash up now based on the way the accounting change and the renewals so that was.

Cristopher David Kennedy: Good afternoon, thanks for taking the question. Can you provide an update on the regulatory environment for Banking as a Service and Embedded Finance and kind of how you view that operating environment?

Something where we just didn't expect the as much shift as we saw and that impacted our our economics, a little bit in Q3, but but with that knowledge. Now Q4 was largely as expected and there is nothing we see or are assumed in 'twenty four that's noteworthy.

Simon Khalaf: Thank you. Thanks, Chris. I would say there are no changes. There is not much that we can talk about, either positive or negative.

Thank you.

Simon Khalaf: I'd say that the environment remains healthy. I mean, the great news about a lot of what's going on in embedded finance is solutions that are tailored to the unbanked and the underbanked. There's no question that Buy Now, Pay Later has opened the credit box and provided what is effectively lending without the 29% APR. So that's definitely helping the community. And same thing with SMBs. They're kind of like the forgotten entity.

The next question is from Andrew Jeffrey of crews Securities.

Got it.

Hi, Good evening, Thank you for taking the question.

Wanted to ask about expansion deals it sounds like or expansion of existing relationships.

Sounds like that was a call out growth driver as well last year can you talk a little bit.

Yes.

Said.

Perhaps 60% of total bookings for expansion deals can you talk a little bit about additional capabilities and how you are monetizing existing customers the way at an improving rate than we were.

Simon Khalaf: So there's a lot of goodness that is happening with these solutions, and we're comfortable with the regulatory environment. The second thing I'd say is, as a company, we have invested in program management, and we've invested in compliance. We've invested in a lot of these services because, number one, we take them very seriously. And the second thing is that when we target brands, especially in embedded finance, the last thing we want is to bring them regulatory trouble.

Yeah.

Absolutely Andrew Thanks for the question.

As many angles to this I mean.

Well, what we've done over the last year its focus on solutions selling like if you look at the <unk>.

Trajectory of Marchetta debt.

I would say there was a knee or banking then buy now pay later than expense management and on demand delivery and.

And we started working on accelerating wage access F&B credit and co brands, so and all of them processing is kind of the least common denominator in just in time processing is the least common denominator everybody uses it.

Simon Khalaf: So I think we've taken this very seriously as a platform. And I think, as you maybe referred to, Chris, some of the announcements out there about BaaS platforms and some of the banks to do business with, the more of those announcements, there's definitely a component of a flight to quality, which we think we are the beneficiaries of, just given our scale and the level of investment. And we were one of the first movers in this space, so we think that, although it's unfortunate that there's some disruption in the marketplace like that, I think, generally speaking, we're definitely more of a beneficiary than something that hurts us. Thank you. The next question is from Cassie Chan of Bank of America. Please go ahead.

As we started rolling out like banking as a service product program management, such as such as disputes and charge backs.

Risk solutions those are kind of like good add ons, but I'd say what also has happened is a lot of our customers started launching multiple programs with us like as an example.

The buy now pay later community most of them started with a solution that integrates with merchants and all of them are now moving I'd say, a good majority of them.

Jinli Chan: Hi, guys. Just two quick questions for me. First, I wanted to ask about the competitive landscape. There's obviously been some headlines around Corona and blossom audience.

Actually either integrating into a payment card or having a payment card like a super card.

So they launch more programs with us so I'd say it is either more programs launched with us or value added services that we are we are adding the third angle is international expansion. So we've taken the strategy that we're going to we're going to basically go at our.

Simon Khalaf: Are you guys seeing the competitive landscape evolving or intensifying among existing clients? And then, just a quick clarifying question. Did you guys disclose the impact, or was there any, from Reg II in the quarter?

Michael Milotich: And if there's anything assumed in the first quarter or the 2024 guide? Thank you. Thank you for the question. I'll take the first one, and I'll toss the second one to Mike.

<unk> go up.

I mean with the reason.

And efficiency.

So a lot of them a lot of the multinationals.

Simon Khalaf: In terms of the competitive landscape, I'd say it is more favorable than it used to be because the majority of the growth we are seeing is in the areas where Marqueta has a much higher moat. So, in the one-time virtual commercial card space, yes, there is competition, but most of our customers buy from us or are partnered with us on more than that. So, growth is coming from areas where our moat is higher. So, I think we're comfortable there in terms of the competitive landscape. Now, that doesn't mean we're not mindful of competition. On the contrary, we respect it.

They want a code once and deploy everywhere and mark cannot gave them that ability. So that's the third dimension of expansion. So in summary, I'd say.

First one is launching more programs to the second one more value added services third one is international now looking forward credit is a phenomenal opportunity to a lot of the debit partners that we have so we are in deep conversations with a lot of our customers that use us for debit and they want to they want to.

Use us for for credit as well.

And another example that I would just add to what Simon just said is that.

Michael Milotich: It keeps everybody honest, and it keeps us innovating. And on your second question about REG-AI, there is really nothing really of note to point out. I think last quarter we did have something because we were a little surprised by the changes that went into effect and the degree to which the mix of volume changed, which is very relevant for us in Cash App now, based on the way the accounting changed and the renewal. So that was something where we just didn't expect as much of a shift as we saw, and that impacted our economics a little bit in Q3. But with that knowledge now, Q4 was largely as expected, and there's nothing we see or have assumed in 24 that's noteworthy. Thank you. The next question is from Andrew Jeffrey of Truist Securities. Please go ahead. Hi, good evening.

They might look at credit or maybe they have something that's customer facing and now maybe we're engaged on something thats more employee facing an accelerated wage access so as we are.

Add to the use cases and the breadth of our platform. There's there's lots of different opportunities that we can discuss with our customers.

And that's one of the as we go into embedded finance, that's one of the really compelling things about our platform is most of these customers are going to our prospects are going to start somewhere but many of them are already big companies in their own right and our thinking a little bit bigger and they have that opportunity to do that with one partner on the Marquette a platform that might be difficult.

To achieve with some of our competitors.

Thank you.

Next question is from Moshe.

With Bush Securities. Please go ahead.

Hey, Thanks for taking my question can we talk a bit about the centers that you're opening in Poland, and how that could potentially bring down some of your technology or development costs down the road.

Andrew William Jeffrey: Thank you for taking the question. I wanted to ask about expansion deals, it sounds like or expansion of existing relationships. Sounds like that was a call out growth driver as well last year. Can you talk a little bit, I guess? and perhaps, Can you talk a little bit about additional capabilities and how you're monetizing existing customers the way you do? It would be great the way you are.

Absolutely. Thanks, Moshe Yeah, I mean, we we all come from our backgrounds in which we scaled organizations and all that.

There is multiple reason to do this one has the talent and Poland is is really good.

And especially as some folks in our industry, whether it's networks or <unk>.

Simon Khalaf: Yeah, absolutely, Andrew. Thanks for the question. There are many angles to this.

I would say accounting have backend services done in Poland. The second one is strong backend engineering risk operations.

Simon Khalaf: I mean, what we've done over the last year is focus on solution selling. Like, if you look at the trajectory of Marqueta, I would say there was neobanking, then buy now, pay later, then expense management, then on-demand delivery. And then as we started rolling out, like the banking as a service product, program management, such as disputes and chargebacks, risk solutions, those were kind of like good add-ons. But I'd say what has also happened is that a lot of our customers started launching multiple programs with us. As an example, the Buy Now, Pay Later community, most of them started with a solution that integrated with merchants.

AI machine learning, so on and so forth.

The labor market is still favorable compared to our to the United States in terms of availability and in terms of cost. So the areas, where we are investing in in Poland will help us on the risk operations program management.

As well as engineering services, and we expect also to to invest on the what I call the back office sales.

Organization as well I mean throughout my carrier.

We've had tremendous success in and in.

So I think where we're at we're looking good there.

Thank you very much our final question is from Jamie Friedman of Susquehanna. Please go ahead.

Simon Khalaf: And all of them are now moving, I'd say a good majority of them, actually either integrating into a payment card or having a payment card like a supercard. So they launch more programs with us. So I'd say it is either more programs launched with us or value-added services that we are adding. The third angle is international expansion. So we've taken the strategy that we're going to basically go where our customers go, with reason and efficiency. So a lot of them, a lot of multinationals, they want to code once and deploy everywhere, and Marqeta gives them that ability. So that's the third dimension of expansion.

Hi, Thank you Mike I think you said in your prepared remarks.

Non block renewals lowered gross profit growth.

Low to mid single digits.

I heard you wrong I apologize if that's the case I was wondering how we might.

If you could unpack that a little about the inputs and how we might be thinking about that.

In 2024 would be helpful. Thank you.

Yes, you got it exactly right Jamie.

Jamie This is <unk>.

It was low to mid single digits from deals that we did between Q2 of 'twenty two and Q1 of 2023. So in that four quarter period, we renewed about 50% of our non block PPV and so the last couple of quarters I've been calling calling this out. So this will lap in Q2 of 'twenty four.

Simon Khalaf: So in summary, I'd say the first one is launching more programs, the second one more value-added services, and the third one is international. Now looking forward, credit is a phenomenal opportunity for a lot of the debit partners we have. So we are in deep conversations with a lot of our customers that use us for debit, and they want to use us for credit as well. And another example that I would just add to what Simon just said is that, you know, they might look at credit, or maybe they have something that's customer-facing, and now maybe we're engaged on something that's more employee-facing, on accelerated wage access.

Now what's not in there it's not all all renewals that are non block is just within that window of time. When there was just a lot of activity and and so we really just have one more quarter Q1 of 24 before we start lapping, but you've got it right. It was low to mid single digit of our gross profit growth drag.

In Q4 as a result of this.

Thank you very much.

Ladies and gentlemen that then concludes today's evening. Thank you for attending and you may now disconnect your lines.

Michael Milotich: So, as we add to the use cases and the breadth of our platform, there are lots of different opportunities that we can discuss with our customers. And that's one of the, as we go into embedded finance, one of the really compelling things about our platform is that most of these customers are going to, or prospects are going to start somewhere, but many of them are already big companies in their own right and are thinking a little bit bigger. And they have that opportunity to do that with one partner on the Marqueta platform, which might be difficult to achieve with some of our competitors. Thank you. The next question is from Moshe Katri of White Bush Securities. Please go ahead.

Yeah.

[music].

Moshe Katri: Hey, thanks for taking my question. Can we talk a bit about the center that you're opening in Poland and how that could potentially bring down some of your technology or development costs on the road? Absolutely. Thanks, Moshe.

Simon Khalaf: Yeah, I mean, we all come from backgrounds in which we scaled organizations, and there are multiple reasons to do this. One is the talent in Poland is really good, and especially as some folks in our industry, whether it's networks or, I'd say, accounting, have backend services done in Poland. The second one is strong backend engineering, risk operations, AI, machine learning, so on and so forth. The labor market is still favorable compared to the United States in terms of availability and cost.

James Eric Friedman: So, the areas where we are investing in Poland will help us with risk operations, program management, as well as engineering services, and we expect also to invest in what I call the back office sales organization as well. I mean, throughout my career, I've had tremendous success in Poland, so I think we're looking good there. Thank you very much. Our final question is from Jamie Friedman of Sushkehana. Please go ahead.

