Q1 2024 Marqeta Inc Earnings Call

Operator: Bollinger, https://www.youtube.com.uk Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Marqueta first quarter 2024 earnings conference. At this time, Liza... At this time, 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 Mark had a first quarter 'twenty 'twenty four earnings conference call.

Operator: At this time lines at let's call.

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

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

Stacey Finerman: Now I'd like to turn the conference over to Stacy <unk>, 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, 2023, and our subsequent periodic filings with the SEC. Consequently, actual results may differ materially from any forward-looking statements we make today.

Stacey Finerman: Thanks, operator, before we begin I would like to remind everyone that today's call may contain forward looking statements.

Stacey Finerman: These forward looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations Web site, including our annual report on Form 10-K for the period ended December 31st 2023, and our subsequent periodic filings with the SEC.

Stacey Finerman: 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: 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: 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.

Stacey Finerman: Available on our Investor Relations website.

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 CFO. With that, I'd like to turn the call over to Simon to begin. Thank you, Stacey.

Stacey Finerman: Hosting todays call are Simon cool off Arcadis, CEO, and Mike Mel attach Mercato CFO with that I'd like to turn the call over to Simon to begin.

Simon Khalaf: And thank you for joining us for Marqueta's first quarter 2024 earnings call. Our first quarter results demonstrate how the strong foundation we built in 2023 is leading to growth with new and existing Marqueta customers and speaks volumes to the strength and depth of the Marqueta platform. We started the year strong with net revenue, gross profit, and adjusted EBITDA outpacing expectations. Total processing volume, or TPV, was $67 billion in the first quarter, a 33% increase compared to the same quarter of 2023.

Simon Khalaf: Thank you Stacy and thank you for joining us for Mark get US first quarter 'twenty 'twenty four earnings call.

Simon Khalaf: Our first quarter results demonstrates how the strong foundation, we built in 'twenty to 'twenty, three is leading to growth with new and existing mark at our customers and speaks volumes to the strength and depth of the market our platform.

Simon Khalaf: We started the year strong with net revenue gross profit and adjusted EBITDA outpacing expectations.

Simon Khalaf: Total processing volume or television or T. P D with 67 billion in the first quarter.

Simon Khalaf: 33% increase compared to the same quarter of 2023 in Q1, we had a day, where we processed over 1 billion in T. B D. A significant milestone for the company.

Simon Khalaf: In Q1, we had a day where we processed over $1 billion in TPV, a significant milestone for the company. Our net revenue of $118 million in the quarter contracted 46% year-over-year, which included a decrease of 58 percentage points from the revenue presentation change related to our cash app contract renewal. Gross profit was 84 million in the quarter, a contraction of 6% versus Q1 2023, primarily due to the catch-up renewal pricing. Our gross margin for the quarter was 71%. Our non-GAAP-adjusted operating expenses were $75 million, a 20% decline year-over-year due to our restructuring in Q2 2023 and operational efficiency.

Simon Khalaf: Our net revenue of $418 million in the quarter contracted 46% year over year, which included a decrease of 58 percentage points from the revenue presentation change related to our cash app contract renewal.

Simon Khalaf: Gross profit was 84 million in the quarter, a contraction of 6% versus Q1, 'twenty two 'twenty three primarily due to the catch up renewal pricing.

Simon Khalaf: Our gross margin for the quarter was 71%.

Simon Khalaf: Our non-GAAP adjusted operating expenses were 75, million% to 20% decline year over year due to our restructuring in Q2, 2023 and operational efficiencies.

Simon Khalaf: This resulted in a positive EBITDA, sorry, adjusted EBITDA of $9 million in the quarter. If you want to use a solid quarter in the, First and foremost, the accelerated bookings we started in late 2022 and our relentless focus on converting them to gross profit are starting to pay off. For example, we launched a program with Trade Republic, a new customer signed in late 2022. Today, Trade Republic is Europe's largest broker and leading savings platform headquartered in Germany.

Simon Khalaf: This resulted in a positive EBITDA, sorry, adjusted EBITDA of $9 million in the quarter.

Simon Khalaf: Q1 was a solid quarter indeed.

Simon Khalaf: First and foremost the accelerated bookings we started in late 2022 and our relentless focus on converting them to gross profit are starting to pay off.

Simon Khalaf: For example, we launched a program with Great Republic, and new customers signed in late 2022 today.

Simon Khalaf: Today's Republic is Europe's largest broker and leading savings platform headquarter in Germany today.

Simon Khalaf: Trade Republic uses Marqeta to power an innovative consumer debit card that combines spending and savings for its 4 million customers across 17 markets. The company chose Marqeta due to our ability to reliably deliver innovation and easy geographic expansion. Over 1 million people joined the waiting list for the highly innovative card in just a few weeks. Second, in addition to launching and scaling new customers, we continue to focus on expanding with our existing customers. Uber Eats recently expanded with us into Latin and South America, Canada, and Australia, bringing the number of markets served to nine.

Simon Khalaf: Republic uses marchetta, two powered and innovative consumer debit card that combined spending and savings for their 4 million customers across 17 markets. The company chose <unk> due to our ability to reliably deliver innovation and easy geographic expansion.

Simon Khalaf: Over 1 million people joined the waiting list for the highly innovative card in just a few weeks.

Simon Khalaf: In addition to launching and scaling new customers, we continue to focus on expanding with our existing customers Uber eats recently expanded with us into Latin and South America, Canada, and Australia, bringing two nine the number of markets served also Florida.

Simon Khalaf: Also, Klarna announced the Klarna card has been open to all U.S. Klarna users. The offering is built into Klarna's app and provides flexible payment options with no revolving credit, personalized spending and budgeting recommendations, and up to 10% cash back. Beyond geographical expansion, our customers are growing with Marqueta by leveraging our deep payments and program management expertise. Previously, several of our customers, namely Fintechs, chose to take program management and other services in-house only to reverse course later, given the complexity and regulatory requirements associated with scale. Now, many customers look to Marqeta to ease a significant amount of their operational burden.

Simon Khalaf: <unk> announced the Florida card has been open to all U S. Florida users. The offering is built into Chlor news App and provides flexible payment options with no revolving credit personal life spending and budgeting recommendations and up to 10% cash back.

Simon Khalaf: Beyond geographical expansion, our customers are growing with marchetta by leveraging our deep payments and program management expertise.

Simon Khalaf: Obviously several of our customers, namely fin techs chose to date program management and other services in house only to reverse course later, given look complexity and regulatory requirements associated with scale.

Simon Khalaf: Now many customers look to mark at a to ease a significant amount of operational burden.

Simon Khalaf: During the first quarter, about 20 of our existing customers added program management products and or optional services from our programs like disputes, compliance reporting, and 3D Secure. Going forward, we believe compliance-related services, in particular, will be a key selling point and differentiator for our platform. Many competitors do not offer the same level of service, and many prospective customers don't want to do this work themselves, especially when we have the advantage of both expertise and economies of scale.

Simon Khalaf: During the first quarter about 20 of our existing customers.

Simon Khalaf: Added program management products at or optional services from our programs like disputes compliance reporting and three D secure.

Simon Khalaf: Going forward, we believe compliance related services in particular will be a key selling point and differentiator for our platform.

Simon Khalaf: Many competitors do not offer the same level of service and many prospective customers don't want to do this work themselves, especially when do we have the advantage of both expertise and economies of scale.

Simon Khalaf: While ramping up our previously booked programs is a top priority, we also focus on the significant embedded finance opportunities right before us, like the $2 trillion market for Accelerated Wage Access, or AWA. As we look to capture this tremendous opportunity, we're working with multiple distribution partners to increase our reach and expand our offering. While we've seen tremendous growth from early large adopters like Uber and Walmart's OneFinance, we're approaching other channels to bring our solution to a broader market.

Simon Khalaf: While ramping our previously booked programs is a top priority. We're also focused on the significant embedded finance opportunities right before us like the two trillion dollar market for accelerated wage access or AWS as.

Simon Khalaf: As we look to capture this tremendous opportunity, we're working with multiple distribution partners to increase our reach and expand our offering.

Simon Khalaf: While we've seen tremendous growth from early large adopters like Uber and Walmart one finance, we're approaching other channels to bring our solution to a broader market.

Simon Khalaf: In April, we announced our new customer RAINN, a financial wellness benefits provider that uses technology to help companies give employees greater control over their finances. Reign's customers include global brands like McDonald's, Taco Bell, Hilton, and Marriott.

Simon Khalaf: In April we announced our new customer brain, if financial wellness benefits provider that uses technology to help companies give employees greater control over their finances rains customers include global brands like Mcdonald's Taco Bell Hilton.

Simon Khalaf: And Marriott.

Simon Khalaf: RAINN brings the technology and payroll acumen that come from integrating with multiple payroll providers to determine the proper withholdings along with what the employee has earned. This relationship delivers value for Marqeta on two fronts. First, Rain will offer a plug-in-play AWA solution for employers, including the Rain spending card, which Marquetta will power.

Simon Khalaf: Rain brings the technology and Pedro acumen that come from integrating with multiple payroll provider providers to determine the proper with holdings along with what the employee has earned.

Simon Khalaf: This relationship delivers value for Merck EDA on two fronts.

Simon Khalaf: Rain will offer a plug and play AWS solution for employers, including the rain spending part, which mark will power.

Simon Khalaf: Second, we're working to offer a more comprehensive AWA solution that seamlessly combines our experience, scale, and reliability in modern card issuing with the technology and payroll acumen of AWA specialists, and the Rain partnership is a significant step in achieving that end state. Another way we're approaching the accelerated wage access market opportunity is by working with labor marketplaces, like the deal we announced with Workwhile, a labor marketplace for shift workers. This offering is stated to go live in the next few months.

Simon Khalaf: We are working to offer a more comprehensive <unk> solution that seamlessly combines our experience scale and reliability in modern card issuing with the technology and payroll acumen of AWS <unk> specialists and the rain partnership is a significant step.

Simon Khalaf: And achieving that end state.

Simon Khalaf: Another way, we are approaching the accelerated wage access market opportunity is by working with labor marketplaces like the deal we announced with worthwhile labor marketplace for shift workers. This offering is slated to go live in the next few months.

Simon Khalaf: This brings me to an important point: for many of our customers, especially labor marketplaces, offering accelerated wage access is only the beginning of their embedded finance journey. In fact, they believe that accelerated wage access is part of a comprehensive neobanking solution for their workforce to increase retention in this tight labor market. As a result, these customers are coming to us for additional services, such as banking and money transfer. We believe that this conversion is not an isolated event, but rather part of a broader conversion and personalization trend, giving consumers a spectrum of integrated payment options, including debit, installment pay, and revolver, with a global and personalized experience across all merchants.

Speaker Change: This brings me to an important point.

Simon Khalaf: For many of our customers, especially labor marketplaces offering accelerated wage axis is only the beginning of that embedded finance journey.

Simon Khalaf: In fact, they believe that accelerated wage access is part of a comprehensive neo banking solution for their workforce to increase retention in this tight labor market. As a result, these customers are coming to us for additional services, such as banking and money.

Simon Khalaf: <unk>.

