Q4 2024 Marqeta Inc Earnings Call
And answer session will follow the formal presentation. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Stacey Feinerman Vice President of Investor Relations. Please go ahead.
Thanks, operator, before we begin I would like to remind everyone that today's call may contain forward looking statements. These forward looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations web site, including our annual ROE.
Speaker Change: Ladies and gentlemen, welcome to Marquetta, Inc.'s 4th Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Port on Form 10-K for the period ended December 31, 2023, and our subsequent periodic filings with the SEC.
A brief question and answer session will follow the formal presentation.
Actual results may differ materially from any forward looking statements we make here today.
Speaker Change: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stacey Finerman, Vice President of Investor Relations. Please go ahead.
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: Thanks, Operator. Before we begin, I would like to remind everyone that today's call may contain forward-looking statements.
In addition, today's call includes non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures reconciliations to the most directly comparable GAAP measures can be found in today's earnings press release or earnings release supplemental materials.
These forward-looking statements are subject to numerous risks and uncertainty.
Stacey Finerman: included those set forth in our filings with the SEC, which are available on our Investor Relations website.
Stacey Finerman: including our annual report on Form 10-K for the period ended December 31st, 2023 and our subsequent periodic filings with the SEC.
Which are available on our Investor Relations website.
Hosting todays call is Mike Miletich, Marquette as interim CEO and CFO with that I'd like to turn the call over to Mike to begin <unk>.
Stacey Finerman: Actual results may differ materially from any forward-looking statements we make here 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.
Speaker Change: Thank you Stacey.
Speaker Change: Thank you for joining us for market as fourth quarter 2024 earnings call.
Stacey Finerman: In addition, today's call includes non-GAAP financial measures. These measures should be considered as a supplement to, and not a substitute for, GAAP financial measures.
Speaker Change: Before I get into our quarterly results first I'd like to speak about the company's leadership transition.
Speaker Change: Today, we announced that Simon <unk> stepped down as Mark had a CEO and as a director.
Stacey Finerman: 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.
Speaker Change: I have been appointed to serve as interim CEO as our board of directors conducts a comprehensive search process to identify market as next CEO.
Speaker Change: On behalf of our board the management team and our entire employee base I'd like to thank Simon for his leadership and dedication to Marcelo.
Stacey Finerman: Hosting today's call is Mike Milotich, Marquette's interim CEO and CFO. With that, I'd like to turn the call over to Mike to begin.
Speaker Change: We are appreciative of his contributions to our company and we wish him well in his next endeavor.
Speaker Change: As many of you know I joined Markel three years ago. After witnessing firsthand how the company's innovative platform was enabling new commerce experience that leverage the existing payment ecosystem, while reducing risks and increasing user engagement.
Mike Milotich: Thank you, Stacey. And thank you for joining us for Marketo's fourth quarter 2024 earnings call.
Mike Milotich: Before I get into our quarterly results, first I'd like to speak about the company's leadership transition.
Mike Milotich: Earlier today, we announced that Simon Khalaf has stepped down as Marquette's CEO and as a director.
Speaker Change: Today, those opportunities are more compelling and widespread than ever and.
Speaker Change: And I am confident in our ability to capture them.
Speaker Change: I have been appointed to serve as Interim CEO as our Board of Directors conducts a comprehensive search process to identify Marquette's next CEO.
Speaker Change: Honored to be taking on this expanded role during such an important time from our Canada and look forward to a seamless transition for our employees partners and customers as we execute on our clear strategy to drive profitable growth and value creation.
Speaker Change: On behalf of our board, the management team, and our entire employee base, I'd like to thank Simon for his leadership and dedication to Marquetta.
Speaker Change: We are appreciative of his contributions to our company and we wish him well in his next endeavor.
Speaker Change: Now, let me turn to our quarterly performance.
Speaker Change: To start I will briefly highlight our Q4 results followed by an update on our accomplishments for the quarter and outline our key priorities for 2025.
Speaker Change: As many of you know, I joined Marquetta three years ago after witnessing firsthand how the company's innovative platform was enabling new commerce experience that leveraged the existing payment ecosystem while reducing risk and increasing user engagement.
Speaker Change: Then I'll conclude the call by going over the quarters financial results and our 2025 guidance and additional detail.
Speaker Change: Our fourth quarter results.
Speaker Change: Today, those opportunities are more compelling and widespread than ever, and I'm confident in our ability to capture them.
Speaker Change: Once again demonstrate our ability to grow at scale, while improving our adjusted EBITDA margin and continuing on our path to profitability.
Speaker Change: I'm honored to be taking on this expanded role during such an important time for Marquetta and look forward to a seamless transition for our employees, partners, and customers as we execute on our clear strategy to drive profitable growth and value creation.
Speaker Change: Total process volume or TPB was $80 billion in the fourth quarter, a 29% increase compared to the same quarter of 2023 or.
Speaker Change: Q4, net revenue of $136 million grew 14% year over year.
Now let me turn to our quarterly performance.
Speaker Change: Q4, gross profit was $98 million, an 18% increase versus Q4 of 2023, resulting in a gross margin of 72%.
Speaker Change: To start, I'll briefly highlight our Q4 results, followed by an update on accomplishments for the quarter, and outline our key priorities for 2025. Then I'll conclude the call by going over the quarter's financial results and our 2025 guidance in additional detail.
Speaker Change: Our adjusted EBITDA was $13 million in the quarter translating into a 9% margin.
Speaker Change: In addition to our results I'm excited to share our recent achievements.
Our fourth quarter results...
Speaker Change: First let me highlight the significant strides we've made in streamlining our program launch timelines by comprehensively enhancing our bank partnerships and the customer experience.
Speaker Change: Once again, demonstrate our ability to grow at scale while improving our adjusted EBITDA margin and continuing on our path to profitability.
Speaker Change: Total process volume, or TPV, was $80 billion in the fourth quarter, a 29% increase compared to the same quarter of 2023.
Speaker Change: We are making progress in adding additional banks, while also streamlining our operations and program Onboarding with existing bank partners with the introduction of a more structured approach for our customers.
Our Q4 net revenue of $136 million grew 14% year-over-year.
Speaker Change: Q4 gross profit was $98 million, an 18% increase versus Q4 of 2023, resulting in a gross margin of 72%.
Speaker Change: <unk> preapproved frameworks that align with bank standards and compliance guidelines.
Speaker Change: We've partnered with our customers to adopt to this new approach while also implementing additional fees for mid process changes to align interests and maintain the sufficiency.
Speaker Change: Our Justity Bida'a was $13 million in the quarter, translating into a 9% margin.
Speaker Change: In addition to our results, I am excited to share our recent achievements.
Speaker Change: As a result of the previously delayed programs discussed in our last call three remain pending launch.
Speaker Change: First, let me highlight the significant strides we've made in streamlining our program launch timelines by comprehensively enhancing our bank partnerships and the customer experience.
Speaker Change: <unk> for these three the delays are result of customers' decisions rather than capacity constraints on our part or from our bank partners.
Speaker Change: We are making progress and adding additional banks while also streamlining our operations and program onboarding with existing bank partners with the introduction of a more structured approach for our customers.
Speaker Change: While this outcome represents great progress, we remain focused on continuously optimizing our launch timelines, while enhancing the overall customer experience.
Speaker Change: emphasizing pre-approved frameworks that align with bank standards and compliance guidelines.
Speaker Change: In addition to these operational improvements we had several great wins in the fourth quarter that underscore our competitive advantages from product innovation global reach and scale.
Speaker Change: We've partnered with our customers to adopt to this new approach while also implementing additional fees for mid-process changes to align interests and maintain this efficiency.
Speaker Change: First we secured a consumer co brand credit partnership with a well established airline located outside the U S that wants to capitalize on its already strong U S customer base.
Speaker Change: As a result of the previously delayed programs discussed in our last call, three remain pending launch.
Speaker Change: While airlines cards have existed for many decades, the value proposition and user experience have remained relatively stagnant, which is a view that we share with our customer.
Speaker Change: However, for these three, the delays are a result of customer decisions rather than capacity constraints on our part or from our bank partners.
Speaker Change: While this outcome represents great progress, we remain focused on continuously optimizing our launch timelines while enhancing the overall customer experience.
Speaker Change: Rather than implementing a traditional mileage program. This airline subtle partner that could deliver a dynamic loyalty solution integrated throughout the customer journey to drive true customer engagement.
Speaker Change: In addition to these operational improvements, we had several great wins in the fourth quarter that underscore our competitive advantages from product innovation, global reach, and scale.
Speaker Change: They selected <unk> for our payment innovation and our comprehensive program management capabilities.
This includes dedicated support built in risk management, and compliance frameworks, allowing our customers to focus on their core business and passenger experience.