Michael Milotich: Thank you. Mike, I think you said in your prepared remarks that the non-block renewals lower gross profit growth. Lode, and Mish Singledigit.

Michael Milotich: If I heard you wrong, I apologize. If so, that's the case. I was wondering how we might, if you could unpack that a little about the inputs and how we might be thinking about that in 2024 would be helpful. Thank you. Yeah, you got it exactly right, Jamie.

[music].

Michael Milotich: This is, it was low to mid single digits from deals that we did between Q2 of 22 and Q1 of 2023. So in that four-quarter period, we renewed about 50% of our non-block TPV. And so the last couple of quarters, I've been calling this out. So this will lap in Q2 of 24.

Michael Milotich: Now, what's not in there, it's not all renewals that are non-block, it's just within that window of time when there was just a lot of activity. And so we really just have one more quarter, Q1 of 24, before we start lapping. But you got it right, it was a low to mid single-digit gross profit growth drag in Q4 as a result of this. Thank you very much.

Operator: Ladies and gentlemen, that then concludes today's event. Thank you for attending and you may now disconnect your line. B.J. D'Angelo, Michael M. B. K. M. B. M. M. M. M. M. M. M. M. M. M. M. M. M. M. M. M. M. M. M. M. M. M. [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] Good afternoon ladies and gentlemen and thank you for standing by. Welcome to the Marqeta fourth quarter 2023 earnings conference call. At this time, lines have been placed on mute to prevent any background noise.

Operator: After the speakers' remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. I would now like to turn the call over to Stacey Finerman, Vice President of Investor Relations. Thank you, and you may begin.

Stacey Finerman: Thanks, Operator. Before we begin, I would like to remind everyone that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our investor relations website, including our annual report on Form 10-K for the period ended December 31, 2022, and our subsequent periodic filings with the SEC. Consequently, actual results may differ materially from any forward-looking statements we make today.

Stacey Finerman: 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.

Stacey Finerman: Reconciliations to the most directly comparable GAAP measures can be found in today's earnings press release or earnings release supplemental materials, which are available on our investor relations website. Hosting today's call are Simon Khalaf, Marqeta's CEO, and Mike Milotich, Marqeta's Chief Financial Officer. With that, I'd like to turn over the call to Simon to begin.

Simon Khalaf: Thank you, Stacey, and everyone for joining us for Marqueta's fourth quarter 2023 earnings call. Last fiscal year was a transformative year for Marqueta, and I'm excited about the foundation laid for the future of our company. I'll briefly touch on our results for the fourth quarter and full year 23 before sharing exciting developments at Marqeta. The last time we spoke was after we released our Investor Day materials, which detailed the changes we made throughout 2023 and the opportunity ahead of us in 2024 and beyond. This most recent quarter demonstrates the focused effort made during 2023 is starting to pay off and has set Marqueta on a new trajectory. This path will lead to sustainable growth, profitability, innovation, and a great ability to capitalize on the fast-growing embedded finance market. Total processing volume, or TPD, in the quarter was $62 billion, an increase of 33% compared to the same quarter of 2022.

Simon Khalaf: Our net revenue of $119 million in the quarter contracted 42% year over year, which included a decrease of 59 percentage points from the revenue presentation change related to our cash app contract renewal. Our gross profit of $83 million contracted by 4% versus Q4 2022, primarily due to the Cash App renewal pricing. Our gross margin for the fourth quarter was 70%. Our non-GAAP-adjusted operating expenses were $80 million, a 16% decrease versus Q4 2022 due to our restructuring, operational efficiencies, and delayed investments, resulting in a positive adjusted EBITDA of $3 million for the quarter and a full year. TPV was $222 billion, an increase of 34% compared to the previous year. The full-year net revenue was $676 million, representing a 10% contraction from the previous year.

[music].

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

Welcome to the market, our fourth quarter 2023 earnings conference call.

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

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

As a reminder, this conference call is being recorded.

I would not have to turn the conference over to Stacey Solomon Vice President of Investor Relations. Thank you and you may begin.

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

Simon Khalaf: This includes a 31 percentage point decline related to the revenue presentation change resulting from the Cash App renewal. Gross profit for the full year was $330 million, a 3% increase compared to 2022. Gross profit was negatively impacted, primarily by several renewals, particularly cash out, and changes in our visa incentives at the start of the year.

On Form 10-K for the period ended December 31, 2022, and our subsequent periodic filings with the SEC.

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

Simon Khalaf: I'm thrilled with these financial results and thankful to all the Marquessans who have made this possible. Outside our pure financial performance, we've delivered on product innovation, sales growth, and operational efficiency. In 2023, we greatly enhanced our credit platform. We added credit program management capabilities with the acquisition of power and quickly executed the integration to launch a unified modern credit office. The two commercial deals we recently signed are characterized by their ability to bring an embedded experience to their end customers, made possible by Marqueta's flexible platform. The first deal we signed was with International Travel Solutions, or ITF. ITS is a successful travel management company with a substantial customer base. IPF plans to use the Marqeta credit platform to build an unsecured credit card for its end-users.

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

On our Investor Relations website.

Hosting todays call are Simon cool off Marquette as CEO, and Mike militants, Mark Hurd as Chief Financial Officer.

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

Thank you Stacey and everyone for joining us for <unk> fourth quarter 2023 earnings call.

Last fiscal year was a transformative year for Mark.

And I am excited about the foundation laid for the future of our company.

Ill briefly touch on our results for the fourth quarter and full year 2003, before sharing exciting developments at Markel.

Simon Khalaf: ITS chose us because of our established reputation in modern card issuing, not to mention our ability to offer solutions with a significant amount of customization and control, which is critical to travel management. With our partnership, ITS can launch and innovate faster to meet the ever-changing demands of its travel partners. Additionally, ITS can personalize its offering to its partners, allowing them to run their business more effectively by providing more robust controls over their traveling. For example, ITS expects to enable carbon impact tracking to help partners make conscious decisions and provide dynamic rewards to enable more customized incentives. We also signed another commercial credit deal, albeit for a very different use. AffiniPay, a leader in online payment and software solutions for professionals, will partner with Marqeta to launch its planned LawPay Visa credit card embedded within the MyCase platform.

The last time, we spoke was after we release, our Investor day materials, which detailed the changes we made throughout 2023 and the opportunity ahead of us in 2024 and beyond this.

This most recent quarter demonstrates the focused effort made during 'twenty to 'twenty three is starting to pay off and as Seth Mark on a new trajectory. This path will lead to sustainable growth profitability innovation and a great ability to capitalize.

On the fast growing embedded finance market.

Total processing volume or TBD in the quarter with 62 billion, an increase of 33% compared to the same quarter of 2022 are net revenue of $119 million in the quarter contracted 42% year over year, which included a deck.

Simon Khalaf: The first comprehensive solution in the industry that helps law firms pay, track, and manage firm and client expenses. AffinityPay selected us because of our trusted platform for building card program management at scale that is dynamic, flexible, and tailored to customer needs. By partnering with Marqeta, MyCase SmartSpend users will have a comprehensive, easy-to-use platform that gives them access to real-time card issuing, transaction data, and spend controls from their credit card office.

Greece up 59 percentage points from the revenue presentation change related to our cash app contract renewal.

Our gross profit of 83 million contracted by 4% versus Q4 2022, primarily due to the cash app and in oil pricing our gross margin for the fourth quarter was 70%.

Our non-GAAP adjusted operating expenses were $80 million, a 16% decrease versus Q4 2022 due to our restructuring operational efficiencies and delayed investments, resulting in a positive adjusted EBITDA of $3 million in the quarter.

Simon Khalaf: This helps cardholders stay on top of business expenses and access capital easily, all from a single dashboard. Smartspend will be rolled out to other Affinity Pay products, KSphere, and LawPay at the end of 2024 and beginning of 2025. Let me talk about the progress we made in our go-to-market approach. As we've previously discussed, we have overhauled our go-to-market operation to better capitalize on the embedded finance opportunities. These changes included reorganizing the sales force, realigning our compensation structure, and shifting the focus of the sales organization more towards full-solution selling, such as accelerated wage access, F&B credit, as well as co-branding.

On a full year basis.

<unk> was 222 billion, an increase of 34% compared to the previous year.

Full year net revenue was 676 million, representing a 10% contraction from the previous year.

This includes a 31 percentage point decline related to the revenue presentation change, resulting from the cash app renewal.

Gross profit for the full year was $330 million at 3% increase compared to 2022.

Gross profit was negatively impacted primarily by several renewals, particularly cash app and changes in our visa incentives at the start of the year.

Simon Khalaf: These changes resulted in bookings growth of over 50% in 2023 compared to 2022. Specifically, in the fourth quarter, we saw another solid slate of bookings, generally in line with the makeup of what we saw during the year. Expansion deals with existing customers came in at approximately 60% of total bookings. Although most bookings came from North America, 20% of the deals came from Europe, and predominantly from net new customers, which bodes well for the future of that geography for Marqeta.

I am thrilled with these financial results and thankful to all Mark captains, who have made this possible.

Outside our pure financial performance, we've delivered on product innovation sales growth and operational efficiencies.

In 2023, we greatly enhanced our credit platform.

We added credit program management capabilities with the acquisition of power and quickly executed the integration to launch a unified modern credit offering the two commercial deals with recently signed are characterized by their ability to bring an embedded experience to their end customers.

Simon Khalaf: Like previous course orders, we also won multiple deals through flipping volumes from our competitors as customers sought out Marqueta's proven scale, flexibility, and expertise in modern card issuing, which was lacking through their current provider. In addition to growing our bookings, we also made great strides in accelerating the time to launch for new programs signed to convert these bookings into revenue and gross profits tax. On average, the time between close and launch in Q4 of this year was about 100 days better than the previous year. This was achieved without adding significant resources by focusing on the solutions architecture and using pre-configured card constructs.

<unk> made possible by Mark get us flexible platform.

The first deal we signed was with international travel solutions or Ics.

<unk> is a successful travel management company with a substantial customer base.

<unk> plans to use them or credit.

Credit platform to build an unsecured credit card foot its end users.

<unk> chose us because of our established reputation and modern card issuing not to mention our ability to offer solutions with a significant amount of customization and control, which is critical to travel management.

With our partnership <unk> launch and innovate faster to meet the ever changing demands of its travel partners.

Simon Khalaf: In other words, while we design innovative solutions for our customers, we also rely on our expertise to create a plan that will be approved by other members of the payment ecosystem, such as banks and networks. Moving back to products, another area where we invested in 2023 was our reliability and continued ability to scale. The results from this investment can be seen in our transaction success rate metrics for the 2023 holiday season, which increased by three basis points. This is remarkable when one considers that on our peak day in 2023, our platform saw over 40 million authorizations, up 66% compared to the big day in 2022.

Additionally, icf's can personalize its offering to its partners, allowing them to run their business more effectively by providing more robust controls over that if travel expenses for example, <unk> expects to enable carbon impact tracking to help partners make conscious decisions and.

Dynamic rewards to enable more customized incentives.

We also signed another commercial credit deal, albeit for very different use case, a finished bank as either an online payment and software solutions for professionals with partnering with <unk> to launch its plans of law pay visa credit card embedded within the <unk> platform.