Simon Khalaf: We believe that this conversion is not an isolated event, but rather part of our broader conversions and personalization trend, giving consumers expect from of integrated payment options, including debit installment Bay and revolver with a global.

Simon Khalaf: And personalized experience across all merchants, we believe that our platform, which has been strengthened with the addition of credit position us extremely well to capitalize on this trend.

Simon Khalaf: We believe that our platform, which has been strengthened with the addition of credit, positions us extremely well to capitalize on this trend. In summary, we're starting the year strong and seeing the foundation we laid over the last year start to deliver solid financial results. Our revamped sales efforts are beginning to pay off, as the new embedded finance customers gain traction. In addition, our strong existing customer base continues to grow with us, a testament to the value they get from our platform.

Simon Khalaf: In summary, we're starting the year strong and seeing the foundation, we laid over the last year start to deliver solid financial results.

Simon Khalaf: Our revamped sales efforts are beginning to pay off.

Simon Khalaf: As the new embedded finance customers gained traction and in addition, our strong existing customer base continues to expand with US the testament to the value they get from our from our platform.

Simon Khalaf: Before I hand it over to Mike, I must mention Jason Garden's decision to step down as executive chairman of the company next month after one and a half years in the position. As our largest shareholder, Jason has always been focused on where he can contribute to maximize shareholder value.

Simon Khalaf: Before I hand, it over to Mike IMAX mentioned, Jason Garden's decision to step down as executive Chairman of the company next month after one and a half years and the position.

Mike: As our largest shareholder Jason has always been focused on where he can contribute to maximize shareholder value his for assistance and value creation continues this tradition.

Simon Khalaf: His persistence in value creation continues this tradition, which Mike will touch upon in his comments. He has contributed significantly to the company over the past 14 years, and this is just the latest chapter as we strive for sustainable, profitable growth for long-term value creation. Since late 2022, we have made changes to mature and evolve the business. Jason felt that the company no longer required the ongoing support and governance that his executive chairman role provided.

Simon Khalaf: Which Mike will touch upon in his comments.

Simon Khalaf: He has contributed significantly to the company over the past 14 years and this is just the latest chapter as we strive strive towards sustainable profit growth for long term value creation.

Simon Khalaf: Since late 2022, we have made changes to mature and evolve the business, Jason felt that the company no longer required the ongoing support and governance that is executive chairman drove provided.

Simon Khalaf: As a board member going forward, Jason plans to focus his role as chair of the board's new Payments Innovation Committee, helping oversee Marqueta's platform capabilities and the acceleration of our innovation agenda. I am excited to work with Jason and the rest of the board on the massive opportunities ahead of Marqueta as the embedded finance market grows.

Simon Khalaf: As a board member going forward, Jason plans to focus his role as chair of the Board's new payments innovation committee, helping oversee mark get us platform capabilities and the acceleration of our innovation agenda I am excited to work with Jason and the rest of the board.

Simon Khalaf: The massive opportunities ahead of marchetta as the embedded finance market growth.

Simon Khalaf: <unk> Mike.

Michael Milotich: Thank you, Simon, and good afternoon, everyone. Our Q1 results represent a strong start to the year, with all of our key metrics exceeding our expectations. TPV grew 33% with broad-based outperformance, particularly in BNPL, on-demand delivery, and financial services. The stronger-than-expected TPV growth drove net revenue to the high end of our expected range. Gross profit meaningfully outperformed due to those volume gains and the benefit of capturing additional network incentives, which I will discuss later in more detail.

Speaker Change: Thank you Simon and good afternoon, everyone.

Michael Milotich: Our Q1 results represent a strong start to the year with all of our key metrics exceeding our expectations TBD.

Michael Milotich: TBD grew 33% with broad based outperformance, particularly in the NPL on demand delivery and financial services.

Michael Milotich: The stronger than expected TVD growth drove net revenue to the high end of our expected range.

Michael Milotich: Gross profit meaningfully outperformed due to those volume gains and the benefit of capturing additional network incentives, which I will discuss later in more detail.

Michael Milotich: Finally, continued execution of efficiency initiatives, particularly the streamlining of technology costs, when coupled with our higher gross profit, led to a significantly higher adjusted EBITDA of $9 million in the quarter. Q1 TPV was $67 billion, a year-over-year increase of 33% for the fourth straight quarter. Non-block TPV grew approximately 15 points faster than block growth.

Michael Milotich: Finally continued execution of efficiency initiatives, particularly the streamlining of technology costs, when coupled with a higher gross profit led to significantly higher adjusted EBITDA of $9 million in the quarter.

Michael Milotich: Q1, <unk> was <unk> 67 billion a year over year increase of 33% for the fourth straight quarter non.

Michael Milotich: <unk> TBD grew approximately 15 points faster than block growth.

Michael Milotich: The financial services vertical grew in line with the company overall, as neobanking, which some of our customers combine with accelerated wage access solutions, continues to resonate with consumers. Lending, including Buy Now Pay Later, grew faster than the overall company due to the continued adoption of our BNPL customers' Pay Anywhere card solution. On-demand delivery growth remained in the double digits, accelerating quarter over quarter as our customers expanded into new merchant categories and geography.

Michael Milotich: The financial services vertical grew in line with the company overall as neo banking with some of our customers combined with accelerated wage access solutions continues to resonate with consumers.

Michael Milotich: Lending, including buy now pay later grew faster than the overall company due to the continued adoption of our <unk> customers pay anywhere card solutions.

Michael Milotich: On demand delivery growth remained in the double digits accelerating quarter over quarter as our customers expanded into new merchant categories and geographies.

Michael Milotich: Q1 had our highest on-demand delivery TPV growth in the last two years. Spence management growth accelerated for the second straight quarter, growing on par with the overall company, driven mainly by strong performance from our top customers. In fact, one of these customers has been increasing the share of their volume on our platform after seeking platform diversification with a competitor in the past. Q1 net revenue was $118 million, a contraction of 46% year over year.

Michael Milotich: Q1 had our highest on demand delivery TPB growth in the last two years.

Michael Milotich: Expense management growth accelerated for the second straight quarter growing on par with the overall company driven mainly by strong performance from our top customers. In fact, one of these customers have been increasing the share of their volume on our platform after seeking platform diversification with a competitor in the past.

Michael Milotich: The most.

Michael Milotich: Q1, net revenue was $118 million and contraction of 46% year over year.

Michael Milotich: The key elements of our net revenue results are as follows. The most significant impact was the 58-point growth headwind related solely to the revenue presentation change resulting from the Cash App renewal. As we've described before, this change in revenue presentation is related to the bank and network fees associated with Cash App's primary payment network volume, which previously were included in net revenue and cost of revenue.

Michael Milotich: The key elements of our net revenue results results are as follows.

Michael Milotich: The most significant impact was the 58 point growth headwind related solely to the revenue presentation change, resulting from the catch up renewal as we've described before this change in revenue presentation related to the banking network fees associated with cash App's primary payment network volume, which previously were included in net revenue and cost of revenue.

Michael Milotich: Starting in Q3'23, these costs are netted against revenue, and there is an additional 10 percentage points decline in net revenue growth due to the cash app renewal price. There was one additional revenue presentation impact related to our Cash App renewal this quarter. We renegotiated a platform partner agreement with reduced pricing that went into effect this quarter. Due to the terms of the Cash App renewal, we pass through the proportional savings to Cash App.

Michael Milotich: Starting in Q3 23 these costs are netted against revenue.

Michael Milotich: There is an additional 10 percentage points decline in net revenue growth due to the cash out for renewal pricing.

Michael Milotich: There was one additional revenue presentation impact related to our cash app renewal this quarter.

Michael Milotich: We renegotiated a platform partner agreement with reduced pricing that went into effect this quarter.

Michael Milotich: Due to the terms of the cash up renewal, we pass through the proportional savings to catch up.

Michael Milotich: Based on the revenue presentation changes, we made last year this reduced pricing impacts cash up net revenue, but not gross profit.

Michael Milotich: Based on the revenue presentation changes we made last year, this reduced pricing impacts Cash App Net revenue but not gross profit. The impact was approximately 4 million, lowering our Q1 growth rate by approximately 2 points. This partner agreement impact was not contemplated when we last shared our 2024 expectations in February.

Michael Milotich: The impact was approximately 4 million lowering our Q1 growth rate by approximately two points.

Michael Milotich: This partner agreement impact was not contemplated when we last shared our 2024 expectations in February.

Michael Milotich: Non-block revenue growth accelerated quarter over quarter by three points as we lapped some of the prior year renewals. We continue to see increased contributions from fast-growing solutions such as BNPL, pay-anywhere cards, on-demand delivery category expansion, and neobanking combined with accelerated wage access. Block net revenue concentration was 49% in Q1, decreasing two points from Q4.

Michael Milotich: Non block revenue growth accelerated quarter over quarter by three points as we lap some of the prior year renewals.

Michael Milotich: We continue to see increased contributions from fast growing solutions, such as B NPL pay anywhere cards on demand delivery category expansion and Neil banking combined with accelerated wage access.

Michael Milotich: Block net revenue concentration was 49% in Q1 decreasing two points from Q4 the.

Michael Milotich: The decline in concentration is helped by the performance brought out by other customers on our platform, particularly larger customers. Excluding Block, our top 10 customers increased net revenue by 30% year over year. Our net revenue take rate of 18 basis points declined one point from last quarter due to seasonality, as the mix of our TPV during the holiday season typically has a higher take rate.

Michael Milotich: The decline in concentration is helped by the broad outperformance from other customers on our platform, particularly larger customers excluding.

Michael Milotich: Excluding block our top 10 customers increased net revenue by 30% year over year.

Michael Milotich: Our net revenue take rate of 18 basis points declined one point from last quarter due to seasonality as the mix of our TPB. During the holiday season, typically has a higher take rate.

Michael Milotich: Q1 gross profit was $84 million, a gross profit margin of 71%, outperforming our expectations primarily due to higher network incentives. In the simplest terms, our stronger TBV trajectory across multiple networks over the last couple of quarters led to this benefit. In the case of one partner in particular, in the final days of the quarter, we reached another incentive tier, generating a gross profit benefit for the quarter before our incentive tiers reset in April.

Michael Milotich: Q1, gross profit was $84 million, a gross profit margin of 71% outperforming our expectations, primarily due to higher network incentives.

Michael Milotich: In the simplest terms are stronger TPB trajectory across multiple networks over the last couple of quarters led to this benefit.

Michael Milotich: In the case of one partner in particular in the final days of the quarter, we reached another incentive tier generating a gross profit benefit for the quarter before our incentive tiers reset in April.

Michael Milotich: As a reminder, our two largest network incentive contracts run April to March, which results in Q1 being our highest incentive quarter and Q2 being the lowest. On a year-over-year basis, our gross profit contracted 6%. While we are starting to see the newer, higher gross profit cohorts begin to contribute, renewals continue to weigh on gross profit growth. The Cash App renewal lowered gross profit growth by mid-20s percentage points. As a reminder, the Cash App revenue presentation changes do not impact gross profit. In addition, all of the renewals lowered growth by mid-single digits.

