Q2 2024 Marqeta Inc Earnings Call
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Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Marqueta Second Quarter 2024 Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise.
Speaker Change: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Marqueta Second Quarter 2024 Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise.
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. You may begin.
Speaker Change: After the speaker's remarks, we will open the lines for your questions.
Speaker Change: As a reminder, this conference call is being recorded.
Speaker Change: I would now like to turn the conference over to Stacey Finerman, Vice President of Investor Relations. Thank you. 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.
Speaker Change: 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, 2021.
Speaker Change: 2023, and our subsequent periodic filings with the SEC.
Speaker Change: Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only as of the time of this call, and the company does not assume any obligation or intent to update them, except as required by law.
Stacey Finerman: These forward-looking statements speak only as of the time of this call, and the company does not assume any obligation or intent to update them, except as required by law. In addition, today's call includes non-GAAP financial measures. These measures should be considered as a supplement to, and not a substitute for, GAAP financial measures. Reconciliations to the most directly comparable gap 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, Marqueta's CEO, and Mike Milotich, Marqueta's CFO. With that, I'd now like to turn over the call to Simon to begin.
Speaker Change: In addition, today's call includes non-GAAP financial measures. These measures should be considered as a supplement to, and not a substitute for, GAAP financial measures.
Speaker Change: 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.
Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Marqeta Second Quarter, 2024, earning conference call. At this time, all lines have been placed on mute to prevent any background noise.
Speaker Change: Hosting today's call are Simon Khalaf, Marqeta's CEO , and Mike Milotich, Marqeta's CFO .
Speaker Change: With that, I'd now like to turn over the call to Simon to begin.
Simon Khalaf: Thank you, Stacey. And thank you for joining us for Marqueta's second quarter 2024 earnings call. Our second quarter results came in ahead of expectations. And once again, we demonstrated significant discipline in operating expenses without compromising our growth trajectory, scale, service, or innovation. I'll now briefly discuss a quarter of the results before diving into company updates. The second quarter's net revenue, gross profit, and adjusted EBITDA exceeded our expectations. Total processing volume, or TPV, was 71 billion in the second quarter, a 32% increase compared to the same quarter of 2023.
Operator: After the speakers remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded.
Simon Khalaf: Thank you, Stacey, and thank you for joining us for Marqueta's second quarter 2024 earnings call.
Stacey Finerman: I would now like to turn the conference over to Stacey Finerman, Vice President of Investor Relations. Thank you. You may begin. Thanks operator. Before we begin, I would like to remind everyone that today's call may contain board-looking statements. These forward-looking statements are subject to numerous risks, 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 10K for the period ended December 31st, 2023, and our subsequent periodic filings with the SEC.
Simon Khalaf: Our second quarter results came in ahead of expectations, and once again, we demonstrated significant discipline in operating expenses without compromising our growth trajectory, scale, service, or innovation.
Stacey Finerman: Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only as of the time of this call, and the company does not assume any obligation or intent to update them, except as required by law. In addition, today's call includes non-GAP financial measures. These measures should be considered as a supplement too, and not a substitute for gaps in the state.
Simon Khalaf: I will now briefly discuss a quarter of the results before diving into company updates.
Simon Khalaf: The second quarter's net revenue, gross profit, and adjusted EBITDA exceeded our expectations.
Simon Khalaf: Total processing volume, or TPV, was 71 billion in the second quarter, a 32% increase compared to the same quarter of 2023.
Simon Khalaf: Our net revenue of 125 million in the quarter contracted 46% year over year, which included a decrease of 60 percentage points from the revenue presentation change related to our Cash App contract renewal. Gross profit was 79 million in the quarter, a contraction of 6% versus the comparable quarter of 2023, primarily due to the cash app renewal price.
Simon Khalaf: Our net revenue of $125 million in the quarter contracted 46% year-over-year, which included a decrease of 60 percentage points from the revenue presentation change related to our Cash App contract renewal.
Simon Khalaf: Gross profit was $79 million in the quarter, a contraction of 6% versus the comparable quarter of 2023, primarily due to the Cash App renewal pricing.
Stacey Finerman: Reconciliation to the most directly comparable GAP measures can be found in today's earnings press release, or earnings release supplemental materials, which are available on our Investor Relations website.
Simon Khalaf: This will be the last quarter the cash app renewal will affect our year-over-year comparison. We believe Q3 2024 will represent a turning point for our business, where our P&L will better reflect the true business momentum we see. Our non-gap adjusted operating expenses were $81 million, representing a 3% decline year-over-year due to effective cost discipline, optimization, and lower average headcount. This resulted in an adjusted EBITDA of negative $2 million in the quarter.
Simon Khalaf: This will be the last quarter the Cash App renewal will affect our year-over-year comparison.
Operator: Hosting today's call are Simon Kuloff, Marquetta CEO, and Mike Militich, Marquetta's CFO.
Simon Khalaf: We believe Q3 2024 will represent a turning point for our business where our P&L will better reflect the true business momentum we see.
Simon Khalaf: With that, I'd now like to turn over the call to Simon to begin.
Simon Khalaf: Our non-gap adjusted operating expenses were $81 million, representing a 3% decline year-over-year due to the effective cost discipline, optimization, and lower average headcount.
Simon Khalaf: Thank you, Stacy, and thank you for joining us for Marquetta's second quarter 2024 earnings call. Our second quarter results came in ahead of expectations. And once again, we demonstrated significant discipline in operating expenses without compromising our growth trajectory, scale, service, or innovation.
Simon Khalaf: This resulted in an adjusted EBITDA of negative $2 million in the quarter.
Simon Khalaf: Our second quarter results demonstrate the continued demand for what has differentiated Marqueta's platform, our ability to deliver solutions for diverse consumer and commercial use cases while continuously innovating and expanding value-added program management services. As discussed in our recent State of Payments report, which we released two weeks ago, consumers continue to branch out in financial services looking for alternatives to traditional banks. A third of consumers surveyed said they were using digital-only banks, with 63% of 18 to 34-year-olds saying they would be open to banking with non-traditional financial service providers.
Simon Khalaf: Our second quarter results demonstrate the continued demand for what has differentiated Marqueta's platform.
Simon Khalaf: I'll now briefly discuss our courted results before diving into company updates. The second quarter's net revenue gross profit and adjusted EBITDA exceeded our expectations. Total processing volume, or TPV, was 71 billion in the second quarter of 32 percent increase compared to the same quarter of 2023. Our net revenue of 125 million in the quarter contracted 46 percent year over year, which included a decrease of 60 percentage points from the revenue presentation change related to our cash app contract renewal.
Simon Khalaf: Our ability to deliver solutions for diverse consumer and commercial use cases while continuously innovating and expanding value-added program management services.
Simon Khalaf: As discussed in our recent State of Payments report, which we released two weeks ago, consumers continue to branch out in financial services looking for alternatives to traditional banks.
Simon Khalaf: A third of consumers surveyed said they were using digital-only banks, with 63% of 18 to 34-year-olds saying they would be open to banking with non-traditional financial service providers.
Simon Khalaf: These trends have given modern and digital banks a genuine foothold in the market. These findings align with the volume growth we see on our platform. In the second quarter, TPV for our financial services customers, excluding block, grew well over 100% year over year. Our track record of scale with customers like Cash App and One Finance in the U.S., as well as Lydia and Trade Republic in Europe, has served as a powerful testimony to the level of personalization and innovation we can serve at scale for businesses looking to offer new bank-like services to their large customer base.
Simon Khalaf: Gross profit was 79 million in the quarter, a contraction of 6 percent versus the comparable quarter of 2023 primarily due to the cash app renewal pricing. This will be the last quarter the cash app renewal will affect our year over year comparison.
Simon Khalaf: These trends have given modern and digital banks a genuine foothold in the market.
Speaker Change: These findings align with the volume growth we see on our platform. At second quarter TPV for our financial services customers, excluding block, grew well over 100% year over year.
Simon Khalaf: We believe Q3 2024 will represent a turning point for our business, where our P&L will better reflect the true business momentum we see. B. Our non-gap adjusted operating expenses were 81 million, representing a 3% decline year-over-year due to the effective cost-discipline optimization and lower average head count. This resulted in an adjusted EBITDA of negative 2 million in the quarter.
Simon Khalaf: Our track record of scale with customers like Cash App and One Finance in the U.S.
Simon Khalaf: as well as Lydia and Trade Republic in Europe have served as a powerful testimony to the level of personalization and innovation we can serve at scale for businesses looking to offer new bank-like services to their large customer bases.
Simon Khalaf: We anticipate more momentum to come in 2025. I'm thrilled to share that Varo Bank, which has 5 million cards in the market, recently chose Marqeta as its partner for its card processing business. Vara will trust us to migrate their customers over from their current processor in 2025 for a five-year exclusive contract. Varo is uniquely positioned as a tech bank with its own bank charter, giving it greater control over its product stack and user interface.
Simon Khalaf: We anticipate more momentum to come in 2025.
Simon Khalaf: Our second quarter results demonstrate the continued demand for what has differentiated Marqeta's platform. Our ability to deliver solutions for diverse consumer and commercial use cases while continuously innovating and expanding value added program management services.
Speaker Change: I'm thrilled to share that Varo Bank, which has 5 million cards in the market, recently chose Marqeta as their partner for its card processing business.
Speaker Change: Vara will trust us to migrate their customers over from their current processor in 2025 for a five-year exclusive contract.
Speaker Change: Varo is uniquely positioned as a tech bank with its own bank charter giving it greater control over its product stack and user interface.
Simon Khalaf: As discussed in our recent State of Payments report, which we released two weeks ago, consumers continued to branch out in financial services looking for alternatives to traditional banks. A third of consumers surveyed said they were only they were using digital only banks with 63% of 18 to 34 year-olds saying they would be open to banking with a non-traditional financial service providers. These trends have given modern and digital banks a genuine foothold in the market.
Simon Khalaf: To realize this advantage, Varusoft is a nimble and sophisticated partner to help them innovate quickly as they look to offer their consumers real-time insights into their transactions. The TPP growth and momentum goes well beyond financial services. In fact, 10 out of our top 20 customers grew over 50% year-over-year during the quarter.
Speaker Change: To realize this advantage, Varasoft, a nimble and sophisticated partner, to help them innovate quickly as they look to offer their consumers real-time insights into their transactions.
Speaker Change: The TPP growth and momentum goes well beyond financial services.
Speaker Change: In fact, 10 out of our top 20 customers grew over 50% year-over-year during the quarter. Their use cases include expense management, SMB working capital, buy now, pay later, in addition to financial services.
Simon Khalaf: These findings align with the volume growth we see on our platform. A second quarter T.P.V, for our financial services customers excluding block grew well over 100% year-over-year. Our track record of scale with customers like CashApp and One Finance in the U.S, as well as Lydia and Trade Republic in Europe had served as a powerful testimony to the level of personalization and innovation we can serve at scale for businesses looking to offer new bank-like services to the large customer bases.
Simon Khalaf: Their use cases include expense management, SMB working capital, and buy now, pay later, in addition to financial services. This speaks to the strength of the Marqeta platform and its ability to support innovation at scale across a variety of use cases, solidifying Marqeta's platform play. While we anticipated demand for consumer use cases, we are thrilled by the demand in the commercial space as well, especially for F&B. The proliferation of marketplaces and platforms that help SMBs reach bigger markets has driven great business growth.
Speaker Change: This speaks to the strength of the Marqeta platform and its ability to support innovation at scale across a variety of use cases, solidifying Marqeta's platform play.
Speaker Change: While we have anticipated demand for consumer use cases, we are thrilled by the demand in the commercial space as well, especially with SMBs.
Speaker Change: The proliferation of marketplaces and platforms that help SMBs reach bigger markets has driven great business growth.
Simon Khalaf: We anticipate more momentum to come in 2025.
Simon Khalaf: However, these platforms have introduced many challenges requiring these SMBs to ramp up their systems and access affordable working capital to handle the elasticity of demand coming free from these marketplaces. This is where Marqeta's solutions come into play.
Simon Khalaf: I'm thrilled to share that VaroBank which has five million cards in the market recently chose Marquetta as their partner for its current processing business. Varo will trust us to migrate their customers over from their current processor in 2025 for a five year exclusive contract. Varo is uniquely positioned as a tech bank with its own bank charter given it greater control over its product stack and user interface. To realize this advantage VaroBank sought a nimble and sophisticated partner to help them innovate quickly as they look to offer their consumers real-time insights into their transactions.
Speaker Change: However, these platforms have introduced many challenges, requiring these SMBs to ramp up their systems and access affordable working capital to handle the elasticity of demand coming free from these marketplaces.
Speaker Change: This is where Marqeta's solutions come into play.
Simon Khalaf: We offer solutions ranging from expense management to commercial credit and working capital to help these businesses operate with improved efficiencies and capitalization, investing more in their business, and having more time to execute and innovate rather than having them manage antiquated back-office applications. This has driven the continued growth in expense management as TPP for this vertical grew slightly more than our average TPP growth during the quarter. To add to that growth, we signed Zoho, a global technology company serving over 700,000 businesses from SMBs to enterprises with a comprehensive suite of business management applications, during the quarter.
Speaker Change: We offer solutions ranging from expense management to commercial credit and working capital to help these businesses operate with improved efficiencies and capitalization.
Speaker Change: investing more in their business and having more time to execute and innovate rather than having them manage antiquated back-office applications.
Speaker Change: This has driven the continued growth in expense management as TPP for this vertical grew slightly more than our average TPP growth during the quarter.
Simon Khalaf: The T.P.V, growth and momentum goes well beyond financial services. In fact, 10 out of our top 20 customers grew over 50 percent year over year during the quarter. Their use cases include expense management, SMB working capital, buy now pay later in addition to financial services. This speaks to the strengths of the Marquetta platform and its ability to support innovation at scale across a variety of use cases solidifying Marquetta's platform play. While we have anticipated demand for consumer use cases, we are thrilled by the demand in the commercial space as well, especially with SMBs.
Speaker Change: To add to that growth, we have signed Zoho during the quarter. Zoho is a global technology company serving over 700,000 businesses from SMBs to enterprises with a comprehensive suite of business management applications.
Simon Khalaf: Zoho chose Marqeta as their partner because of our expertise in launching card solutions that enable businesses to manage expenses efficiently. Marqeta was also chosen because of the breadth and depth of our platform, which enables businesses to accelerate growth globally. While digital banking and expense management continue to perform well on our platform, we continue to innovate in e-commerce and digital payments. We recently announced that we are the first U.S. issuer processor certified by Visa to support Visa Flexible Credentials.
Speaker Change: Zoho chose Marqeta as their partner because of our expertise in launching card solutions that enables businesses to manage expenses efficiently.
Speaker Change: Marqeta was also chosen because of the breadth and depth of our platform, which enables businesses to accelerate growth globally.
Speaker Change: While digital banking and expense management continue to perform well on our platform, we continue to innovate in e-commerce and digital payments.
Simon Khalaf: The proliferation of marketplaces and platforms that help SMBs reach bigger markets has driven great business growth. However, these platforms have introduced many challenges, requiring these SMBs to ramp up their systems and access affordable working capital to handle the elasticity of demand coming from these marketplaces. This is where Marqeta's solutions come into play. We offer solutions ranging from expense management to commercial credit and working capital to help these business operate with improved efficiencies and capitalization.
Speaker Change: We recently announced that we are the first U.S. issuer processor certified by Visa to support Visa Flexible Credential.
Simon Khalaf: With some Visa Flex cards, consumers can allow a single card product to toggle between payment methods on each transaction, bringing multiple funding sources to one card. Cardholders can choose whether to use debit, credit, pay in for, with buy now, pay later, or even pay using rewards points. Currently, we're partnering with Affirm, the first in the U.S. to offer Visa Flexible Credential to enable this capability for that Affirm card.
Speaker Change: With some Visa Flex cards, consumers can allow a single-card product.
Speaker Change: To toggle between payment methods on each transaction, bring in multiple funding sources to one card. Cardholders can choose whether to use debit, credit, pay-in-for, with buy now, pay later, or even pay using rewards points.
Simon Khalaf: Investing more in their business and having more time to execute and innovate rather than having them manage antiquated back office applications. This has driven the continued growth in expense management as TPP for this vertical grew slightly more than our average TPP growth during the quarter.
Speaker Change: Currently, we are partnering with Affirm, the first in the U.S. to offer Visa Flexible Credential, to enable this capability for that Affirm card.