The first comprehensive solution in the industry that helps law firms PE track and manage firm and client expenses at.

Simon Khalaf: This improvement occurred simultaneously with efficiency initiatives that right-sized our technology spending but also increased investment in multi-region authorization, demonstrating that we are focusing on the right things when considering the reliability of our platform. In summary, in 2023, we focused on building a solid foundation for a growing and profitable business in the long run. We went broad, building out our platform and reorienting our sales teams to a proven and winning solution. In 2024, we plan to accelerate what we started and return to strong revenue and gross profit growth as we bring to life new and exciting solutions with our fintech customers and prospective embedded finance customers. Our ability to offer credit, debit, banking, and risk solutions at scale positions us well to unlock the massive embedded finance opportunity that's ahead of us. We've only just begun to execute on the strong foundation we have built. With that, I will turn it over to Mike for a more detailed look at our results for the quarter, the full year, and our financial outlook for 2024. Thank you, Simon, and good afternoon, everyone.

<unk> selected us because of our trusted platform for building card program management at scale that are dynamic flexible and tailored to customer needs.

By partnering with Mercado, Mike is smart spend users will have a comprehensive easy to use platform that gives them access to real darn card issuing transaction data and spend controls to their credit card offering.

This help cardholders stay on top of business expenses and access capital easily all from a single dashboard.

Smart spend will be rolled out to other affinity product case sphere and law pay in the end of 'twenty 'twenty four and beginning 2025.

Let me talk about the progress we made in our go to market approach.

As we've previously discussed we have overhauled our go to market operations to better capitalize on the embedded finance opportunities.

These changes included reorganizing the sales force.

Aligning our compensation structure and shifting the focus of the sales organization more towards full solutions selling such as accelerated wage axis F&B credit as well as co brands.

These changes resulted in bookings growth of over 50% in 2023 compared to 2022.

Michael Milotich: As expected and consistent with last quarter, net revenue and gross profit contracted due to the cash app renewal, with the majority of the renewal impact on revenue resulting from the revenue presentation change. Q4 was a strong finish to the year with TPV growth of 33% and better than expected results for net revenue, gross profit, and expense, driving positive adjusted EBITDA. Net revenue and gross profit outperformed due to stronger-than-expected TPV growth, particularly in BNPL, on-demand delivery, and accelerated wage access, as well as higher network incentives. Continued execution of efficiency initiatives, such as streamlining technology spend as well as delays in planned investments, coupled with higher gross profit, led to $3 million of adjusted EBITDA in the quarter. I will share the Q4 highlights before spending more time detailing our expectations for 2024. Q4 TPV was $62 billion, growing 33% for the third straight quarter. Non-block TPV grew approximately 10 points faster than block growth.

Specifically in the fourth quarter, we capture another solid slate of bookings generally in line with the makeup of what we saw during the year <unk>.

Expansion deals with existing customers came in at <unk>, approximately 60% of total bookings.

Although most bookings came from North America, 20% of the deals came from Europe.

And predominantly from net new customers, which bodes well for the future of that geography form or Kevin.

Like previous course orders. We also won multiple deals through flipping volumes from our competitors as customers sought out mark get us proven scale flexibility and expertise and modern card issuing which was lacking through their current provider.

In addition to growing our bookings we also made great strides and accelerating the time to launch for new programs signed them to convert these bookings into revenue and gross profit faster.

On average the time between close and launch in Q4 of this year was about 100 days better than the previous year.

This was achieved without adding significant resources by focusing on solutions architecture, and using pre configured reconfigured card construct in other words, while we designed innovative solutions for our customers. We also rely on our expertise to create a plan that will be.

Michael Milotich: The financial services vertical continues to grow a little faster than the overall company, helped by the rapid ramping of accelerated wage access TPV, which now contributes about 3% of total company TPV. Lending, including Buy Now Pay Later, grew several points faster than the overall company due to a strong holiday season and the continued adoption of our BNPL customers' Pay Anywhere card solution. On-demand delivery continues to grow in the double digits due to consumer adoption of new services and merchant segments, as well as geographic expansion. Spence Management growth re-accelerated this quarter, but it is growing a little slower than the overall company as this vertical matures. Q4 net revenue was $119 million, a 42% contraction year-over-year.

Approved by other members of the payment ecosystem, such as banks and networks.

Moving back to product.

Other area, where we invested in 2023, what's our reliability and continued ability to scale.

The results from this investment can be seen in our transaction success rate metrics for the 2020 for the holiday season, which increased by three basis points. This is remarkable when one considers that on our peak day in 2023, our platform saw over 40 million authorizations up 60%.

6% compared to the Big day in 2022.

This improvement occurred simultaneously with efficiency initiatives that rightsize, our technology spending, but also increased investment on multi region authorization demonstrating that we are focusing on the right efforts when considering when considering the reliability of our platform.

Michael Milotich: The key drivers of our net revenue growth are as follows. The most significant impact was the 59-point growth headwind related solely to the revenue presentation change resulting from the Cash App renewal. As we've described previously, this change in revenue presentation is related to the cost associated with Cash App's primary payment network volume. Previously, the bank and network fees associated with the primary network volume were included in net revenue and cost of revenue.

In summary in 'twenty two 'twenty three we focused on building a solid foundation for a growing and profitable business in the long run we went broad building out our platform and Reorienting, our sales teams to a proven and winning solutions.

And in 2024, we plan to accelerate what we started and the return to strong revenue and gross profit growth as we bring to life, new and exciting solutions with our fintech customers and prospective embedded finance customers.

Michael Milotich: Starting in Q3 2023, these costs will be netted against revenue, and there will be an additional 10 percentage point decline in net revenue growth due to the cash app renewal price. Non-block revenue growth accelerated by more than five points as we began to lap prior year renewals and newer, faster-growing solutions, such as BNPL, pay-anywhere cards, and accelerated wage access increased in their contribution. Block net revenue concentration was 51% in Q4, increasing one point from Q3 due to seasonality. Our net revenue take rate remains unchanged from last quarter at 19 bps.

Our ability to offer credit debit banking and risk solutions at scale positions us well to unlock the massive embedded finance opportunity. That's ahead of US we've only just begun to execute over the strong foundation, we have built with that I will turn it over to Mike.

For a more for a more detailed look at our results for the quarter, the full year and financial outlook for 2024.

Michael Milotich: Excluding Cash App, the net revenue take rate has remained consistent over the last three quarters, despite the lower take rate powered by Marqeta TPV growing faster than managed by, as we continue to move beyond the period of heavy renewal activity. Q4 gross profit was $83 million, contracting 4%.

Thank you Simon and good afternoon, everyone as.

As expected and consistent with last quarter net revenue and gross profit contracted due to the catch up renewal with the majority of the renewal impact on revenue, resulting from the revenue presentation change.

Q4 was a strong finish to the year with TPG growth of 33% and better than expected results for net revenue gross profit and expense driving positive adjusted EBITDA.

Michael Milotich: Similar to net revenue, gross profit growth, excluding block, also accelerated by more than five points. However, three factors continue to weigh on gross profit growth. First, the cash app renewal lowered growth by mid-20 percentage points. As a reminder, the Cash App Revenue Presentation Exchange does not impact gross profit.

Net revenue and gross profit outperformed due to stronger than expected TBD growth, particularly in the NPL on demand delivery and accelerated wage access as well as higher network incentives.

Continued execution of efficiency initiatives, such as streamlining technology spend as well as delays in planned investments coupled with higher gross profit led to $3 million of adjusted EBITDA in the quarter.

Michael Milotich: Second, non-block renewals between Q2 2022 and Q1 2023 lowered growth by low to mid-single digits. These customers represented approximately 50% of our non-block TPV, and the effects of these renewals will be fully lapped in Q2 2024. Lastly, we lost full visa incentives for two of our customers at the start of 2023, lowering growth by low to mid single digits each quarter until we lapped this impact in Q1 of 24. Our gross profit take rate was 13 VIPs, consistent with last quarter. The gross profit take rate outside of Cash App increased one point from last quarter due to higher network consensus. As expected, the gross profit margin was 70%. Q4 adjusted operating expenses were $80 million, a decrease of 16% year-over-year due to realized savings from our restructuring in late May, as well as efficiency initiatives in our technology and professional service expenses. These savings were achieved without sacrificing innovation, compliance, or platform resiliency.

I'll share the Q4 highlights before spending more time detailing our expectations for 2024.

Q4, <unk> was 62 billion growing 33% for the third straight quarter non block PPV grew approximately 10 points faster than block growth.

The financial services vertical continues to grow a little faster than the overall company helped by the rapid ramping of accelerated wage access TPB, which now contributes about 3% of total company TBD.

Lending, including by now pay later grew several points faster than the overall company due to a strong holiday season, and the continued adoption of our <unk> customers pay anywhere card solutions.

On demand delivery continues to grow in the double digits due to consumer adoption of new services and merchant segments as well as geographic expansion.

Expense management growth re accelerated this quarter, but is growing a little slower than the overall company as this vertical matures.

Q4, net revenue was $119 million, a contraction of 42% year over year. The key drivers of our net revenue growth are as follows the.

The most significant impact was the 59 point growth headwind related solely to the revenue presentation change, resulting from the cash up renewal.

As we've described previously this change in revenue presentation is related to the costs associated with cash App's primary payment network volume previously the bank and network fees associated with the primary network volume were included in net revenue and cost of revenue starting in Q3 2023. These costs are netted against revenue.

Michael Milotich: On a sequential basis, expenses grew 7% quarter over quarter, largely due to an increase in professional services, which tend to increase in Q4 due to the timing of audit fees, as well as product and security assessments. Q4 adjusted operating expenses were over $3 million lower than we expected, mostly due to investment timing delays, particularly hiring, as we just recently established an office location in Poland, which we intend to utilize for a significant portion of our headcount growth. In Q4, Adjusted EBITDA was positive $3 million, a margin of 3%. Interest income was $15 million, driven by elevated interest rates. The Q4 gap net loss was $40 million, including a $10 million non-cash post-combination expense related to the power acquisition.

There is an additional 10 percentage point decline in net revenue growth due to the cash app renewal pricing.

Non block revenue growth accelerated by more than five points as we begin to lap prior year renewals and newer faster growing solutions, such as the NPL pay anywhere cards and accelerated wage access increase in their contribution.

Block net revenue concentration was 51% in Q4, increasing one point from Q3 due to seasonality.

Our net revenue take rate remains unchanged from last quarter at 19 bps, excluding cash app. The net revenue take rate has remained consistent over the last three quarters. Despite the lower take rate powered by Mark <unk> growing faster than managed by.

As we continue to move beyond the period of heavy renewal activity.

Michael Milotich: During Q2, we announced a buyback of $200 million. As of the Q4 quarter end, we purchased 31.3 million shares for an average price of $5.36, for $168 million. We ended the quarter with $1.25 billion of cash and short-term investments.

Q4, gross profit was $83 million contracting 4% similar to net revenue gross profit growth excluding block also accelerated by more than five points.

Three factors continue to weigh on gross profit growth first the catch up renewal lowered growth by mid 20 percentage points.