Michael Milotich: As a reminder, our two largest network incentive contracts run April to March which results in Q1, being our highest incentive quarter and Q2 being the lowest.

Michael Milotich: On a year over year basis, our gross profit contracted 6%.

Michael Milotich: While we are starting to see the newer higher gross profit cohorts begin to contribute renewals continue to weigh on gross profit growth.

Michael Milotich: The catch up renewal lower gross profit growth by mid twenties percentage points.

Michael Milotich: As a reminder, the cash app revenue presentation changes do not impact gross profit.

Michael Milotich: In addition, although renewals lowered growth by mid single digits roughly half of this impact is driven by renewals completed between Q2 2022 in Q1, 2023, which will lap in Q2.

Michael Milotich: Roughly half of this impact is driven by renewals completed between Q2 2022 and Q1 2023, which will lap in Q2. The remaining impact is driven by the square renewal, which won't anniversary until Q4. Non-block gross profit growth accelerated quarter over quarter by seven points, helped by the higher incentive. Our gross profit take rate was 13 basis points, consistent with the last two quarters. Q1 adjusted operating expenses were $75 million, a decrease of 20% year-over-year due to realized savings from our restructuring in May last year and efficiency initiatives targeting our technology and professional service expenses.

Michael Milotich: The remaining impact is driven by the square renewal, which won't anniversary until Q4.

Michael Milotich: Non block gross profit growth accelerated quarter over quarter by seven points helped by the higher incentives.

Michael Milotich: Our gross profit take rate was 13 basis points consistent with the last two quarters.

Michael Milotich: Q1, adjusted operating expenses were $75 million, a decrease of 20% year over year due to realized savings from our restructuring in may last year and efficiency initiatives targeting our technology and professional service expenses.

Michael Milotich: We continue to find opportunities to optimize our operations and execution while maintaining high reliability. On a sequential basis, expenses shrink 6% quarter over quarter, largely due to a decrease in professional services, which tend to be higher in Q4 due to the timing of audit fees, as well as product and security assessments. Q1 adjusted EBITDA was positive $9 million, resulting in a margin of 8%. Interest income was $14 million, driven by continued elevated interest rates. The Q1 GAAP net loss was $36 million, including a $10 million non-cash post-combination expense related to the power acquisition.

Michael Milotich: We continue to find opportunities to optimize our operations and execution, while maintaining high reliability.

Michael Milotich: On a sequential basis expenses shrank, 6% quarter over quarter, largely due to a decrease in professional services, which tend to be higher in Q4 due to the timing of audit fees as well as product and security assessments.

Michael Milotich: Q1, adjusted EBITDA was positive $9 million, resulting in a margin of 8%.

Michael Milotich: Interest income was $14 million driven by continued elevated interest rates.

Michael Milotich: Q1, GAAP net loss was $36 million, including a 10 million noncash post combination expense related to the power acquisition.

Michael Milotich: Within Q1, we exhausted the $200 million buyback authorization announced in May of 2023. In the quarter, we purchased 5.2 million shares at an average price of $6.22 for $32.7 million. We ended the quarter with $1.2 billion of cash in short-term investments.

Michael Milotich: Within Q1, we exhausted the $200 million buyback authorization announced in May of 2023 in the quarter. We purchased five 2 million shares at an average price of $6 22.

Michael Milotich: For $32 7 million.

Michael Milotich: We ended the quarter with $1 2 billion of cash and short term investments.

Michael Milotich: Now let's shift to our Q2 and full year outlook. We expect Q2 net revenue to contract between 47 and 50%. This is in line with the expectations we shared last quarter, with the exception of the two-point revenue presentation impact related to the renegotiated platform partnership. Consistent with what we have seen in the last three quarters, we have assumed a 65 to 70 percent negative impact of the cash app renewal.

Speaker Change: Now, let's shift to our Q2 and full year outlook.

Michael Milotich: We expect Q2 net revenue to contract between 47% and 50%.

Michael Milotich: This is in line with the expectations, we shared last quarter with the exception of the two point revenue presentation impact related to the renegotiated platform partnership.

Michael Milotich: Consistent with what we've seen in the last three quarters, we have assumed a 65% to 70 point percentage point negative impact of the catch up renewal.

Michael Milotich: Q2 gross profit is expected to contract between 7% and 9%, a little better than our expectations at the start of the year based on our current trajectory. We expect gross profit margin to be in the low to mid-60s as our network incentive tiers with our two largest network partners reset every April. Therefore, Q2 is always our lowest gross profit quarter.

Michael Milotich: Q2, gross profit is expected to contract between 7% to 9% a little better than our expectations at the start of the year based on our current trajectory. We expect gross profit margin to be in the low to mid <unk> as our network incentive tiers with our two largest network partners reset every April and therefore Q2 is always our lowest gross.

Michael Milotich: Profit quarter.

Michael Milotich: Due to adjusted operating expenses are expected to grow in the low single digits as we start to lap our restructuring from last May. This is also better than our expectations at the start of the year due to optimization initiatives. But we will continue to reinvest in headcount and enhanced platform resiliency to support the growth of our scaled customers. Therefore, the Q2 adjusted EBITDA margin is expected to be in the negative 5-7% range, two points better than our expectations at the start of the year.

Michael Milotich: Q2, adjusted operating expenses are expected to grow in the low single digits as we start to lap our restructuring from last may.

Michael Milotich: This is also better than our expectations at the start of the year due to optimization initiatives, but we will continue to reinvest in head count and enhanced platform resiliency to support the growth of our scale customers.

Michael Milotich: Therefore, Q2, adjusted EBITDA margin is expected to be in the negative 5% to 7% range two points better than our expectations at the start of the year although.

Michael Milotich: Although the reset of our network incentives will lead to negative adjusted EBITDA for the quarter, barring unforeseen macroeconomic events, we expect this to be our final negative adjusted EBITDA quarter as we move forward on our path of sustainable, profitable growth. Our expectations for the full year 2024 have increased for Adjusted EBITDA and gross profit, while reducing net revenue growth. We now expect net revenue to contract 24 to 27%.

Michael Milotich: Although the reset of our network incentives will lead to negative adjusted EBITDA in the quarter barring unforeseen macroeconomic events. We expect this to be our final negative adjusted EBITDA quarter as we move forward on our path of sustainable profitable growth.

Michael Milotich: Our expectations for the full year 2024 have increased for adjusted EBITDA and gross profit remains largely remains largely unchanged.

Michael Milotich: Reducing net revenue growth.

Michael Milotich: We now expect net revenue to contract 24% to 27%.

Michael Milotich: This is a 3-4 point reduction from what was shared previously driven by two factors, neither of which are impactful to gross profit. First, the revenue presentation impact related to the renegotiated platform partnership is approximately two and a half points for the year. Second, we now expect the mix of our TPV to be more heavily weighted toward the Powered By Marqueta business, which materially impacts net revenue but has a much lesser impact on gross profit.

Michael Milotich: This is a three to four point reduction from what was shared previously driven by two factors neither of which are impactful to gross profit first the revenue presentation impact related to the renegotiated platform partnership is approximately two five points for the year.

Michael Milotich: Second we now expect the mix of our <unk> to be more heavily weighted towards the powered by Mark head of business, which are materially impacts net revenue, but has a much lesser impact on gross profit. This will lower the revenue growth by approximately one point.

Michael Milotich: This will lower revenue growth by approximately one point. Gross profit is now expected to grow 7% to 9%, lifting the bottom of the range from what we have shared previously. TPV, year-to-date, has been a little stronger, helping the first-half gross profit growth, but the majority of the Q1 gross profit upside was related to incentives that are specific to Q1 because of the way our incentive contracts are structured. Our expectations for the second half gross profit growth have remained unchanged for now at 23 to 26 percent.

Michael Milotich: Gross profit is now expected to grow 7% to 9% lifting the bottom of the range from what we have shared previously.

Michael Milotich: TBD year to date has been a little stronger helping the first half first half gross profit growth, but the majority of the Q1 gross profit upside was related to incentives that are specific to Q1 because of the way our incentive contracts are structured.

Michael Milotich: Our expectations for the second half gross profit growth remained unchanged for now at 23% to 26%.

Michael Milotich: These changes in our net revenue and gross profit expectations highlight why we focus on gross profit as the measure of value we deliver for our customers. Our net revenue can be noisy based on our business mix and revenue presentation. Based on our continued success with cost optimization and efficiency initiatives, we are raising our full-year adjusted EBITDA margin to positive 1 to 3%. We still expect positive adjusted EBITDA for three out of our four quarters in 2024, with Q2 being the exception.

Michael Milotich: These changes in our net revenue and gross profit expectations highlight why we focus on gross profit as the measure of value we deliver for our customers. Our net revenue can be noisy based on our business mix and revenue presentation.

Michael Milotich: Based on our continued success with cost optimization and efficiency initiatives, we are raising our full year adjusted EBITDA margin to positive 1% to 3%, we still expect positive adjusted EBITDA for three out of our four quarters in 2024 with Q2 being the exception.

Michael Milotich: Before we wrap up, I wanted to address our stock-based compensation and the impact of Jason's election to step down as executive chairman. As we discussed during our investor day late last year, we are being more thoughtful in our deployment of stock-based compensation and are managing to a dilution target of below 3%. We are on track to meet our target in 2024, but it will take time for our increased discipline to impact our stock-based compensation due to the vesting of grants from prior years.

Michael Milotich: Before we wrap up I wanted to address our stock based compensation and the impact of Jason's election to step down as executive Chairman.

Michael Milotich: As we discussed during our Investor day late last year, we are being more thoughtful in our deployment of stock based compensation and are managing to a dilution target of below 3%.

Michael Milotich: We are on track to meet our target in 2024, but it will take time for our increased discipline to impact our stock based compensation due to the vesting of grants from prior years.

Michael Milotich: For the past several quarters, approximately 30% of our stock-based compensation is driven by the accounting for Jason's Pre-IPO Long-Term Performance Award, which consists of seven equal tranches that vest upon the achievement of company stock price hurdles ranging from $67 to $173. For this award to be earned, it included very specific service requirements as the CEO or Executive Chairman. Therefore, Jason's decision to step down from the executive chairman role will result in him forfeiting the award and the reversal of previously recognized expenses.

Michael Milotich: For the past several quarters, approximately 30% of our stock based compensation is driven by the accounting for Jason's pre IPO long term performance awards, which consists of seven equal tranches that vest upon the achievement of company's stock price hurdles ranging from $67 to $173.

Michael Milotich: For this award to be earned and included very specific service requirements as the CEO or executive chairman.

Michael Milotich: Therefore adjacent decisions to step down from the executive chairman role or resorts and him Forfeiting The award and the reversal of previously recognized expenses.

Michael Milotich: This reversal will occur with the transition in June, resulting in a $158 million one-time benefit to stock-based compensation in Q2. In addition, we will no longer expense $32 million of stock-based compensation that we would have booked from Q2 to Q4 of this year. Therefore, this change will lower our 2024 stock-based compensation by $190 million compared to what was expected at the start of the year. This will also lower our 2025 expense by $18 million.