Simon Khalaf: This reinforces Marqeta's commitment to innovation and provides us with further differentiation in the BMPL space. In the future, we believe this technology will be utilized more broadly by Marqeta's debit and credit customers in use cases beyond the NPL. The combination of the innovation we power with the ability to execute at scale truly differentiates Marqueta.
Speaker Change: This reinforces Marqeta's commitment to innovation and provides us with further differentiation in the BNPL space.
Speaker Change: In the future, we believe this technology will be utilized more broadly by Marqeta's debit and credit customers in use cases beyond the NPL.
Simon Khalaf: To add to that growth, we have signed Zoho during the quarter. Zoho is a global technology company serving over 700,000 businesses from SMBs to enterprises with a comprehensive suite of business management applications. Zoho chose Marqeta as their partner because of our expertise in launching card solutions that enables businesses to manage expenses efficiently. Marqeta was also chosen because of the breadth and depth of our platform, which enables businesses to accelerate growth globally.
Speaker Change: The combination of the innovation we power, with the ability to execute at scale, truly differentiates Marqueta.
Simon Khalaf: As our customers reach scale and the regulatory environment changes, the guidance we provide our customers becomes a true differentiator. That's why we continue to enhance both program management and compliance. With the launch of our new office in Warsaw, Poland, we're now equipped to support more program management capabilities for our European customers, allowing us to deepen our already successful offering in the market. Program management is important to our long-term growth for the following reasons.
Speaker Change: As our customers reach scale and the regulatory environment changes.
Speaker Change: The guidance we provide our customers becomes a true differentiator.
Speaker Change: That's why we continue to enhance both program management and compliance.
Speaker Change: With the launch of our new office in Warsaw, Poland, we're now equipped to support more program management capabilities for our European customers, allowing us to deepen our already successful offering in the market.
Simon Khalaf: While digital banking and expense management continue to perform well on our platform, we continue to innovate in e-commerce and digital payments. We recently announced that we are the first US issuer processor certified by visa to support visa flexible credential. With some visa flex cards, consumers can allow a single card product to toggle between payment methods on each transaction, bringing multiple funding sources to one card. Card holders can choose whether to use debit, credit, paying for, with by now pay later, or even pay using rewards points.
Speaker Change: Program management is important to our long-term growth for the following reasons. First, increased services add incremental net revenue, typically with higher gross profit margins.
Simon Khalaf: First, increased services add incremental net revenue, typically with higher gross profit margins. In the second quarter, net revenue driven by our suite of risk solutions, such as 3DS and risk control, increased by 61% year-over-year. Second, it improves our customers' speed to market and our time to realize gross profit. As an example, if a customer looks to secure a bank partner without assistance, this can take 9 to 12 months. However, without assistance, we could bring this time down dramatically.
Speaker Change: In the second quarter, net revenue driven by our suite of risk solutions, such as 3DS and risk control, increased by 61% year over year.
Speaker Change: Second, it improves our customers' speed to market and our time to realize gross profit.
Speaker Change: As an example, if a customer looks to secure a bank partner without assistance, this can take 9 to 12 months. However, without assistance, we can bring this time down dramatically.
Simon Khalaf: Currently, we're partnering with Affirm, the first in the US to offer visa flexible credential to enable this capability for that Affirm card. This reinforces Marqeta's commitment to innovation and provides us with further differentiation in the BNPL space. In the future, we believe this technology will be utilized more broadly by Marqeta's debit and credit customers in use cases beyond BNPL. The combination of the innovation with power, with the ability to execute at scale, truly differentiates Marqeta. As our customer reach scale and the regulatory environment changes. The guidance we provide our customers becomes it through differentiator. That's why we continue to enhance both program management and compliance.
Simon Khalaf: Third, it positioned us well with companies looking to offer embedded finance. These companies can focus on their brand and their customer experience while leaving cumbersome details around offerings such as Dispute to Marqueta. All these updates speak to our platform's breadth, depth, and scale. Why is our ability to innovate?
Speaker Change: Third, it positions us well with companies looking to offer embedded finance. These companies can focus on their brand and their customer experience while leaving cumbersome details around offerings such as Dispute to Marqeta.
Speaker Change: All these updates speak to our platform's breadth, depth, and scale, while our ability to innovate
Simon Khalaf: demonstrate our expertise. Delivering solutions for consumer and commercial debit and credit in countries around the world with a modern, flexible architecture is very appealing to both existing customers and new prospects. For example, we're already hearing from existing customers who want to leverage Visa Flexible Credentials for their business. In addition, our pipeline includes large digital brands with significant consumer adoption that are looking for a comprehensive and global payment solution encompassing debit, revolving credit, and BMPL.
Speaker Change: Demonstrate our expertise.
Speaker Change: Delivering solutions for consumer and commercial, debit and credit, in countries around the world with modern flexible architecture is very appealing to both existing customers and new prospects.
Speaker Change: For example, we're already hearing from existing customers who want to leverage Visa Flexible Credentials for their business.
Simon Khalaf: With a launch of our new office in Warsaw, Poland, we're now equipped to support more program management capabilities for our European customers, allowing us to deepen our already successful offering in the market. First, increased services add incremental net revenue, typically with higher gross profit margins. In the second quarter net revenue driven by our suite of risk solutions, such as 3DX and risk control, increased by 61% year over year. Second, it improves our customer speed to market and our time to realize gross profit.
Speaker Change: In addition, our pipeline contains large digital brands with significant consumer adoption that are looking for a comprehensive and global payment solution encompassing debit, revolving credit, and BMPL.
Simon Khalaf: Before I turn it over to Mike, I wanted to mention one last milestone. We believe the second quarter represents the last quarter of negative adjusted EBITDA. We have now proven our ability to support TPP growth and our customers' innovation while managing our costs effectively. The results this quarter, combined with this improved financial profile, give us confidence that the company can grow in a sustainable and profitable way in the years to come. I will now turn it over to Mike to discuss our financials in more depth.
Speaker Change: Before I turn it over to Mike, I wanted to mention one last milestone.
Mike Milotich: We believe the second quarter represents the last quarter of negative adjusted EBITDA.
Speaker Change: We have now proven our ability to support TPP growth and our customers' innovation while managing our costs effectively.
Simon Khalaf: As an example, the customer looks to secure a bank partner without assistance. This can take 9-12 months. However, without assistance, we can bring this time down dramatically. Third, it positions us well with companies looking to offer embedded finance. These companies can focus on their brand and their customer experience, while leaving cumbersome details around offerings such as dispute to Marqeta. All these updates speak to our platform's breadth, depth, and scale, while our ability to innovate demonstrates our expertise.
Mike Milotich: The results this quarter, combined with this improved financial profile, gives us confidence that the company can grow in a sustainable and profitable way in the years to come.
Speaker Change: I will now turn it over to Mike to discuss our financials in more depth.
Mike Milotich: Thank you, Simon, and good afternoon, everyone. Our Q2 results demonstrate continued momentum, with all of our key metrics for the quarter exceeding our expectations. Broad-based TPV outperformance, fueled by continued strength in financial services, expense management, and BNPL, drove both net revenue and gross profit upsides. In addition, our continued execution of efficiency and optimization initiatives, when coupled with higher gross profit, led to a significantly lower adjusted EBITDA loss in the quarter. Q2 TPV was $71 billion, a year-over-year increase of 32%. Non-block TPV grew more than 15 points faster than block growth.
Mike Milotich: Thank you, Simon, and good afternoon, everyone. Our Q2 results demonstrate continued momentum with all of our key metrics for the quarter exceeding our expectations.
Mike Milotich: broad-based tv outperformance fueled by continued strengththened financial services expense management and bnpl drove both net revenue and grossprofit upside
Speaker Change: In addition, our continued execution of efficiency and optimization initiatives, when coupled with higher gross profit, led to a significantly lower adjusted EBITDA loss in the quarter.
Simon Khalaf: Delivering solutions for consumer and commercial, debit and credit in countries around the world with modern, flexible architecture is very appealing to both existing customers and new prospects. For example, we're ready hearing from existing customers who want to leverage visa flexible credentials for the business. In addition, our pipeline contains large digital brands with significant consumer adoption that are looking for a comprehensive and global payment solution in encompassing debit, evolving credit, and the MPL.
Speaker Change: Q2 TPV was 71 billion, a year-over-year increase of 32%. Non-block TPV grew more than 15 points faster than block growth.
Mike Milotich: Financial services, lending, including Buy Now, Pay Later, and expense management all grew at roughly the same rate, slightly faster than the overall company, partially offset by on-demand delivery. Financial services, by far our largest use case, continues to deliver strong growth despite its size. Our long-established customers continue to thrive, while some of our newer customers across new banking and accelerated wage access are experiencing rapid growth. PPV, driven by customers who launched within the last two years, is contributing about 10 points to the growth within financial services due to volume that is many multiples larger now than it was in Q2 last year.
Speaker Change: financial services lending including by now pay later and expense management all grew it roughly the same rate slightly faster than the overall company partially offset by on-demand delivery
Speaker Change: Financial services, by far our largest use case, continues to deliver strong growth despite its size.
Simon Khalaf: Before I turn it over to Mike, I wanted to mention one last milestone. We believe the second quarter represents the last quarter of negative adjusted EBDA. We have now proven our ability to support TPG growth and our customers' innovation while managing our costs effectively. The results of this quarter combined with this improved financial profile gives us confidence that the company can grow in a sustainable and profitable way in the years to come.
Speaker Change: Our long-established customers continue to thrive, while some of our newer customers across neo-banking and accelerated wage access are experiencing rapid growth.
Speaker Change: PPV, driven by customers who launched within the last two years, is contributing about 10 points to the growth within financial services due to volume that is many multiples larger now than it was in Q2 last year.
Mike Milotich: Strong in-city growth in lending, including Buy Now, Pay Later, continues to be helped by the adoption of our BNPL customers' Pay Anywhere card solutions targeted at their consumers, which are now over 15% of our BNPL volume. Expense management growth accelerated slightly for the third straight quarter as the seamless flexibility and control we enable for cards is helping to drive our customers' robust performance, especially among our top customers. On-demand delivery growth remained in the double-digits.
Speaker Change: Strong and steady growth in lending, including buy now pay later, continues to be helped by the adoption of our BNPL customers pay anywhere card solutions targeted at their consumers, which are now over 15% of our BNPL volume.
Mike Milotich: I will now turn it over to Mike to discuss our financials in more than. Thank you Simon and good afternoon everyone. Our Q2 results demonstrate continued momentum with all of our key metrics for the quarter exceeding our expectations. Broadbase TBB outperformance, fueled by continued strength and financial services, expense management and BNPL, drove both net revenue and gross profit upside. In addition, our continued execution of efficiency and optimization initiatives when coupled with higher gross profit led to a significantly lower adjusted EBDA loss in the quarter.
Speaker Change: Expense management growth accelerated slightly for the third straight quarter, as the seamless flexibility and control we enable for cards is helping to drive our customers' robust performance, especially among our top customers.
Speaker Change: On-demand delivery growth remained in the double digits.
Mike Milotich: Q2 net revenue was $115 million, a contraction of 46% year over year. The most significant impact on net revenue growth was the 60-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 the cash app's primary payment network volume, which were included in net revenue and cost of revenue prior to Q3 2023. Additionally, there is an additional 9 percentage point decline in net revenue growth due to the Cash App renewal pricing. Block net revenue concentration was 47% in Q2, decreasing two points from last quarter.
Speaker Change: Q2 net revenue was $115 million, a contraction of 46% year-over-year. The most significant impact on net revenue growth was the 60-point growth headwind related solely to the revenue presentation change resulting from the cash app renewal.
Mike Milotich: Q2-TPV was 71 billion, a year of your increase at 32%, non-block-TPV grew more than 15 points faster than block growth. Financial services, lending including by now pay later and expense management all grew at roughly the same rate, slightly faster than the overall company, partially offset by on-demand delivery. Financial services by far our largest use case continues to deliver strong growth despite its size. Our long-established customers continue to thrive while some of our newer customers across Neil Banking and accelerated wage access are experiencing rapid growth.
Speaker Change: As we've described before, this change in revenue presentation is related to the bank and network fees associated with the cash app's primary payment network volume, which were included in net revenue and cost of revenue prior to Q3 2023.
Speaker Change: There is an additional 9 percentage point decline in net revenue growth due to the Cash App renewal pricing.
Speaker Change: Block net revenue concentration was 47% in Q2, decreasing 2 points from last quarter. Non-block revenue growth accelerated by over 10 points as we lapped a few prior year renewals, and non-block TPV growth remained strong across several use cases.
Mike Milotich: Non-block revenue growth accelerated by over 10 points as we lapped a few prior year renewals, and non-block TPV growth remained strong across several use cases. Our net revenue take rate of 18 bps is consistent with last quarter. Q2 gross profit was $79 million, a gross profit margin of 63%. Gross profit margin is generally low in Q2 compared to other quarters as two of our network incentive contracts run April to March, meaning that our incentives reset in Q2 and increase over time within the contract year. On a year-over-year basis, our gross profit contracted 6%, consistent with last quarter. The Cash App Renewal lowered gross profit growth by mid-20s percentage points.
Mike Milotich: PPV driven by customers who launched within the last two years is contributing about 10 points to the growth within financial services due to volume that is many multiples larger now than it was in Q2 last year. Strong and city growth in lending, including by now pay later, continues to be helped by the adoption of our BNPL customers pay anywhere card solutions targeted at their consumers which are now over 15% of our BNPL volume.
Speaker Change: Our net revenue take rate of 18 bps is consistent with last quarter.
Speaker Change: Q2 gross profit was $79 million, a gross profit margin of 63%.
Speaker Change: Gross profit margin is generally low in Q2 compared to other quarters as two of our network incentive contracts run April to March, meaning that our incentives reset in Q2 and increase over time within the contract year.
Speaker Change: On a year-over-year basis, our gross profit contracted 6%, consistent with last quarter.
Mike Milotich: Expense management growth accelerated slightly for the third straight quarter, as the seamless flexibility and control we enable for cards is helping to drive our customers robust performance especially among our top customers. On-demand delivery growth remained in the double digits. Q2 net revenue was 115 million a contraction of 46% year-over-year. The most significant impact on net revenue growth was the 60 point growth headwind related solely to the revenue presentation change resulting from the cash app renewal.
Speaker Change: The Cash App Renewal lowered gross profit growth by mid-20s percentage points. As a reminder, the Cash App Revenue Presentation change does not impact gross profit.
Mike Milotich: As a reminder, the Cash App revenue presentation change does not impact gross profit. Q2 is the last quarter impacted by the Cash App renewal. Therefore, our quarterly year-over-year comparisons will better represent our true business trajectory going forward. The Square Renewal lowered Q2 gross profit growth in the low to mid-single digits, which will start the anniversary in Q4. Our gross profit take rate was 11 BPS, 1.4 basis points lower than last quarter, driven by the annual reset of incentives based on the contract year. This is consistent with the impact we see every year in Q2 and has no impact on an annual basis. Q2 adjusted operating expenses were $81 million, a decrease of 3% versus last year.
Speaker Change: Q2 is the last quarter impacted by the Cash App renewal, therefore our quarterly year-over-year comparisons will better represent our true business trajectory going forward.
Speaker Change: The Square Renewal lowered Q2 gross profit growth in the low to mid-single digits, which will start the anniversary in Q4.
Speaker Change: Our gross profit take rate was 11 bps, 1.4 basis points lower than last quarter, driven by the annual reset of incentives based on the contract year. This is consistent with the impact we see every year in Q2 and has no impact on an annual basis.
Mike Milotich: As we've described before, this change in revenue presentation is related to the Banking Network fees associated with the cash app's primary payment network volume which were included in net revenue and cost of revenue prior to Q3 2023. There is an additional 9 percentage point decline in net revenue growth due to the cash app renewal pricing. Block net revenue concentration was 47% in Q2, decreasing two points from last quarter. Non-block revenue growth accelerated by over 10 points as we lapped a few prior year renewals and non-block TPV growth remained strong across several use cases.
Speaker Change: Q2 adjusted operating expenses were $81 million, a decrease of 3% versus last year. This was mostly due to lower headcount for part of the quarter after our restructuring in May 2023.