Speaker Change: First, we secured a consumer co-brand credit partnership with a well-established airline located outside the U.S. that wants to capitalize on its already strong U.S. customer base.
Speaker Change: This partnership is representative of a shift from loyalty programs that are more traditional to a daily engagement model.
Speaker Change: While airlines cards have existed for many decades, the value proposition and user experience have remained relatively stagnant, which is a view that we share with our customer.
Speaker Change: Our European business continues to gain momentum with Q4, TPB growth well over 100%.
Speaker Change: In Q4, we had two notable wins that will contribute to this momentum in the future.
Speaker Change: Rather than implementing a traditional mileage program, this airline sought a partner that could deliver a dynamic loyalty solution integrated throughout the customer journey to drive true customer engagement.
Speaker Change: We've secured a deal to provide both commercial card processing and program management to one of Europe's fastest growing technology companies, which has a strong presence in central and eastern Europe.
Speaker Change: They selected Marquetta for our payment innovation and our comprehensive program management capabilities.
Speaker Change: This win as a result of our focus on elevating our European program management services to align with our U S offering combined with our proven track record with innovative tech companies and our scalability.
Speaker Change: This includes dedicated support, built-in risk management, and compliance frameworks, allowing our customer to focus on their core business and passenger experience.
Speaker Change: This partnership is representative of a shift from loyalty programs that are more traditional to a daily engagement model.
Speaker Change: Although eight of our top 10 customers utilize our platform in more than one region and by region, I mean U S, Canada and Europe.
Speaker Change: Our European business continues to gain momentum, with Q4 TPV growth well over 100%.
Speaker Change: Typically they launch in one region first and expand overtime, so although our global platform might be one of the key reasons. They select marchetta. They typically don't utilize a globally from the start.
Speaker Change: In Q4, we had two notable wins that will contribute to this momentum in the future.
Speaker Change: We've secured a deal to provide both commercial card processing and program management to one of Europe's fastest growing technology companies
Speaker Change: We have said we expect this gradual expansion approach to change as we engage with more well established multinational companies with embedded finance ambitions and in Q4, we signed our first multinational solution sale.
Speaker Change: which has a strong presence in Central and Eastern Europe. This win is a result of our focus on elevating our European program management services to align with our U.S. offering, combined with our proven track record with innovative tech companies and our scalability.
Speaker Change: A U S based BTB payments company has chosen to entrust marchetta with a portion of their U S volume and their European operations and one highly coordinated global effort.
Speaker Change: Although eight of our top 10 customers utilize our platform in more than one region, and by region I mean US, Canada, and Europe,
Speaker Change: As we look forward we are building upon many of our previous year's accomplishments to make significant strides torn and even more transformative 2025.
Speaker Change: Typically they launch in one region first and expand over time.
Speaker Change: So although our global platform might be one of the key reasons they select Marketa, they typically don't utilize it globally from the start.
Speaker Change: We aim to establish <unk> as the preferred partner for embedded finance and Fintech innovations through three key strategic pillars.
Speaker Change: We have said we expect this gradual expansion approach to change as we engage with more well-established multinational companies with embedded finance ambitions. And in Q4, we signed our first multinational solution sale.
Speaker Change: Deepening our platform breadth.
Speaker Change: Expanding the solutions, we offer and strengthening our leadership in payments innovation.
Speaker Change: Less than two months into 2025, we are already making meaningful progress on all of these fronts.
Speaker Change: A U.S. based B2B payments company has chosen to entrust Marquetta with a portion of their U.S. volume and their European operations in one highly coordinated global effort.
Speaker Change: For platform breath, let me highlight two focus areas.
Speaker Change: We are excited we are excited to welcome the American Express network as a new option for credit and debit card programs for our customers starting later in 2025.
Speaker Change: As we look forward, we are building upon many of our previous year's accomplishments to make significant strides toward an even more transformative 2025.
Speaker Change: With their unique brand assets and expertise offering American express will further widen the choices on our platform to differentiate and provide even more options to fintech and embedded finance partners and prospects.
Speaker Change: We aim to establish Marketa as a preferred partner for embedded finance and FinTech innovations through three key strategic pillars.
Deepening our platform breath.
Speaker Change: We have signed an agreement and are working together to make an American Express network available to our customers. Later this year leveraging the American Express Express agile partnership platform, which enables fintech and other partners to launch cards on the American Express network.
Speaker Change: expanding the solutions we offer and strengthening our leadership in payments innovation.
Speaker Change: Less than two months into 2025, we are already making meaningful progress on all of these fronts.
For platform breath, let me highlight two focus areas.
Speaker Change: We will share more details when we get closer to launch.
Speaker Change: We are excited to welcome the American Express Network as a new option for credit and debit card programs for our customers starting later in 2025.
With this addition completed in 2025, the breadth of our capabilities combined with the ability to leverage all the major card networks will further differentiate mercado.
Speaker Change: With their unique brand, assets and expertise, offering Ameritech Express will further widen the choices on our platform to differentiate and provide even more options to FinTech and embedded finance partners and prospects.
Speaker Change: Platform breadth also means having product parity no matter, where our customer chooses to operate or expand their business.
Speaker Change: As I referenced earlier program management is becoming another key lever to enhance our offering in Europe, especially for companies seeking to offer embedded finance however.
Speaker Change: We have signed an agreement and are working together to make an American Express network available to our customers later this year. Leveraging the American Express Agile Partnership Platform, which enables FinTechs and other partners to launch cards on the American Express network.
Speaker Change: However, unlike the U S and the UK and Europe, and EMI licenses required for companies to issue and manage electronic money, including digital wallets or prepaid cards and provide payment services such as online transactions money transfers virtual cards and the ability to store customer funds electronics electronically.
Speaker Change: We will share more details as we get closer to launch.
Speaker Change: With this edition completed in 2025, the breadth of our capabilities, combined with the ability to leverage all the major card networks, will further differentiate Marketa.
Speaker Change: Previously, we partnered with transact day to meet licensing needs. However, customer feedback consistently highlighted the desire to avoid the complexity associated with contracting multiple partners.
Speaker Change: Platform breadth also means having product parity no matter where our customer chooses to operate or expand their business.
Speaker Change: As I referenced earlier, program management is becoming another key lever to enhance our offering in Europe, especially for companies seeking to offer embedded finance.
Speaker Change: Rather than building, our licensing infrastructure, which would take several years and given the substantial European opportunity, we see in our pipeline, we decided to acquire transact day to integrate our offering.
However, unlike the U.S.
Speaker Change: In the UK and Europe, an EMI license is required for companies to issue and manage electronic money.
Speaker Change: The close is subject to regulatory approvals, which could take up to six months from now I will share the financial impact of the acquisition later, when we discuss our expectations for 2025.
including digital wallets or prepaid cards.
Speaker Change: and provide payment services such as online transactions, money transfers, virtual cards and the ability to store customer funds electronically.
Speaker Change: Next let me touch on expanding solutions in 2025, we will continue to deepen our offering and harness our expertise and scale to solve specific customer pain points, specifically around risk compliance and business insights.
Speaker Change: Previously, we partnered with TransactPay to meet licensing needs. However, customer feedback consistently highlighted the desire to avoid the complexity associated with contracting multiple partners.
Speaker Change: Our real time Decisioning risk product exemplifies the success. The success of this approach with revenue more than doubling from 2023 to 2024 and now serving over 20 global customers. This.
Speaker Change: Rather than building our licensing infrastructure, which would take several years, and given the substantial European opportunity we see in our pipeline, we decided to acquire TransactPay to integrate our offering.
This revenue stream carry significantly higher gross margins due to limited transaction costs.
Speaker Change: The close is subject to regulatory approvals, which could take up to six months from now. I will share the financial impact of the acquisition later when we discuss our expectations for 2025.
Speaker Change: Over the course of 2025, we plan to offer additional services that will enable business insights and do program performance and improved visibility into key compliance activities.
Speaker Change: Next, let me touch on expanding solutions. In 2025, we will continue to deepen our offering and harness our expertise and scale to solve specific customer pain points, specifically around risk, compliance, and business insights.
Speaker Change: As a result, we believe this will give more customers the opportunity to use the Marquette a platform and a more holistic way.
Lastly, we will continue to be a first mover on payments innovations to help our customers deliver unique value propositions.
Speaker Change: Our real-time decisioning risk product exemplifies the success of this approach, with revenue more than doubling from 2023 to 2024, and now serving over 20 global customers.
Speaker Change: Nowhere has this been more evident than with the NPL.
Speaker Change: Early on Marquette to help ease the burden of merchant adoption with instant issuance virtual cards.
Speaker Change: This revenue stream carries significantly higher gross margins due to limited transaction costs.