Michael Milotich: This reversal will occur with the transition in June resulting in a 158 million onetime benefit to stock based compensation in Q2.

Michael Milotich: In addition, we will no longer expense $32 million of stock based compensation that we would have booked from Q2 to Q4 of this year.

Michael Milotich: Therefore, this change will lower our 2020 for stock based compensation by $190 million compared to what was expected at the start of the year.

Michael Milotich: This will also lower our 2025 expense by $18 million.

Michael Milotich: While this does not change the timing of sustained net income profitability, it does substantially reduce our net income loss over the next two years. In fact, we now expect 2024 net income to be around break-even to slightly positive due to the accounting of this forfeiture, then going negative again in 2025 before reaching true and sustained profitability exiting 2026, as we laid out in our investor day late last year. In addition, Jason is elected to voluntarily convert a portion of his Class B shares to Class A shares on a one-for-one basis. Therefore, our board has authorized another share-repurchase program of up to 200 million.

Michael Milotich: While this does not change the timing of sustained net income profitability. It does substantially reduce our net income loss over the next two years. In fact, we now expect 2024 net income to be around breakeven to slightly positive due to the accounting of this forfeiture.

Michael Milotich: And then going negative again in 2025, before reaching true and sustained profitability exiting 2026, as we laid out in our Investor day late last year.

Michael Milotich: In addition, Jason has elected to voluntarily convert a portion of its class B shares to class a shares on a one for one basis.

Michael Milotich: Therefore, our board has authorized another share repurchase program of up to $200 million.

Michael Milotich: While we are not ready to commit to being a systematic buyer of our stock going forward, we continue to believe that our current valuation does not properly reflect the market opportunity, our differentiated and comprehensive offering, and the expense discipline we have instilled in our business. This attractive path to sustainable, profitable growth, combined with our strong balance sheet and limited cash burn, make this buyback program a great opportunity to reduce our shares outstanding at our current valuation as we continue to manage the business for the long term.

Michael Milotich: While we are not ready to commit to being a systematic buyer of our stock going forward. We continue to believe that our current valuation does not properly reflect the market opportunity, our differentiated and comprehensive offering and the expense discipline, we have instilled in our business this attractive path to sustainable profitable growth combined with our strong balance.

Michael Milotich: And limited cash burn make this buyback program a great opportunity to reduce our shares outstanding at our current valuation as we continue to manage the business for the long term.

Michael Milotich: In conclusion, we are starting 2024 with solid results and continuing to generate the momentum we've built over the last 18 months to deliver sustainable growth, profitability, and innovation in 2024 and beyond. Once we lap the cash app renewal impacts at the end of Q2, our second half financial metrics will begin to reflect what we believe is our true performance trajectory. Our success with efficiency initiatives is expected to deliver positive adjusted EBITDA in 2024 for the first time as a company, while continuing to enhance our platform capabilities to capture the immense opportunities ahead with new and existing customers. I will now turn it over to the operator for Q&A. Thank you.

Michael Milotich: In conclusion, we.

Michael Milotich: We are starting 2024 with solid results and continuing to generate the momentum we've built over the last 18 months to deliver sustainable growth profitability and innovation in 2024 and beyond.

Michael Milotich: Once we lap the catch up renewal impacts at the end of Q2, our second half financial metrics will begin to reflect what we believe is our true performance trajectory.

Michael Milotich: Our success with efficiency initiatives is expected to deliver positive adjusted EBITDA in 2024 for the first time as a company, while continuing to enhance our platform capabilities to capture the immense opportunities ahead with new and existing customers.

Speaker Change: I will now turn it over to the operator for Q&A.

Operator: At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. We ask that you please limit yourself to one question and one follow-up. Any confirmation tone will indicate your line is in the question. You may press star 2 if you'd like to remove your question from. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the door.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad. We ask that you. Please limit to one question and one follow up.

Operator: A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the Q.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Operator: One moment, please while we pause. My first question comes from Insin Ang with J.P. Morgan. Please proceed with your question. Sure, thanks a lot.

Insin Ang: Our first question comes from Ensign hang with J P. Morgan. Please proceed with your question.

Insin Ang: Sure. Thanks, a lot.

Insin Ang: Yeah, thanks for all the detail here. Just wanted to ask on the bookings front. Any update there? How did it start the year?

Insin Ang: Yes, thanks for all the detail here I just wanted to ask on the bookings front any update there how did it start.

Insin Ang: The year, what are you seeing from a from a pipeline standpoint, any changes I know last year was up nicely up 50%.

Insin Ang: What are you seeing from a pipeline standpoint? Any changes? I know last year was up nicely, up 50%. Hi, and thank you for the question. This is Simon.

Simon Khalaf: Things are looking good, and I'd say we had a plan. I think last year, we spent a lot of time disclosing Booking's number because it was a problem before, I'd say in 21 and 22.

Insin Ang: Yeah, Hi, Tien Tsin and thank you for the question. This is Simon.

Simon Khalaf: Things are looking good.

Simon Khalaf: I'd say, we are ahead of plan.

Simon Khalaf: I think last year, we spend a lot of time disclosing bookings number because it was a problem.

Simon Khalaf: Before I would say in 'twenty, one into 'twenty two that problem is way behind us right now so.

Simon Khalaf: That problem is way behind us right now, so we're doing really well. And in terms of pipeline, the pipeline is growing strongly in both fintech as well as embedded finance. So we're on track, I'd say, slightly ahead. Good, and then just my follow-up question just on the expense management side, you talked about whether you were doing some split processing, you did see some higher share for one of your partners there. Can you discuss why that's the case? I know it's common for us to just assume it's pricing, but I'm sure performance is a part of it. So just maybe walk us through what changed there and how you win those jump ball situations.

Simon Khalaf: Really well and in terms of pipeline the pipeline is growing strongly and.

Simon Khalaf: Both fintech as well as embedded finance, so we don't track I'd say slightly ahead.

Simon Khalaf: Okay. Good and then just my follow up just I think on the expense management side, you talked about where you're doing some split processing you did see some higher share.

Simon Khalaf: For for one of your partners. There can you discuss why that's the case I know, it's common for us to just assume as pricing, but I'm sure. It performance is it part of it so just maybe walk us through what.

Simon Khalaf: What changed there and how your windows jump ball situations.

Simon Khalaf: Yeah, I think what happens is, you know, particularly in the expense management area, there can be a lot of single-use commercial cards. And, you know, that is a more competitive area than our business. But when you look at our comprehensive offering and all the different values that we can provide our customers over time, what we're seeing, in this case, is that they're starting to see that value and are adding just more volume to our platform and growing much faster with us now.

Simon Khalaf: Yes, I think what happens is.

Simon Khalaf: It is.

Simon Khalaf: Particularly when and expense management, there can be a lot of single use commercial card and.

Simon Khalaf: And that is a more competitive areas of our business, but when you look at our comprehensive offering and all the different value that we can provide our customers over time.

Simon Khalaf: What we're seeing is in this case is they are starting to see that value and are adding just more volume to our platform and growing much faster with us now so.

Simon Khalaf: So, you know, it's just a tribute to the breadth and depth of the platform and the value proposition we offer. And, you know, we, you know, obviously, we'd like this to happen with many of our other customers who may have also sought diversity.

Simon Khalaf: Just attribute to the the breadth and depth of the platform and the value proposition, we offer and we obviously would like this to happen with many of our other customers who may have also sought diversity.

Simon Khalaf: Okay.

Speaker Change: Got it thanks for taking the questions.

Speaker Change: Thanks, Tien tsin.

Operator: Thanks for taking the questions. Our next question comes from Timothy Chiodo with UBS. Please proceed with your question. Great, thank you for taking the question. I was hoping we could spend a little bit more time on the RAINN partnership. You mentioned some of those large employer logos that are part of RAINN's network or customer base. Maybe you could dig into the mechanics of how you go about penetrating those employers?

Simon Khalaf: Our next question comes from Timothy Toyota with UBS. Please proceed with your question.

Timothy Chiodo: Great. Thank you for taking the question I was hoping we could spend a little bit more time on the rain partnership you mentioned some of those large employer logos that are part of rains network or customer base, maybe you could dig into the mechanics of how you go about penetrating those employers co marketing that you do alongside rain or.

Timothy Chiodo: Is there co-marketing that you do alongside RAINN or the employers? Are there any revenue sharing mechanics that we should think about? Timing?

Timothy Chiodo: Employers are there any revenue sharing mechanics that we should think about timing really anything that you could help us on better better understanding the rain opportunity. Thank you.

Timothy Chiodo: Really anything that you could help us with on better understanding the RAINN opportunity? Thank you. Hi Tim. Simon here.

Simon Khalaf: Yeah, I'll spend time on that just to kind of frame the broader market. I'd say that this is a very large market. As we discussed in our investor day, it is a $2 trillion market. And I would say that shift and gig workers in the United States are almost 83 million people.

Simon Khalaf: Hi, Tim Simon here.

Simon Khalaf: I'll spend time on that just to kind of frame the broader market.

Simon Khalaf: I would say that this is a very large market as we discussed in our <unk>.

Simon Khalaf: Investor Day, it is a trillion dollar market.

Simon Khalaf: And <unk>.

Simon Khalaf: I'd say shift 10 gig workers in the United States.

Simon Khalaf: And they're distributed between very large organizations, the gig economy, as well as some regional players that either serve consumers or serve businesses. So we decided to take a three-tiered approach to the market, given its size and the requirements that come from our customers. So in the high end of the market, I'd say, especially with the gig workers, where they have a vast majority of their labor force as 1099 contractors, we've taken a direct approach to them or highly skilled ISAs. So I put Uber in that category and Walmart 1 on it.

Simon Khalaf: Almost 83 million people.

Simon Khalaf: And they are distributed between very large organization.

Simon Khalaf: The gig economy.

Simon Khalaf: Well as some regional players that either serve consumers or businesses. So we decided to take a three tiered approach to the market given its size and the requirement that comes from our customers. So in the high end of the market that I'd say, especially with the gig workers.

Simon Khalaf: So, that's one segment of the market. The other segment of the market, and a fast-growing segment of the market, would be open labor marketplaces, in which a company goes in, and rather than hire a shift worker, they hire a shift, and these labor marketplaces fill that shift on their behalf. One of those deals we announced last year is Workwhile, and those labor marketplaces are growing fast. Now the third tier would be your traditional employers, such as large franchisees, so on and so forth, and they have a combination of W-2 workers, as well as 1099-related workers, and our partnership with RAINN will address that market.

Simon Khalaf: Where do they have the vast majority of their labor force at $10 99 contractors, we've taken a direct approach to them or highly skilled Isps. So I put the ubers in that category and Walmart one.

Simon Khalaf: So.

Simon Khalaf: That's one segment of the market.

Simon Khalaf: The other segment of the market and a fast growing segment of the market would be labor open labor market places in which a company goes in and rather than hiring a shift sorry, London and hire a shift worker the hottest shift and these labor marketplaces filled that shift on their behalf.

Simon Khalaf: One of those deals we announced last year.

Simon Khalaf: It is worthwhile and dose labor market basis are growing fast now the third tier would be your traditional employers such as large franchisees so on and so forth and they have a combination of W. Two as well as $10 99.