As a reminder, the cash App revenue presentation change does not impact gross profit.

Michael Milotich: The full year 2023 net revenue decrease of 10% and gross profit growth of 3% did not necessarily reflect the strength of our underlying business due to the change in the cash app revenue presentation and heavy renewal activity. 2023 was a transformative year for Marqueta, putting the company on a path to sustainable growth, profitability, and innovation.

Second non block renewals between Q2 2022 in Q1 2023 lowered growth by low to mid single digits. These customers represented approximately 50% of our non block CTV and the effects of these renewals will be fully lapped in Q2 2024.

Lastly, we last fall these incentives for two of our customers at the start of 2023 lowering growth by low to mid single digits each quarter until we lap this impact in Q1 of 'twenty four.

Michael Milotich: TPV grew 34%, and our adjusted EBITDA was negative $2 million as we restructured our cost base and focused on efficiency while securing over 80% of our TPV in renewals over the past seven quarters. We were free cash flow positive for the year. Now let's transition to our expectations for 2024. Let me quickly provide the full-year 2024 expectations before diving into more details on the first and second half. I will also call out any changes to the 2024 financial targets we shared at Investor Day a few months ago. Full year 2024 net revenue is expected to contract 20 to 24% as the change in cash tap revenue presentation weighs on growth in the first half. In 2024, gross profit growth is expected to grow six to nine percent, which equates to gross profit margin in the high 60s. Adjusted operating expenses are expected to grow in the mid to high single digits as we continue to operate with a strong investment discipline and focus on achieving economies of scale.

Our gross profit take rate was 13 bps consistent with last quarter. The gross profit take rate outside of cash App increased one point from last quarter due to higher network incentives.

As expected the gross profit margin was 70%.

Q4, adjusted operating expenses were $80 million, a decrease of 16% year over year due to realize savings from our restructuring in late may as well as efficiency initiatives and our technology and professional service expenses.

These savings were achieved without sacrificing innovation compliance or platform resiliency.

On a sequential basis expenses grew 7% quarter over quarter, largely due to an increase in professional services, which tend to increase in Q4 due to the timing of audit fees as well as product and security assessments.

Q4, adjusted operating expenses were over $3 million lower than we expected, mostly due to investment timing delays, particularly hiring as we've just recently established an office location in Poland.

Which we intend to utilize for a significant portion of our head count growth.

Michael Milotich: Therefore, we expect full-year 2024 Adjusted EBITDA to be around break-even, or said differently, an Adjusted EBITDA margin of around 0%. Because of the details I'll describe in a minute, we expect to be Adjusted EBITDA positive in three out of the four quarters in 2024. This expectation is a little better than what we shared at our investor day in November as a result of the efficiency initiatives. Before I get into the more granular detail, let me first start by providing important context for 2024. We have assumed the overall macroeconomic environment remains consistent with recent trends. However, we have yet to see meaningful changes in the spend patterns on our consumer and commercial cards in the past several months.

Q4, adjusted EBITDA was positive 3 million a margin of 3%.

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

Q4, GAAP net loss was $40 million, including a $10 million noncash post combination expense related to the power acquisition.

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

As of the Q4 quarter end, we purchased 31 3 million shares for an average price of $5 36.

For $168 million.

We ended the quarter with $1 5 billion of cash and short term investments.

The full year 2023, net revenue decrease of 10%.

And gross profit growth of 3% do not necessarily reflect the strength of our underlying business due to the change in the cash app revenue presentation and heavy renewal activity.

23 was a transformative year for marchetta, putting the growth on putting the company on a path to sustainable growth profitability and innovation.

Michael Milotich: Therefore, assuming the current trajectory persists, our financial performance will be meaningfully different in the first and second half of 2024, primarily for two reasons. First, the lapping of the effects of the cash-up renewal will dissipate at the start of Q3. Second, the revitalization and strength of our sales bookings since Q4 of 2022 should lead to a fair amount of new business launching and ramping on our platform throughout the year. The contribution of these bookings to net revenue and gross profit will increase each quarter, further accentuating the difference in our first and second half growth rates. Adjusted expense growth will also be meaningfully different in the first and second halves of 2024 due to our restructuring executed at the end of May 2023.

TBD grew 34% and our adjusted EBITDA was negative $2 million as we restructured our cost base and focused on efficiency, while securing over 80% of our TPB and renewals over the past seven quarters.

We were free free cash flow positive for the year.

Now, let's transition to our expectations for 2024, let.

Let me quickly provide full year 2024 expectations before diving into more details on the first and second half.

I'll also call out any changes to the 2024 financial targets, we shared at Investor Day, a few months ago.

Full year 2024, net revenue is expected to contract 20% to 24% as the change in cash App revenue presentation weighs on growth in the first half.

2024, gross profit growth is expected to grow 6% to 9%, which equates to a gross profit margin in the high <unk>.

Michael Milotich: Our expense base was meaningfully different in the first five months of 2023 than it was in the last seven months. The difference was further exacerbated by the fact that we did not reinvest some of the savings in new initiatives and focus areas as quickly as we intended, as referred to in my Q4 2023 comments. Therefore, our second half 2023 adjusted expenses are unusually low.

Adjusted operating expenses are expected to grow in the mid to high single digits. As we continue to operate with a strong investment discipline and focus on achieving economies of scale.

Therefore, we expect full year 2024, adjusted EBITDA to be around breakeven or said differently and adjusted EBITA margin of around zero percent.

Because of the details I'll describe in a minute we expect to be adjusted EBITDA positive in three out of the four quarters in 2020 for.

This expectation is a little better than what we shared at our Investor day in November as a result of efficiency initiatives.

Michael Milotich: Now let's turn to the first half of 2024. For Q1 2024, we expect net revenue to contract between 45% and 48%, including a 65% to 70% negative impact of the cash-out renewal, mostly due to the revenue presentation change, consistent with what we have seen in the last two quarters. We expect Q2 net revenue to contract in the same range. As expected, this is a few points lower than the second half of 2023 due to the unfavorable business mix and slower growth from a few of our customers without much contribution from new program launches at this point. Q1 gross profit is expected to contract between 8 and 10% with a gross profit margin in the high 60s.

Before I get into the more granular detail, let me first start by providing important context for 2024.

We have assumed the overall macroeconomic environment remains consistent with recent trends, we have yet to see meaningful changes in the spend patterns on our consumer and commercial cards in the past several months. Therefore, we assume the current trajectory persists.

Our financial performance will be meaningfully different than the first and second half of 2024, primarily for two reasons first the lapping of the effects of the catch up renewal will dissipate at the start of Q3.

Second the revitalization and strength of our sales bookings since Q4 of 2022 should lead to a fair amount of new business launching and ramping on our platform throughout the year the.

The contribution of these bookings to net revenue and gross profit will increase each quarter further accentuating the difference in our first and second half growth rates.

Adjusted expense growth will also be meaningfully different than the first and second half of 2024 due to our restructuring executed at the end of May 2023.

Michael Milotich: We expect gross profit to contract in the same range in Q2. However, the Q2 gross margin will be approximately seven points lower than Q1 as our network incentive tiers reset in April with our two largest network partners. The first-half gross profit contraction is now expected to be a little worse than what we shared at our November investor day due to an unfavorable business mix and revised expectations for the timing of when some key customers will achieve certain price tiers based on their TPV trajectory. Q1 adjusted operating expenses are expected to shrink in the mid-teens, similar to Q4-23, but with some ramp in hiring results from the delays I discussed earlier.

Our expense base was meaningfully different in the first five months of 2023 than it was in the last seven months.

The difference was further exacerbated by the fact that we did not reinvest some of the savings and new initiatives and focus areas as quickly as we intended as I referred to in my Q4 of 2023 comments.

Therefore, our second half 2023 adjusted expenses are unusually low.

Now, let's turn to the first half of 2024.

For Q1, 2024, we expect net revenue to contract between 45, and 48%, including a 65 to 70 percentage point negative impact of the catch up renewal, mostly due to the revenue presentation change consistent of what we've seen in the last two quarters.

Michael Milotich: In contrast, we expect Q2 adjusted operating expenses to grow in the mid-single digits. In Q2, we'll begin to lap our restructuring from last May, and we will incur additional costs from our reinvestment in hiring, as well as investments in platform resiliency to support our scaled customers. Therefore, our Q1 adjusted EBITDA margin is expected to be in the 0 to positive 2% range.

We expect Q2 net revenue to contract in the same range as expected. This is a few points lower in the second half of 2023 due to the unfavorable business mix and slower growth from a few of our customers without much contribution from new program launches at this point.

Q1, gross profit is expected to contract between eight and 10% with a gross profit margin in the high <unk> we.

Michael Milotich: This is better than what we shared at Investor Day due to our investment delays and increased efficiencies we realized in Q4'23. We expect Q2 to be our only negative adjusted EBITDA quarter with a margin in the negative 79% range due to a combination of the resetting of our network incentives weighing on gross profit and additional investment needed to support our growth. In the second half of 2024, our business performance metrics are expected to improve significantly after lapping almost all of the major renewal activity, particularly cash out. We expect net revenue growth in the second half of 2024 to reaccelerate to 23 to 26%, primarily driven by three factors. First, the cash up revenue presentation change.

We expect gross profit to contract in the same rate same range in Q2. However.

However, the Q2 gross margin will be approximately seven points lower than Q1, as our network incentive tiers reset in April with our two largest network partners.

The first half growth gross profit constant contraction is now expected to be a little worse than what we shared at our November investor day, due to unfavorable business mix and revised expectations for the timing of when some key customers will achieve certain price tiers based on their T. P V trajectory.

Q1, adjusted operating expenses are expected to shrink in the mid teens similar to Q4, 'twenty three but with some ramp in hiring results from the delays I discussed earlier.

In contrast, we expect Q2 adjusted operating expenses to grow in the mid single digits.

In Q2, we will begin to lap our restructuring from last May and we will occur additional cost from our reinvestment and hiring as well as investments in platform resiliency to support our scaled customers.

Michael Milotich: Second, realizing existing customers' growth as we lap all the elevated renewal activity. And third, benefiting from the ramping new programs as we progress through the year. Second half 2024 gross profit growth is also expected to be in the 23 to 26% range, consistent with net revenue.

Therefore, Q1 adjusted operating.

Therefore, Q1 adjusted EBITDA margin is expected to be in the zero to positive 2% range. This is better than what we shared at Investor day due to our investment delays and increased efficiencies we realized in Q4 23.

We expect Q2 to be our only negative adjusted EBITDA quarter with a margin and a negative 79% range due to a combination of the resetting of our network incentives weighing on gross profit and additional investment needed to support our growth.

Michael Milotich: This second half gross profit growth is expected to be a little higher than what we shared with you at Investor Day due to positive business mix and expected shifts in a couple of existing program constructs where we currently incur excessive network. Second half 2024 adjusted operating expenses are expected to grow in the high teens as we continue to invest in growth initiatives and resiliency, combined with the fact that we grow over the unusually low expenses in 2023 as our post-restructuring Therefore, we expect second half 2024 Jesse Bidaw to be positive 1 to 3% margin, a little higher than what we shared at Investor Day due to higher gross profit. In conclusion, we are exiting 2023 with great business momentum and a solid foundation to deliver sustainable growth, profitability, and innovation in 2024 and beyond. Our excitement and confidence are primarily driven by three factors. First, by renewing over 80% of our TPV in the last seven quarters, most of which are in contracts for at least four years, we have secured our attractive customer base and opened up potential cross-selling opportunities as we continue to expand our platform capabilities. This was short-term pain for long-term gain.