Speaker Change: Then we were the first to help providers deliver the <unk> value proposition via card that they issue, making <unk> available anywhere card is accepted reach.
Speaker Change: Over the course of 2025, we plan to offer additional services that will enable business insights into program performance and improve visibility into key compliance activities.
Recently, we were the first processor to work on visa flexible credentials in the U S, which have launched and are already showing traction from multiple customers across multiple wallet solutions.
Speaker Change: As a result, we believe this will give more customers the opportunity to use the Marketa platform in a more holistic way.
Speaker Change: We are excited to partner with Mastercard on their recent announcement of Mastercard, one and deliver flexible card credentials to many more of our customers.
Speaker Change: Lastly, we will continue to be a first mover on payments innovations to help our customers deliver unique value propositions.
Speaker Change: We are also making progress on Marquette, a flex with the goal of enhancing how be NPL payment options can be delivered inside payment apps and wallets servicing them when needed within the existing payment flow.
Speaker Change: Nowhere has this been more evident than with BNPL. Early on, Marquetta helped ease the burden of merchant adoption with instant issuance virtual cards.
Speaker Change: Then, we were the first to help providers deliver the BNPL value proposition via a card that they issue, making BNPL available anywhere a card is accepted.
Speaker Change: From an operational perspective, Q4 demonstrated our ability to navigate challenges prioritized customer needs and maintain a strong focus on scale.
Speaker Change: Recently, we were the first processor to work on Visa Flexible Credentials in the U.S., which have launched and are already showing traction for multiple customers across multiple wallet solutions.
Speaker Change: Looking ahead, we are focused on leading in fintech and embedded finance by strengthening our platform accelerating payment innovations while prioritizing compliance.
Speaker Change: We are excited to partner with MasterCard on their recent announcement of MasterCard One and deliver flexible card credentials to many more of our customers.
Speaker Change: However, we are equally focused on driving profitable growth with a trajectory that is sustainable and diversified.
Speaker Change: With that I'm now going to transition over to discussing our Q4 financial results and 2025 guidance in more detail.
Speaker Change: We are also making progress on Marketaflex with the goal of enhancing how BNPL payment options can be delivered inside payment apps and wallets, surfacing them when needed within the existing payment flow.
Speaker Change: Our financial results for Q4 reflect a stronger than expected finish to the year.
Speaker Change: Q4, <unk> growth of 29% remains strong and steady coupled with outperformance across net revenue gross profit and expense delivering an improved adjusted EBITDA margin of 9% net.
Speaker Change: From an operational perspective, Q4 demonstrated our ability to navigate challenges, prioritize customer needs, and maintain a strong focus on scale. Looking ahead, we are focused on leading in fintech and embedded finance by strengthening our platform, accelerating payment innovations, while prioritizing compliance.
Speaker Change: Net revenue and gross profit growth outperformed by three to four points, primarily due to a favorable business mix new programs performing a little better than expected in the holiday season, and the achievement of a performance incentive with a partner.
Speaker Change: However, we are equally focused on driving profitable growth with a trajectory that is sustainable and diversified.
Speaker Change: With that, I'm now going to transition over to discussing our Q4 financial results and 2025 guidance in more detail.
Speaker Change: The business outperformance combined with the continued execution of efficiency initiatives moderating expense growth delivered a much higher adjusted EBITDA of $13 million in the quarter.
Speaker Change: Our financial results for Q4 reflect a stronger-than-expected finish to the year.
Speaker Change: Let me quickly share the Q4 highlights before spending more time discussing expectations for 2025.
Speaker Change: Q4 TPV growth of 29% remains strong and steady, coupled with outperformance across net revenue, gross profit, and expense, delivering an improved Adjusted EBITDA margin of 9%.
Speaker Change: Q4, <unk> was 80 billion growing 29% year over year, one points lower than last quarter TBD.
Speaker Change: <unk> growth has been steady for some time now growing between 29% and 33% in each of the last seven quarters, resulting in marchetta, achieving new levels of scale.
Speaker Change: Net revenue and gross profit growth outperformed by 3-4 points, primarily due to a favorable business mix, new programs performing a little better than expected in the holiday season, and the achievement of a performance incentive with a partner.
Speaker Change: To put our growth at scale and perspective in Q1 of 2024, we had our first day of over $1 billion of TPB and in Q4, there were 17 days, where we crossed $1 billion.
Speaker Change: The business outperformance, combined with the continued execution of efficiency initiatives, moderating expense growth, delivered a much higher adjusted EBITDA of $13 million in the quarter.
Speaker Change: Non block TBD grew roughly twice as fast as block fueled by customers big and small across several use cases.
Speaker Change: Let me quickly share the Q4 highlights before spending more time discussing expectations for 2025.
Speaker Change: Consistent with the last several quarters financial services lending, including buy now pay later and expense management. All grew at roughly the same rate in Q4 slightly faster than the overall company.
Speaker Change: Q4 TPV was $80 billion, growing 29% year-over-year, one point slower than last quarter.
Speaker Change: TBV growth has been steady for some time now, growing between 29 and 33 percent in each of the last seven quarters, resulting in Marquetta achieving new levels of scale.
Speaker Change: Growth within our financial services vertical continues to be fueled by block success as well as the rapid expansion of our non block neo banking customers, whose TBB grew roughly 100% year over year.
Speaker Change: To put our growth at scale in perspective, in Q1 of 2024, we had our first day of over one billion of TPB, and in Q4, there were 17 days where we crossed one billion.
Speaker Change: Lending, including buy now pay later growth remains strong due to several drivers, including the adoption of our <unk> customers pay anywhere card solutions.
Speaker Change: Non-block TPV grew roughly twice as fast as block, fueled by customers, big and small, across several use cases.
Speaker Change: Our customers' increased distribution through wallets.
Speaker Change: Strong user growth among SMB lending solutions and client is migration to our platform in Europe in October, which we discussed on our last call.
Speaker Change: Consistent with the last several quarters, financial services, lending including Buy Now Pay Later, and expense management all grew at roughly the same rate in Q4, slightly faster than the overall company.
Expense management growth accelerated a bit this quarter due to our customers' sustaining strong end user acquisition as AP automation and modern corporate card platforms continued to gain share.
Speaker Change: Growth within our financial services vertical continues to be fueled by block success as well as the rapid expansion of our non-block neobanking customers whose TPV grew roughly 100% year-over-year.
Speaker Change: On demand delivery growth remained in the single digits due to the maturity of this use case as well as three distinct instances of customers reducing card usage by connecting their platforms directly to an individual merchant as we discussed last quarter.
Speaker Change: Lending, including Buy Now Pay Later, growth remains strong due to several drivers, including the adoption of our BNPL customers Pay Anywhere card solutions,
Our customers increased distribution through wallets.
Speaker Change: Q4, net revenue was $136 million growing 14% year over year.
Speaker Change: strong user growth among SMB lending solutions, and Klarna's migration to our platform in Europe in October, which we discussed on our last call.
Speaker Change: Our growth slowed four points versus last quarter, primarily due to tougher year over year comparisons as well as a greater percentage of volume coming from powered by customers, which have a lower net revenue take rate due to minimal cost of revenue.
Speaker Change: Expense management growth accelerated a bit this quarter due to our customers sustaining strong end-user acquisition as AP automation and modern corporate card platforms continue to gain share.
Speaker Change: This mix shift was partially offset by our powered by Mark had a take rate improving by more than one point due to favorable mix as consumer use cases are growing much faster than single use commercial virtual card.
Speaker Change: On-demand delivery growth remained in the single digits due to the maturity of this use case as well as three distinct instances of customers reducing card usage by connecting their platforms directly to an individual merchant as we discussed last quarter.
Block net revenue concentration was 46% in Q4 decreasing one point from Q3 of 'twenty, four and down five points from Q4 of 2023.
Q4 net revenue was $136 million, growing 14% year-over-year.
Speaker Change: <unk> revenue growth accelerated a bit versus last quarter.
Speaker Change: Our growth slowed four points versus last quarter, primarily due to tougher year-over-year comparisons, as well as a greater percentage of volume coming from powered by customers, which have a lower net revenue take rate due to minimal cost of revenue.
Speaker Change: By the ramping of new programs.
Speaker Change: Net revenue take rate of 17 basis points remains unchanged from last quarter.
Speaker Change: Q4, gross profit was 98 million growth of 18% year over year, resulting in a 72% gross profit margin.
Speaker Change: This mix shift was partially offset by our Powered by Marketa take rate improving by more than one point due to favorable mix, as consumer use cases are growing much faster than single-use commercial virtual cards.
Speaker Change: This is approximately four points higher than we expected at the end of last quarter, primarily driven by three factors.