Mike Milotich: This was mostly due to lower headcount for part of the quarter after our restructuring in May 2023. In addition, we continue to execute our efficiency and cost optimization initiatives well, which exceeded our expectations this quarter. Due to Adjusted EBITDA was negative $1.8 million, resulting in a negative margin of 1%. Interest income was $14 million, driven by continued elevated interest rates. Q2 Gap Net Income was positive $119 million, which included a $158 million one-time benefit to stock-based compensation recognized in previous periods due to the forfeiture of the Executive Chairman Long-Term Performance Award. As we mentioned last quarter, this pre-IPO award included service requirements for Jason to be either the CEO or Chairman. The award was forfeited once he stepped down from the executive chairman role in June.
Speaker Change: In addition, we continue to execute our efficiency and cost optimization initiatives well, which exceeded our expectations this quarter.
Speaker Change: Due to adjusted EBITDA was negative 1.8 million, resulting in a negative margin of 1%.
Mike Milotich: Our net revenue take rate of 18 BIPs is consistent with last quarter. Q2 gross profit was 79 million a gross profit margin of 63%. Gross profit margin is generally low in Q2 compared to other quarters as two of our network incentive contracts run April to March meaning that our incentives reset in Q2 and increase over time within the contract year. On a year-of-year basis, our gross profit contracted 6% consistent with last quarter. The cash app renewal lowered gross profit growth by mid 20s percentage points. As a reminder, the cash app revenue presentation change does not impact gross profit.
Speaker Change: Interest income was $14 million driven by continued elevated interest rates.
Speaker Change: Due to gap net income was positive $119 million, which included a $158 million one-time benefit to stock-based compensation recognized in previous periods due to the forfeiture of the Executive Chairman Long-Term Performance Award.
Speaker Change: As we mentioned last quarter, this pre-IPO award included service requirements for Jason to be either the CEO or Executive Chairman.
Speaker Change: The award was forfeited once he stepped down from the Executive Chairman role in June .
Mike Milotich: We have broken this out into a separate line item on our P&L to help isolate the one-time impact this quarter and going forward. In May, we received a new 200 million buyback authorization from the board, which enabled us to repurchase 11 million shares at an average price of $5.39 for $59 million in Q2. We ended the quarter with $1.2 billion of cash and short-term investments.
Speaker Change: We have broken this out into a separate line item on our P&L to help isolate the one-time impact this quarter and going forward.
Mike Milotich: Q2 is a last quarter impacted by the cash app renewal therefore our quarterly year-of-year comparisons will better represent our true business trajectory going forward. The square renewal lowered Q2 gross profit growth in the low-to-mid single digits which will start to anniversary in Q4. Our gross profit take rate was 11 bips, 1.4 basis points lower than last quarter, driven by the annual reset of incentives based on the contract year. This is consistent with the impact we see every year in Q2 and has no impact on an annual basis.
Speaker Change: In May, we received a new $200 million buyback authorization from the board, which enabled us to repurchase 11 million shares at an average price of $5.39 for $59 million in Q2.
Speaker Change: We ended the quarter with $1.2 billion of cash and short-term investments.
Mike Milotich: Now let's shift to our second half and full year outlook. As we move into Q3, we begin the first chapter of a new era for Marqueta, where we aim to deliver sustainable, profitable growth. We are returning to growth now that we have completed the resetting of the large majority of our customer contracts and the cash app renewal in particular. We have established longer-term partnerships with our customers where we can work together to drive growth with win-win outcomes.
Speaker Change: Now let's shift to our second half and full year outlook.
Speaker Change: As we move into Q3, we begin the first chapter of a new era for Marqueta, where we aim to deliver sustainable, profitable growth.
Speaker Change: we are returning to growth now that we have laped the resetting of the large majority of our customer contracts and the cash up renew in particular we have established longer-term partnerships with our customers where we can work together to drive growth with win-win outcomes
Mike Milotich: In addition, we expect to be adjusted EBITDA positive going forward at an increasing rate over time. Renewed expense discipline, a focus on efficiency and optimization, and the realization of our platform economies of scale as the business flourishes have put us on a clear path to gap profitability in the coming years. We expect both Q3 and Q4 net revenue growth to be between 16 to 18%, in line with what we indicated last quarter.
Mike Milotich: In addition, we continue to execute our efficiency and cost optimization initiative as well, which exceeded our expectations this quarter. Due to adjusted EBITDA was negative 1.8 million, resulting in a negative margin of 1%. Interest income was 14 million, driven by continued elevated interest rates. Due to gap net income was positive 119 million, which included a 158 million, one-time benefit to stock base compensation. As we mentioned last quarter, this pre IPO award included service requirements for Jason to be either the CEO or executive chairman.
Speaker Change: In addition, we expect to be adjusted Ivata positive going forward at an increasing rate over time.
Speaker Change: Renewed expense discipline, a focus on efficiency and optimization, and the realization of our platform economies of scale as the business flourishes has put us on a clear path to gap profitability in the coming years.
Speaker Change: We expect both Q3 and Q4 net revenue growth to be between 16 to 18% in line with what we indicated last quarter.
Mike Milotich: Therefore, full-year net revenue growth is expected to contract 24 to 27 percent, again consistent with the expectations we shared last quarter. Q3 gross profit growth is expected to grow between 25 and 27%, while Q4 is expected to grow approximately three points slower than Q3. As a result, second half growth is consistent with the expectations we shared last quarter.
Speaker Change: Therefore, full-year net revenue growth is expected to contract 24 to 27 percent, again consistent with the expectations we shared last quarter.
Speaker Change: Q3 gross profit growth is expected to grow between 25 and 27 percent, while Q4 is expected to grow approximately three points slower than Q3.
Mike Milotich: The award was forfeited once he stepped down from the executive chairman role in June. We have broken this out into a separate line on them on our P&L to help isolate the one-time impact this quarter and going forward. In May, we received a new 200 million buyback authorization from the board, which enabled us to repurchase 11 million shares at an average price of $5.39 for $59 million in Q2. We ended the quarter with 1.2 billion of cash and short-term investments.
Speaker Change: As a result, second half growth is consistent with the expectations we shared last quarter.
Mike Milotich: Both quarters are expected to benefit from non-block gross profit growth of over 30 percent, which is accelerating from the first half as we have now lapped heavy renewal activity, as well as the growing contribution from the ramping of new cohorts driven by improving sales last year. The gross profit growth slows a little from Q3 to Q4, mostly due to the difference in year-over-year comparisons, where Q3 has a slightly easier comp due to higher bank fees last year, while Q4 has a slightly tougher comp due to a strong 2023 holiday season, particularly in BNPL, as well as lapping a platform partner bonus.
Speaker Change: Both quarters are expected to benefit from non-block gross profit growth of over 30%, which is accelerating from the first half as we have now lapped heavy renewal activity as well as the growing contribution from the ramping of new cohorts driven by improving sales last year.
Speaker Change: The gross profit growth slows a little from Q3 to Q4, mostly due to the difference in year-over-year comparisons.
Mike Milotich: Now let's shift to our second half and full year outlook. As we move into Q3, we begin the first chapter of a new era for Marquetta, where we aim to deliver sustainable, profitable growth. We are returning to growth now that we have lapped the resetting of the large majority of our customer contracts and the cash app renewal in particular. We have established longer-term partnerships with our customers where we can work together to drive growth with win-win outcomes.
Speaker Change: where Q3 has a slightly easier comp due to higher bank fees last year, while Q4 has a slightly tougher comp due to a strong 2023 holiday season, particularly in BNPL, as well as lapping a platform partner bonus.
Mike Milotich: We expect the gross profit margin to be in the low 70s in both Q3 and Q4 as network incentive levels increase from Q2. Therefore, we expect full-year gross profit growth to be 7 to 9 percent, consistent with expectations we shared last quarter. Net revenue growth is expected to be six to nine points lower than gross profit growth in Q3 and Q4, primarily for three reasons, all of which we discussed earlier in the year.
Speaker Change: We expect a gross profit margin to be in the low 70s in both Q3 and Q4, as network incentive levels increase from Q2. Therefore, we expect full-year gross profit growth to be 7-9%, consistent with the expectations we shared last quarter.
Mike Milotich: In addition, we expect to be adjusted even top positive going forward at an increasing rate over time. Renewed expense discipline, a focus on efficiency and optimization, and the realization of our platform economies of scale as the business flourishes has put us on a clear path to gap profitability in the coming years. We expect both Q3 and Q4 net revenue growth to be between 16 to 18% in line with what we indicated last quarter.
Speaker Change: Net revenue growth is expected to be six to nine points lower than gross profit growth in Q3 and Q4 primarily for three reasons, all of which we've discussed earlier in the year.
Mike Milotich: First, a renegotiated platform partnership with reduced pricing that went into effect in Q1 is leading to a revenue presentation impact as we pass through the proportional savings to Cash App based on the terms of our Cash App contract. This reduces net revenue growth by three to four points per quarter until it laps in Q1 2025 but has no impact on gross profit. Second, starting in Q3, we are optimizing the setup of a couple of programs that have been incurring unnecessary cross-border network costs.
Speaker Change: First, a renegotiated platform partnership with reduced pricing that went into effect in Q1 is leading to a revenue presentation impact as we pass through the proportional savings to Cash App based on the terms of our Cash App contract.
Mike Milotich: Therefore, full year net revenue growth is expected to contract 24 to 27% again consistent with the expectations we shared last quarter. Q3 gross profit growth is expected to grow between 25 and 27% while Q4 is expected to grow approximately 3 points slower than Q3. As a result, second half growth is consistent with the expectations we shared last quarter. Both quarters are expected to benefit from non-block gross profit growth of over 30%, which is accelerating from the first half as we have now lapped heavy renewal activity, as well as the growing contribution from the ramping of new cohorts driven by improving sales last year.
Speaker Change: This reduces net revenue growth by 3-4 points per quarter until it laps in Q1 2025 but has no impact on gross profit.
Speaker Change: Second, starting in Q3, we are optimizing the setup of a couple of programs that have been incurring unnecessary cross-border network costs.
Mike Milotich: Since we often pass through the cross-border network fee premium to our customers, this optimization reduces net revenue growth by 2 to 3 points per quarter until it peaks in Q3 2025 but has no impact on gross profit. Third, TPP growth and our Powered by Marqueta business are growing significantly faster than our Managed by Marqueta business. This materially impacts net revenue due to the lack of network and bank fees but has a much lesser impact on gross profit.
Speaker Change: Since we often pass through the cross-border network fee premium to our customers, this optimization reduces net revenue growth by 2 to 3 points per quarter until it laps in Q3 2025 but has no impact on gross profit.
Speaker Change: Third, TBV growth and our Powered by Marqueta business is growing significantly faster than our Managed by Marqueta business.
Mike Milotich: The gross profit growth slows a little from Q3 to Q4 mostly due to the difference in year-over-year comparisons, where Q3 has a slightly easier comp due to higher bank fees last year, while Q4 has a slightly tougher comp due to a strong 2023 holiday season, particularly in BNPL, as well as lapping a platform partner bonus. We expect a gross profit margin to be in the low 70s in both Q3 and Q4 as network incentive levels increase from Q2.
Speaker Change: This materially impacts net revenue due to the lack of network and bank fees but has a much lesser impact on gross profit.
Mike Milotich: As we have previously discussed, while the net revenue take rate is lower for our Powered by Marqueta business, the gross profit take rate is much closer to the managed buy. This is expected to contribute one to two points to the growth gap in Q3 and Q4. With our continued success in executing cost optimization and efficiency initiatives, we now expect our adjusted operating expense growth in both Q3 and Q4 to be in the mid-segment.
Speaker Change: As we have previously discussed, while the net revenue take rate is lower for our Powered by Marqueta business,
Speaker Change: The gross profit take rate is much closer to manage buy. This is expected to contribute one to two points to the growth gap in Q3 and Q4.
Speaker Change: With our continued success in executing cost optimization and efficiency initiatives, we now expect our adjusted operating expense growth in both Q3 and Q4 to be in the mid-teens.
Mike Milotich: Therefore, we expect full-year gross profit growth to be 79% consistent with expectations we shared last quarter. Net revenue growth is expected to be six to nine points lower than gross profit growth in Q3 and Q4 primarily for three reasons, all of which we've discussed earlier in the year. First, a renegotiated platform partnership with reduced pricing that went into effect in Q1 is leading to a revenue presentation impact as we pass through the proportional savings to cash-app based on the terms of our cash-app contract.
Mike Milotich: This growth is a result of thoughtful reinvestment in specific capabilities to drive growth and enhance platform resiliency underway since Q4 last year, following our restructuring in May 2023. Given our gross profit growth remains on track while our adjusted operating expenses are trending meaningfully lower, we now expect our adjusted EBITDA margin to be two points higher than we shared previously. Therefore, our just-to-leave-at-daw margin is expected to be between 4% and 6% in Q3. 6-8% in Q4 and 3-5% for the full year.
Speaker Change: This growth is a result of thoughtful reinvestment in specific capabilities to drive growth and enhance platform resiliency underway since Q4 last year following our restructuring in May 2023.
Mike Milotich: This reduces net revenue growth by three to four points per quarter until it laps in Q1 2025 but has no impact on gross profit. Second, starting in Q3, we are optimizing the setup of a couple of programs that have been incurring unnecessary cross-border network costs. Since we often pass through the cross-border network fee premium to our customers, this optimization reduces net revenue growth by two to three points per quarter until it laps in Q3 2025 but has no impact on gross profit.
Speaker Change: Given our gross profit growth remains on track, while our adjusted operating expenses are trending meaningfully lower, we now expect our adjusted EBITDA margin to be two points higher than we shared previously.
Speaker Change: Therefore, our justity by dollar margin is expected to be between 4% and 6% in Q3.
Speaker Change: 6-8% in Q4 and 3-5% for the full year.
Mike Milotich: To wrap up, the business is at an exciting turning point as we enter the second half of 2024. Our Q2 results demonstrate the continued momentum in our business. TBV growth remains robust at 32%, fueled by strong results across financial services, expense management, and BNPL use cases among both well-established customers, as well as those who are newer to our platform. As Simon mentioned, TPV for 10 of our top 20 customers grew by over 50% in Q2.
Speaker Change: To wrap up, the business is at an exciting turning point as we enter into the second half of 2024. Our Q2 results demonstrate the continued momentum in our business.
Speaker Change: TBV growth remains robust at 32% fueled by strong results across financial services, expense management, and BNPL use cases among both well-established customers as well as those who are newer to our platform.
Mike Milotich: Third, TBB growth in our powered by market of business is growing significantly faster than our managed by market of business. This materially impacts net revenue due to the lack of network and bank fees but has a much lesser impact on gross profit. As we have previously discussed, while the net revenue take rate is lower for our powered by market of business, the gross profit take rate is much closer to managed by.
Speaker Change: As Simon mentioned, the TPV for 10 of our top 20 customers grew by over 50% in Q2.
Mike Milotich: Gross profit growth was weighed down by the cash app renewal for the last time, and accelerating non-block growth signals the strong underlying growth of the business. Well executed efficiency and optimization initiatives continue to lower adjusted operating expenses without sacrificing innovation or platform resiliency, compliance, and security. As we begin the second half of 2024, we expect TPV growth to remain over 30% based on the current trajectory and the newer programs that are still rampant.
Simon Khalaf: Gross profit growth was weighed down by the cash-up renewal for the last time and accelerating non-block growth signals the strong underlying growth of the business.
Speaker Change: Well-executed efficiency and optimization initiatives continue to lower adjusted operating expenses without sacrificing innovation or platform resiliency, compliance, and security.
Mike Milotich: This is expected to contribute one to two points to the growth gap in Q3 and Q4. With our continued success in executing cost optimization and efficiency initiatives, we now expect our adjusted operating expense growth in both Q3 and Q4 to be in the midteens. This growth is a result of thoughtful reinvestment in specific capabilities to drive growth and enhance platform resiliency underway since Q4 last year following our restructuring in May 2023.
Speaker Change: As we begin the second half of 2024, we expect TPV growth to remain over 30% based on the current trajectory and the newer programs that are still ramping.
Mike Milotich: The variety of use cases across consumer and commercial and multiple geographies showcases the strength of our platform. With the large concentration of contract renewals behind us, the TPE growth is expected to translate into gross profit growth in the mid-20s, with some quarterly variation. Finally, the P&L should reflect growth commensurate with the underlying strength of the business. The expected gross profit growth combined with the disciplined adjusted operating expense trajectory gives us the confidence to raise the adjusted EBITDA margin expectations to mid to high single digits in the second half, well ahead of what we expected at the start of the year. This is a great start on our path to profitability. I will now turn it over to the operator for Q&A.