In the second half of 'twenty four our business performance metrics are expected to improve significantly after lapping almost all of the major renewal activity, particularly cassia.

We expect net revenue growth in the second half of 2024 to Reaccelerate to 23% to 26% primarily driven by three factors.

First lap into cash App revenue presentation change.

Second realizing existing customers growth as we lap all the elevated renewal activity and third benefiting from the ramping new programs as we progress through the year.

Second half 2024 gross profit growth is also expected to be in the 23% to 26% range consistent with net revenue.

This second half gross profit growth is expected to be a little higher than what we shared with you at Investor day due to positive business mix and expected shifts in a couple of existing program contracts, where we currently incur excessive network fees.

Second half 2024, adjusted operating expenses are expected to grow in the high teens as we continue to invest in growth initiatives and resiliency combined with the fact that we grow over the unusually low expenses in 2020 as our post restructuring reinvestment was delayed.

Therefore, we expect second half 2024, adjusted EBITDA to be positive, 1% to 3% margin a little higher than what we shared at Investor day due to higher gross profit.

In conclusion, we are exiting 2023 with great business momentum and a solid foundation to deliver sustainable growth profitability and innovation in 2024 and beyond.

Our excitement and confidence is primarily driven by three factors.

Michael Milotich: Second, we are starting to get contributions from ramping new use cases such as BNPL Pantywear Cards and the Accelerated Wage Act. As we move through 2024, this will be combined with ramping new cohorts that result from our improved sales performance that delivered over 50% bookings growth in 2023. Third, we are getting early customer traction with our new credit capabilities, signing our first two customers to leverage our fully modern, scaled issuer credit platform for innovators. Although this won't meaningfully contribute much to the 2024 P&L, credit will be a meaningful driver of future growth.

First by renewing over 80% of our T V. In the last seven quarters, most of which are in contracts of at least four years, we have secured our attractive customer base and opened up potential cross selling opportunities as we continue to expand our platform capabilities.

This was short term pain for long term gain.

We are starting to get contributions from ramping new use cases, such as the NPL pay anywhere cards and accelerated wage access.

As we move through 2024, this will be combined with ramping new cohorts that result from our improved sales performance that delivered over 50% bookings growth in 2023.

Third we are getting early customer traction with our new credit capabilities, signing our first two customers to leverage our fully modern scaled issuer credit credit platform for innovators. Although this won't meaningfully contribute much to the 2024 P&L credit will be a meaningful driver of future growth.

Michael Milotich: Fourth, Marqeta's differentiated platform in terms of both breadth and depth of our capabilities gives us an outsized market opportunity as many fintechs continue to thrive combined with the continued emergence of embedded finance use cases. Lastly, we have achieved a more efficient cost structure while maintaining compliance, security, and innovation that will power profitable growth for years to come. Starting in the second half of 2024, our business and financial metrics are expected to reflect this momentum as we return to growth. We are excited to share our progress with you in the coming quarters. I'll now turn it back over to the operator for questions. Thank you very much.

Fourth Marquette is differentiated platform in terms of both breadth and depth of our capabilities gives us an outsized market opportunity as many fintech continue to thrive combined with the continued emergence of embedded finance use cases.

Lastly, we have achieved and more efficient cost structure, while maintaining compliance security and innovation that will power profitable growth for years to come.

Starting in the second half of 2020 for our business and financial metrics are expected to reflect this momentum as we returned to growth. We are excited to share our progress with you in the coming quarters.

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

Thank you very much ladies and gentlemen at this time, we will be conducting a question and answer session.

Operator: Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the questioning queue. You may press star and then 2 if you would like to remove your question from the queue.

If you'd like to ask a question. Please press star and then one telephone keypad.

Information tone will indicate your line is an accretion in Q.

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

Timothy Chiodo: For participants using speaker equipment, it may be necessary to pick up your handset before pressing start. We do request that you limit yourself to one question and then rejoin the queue. Our first question is from Timothy Chiodo of UBS. Please go ahead.

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

We do request that you limit to one question and then rejoin the queue.

Our first question is from Timothy Chiodo of UBS. Please go ahead.

Simon Khalaf: Great, thank you for taking the question. I wanted to touch on accelerated wage access a little bit. So you have the two large customers to start with Uber and also OneApp. OneApp with it becoming the default for all Walmart employees as new employees have come on and others have rolled off or left the company.

Great. Thank you for taking the question I wanted to touch on accelerated wage access a little bit. So you had the two large customers to start with the Uber and also the one app one app, becoming the default for all Walmart employees as new employees have come on and others have rolled off or left the company can you just talk a little bit.

Simon Khalaf: Can you just talk a little bit about the traction that you're seeing with the offering with that one large customer? And related, you had mentioned that there were others coming down the pike in terms of your pipeline for accelerated wage access. Could you just give a brief update on what that looks like now a few months later? Hey Tim, Simon here.

The traction that youre seeing with the offering with that one large customer and related you had mentioned that there were others coming down the pike in terms of your pipeline for accelerated wage access could you just give a brief update on what that looks like now a few months later.

Hey, Tim Simon here, Thanks for the question.

Simon Khalaf: Thanks for the question. So, the trend is extremely healthy, and accelerated wage access is now about 3% of our processing volume, up from an insignificant number in 2022. So, to put that in perspective, you're looking at about an annualized $7 billion of pay that is running through the Marqueta pipes. That's a massive achievement.

R&D are extremely excited about accelerated wage access so.

The trend is extremely healthy and accelerated wage axis is now.

3% of our processing volume.

Up from an insignificant number in 2022 so.

To put that in perspective, you're looking at about an annualized $7 billion.

That is running through the Marquette a pipe that's a massive achievement, we cant comment specifically on an individual customers but.

Simon Khalaf: We can comment specifically on individual customers, but the trend is extremely healthy, and so is our pipeline. I mean, at the end of the day, look. I mean, our solution is kind of a win, win, win, win. Our approach actually benefits the actual employer that has a contingent workforce because they can retain the working capital but, at the same time, give accelerated wage access to their contingent workforce. And, of course, the associates or the contingent workforce gets paid instantaneously, and we save the employer money.

But the trend is extremely healthy and it's always our pipeline.

I mean at the end of the day look I mean, our solution is cannot say win win win win.

Our approach actually benefit.

The actual employer that has a contingent workforce.

They can retain the working capital.

But at the same time give accelerated wage access to their contingent and of course, the associates or the contingent workforce get space instantaneously and we save the employer money. So they actually make money so you're taking effectively an expense line and moving it.

Simon Khalaf: So, they actually make money. So, you're taking, effectively, an expense line and moving it into a revenue potential that could be returned to the contingency in terms of rewards and discounts. So, I mean, that win, win, win gives us, ironically, an accelerator, and we're extremely excited about it. Thank you very much.

Into a revenue potential that could be returned to the contingencies in terms of rewards and discounts. So I mean that win win win gives it gives us.

Ironically in accelerator and we're extremely excited about it.

Thank you very much.

Ramsey Clark El: The next question is from Ramsey Al-Assaw of Barclays. Please go ahead. All right, thanks for taking my questions. It was great to hear you signing some credit deals. Can you comment on the credit pipeline and just signals you're picking up in the marketplace in general about the demand environment for credit? And maybe even put a little nuance on it in the context of a sort of embedded finance use case that it seems like you're winning? Yeah, thanks, Ramsey, for the question. The pipeline is extremely healthy. As we stated many times, we actually did expect consumer credit demand to be high.

Next question is from Brian <unk>.

Bob Please go ahead.

Hi, Thanks for taking my question this afternoon.

It was great to hear you signing some credit deals.

Can you comment on the credit pipeline and just signals you are picking up in the marketplace in general about the demand environment for Ford credit and maybe even put a little nuance on it in the context of that sort of embedded finance use case that it seems like you're winning.

Yeah. Thanks Ramsey.

For the question the pipeline is extremely healthy as we stated many times, we'd actually expect the consumer credit demand to be high well, we were positively surprised by is the F&B credit.

Simon Khalaf: What we were positively surprised by was the SMB credit demand, and especially from, I'd say, aggregators or platforms that have established relationships with SMBs and have a great view and visibility into the performance of these SMBs and can help with getting them credit because they know what their revenues are going to be, so they can diminish the risk. So I would say across the board, our credit pipeline is extremely healthy. And I would say that the vast majority is in embedded finance, whether it is commercial or consumer. I mean, that's the space we're playing in.

Demand and especially from I'd say aggregators or platforms that have established relationship with Smbs and have great purview and visibility into the performance of these smbs and can help with getting them credits because they they know.

<unk>, what the revenues are going to be so they can diminish the risk. So I would say across the board our credit pipeline is extremely healthy and I would say that the vast majority is in the embedded finance, whether it is commercial or consumer I mean, that's.

That's the space, we're playing in.

Tianxin Huang: So there could be bias because that's what we're actually chasing, the modern day co-brand. I think there are plenty of innovations to simply drive user engagement and change online commerce and not just payments. So we're very excited about that. Thank you. The next question is from Tianxin Huang of JP Morgan. Please go ahead. Thank you so much.

So there could be biased because that's what we are we're actually chasing but also from a demand perspective, I would say between F&B credit and.

New.

Modern day co brand I think there is plenty of innovations to simply drive user engagement and changed online commerce and not just payments. So we're very excited about that.

Thank you. The next question is from Tien Tsin Huang.

Simon Khalaf: Really strong bookings with, what was that, 50% I believe. I'm just curious, is that... include any wins with the potential for clients to become maybe top 10 down the road? Just a little bit more context on the type of stuff that you're adding and also just your confidence and your ability to replenish that pipeline and backlog. Are there large deals out there to win versus 90 days ago? Thanks. Hey, Tenzin. Simon here.

P. Morgan. Please go ahead.

Thank you so much really really strong bookings with the.

Was up 50% I believe that I'm, just curious does that incur.

Include any wins with the potential for clients to become maybe top 10 down the road just a little bit more context on that type of stuff that you're adding in and also just your confidence in your ability to replenish that.

That pipeline and backlog are there large deals out there to win versus 90 days ago.

Yes.

Hey, Tien tsin its Simon here. Thanks for the question I mean, let me start with your last our ability to replenish the pipeline is actually very strong we haven't drained the pipeline or accelerated.

Simon Khalaf: Thanks for the question. I mean, let me start with your last one. Our ability to replenish the pipeline is actually very strong. We haven't drained the pipeline or accelerated or artificially accelerated any of these.

Artificially accelerated any deals quite the contrary our pipeline is actually growing very efficiently in terms of the customers. We have closed absolutely I mean all of them.

Simon Khalaf: Quite the contrary. Our pipeline is actually growing very efficiently. In terms of the customers, we have closed absolutely every deal. I mean, all of them could be big.