Speaker Change: First the growth contribution from new program launches was approximately two points better than we anticipated mostly due to stronger holiday season TPB. Among these programs.
Speaker Change: Block net revenue concentration was 46% in Q4, decreasing one point from Q3 of 24 and down five points from Q4 of 2023.
Speaker Change: But also the program launch delays that we discussed extensively last quarter, we're a little less impactful than we expected.
Speaker Change: Non-block revenue growth accelerated a bit versus last quarter, helped by the ramping of new programs.
Speaker Change: The other two factors were unforeseen benefits.
Speaker Change: Our net revenue take rate of 17 basis points remains unchanged from last quarter.
Speaker Change: We earned a performance incentive that contributed one point of growth after achieving an unexpected milestone.
Speaker Change: Q4 gross profit was $98 million, growth of 18% year-over-year, resulting in a 72% gross profit margin.
In addition favorable customer mix also contributed one point of growth upside as several of our higher yielding use cases and customers outperformed our expectations.
Speaker Change: This is approximately four points higher than we expected at the end of last quarter, primarily driven by three factors.
Speaker Change: Non block and gross profit growth was consistent with last quarter growing many points faster than the overall company.
Speaker Change: First, the growth contribution from new program launches was approximately two points better than we anticipated, mostly due to stronger holiday season TPV among these programs.
Speaker Change: Our gross profit take rate was 12 basis points consistent with last quarter.
Speaker Change: But also the program launch delays that we discussed extensively last quarter were a little less impactful than we expected.
Speaker Change: Q4, adjusted operating expenses were 86 million growing 7% year over year, which was a little better than expected.
The other two factors were unforeseen benefits.
Speaker Change: We continue to be focused on our hiring utilizing multiple geographic locations to find the best talent in part to rely less on professional services.
Speaker Change: We earned a performance incentive that contributed one point of growth after achieving an unexpected milestone.
Speaker Change: We are also benefiting from increased scale as our platform related costs grow slower than our processed transactions and our gross profit.
Speaker Change: In addition, favorable customer mix also contributed one point of growth upside as several of our higher yielding use cases and customers outperformed our expectations.
Speaker Change: Q4, adjusted EBITDA was positive $13 million and margin of over 9%, which are both a new all time highs for the company as.
Speaker Change: Non-block gross profit growth was consistent with last quarter, growing many points faster than the overall company.
Speaker Change: As we continue on our path to profitability.
Speaker Change: Our gross profit take rate was 12 basis points, consistent with last quarter.
Speaker Change: The Q4, GAAP net loss was $27 million, including a $10 million post combination expense related to the power acquisition offset by interest income of $11 million.
Speaker Change: Q4 adjusted operating expenses were $86 million, growing 7% year over year, which was a little better than expected. We continue to be focused on our hiring, utilizing multiple geographic locations to find the best talent, in part to rely less on professional services.
Speaker Change: We ended the quarter with $1 1 billion of cash and short term investments.
Speaker Change: To briefly summarize our full year 2020 for performance <unk> growth was 31%.
Speaker Change: We are also benefiting from increased scale as our platform-related costs grow slower than our process transactions and our gross profit.
Speaker Change: Net revenue contracted 25% and gross profit grew 7%.
Speaker Change: Which does not reflect the strength of the underlying business due to the cash up renewal and the change in the revenue presentation that impacted our year over year comparison in the first half of the year.
Speaker Change: Q4 Jussie Bidaw was positive 13 million, a margin of over 9%, which are both new all-time highs for the company.
Speaker Change: The second half of 2024, clearly demonstrates we are on a path to sustainable profitable growth.
as we continue on our path to profitability.
Speaker Change: The Q4 gap net loss was $27 million, including a $10 million post-combination expense related to the power acquisition, offset by interest income of $11 million.
Speaker Change: Adjusted EBITDA was $29 million for the year, which is a 6% margin on revenue or an 8% margin on gross profit.
Speaker Change: We ended the quarter with $1.1 billion of cash and short-term investments.
Speaker Change: This is a milestone for the company as we leave our negative adjusted EBITDA EBITDA days behind us and drive toward GAAP profitability exiting 2026.
Speaker Change: To briefly summarize our full-year 2024 performance, TPV growth was 31 percent.
The net revenue contracted 25% and gross profit grew 7%.
Speaker Change: Before I transition to our expectations for 2025, let me spend a minute discussing share buybacks.
Speaker Change: which does not reflect the strength of the underlying business due to the cash app renewal and the change in the revenue presentation that impacted our year-over-year comparison in the first half of the year.
Speaker Change: We currently have $80 million remaining on the Q2 2024 authorization.
There was very little buyback activity in Q4 as the prior <unk> one plan expired shortly after our November earnings release at that time. The company was not in a position to trade or enter into a new <unk> one plan because of legal restrictions.
Speaker Change: The second half of 2024 clearly demonstrates we are on a path to sustainable, profitable growth.
Speaker Change: Adjusted EBITDA was $29 million for the year, which is a 6% margin on revenue or an 8% margin on gross profit.
Speaker Change: However, we expect to restart our share repurchase activity in the coming days as we do not believe the current valuation fairly represent the company's value or the market opportunity in front of us.
Speaker Change: To that end our board has approved an additional $300 million share back buyback authorization, bringing our total authorization to $380 million.
Speaker Change: Before I transition to our expectations for 2025, let me spend a minute discussing share buybacks.
Speaker Change: We currently have $80 million remaining on the Q2 2024 authorization.
Speaker Change: We intend to capitalize on this opportunity to return capital to shareholders at prices well below what we believe is fair market value.
Speaker Change: There was very little buyback activity in Q4, as the prior 10b-5-1 plan expired shortly after our November earnings release.
Now, let's transition to our expectations for 2025.
Speaker Change: At that time, the company was not in a position to trade or enter into a new 10b-5-1 plan because of legal restrictions.
Speaker Change: Let me first start with our full year 2025 expectations before diving into more details on the quarterly cadence.
Speaker Change: Full year 2025, net revenue growth is expected to be between 16, and 18%, which is relatively consistent with our second half performance in 2024.
Speaker Change: However, we expect to restart our share of purchase activity in the coming days as we do not believe the current valuation fairly represents the company's value or the market opportunity in front of us.
Speaker Change: This is fueled by our expectation of TPB growth in the mid to high <unk>, which assumes a stable macro economic environment consistent with the past several quarters.
Speaker Change: To that end, our board has approved an additional $300 million share buyback authorization, bringing our total authorization to $380 million.
Speaker Change: We intend to capitalize on this opportunity to return capital to shareholders at prices well below what we believe is fair market value.
Speaker Change: The TBD growth is partially offset by a lower net revenue take rate, mostly driven by two factors.
Speaker Change: First stronger growth among our powered by marchetta customers, where our take rate is lower.
Now let's transition to our expectations for 2025.
Speaker Change: It is important to note that this factor is much more impactful to net revenue growth in the gross profit growth.
Speaker Change: Let me first start with our full year 2025 expectations before diving into more details on the quarterly cadence.
Speaker Change: A big component of the lower revenue take rate is the minimal cost of revenue.
Speaker Change: Full year 2025 net revenue growth is expected to be between 16 and 18 percent, which is relatively consistent with our second half performance in 2024.
Speaker Change: Which is not relevant for gross profit.
Speaker Change: And second lower pricing as a result of expected contract renewal activity.
Speaker Change: New programs sold since the revitalization of our sales motion late in 2022 and launch since the start of 2024 are expected to contribute over $40 million net revenue.
Speaker Change: This is fueled by our expectation of TPV growth in the mid to high 20s, which assumes a stable macroeconomic environment consistent with the past several quarters.
Speaker Change: The TBV growth is partially offset by a lower net revenue take rate, mostly driven by two factors.
Speaker Change: The contribution to 2025 net revenue growth will be roughly 5% based on our 2024 performance of less than $20 million.
Speaker Change: First, stronger growth among our Powered by Marketa customers where our take rate is lower. It is important to note that this factor is much more impactful to net revenue growth than to gross profit growth because a big component of the lower revenue take rate is the minimal cost of revenue, which is not relevant for gross profit.
Speaker Change: Unfortunately, this was behind our $60 million goal, we shared previously due to fewer new programs launching and ramping in 2024 as well as launch delays, which we believe is partly due to heightened regulatory environment from our bank partners, which we discussed in detail last quarter.
Speaker Change: and second, lower pricing as a result of expected contract renewal activity.
Speaker Change: While we did not make great progress in launching delayed programs in 2020, while we did make great progress in launching delayed programs. In 2024, we are still not back to our 2023 time to value run rate.
Speaker Change: New programs sold since the revitalization of our sales motion late in 2022 and launched since the start of 2024 are expected to contribute over 40 million net revenue.