Simon Khalaf: The variety of use cases across consumer and commercial and multiple geographies showcases the strength of our platform.
Speaker Change: With the large concentration of contract renewals behind us, the TPE growth is expected to translate into gross profit growth in the mid-20s, with some quarterly variation.
Mike Milotich: Given our gross profit growth remains on track, while our adjusted operating expenses are trending significantly lower, we now expect our adjusted EBITDA margin to be two points higher than we shared previously. Therefore, our adjusted EBITDA margin is expected to be between four and six percent in Q3, six and eight percent in Q4 and three to five percent for the full year.
Speaker Change: Finally, the P&L should reflect the growth commensurate with the underlying strength of the business.
Simon Khalaf: The expected gross profit growth, combined with the discipline,
Simon Khalaf: Disciplined adjusted operating expense trajectory gives us the confidence to raise the adjusted EBITDA margin expectations to mid to high single digits in the second half, well ahead of what we expected at the start of the year. This is a great start on our path to profitability.
Mike Milotich: To wrap up, the business is at an exciting turning point as we enter into the second half of 2024. Our Q2 results demonstrate the continued momentum in our business. TBB growth remains robust at 32 percent, fueled by strong results across financial services, expense management, and BNPL use cases among both well-established customers, as well as those who are newer to our platform. Simon mentioned the TPV for 10 of our top 20 customers grew by over 50% in Q2.
Speaker Change: I will now turn it over to the operator for Q&A.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star then 1 on your touch-tone phone.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Mike Milotich: Gross profit growth was weighed down by the cash-up renewal for the last time and accelerating non-block growth signals the strong underlying growth of the business. Well-executed efficiency and optimization initiatives continue to lower adjusted operating expenses without sacrificing innovation or platform resiliency, compliance and security. As we begin the second half of 2024, we expect TPV growth to remain over 30% based on the current trajectory and the newer programs that are still ramping.
Speaker Change: In the interest of time, please limit yourself to one question and one follow-up.
Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. In the interest of time, please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question today comes from Timothy Chiodo with UBS; please go ahead.
Simon Khalaf: At this time, we will pause momentarily to assemble our roster.
Speaker Change: the first question today comes from timothy choto with u b s please go ahead
Timothy Chiodo: Great Thank you for taking the time to answer the question. You mentioned the Affirm partnership with VisaFlex Credentials, but I was hoping we could also expand upon Affirm's role within Apple Pay, where it will be one of the key or maybe for some time, one of the only options for Buy Now, Pay Later there as Apple sort of sunsets their own Buy Now, Pay Later efforts. So maybe you could just expand upon Marqueta's role when Affirm is used in Apple Pay and if there is any broader role that Marqueta will be playing within the Apple Pay, Buy Now, Pay Later ecosystem.
timothy choto: great thank you for taking the question you mentioned the affirm partnership with theseaflex credentials but i was hoping we could also expand upon affirm's role within apple pay where there will be one of the key or
Mike Milotich: The variety of use cases across consumer and commercial and multiple geographies showcases the strength of our platform. With the large concentration of contract renewals behind us, the TPV growth is expected to translate into gross profit growth in the mid-20s with some quarterly variation. Finally, the P&L should reflect the growth, commensurate with the underlying strength of the business. The expected gross profit growth combined with the discipline, discipline-adjusted operating expense trajectory gives us the confidence to raise the adjusted petal margin expectations to mid to high single digits in the second half, well ahead of what we expected at the start of the year. This is a great start on our path to profitability.
Speaker Change: Maybe for some time one of the only options for Buy Now Pay Later there is Apple sort of sunsetted their own Buy Now Pay Later efforts. So maybe you could just expand upon Marqueta's role when a firm is used in Apple Pay and if there is any broader role that Marqueta will be playing within the Apple Pay Buy Now Pay Later ecosystem.
Simon Khalaf: Hey Tim, Simon here. Thank you so much for the question. So the trend is buy now, pay later. Migrating from merchant integration into integrating into either cards that have buy now, pay later or integration into wallets, giving the ability to do buy now, pay later anywhere is a trend that we've spoken about. So exactly what you have mentioned, we have two big initiatives that, on an ecosystem perspective, are gonna like put fuel on this fire. And I'd say both of these are gonna provide Marqueta with phenomenal tailwinds. The first one is the Visa Flexible Credential.
Speaker Change: yeah
Tim: Hey Tim, Simon here. Thank you so much for the question. So, the trend is buy now pay later migrating from merchant integration into integrating into either have cards or
Speaker Change: that have buy now pay later or integration into wallets, giving the ability to do buy now pay later anywhere is a trend that we've spoken about.
Operator: I will now turn it over to the operator for Q&A. We will now begin the question and answer session.
Operator: To ask your question, you may press star than one on a catch-tone phone.
Tim: So, exactly what you have mentioned, we have two big initiatives.
Operator: If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star than two. In the interest of time, please limit yourself to one question and one follow-up.
Speaker Change: that, on an ecosystem perspective, are going to put fuel on this fire. And I'd say both of these are going to provide Marqeta with phenomenal tailwinds. The first one is the Visa Flexible Credential.
Simon Khalaf: And that allows us, it allows consumers to use a single card and toggle between debit, credit, sorry, Debit, and BNPL without the merchants, without having to overburden the merchants with integration. So that's gonna create significant effectiveness in the ecosystem, and Marqueta has played a big role in that. So that's definitely gonna give us nice tailwinds.
Speaker Change: And that allows us – it allows consumers to use a single card and toggle between debit, credit,
Operator: At this time, we will pause momentarily to assemble our roster.
Timothy Chiodo: The first question today comes from Timothy Chiotto with UBS. Please go ahead. Great.
Speaker Change: Sorry, Devin and BMPL, without the merchants, without having to overburden the merchants with integration.
Timothy Chiodo: Thank you for taking the question. You mentioned the affirm partnership with VisaFlex credentials, but I was hoping we could also expand upon a firm's role within Apple Pay, where there will be one of the key, or maybe for some time one of the only options for buy-and-out pay later there is Apple sort of sunsetted their own buy-and-out pay later efforts. So maybe you could just expand upon Marquetta's role when a firm is used in Apple Pay, and if there is any broader role that Marquetta will be playing within the Apple Pay, buy-and-out pay later ecosystem.
Speaker Change: So that's going to create significant effectiveness in the ecosystem, and Marqeta has played a big role into that.
Speaker Change: So, that's definitely going to give us nice tailwinds. The second one is Apple has decided to integrate or take an ecosystem play and make BNPL, third-party BNPL providers.
Simon Khalaf: The second one is that Apple has decided to integrate or take an ecosystem play and make third-party BNPL providers that offer their services inside Apple Pay without involving the merchant. So, and we've seen the report that Affirm is going to take a prime spot in that, but as Apple mentioned, there's going to be others. So we expect that to benefit Marqeta significantly, and our role is substantially similar to what we have done enabling the NPL anywhere. So I'd say both of these developments are an endorsement of the trend that takes NPL anywhere without having merchants, and it's a trend that Marqeta has supported early on.
Speaker Change: offer their services inside Apple Pay without involving the merchants.
Simon Khalaf: Hey, Tim. Simon here. Thank you so much for the question. So the trend if buy-and-out pay later, migrating from merchant integration into integrating into either have cards that have buy-and-out pay later or integration into wallets, giving the ability to do buy-and-out pay later anywhere is a trend that we've spoken about. So exactly what you have mentioned, we have two big initiatives that on an ecosystem perspective are going to put fuel on this fire.
Speaker Change: So, and we've seen the report that Affirm is going to take prime spots in that, but as Apple mentioned, there's going to be others.
Speaker Change: So, we expect that to benefit Marqeta significantly. And our role is substantially similar to what we have done enabling the NPL anywhere. So, I'd say both of these developments...
Speaker Change: are an endorsement of the trend that takes BNPL anywhere without having merchants and it's a trend that Marqeta has supported early on.
Simon Khalaf: Excellent. Thank you, Simon. The brief follow-up there is simply around your certification with Visa being the first to obtain the VisaFlex credential. Maybe just a shorter follow-up there. Is that something that is extremely challenging and time-consuming that others might struggle with? Or is that something that you expect, over time, there will be many partners that are certified and include some of the more traditional or legacy Sure.
Speaker Change: Excellent. Thank you, Simon. The brief follow-up there is simply around your certification with Visa being the first on VisaFlex credential, maybe just a shorter...
Simon Khalaf: And I'd say both of these are going to provide Marquetta with phenomenal tailwinds. The first one is the visa flexible credential, and that allows us, it allows consumers to use a single card and toggle between debit credits. David and BNPL, without the merchants, without having to overburden the merchants with integration. So that's going to create significant effectiveness in the ecosystem, and Marqeta has played the big role into that, so that's definitely going to give us nice tailwinds.
Speaker Change: Is that something that is extremely challenging and time-consuming that others might struggle with, or is that something that you expect over time there will be many partners that are certified, including some of the more traditional or legacy competitors?
Simon Khalaf: Sure. I'll be brief on this.
Speaker Change: Sure. I'll be brief on this. Marqeta's platform is unique in a way that it is real-time, and that's inflexible. And that's what allowed us to move fast in order to support, I would say, just-in-time switching from one card to the other. I don't have great visibility into the legacy stacks, but it's not going to be as easy. But at the same time, that's not going to be the only innovation out there. But I can clearly tell you that Marqeta is going to be one of the fastest to support all the innovations in that space, given that our platform is modern, in real-time, and very numberable.
Simon Khalaf: Marqeta's platform is unique in the way that it is real-time, and that's inflexible, and that's what allowed us to move fast in order to support, I would say, just-in-time switching from one card to the other. I don't have great visibility into the legacy stacks, but it's not going to be as easy. But at the same time, that's not going to be the only innovation out there, but I can clearly tell you that Marqeta is going to be one of the fastest to support all the innovations in that space, given that our platform is modern, in real-time, and very nimble.
Simon Khalaf: The second one is Apple has decided to integrate or take an ecosystem play and make BNPL third party, BNPL providers, and offer their services inside Apple Pay without involving the merchants. So, and we've seen the report that Affirm is going to take prime spot in that, but as Apple mentioned, there's going to be others. So, we expect that to benefit Marqeta significantly, and our role is substantially similar to what we have done, enabling BNPL anywhere.
Operator: The next question comes from Tianxin Huang of JP Morgan. Please go ahead.
Speaker Change: The next question comes from Tianxin Huang with JP Morgan. Please go ahead.
Tianxin Huang: Hi, thanks. Nice results here. I just wanted to ask about the Vero Bank win, which is nice. I think this is the first conversion that you guys are working on. So, correct me if I'm wrong, but I just want to understand the risk there. Are there any protections that you're going to provide? And also, is this a credit and debit flip?
Tianxin Huang: Hi, thanks. Nice results here. I just wanted to ask on the VeroBank win, which is nice. I think this is the first conversion that you guys are working on, so correct me if I'm wrong, but I just want to understand the risk there. Are there any protections that you're going to provide? And also, is this a credit and debit flip?
Simon Khalaf: So, I'd say both of these developments are an endorsement of the trend that takes BNPL anywhere without having merchants, and it's a trend that Marqeta has supported earlier.
Simon Khalaf: Hey Tingen, Simon here. In fact, this is not the first conversion. We're actually in the middle of a conversion that we expect to complete tail-end at 24 or early 2025. So this is a muscle that we have been building, and it's being tested as we speak, and it's going according to our expectations. So VARO is definitely very excited about it, and it's something that we have planned and will execute with VARO in 2025. And we feel comfortable about the plans we've put together with the VARO team. And for now, this is a debit.
Speaker Change: Simon here. In fact, this is not the first conversion. We're actually in the middle of a conversion that we expect to complete
Simon Khalaf: Excellent. Thank you, Simon. The brief follow-up there is simply around your certification with Visa being the first on Visa Flex Credential, maybe just a shorter follow-up there. Is that something that is extremely challenging and time consuming that others might struggle with, or is that something that you expect over time? There will be many partners that are certified, including some of the more traditional or legacy competitors. Sure. I'll be brief on this.
Simon Khalaf: tail end at 24 or early 2025. So this is a muscle that we have been building and it's being tested as we speak and it's going per our expectations.
Speaker Change: So VARO is definitely very excited about it.
Simon Khalaf: Marqeta's platform is unique in a way that it is real-time, and that's inflexible, and that's what allowed us to move fast. In order to support, I would say, just in time switching from one card to the other. I don't want to have great visibility into the legacy stacks, but it's not going to be as easy, but at the same time, that's not going to be the only innovation out there. But I can clearly tell you that Marqeta is going to be one of the fastest to support all the innovations in that space, given that our platform is modern in real-time and very nimble.
Speaker Change: and it's something that we have we will we have planned and will' execute with vto in two thousand and twenty-five and we feel comunfortable about the plans we've put together with a our team and for now this is a debit deal
Simon Khalaf: Perfect. No, if you can develop that muscle, I think it opens up a lot of opportunities.
Speaker Change: Perfect. No, if you can develop that muscle, I think it opens up a lot of opportunities. So we'll be tracking on that. I think my follow-up question...
Simon Khalaf: So we'll be tracking on that. I think my follow-up question... is an industry one. We've been hearing some concerns from some of the players out there on virtual card acceptance costs being a problem for some suppliers in the expense management world. Is this a trend that you've seen? It doesn't sound like it because your expense management trends are doing quite well. But what are your thoughts around that adverse payment selection around virtual cards? Thanks for your questions.
Speaker Change: is an industry one. We've been hearing some concerns from some of the players out there on virtual card acceptance costs.
Speaker Change: Being a problem for some suppliers in the expense management world, is this a trend that you've seen? It doesn't sound like it because your expense management trends are doing quite well, but what are your thoughts around that adverse payment selection around virtual card?
Tianxin Huang: The next question comes from Tianxin Huang with JPMorgan. Please go ahead. Hi, thanks. Nice results here. I just wanted to ask on the Vera bank win, which is nice.
Simon Khalaf: Thanks for your questions Injun, I know that is a challenge in the ecosystem, but it's not, it's nothing new. I would say that it has been around for some time. And just given our leadership in this area of the business, maybe we have maybe more experience, maybe a few more bruises than maybe some others. So, but that's always been a part of this business. And at this time, it doesn't affect the trajectory of our business in the expense management space.
Speaker Change: Thanks for your question, Jinjin. You know, that is...
Simon Khalaf: I think this is the first conversion that you guys are working on, so correct me if I'm wrong, but I just want to understand the risk there, are there any protections that you're going to provide? And also, is this a credit end debit flip? Thanks.
Speaker Change: that is a challenge in the ecosystem but it's not it's nothing new i would say that
Speaker Change: that has been around for some time and just given our leadership in this area of the business, maybe we have more experience, maybe a few more bruises than maybe some others. But that's always been a part of this business and at this time it doesn't affect the trajectory of our business in the expense management space.
Simon Khalaf: Hey, Tianxin, Simon here. In fact, this is not the first conversion. We're actually in the middle of a conversion that we expect to complete tail on that 24 or early 2025. So this is a muscle that we have been building, and it's being tested as we see, and it's going per out of expectations. So VARO is definitely very excited about it, and it's something that we have planned, and we'll execute with VARO in 2025. And we feel comfortable about the plans we put together with a VARO team. And for now, this is a debit.
Operator: The next question comes from Darrin Peller with Wolf Research. Please go ahead.
Speaker Change: The next question comes from Darrin Peller with Wolf Research. Please go ahead.
Darrin Peller: Hey guys, thanks. I just want to follow up for a minute on Navarro's win just because, again, putting aside whether it's debit or credit, I mean, just seems like it's a further step into an area that, you know, neobanking that you guys generally, I think you were really just working with block on before. And so this is definitely an incremental vertical. So let's call it the sub vertical.
Darrin Peller: hey guys thanks i just want to follow up a minute on varra win just because again it does see like you know putting aside whetherit's its's debitper crediti mean just seems like it's a further step into
Speaker Change: an area that, you know, neo-banking that you guys generally, I think you were really just working with block on before. And so this is definitely an incremental vertical, so let's call it sub-vertical.
Darrin Peller: So maybe just a little more color on the differentiation that you were able to offer to win that business combined with maybe a real quick update, again, a little deeper on embedded finance trends. You touched on it a bit in the prepared remarks, but, you know, just curious where we are on our wage access and how much that can still deliver for the year or two ahead of us.