It could be big it takes time I mean, you understand this industry it takes time to ramp.

Simon Khalaf: It takes time. I mean, you understand this industry. It takes time to ramp up. But all of them have great potential and transformative potential. I mean, not each one of them, but there's definitely quite a few that we're very excited about. And in terms of the ability to capitalize on the pipeline, we do have an aggressive plan, but we feel comfortable about it.

But all of them have great potential.

And transformative potential I mean, not at each one of them, but there is definitely quite a few that we're very excited about.

And ability to capitalize on the pipeline.

We do have an aggressive plan.

But we feel comfortable about it.

Darrin David Peller: Thank you. The next question is from Darrin Peller of Wolf Research. Please go ahead.

Thank you.

Next question is from Darrin Peller of Wolfe Research. Please go ahead.

Michael Milotich: Guys, hey, thanks. You know, a couple of things. Number one, it looks like when we see all the adjustments that would sort of normalize gross profit, a bridge to normalize gross profit growth, we're coming out to, you know, well into the high 20s. I know there's obviously some element of cadence as the year progresses, as your second quarter starts off with an incentive rebuild, etc. But maybe just talk about that nuance, make sure we're in the right ballpark first. And second of all, you talked about the second half being a little bit better.

Hey, Thanks, a couple of things number one it looks like when we see the.

All the adjustments that would sort of normalize for gross profit bridge to normalized gross profit growth were coming out to the well into the high 20.

Percent growth and I know, there's obviously some element of cadence as the year progresses as your second quarter starts off with incentive rebuild et cetera, but maybe you could talk about that nuance to make sure. We're in the right ballpark first and second of all.

You talked about the second half being a little bit better Mike So any any more color on what's gone well there would be great.

Michael Milotich: So any more color on what's gone well there would be great. Yeah, so, the first question I would say it's probably closer to the mid 20s, and we were negative 4% on an adjusted basis. As you mentioned, we were negative 4% in our reported results.

Yeah. So so.

So the first question I would say, it's probably it's probably more closer to mid Twenty's. A word we were negative 4% unadjusted basis. As you mentioned, we were negative 4% in our reported results.

Michael Milotich: The cash app is mid-20s, and then visa incentives and renewals are both kind of low to mid, so it kind of puts you in the low to mid-single digits, that is, so it's a total impact of, say, around 30% plus or minus, which puts you kind of on an adjusted basis in the mid-20s percent growth, which is now what we're sort of saying we expect the second half to be in that The biggest benefit we're getting compared to what we knew a few months ago when we had Investor Day is that some of it is a little bit of business mix. As you know, in our business, between all the different use cases, and is it a physical or virtual card? Is it powered by or managed by?

The cash App is mid twenties, and then visa and.

Incentives and renewals are both kind of low to low to mid so it kind of puts you a low to mid single digits that is so it's a it's a total impact of say around 30, 30% plus or minus which puts you kind of an adjusted basis in the mid <unk> percent growth, which is now what we're sort of saying we expect our second half to be.

Is in that 23% to 26% gross profit growth range in the second half of 2024 once we've lapped most of these things that the biggest.

I guess benefit we're getting compared to what we knew a few months ago. When we had investor day is some of it is a little bit of business mix as you know in our in our business between all the different use cases, and and as a physical or virtual card as a powered by managed by like we have lots of different gross profit take rates on our volume and there is a little bit of positive mix.

Michael Milotich: Like, we have lots of different gross profit take rates on our volume, and there's a little bit of positive mix there. But I would say that the bigger factor is that we have a couple of programs right now where we feel we incur sort of excessive network costs. And we're always working with our customers to try to optimize how their program is operating, both for their benefit and, of course, ours as well. And this can take the form of how they're looking at declines and are they really optimized based on the way their program is set up? Are they incurring any sort of unnecessary costs? Or the same thing can happen in cross-border. How exactly is their program set up for cross-border?

There, but I'd say that the bigger factor is that we have a couple of programs right now where we feel we incur sort of excessive network costs and we're always working with our customers to try to optimize.

How their program is operating both for their benefit and of course ours as well and this can take the form of how they're looking at declines and are they really optimized based on the way. Their program is set up are they incurring sort of unnecessary costs or the same thing can happen in cross border how exactly as their programs set up.

For cross border and as you know those come with much higher fees associated with them and so are there changes that can be made and we've identified some changes for a couple of our programs that are in flight right now that we expect to be fully in place for our benefit in the second half.

Michael Milotich: And as you know, those come with much higher fees associated with them. And so are there changes that can be made? And we've identified some changes for a couple of our programs that are in flight right now that we expect to be fully in place for our benefit in the second half. These kinds of things are always opportunities you're hunting for, but you don't really count on them. They're a lot like how flips, I would say, how we think about flips.

These kinds of things are always.

Opportunities you're hunting for but you don't really count on and then there are a lot like how flips I would say how would we think about flips. We're always of course going after flip volume, but you don't count on flip volume when youre projecting business into the future. So that's really what's driving the upside in the second half and that's a great win because it's really a structural.

Michael Milotich: We're always, of course, going after flip volume, but you don't count on flip volume when you're projecting business into the future. So that's really what's driving the upside in the second half, and that's a great win because it's really a structural benefit for those programs and, therefore, our P&L. Thank you. The next question is from Bryan Keane of Deutsche Bank. Please go ahead. Hey guys, I just want to ask about the bookings ramp. It sounds like Simon, you've closed off some of the time to ramp.

<unk> for our for those programs and therefore, our P&L.

Thank you. The next question is from Bryan Keane of Deutsche Bank. Please go ahead.

Hey, guys I just wanted to ask about the bookings ramp it sounds like Simon you've closed some of the time to ramp.

Bryan Connell Keane: Can you talk about that as the bookings the 50% growth in bookings kind of unfolds in 2024? And do we still expect kind of the 20 million in revenue and 24 50 million and 25 and 150 and 26 from these bookings just trying to get the cadence down correctly at the ramp time? Yeah, hi Brian.

Can you talk about that as the bookings the 50% growth in bookings.

Kind of unfold in 2024, and do we still expect kind of a $20 million in revenue and $24 $50 million and 25 and $1 50 in 2006 from these bookings just trying to get the cadence down correctly and the ramp times.

Yeah, Hi, Brian Thanks for the question Yeah.

Simon Khalaf: Thanks for the question. Yeah, it's about right. I'd say we are on track to deliver the number that we kind of pegged at Investor Day. So the 20, 50, and 150. So I mean, we're always working to accelerate those, but I think that's the right range.

It's about right I'd say, we are on track.

To deliver is the number that we cannot back at Investor day. So the 2015 and 150, so I mean, we'd always working to accelerate those.

But I think that that's the right range. So we're very comfortable with these numbers.

Simon Khalaf: So we're very comfortable with these numbers. Thank you. The next question then is from James Faucette of Mormon's Daily. Please go ahead.

Okay.

Thank you our.

Our next question is from James Faucette.

Morgan Stanley. Please go ahead.

James Eugene Faucette: Great, thank you so much. Quickly on the long-term FI opportunity, I just wanted to ask, Quickly on the long-term FI opportunity, I think there's some opportunity to win some of the Novo at some of the top 10 banks. How long do you think it will take for those tech stacks to catch up such that adoption of Marqueta becomes easier, just trying to think about ongoing penetration into more of that broader market? James, yeah, thanks for the question. Simon here. So we're still on the same timeline?

Great. Thank you so much I just wanted to ask.

Quickly on on the.

Long term mifi opportunities.

Yes, there are smaller novo.

Novo.

From the top 10 banks, how long do you think it will take for those tech stacks to catch up such that adoption of Marquette. It becomes easier just trying to think about ongoing penetration into more of the broader market.

Hey, Jamie Thanks for the question Simon here, So we're still on the same timeline.

Simon Khalaf: There's definitely a lot of conversations with large financial institutions, but I do believe we're still on the same trajectory. The majority of the growth we will witness over the next two years will be from fintechs and embedded finance customers. But as, as, I'd say those players take a share, either de novo or take a spending share, it is going to be extremely hard for the financial institutions not to look and say, hey, what's going on here?

There is definitely a lot of conversations with large <unk>.

But I do believe we're still on the same trajectory.

The majority of the growth we will witness over the next two years will be from Fintech and embedded finance customers.

But as as I'd say those players take share either de novo or take spending share it's going to be extremely hard for the financial institutions not to look and say hey, what's going on here and we expect that trend to start materializing exactly what we have.

Michael Milotich: And we expect that trend to start materializing exactly what we've got in 2025-26. And I guess just to add one thing, James, to that. I think that we fully expect that the initial opportunities are likely to come on the commercial side as well because if you look at what's happening with some of the more modern sort of expense management and corporate card issuing platforms, several of those companies have gotten to be quite big and are starting to capture, you know, larger and larger accounts. And so we believe that, you know, there's a little more activity within large banks on the commercial side to, you know, sort of counteract the impacts that might be seen from those companies. There's less of that so far on the consumer side.

Got it in that 25 26 timeframe.

And I guess just to add one thing James for that I think the we fully expect that the initial opportunities are likely to come on the commercial side as well because if you look at what's happening with some of the more modern kind of expense management and corporate card issuing platform several of those companies have gotten to be quite big.

And and starting to capture larger and larger accounts and so we believe that there is a little more activity within large banks on the commercial side too.

Sort of counteract.

Counteract the impacts that might be seeing from those those companies there's less of that so far on the consumer side.

Michael Milotich: You know, we hope to, I guess, propagate that in the future with people coming on board and doing some modern co-brands with our new credit capabilities, but we would expect, you know, the initial traction is much more likely to be in commercial than it is in consumer with large FIs. Thank you. The next question is from Andrew Bauch of Wells Fargo. Please go ahead.

We hope to I guess propagate that in the future with people coming on board and doing some modern co brands with our new credit capabilities, but we would expect the initial traction is much more likely to be in commercial and consumer with large <unk>.

Thank you. The next question is from Andrew <unk> of Wells Fargo. Please go ahead.

Andrew Thomas Bauch: Hey, thank you for taking the question. I know you don't guide to it per se, but we want to get a sense of how we should be thinking about TPV growth and kind of the take rate dynamics here in the 24. I know you've mentioned in the past that because of your enhanced data capabilities, your ability to forecast TPV is significantly better than it has been in the past. So any thoughts around that would be helpful.

Hey, Thank you for taking the question I know you don't guide to it per se, but we wanted to give us a sense on how we should be thinking about TPG growth in kind of the take rate dynamics. Here then the 'twenty four I know you've mentioned in the past that because of your enhanced data capabilities that your ability to forecast CBB significantly.

<unk> better than it has been in the past so any thoughts around there would be helpful.

Michael Milotich: Sure, Andrew. So our TP growth is expected to be about 30% throughout 2024, and it'll be relatively consistent each quarter.

Sure Andrew So our <unk> growth, we expect it to be about 30%.

Throughout 2024, and it'll be relatively consistent.

Michael Milotich: So just to give you a little sense, like we grew in Q4 by 33%. It was relatively consistent each month, you know, October was a little lighter, November a little stronger. But in January, our TPV growth was very similar to the December growth rate. It was only one point lower.