Speaker Change: 2025, gross profit is expected to grow between 14, and 16%, which equates to a gross profit margin in the high <unk>.
Speaker Change: The contribution to 2025 net revenue growth will be roughly 5% based on our 2024 performance of less than $20 million.
Speaker Change: Gross profit growth is expected to be slightly lower than net revenue growth, mostly due to the contract renewals, we expect to execute this year, where our pricing changes, but our cost of revenue remains unchanged.
Speaker Change: Unfortunately, this is behind our $60 million goal we shared previously due to fewer new programs launching and ramping in 2024, as well as launch delays, which we believe is partly due to heightened regulatory environment from our bank partners, which we discussed in detail last quarter.
Speaker Change: There is always some renewal activity in any given year, but 2025 will be a little more significant than what we should typically see going forward.
Speaker Change: While we did not make great progress in launching delayed programs in 2024, while we did make great progress in launching delayed programs in 2024, we are still not back to our 2023 time-to-value run rate.
Speaker Change: We have previously discussed renewing over 80% of our TPB over roughly 18 months in 2022 and 2023 following the Fintech boom.
Speaker Change: The last couple of significant remaining contracts are up for renewal in 2025.
Speaker Change: 2025 gross profit is expected to grow between 14 and 16 percent, which equates to a gross profit margin in the high 60s.
Speaker Change: 2025, adjusted operating expenses are expected to grow in the mid to high single digits. As we continue to focus on efficiency operating with a strong investment discipline and achieving economies of scale.
Speaker Change: Gross profit growth is expected to be slightly lower than net revenue growth, mostly due to the contract renewals we expect to execute this year, where our pricing changes but our cost of revenue remains unchanged.
Speaker Change: Therefore, we expect full year 2025, adjusted EBITDA margin to be in the range of 9% to 10%.
Speaker Change: There is always some renewal activity in any given year, but 2025 will be a little more significant than what we should typically see going forward. We have previously discussed renewing over 80% of our TPV over roughly 18 months in 2022 and 2023 following the fintech boom.
Speaker Change: This equates to adjusted EBITDA of well over $50 million.
Speaker Change: One note on EBITDA margin, we feel looking at EBITDA adjusted EBITDA margin on the basis of gross profit, which is expected to be in the mid teens better reflects the nature of our business and profitability.
Speaker Change: The last couple of significant remaining contracts are up for renewal in 2025.
Speaker Change: As I mentioned earlier, we reached an agreement to acquire transact pay to enhance our program management offering in Europe.
Speaker Change: 2025 adjusted operating expenses are expected to grow in the mid to high single digits as we continue to focus on efficiency, operating with a strong investment discipline, and achieving economies of scale.
Speaker Change: For financial planning purposes, we are assuming we close at the start of Q3 2025, which is dependent on when we receive regulatory approval associated with the EMI licenses.
Speaker Change: Therefore, we expect full year 2025 adjusted EBITDA margin to be in the range of 9-10%.
Speaker Change: The purchase price was 45 million euros with an additional 5 million euros tied to performance incentives.
Speaker Change: This equates to a Justin Ibida of well over $50 million.
Speaker Change: Based on consistent feedback from customers and prospects, we believe that transact pay and marchetta offerings together will drive value in three ways.
Speaker Change: One note on EBITDA margin. We feel looking at adjusted EBITDA margin on the basis of gross profit, which is expected to be in the mid-teens, better reflects the nature of our business and profitability.
One more European customers will adopt our program management services.
Speaker Change: Two we will attract additional customers looking for a single provider of processing program management and the EMI license.
Speaker Change: As I mentioned earlier, we reached an agreement to acquire TransacPay to enhance our program management offering in Europe.
Speaker Change: And three geographic expansion on our platform will be even more seamless as there will be significantly more parity in our product offerings in the U S, Canada and Europe.
Speaker Change: For financial planning purposes, we are assuming we close at the start of Q3 2025, which is dependent on when we receive regulatory approval associated with the EMI licenses.
Speaker Change: Therefore, we believe the value of the acquisition will mostly be visible in new sales, which typically take more than one year to meaningfully contribute to the P&L.
Speaker Change: The purchase price was €45 million, with an additional €5 million tied to performance incentives.
Speaker Change: Our 2025 expectations and include two quarters of the current transacted business included in our P&L, which should contribute approximately one point to full year growth rate of both net revenue and gross profit.
Speaker Change: Based on consistent feedback from customers and prospects, we believe that TransactPay and Marketa offerings together will drive value in three ways.
One, more European customers will adopt our program management services.
Speaker Change: Two, we will attract additional customers looking for a single provider of processing, program management, and the EMI license. And three, geographic expansion on our platform will be even more seamless, as there will be significantly more parity in our product offerings in the U.S., Canada, and Europe.
Speaker Change: And be neutral to adjusted EBITDA.
Speaker Change: Before I share the quarterly cadence of our 2025 expectations I want to highlight a change to how incentives will be recorded starting in Q2, 2025, which would be the largest driver of quarterly gross profit growth fluctuations.
Speaker Change: Therefore, we believe the value of the acquisition will mostly be visible in new sales, which typically take more than one year to meaningfully contribute to the P&L.
Speaker Change: As a quick reminder, our two most significant incentive contracts both have contract years that run April to March.
Speaker Change: Our 2025 expectations include two quarters of the current transact paid business included in our P&L, which should contribute approximately one point to full year growth rate of both net revenue and gross profit, and be neutral to adjusted EBITDA.
Speaker Change: When our accounting was finalized prior to the IPO, we didn't have enough history to demonstrate an ability to forecast incentives. Therefore, it was determined we would record the benefits as they were earned.
Speaker Change: This meant our incentives increased significantly throughout the year as we reached additional tiers, which resulted in our gross profit growth being lower in Q2 in particular.
Speaker Change: Before I share the quarterly cadence of our 2025 expectations, I want to highlight a change to how incentives will be recorded starting in Q2 2025, which will be the largest driver of quarterly gross profit growth fluctuations.
Speaker Change: Now that we are approaching the four year anniversary of our IPO and have an established track record starting in Q2 2025, we anticipate that we will accrue incentives each quarter based on the forecasted annual contract here, we expect to achieve.
Speaker Change: As a quick reminder, our two most significant incentive contracts both have contract years that run April to March.
Speaker Change: As a result, we expect that there'll be much less variation in the quarterly incentives recorded in the P&L, even though this does not impact what we earn in any given contract year.
Speaker Change: When our accounting was finalized prior to the IPO, we didn't have enough history to demonstrate an ability to forecast incentives. Therefore, it was determined we would record the benefits as they were earned.
Speaker Change: Therefore in 2025 as we implement this change the quarterly gross profit growth rate will be impacted due to the differences in the year over year comparison.
Speaker Change: This meant our incentives increased significantly throughout the year as we reached additional tiers, which resulted in our gross product growth being lower in Q2 in particular.
Speaker Change: We will provide the impact each quarter. So it is clue clear what our true growth trajectory is on an apples to apples basis.
Speaker Change: Now that we are approaching the four-year anniversary of our IPO and have an established track record, starting in Q2 2025, we anticipate that we will accrue incentives each quarter based on the forecasted annual contract tier we expect to achieve.
Speaker Change: With that let me turn to the quarterly cadence.
Speaker Change: In Q1, 2025, we expect net revenue to grow between 14, and 16% a little faster than we exited 2024 as we lap the renegotiated platform partner agreement that has weighed on revenue growth. Since Q1 2024, as a result of the new cash App revenue presentation.
Speaker Change: As a result, we expect that there will be much less variation in the quarterly incentives recorded in the P&L, even though this does not impact what we earn in any given contract year.
Speaker Change: We expect net revenue growth to accelerate by approximately one point each quarter as we progress through the year bolstered by contributions from new programs launching and ramping as well as the customers adopting new solutions as we continue to expand the services we offer.
Speaker Change: Therefore, in 2025, as we implement this change, the quarterly gross profit growth rate will be impacted due to the differences in the year-over-year comparison.
Speaker Change: We will provide the impact each quarter so it is clear what our true growth trajectory is on an apples-to-apples basis.
Speaker Change: For quarterly gross profit, let me first share of the growth trajectory on an apples to apples basis without the change to accrued incentives or the inclusion of transact pay which is the best reflection of the underlying business performance.
With that, let me turn to the quarterly cadence.
Speaker Change: In Q1 2025, we expect net revenue to grow between 14% and 16% a little faster than we exited 2024 as we lapped the renegotiated Platform Partner Agreement that has weighed on revenue growth since Q1 2024 as a result of the new Cash App revenue presentation.