Speaker Change: So maybe just a little more color on the differentiation that you were able to offer to win that business combined with maybe a real quick update, again, a little more deeper on embedded finance trends. You touched on it a bit on the prepared remarks.
Speaker Change: I'm just curious where we are on earned wage access and how much that can still deliver for the year or two ahead of us.
Simon Khalaf: Sure. Hey Darrin, Simon here.
Simon Khalaf: Hey Darrin, Simon here.
Darrin: Yes, indeed. Like I mentioned in my prepared remarks, the financial services space, which is almost neobanking,
Simon Khalaf: So, yes, indeed. Like I mentioned in my prepared remarks, the financial services space, which is almost neo-banking, has taken off for us. Like, excluding Cash App, the growth is over 100%. And these are not small numbers.
Darrin: is actually taking off with us, like, excluding Cash App, the growth is over 100%.
Simon Khalaf: What are your thoughts around that adverse payment selection around virtual card? Thanks for your questions, engine. That is a challenge in the ecosystem, but it's nothing new. I would say that that has been around for some time and just given our leadership in this area of the business. Maybe we have maybe more experience, maybe a few more bruises than maybe some others. But that's always been a part of this business. And at this time, it doesn't affect the trajectory of our business in the expense management space.
Speaker Change: And these are not small numbers. The experience we've built with Cash App and One Finance in the U.S. and Trade Republic and Lydia and many others have prepared us to demonstrate
Speaker Change: that to our customers that they can innovate at scale. And that's what they're looking for. The space is moving fast and it's the value proposition is resonating with consumers.
Simon Khalaf: The experience we've built with Cash App and One Finance in the U.S., Trade Republic and Lydia, and many others, has prepared us to demonstrate to our customers that they can innovate at scale. And that's what they're looking for. The space is moving fast, and the value proposition is resonating with consumers. And we're also seeing conversions between the accelerated wage access space and neo-banking. And we expect that accelerated wage access will come in two flavors.
Speaker Change: And we've also seen conversions.
Simon Khalaf: One is smaller employers or labor marketplaces will work with these neo-banks so that they will become the accelerated wage access provider for these, I'd say, mid-market labor marketplaces and employers, while large employers or large labor marketplaces will have their own neo-bank, kind of like a credit union.
Speaker Change: between the accelerated wage access space and new banking and we expect that the accelerating whichage access will come in into flavors
Darren Peller: The next question comes from Darren Peller with Wolf Research. Please go ahead. Hey guys, thanks.
Speaker Change: One is...
Speaker Change: Smaller employers of label marketplaces will work with these neobanks.
Darren Peller: I just want to follow up for a minute on Navarra win just because again, it does seem like putting aside whether it's Deb at our credit, it seems like it's a further step into an area that Neo banking that you guys generally I think you were really just working with block on before. And so this is definitely an incremental vertical. So let's call it sub vertical. So maybe just a little more color on the differentiation that you were able to offer to win that business combined with maybe a real quick update.
Speaker Change: So that they will become the accelerated wage access provider of these, I'd say, mid-market labor marketplaces and employers, while large employers or large labor marketplaces will have their own...
Simon Khalaf: So we're very well positioned from every dimension you look at. We can provide all the features and functionality. We provide the scale.
Speaker Change: neo bank kind of like a gratit union
Speaker Change: So...
Speaker Change: We're very well positioned there from every dimension you look at. We can provide all the features and functionality, we provide the scale, we provide the compliance, we can give them an upgrade path towards any form of credit.
Darren Peller: Again, a little more deeper on embedded finance trends. You touched on it a bit on the prepared remarks, but you know, just curious where we are on our word wage access and how much how much that can still deliver for the year or two out of us. Sure.
Simon Khalaf: We provide the compliance. We can give them an upgrade path towards any form of credit. And Visa Flexible Credentials will allow us also to distribute our top BNPL partners into that application. So that's on that.
Speaker Change: And the Visa Flexible Credentials will allow us also to distribute our top BNPL partners into that application.
Simon Khalaf: Hey Darren, Simon here. So yes indeed, like I mentioned in my prepared remarks, the financial services space, which is almost Neo banking is actually taken off with us. Like excluding cash app, the growth is over 100% and these are not small numbers. The experience we built with cash app and and one finance in the US include entry public and Lydia and many others have prepared us to demonstrate that to our customers that they can innovate at scale.
Speaker Change: So that's on that. Moving on to embedded finance, look, the demand is growing extremely fast. And I'd like to probably take a minute without going very deep into, can I give you the color around what's driving this demand?
Simon Khalaf: Moving on to Embedded Finance, look, the demand is growing extremely fast, and I'd like to take a minute, without going very deep, to give you some color around what's driving this demand. So first one, as you mentioned or suggested, we have brands that want to be the bank for their consumers, whether it's their consumers or their employers. That's one. The second one is brands that do want payment innovation.
Speaker Change: So first one, as you mentioned or suggested, we have brands that want to be the bank for their consumers, whether it's their consumers or their employers. That's one. The second one is brands that do want to have payment innovation, and we put BNPL in that bucket.
Simon Khalaf: And then, on the commercial side, you have these large marketplaces or aggregators that want to provide engagement to their suppliers, whether it's SMBs, so on and so forth. And all these companies are coming to us and say, look, we need a solution that embeds this technology into our experience because we want an engagement play. We don't want to have to deal with any program management or compliance thing, and we want a full solution encompassing credit, debit, buy now, pay later, working capital, expense management, this goes on and on, and we wanna do it in the US and across the globe.
Speaker Change: And then you have, on the commercial side, these large marketplaces or aggregators that want to provide engagement to their suppliers, whether it's SMBs, so on and so forth.
Simon Khalaf: And that's what they're looking for. The space is moving fast and it's the value proposition is resonating with consumers and we've also seen conversions between the accelerate wage access space and Neo banking. And we expect that the accelerate wage access will come into flavors.
Simon Khalaf: One is smaller employers or label marketplaces will work with these neo banks so that they will become the accelerate wage access provider of these, I'd say mid market labor marketplaces and employers while large employers or large labor marketplaces will have their own neo bank kind of like a credit union. So we're very well positioned there from every dimension you look at, we can provide all the features and functionality, we provide the scale, we provide the compliance, we can give them an upgrade, upgrade path towards any form of credit. And these flexible cash and credential will allow us also to distribute our top BNPL partners into into that application.
Speaker Change: And all these are coming to us and say, look, we need a solution that embeds this technology into our experience because we want an engagement play.
Speaker Change: We want not to have to deal with any...
Speaker Change: Program Management or Compliance thing.
Speaker Change: And we want a full solution, encompassing credit, debit, buy now, pay later, working capital, expense management, the list goes on and on, and we want to do it in the U.S. and across the globe.
Simon Khalaf: So that basically reduces the competitive set to a very, very small entity, and that's why this is, like we're benefiting from this. I'll turn it over to Mike when I get, any callers left? Sorry, okay, we're good.
Speaker Change: So, that basically reduces the competitive set to a very, very small entity, and that's why this is, like, what benefits from this. I'll turn it over to Mike when I get any color left. Sorry. Okay.
Darrin Peller: That's helpful. Mike, can I just ask a quick follow-up on the profit side for a minute? I mean, you're obviously trending well.
Mike Milotich: no okay
Speaker Change: That's helpful. Mike, can I just ask a quick follow-up on the profit side for a minute? I mean, you're obviously trending well. Just remind us on the roadmap on the profitability, both non-GAAP and GAAP, and then I know you talked about, I think it was mid-teens growth and OPEX in the second half.
Mike Milotich: Just remind us of the roadmap for profitability, both non-GAAP and GAAP. And then I know you talked about, I think it was mid-teens growth and OPEX in the second half. So if you could just remind us where the underlying investments are going into there, it'd be great. Thanks, guys.
Simon Khalaf: So that's that's on on the moving on to embedded finance look the demand is is growing extremely fast. And I'd like to probably take a minute without going very deep into kind of give you the color around what's driving the demand. So first one as you mentioned or suggested we have brands that want to be the bank for their consumers, whether it's their consumers or their employers, that's one. The second one is brands that do want to have payment innovation and we put BNPL in that bucket, and then you have on the commercial side these large marketplaces or aggregators that want to provide engagement to their suppliers, whether it's SMBs, so on and so forth.
Speaker Change: So if you could just remind us where the underlying investments are going into there, it would be great. Thanks guys.
Mike Milotich: Yeah, sure. So just keep in mind that I guess just to address that second part of your question first. So, what happened last year was in May. We did a restructuring, and like a lot of companies when you do that, in many cases, you might reduce more costs than you want for the long run to give yourself some room to reinvest in some newer areas of the business where you might need different kinds of skill sets.
Mike Milotich: yeah sure so just keep in mind that iguess just to address that that second part of your question for so the what happened last year was in may we did a restructuring and like a lot of companies when you when you do that in many cases you might
Speaker Change: Reduce more cost than you want for the long run to give yourself some room to reinvest in some newer areas of the business where you might need different kinds of skill sets.
Mike Milotich: And so what that meant was, in Q3 in particular, our expenses were sort of artificially low, and then by Q4, we started to execute that reinvestment plan. And a lot of that just coming in all the areas we've talked about credit, a lot of our banking services. We've also been significantly increasing our investment in compliance and program management capabilities because we see that not only is the temperature or the scrutiny rising, but we also see that adding more and more value to embedded finance customers. So that's where a lot of the investment has been going.
Speaker Change: And so, what that meant is, in Q3 in particular, our expenses were sort of artificially low, and then by Q4, we started to execute that reinvestment plan.
Simon Khalaf: And all these are coming to us and say, look, we need a solution that embeds this technology into our experience because we want an engagement play. We want not to have to deal with any program management or compliance thing, and we want a full solution in composing credit debit by now pay later working capital expense management list goes on and on, and we want to do it in the U.S, and across the globe. So that basically reduces the competitive set to very, very small entity, and that's why this is like with benefits from this.
Speaker Change: and a lot of that just coming in all the areas we've talked about credit a lot of our banking services. We've also
Speaker Change: been significantly increasing our investment in compliance and program management capabilities.
Speaker Change: because we see that not only is...
Speaker Change: sort of the temperature or the scrutiny rising, but we also see that adding more and more value to embedded finance customers. So that's where a lot of the investment has been going. In terms of the roadmap, you know, the margins are definitely doing a lot better. You know, we started the year
Mike Milotich: In terms of the roadmap, the margins are definitely doing a lot better. We started the year saying we'd be about breakeven on a non-gap basis adjusted EBITDA. And at the end of Q1, we said 1% to 3% margin. Now we're saying 3% to 5% margin. So we are definitely making great progress on efficiency without sacrificing growth on the top line and gross profit, in particular. That margin should continue to improve at a pretty good clip going forward, maybe not quite at that pace on a quarter to quarter basis, but we expect the margin to continue to rise at a steady clip.
Speaker Change: ...saying we would be about breakeven on a non-gap basis, adjust a little bit. And at the end of Q1 we said 1 to 3% margin, now we're saying 3 to 5% margin. So we are definitely making great progress on efficiency without sacrificing the growth on the top line and gross profit in particular.
Mike Milotich: I'll turn it over to Mike's when I get any color left. Sorry. Okay. That's helpful.
Mike Milotich: Mike, can I just ask a quick follow up on the profit side for a minute? I mean, you're obviously trending well. Just remind us on the road map on the profitability, both non-gap and gap. And then I know you talked about it. I think it was mid teens growth and op-ex and the second half. So if you could just remind us where the underlying investments are going into there. Be great. Thanks guys. Yeah. Sure.
Speaker Change: That margin should continue to improve at a pretty good clip going forward, maybe not quite at that pace on a quarter-to-quarter basis, but we expect the margin to continue to rise at a steady clip.
Mike Milotich: And from a gap perspective, we said that we would exit 2026 with gap profitability. So, you know, we're a little ahead of schedule, but we don't think that meaningfully changes our when we become gap profitable. But certainly, you know, we're off to a good start in 2024. The next question comes from Craig Maurer with FP Partners. Please go ahead. Yeah, hi, thanks. A couple questions, first on Borrow.
Speaker Change: And from a gap perspective, we said that we would exit 2026.
Mike Milotich: So the just keep in mind that I guess just to address that that second part of your question first. So the what happened last year? Last year was in May, we did a restructuring and like a lot of companies when you when you do that in many cases, you might reduce more cost than you want for the long run to give yourself some room to reinvest in some newer areas of the business where you might need different kinds of skill sets.
Speaker Change: with Gap Profitability. So, you know, we're a little ahead of schedule, but we don't think that meaningfully changes our, you know, when we become Gap Profitable, but certainly, you know, we're off to a good start in 2024.
Operator: The next question comes from Craig Maurer with FT Partners; please go ahead.
Speaker Change: The next question comes from Craig Maurer with FT Partners. Please go ahead.
Mike Milotich: And so what what that meant is in Q3 in particular, our expenses were sort of artificially low. And then by Q4, we started to execute that reinvestment plan. And a lot of that just coming in all the years, we've talked about credit, a lot of our banking services. We've also been significantly increasing our investment in compliance and program management capabilities because we see that not only is sort of the temperature or the scrutiny rising, but we also see that adding more and more value in the embedded finance customers.
Operator: What if you could maybe characterize what convinced them?
Speaker Change: What, if you could maybe characterize what convinced Morrow to switch off of DPS?
Speaker Change: And, you know, do you expect the benefit of Borrow to be fully realized by the end of fiscal year 25 and to have all the cards reissued? And secondly,
Speaker Change: We're.
Speaker Change: From our calculations, it looks like the VARA deal implies maybe $10 to $15 billion in additional TPBs, so just some thoughts on that. Thank you.
Mike Milotich: So that's where a lot of the investment has been going in terms of the the roadmap, you know, the margins are definitely doing a lot better. You know, we started the year saying we'd be about break even on a non on a non-gap basis, adjust the beta. And at the end of Q1, we said 1 to 3% margin, now we're saying 3 to 5% margin. So we are definitely making great progress on efficiency without sacrificing the growth on on the top line and growth profit, growth profit in particular.
Craig Maurer: Thanks, Craig. I'll address the first one and defer the rest to Mike. So, in terms of what convinces us tomorrow, I'd say two simple things. The first one is innovation at scale. Like I mentioned, the space is moving fast, and it is hard to ignore the pace of innovation, whether it is European neobanks like Revolut or Trade Republic or many others or the U.S. So, you do need a platform that moves at innovation speed, and that's what we offer.
Mike Milotich: That margin should continue to improve at a pretty good clip going forward. Maybe not quite a back phase on a quarter to quarter basis, but we expect the margin to continue to rise at a steady clip.
Speaker Change: Thanks, Craig. I'll address the first one and defer the rest to Mike. So in terms of what convinced Navarro, I'd say two simple things. First one is innovation at scale. Like I mentioned, the space is moving fast.
Speaker Change: And it is hard to ignore the pace of innovation, whether it is like European neobanks like Revolut, or Trade Republic, or many others, or the U.S. ones.
Mike Milotich: And from a gap perspective, we said that we would exit 2026 with gap profitability. So, you know, we're a little head of schedule, but we don't think that meaningfully changes are, you know, when we become gap profitable. But certainly, you know, we're off to a good start in 2024.
Mike Milotich: So, you do need a platform that moves at an observation speed, and that's what we offer.
Craig Maurer: And I'd say the second thing is the ability to, the Varus team is very product focused, and I love their obsession with giving great product experiences. Like a great user experience, any UI, that is real time. Like the generation they appeal to is the TikTok generation that gets everything in real time, and that's the nature of what they'd like to give their consumers a real-time transactional experience. So I'd say scale with stability and innovation at scale is one angle. The second one, great features in real time, that's what drives the partnership. Mike, any color on that?
Mike Milotich: And I'd say the second thing is...
Speaker Change: The ability to borrow, with our team, are very product focused.
Speaker Change: And I love their obsession with giving great product experience, like a great user experience, any UI that is real-time.
Craig Moore: The next question comes from Craig Moore with F.T. Partners. Please go ahead. Yeah, hi, thanks. A couple of questions. First on borrow.
Speaker Change: Like, like the generation they appeal to.
Simon Khalaf: What, if you could maybe characterize what convinced borrowers switch off of DPS, and you know, do you expect the benefit of borrow to be fully realized by the end of fiscal year 25 and to have all the cards reissued? And secondly, we're, from our calculations, it looks like the borrow, the borrow of the old implies maybe 10 to 15 billion in additional TPB. So just some thoughts on that. Thank you. Thanks, Craig.