Simon Khalaf: Related workforce and our partnership with rain will address that that market. So you can consider us and rate as you can.

Simon Khalaf: So you can consider us and RAINN, you can consider RAINN as a highly specialized and extremely fast-moving ISV that plugs into the payroll systems and kind of taps into the right flow with the creation of the RAINN debit card that's powered by Marqeta. So between those two, I think, I'd say, go-to-market initiatives, we feel good about our opportunity in the space. Excellent. Thank you, Simon.

Simon Khalaf: <unk>.

Simon Khalaf: <unk> as a highly specialized and extremely fast moving ICD that plugs into the payroll systems and cannot tap into the right flow.

Simon Khalaf: Creation of the rain debit card that's part by Mark Kedo. So between I think those two I'd say go to market initiatives, we feel good about our opportunity in this space.

Simon Khalaf: Excellent. Thank you Simon.

Operator: Our next question comes from Ramsey El Assal with Barclays. Please proceed with your question. Thank you for taking my question.

Speaker Change: Our next.

Simon Khalaf: Question comes from Ramsey El <unk> with Barclays. Please proceed with your question.

Speaker Change: Taking my questions. This evening.

Ramsey Clark El: Maybe I'll follow up on Tim's question about earned wage access. It's interesting how you kind of contextualize that as maybe the thin end of the wedge into more neo-bank, detail on that opportunity and how you can position yourself to benefit. Sure, Ramsey. This is Simon again.

Speaker Change: Maybe I'll follow up on Tim's question about earned wage access it was interesting how you kind of contextualize that as maybe that fit into the wedge into more new banking types.

Ramsey Clark El: Type services, maybe you can give us a little more detail on that opportunity and how you can position yourself to benefit from it.

Simon Khalaf: Look, this is not new. I'd say at the turn of the last century, credit unions started emerging because they could support a certain workforce, and the employer kind of wants to offer a lot of these services to their employees to increase labor retention. When there was a very, very tight labor market, and the growth of a company was limited by the number of employees they had, And we're seeing the same thing materialize now. So you can think of accelerated wage access as like a neo-credit union, but the credit union actually applies to folks that are not direct employees of that entity. So I'll give you an example.

Ramsey Clark El: Sure Ramsey. This is Simon again look this is not new.

Simon Khalaf: I'd say.

Simon Khalaf: At the turn of last century crafting you credit Union started emerging.

Simon Khalaf: They could support a certain workforce and the employer kind of like wants to offer a lot of these services to their employees to increase labor retention when when there was a very very tight labor market and the growth of our company is limited by the number of employees they have.

Simon Khalaf: And we're seeing the same thing materialize now so that you can think of accelerated wage axis.

Simon Khalaf: <unk> credit Neo credit Union, but the credit Union actually applies to folks that are not direct employees of that entity. So I'll give you. An example, like let's say if I'm, a neo bank and I want to offer accelerated wage axis I can do that to a broad swath of the population.

Simon Khalaf: Like, let's say if I'm a neobank and I want to offer accelerated wage access, I can do that to a broad swath of the population, but for specifically the employees or workers or laborers of that company, I can offer instant wage access. So one will get paid immediately, the other one will get paid two days later, or anything below 15 days is actually a bonus to about 60% of the U.

Simon Khalaf: But for US specifically the employees workers are leaders of that company I can offer instant wage axis. So why don't we get paid immediately the other one would get paid two days or anything below 15 days is actually a bonus.

Simon Khalaf: About 60% of the U S population.

Simon Khalaf: So I think that's what's creating the conversions. But Ramsey, I'll say that conversions are not just unique to that space. We're seeing the same conversions that happen in embedded finance. I mean, they want everything from us.

Simon Khalaf: So I think that's what's creating.

Simon Khalaf: The conversions, but Ramsey I'll say that convergence is not just unique to that space.

Simon Khalaf: Seeing like we're seeing the same conversions that happened in embedded finance I mean day, one everything from US we're seeing syntax starting to look almost the same as embedded finance no longer focus on a single use case, they're focused on a consumer or a business and offering all.

Simon Khalaf: We're seeing fintechs starting to look almost the same as embedded finance, no longer focused on a single use case. They're focused on a consumer or a business and offering all their financial services to them. So that example, I mean, no one will benefit from BNPL more than the underbanked that accelerated wage access provides. So we are extremely excited about this conversion, because honestly, we are part of a very, very, very few competitive sets that can offer these combined solutions with the right program management on a global basis, including pay now, pay in installments, revolver, secured credit on the consumer side, as well as commercial and consumer on the credit So I think we're looking good there. That's fantastic.

Simon Khalaf: Their financial services to them. So that trend example, I mean, no one will benefit from the NPL more than the Underbanked that accelerated wage access provides so we are extremely excited about this conversions because honestly. We are we are very very.

Simon Khalaf: Very few competitive set that can offer these combined solution with the right program management on a global basis, including pay now.

Simon Khalaf: In installments revolver secured credit on the consumer side as well as commercial and can see around the credit side. So I think we're looking good there.

Simon Khalaf: That's fantastic I appreciate it thank you.

Operator: I appreciate it. Our next question comes from Darrin Peller with Wolf Research. Please proceed with your question. Guys, nice job, thanks.

Simon Khalaf: Our next question comes from Darrin Peller with Wolfe Research. Please proceed with your question.

Darrin David Peller: Listen, just on new bookings, you know, you obviously have talked about bookings being a more material contributor in the back half of the year for those that you've already booked. Just curious to be touched on how the courts are trending. Any variants you guys are seeing with regard to those customers ramping up? And then, just a quick follow-up; I'll just ask you together on credit and maybe a little more on what the pipeline's looking like there. And if you can expect the versions there,

Darrin David Peller: Guys nice job thanks listen.

Darrin David Peller: New bookings.

Darrin David Peller: Obviously, <unk> talked over bookings being more material contributor in the back half of the year for those of you are already but just curious and gets us in and out of the quarters are trending any variance you guys are seeing with regard to those customers ramping and then just a quick follow up on just that together on credit maybe a little more on what the pipelines look like.

Darrin David Peller: That conversion.

Speaker Change: Thanks, guys.

Darrin David Peller: Thanks, guys. Sure. So, on your first question, Darrin, thanks for the question. So far, what we're seeing is we're a little bit ahead of schedule. So, we had said we expected about $20 million in revenue coming from these new cohorts for 2024 and then that to ramp to $60 million next year. And in Q1, it's obviously early, but we were a little bit ahead based on a couple of customers launching a little more quickly than we expected and one or two also ramping a little faster than we had projected. That being said, because of, as you can imagine, the ramp of a card program, it takes a little bit of time.

Speaker Change: Sure. So on your first question Darrin. Thanks for the question. So far what we're seeing is we're a little bit ahead of schedule. So we had said we expected about $20 million in revenue coming from.

Darrin David Peller: These new cohorts for 2024, and then that ramping to $60 million next year and in Q1. It's obviously early but we were a little bit ahead based on a couple of customers launching a little more quickly than we expected and one or two also ramping a little faster than we had projected.

Darrin David Peller: That being said because of as you can imagine the ramp of our card program at.

Michael Milotich: So, we're, I guess, encouraged by the first couple of months, but, you know, the real value will be generated, you know, say, four to seven, eight months after the launch when you really start to see what kind of momentum those programs have and what kind of volume they can generate. But we're off to a good start, a little bit ahead of schedule. And on the credit side, again, like we said, our focus is to do a hell of a job on the initial accounts and partners that we have established.

Darrin David Peller: It takes a little bit of time. So we're encouraged by the first couple of months, but you know the.

Michael Milotich: The real value will be generated.

Michael Milotich: Say four to six 4% to seven eight months after the launch when you really start to see what kind of <unk>.

Michael Milotich: Momentum those programs have been and what kind of volume they can generate but where.

Michael Milotich: We're off to a good start a little bit ahead of schedule.

Michael Milotich: Okay.

Michael Milotich: And then.

Michael Milotich: Simon on the on the credit side again.

Michael Milotich: Like we said our focus is to do a hell of a job on the initial accounts.

Michael Milotich: And partners that we have established I'd say.

Michael Milotich: I'd say we're looking really good on the consumer credit side, for one particular reason, which is that most of the brands that align with our vision for credit are thinking about a co-brand as an engagement tool and not just a loyalty tool.

Michael Milotich: Were looking really good on the on the consumer credit side.

Michael Milotich: Say for one particular reason, which is most of the brands that align with our vision on credit or thinking about a co brand as an engagement tool and not just a loyalty tool.

Simon Khalaf: Kind of like addressing the top of the funnel, which is bringing me more users or regaining me the users that I've lost versus making my loyal customers more loyal. So that fits exactly with how we perceive the credit market going. And also, it's a great thing for our platform because it operates in real time, and the rewards engine can be changed on a real-time basis in order to increase engagement and not just loyalty.

Simon Khalaf: And kind of like addressing the top of the funnel, which is bringing more users are redeemed neither usage that I've lost versus making my loyal customers more loyal so that as that fits exactly with with how we perceive the credit market going and also.

Simon Khalaf: <unk> is a great thing for our platform because it operates in real time.

Simon Khalaf: The rewards engine could be could be changed in a real time basis in order to increase engagement and not just loyalty and on the on.

Simon Khalaf: And on the commercial side, it's actually better than we had expected. We did not anticipate such strong demand for commercial credit. And most of it is driven by, I'd say, the aggregator marketplaces that have great visibility into the performance of a small to medium-sized business. So just to give you an example, out of all lending that JP Morgan did last year, only 2.6% of that went to small businesses.

Simon Khalaf: On the commercial side, it's actually better than we had expected we did not anticipate such strong demand in commercial credit and most of it is driven by I would say the aggregator marketplaces that have great visibility into the performance of our small to medium size business.

Simon Khalaf: So just to give you. An example out of all lending that Jpmorgan has done last year only two 6% of that went to small businesses, but small businesses account for like 53% of our GDP. So I think I think we should have anticipated this great demand, but we didn't but I think it's actually a very good very good sign for.

Simon Khalaf: But small businesses account for like 53% of our GDP. So I think we should have anticipated this great demand, but we didn't. But I think it's actually a very good sign.

Simon Khalaf: Us.

Operator: That's great to hear, Simon. Thanks, guys. Our next question comes from Andrew Bauch with Wells Fargo. Please proceed with your question. Hey, thanks for taking the question. I wanted to speak about... [inaudible] Sure. So, uh, I'd say that, this is Simon, by the way, and thank you, Andrew, for the question. So, as expense management players start adding more features and start reaching scale, they will look at Marqueta as their platform of choice. I'll give you an example; it's very simple.

Speaker Change: That's great to hear.

Simon Khalaf: Yes.

Operator: Yes.

Andrew Thomas Bauch: Like expense management is part of a set that a finance department takes care of. There's invoicing, there's bill payment, there's many things. So as we see this conversion trend materialize, and like I said, it's not just in the consumer space, but in the commercial space, which is where expense management lands, we're seeing a lot of players come to us and say, look, I can do more with your platform, and you have all the program management that I need, you've got all the relationships that I need, I'm coming back to you. And that takes us away from, as Mike mentioned, the one-time virtual commercial card that is almost a commodity or heading in that direction.