Speaker Change: Q1, gross profit growth is expected to be 11% to 13%, which will be our lowest quarter before the revenue growth starts accelerating.
Speaker Change: This is six points lower than our Q4 2024 exit for two reasons.
Speaker Change: We expect net revenue growth to accelerate by approximately one point each quarter as we progress through the year, bolstered by contributions from new programs launching and ramping, as well as the customers adopting new solutions as we continue to expand the services we offer.
Speaker Change: Q4, 2024 benefitted by a combined two points of growth from our partner incentive tied to an annual performance and favorable customer mix during the holiday season.
Speaker Change: There is an additional four points of drag on Q1 growth due to the timing of of an incentive which was booked in Q1 2024 for the previous contract year, but was earned in Q4 2024 and the most recent contract year.
Speaker Change: For quarterly gross profit, let me first share the growth trajectory on an apples-to-apples basis without the change to accrued incentives or the inclusion of transact pay, which is the best reflection of the underlying business performance.
Speaker Change: Q1 goes profit growth is expected to be 11 to 13 percent which will be our lowest quarter before the revenue growth starts accelerating.
Speaker Change: Creating an unfavorable year over year comparison in Q1.
Speaker Change: Q2 growth will be the highest quarter roughly four points faster than Q1 in the mid to high teens as new programs ramp and new services are adopted but we don't yet have headwinds from renewals, which we so we have the easiest year over year comparison.
Speaker Change: This is six points lower than our Q4 2024 exit for two reasons.
Speaker Change: First, Q4 2024 benefited by a combined two points of growth from a partner incentive tied to an annual performance and favorable customer mix during the holiday season.
Speaker Change: Q3, and Q4 growth should be similar roughly two points slower than Q2 in the mid teens as expected renewals begin to offset the benefits of accelerating new programs and services.
Speaker Change: Second, there's an additional four points of drag on Q1 growth due to the timing of an incentive, which was booked in Q1 2024 for the previous contract year, but was earned in Q4 2024 in the most recent contract year.
Let me share quarterly gross profit growth expectations on a reported basis.
Speaker Change: Including the noise from the change in accrued incentives and the inclusion of transacting.
creating an unfavorable year-over-year comparison in Q1.
Speaker Change: Q1 gross profit growth is expected to grow between 11 and 13%.
Speaker Change: Q2 growth will be the highest quarter, roughly four points faster than Q1, in the mid to high teens as new programs ramp and new services are adopted, but we don't yet have headwinds from renewals, so we have the easiest year-over-year comparison.
Speaker Change: Q2 gross profit growth is expected to accelerate into the mid twenty's, including an approximately eight point lift from the incentive accounting change.
Q3 gross profit growth is expected to be in the mid teens on a reported basis approximately two points higher than Q1 due to the inclusion of transact pay.
Speaker Change: Q3 and Q4 growth should be similar, roughly two points slower than Q2 in the mid-teens as expected renewals begin to offset the benefits of accelerating new programs and services.
Speaker Change: The incentive accounting change will contribute one to two points of growth drag, which is offset by better business performance.
Speaker Change: Let me share quarterly gross profit growth expectations on a reported basis, including the noise from the change in accrued incentives and the inclusion of TransactPay.
Speaker Change: Q4 gross profit growth is expected to slow by three points versus Q3 into the low double digits due to the larger impact from the incentive accounting change.
Speaker Change: Q1 gross profit growth is expected to grow between 11 and 13 percent.
Speaker Change: Our 2025 investments are primarily focused on platform capabilities and innovation additional go.
Speaker Change: Q2 gross profit growth is expected to accelerate into the mid-20s, including an approximately 8-point lift from the incentive accounting change.
Speaker Change: Go to market resources to meet growing demand and maintaining high standards of compliance Q.
Speaker Change: Q1, adjusted operating expenses are expected to grow in the mid to high single digits roughly in line with Q4 2020 for growth.
Speaker Change: Q3 gross profit growth is expected to be in the mid-teens on a reported basis approximately two points higher than Q1 due to the inclusion of TransactPay.
Speaker Change: We expect Q2 growth to be roughly two to three points lower than Q1 in the mid single digits due to an easier year over year comparison.
Speaker Change: The incentive accounting change will contribute one to two points of growth drag, which is offset by better business performance.
Speaker Change: Q3, and Q4 are expected to be approximately two to three points higher than Q1 in the high single to low double digits due to the expected inclusion of transact pay.
Speaker Change: Q4 gross profit growth is expected to slow by 3 points versus Q3 into the low double digits due to the larger impact from the incentive accounting change.
Speaker Change: Q1, adjusted EBITDA margin is expected to be 10% to 11% slightly better than Q4 2024, we expect to.
Speaker Change: https://www.youtube.com or the link in the description to watch more videos.
Speaker Change: Our 2025 investments are primarily focused on platform capabilities and innovation.
Speaker Change: additional go-to-market resources to meet growing demand and maintaining high standards of compliance.
Speaker Change: The remaining quarters of 2025 to be one point lower at 9% 10%.
Speaker Change: Q1 adjusted operating expenses are expected to grow in the mid to high single digits roughly in line with Q4 2024 growth.
Speaker Change: In conclusion, we are exiting 2024 with a solid foundation and with many impactful business enhancements coming in 2025 that will enable us to deliver sustainable profitable growth for years to come.
Speaker Change: We expect Q2 growth to be roughly 2-3 points lower than Q1 in the mid-single digits due to an easier year-over-year comparison.
Speaker Change: Our excitement and confidence is primarily driven by four factors.
Speaker Change: First our sales pipeline suggests embedded finance is getting close to breaking out offering card issuing solutions to drive engagement and enhance the monetization of their already existing user basis.
Speaker Change: Q3 and Q4 are expected to be approximately 2-3 points higher than Q1 in the high single to low double digits due to the expected inclusion of TransactPay.
Speaker Change: Q1 adjusted EBITDA margin is expected to be 10 to 11 percent, slightly better than Q4 2024. We expect the remaining quarters of 2025 to be one point lower at 9 to 10 percent.
Speaker Change: Our 2025 technology roadmap will deliver significant expansion of the platform services, we provide and strengthen our payment innovation leadership.
Speaker Change: This not only increases the value we can offer our customers, but also strengthens our ties with the customer.
Speaker Change: In conclusion, we are exiting 2024 with a solid foundation and with many impactful business enhancements coming in 2025 that will enable us to deliver sustainable, profitable growth for years to come. Our excitement and confidence is primarily driven by four factors.
Speaker Change: Our Europe business continues to grow very fast and we are enhancing our program management capabilities to make our value proposition as comprehensive as what we offer in the U S and.
Speaker Change: And finally, our platform continues to reach new levels of economies of scale to drive higher profit margins as we strive to accelerate growth in 2026 and beyond the.
Speaker Change: First, our sales pipeline suggests embedded finance is getting close to breaking out, offering card issuing solutions to drive engagement and enhance the monetization of their already existing user bases.
Speaker Change: The combination of strong gross profit growth and rapid adjusted EBITDA margin expansion will fuel value creation, well beyond our 2026 exit with GAAP profitability.
Speaker Change: Our 2025 Technology Roadmap will deliver significant expansion of the platform services we provide and strengthen our payment innovation leadership.
Speaker Change: I will now turn it back over to the operator for questions.
Speaker Change: This not only increases the value we can offer our customers, but also strengthens our ties with the customer.
Speaker Change: Thank you.
Speaker Change: At this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
Speaker Change: Our Europe business continues to grow very fast, and we are enhancing our program management capabilities to make our value proposition as comprehensive as what we offer in the U.S.
Speaker Change: And finally, our platform continues to reach new levels of economies of scale to drive higher profit margins as we strive to accelerate growth in 2026 and beyond.
Speaker Change: We ask analysts to limit themselves to one question and a follow up so that others may have an opportunity to ask question.
Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: I will now turn it back over to the operator for questions.
Speaker Change: Our first question comes from Tien Tsin Huang with Jpmorgan. Please proceed with your question.
Speaker Change: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. We ask analysts to limit themselves to one question and a follow-up, so that others may have an opportunity to ask questions.
Speaker Change: Thanks, so much.
Speaker Change: You went through a lot of stuff there are millions of alone in your plate. So thanks for that I want to.
Speaker Change: I want to ask on the transact pay and better understand what <unk>.
Speaker Change: <unk> here.
Speaker Change: We're acquiring here that you could build yourself, Mike I understand the licenses and things like that it doesn't sound like there is a customer list that you cannot for example, but.
Maybe a little bit more on that would be great.
One moment, please, while we poll for questions.
Speaker Change: Sure. So let me just explain the business a little bit what transact pay is a bin sponsorship provider that has lost license with any money institution and regulated and authorized to issue E money and undertake payments in both the UK and EU.