Mike Milotich: is the TikTok generation that gets everything in real time.
Speaker Change: And that's...
Speaker Change: That's the nature that they'd like to give their consumer a real-time transactional experience.
Speaker Change: So I'd say the scale, the stability, and the innovation at scale is one angle. The second one, great features in real time. That's what driven the partnership.
Simon Khalaf: In terms of the P&L impact, Craig, I mean, the exact timing details we'll leave to Varus to share, but we do expect to complete the conversion in 2025, but it would be done throughout the year. So we will get some benefits certainly in our 2025 P&L, but the full benefit won't be realized until 2026, at least based on the preliminary timelines that we've discussed with them.
Speaker Change: In terms of the P&L impact, Craig, I mean, the exact timing details we'll leave to Varo to share. But we do expect to...
Craig Maurer: gotcomplete the conversion in two thousand and twenty five but it would be done throughout the year so we will get some benefit certainlyin two thousand and twenty five pl but the full benefit will be realized until two thousand and twenty six based on theat least preliminary timelines that we've discussed with them
Simon Khalaf: I'll address the first one and differ the rest to Mike. So in terms of what convinced borrow, I'd say two simple things. First one is innovation at scale. Like I mentioned, the space is moving fast, and it is hard to ignore the pace of innovation, whether it is like European, neo banks that could have a loot or trade republic or many others or the US ones. So you do need a platform that moves at an reservation speed, and that's what we offer.
Simon Khalaf: And I'd say the second thing is the ability to, borrow, borrow steam are very product focused, and I love their obsession with giving great product experience, like a great user experience, a new eye, that is real time. Like the generation they appeal to is the dig stock generation that gets everything in real time. And that's the nature that they'd like to give their consumer a real time friends action experience. So I'd say the scale the stability and the innovation at scale is one angle.
Mike Milotich: The next question comes from Ramsey El Assel with Barclays. Please go ahead.
Speaker Change: The next question comes from Ramsey El Assel with Barclays, please go ahead.
Operator: Hi, thanks for taking my question. I also wanted to ask about the Visa Flex certification, and I was wondering if you could comment on the broader timeline by which the opportunity for this product will convert into revenue for you guys. Aside from the Affirm card, should we expect to see any incremental benefit hit in 24? Or is this more of a 25 and beyond type of actual P&L opportunity? How will the pipeline convert?
Speaker Change: Alright, thanks for taking my question.
Speaker Change: I also wanted to ask about the Visa Flex certification, and I was wondering if you could comment on the broader timeline.
Speaker Change: By which the opportunity for this product will convert into revenue for you guys. Aside from the affirmed card, should we expect to see any incremental benefit hit in 24? Is this more of a 25 and beyond type of actual P&L opportunity? How will the pipeline convert?
Simon Khalaf: Sure. We will see some in 2024 because this is something, as we've announced, it's available immediately. So we will start getting the benefit, gross profit benefit, in the Q4 timeframe. We have a strong pipeline both in the US and in the EU. And we expect that I'd say the gross profit from the flexible credentials to trickle in starting. I'd say mid-Q4, outside what we announced with Affirm, all the way through 2025. But it's not like it's available now, so there's no data or whatever. We're ready.
Speaker Change: Sure. We will see some in 2024, because this is something, as we've announced, it's available immediately, so we will start getting
Speaker Change: the benefit, gross profit benefit in the Q4 time frame. We have a strong pipeline, both in the U.S. and in the EU, and we expect that that
Simon Khalaf: The second one, great features in real time. That's what driven the partnership. Mike, any color on that? In terms of the P&L impact, Craig, I mean the exact timing details will leave to borrow to share, but we do expect to complete the conversion in 2025, but it would be done throughout the year. So we will get some benefits certainly in our 2025 P&L, but the full benefit won't be realized until 2026 based on the at least preliminary timelines that we've discussed with them.
Speaker Change: I'd say the gross profit from the flexible credentials to trickle in starting
Speaker Change: I'd say mid-Q4, outside where we announced with Affirm, all the way through 2025. But it's not like, it's available now, so there's no like beta or whatever, we're ready.
Mike Milotich: The only thing I would add to that, Ramsey, is that I think it's going to require a little bit of a mental shift change. So I think it will take some time because what this really offers is if you think about now when you are making a decision whether you want to sort of pay in full versus revolve or maybe buy now, pay later, right now, you have to select a different credential from your wallet. What this capability is really allowing you to do is have one credential that serves all those needs.
Speaker Change: And the only thing I would add too to that, Ramsey, is I think...
Speaker Change: It's gonna require a little bit of a mind shift change. So I think it will take some time because what really this offers is, if you think about now when you are making a decision whether you want to sort of pay in full versus.
Mike Milotich: The next question comes from Ramsey, L.A.S.U, with Blacklist. Please go ahead. Hi, thanks for taking my question. I also wanted to ask about the visa flex certification, and I just wonder if you could comment on the broader timeline by which the opportunity for this product will convert into revenue for you guys aside from the Affirm Card. Should we expect to see any incremental benefit hidden 24? Is this more of a 25 and beyond type of actual P&L opportunity?
Ramsey: Revolve, or maybe Buy Now Pay Later. Right now, you have to select a different credential from your wallet. What this capability is really allowing you to do is have one credential that serves all those needs.
Simon Khalaf: And so I think we see this as something that's very powerful and will be very compelling for our customers. But I think it's, you know, it's not something that everyone is just going to immediately embrace. I think it's going to take a little time for people to fully appreciate and understand how to best take advantage of it. And so we're excited about the potential, but I think it will be, you know, a couple years before we're really seeing this, you know, very broadly used across many customers.
Speaker Change: And so I think we see this as something that's very powerful and will be very compelling to our customers, but I think it's, you know, it's not something that everyone...
Speaker Change: It's just gonna immediately embrace. I think it's gonna take a little time for people to fully appreciate and understand how to best take advantage of it. And so we're excited about the potential, but I think it will be, you know, a couple of years before we're really, this is, you know, very broadly used across many customers.
Mike Milotich: How will the pipeline convert? Sir, we would see something in 2024 because this is something we've announced. It's available immediately, so we will start getting the growth profit benefit in the Q4 time frame. We have a strong pipeline, both in the U.S, and in the EU. And we expect that, I'd say, the growth profit from the flexible credentials to trickle in, starting, I'd say, mid Q4 outside where we're announced with a firm all the way through 2025. But it's not like, it's available now, so there's no like beta or whatever, we're ready.
Mike Milotich: Separately, I guess I also wanted to ask, with the renewals behind you, how should we think about the growth algorithms balance between new customer versus existing customer growth? I think you guys have highlighted a lot of new opportunities on this call. I'm just kind of curious, in your mind, which is shaping up to be the more powerful drivers sort of today and in your projections between sort of, you know, harvesting growth from the clients you have today versus, you know, new customers that you think may drive, you know, kind of an incremental share of growth as we move forward.
Speaker Change: I see.
Speaker Change: Separately, I guess I also wanted to ask, with the renewals behind you,
Speaker Change: You know, how should we think about the growth algorithms balance between new customer versus existing customer growth? I think you guys have highlighted a lot of new opportunity on this call. I'm just kind of curious in your mind which is shaping up to be the more powerful driver sort of today and in your projections?
Alesundara: Alesundara. So there's a real contrast between sort of, you know, harvesting growth from the clients you have today versus, you know, new customers that you think may drive, you know, kind of an incremental share of growth as we move forward.
Simon Khalaf: Yeah, let me, I'll give an answer and hand it over to Mike. Ramsey, it is kind of a yes and yes.
Speaker Change: Let me, I'll give an answer and hand it over to Mike. Ramsey, it is kind of yes and yes. So, we're excited that the new cohorts
Simon Khalaf: The only thing I would add to you to that rimsy is I think it's going to require a little bit of a mind shift chain. So I think it will take some time because what really this offers is, if you think about now, when you are making decision, whether you want to sort of pay in full versus revolve, or maybe buy now, pay later right now, you have to select a different credential from your wallet.
Ramsey: are on track to generate $20 million in revenue, which is what we've guided. So we're on track with that.
Simon Khalaf: So, we're excited that the new cohorts are on track to generate $20 million in revenue, which is what we've guided. So, we're on track with that, and again, speaks volumes to how fast we can onboard new customers and get them ramped up. So, that's a growth vector.
Mike Milotich: Again, it speaks volume to how fast we can onboard new customers and get them ramped up.
Mike Milotich: So that's a growth vector.
Mike Milotich: Our customers also...
Simon Khalaf: But with this capability is really allowing you to do is have one credential that serves all those needs. And so I think we see this as something that's very powerful and will be very compelling to our customers. But I think it's not something that everyone is just going to immediately embrace. I think it's going to take a little time for people to fully appreciate and understand how to best take advantage of it.
Mike Milotich: are growing. Some of them geographically, others they're launching multiple programs, so that also factors into our growth calculations.
Simon Khalaf: And so we're excited about the potential, but I think it will be, you know, a couple of years before we're really, this is, you know, very broadly used across many customers. I see.
Simon Khalaf: Our customers are also growing, some of them geographically; others are launching multiple programs. So, that also factors into our growth calculations. But, Mike, you can give more color over a multi-year period. Yeah, I think that what I would say is if you look at our bookings through the first half, roughly half of them are expansions with existing customers versus newer, newer logos, if you will, or new customer bases. So it's a nice balance between the two.
Mike Milotich: But Mike, you can get more color over the multi-year. Yeah, I think that what I would say is if you look at our bookings through the first half, roughly half of it are expansions with existing customers.
Mike Milotich: Vs. newer, new logos, if you will, or new customer bases, so it's a nice balance between the two. We still have a lot of...
Mike Milotich: established customers who still have a lot of growth potential and so we continue to try to do more business with them as well as bringing in new pieces of business. The other thing I would say is also just even within our
Mike Milotich: We still have a lot of established customers who still have a lot of growth potential, and so we continue to try to do more business with them as well as bring in new pieces of business. The other thing I would say is even within our... programs that are already live with our existing customers. Again, the growth is really significant. We talked about, you know, 10 of our 20 customers have their TPP growing over 50%, but eight of those 10 are growing more than 75%.
Mike Milotich: Separately, I guess I also wanted to ask with the renewals behind you, you know, how should we think about the growth algorithms balance between new customer versus existing customer growth. I think you guys have highlighted a lot of new opportunity on this call. I'm just kind of curious in your mind, which is shaping up to be the more powerful drivers, sort of today and in your projections between sort of, you know, harvesting growth from the clients you have today versus, you know, new customers that you think may drive, you know, kind of an incremental share of growth as we move forward.
Mike Milotich: programs that are already live with our existing customers. Again, the growth is really significant. We talked about, you know, 10 of our 20 customers have their TPP growing over over 50%, but 8 of those 10 are growing more than 75%. So
Mike Milotich: So, it's really we have several customers who really have caught on to something that's very much responding in the market, and they're growing really fast, even separate from necessarily doing additional business with us, so they'll come over time. So, it's a very nice combination for us to have in the coming quarters to get growth from both new and existing customers.
Mike Milotich: So it's really is we have several customers who are really have
Mike Milotich: caught on to something that's very much resonating in the market.
Mike Milotich: and they're growing really fast.
Mike Milotich: Yeah, let me I'll give an answer and then over to Mike Ramsey. It is kind of yes and yes. So are we are excited that the new cohorts are on track to generate 20 million in revenue, which is what we've guided. So we don't track with that and again, speaks volume to how fast we can onboard new customers and get them ramped up. So that's a growth vector. Our customers also are are are growing some of them geographically others, they're launching multiple programs.
Operator: The next question comes from Will Nance of Goldman Sachs. Please go ahead.
Mike Milotich: The next question comes from Will Nance with Goldman Sachs. Please go ahead.
Will Nance: Hey guys, I appreciate you taking the time to answer the question. I wanted to ask about some of the cyber security events that happened recently with the Evolve hat and was wondering if you could talk about maybe some of the ramifications for the broader ecosystem and, I guess, A, how that's impacting some of the partner banks in the ecosystem and then B, if there's any impact on pipelines or kind of new program upstarts that may be impacted by increased regulatory scrutiny.
Will Nance: guys prec thing the question i wanted to ask about some of the cyish security events that happen recently with' they evolved have and just wondering if you could talk about maybe some the rammoificcations for the broader ecosystem and
Mike Milotich: So that also factors into our growth calculations, but Mike, you can give more color over the multi year. Yeah, I think what I would say is if you look at our bookings through the first half, roughly half of it are expansions with existing customers versus, you know, the newer new logos, if you will, or new customer basis. So it's a it's a nice balance between the two. We still have a lot of established customers who still have a lot of growth potential.
Speaker Change: I guess A, how that's impacting some of the partner banks in the ecosystem, and then B, if there's any impact on pipelines or kind of new program upstarts that may be impacted by increased regulatory scrutiny.
Simon Khalaf: Hey, well, Simon here. Thank you for the question. The short answer is no. The little bit longer answer is that we, like, there's the CrowdStrike event that did not impact us, our predominantly Mac shop. I mean, we are the customer of CrowdStrike, but thanks to a great effort by our security team, we were not impacted. Neither were our customers impacted in any major way. So that's good.
Mike Milotich: Hey, well, Simon here. Thank you for the question. The short answer is, no. The little bit long answer is,
Simon Khalaf: We, like, there's the CrowdStrike event that did not impact us, our predominant match-up. I mean, we are the customer of CrowdStrike, but thanks to a great effort by our security team, we were not impacted. Neither were our customers impacted in any major way.
Mike Milotich: And so we continue to try to do more business with them as well as bringing in new pieces of business. The other thing I would say is also just even within our and other programs that are already live with our existing customers. Again, the growth is really significant. We talked about, you know, 10 of our 20 customers have their TBD growing over 50%. But 8 of those 10 are growing more than 75%.
Simon Khalaf: In terms of the other security and regulatory scrutiny, I don't expect it to create medium-term or long-term challenges. On the contrary, I would say they are going to create a lot of tailwinds for Marqueta because of the flight to quality syndrome. We have demonstrated our ability to scale and in a compliant manner. In terms of Evolve specifically, our business on Evolve is not big, but Evolve is a great partner of ours.
Mike Milotich: So that's good. In terms of the other security and regulatory scrutiny,
Mike Milotich: So, so it really is, we have several customers who are really have caught on to something that's very much resonating in the market. And they're growing really fast, even separate from necessarily doing additional business with us, so they'll come over time. So, it's a very nice, you know, combination for us to have in the coming quarters to get growth from both, both new and existing customers.
Mike Milotich: I don't expect it.
Mike Milotich: to create a medium-term or long-term
Mike Milotich: Challenges on the contrary, I would say they are going to create a lot of tailwinds for Marqueta because of the flight to quality syndrome.
Mike Milotich: We have demonstrated our ability to scale and in a compliant manner.
Mike Milotich: In terms of Evolve specifically, our business on Evolve is not big.
Simon Khalaf: But most of the issues, I'd say, do not involve Marqueta, and some of the challenges that we've actually read in the press, we don't have intimate knowledge of, are something that will not impact Marqueta because we've invested heavily in those, I'd say, in the chrome around our solution. Whether it's settlement or reconciliation, this is something that we've done beautifully as we've scaled. I would say that we're looking good, and this is actually working in favor of Marqueta.
Mike Milotich: But Evolve is a great partner of ours.
Will Nance: The next question comes from Will Nance with Goldman Sachs. Let's go ahead. Hey guys, I appreciate you taking the question.
Mike Milotich: But most of the issues, I'd say, do not involve Marqueta.
Mike Milotich: and some of the challenges that we've actually read in the press.
Simon Khalaf: I wanted to ask about some of the cybersecurity events that happened recently with the Evolve Hat. And just wondering if you could talk about maybe some of the ramifications for the broader ecosystem and I guess A, how that's impacting some of the partner banks in the ecosystem and B, if there's any impact on, you know, pipelines or kind of new program upstarts that, you know, may be impacted by increased regulatory scrutiny.
Mike Milotich: We don't have intimate knowledge, right, are something that will not impact Marqueta because we've invested heavily in those, I'd say, in the chrome around our solution whether it is
Mike Milotich: Whether it's settlement or reconciliation, this is something that we've done beautifully as we've scaled. So I would say that we're looking good, and this is actually working in favor of market.