Each quarter. So just to give you a little sense. If we grew in Q4, 33%. It was relatively consistent each month October was a little lighter November a little stronger.

But in January our <unk> growth was very similar to the December growth rate. It was only one point lower and February through the first three weeks is looking very similar to January and of course, we'll get the benefit of leap year at the end of the month. So I would say the the trajectory of TPB growth is sort of in that low <unk>.

Michael Milotich: And February, through the first three weeks, is looking very similar to January. And, of course, we'll get the benefit of leap year at the end of the month. So I'd say the trajectory of TPV growth is sort of in that low-30s range so far. And we expect about 30% growth for the year. So it'll all be kind of in that same area of around 30%, plus or minus.

<unk> range, so far and that and we expect about 30% growth for the year. So it'll all be kind of in that same area of around 30% plus or minus from a take rate perspective, I think we're starting to see stability right we as.

Michael Milotich: From a take rate perspective, I think we're starting to see stability, right? We, as we've said, have 80% of our, over 80% of our TPV, we've renewed recently. And so, as I sort of called out, if you exclude cash app, which of course, we're still lapping, our take rate on revenue has been consistent, excluding cash app for three straight quarters. On the gross profit side, it actually ticked up in Q4 compared to Q3 when you exclude cash app, which just has to do with a lot more incentives happening in the fourth quarter compared to Q3.

We said, we have 80% of our over 80% of our TBD, we've renewed recently and so as I sort of called out if you exclude cash app, which of course, we're still lapping our take rate on revenue has been consistent excluding cash up for three straight quarters on the gross profit side, it's actually ticked up in Q.

Four compared to Q3, when you exclude cash app.

Which just has to do with a lot more incentives happening in the fourth quarter compared to Q3. So.

Which just has to do with a lot more incentives happening in the fourth quarter compared to Q3. So.

Michael Milotich: So, we expect take rate stability for the most part. You know, there'll always be some, a little bit of renewal activity, but we'll also have new customers coming on who aren't nearly as deep into their pricing tiers as our existing customers. So we expect relative stability on that 30% TPV growth. Thank you. The next question is from Dan Dolev of Mizzou Hall. Please go ahead.

We expect take rate stability for the most part.

There'll always be some a little bit of renewal activity, but.

You also have new customers ramping who arent nearly as deep into their pricing tiers as our existing customers. So we expect relative stability on that 30% TBD growth.

Okay.

Thank you.

Question is from Dan Donlan of Mizuho. Please go ahead.

Dan Dolev: Oh, guys, great results. Thank you for taking my question. I think, Simon, you mentioned that you flipped volumes from your competitors and you prepared your marks. Like, you know, without naming specific names, can you give us a flavor of sort of the types of competitors that you're winning share from? Thank you. Sure. Thanks for the question. Yes. I mean, I say there are two flavors.

Oh, Hey, guys great results. Thank you for taking my question.

I think Simon you mentioned that you had.

Flipped volte.

Volumes from your competitors in your prepared remarks.

Without naming specific names can you give us a flavor of sort of the.

Types of competitors that you're winning share from thank you.

Sure. Thanks for the question, Yes, I mean.

I'd say, there's two flavors.

Simon Khalaf: One flavor is taking share from legacy. The other is, I'd say, the flight to quality. There are folks who probably chose an alternate processor because they were cheaper than Marqeta, but then as they scaled up and realized our stability, our multiple nines, and as their business scaled, they're looking for a partner that can take them to the next stage. So I think it's a mix, a healthy mix of like taking incumbents out and also taking kind of less stable processors. And just to add a little bit to that, Dan, I would say in Q4 of our bookings, about 10% were flips. And that's actually on the low side for each quarter of the year.

One flavor is taking share from legacy the others is I'd say the flight to quality.

Folks, who have probably chosen and I will turn it processor because.

They were cheaper than mark out, but then as they scaled up and they realize our stability.

Our multiple nines and as that business scaled.

Looking for a partner that can take them to the next stage. So I would say, it's a mix I hope it makes up.

Like taking incumbents out and also taking less stable.

Processors.

And just to add a little bit to that Dan I would say the in Q4 of our bookings about 10%, where flips and and that's actually on the low side for each quarter of the year. So each quarter in 2023 at least 10% of our bookings.

Michael Milotich: So each quarter in 2023, at least 10% of our bookings were flips. So I think there's a good amount of activity of, as Simon was saying, people who maybe a couple of years ago made a different choice. You know, we were a contender for the business, and we didn't get it.

We're flips so I think there's.

A good amount of activity of our Simon was saying people, who maybe a couple of years ago made a different choice. We are a contender for the business and we didn't get it in and now they're sort of realizing some of the benefits of in terms of art expertise to help them.

Michael Milotich: And now they're sort of realizing some of the benefits in terms of our expertise to help them scale and grow their platform, also the reliability we provide. And so I think that's really what's helping us. Thank you. The next question is from Craig Maurer of FT Partners. Please go ahead.

Scale and grow their platform.

Also the reliability, we provide them.

And so I think that's really what's helping us.

Thank you the next question.

From Craig Maurer of Ft Partners. Please go ahead.

Craig Jared Maurer: Yeah, hi, thanks for taking the question. I wanted to come back to Buy Now Pay Later for a second. Do you expect that Block's new cash app strategy to drive more adoption using Buy Now, Pay Later will cause any inflection in volume? We do expect, I mean, there's no question that the buy now, pay later market is here to stay. And we're seeing two types of distribution for buy now, pay later solutions. One is integration with merchants, and the other one is integration with payment vehicles. And we're seeing, I would say, higher engagement, consumer engagement, with integrating buy now, pay later into a payment vehicle or a card. So across the Marqueta platform, and that's where Marqueta has a higher moat.

Yeah, Hi, thanks for taking the question.

Wanted to come back to buy now pay later for a second do you expect.

That blocks, new cash App strategy to drive more adoption using buy now pay later will cause any inflection in volume.

We do expect I mean, there's no question that the buy now pay later market is here to stay.

And we're seeing type of distribution.

Or buy now pay later solutions, one is integration with with merchants and the other one is integration with a payment vehicle and.

We are seeing.

I would say higher engagement.

Human engagement with integrating buy now pay later into a payment vehicle or a card so across the Marquette a platform and that's where mark <unk> has a higher moat. So in terms of cash App specifically of course, I mean cash app is widely distributed.

Simon Khalaf: So in terms of cash apps specifically, of course, I mean cash app is widely distributed. It's a highly engaging product. So having buy now, pay later in it, which is also powered by Marqueta, is definitely a solution we're excited about. It makes sense for consumers. It makes sense for the distribution of buy now, pay later, and it's a segment that Cash App is well penetrated in. Yeah, I mean, if you think about Craig that, you know, there are over 23 million active Cash App card users every month.

Highly engaging product so having buy now pay later in it.

Which is also powered by Mark Kara.

It's definitely a solution. We are excited about it makes sense for the consumers. It makes sense for the distribution of buy now pay later and it's a segment that cash app.

It is well penetrated in.

Yes, I mean, if you think about Craig that there's over 23 million active cash App card users every month so.

Michael Milotich: So, you know, although Afterpay has been successful for them and for our business, you know, that's an incredible installed base. So, what they talked about on their call last week makes a lot of sense to us. Thank you. The next question is from Chris Kennedy of Woodham Blair. Please go ahead.

Although after pay has been successful for them and for our business. That's an incredible installed base. So what they talked about on their call last week. You know makes it makes a lot of sense to us.

Okay.

Thank you.

The next question is from Chris Kennedy with William Blair. Please go ahead.

Cristopher David Kennedy: Good afternoon, thanks for taking the question. Can you provide an update on the regulatory environment for Banking as a Service and Embedded Finance and kind of how you view that operating environment?

Good afternoon. Thanks for taking the question can you provide an update on your on the regulatory environment for banking as a service and embedded finance and kind of how you view that.

That operating environment. Thank you.

Thanks, Chris.

Simon Khalaf: Thank you. Thanks, Chris. I would say there are no changes. There is not much that we can talk about, either positive or negative.

I would say there is no changes there is not much that we can talk about either positive or negative I would say that the environment is remains healthy.

Simon Khalaf: I'd say that the environment remains healthy. I mean, the great news about a lot of what's going on in embedded finance is solutions that are tailored to the unbanked and the underbanked. There's no question that Buy Now, Pay Later has opened the credit box and provided what is effectively lending without the 29% APR. So that's definitely helping the community. And same thing with SMBs. They're kind of like the forgotten entity.

The great news about a lot of what's going on in embedded finance.

Is.

<unk> that are catering to the Unbanked and Underbanked.

There's no question that buy now pay later has opened the credit box and provided what is effectively lending without the 29% APR. So thats definitely helping the community and same thing with Smbs, they're kind of like the forgotten entity.

So I do.

Simon Khalaf: So there's a lot of goodness that is happening with these solutions, and we're comfortable with the regulatory environment. The second thing I'd say is, as a company, we have invested in program management, and we've invested in compliance. We've invested in a lot of these services because, number one, we take them very seriously. And the second thing is that when we target brands, especially in embedded finance, the last thing we want is to bring them regulatory trouble.

There is a lot of goodness that is happening.

With with these solutions so I do.

We're comfortable with the regulatory environment. The second thing I'd say is as a company.

<unk> invested in program management, and we've invested in compliance with invested in a lot of these services because number one we take it very seriously and the second thing is that when we target the brands, especially in embedded finance. The last thing we want is bring them regulatory travel so I think we.

Simon Khalaf: So I think we've taken this very seriously as a platform. And I think, as you maybe referred to, Chris, some of the announcements out there about fast platforms and some of the banks to do business with, the more of those announcements, there's definitely a component of a flight to quality, which we think we are the beneficiaries of, just given our scale and the level of investment. And we were one of the first movers in this space, so we think that, although it's unfortunate that there's some disruption in the marketplace like that, I think, generally speaking, we're definitely more of a beneficiary than something that hurts us. Thank you. The next question is from Cassie Chan of Bank of America. Please go ahead.

We've taken this very seriously as a as a platform and I think as you may be referred to Chris I mean, some of the announcements out there about <unk> platforms and some of the banks to do business with the more of those announcements.

There is definitely a component of a flight to quality, which we think we are the beneficiaries of just given our our scale and the level of investment and we were one of the first movers in this space. So.

We think that.

Although it's on.

It's unfortunate.

That theres some disruption in the marketplace like that I think generally speaking, we're we're definitely more of a beneficiary.

Something that hurts us.

Thank you.

Next question is from Cathy Chan of Bank of America. Please go ahead.

Jinli Chan: Hi guys, just two quick questions for me. First, I wanted to ask about the competitive landscape. There's obviously been some headlines around Kroner and Bloss with Audien.

Hi, I am just the two quick questions for me. So first I wanted to ask about the competitive landscape. There's obviously been some headlines around corner on block with audience are you seeing the competitive landscape evolving are intensifying.

Simon Khalaf: Are you guys seeing the competitive landscape evolving or intensifying among existing clients? And then, just a quick clarifying question. Did you guys disclose the impact, or was there any, from Reg II in the quarter? And if there's anything assumed in the one quarter in the first quarter or the 2024 guide?