Speaker Change: Our first question comes from Tien-Hsien Hoang with JP Morgan. Please proceed with your question.
Tien-Hsien Hoang: Thanks so much. Mike, you went through a lot of stuff there. I know you have a lot on your plate, so thanks for that.
Speaker Change: And so the way I think about it is what makes it different Europe makes Europe different than in the U S. When we offer program management in the U S. We still rely on the bank to be the bin sponsor.
Tien-Hsien Hoang: I want to ask on this transact pay and better understand what exactly you're acquiring here that you couldn't build yourself. I understand the licenses and things like that. It doesn't sound like there's a customer list that you can hunt, for example, but maybe a little bit more on that would be great.
Speaker Change: The bank controls the bins and they are the member of the network either visa Mastercard.
Speaker Change: With this license we actually become the bin sponsor. So we are the member so transact pay as a member of the networks and they control the beans. So it.
Sure
So let me just explain the business a little bit.
Tien-Hsien Hoang: TransactPay is a BIN sponsorship provider that is licensed with an e-money institution.
Speaker Change: It makes it you have a little bit more control over of the offering and what we consistently hear from customers is that because oftentimes the processor and the license holder is different they have to contract with multiple parties, which is not as attractive. So the ability to have one solution is.
Tien-Hsien Hoang: and regulated and authorized to issue e-money and undertake payments in both the UK and the EU.
Speaker Change: And so if the way I think about it is what makes it different, Europe makes Europe different than in the US when we offer program management.
Tien-Hsien Hoang: in the U.S., we still rely on the bank to be the BIN sponsor. So the bank controls the BINs, and they are the member of the network, either Visa or MasterCard.
Speaker Change: What we are after you're right Tien tsin that we could have done this ourselves but the.
Speaker Change: There's two aspects to it one you have to show that Youre ready for all the compliance and so the to build that capability and then show the regulators that you are ready to do it is quite time consuming our estimate is it would take several years for that and we really did not want to wait given.
Tien-Hsien Hoang: With this license, we actually become the BIN sponsor. So we are the member. So Transaxpay is a member of the networks.
Tien-Hsien Hoang: and they control the bins. So it makes it, you have a little bit more control over the offering.
Tien-Hsien Hoang: And what we consistently hear from customers is that because oftentimes the processor and the license holder is different, you know, they have to contract with multiple parties, which is not as attractive, so the ability to.
Speaker Change: The amount of activity, we see in Europe, and the momentum we have in that business.
Speaker Change: The second thing is that.
Speaker Change: Once you have that license the skill set is pretty specialized so the value here is the transact pay is already one of the leaders in that market and has the specialized resources and has proven to deliver on our great with great performance over many years and so it becomes very seamless for us to just.
Tingen: have one solution is what we are after. You're right, Tingen, that we could have done this ourselves, but the
Great.
Tingen: There's two aspects to it. One, you have to show that you're you're ready for all the compliance and so the
Speaker Change: Art inserting that into our value proposition to our customers. So that's really what we're getting and again the primary benefits for US is that we think more European customers will adopt our program management.
Tingen: To build that capability and then show the regulators that you are ready to do it is quite time-consuming. Our estimate is it would take several years for that. And we really did not want to wait given the amount of activity we see in Europe and the momentum we have in that business.
Speaker Change: We will attract more customers new customers, who right now are looking for that bundled offering that we don't provide and the last thing is that it will make it even easier for our non European customers to expand on our platform in Europe and essentially get the same level of service and so we're quite excited about the combination and look forward to closing in the coming months.
Tingen: The second thing is that once you have that license, the skill set is pretty specialized. So the value here is that Transacte is already one of the leaders in that market and has the
Tingen: to specialize resources and has proven to deliver on a great, you know, with great performance over many years. And so it becomes very seamless for us to just start inserting that into our value proposition to our customers.
Speaker Change: Okay no. Thanks for the education, there that's great Mike.
Speaker Change: My follow up then just on the.
Consequently to ask I'll ask on the deal front.
Speaker Change: A couple of nice wins airline win I'm curious, who you competed against secured that business and.
Tingen: So, you know, that's really what we're getting. And again, the primary benefits for us is that we think more European customers will adopt our program management.
Speaker Change: What does the pipeline look like now, especially that it feels like the banking side is is more an order I know you said another year.
Tingen: will attract more customers, new customers who right now are looking for that bundled offering that we don't provide.
Speaker Change: For the transact paid maybe translate for you P&L wise, but how would you qualify the pipeline.
Tingen: And the last thing is that it'll make it even easier for our non-European customers to expand on our platform in Europe and essentially get the same level of service. And so we're quite excited about the combination and look forward to closing in the coming months.
Speaker Change: At this stage.
Speaker Change: Yes. The pipeline is really strong there is there's two dynamics that I would say are favoring our pipeline. So one from embedded finance perspective, as I mentioned in my prepared remarks, we're really starting to see more momentum and if we look at our pipeline today roughly two thirds of it.
Speaker Change: Okay, no, thanks for the education there. That's great. My follow-up then, just on the...
Speaker Change: and M.D. For more information visit www.fema.gov For more information visit www.fema.gov
Speaker Change: I'm trying to think what I should ask. I'll ask on the deal front. A couple nice wins, the airline win. I'm curious...
Speaker Change: Who you competed against to secure that business and What does the pipeline look like now, especially that it feels like the banking side is is more in order I know it takes you said another year for a transact pay to maybe translate for you P&L wise But how would you qualify the pipeline at this stage?
Speaker Change: It is embedded finance customers and if you think about <unk> over the last several quarters in the last year, we've typically talked about of our new bookings that we've made roughly a third of them being in an embedded finance, so theres, a pretty big increase in the funnel.
Speaker Change: It's.
Speaker Change: Really driven by by two areas. One is that a lot of these companies. These are bigger businesses that.
Speaker Change: Yeah, the pipeline is really strong. There's two dynamics that I would say are favoring our pipeline. So one from an embedded finance perspective, as I mentioned in my prepared remarks, we're really starting to see more momentum.
Speaker Change: Or in another industry altogether, and so the navigating the organizations a little more complicated but also it's a bigger decision they're going to insert this service into an already existing platform or product that they have and so it's just taking a little more time and theres just real momentum in the market now which is something we're benefiting from.
Speaker Change: And, you know, if we look at our pipeline today, roughly two-thirds of it is embedded finance customers. And if you think about over the last several quarters in the last year,
Speaker Change: And then I would say specifically in credit.
Speaker Change: You know, we've typically talked about of our new bookings that we've made, roughly a third of them being in embedded finance. So there's a pretty big increase in the funnel and it's.
Speaker Change: We have been purposely going a little bit slow to make sure credit is not something you want to want to rush, but also what we're trying to do is is pretty unique in credit. We are trying to offer the brand more control over the value proposition the marketing the onboarding and have it delivered as a truly embedded.
really driven by my two areas.
Speaker Change: You know, one is that a lot of these companies, you know, these are bigger businesses that, you know, are in another industry altogether.
Speaker Change: Experience and so we're trying to appeal to digital first companies, who want to do it a little differently and we're just starting to get more reception.
Speaker Change: And so, you know, the navigating the organization is a little more complicated, but also it's a bigger decision. They're going to insert this service into an already existing platform or product that they have. And so it's just taking a little more time. And there's just real momentum in the market now, which
Speaker Change: Of that it's taking a little bit longer because it's different but particularly customers who.
Speaker Change: is something we're benefiting from. And then I'd say specifically in credit, you know, we have been purposely going a little bit slow to make sure, you know, credit is not something you want to want to rush.
Speaker Change: Donna traditional co brand are pretty open to it. So for example this.
Speaker Change: This airline that we just signed they do have a card in their home market. So they kind of understand that we'll have the traditional approach works and when they were coming to the U S. They were looking for something that was different that there could be a lot more engaging a lot more embedded in the in sort of the overall user experience that they want to deliver and that was key to.
Speaker Change: But also, you know, what we're trying to do is pretty unique in credit. We are trying to offer the brand more control over the value proposition, the marketing, the onboarding.
and have it be delivered as a truly embedded experience.
Speaker Change: and so you know we're trying to appeal to digital first companies who want to do it a little differently and you know we're just starting to get more reception.
Winning the business.
Speaker Change: Our next question comes from Timothy Chiodo with UBS. Please proceed with your question.
Speaker Change: of that. It's taking, you know, a little bit longer because it's different, but particularly customers who
Timothy Chiodo: Okay. Thank you for taking the question, Mike a little bit of similar note there on embedded finance. So there was a recent other large contract by one of your competitors. So it was very public and announced on the earnings call press release on that company's earnings call. They talked about there being a pipeline of other similar opportunities now whether.