Will Nance: Got it. That makes sense. Appreciate all that. And then, just a brief follow-up. You mentioned some optimization on the quarter side. I was just wondering if you could elaborate a little bit on some of the optimizations that you're doing and kind of how you were able to affect those. Thanks for taking the questions.
Simon Khalaf: Hey, well, Simon here. Thank you for the question.
Speaker Change: Got it. That makes sense. Appreciate all that. And then just a brief follow-up, you mentioned some optimization on the quarter side. I was just wondering if you could elaborate a little bit on some of the optimizations that you're doing and kind of how you were able to affect those. Thanks for taking the questions.
Simon Khalaf: The short answer is, no. The little bit long answer is that we, like there's the crowd strike event that did not impact us, however long to match up. I mean, we are a customer of crowd strike, but thanks to great effort by our security team, we were not impacted. Neither were our customers impacted in any major way. So that's good.
Mike Milotich: Sure, I can cover that. I would say there are probably four primary drivers of the areas we're focused on where we're getting a lot of efficiency optimization, and I would kind of put these in order of magnitude. The first is in our tech tool usage optimization. To run our platform, we obviously use a lot of third-party providers, whether it's the cloud or data tools that are critical to our platform. And a lot of it has been really looking at how we use each of those services, and is there waste, right? And being much more thoughtful about how we're set up with each of those providers to make sure that we're being as efficient as possible. So that, I would say, is bearing the most fruit.
Speaker Change: Sure, I can cover that. I would say there are probably four primary drivers of the areas we're focused on where we're getting a lot of efficiency optimization, and I would kind of put these in, in order of magnitude. The first is in,
Simon Khalaf: In terms of the other security and regulatory scrutiny, I don't expect it to create a medium term or long term challenges on the contrary. I would say they are going to create a lot of tailwinds from our car because of the flight to quality syndrome. We have demonstrated our ability to scale and in a compliant matter. In terms of like evolves specifically there, they are, our business on evolves not big, but evolves the great partner of ours.
Speaker Change: Our tech tool usage optimization right to run our platform. We obviously use a lot of third party providers, whether it's the cloud or data tools that are critical to our platform and
Speaker Change: A lot of it has been really looking at how are we using each of those services and is there waste, right? And being much more thoughtful about how we're set up with each of those providers to make sure that we're being as efficient as possible. So that, I would say, is bearing the most fruit.
Mike Milotich: The second one has to do with insourcing. So, you know, a couple of years ago, we had a lot of things that we were using third parties for, and we've made a pretty concerted effort to reduce our contractors and professional services and hire our own people, which tends to be, you know, much more efficient. The third is that we've also started to hire those people in lower-cost locations.
Speaker Change: The second one has to do with insourcing.
Speaker Change: So, you know, you go back a couple of years, I think, like any maybe younger, fast-growing company, we had a lot of things that we were using third parties for, and we've made a pretty concerted effort to reduce our contractors and professional services, hire our own people, which tends to be, you know, much more efficient. The third is we've also then started to hire those people in lower-cost locations. So, prior to a year ago, we were pretty much 100% U.S.
Simon Khalaf: But most of the issues I say do not involve Marquetta. And some of the challenges that we've actually read in the press, we don't have intimate knowledge, right, are something that would not impact Marquetta because we've invested heavily in those, I'd say, in the chrome around our solution, whether it is, whether it's settlement or reconciliation. This is something that we've done beautifully as we've scaled.
Mike Milotich: So prior to a year ago, we were pretty much 100% U.S.-based in terms of both operated and maintained, and now we've started to hire in lower-cost locations, so we're hiring more cost-effectively. And then the last piece is we've renegotiated some contracts to get better terms. So those, I would say, are the four big levers that we've been focused on to get the improvements we've seen so
Will Nance: So I would say that we're looking good and this is actually working in favor of Marquetta. Got it. That makes sense. Appreciate all that. And then just a brief follow-up.
Speaker Change: And now we've started to hire in lower-cost locations, so we're hiring more cost-effectively. And then the last piece is we've renegotiated some contracts to get better terms. So those, I would say, are the four big levers that we've been focused on to get the improvements we've seen so far.
Mike Milotich: You mentioned some optimization on the quarter side. I was just wondering if you could elaborate a little bit on some of the optimizations that you're doing and kind of how you were able to affect those. Thanks for your attention. Sure, I can cover that.
Operator: The next question comes from Andrew Schmidt with Citi. Please go ahead.
Speaker Change: The next question comes from Andrew Schmidt with Citi. Please go ahead.
Mike Milotich: I think if I would say there are probably four primary drivers to the areas we're focused on where we're getting a lot of efficiency optimization and I would kind of put these in order of magnitude. The first is in our tech tool usage optimization right to run our platform. We obviously use a lot of third party providers, whether it's a cloud or data tools that are critical to our platform and a lot of it has been really looking at how are we using each of those services and is there waste right and being much more thoughtful about how we're set up with each of those providers to make sure that we're being as efficient as possible.
Andrew Schmidt: Hey Simon. Hey Mike.
Andrew Schmidt: Hey Simon, hey Mike, thanks for taking my questions and congrats on the sustained profitability flip here.
Mike Milotich: Thanks for taking my questions, and congrats on the sustained profitability flip here. If I could just go back to November 2023 Analyst Day, I recall you had to make some assumptions around pipeline, conversion, and then, you know, which segments would grow at which rates. Maybe you could talk about, you know, how some of those key assumptions are trending. Obviously, some good wins were announced in the quarter, so it seems fairly positive. But curious about how some of those key assumptions are trending and how that influences your visibility for gross profit growth in the coming years. Thanks a lot, guys.
Speaker Change: if i could just go back to the end noveber two thousand and twenty- three analysts day every call you had to make some assumptions around
Speaker Change: Pipeline
Speaker Change: conversion, and then, you know, which segments would grow at which rates. Maybe you talk about, you know, how some of those key assumptions are trending. Obviously, some good winds announced in the quarter, so it seems fairly positive. But curious about how some of those key assumptions are trending and how that influences your visibility for gross profit growth in the out years. Thanks a lot, guys.
Mike Milotich: Yeah, thank you for your question. I think For the most part, of course, there's always puts and takes. You don't get everything right.
Speaker Change: Yeah, thank you for your question. I think...
Speaker Change: For the most part, of course, there's always puts and takes, you don't get everything right. But I would say on a on a bigger picture level, we're very much on trend. We had said that we expected
Mike Milotich: So that I would say is bearing the most fruit. The second one has to do with insourcing so you know you go back a couple of years I think like any maybe younger fast growing company. We had a lot of things that we were using third parties for and we've made a pretty concerted effort to reduce our contractors and professional services higher on people which tends to be you know much more efficient.
Mike Milotich: But I would say on a bigger picture level, we're very much on trend. We had said that we expected $20 million in revenue from, you know, customers who essentially had not launched prior to 2024 in the year and were on track to deliver that. And, you know, that number is expected to go up to 60% or $60 million, sorry, next year.
Mike Milotich: The third is we've also then started to hire those people in lower cost locations so prior to a year ago we were pretty much 100% US based in terms of both operated and maintained and now we've started to hire in lower cost locations so we're doing hiring more cost effectively and then the last piece is we renegotiate some contracts to get better terms. So those are the four big levers that we've been focused on to get the improvements we've seen so far.
Speaker Change: 20 million in revenue from
Speaker Change: customers who essentially had not launched prior to two thousand and twenty four in the year and we're on tracked to deliver that and that number is expected to go up to to sixty percent or sixty million sorry next year so we feel good that the new
Andrew Schmidt: So we feel good that the new business that we're onboarding is on track. I think in terms of when we look at the existing business and how it's trending, I would say, you know, it's about as expected with maybe a slightly different mix than maybe we'd anticipated a year ago. I think some of the things that Simon has highlighted in financial services and this concept where many, many companies, particularly in embedded finance, have some neobank aspects to their strategy in terms of how they want to engage their users or their employees.
Speaker Change: Business that we're onboarding is on track.
Speaker Change: I think in terms of when we look at the existing business and how it's trending, I would say, you know, it's about as expected with maybe
Speaker Change: Slightly different, a slightly different mix than maybe we'd anticipated a year ago. I think some of the things that Simon has highlighted in financial services and this
Simon Khalaf: This concept where just many, many companies, particularly in embedded finance, have some neobank aspects to their strategy in terms of how they want to engage their users or their employees.
Andrew Schmidt: The next question comes from Andrew Schmidt with City. Please go ahead. Hey so I'm in Hey Mike.
Andrew Schmidt: And so I would say that's an area where we're probably seeing more demand than we had thought nine months ago. And that's probably the earliest place where we're really seeing a lot of embedded finance activity. But big picture wise, we're largely on track, and things are as planned, with the one exception being our ability to manage costs effectively. That's the one place where we're noticeably ahead of where we expected, you know, nine months ago.
Simon Khalaf: And so I would say that's an area where we're probably seeing more demand than we had thought nine months ago. So that's probably the earliest place where we're really seeing a lot of embedded finance activity.
Mike Milotich: Thank you for taking my questions and congrats on the sustained profitability flip here. If I could just go back to the in November 2023 analyst day every call you had to make some assumptions around pipeline conversion and then you know which segments would grow at which rates. Maybe to talk about you know how some of those key assumptions are trending obviously some good wins announced in the quarters it seems fairly positive but curious about how some of those key assumptions are trending and how that influences your visibility for gross profit growth in the out years.
Simon Khalaf: But big picture-wise, we're largely on track and things are as planned, with the one exception being our ability to manage costs effectively. That's the one place where we're noticeably ahead where we expected, you know, nine months ago.
Mike Milotich: Absolutely. Thank you for that, Mike. And then, you know, a lot of questions this quarter around psychicality and macro, which obviously doesn't seem to be showing up in your results, pretty strong growth. But maybe you could just remind us the components of psychicality and maybe more towards the fourth quarter, when we do get the heightened shopping season with BNPL and such in terms of, you know, what the sensitivity is there. Thank you very much. Sure.
Simon Khalaf: Absolutely. Thank you for that, Mike.
Speaker Change: And then, you know, a lot of questions this quarter around psychicality and macro obviously doesn't seem to be showing up in your results, pretty strong growth. But maybe you could just remind us, you know, components of psychicality and maybe more towards the fourth quarter where we do get, you know, a heightened shopping season with BNPL and such in, you know, what the sensitivity is there. Thank you very much. Sure.
Mike Milotich: Thanks a lot guys. Yeah thank you for your question. I think for the most part of course there's always puts in takes you don't get everything right but I would say on a on a bigger picture level we're very much on trend. We had said that we expected 20 million in revenue from you know customers who essentially had not launched prior to 2024 in the year and were on track to deliver that and you know that number is expected to go up to to 60 percent or 60 million sorry next year.
Mike Milotich: So, so far, we're seeing, you know, very stable trends. Even our July TPV growth is in line with Q2. So, and if you actually go back much further, what you see is that for about 18 months, our TPV growth has been incredibly stable, which, you know, we're quite happy about because our base is getting materially larger, and we're still able to maintain this growth that's called, like, sort of low to mid-30s growth on a very consistent basis. So, we're certainly not seeing anything macro-wise that seems to be disrupting that trajectory, including the month of July.
Speaker Change: So, so far we're seeing, you know, very stable trends, even our July TPV growth is in line with Q2. So, and if you actually go back much further, what you see is really for about 18 months our TPV growth has been incredibly stable.
Mike Milotich: So we feel good that the new business that we're onboarding is on track. I think in terms of when we look at the existing business and how it's trending I would say you know it's about as expected with maybe slightly different a slightly different mix than maybe we'd anticipated a year ago. I think some of the things that Simon has highlighted in financial services and this this concept where just many many companies particularly embedded finance have some neo bank aspects to their strategy in terms of how they want to engage their users or their employees and so I would say that's an area we're probably seeing more demand than we had thought nine nine months ago.
Speaker Change: which we're quite happy about of our base is getting materially larger and we're still able to maintain this growth that's called i sort of load to mid-dirty's growth on a very consistent basis so
Speaker Change: We're certainly not seeing...
Mike Milotich: So that's probably the earliest place where we're really seeing a lot of embedded finance activity but but but big picture wise we're largely on track and things are are as planned with the one exception being our ability to manage cost effectively that's the one place where we're noticeably ahead where we expected you know nine months ago. Absolutely. Thank you for that, Mike.
Speaker Change: Anything macro-wise that seems to be disrupting that trajectory, and including the month of July . So, so far, you know, we see things trending quite stable.
Mike Milotich: So, so far, you know, we see things trending quite stable. One of the other things we also look at is the mix of our spend. So, we look at the spend by what's high discretionary, what's low discretionary, and kind of a medium bucket, everything in between.
Speaker Change: One of the other things we also look at is...
Speaker Change: We look at the spend by what's high discretionary, what's low discretionary, and kind of a medium bucket, everything in between. And when we cut our TPV that way, what we're seeing is each of those three buckets is growing at roughly the same rate.
Mike Milotich: And when we cut our TPV that way, what we're seeing is each of those three buckets is growing at roughly the same rate. So, right now, at this point, too, with this compounding growth, we're getting very nicely the mix of our business by sort of discretionary buckets is not changing a whole lot. So, everything is fairly stable. The last question that you had about the holiday season, so the only thing that's material for us is that, yes, in Q4, the mix of our volume shifts a little bit more to BNPL, right?
Speaker Change: So, right now, at this point, too, with this compounding growth, we're getting very nicely the mix of our business.
Speaker Change: By sort of discretionary buckets is not changing a whole lot. So everything is fairly stable.
Simon Khalaf: The last question that you had about the holiday season, so the only...
Mike Milotich: And then, you know, a lot of questions, this quarter around sick-a-cality in macro, and obviously it doesn't seem to be showing up near results, pretty strong growth. But maybe just remind us, you know, components of sick-a-cality and maybe more towards the fourth quarter where we do get, you know, heightened shopping season with DNPL and such in, you know, what the sensitivity is there. Thank you very much. Sure. So far, we're seeing, you know, very stable trends, even our July TBV growth is in line with Q2.
Simon Khalaf: The other thing that's material for us is that, yes, in Q4, the mix of our volume shifts a little bit more to BNPL, right, just given the role that BNPL plays in retail, holiday shopping in particular.
Mike Milotich: Given the role that BNPL plays in retail holiday shopping in particular, the mix of our volume shifts a couple of points to BNPL in the fourth quarter compared to the rest of the year, but otherwise, you know, everything is pretty stable. That's the only thing that's noticeable in Q4 versus the other quarters of the year.
Speaker Change: The mix of our volume shifts a couple of points to BNPL in the fourth quarter compared to the rest of the year. But otherwise, you know, everything is pretty stable. That's the only thing that's noticeable in Q4 versus the other quarters of the year.
Operator: The next question comes from Andrew Bauch with Wells Fargo. Please go ahead.
Mike Milotich: So, and if you actually go back much further, what you see is really for about 18 months, our TBV growth has been incredibly stable, which, you know, we're quite happy about because our base is getting materially larger and we're still able to maintain this growth that's called, like, sort of low to mid-dirties growth on a very consistent basis. So, we're certainly not seeing anything macro wise that seems to be disrupting that trajectory and including the month of July.
Speaker Change: The next question comes from Andrew Bauch with Wells Fargo. Please go ahead.
Andrew Bauch: Hey, thanks for taking the question. I guess I'll take a shot at the back half guide here. You know, showing strong momentum coming out of the second quarter, and the guides are relatively unchanged. I know that business is pretty predictable here. And you kind of mentioned a lot of everyday spend, but maybe if there are certain elements of the model that could lead to upside or incremental risk on the downside, maybe you could just walk us through what those potentially could be.
Andrew Bauch: Hey, thanks for taking the question. I guess I'll take a shot at the back half guide here.
Speaker Change: Showing strong momentum coming out of the second quarter, the guides relatively unchanged.
Andrew Bauch: I know that the business is pretty predictable here, and you kind of mentioned a lot of everyday spend, but maybe if there are certain elements of the model that could lead to upside or incremental risk on the downside, maybe if you could just walk us through what those potentially could be.
Mike Milotich: So far, you know, we see things trending quite stable. One of the other things we also look at is the mix of our spend. So we look at the spend by what's high discretionary, what's low discretionary, and kind of a medium bucket, everything in between. And when we cut our TBV that way, what we're seeing is each of those three buckets is growing at roughly the same rate. So right now, at this point two, with this compounding growth, we're getting very nicely the mix of our business by sort of discretionary buckets is not changing a whole lot.