As a thin client and then just a quick clarifying question.

Did you guys disclose the impact or was there any problem <unk> II in the quarter and if there's anything assumed in the one quarter and the first quarter or the 2024 guide. Thank you.

Thank you for the question I'll take the first one and I'll toss the second one to.

Mike.

Simon Khalaf: Thank you. Thank you for the question. I'll take the first one, and I'll toss the second one to Mike.

In terms of the competitive landscape.

I would say it is more favorable.

Michael Milotich: In terms of the competitive landscape, I'd say it is more favorable than it used to be because the majority of the growth we are seeing is in the areas where Marqueta has a much higher moat. So, in the one-time virtual commercial card space, yes, there is competition, but most of our customers buy from us or are partnered with us on more than that. So, growth is coming from areas where our moat is higher. So, I think we're comfortable there in terms of the competitive landscape. Now, that doesn't mean we're not mindful of competition. On the contrary, we respect it.

It used to be because the majority of the growth we are seeing is in.

Areas.

Is that <unk> has a much higher moat.

In the one time I'd.

I'd say the one time.

Virtual commercial parts space.

Yes, there is competition, but most of our customers.

Buy from us or a partner with us on more than that so the growth is coming from areas, where our moat is higher. So so I think we're comfortable there in terms of in terms of the competitive landscape now that doesn't mean, we're not mindful of competition on the country with respected.

Andrew William Jeffrey: It keeps everybody honest, and it keeps us innovating. And on your second question about REG-AI, there is really nothing really of note to point out. I think last quarter we did have something because we were a little surprised by the changes that went into effect and the degree to which the mix of volume changed, which is very relevant for us in Cash App now based on the way the accounting changed and the renewal. So that was something where we just didn't expect as much of a shift as we saw, and that impacted our economics a little bit in Q3. But with that knowledge now, Q4 was largely as expected, and there's nothing we see or have assumed in 24 that's noteworthy.

It keeps everybody honest and it keeps us innovating.

And on your second question on rig II, nothing really too.

Nothing really of note to point out I think last quarter. We did have something because we were a little surprised by the changes that went into effect.

And the degree to which the mix of volume changed which is very relevant for us and cash up now based on the way the accounting change and the renewals so that was.

Something where we just didn't expect as much shift as we saw and that impacted our our economics, a little bit in Q3, but but with that knowledge. Now Q4 was largely as expected and there is nothing we see or have assumed in 'twenty four that's noteworthy.

Simon Khalaf: Thank you. The next question is from Andrew Jeffrey of Truist Securities. Please go ahead. Hi, good evening.

Thank you.

Next question is from Andrew Jeffrey of crews Securities.

Got it.

Simon Khalaf: Thank you for taking the question. I wanted to ask about expansion deals, it sounds like or expansion of existing relationships. Sounds like that was a call out growth driver as well last year. Can you talk a little bit, um, I guess, and perhaps, about additional capabilities and how you're monetizing existing customers the way you do? for being right the way you are.

Hi, Good evening, Thank you for taking the question.

Wanted to ask about expansion deals it sounds like or expansion of existing relationships. It sounds like that was a call out growth driver as well last year can you talk a little bit I guess you said.

Ed.

Perhaps 60% of total bookings for expansion deals can you talk a little bit about additional capabilities and how you are monetizing existing customers and an improving rate than we were.

Simon Khalaf: Yeah, absolutely, Andrew. Thanks for the question. There are many angles to this.

Yeah, absolutely Andrew Thanks for the question, there's many angles to this I mean.

Simon Khalaf: I mean, what we've done over the last year is focus on solution selling. Like, if you look at the trajectory of Marqueta, I would say there was neobanking, then buy now, pay later, then expense management, then on-demand delivery. And then as we started rolling out, like the banking as a service product, program management, such as disputes and chargebacks, risk solutions, those were kind of like good add-ons. But I'd say what has also happened is that a lot of our customers started launching multiple programs with us. As an example, the Buy Now, Pay Later community, most of them started with a solution that integrated with merchants.

Well, what we've done over the last year its focus on solutions selling like if you look at.

The trajectory of Aramark, Canada.

I would say there was any or banking then buy now pay later than expense management and on demand delivery and.

And we started working on accelerating wage access F&B credit and co brands, so and all of them processing is kind of the least common denominator in just in time processing is the least common denominator everybody uses it.

As we started rolling out like banking as a service product program management, such as such as disputes and charge backs.

Risk solutions those are kind of like good add ons, but I'd say what also has happened is a lot of our customers started launching multiple programs with us like as an example.

The buy now pay later community most of them started with a solution that integrates with merchants and all of them are now moving I'd say, a good majority of them.

Simon Khalaf: And all of them are now moving, I'd say a good majority of them, actually either integrating into a payment card or having a payment card, like a supercard. So they launch more programs with us. So I'd say it is either more programs launched with us or value-added services that we are adding. The third angle is international expansion. So we've taken the strategy that we're going to basically go where our customers go, I mean, with reason and efficiency. So a lot of them, a lot of multinationals, they want to code once and deploy everywhere. And Marqeta gave them that ability.

Actually either integrating into a payment card or having a payment card lucky supercars.

So they launch more programs with us so I'd say it is either more programs launched with us or value added services that we are we are adding the third angle is international expansion. So we've taken the strategy that we're going to we're going to basically go at our.

<unk> go.

I mean with the reason.

And efficiency.

So a lot of them a lot of the multinationals.

Are they want a code once and deploy everywhere and Marc Cadieux gave them that ability. So that's the third dimension of expansion. So in summary, I'd say.

Simon Khalaf: So that's the third dimension of expansion. In summary, I'd say the first one is launching more programs. The second one is more value-added services. The third one is international. Now looking forward, credit is a phenomenal opportunity for a lot of the debit partners we have. So we are in deep conversations with a lot of our customers that use us for debit, and they want to use us for credit as well. And another example that I would just add to what Simon just said is that, you know, they might look at credit or maybe they have something that's customer-facing, and now maybe we're engaged on something that's more employee-facing, such as accelerated wage access. So, as we, you know, add to the use cases and the breadth of our platform, there are lots of different opportunities that we can discuss with our customers.

First one is launching more programs secondly, more value added services third one is international now looking forward credit is a phenomenal opportunity to a lot of the debit partners that we have so we are in deep conversations with a lot of our customers that use us for debit and they want to they want to.

Use us for for credit as well.

And another example that I would just add to what Simon just said is that.

They might look at credit or maybe they have something that's customer facing and now maybe we're engaged on something thats more employee facing an accelerated wage access so as we are.

Add to the use cases and the breadth of our platform. There's there's lots of different opportunities that we can discuss with our customers.

Simon Khalaf: And that's one of the, as we go into embedded finance, one of the really compelling things about our platform is that most of these customers are going to, or prospects are going to start somewhere, but many of them are already big companies in their own right and are thinking a little bit bigger. And they have that opportunity to do that with one partner on the Marqueta platform, which might be difficult to achieve with some of our competitors.

And that's one of the as we go into embedded finance, that's one of the really compelling things about our platform is most of these customers are going to our prospects are going to start somewhere but many of them are already big companies in their own right and our thinking a little bit bigger and they have that opportunity to do that with one partner on the Marquette a platform that might be difficult.

To achieve with some of our competitors.

Michael Milotich: Thank you. The next question is from Moshe Katri of White Bush Securities. Please go ahead.

Thank you.

Next question is from Moshe.

<unk> Wedbush Securities. Please go ahead.

Moshe Katri: Hey, thanks for taking my question. Can we talk a bit about the center that you're opening in Poland and how that could potentially bring down some of your technology or development costs on the road? Absolutely. Thanks, Moshe. Yeah, I mean, we all come from backgrounds in which we scaled organizations, and there are multiple reasons to do this. One is the talent in Poland is really good, and especially as some folks in our industry, whether it's networks or, I'd say, accounting, have backend services done in Poland. The second one is strong backend engineering, risk operations, AI, machine learning, so on and so forth. The labor market is still favorable compared to the United States in terms of availability and cost.

Hey, Thanks for taking my question can we talk a bit about the centers that you're opening in Poland, and how that could potentially bring down some of your technology or development costs down the road.

Absolutely. Thanks, Moshe Yeah, I mean, we we all come from backgrounds in which we scaled organizations and that.

There is multiple reason to do this one has the talent and Poland is is really good.

And especially as some folks in our industry, whether it's networks or <unk>.

I'd say accounting have backend services done in Poland. The second one is strong backend engineering risk operations.

AI machine learning, so on and so forth.

The labor market is still favorable compared to the United States in terms of availability and in terms of cost. So the areas, where we are investing in in Poland will help us on the risk operations program management.

Simon Khalaf: So, the areas where we are investing in Poland will help us with risk operations, program management, as well as engineering services, and we expect also to invest in what I call the back office sales organization as well. I mean, throughout my career, I've had tremendous success in Poland, so I think we're looking good there. Thank you very much. Our final question is from Jamie Friedman of Sushkehanna. Please go ahead.

As well as engineering services, and we expect also to to invest on the what I call the back office sales.

Organization as well I mean throughout my carrier.

We've had tremendous success in in.

So I think where we're at we're looking good there.

Thank you very much our final question is from Jamie Friedman of Susquehanna. Please go ahead.

James Eric Friedman: Hi, thank you, Mike. I think you said in your prepared remarks that the non-block renewals lower gross profit growth, low to mid single digit. If I heard you wrong, I apologize. If so, that's the case. I was wondering how we might, if you could unpack that a little about the inputs and how we might be thinking about that in 2024 would be helpful. Thank you. Yeah, you got it exactly right, Jamie

Hi, Thank you Mike I think you said in your prepared remarks.

Non block renewals lowered gross profit growth.

Low to mid single digits.

If I heard you wrong I apologize if that's the case I was wondering how we might.

If you could unpack that a little about the inputs and how we might be thinking about that.

In 2024 would be helpful. Thank you.

Yes, you got it exactly right Jamie.

Jamie This is <unk>.

Michael Milotich: This is, it was low to mid-single digits from deals that we did between Q2 of 22 and Q1 of 2023. So in that four-quarter period, we renewed about 50% of our non-block TPV. And so the last couple of quarters, I've been calling this out. So this will laps in Q2 of 24. Now, what's not in there, it's not all renewals that are non-block, it's just within that window of time when there was just a lot of activity. And so we really just have one more quarter, Q1 of 24, before we start lapping. But you got it right. It was a low to mid-single digit of gross profit growth drag in Q4 as a result of this.

It was low to mid single digits from deals that we did between Q2 of 'twenty. Two in Q1 of 2023, so in that four quarter period, we renewed about 50% of our non block PPV and so the last couple of quarters I've been calling calling this out. So this will lap in Q2 of 'twenty four.

Now what's not in there it's not all all renewals that are non block is just within that window of time. When there was just a lot of activity and and so we really just have one more quarter Q1 of 24 before we start lapping, but you've got it right. It was low to mid single digit of our gross profit growth drag.

In Q4 as a result of this.

Operator: Thank you very much. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your line.

Thank you very much.

Ladies and gentlemen that then concludes today's BP. Thank you for attending and you may now disconnect your lines.