Andrew Thomas Bauch: Our next question comes from Andrew Barish with Wells Fargo. Please proceed with your question.

Speaker Change: Hey, Thanks for taking the question I wanted to speak about the expense management customer that you highlighted.

Andrew Thomas Bauch: In the prepared remarks, you said that this one customer was looking at other.

Andrew Thomas Bauch: Competitors, but then decided to come back to US maybe if you could just extrapolate.

Andrew Thomas Bauch: What went on there.

Andrew Thomas Bauch: Sure so.

Speaker Change: I would say that this is time and by the way and thank Andrew for the question So as <unk>.

Andrew Thomas Bauch: Expense management layers.

Andrew Thomas Bauch: Start adding more feature.

Andrew Thomas Bauch: More features and start.

Andrew Thomas Bauch: Reaching scale.

Andrew Thomas Bauch: They will look at Mark Curt our asset platform of choice.

Andrew Thomas Bauch: Give you. An example, it's a very simple like expense management as part of.

Andrew Thomas Bauch: That that our finance department takes theirs like invoicing there is bill payment, there's many things so as we see this conversion trend.

Andrew Thomas Bauch: We realize and like I said, it's not just in the consumer space in the <unk>.

Andrew Thomas Bauch: Commercial space, which is where expense management land.

Andrew Thomas Bauch: We are seeing a lot of players come to us and say look I can do more with your platform and you have all the program management that I need you've got all the relationships that I need I'm coming back to you and and.

Andrew Thomas Bauch: And that takes us away from as Mike mentioned, the one time virtual commercial.

Andrew Thomas Bauch: Card that is almost a commodity or heading in that direction. So I think I think.

Andrew Thomas Bauch: I would attribute these things to the conversion to the conversion trends.

Simon Khalaf: So I think I would attribute these things to the conversion trend. The only thing I would add to that is that it also is this where I think we are benefiting from our focus on issuing specifically. So these, as our customers get bigger and bigger, and so, therefore, they become, you know, more sophisticated and, looking at a lot of different capabilities they would like to have delivered with very high reliability and a high level of service. You know, that's something that we're just well positioned to do.

Speaker Change: The only thing I would add to that I think.

Simon Khalaf: The only thing I'd add is that it also is this is where I think we are benefiting from our focus on issuing specifically so.

Simon Khalaf: As these as our customers get bigger and bigger and so therefore they become.

Simon Khalaf: More sophisticated in and looking at a lot of different <unk>.

Simon Khalaf: Capabilities, they would like and we need to be delivered at very high reliability and high level of service.

Simon Khalaf: That's something that we're just well positioned to do given our sole focus on the issuing business, where a lot of our competitors have a broader remit and therefore may not have the breadth of.

Michael Milotich: Given our sole focus on the issuing business, where, you know, a lot of our competitors have a broader remit and therefore may not have the, you know, the breadth of capabilities and, and focus that we have, the relationship is getting deeper. I wanted to just talk about the adjusted EBITDA, you know, how the performance in the quarter was, nice to see the EBITDA positive and the cash flow headwinds kind of coming to an end in unison in the third quarter here.

Michael Milotich: Capabilities and focus that we have.

Michael Milotich: When the relationship is going deeper but wanted to just talk to the adjusted EBITDA outperformance in the quarter nice to see that.

Michael Milotich: EBITDA positive in the cash up headwinds kind of coming to an end in unison in the third quarter here. So how should we think about.

Michael Milotich: So how should we think about, you know, the ramp of EBITDA margins as we progress beyond these headwinds that you guys have been experiencing, meaning the amount of flow through or in your ways you want to invest in the business? Yeah, so thank you for your question.

Michael Milotich: The ramp of EBITDA margins as we progress beyond these headwinds that you guys had been experiencing meaning the amount of flow through or and your ways you want to invest in the business.

Michael Milotich: The way we've thought about it is that we believe we can grow our gross profit, right, by 20 plus percent, so in the 20s. And we also believe that if we're growing at that pace, we only need to grow our expenses sort of in the low double digits, so there should be at least a 10 point gap. Once we sort of lap all this and things, we kind of get a normalized base to grow off of, you know, starting, you know, in coming in at 25 and 26, that there should be, you know, about a 10 point gap, at least between our gross profit growth and our expense growth.

Speaker Change: Yes so.

Speaker Change: Thank you for your question the the way we've thought about it is that we believe we can grow our gross profit rate in the 20.

Michael Milotich: Plus percent so in the twenties.

Michael Milotich: And we also believe that if we're growing at that pace that we only need to grow our expenses.

Michael Milotich: Sort of in the low double digits that there should be at least a 10 point gap.

Michael Milotich: Once we sort of lap all of this.

Michael Milotich: And things, we kind of get a normalized base to grow off of starting in the coming in 'twenty, five and 26 that there should be.

Michael Milotich: About a 10 point gap at least between our gross profit growth and our.

Michael Milotich: And that's just the benefit of a platform business and achieving and reaching our economies of scale. And so when you start to look at that 10, 10 point gap in growth, and you start to grow that out a year or two, you'll see that the EBITDA comes in in pretty significant chunks. It doesn't just sort of drip in. It becomes a meaningful gap as our volume and business just keep getting bigger and bigger. And so that's really the formula we're looking at.

Michael Milotich: Our expense growth.

Michael Milotich: And that's just the benefit of our platform business and achieving and reaching our economies of scale and so when you. When you start to look at that 10, 10 point gap in growth and you and you start to grow that out a year or two you will see that the the EBITDA comes in pretty significant chunks it doesn't.

Michael Milotich: Just sort of drip in.

Michael Milotich: It becomes a meaningful gap as our volume and business just keeps getting bigger and bigger and so that's really the formula. We're looking at I mean, and just to get a little more specificity.

Michael Milotich: I mean, and just to get a little more specific, because we're so headcount and technology-driven, our cost structure, what we see is, you know, between merit increases and things we give to our employee base, as well as the variable costs we have of running our platform with, you know, cloud costs and other data tools that we use, you know, just those two things, our expenses would probably grow in the like, mid to high single-digit range And so with that, it's all a matter of how much more we are going to be investing incrementally to drive additional capabilities on the platform.

Michael Milotich: Because we're so head count and technology, driven our cost structure, what we see is between merit increases and things, we get to our employee base as well as the variable costs, we have of running our platform with cloud costs and other data tools that we use.

Michael Milotich: Just those two things are expenses would probably grow in like mid to high single digit range, assuming we continue to compound at this kind of clip in terms of volume and so with that then it's all a matter of how much more are we going to be investing incrementally to drive additional capabilities on the plot.

Michael Milotich: And that's where we said, you know, we think that anywhere from say, three to five points of growth should be enough in investment on top of the existing investment capacity we already have, which includes over 300 people who are focused on our platform today. And so that's sort of the model that we are projecting our business going forward. Nice to have that line of sight.

Michael Milotich: Form and that's where we've said we think that anywhere from say three to five points of growth should be enough of an investment on top of the existing investment capacity, we already have.

Michael Milotich: Which includes over 300 people, who are focused on our platform today and so that's sort of the model that we are projecting our business going forward.

Speaker Change: I said that line of sight. Thanks, Mike.

Michael Milotich: Mhm.

Operator: Thanks, Mike. Our next question comes from Gus Galla with Monash Crespi-Hart. Please proceed with your question.

Michael Milotich: Our next question comes from Gus Gala with <unk> Crespi Hardt. Please proceed with your question.

Gus Galla: Thank you for taking my questions. In the last couple of updates, we talked about ramps coming down in about a hundred days.

Gus Galla: Hi team. Thank you for taking my questions.

Gus Galla: Last couple of updates, we're talking about ramps coming down.

Gus Galla: We're here, you know, a third of the way through the year. Um, how are these faring now? What are we making progress on Tantrably that's allowing this to happen? And last one, I'll layer in there, is can you dig in on progress, maybe? Penetration, Marqeta in a box, helping drive that down. Appreciate all the comments. Hi guys, this is Simon.

Gus Galla: About 100 days, we're here you know a third of the way through the year.

Simon Khalaf: How are these sparing now.

Simon Khalaf: What are we making progress on tangibly, allowing this to happen.

Simon Khalaf: And last one I'll layer in there is can you dig in on progress maybe.

Simon Khalaf: Penetration in market in a box, helping drive that down.

Simon Khalaf: I appreciate all the comments.

Simon Khalaf: You're absolutely right. We've made a lot of progress, and I'll attribute all this to the Marqeta-in-a-Box solution, in addition to engaging our solutions team early on in the process and not when the MFA is signed. So, in a more concrete way, throughout the whole thing, from the moment we touch a customer all the way to realizing the gross profit, we've made tremendous improvements north of 10%, which is material if you actually look at how this compounds. And I'd say that Marqeta-in-a-Box has made a huge difference, engaging the solutions team, working on a good blend between commercial and consumer.

Gus Galla: Hi, guys. This is Simon.

Simon Khalaf: Youre absolutely right I mean, we've made a lot a lot of progress and I'll, let tribute all of these to the market on a box solution. In addition to engaging our solutions team early on in the process and not when the MSA signed so in a more concrete way throughout the whole.

Simon Khalaf: Thing isn't like from the moment, we touch a customer.

Simon Khalaf: All the way to.

Simon Khalaf: Realizing the gross profit right, we've made tremendous improvement north of 10%, which is material. If you actually look at at how this compounds.

Simon Khalaf: And I'd say that there is.

Simon Khalaf: <unk> in a box.

Simon Khalaf: That made a huge difference engaging the solutions team.

Simon Khalaf: Working on a good blend between commercial and consumer commercial moves much faster than consumer.

Simon Khalaf: Last but not least, focused on more expansion into the existing base that reduces a lot of the up-front cycles. So, they know us, they've worked with us, our bank partners know them. So, I would say, overall, there are the tailwinds that are helping us because our customers land and we expand with them, but also, we've made significant operational improvements that have helped tremendously.

Simon Khalaf: Last but not least focused on the I'd say.

Simon Khalaf: More expansion into the existing base that reduces a lot of the upfront cycles. So they know us.

Simon Khalaf: Worked with US our bank partners know them. So I would say overall there is there is the.

Simon Khalaf: Tailwind that are helping us because our customers land and we expand with them, but also we've made significant operational improvements.

Simon Khalaf: Improvements that have helped tremendously.

Simon Khalaf: And one thing I would add is that in the last several quarters, we've had, you know, a couple of flips per quarter. And where that helps is not only are those customers already very experienced, so they're not sort of learning as they go there; they already know how to run the card program. But as the cards move, the volume obviously comes very quickly because they already have existing volume.

Simon Khalaf: And the one thing I would add is the last several quarters we've had.

Simon Khalaf: A couple of flips per quarter, and where that helps us not only are those customers already very experienced so they're not sort of learning as they go there they already know how to run the card program, but as the cards move the volume obviously comes very quickly because they already have existing volume and so that's also something that's contributing to the.