Mike Milotich: Sure. Thank you for your question, Andrew.
Danger: sure thank you for your question danger i think the sources of upside i would say that you know our
Mike Milotich: I think the sources of upside, I would say that, you know, As we've, I guess, mentioned maybe several times, our existing customers really are growing at a very fast clip. And we do our best to project that forward, but I would say, you know, we could be surprised on the upside. There are several customers who just seem to be defying gravity, and that could be a source of upside. We also have several customers in our pipeline that are eager to move quickly.
Speaker Change: As we've, I guess, mentioned maybe several times, our existing customers really are growing at a very fast clip.
Simon Khalaf: And we, you know, do our best to project that forward, but I would say, you know, we could be surprised to the upside. There are several...
Mike Milotich: So everything is fairly stable. The last question that you had about the holiday season, so the only thing that's material for us is that yes, in Q4, the mix of our volume shifts a little bit more to BNPL, right? Just given the role that BNPL plays in retail holiday shopping in particular, the mix of our volume shifts a couple of points to BNPL in the fourth quarter compared to the rest of the year. But otherwise, you know, everything is pretty stable. That's the only thing that's noticeable in Q4 versus the other Q4s of the year.
Speaker Change: Customers who just are seem to be defying defying gravity and that could be a source of upside. We also have a several customers in our pipeline that are eager to move quickly so the
Mike Milotich: So, the more we talk to very sort of sophisticated technology businesses, their timelines are a little different. So, you know, that could be a source of upside, as well as cross-selling certain capabilities to our existing customer base. Not necessarily new program launches, although we did have an existing customer launch a program in, I think, 10 weeks earlier this year. But also, you know, selling; we're doing disputes for a few customers that we weren't a year ago. You know, Simon mentioned our risk product is growing by about 60%.
Speaker Change: The more we talk to very sophisticated technology businesses, their timelines are a little different.
Simon Khalaf: So, you know, that could be a source of upside as well as cross-selling certain capabilities to our existing customer base.
Simon Khalaf: Not necessarily new program launches, although we did have an existing customer launch a program in, I think, 10 weeks.
Simon Khalaf: earlier this year. But also, you know, selling, we're doing disputes for a few customers that we weren't a year ago. You know, Simon mentioned our risk product is growing about 60%. So there are some things also that can be cross-sold that could help to the upside in the second half.
Andrew Bunch: The next question comes from Andrew Bunch with Wells Fargo. Please go ahead. Hey, thanks for taking the question.
Mike Milotich: So, there are some things that can also be cross-sold that could help to the upside in the second half. If I were to look at the downside, I think the biggest one would be something macro-related that, you know, has an impact on the overall spend trajectory of our business. At this point, especially as we get closer and closer to the holiday season, you know, people don't want to disrupt their payments platforms and their checkout experiences and everything else. So, there are only a couple more months that changes could be made. So, to me, to see any downside would have to be something that's more macro-related.
Andrew Bunch: I guess I'll take a shot at the the back half guide here. You know, showing strong momentum coming out of the second quarter, the guides relatively unchanged. I know that the business is pretty predictable here and you kind of mentioned the a lot of everyday spend, but maybe if there are certain elements of the model that could lead to upside or incremental risk on the downside, maybe you could just walk us through what those potentially could be.
Speaker Change: If I were to look at downside, I think the biggest one would be something macro-related that just has an impact on the overall spend trajectory of our business.
Speaker Change: At this point, especially as we get closer and closer to the holiday season, you know, people don't want to disrupt
Speaker Change: So there's only a couple more months that changes could be made, so to me to see any downside would have to be something that's more macro related.
Andrew Bunch: Sure, thank you for your question, Andrew. I think the sources of upside, I would say that, you know, our, as we've I guess mentioned, maybe several times, our existing customers really are growing at a very fast clip. And, and we, you know, do our best to project that forward, but I would say, you know, there's we could be surprised to the upside. There are several customers who just are seem to be defying, defying gravity and that could be a source of upside.
Andrew Bauch: Understandable. And then my second question: I just want to touch upon European and some kind of international opportunity. Last quarter, you highlighted the launch of Trade Republic, which I think had four million users you called out. Some European fintechs on the private side made some splashes in the quarter with some pretty hefty valuations. So I just want to get a better understanding, you know, where you stand today from a competitive standpoint in Europe and, broadly speaking, worldwide.
Speaker Change: Understood. And then my second question, I just want to touch upon the European and kind of international opportunity.
Speaker Change: Last quarter you highlighted the launch of Trade Republic, which I think had 4 million users you called out.
Speaker Change: some european fintex on the private side made some splashes in the quarter about pretty happalthy evaluation so just wanted to get a better understanding you know how you sit today from a competitive standpoint in europe and mix internationally broadly
Andrew Bunch: We also have several customers on our pipeline that are eager to move quickly. So the, the more we talk to very sort of sophisticated technology businesses, their timelines are a little different. So, you know, that could be a source of upside as well as cross selling certain capabilities to our existing customer base. Not necessarily new program launches, although we did have an existing customer launch a program and I think 10 weeks earlier this year, but, but also, you know, selling, we're doing disputes for a few customers that we weren't a year ago.
Simon Khalaf: Yeah, let me take a stab at that. So very favorably, I'd say, because we have demonstrated that we can scale fast with these customers. And that's number one.
Speaker Change: Yeah, let me let me take a stab at that.
Speaker Change: very favorably I'd say because we have demonstrated that we can scale fast with these customers and that's number one. Number two, a lot of, as you mentioned, a lot of these fintechs
Simon Khalaf: Number two, a lot of, as you mentioned, a lot of these FinTechs have global aspirations and not just EU aspirations and definitely cost more for their applications. So that's what they look at Marqeta in terms of a long-term partner. I would say, to be perfectly honest, that they want more from Marqeta, not less.
Speaker Change: have global aspirations
Simon Khalaf: and not just AU aspiration and definitely cross-border applications.
Andrew Bunch: You know, Simon mentioned our risk product is growing about 60%. So there are some things also that can be cross sold that could help to the upside in the second half. If I were to look at downside, I think the biggest one would be something macro related that, you know, just has an impact on the overall spend trajectory of our business. At this point, especially as we get closer and closer to the holiday season, you know, people don't want to disrupt their payments platforms and their checkout experiences and everything else. So there's only a couple more months that changes could be made. So, to me, to see any downside would have to be something that's more macro related.
Simon Khalaf: So that's what they look at Marqeta in terms of long-term partner. I would say, to be perfectly honest, that they want more from Marqeta, not less.
Simon Khalaf: And we are getting a lot of our services, especially program management, enabled in Europe because this is a great opportunity for us to upsell and service our customers better. We've also made some strong hires in Europe and strengthened our team in order to support the territory. And we've opened up offices in Poland, in Warsaw. It's a lower cost location, but also from a time zone perspective, it can help support our EU customers.
Speaker Change: And we are getting a lot of our services, actually program management, enabled in Europe because this is a great opportunity for us to upsell and service our customers better. We've also made some strong hires in Europe and strengthened our team in order to support the territory. And we've opened up offices in Poland, in Warsaw.
Simon Khalaf: It's a lower cost location, but also from a time zone perspective, can help support our EU customers. Last thing I'd say is, there isn't a single vertical in Europe that is growing fast. I'd say all of them are growing fast.
Andrew Bunch: Anderson.
Andrew Bunch: And then my second question, I just want to touch upon the European and kind of international opportunity. Last quarter, you highlighted the launch of Trade Republic, which I think had four million users, you called out. Some European fintechs on the private side made some splashes in the quarter about pretty hefty valuation.
Simon Khalaf: Last thing I'd say is there isn't a single vertical in Europe that is growing fast. I'd say all of them are growing fast. So including neobanking, expense management, with some really cool customers we have, in addition to, I'd say, short-term working capital to SMBs, all are hitting it on all cylinders, I'd say, from a volume growth perspective.
Simon Khalaf: So, including neobanking, expense management with some really cool customers we have, in addition to, I'd say, short-term working capital to SMBs, all are hitting it on all cylinders, I'd say, from a volume growth perspective.
Simon Khalaf: So, just want to get a better understanding, you know, how you sit today from a competitive standpoint in Europe and internationally broadly. Yeah, let me, let me take a step at that. So very favorably, I'd say, because we have demonstrated that we can scale fast with these customers. And that's number one, number two, a lot of, as you mentioned, a lot of these fintechs have global aspirations and not just EU aspiration.
Mike Milotich: Yeah, if I was going to just add something, I would just add two things. I think the...
Speaker Change: Yeah, if I was going to just add something, I would just add two things. I think the...
Mike Milotich: It's really significant that we're bringing our program management capabilities to Europe. I think our solution, although we have a great processing platform, obviously, you know, what we could service was relatively limited in Europe, and we've had a lot of success, but with a more comprehensive solution, particularly as things shift more to embedded finance, we think we'll make a big difference. So you know, that's something that I think is significant. The other thing that I think really helps us in Europe is that because the economics are so different in payments there, engagement is really everything to European businesses.
Speaker Change: It's really significant that we're bringing our program management capabilities to Europe.
Speaker Change: solution. Although we have a great processing platform, obviously, you know, our what we could service was relatively limited in Europe, and we've had a lot of success. But with a more comprehensive solution, particularly as things shift more to embedded finance, we think will make a big difference. So, you know, that that's something that I think is significant. The other thing that I think really helps us in Europe is that because the economics are so different in payments there,
Simon Khalaf: And definitely, I think that's a great question. It's a cost-border application. So, that's what they look at Marqeta in terms of long-term partner. I would say to be perfectly honest, that they want more from Marqeta, not less. And we are getting a lot of our services, actually program management, enabled in Europe, because this is a great opportunity for us to upsell and service our customers better. We've also made some strong hires in Europe and strengthen our team in order to support the territory.
Speaker Change: Engagement is
Simon Khalaf: Really, everything to the European businesses, like you're not going to be successful unless you have a very good engagement strategy and the user experience is very strong. And that's where the, you know, the flexibility of our platform, the ability to embed it really becomes, you know, more of a differentiator potentially there than in the U.S. where, you know, there's just more monetization available. So...
Mike Milotich: You're not going to be successful unless you have a very good engagement strategy, and the user experience is very strong. And that's where the, you know, the flexibility of our platform, the ability to embed it, really becomes, you know, more of a differentiator potentially there than in the U.S., where there's just more monetization available. So you know, those two things are serving us well. And the last question today comes from Bryan Keane with...
Speaker Change: You know, those two things are serving us well.
Operator: The last question today comes from Bryan Keane with Deutsche Bank; please go ahead.
Simon Khalaf: And we've opened up offices in Poland in Warsaw to their, it's a lower cost location, but also from a time zone perspective can help support our EU customers. Last thing I'd say is there is a single vertical in Europe that is growing fast, I'd say all of them are growing fast. So, including new banking, expense management with some really cool customers we have, in addition to, I'd say short-term working capital to SMBs, all are hidden it on all cylinders, I'd say from a volume growth perspective.
Speaker Change: The last question today comes from Bryan Keane with Deutsche Bank. Please go ahead.
Bryan Keane: Hey guys, congrats on the solid results here. Simon, just looking for an update maybe on the power credit platform. Is that ramping or how do you see that the pipeline for that business?
Bryan Keane: Hey, thank you for your comments. So, as we've mentioned, our goal for this year is to launch two programs, and we're on track to do that in H2. Everything's going well.
Speaker Change: Thank you for your comments. So it's going well. So as we've mentioned, our goal
Simon Khalaf: for this year is to launch two programs.
Mike Milotich: Yeah, if I was going to just add two things, I think it's really significant that we're bringing our program management capabilities to Europe. I think our solution, although we have a great processing platform obviously, our what we could service was relatively limited in Europe. And we've had a lot of success, but with a more comprehensive solution, particularly as things shift more to embedded finance, we think we'll make a big difference. So, that's something that I think is significant.
Speaker Change: And we're on track to do that in H2. Everything's going on track. So we're very excited about this.
Simon Khalaf: So, we're very excited about this. The second thing I'd say, like we mentioned, that we were positively surprised by the demand for commercial credit. But overall, I'd say most of the folks we'd engage with are actually embedded finance customers that are looking for engagement, as Mike mentioned, and engagement means top of the funnel acquisition. So they're not just looking, honestly, for just a co-brand card. They're looking for a full solution that can drive that engagement.
Speaker Change: Second thing I'd say...
Speaker Change: Like we mentioned, we were positively surprised by the demand in commercial credit, but overall, I'd say most of the folks we'd engage with are actually embedded finance customers.
Simon Khalaf: that are looking for engagement, as Mike mentioned.
Mike Milotich: And engagement means top-of-funnel acquisition. So they're not just looking, honestly, for just a co-brand card. They're looking for a full solution that can drive that engagement.
Mike Milotich: The other thing that I think really helps us in Europe is that because the economics are so different in payments there, engagement is really everything to the European businesses. You're not going to be successful unless you have a very good engagement strategy and the user experience is very strong. And that's where the flexibility of our platform, the ability to embed it really becomes more of a differentiator potentially there than in the US where there's just more monetization available. So, those two things are serving us well.
Simon Khalaf: And also, the brands we're talking to are predominantly digital tech brands that have wide distributions, and they don't want to leave anybody behind, so they're looking for our full suite of solutions. So debit, buy now, pay later, and credit. So that's given us great momentum on the consumer side. And on the commercial side, most of our engagements are with either aggregators or large marketplaces that either have creators or SMBs or suppliers.
Speaker Change: and also the brands we' talking to our predomly digital tech brands that have white distribution and they don't want to leave anybody behind so they're looking for artful suite of solutions so debit the by now faayer and credit
Simon Khalaf: So that's given us great momentum on the consumer side and on the
Bryan Keane: The last question today comes from Brian Keane with Deutsche Bank. We go ahead. Hey guys, congrats on the solid results here.
Simon Khalaf: On the commercial side, most of our engagements are with either aggregators or large marketplaces that either have creators or SMBs or suppliers.
Simon Khalaf: And honestly, they want to give them a suite of products ranging from like Net 30 or a revolver or working capital. So honestly, I'd say that the stars are aligning in terms of our unified solution set coupled with great program management is actually driving our pipeline versus having, I'd say, a separate credit pipeline. So it is a solution pipeline. Those two trends give us great comfort around our overall solution.
Simon Khalaf: Simon, just looking for an update on the power credit platform, is that ramping, or how do you see that, the pipeline for that business? Hey, thank you for your comments. So, it's going well. So, as we've mentioned, our goal for this here is to launch two programs, and we're on track to do that in H2. Everything's going on track. So, we're very excited about this. Second thing I'd say that, like we mentioned, that we were positively surprised by the demand in commercial credit, but overall, I'd say most of the folks we're engaged with are actually embedded finance customers that are looking for engagement, as Mike mentioned.
Simon Khalaf: And honestly, they want to give them a suite of products ranging from like Net 30 or a revolver or working capital.
Simon Khalaf: So, honestly, I'd say that the stars are aligning in terms of our unified solution set, coupled with great program management, is actually driving our pipeline, versus having, I'd say, a separate credit pipeline, so it is a solution pipeline. So those two trends give us great comfort around our overall solution.
Operator: This concludes our question and answer session and concludes our conference call. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: This concludes our question and answer session and concludes our conference call. Thank you for attending today's presentation. You may now disconnect.
Simon Khalaf: And engagement means top of funnel acquisition. So, they're not just looking, honestly, for just a co-brand card. They're looking for a full solution that can drive that engagement. And also, the brands we're talking to are predominantly digital tech brands that have wide distribution, and they don't leave anybody behind. So, they're looking for our full suite of solutions. So, debit, buy now, pay later, and credit. So, that's given us great momentum on the consumer side, and on the commercial side, most of our engagements are with either aggregators, or large-market places that either have creators, or SMBs, or suppliers.
Simon Khalaf: And honestly, they want to give them a suite of products ranging from like net $30, or a revolver, or working capital. So, honestly, I'd say that the stars are aligning in terms of our unified solution set, coupled with great program management, is actually driving our pipeline, versus having I'd say a separate credit pipeline. So, it is a solution pipeline. So, those two trends give us this great comfort around our overall solution.
This concludes our question and answer session, and concludes our conference call. Thank you for attending today's presentation. You may now disconnect.
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