Simon Khalaf: The time it takes to to realize that gross profit.

Michael Milotich: And so that's also something that's contributing to the time it takes to realize that gross profit is collapsing. Right, I'll add one more thing: we've been able to do this without adding more operating operational expenses. So, and if we've added them, they're extremely small. So it's operational. Great. I appreciate all the calls, guys. Nice work.

Simon Khalaf: Is collapsing.

Michael Milotich: Alright, I'll add one more thing is we've been able to do this without adding more operating operational expenses, so and if we have Adam it's extremely small so its operational efficiency.

Speaker Change: Great I appreciate all the color guys nice quarter.

Operator: Our next question comes from Bryan Keane with Deutsche Bank. Please proceed with your question. Hi guys, thanks for taking the question. Wanted to ask about international expansion. It sounds like Uber Eats has expanded internationally.

Michael Milotich: Our next question comes from Bryan Keane with Deutsche Bank. Please proceed with your question.

Bryan Connell Keane: Hi, guys. Thanks for taking the question wanted to ask about international sound like Uber eats expanded internationally, maybe you could just talk to us about what youre seeing in the pipeline and growth of TPB as it is it still Europe and Canada, the big opportunities you see right now.

Bryan Connell Keane: Maybe you could just talk to us about what you're seeing in the pipeline and growth of TPV. Is it still Europe and Canada, the big opportunities you see right now? Hey, Bryan, thank you for the question.

Simon Khalaf: So, look, there is demand everywhere, but we have to remain focused. So, there's two parts to international. I'd say the first part is our domestic customers, like US-based customers that want to expand overseas. And we've done well there. I mean, Uber is just one example. And what is good news here is that kind of all of them want to go to the same countries.

Speaker Change: Hey, Brian Thank you for the question.

Simon Khalaf: No.

Simon Khalaf: There is demand everywhere, but we have to remain focused so.

Simon Khalaf: There's two parts of international I'd say the first part is our domestic customers like U S based customers that want to expand overseas and we've done well there.

Simon Khalaf: Uber is just one example, and what is good news here is kind of all of them want to go through the same countries. So.

Simon Khalaf: So it doesn't give us that.

Simon Khalaf: Divergence in terms of where we need to put the effort and then the second part of international is in the EU.

Simon Khalaf: So, it doesn't give us that divergence in terms of where we need to put the effort. And then the second part of international is the EU, where we see, I'd say, the pace of innovation accelerating in Europe. And as a consequence of that, our volumes, albeit smaller than the US, are outpacing the growth of the US. So, I'd say those are two healthy trends. Got it, got it.

Simon Khalaf: And which we see I'd say the pace of innovation accelerating.

Simon Khalaf: In Europe, and we as a subset as a consequences of that are our volumes, albeit smaller than you than U S are outpacing the growth.

Simon Khalaf: The U S. So.

Simon Khalaf: I'd say those are two healthy trends.

Bryan Connell Keane: And then my other question, you know, you talk about adding value-added services. In particular, you highlight compliance. Just wondering, does that help with retention?

Speaker Change: Got it got it and then my other question you talk about adding value added services in particular, you highlighted a compliance.

Speaker Change: Just thinking does that does that help with retention does it help kind of with the gross margin and profitability just thinking about how you add on these products.

Simon Khalaf: Does it help kind of with gross margin and profitability? Just thinking about how you add on these products, you know, where we see it in the P&L. Yes, yes, and yes.

Simon Khalaf: Where we see it in the P&L.

Simon Khalaf: So I'd say, in terms of retention, of course. I mean, the more they engage with us, the better it becomes. And also, from a gross profit take rate, yes, it does help. Examples would be managing disputes, whether it's related to Reg E or Reg Z or 3DS, which is related to factor authentication.

Speaker Change: Yes, yes, and yes, so I would say in terms of our retention of course, I mean, the more they engage with us the better it becomes.

Simon Khalaf: And also.

Simon Khalaf: From a gross profit take rate.

Simon Khalaf: Yes, it does help.

Simon Khalaf: Examples would be managing disputes, whether it's related to Reg E or Reg Z.

Simon Khalaf: Or <unk>, which is really two two factor authentication. They are just fine on our gross profit take rates and despite the growth in volume.

Simon Khalaf: They just pile on to our gross profit take rate, and despite the growth in volume, it will either keep the gross profit take rate flat or inch it up. That's how it will reflect on our bottom line. And the last thing is economies of scale, right? The way Marqeta, the way our team has handled and managed disputes, and the reduction of cost make it attractive for us, but also attractive for our customers. So it's kind of like membership has its benefits. Everybody benefits from the economy of scale achieved by Marqeta, and that's something that is extremely hard to achieve, especially on consumer programs.

Simon Khalaf: It was either keep the gross profit.

Simon Khalaf: Take rate flat or inches. It that's how it will reflect in.

Simon Khalaf: Our to our bottom line and the last thing is economies of scale right with the way Mark get up the way we have.

Simon Khalaf: Our team has handled and managed disputes and the reduction of costs make it attractive for us, but also attractive for our customers. So it's kind of like membership has its benefits everybody benefits from the economy of scale.

Simon Khalaf: <unk> achieved by markdown and Thats something that is extremely hard to achieve especially on the consumer programs. So it might be easier on commercial programs, but in order to get that economy of scale across both debit and credit on a global basis.

Simon Khalaf: So it might be easier on commercial programs. But in order to get that economy of scale across both debit and credit, and on a global basis, it's a huge moat for us. So we're excited about it because it's like a win, win, win.

Simon Khalaf: It's a huge moat for us so.

Simon Khalaf: We are excited about it because it's likely to win win win so we win our partners win but more importantly, our customers win and honestly.

Simon Khalaf: So we win, our partners win, but more importantly, our customers win. And honestly, the embedded finance customers don't want to deal with this at all. The fintech players like to dabble in these services, but not with the economy of scale. It's going to be hard for them to beat our economy of scale.

Simon Khalaf: But its finance customers don't want to deal with it at all the Fintech players like to dabble in these services.

Simon Khalaf: Not with the economy of scale is going to be hard for them to beat our economy of scale, but the embedded finance services I'd say from day, one depleted with us that they want this to be to be done by us and they're happy to pay for it.

Michael Milotich: But the embedded finance services, I'd say from day one, they're clear with us that they want this to be done by us, and they're happy to pay for it. Yeah, I think this is an area where sort of everyone in the market, in the markets' focus on profitability is something that really helps us quite a bit because of that economy of scale advantage and expertise advantage. A lot of our existing customers, like Simon mentioned, we have 20 programs that added some sort of service in the quarter. Everyone is evaluating, you know, are these really my core competency? Should I really be doing these things by myself?

Michael Milotich: Yes, I think this is an area where sort of everyone's in the market and the market's focus on profitability is something that really helps us quite a bit because of that economy of scale advantage and expertise advantage a lot of or even existing customers like Simon mentioned, we have 20 programs that added some sort of service in the quarter.

Michael Milotich: Everyone is evaluating.

Operator: Or should I, you know, make this a variable cost and utilize someone who has more expertise in scale than I do? And as that continues to happen in the market, that should benefit us. And the more it happens, then we get even more scale, and, you know, it becomes a, you know, sort of feedback loop.

Michael Milotich: Are these really my core competencies should I really be doing these things or myself or should I.

Operator: Make this a variable cost and utilize someone who has more expertise and scale than I do.

Operator: And as that continues to happen in the market that should benefit us.

Operator: And the more it happens then we get even more scale and it becomes a.

Operator: Sort of feedback loop.

Speaker Change: Yes sounds good I appreciate the color.

Craig Jared Maurer: Our next question comes from Craig Mara with FT partners. Please proceed with your question. Yeah, good afternoon.

Operator: Our next question comes from Craig Maurer with Ft Partners. Please proceed with your question.

Craig Jared Maurer: Thanks for taking the questions. My first is on, excuse me, earned wage access. You know, I wanted to, could you compare the unit economics of that business to your other lines of business and the upside to that over the long term from embedded finance? And second, you know, we're starting to see some improved performance out of the larger U.S. neobanks, at least the ones that are public. And I was wondering if there's any, if you could update if there's any renewed opportunities in the FI space for you. Thanks. I'll maybe take the first one and then pass it to Simon for the second one.

Craig Jared Maurer: Yes, good afternoon, thanks for taking the questions.

Simon Khalaf: My first is on <unk>.

Craig Jared Maurer: Excuse me earned wage access.

Craig Jared Maurer: Wanted could you compare the unit economics of that business to your other.

Craig Jared Maurer: The lines of business and the upside to that over the long term from embedded finance in second.

Simon Khalaf: Turning to see some improved performance out of the <unk>.

Craig Jared Maurer: Larger U S. Neo banks at least the ones that are public and I was wondering if there's any if you could update if there's any renewed opportunity in the <unk> space for you. Thanks.

Craig Jared Maurer: I'll, maybe take the first one and then pass it to Simon for the second one. So are are you didn't you didn't economics right anyway. I would say are are very similar to our Neo bank Neil banking economics that we would have for other customers. Those use cases are sort of tied together in many ways and so our.

Michael Milotich: So our union economics for AWA, I would say, are very similar to our neobanking economics that we would have for other customers. Those use cases are sort of tied together in many ways. And so our economics end up being quite similar.

Michael Milotich: Economics end up being quite similar so it's it's.

Michael Milotich: So it's a very attractive use case for us in terms of how much we can earn, you know, on part with, you know, what we earn in many other use cases across our business. In terms of your two other questions, which are, are we seeing renewed interest or opportunities in neobanking? And the third one was large FIs.

Michael Milotich: Very attractive use case for us in terms of how much we can earn.

Michael Milotich: On par with what we earn and many other use cases across our business.

Michael Milotich: In terms of the.

Michael Milotich: Two other questions, which is which is are we seeing a renewed.

Michael Milotich: Our interest or opportunities in the banking and the third one was large <unk>. So the answer on <unk> is absolutely as we see some of the accelerated wage access players.

Simon Khalaf: So the answer on two is absolutely, as we see some of the accelerated wage access players expanding from just being a credit union, for the lack of a better term, and becoming effectively a national bank. We are a beneficiary of that trend. And there's a couple that are getting interesting traction. So that's one.

Simon Khalaf: Expanding from just being a credit union for the lack of about a term and to be effectively a national bank.

Simon Khalaf: Our benefit tour of that trend and Theres, a couple that are getting interesting traction.

Simon Khalaf: So that's one on the large financial institutions, we are still on the same timeline I would say the.

Simon Khalaf: On the large financial institutions, we're still on the same timeline. I would say the commercial side of the large financial institutions is starting to probably accelerate the conversations with us. But I wouldn't say that, I mean, we're still on the same timeline in terms of not that segment being material in terms of revenue till like the late 25, 27. Okay, thank you.

Simon Khalaf: <unk>.

Simon Khalaf: On the commercial side of the large financial institutions.

Simon Khalaf: Or are starting to probably accelerate the conversations with us, but I wouldn't say that I mean, we're still on the same timeline in terms of not.

Simon Khalaf: Not not that segment being material in terms of revenue till like the late 'twenty five 'twenty six.

Simon Khalaf: Okay. Thank you.

Simon Khalaf: Sure.

Operator: Our next question is from Cassie Chan with Bank of America. Please proceed with your question. Hey guys, thanks for taking my question. So I just wanted to ask if there were any changes to your TPV growth expectations for the full year? I believe you previously said about 30%. Obviously, you're running slightly higher than that.

Simon Khalaf: Our next question is from Cathy Chan with Bank of America. Please proceed with your question.

Jinli Chan: Hey, guys. Thanks for taking my question. So just wanted to ask any changes to your PPD growth expectation for the full year. I believe you previously said about 30%, obviously, you're running slightly higher than that you know should we expect it to remain relatively steady in 'twenty, four and kind of associated take rate dynamics.

Jinli Chan: You know, should we expect it to remain relatively steady in 24 and the associated take rate dynamics that we should expect there? And then, kind of on a related note, you mentioned the mix of TPV swinging more towards the power buy side, which is impacting some of those net revenue figures and expectations for the full year. I mean, is there any change in client behavior in the market that you're seeing? And how should we think about the mix of powered buy versus managed buy going forward? Thank you.

Jinli Chan: You should expect there and then kind of on a related note you mentioned that makes the PPD is leaning more towards the powered by side, which is impacting some of the revenue figures and expectation for the full year. I mean is there any change in client behavior in the market that you're seeing and how should we think about to make the powered by <unk> is managed by going forward. Thank you.

Jinli Chan: Thank you for your question. So, if in Q1, our TPV growth was 33%, but you know, a little over a point of that is the leap year benefit. So, you know, that we do still expect our TPV growth to be about 30, without 30%. Things are running a little bit better.

Speaker Change: Thank you for your question so.

Jinli Chan: In Q1 are TBD growth was 33%, but a little over a point of that is the leap year benefit.

Jinli Chan: So.

Jinli Chan: That we do still expect our TVD growth to be about 30 without 30% things are running a little bit better, but obviously as we go through the year as I mentioned in my remarks. This is the fourth straight quarter, where we've grown 33% year over year and so our comps will get tougher as the year goes on so we don't expect material changes.

Michael Milotich: But obviously, as we go through the year, as I mentioned in my remarks, this is the fourth straight quarter where we've grown 33% year over year. And so, you know, our comps will get tougher as the year goes on. So we don't expect material changes from quarter to quarter. But Q1, because the leap year will be a little bit on the higher end, and we still expect our growth for the year to be about 30%, roughly.

Michael Milotich: Quarter to quarter, but Q1 because of leap year will be a little bit on the higher end and we still expect our growth for the year to be about 30% roughly.

Michael Milotich: In terms of your second question on the shift to powered by I think.

Michael Milotich: We're not seeing a change in the behavior, it's really related to two two dynamics. One is some of our very large customers who we are in a powered by relationship are growing very quickly.

Michael Milotich: And so that's that's one dynamic that's happening the second is that there are a lot more customers, who are coming to us with what internally we call powered by plus type construct where.

Michael Milotich: In terms of your second question on the shift to powered by, I think, without seeing a change in behavior, it's really related to two dynamics. They want to maybe manage the network relationship themselves or have their own bank relationship, for example, but they still want us to do everything else. So we're still going to do a lot of program management activities for them. But the big difference from a P&L perspective between Powered By and Managed By is that when we're managed by, the network and bank costs are also running through our P&L versus in a Powered By construct, we're really just charging for our processing services and any other additional service we provide.

Michael Milotich: They want to maybe manage the network relationship themselves are have their own bank relationship for example, but they still want us to do everything else. So we're still going to do a lot of program Management Act.

Michael Milotich: Activities for them, but the big difference from a P&L perspective between powered by and managed by is that when were managed by the network and bank costs are also running through our P&L versus in our powered by construct we're really just charging for our processing services and any other additional service we provide and so.

Michael Milotich: Ends up working out similar in gross profit not exactly the same because obviously when we manage everything we add a little bit more value, but the revenue differences, what so significant and so it's not really a change in behavior.

Michael Milotich: And so it ends up working out similar in gross profit, not exactly the same, because obviously, when we manage everything, we add a little bit more value. But the revenue difference is what's so significant. And so it's not really a change of behavior.

Michael Milotich: It's more just about the the growth of customers and where how people are approaching the marketplace.

Speaker Change: Great. Thank you.

Michael Milotich: It's more just about the growth of customers and how people are approaching the marketplace. Great, thank you. Our final question is from Alex Markref with KeyBank Capital Markets. Please proceed with your question. Thank you for taking my question. I just wanted to come back to the expense management volume migration that you mentioned. I'm just curious, you know, sort of taking that in the broader context of Marqueta; what is the right way to think about that?

Speaker Change: Our final question is from Alex Mark Rough with Keybanc capital markets. Please proceed with your question.

Alex Markref: And maybe another way to ask it is sort of thinking about Marqueta wallet share. I'm just sort of curious if there are other opportunities in the future around this type of migration, or if it was more of a one-time event. Yeah, maybe I'll start, and then Simon may have some comments as well.

Alex Markref: Taking my question just wanted to come back to the expense management volume migration that you mentioned I'm just curious.

Alex Markref: Taking that in the broader context of Marquette.

Alex Markref: What is the right way to think about that and maybe another way to ask it is sort of thinking about market.

Simon Khalaf: Wallet share with TPG share at customers today, just sort of curious if there are other opportunities in the future around.

Alex Markref: This type of migration or if it was more of a one time anomaly.

Speaker Change: Yeah, maybe I'll start and then Simon may have some comments as well I think that if you think about the way our customers view it is.

Michael Milotich: I think that if you think about the way our customers view it is, once, when they sign a new customer, right, and they're in the expense management space in particular, and they, you know, are going to start offering a card solution, if they, if they're using more than one provider, typically, they'll decide, okay, which platform am I going to put that customer on, right, so they can start to diversify And so maybe before it was a 70-30 split the last few quarters; now maybe I'm going to be 80-20 or 90-10. Because a lot of the types of deals I'm signing are things that I think will be better served on one of the platforms or the other.

Michael Milotich: Once.

Michael Milotich: As they sign a new customer right and they are in the expense management space in particular and Larry.

Michael Milotich: You know, we're going to start offering a card solution. If they if they are using more than one provider typically they'll decide okay, which platform I going to put that customer on right. So they can start to diversify between two providers and maybe they've been doing that for the last couple of quarters and then they start to say, okay, but now the customers I'm signing one of these types of capabilities.

Michael Milotich: And so maybe before was the 730 70 30 split the last few quarters now maybe I'm going to be 80, 20, or 90 10, because a lot of the types of deals I'm signing or are things that I think will be better served on one of the platforms or the other so it really is a dynamic environment, particularly in this space where many of.

Michael Milotich: So it really is a dynamic environment, particularly in this space, where many of these companies are growing quite quickly, right, these are not customers growing 5-10% a year; these are companies growing 30-50, you know, 50-plus type percentage growth rates, and so as they're bringing on that much additional volume, where they decide to put that volume can be pretty impactful in terms of the share we capture. And so, in terms of as we look ahead to your second question, I think what we believe is because of our focus and the comprehensive nature of our platform, as well as the consistent reliability that we deliver, it should help us increase our lead over time.

Michael Milotich: These companies are growing quite quickly right. These are not customers growing 5%, 10% a year. These are companies growing 30 50.

Michael Milotich: 50, plus type percentage growth rates and so as they're bringing on that much additional volume, where they decided to put that volume can be pretty impactful in terms of the share recapture and so in terms of as we look ahead to your second question I think what we believe is because of our focus and the comprehensive nature of our.

Michael Milotich: Our platform as well as the consistent reliability that we deliver it should help us increase our lead over time we.

Michael Milotich: We should become more attractive to larger players who are looking to do a program that maybe is focused on engagement, as Simon talked about, rather than just loyalty in the co-brand space. Or if you're an expense management player and you're really thinking big, then that reliability and that focus in terms of the capabilities we can serve up become quite attractive as you get to even greater and greater scale. So, you know, there will also be new competitors, of course, along the way, but we think that our position should benefit us more and more as time goes on.

Michael Milotich: We should become more attractive to larger players who are looking to do a program that may be as focused on engagement as Simon talked about rather than just loyalty in the co brand space or if youre, an expense management player and you're really thinking big then that reliability and that focus in terms of the capabilities. We can serve up.

Michael Milotich: It becomes quite attractive as you get to even greater and greater scale. So.

Michael Milotich: There will also be new competitors of course, along the way, but but we think that our position should benefit us more and more as time goes on.

Michael Milotich: Yeah, I'll add to that, Alex, that credit is a big differentiator, like a lot of customers that were focused on either prepaid debit, or debit only, or even net 30, are actually all of them thinking about what their disposition is on credit. And they came to us saying, okay, we might, we could have, distributed the volume or the relationship among many debit providers, but when it comes to credit, you guys are going to win this. The second thing is international expansion. You can't be a U.S. citizen only or an E.U. citizen.

Speaker Change: Yes, I'll add to that Alex that.

Michael Milotich: Credit is a big differentiator like.

Michael Milotich: A lot of a lot of the customers that we're focused on either prepaid debit or.

Michael Milotich: Or debit only or even net 30.

Michael Milotich: Or actually all of them thinking about what their disposition is on credit.

Michael Milotich: And they've come to us saying okay.

Michael Milotich: We might we could have.

Michael Milotich: You know distributed volume or the relationship among many debit providers, but.

Michael Milotich: But when it comes to credit you guys are going to win this.

Michael Milotich: Thing is international expansion so.

Simon Khalaf: Only in this market, where we're seeing a consistent experience across the globe, are those helping us as well. The last thing I'd say is, look, as our customers scale, their regulatory requirements and their operational requirements scale with them. While they could have taken it on their own and distributed their processing volume, it gets very complicated and expensive as they grow. They're coming back to us and saying, look, your economy of scale is significantly better than mine, so I'm hopping on your platform, and that makes, I'd say, the distribution or whatever you want to call it, diversification or distributing the volume harder to accomplish.

Michael Milotich: You can be a U S only or an EU only in this market, where we're seeing a consistent experience.

Simon Khalaf: Across the globe. So those are helping us as well the last thing I'd say is look as our customers scale their regulatory requirements and their operation requirement scale with them, so and while they.

Simon Khalaf: Could have taken it on their own and distribute their processing volume it gets very complicated and expensive.

Simon Khalaf: They grow up so they're bringing it back to us and saying look your economy of scale is significantly better than mine. So I'm hopping on your platform.

Simon Khalaf: That makes the I'd say the distribution or the.

Simon Khalaf: Whatever you want to call it diversification or.

Simon Khalaf: Distributing the volume harder to accomplish so I think all in all we are benefiting from the winners winning more.

Simon Khalaf: I think, all in all, we are benefiting from the winners winning more, and it's looking good for us. Okay, thank you both. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your...

Simon Khalaf: And.

Simon Khalaf: It's looking good for us.

Speaker Change: Okay. Thank you both.

Speaker Change: Thank you Alex.

Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.