Speaker Change: have done a traditional co-brand are pretty open to it. So for example, this.
Speaker Change: this airline that we just signed, they do have a card in their home market. So they kind of understand how the traditional approach works.
Speaker Change: And when they were coming to the U.S., they were looking for something that was different, that they could be a lot more engaging, a lot more embedded in sort of the overall user experience that they want to deliver, and that was key to us winning the business.
Timothy Chiodo: Or not they met similar order of magnitude of size unclear.
Timothy Chiodo: It seems like you're seeing some more opportunities.
Timothy Chiodo: Not specific to that deal, but in general for these larger embedded finance type deals do does mark kind of have everything that you need to win one of those rfps, whether it's the money movement issuer processing and program management. The core I think all the pieces are there and just wanted to see if youre seeing.
Speaker Change: Our next question comes from Timothy Chiodo with UBS. Please proceed with your question.
Thank you.
Speaker Change: Thank you for taking the question. Mike, a little bit of similar note there on embedded finance. So there was a recent
Speaker Change: rather large contract won by one of your competitors that was very public and announced on the earnings calls, there was press release
Timothy Chiodo: Similar things in terms of that.
Timothy Chiodo: As of potential deals that are in your pipeline because that was a pretty large one.
Speaker Change: And on that company's earnings call, they talked about there being a pipeline of other similar opportunities. Now, whether or not they meant similar in that order of magnitude, of size, unclear. But it seems like you're seeing similar opportunities.
Timothy Chiodo: Yes, no that Tim. Thank you for the question and yes, we are seeing we're talking to many large companies.
Timothy Chiodo: That are interested and I think that the few things that the embedded finance companies are looking for is when they want it packaged through Apis. So they want to be easily make it easily to integrate into their existing business.
Speaker Change: So, not specific to that deal, but in general, for these larger embedded finance type deals.
Speaker Change: Do you does Marquetta have everything that you need to win one of those RFPs whether it's
Timothy Chiodo: They're also looking for a full solution provider. So many of them are interested in both credit and debit as well as maybe some be NPL.
Speaker Change: the money movement, the issuer processing, program management, the core. I think all the pieces are there and just wanted to see if you're seeing similar things in terms of that size of potential deals that are in your pipeline because that was a pretty large one.
Timothy Chiodo: Depending on the provider to be included as part of that debit.
They also want full program management, because they want to sort of be a step removed from the complexity of all the regulatory requirements of card.
Speaker Change: Yes, no, Tim, thank you for the question, and yes, we are seeing, you know, we're talking to, you know, many large companies that are interested, and I think that the few things that the embedded finance companies are looking for.
Timothy Chiodo: And last but not least almost all of them are already global companies. So they don't think about.
Timothy Chiodo: Payments, we all understand that each country sort of have as a unique flavors and.
Speaker Change: is, you know, one, they want it packaged through APIs, so they want to be easily, make it easily to integrate into their existing business.
Timothy Chiodo: You don't necessarily the service you deliver is not exactly the same from country to country or it's harder to replicate that these businesses don't think that way and so their offer and looking for someone who can support them in many markets and so where we think we have a big advantage is we are fully modern we <unk>.
Speaker Change: They're also looking for a full solution provider. So many of them are interested in both credit and debit, as well as maybe some BNPL, you know, depending on the provider to be included as part of that debit.
Speaker Change: They also want full program management because they want to sort of be a step removed from the complexity of all the regulatory requirements of CARD.
Timothy Chiodo: Operator at scale right, we have some very large customers. So it's hard for someone to look at look at our platform and say you may not be able to handle our success and.
Timothy Chiodo: And we do credit and debit.
Speaker Change: Last but not least, almost all of them are already global companies, so they don't...
Timothy Chiodo: Consumer and commercial with program management, and we do it in many many markets and we think Thats, that's quite unique and differentiated and should help us in.
Speaker Change: think about, you know, payments. We all understand that each country sort of has unique flavors and you know, you don't necessarily, the service you deliver is not exactly the same from country to country or it's harder to replicate that. You know, these businesses don't think that way and so they're often looking for someone who can support them in many markets.
In this next year, hopefully, where theres some momentum behind embedded finance deals.
Timothy Chiodo: Excellent really appreciate that thank you Mike.
Timothy Chiodo: Uh huh.
Speaker Change: Our next question comes from Ramsey El <unk> with Barclays. Please proceed with your question.
Speaker Change: And so, you know, where we think we have a big advantage is, you know, we are fully modern. We operate at scale, right? We have some very large customers. So it's hard for someone to look at look at our platform and say, you may not be able to handle our success.
John: Great. Thank you very much this is actually John on for Ramsey.
John: Just one quick clarification question when it comes to your guidance and all of the quarterly cadence that you provided all of this 100% does presume that you are going to be quitting transact pay in Q3 is that right Mike.
Speaker Change: And we do credit and debit, consumer and commercial, with program management, and we do it in many, many markets. And we think that's quite unique and differentiated and should help us in this next year, hopefully, where there's some momentum behind embedded finance deals.
That's correct. That's correct. So we have filed the applications required to.
John: For the license transfer, but so its with its with the regulators and so that's our our estimate for financial planning purposes.
Thank you.
Excellent. Really appreciate that. Thank you, Mike.
and Michael Milotich. Thank you.
Speaker Change: Our next question comes from Ramsey L. Asal with Barclays. Please proceed with your question.
John: Should be around that time, plus or minus a month or two.
Speaker Change: Great, thank you very much. This is actually John on for Ramsey just a Quick clarification question when it comes to your guidance and all the quarterly cadence that you provided all of this 100% does presume that you are going to be acquiring transact paying q3. Is that right Mike?
John: But to make it a little bit easier for financial purposes, we assume sort of a July one close.
John: Alright, perfect and just my other question was I think you said you expected to exit 2026 with GAAP profitability and any comments you can provide on from where we are now to that point as far as the cadence of what we might see as far as GAAP profitability.
Speaker Change: That's correct. That's correct. So we have filed the applications required to for the license transfer. But, you know, so it's with it's with the regulators. And so, you know, that's our
John: Yes, so just to be clear when we say that we mean sort of the core to like on a quarterly basis. So the full year, we don't expect to be GAAP profitable in 'twenty six but on a quarterly basis that we would be able to exit in that way.
Speaker Change: our estimate for sort of financial planning purposes. You know, it should be around that time, plus or minus, you know, a month or two. But to, you know, make it a little bit easier for financial purposes, we assumed sort of a July 1 close.
John: And really the there is there's really a pretty simple formula that we're adopting we think we can drive gross profit growth at a significantly faster rate than our expense growth.
Speaker Change: All right, perfect. And just my other question was, I think you said you expected to exit 2026 with gap profitability. Any comments you can provide on from where we are now to that point as far as the cadence of what we might see as far as gap profitability?
John: And there's a few reasons for that one again, we feel like embedded finance is gaining momentum.
John: A lot of our existing customers are continuing to expand and do new business with us. So our existing customer base continues to thrive and and we have a unique set of capabilities that makes us an attractive partner and at the same time. We're at the size now that we're really just starting to benefit from our scale our.
Speaker Change: Yeah, and just to be clear, when we say that, we mean on a quarterly basis, so the full year we don't expect to be GAAP profitable in 26, but on a quarterly basis that we would be able to exit in that way. And really, there's really a pretty simple formula that we're adopting.
John: We are largely as most platform businesses are fairly fixed cost very people driven and so as we continue to grow we're just finding more and more ways to do that efficiently and well.
at a significantly faster rate than our expense growth.
Speaker Change: And there's a few reasons for that. One, you know, again, we we feel like embedded finance is gaining momentum. You know, a lot of our existing customers are continuing to expand and do new business with us. So, you know, our existing customer base continues to thrive.
John: We're simplifying a lot of things a lot of automation is being done.
John: And so that gap between gross profit growth and expense growth is going to stay relatively wide and as we compound over the quarters. That's what that's what drives the GAAP profitability.
Speaker Change: and we have, you know, a unique set of capabilities that makes us an attractive partner.
Speaker Change: Our next question comes from Darrin Peller with Wolfe Research. Please proceed with your question.
Speaker Change: And at the same time, we're at the size now that we're really just starting to benefit from our scale, our
Darrin Peller: Hey, guys. Thanks, good to see things getting back on track here I just wanted to start off with.
Speaker Change: You know, we are largely, as most platform businesses are, you know, we're fairly fixed costs, very people-driven. And so as we continue to grow, we're just finding more and more ways to do that efficiently. And, you know, we're simplifying a lot of things, a lot of automation is being done.
Speaker Change: Again from last quarter, obviously, we had a cut to your numbers of around nine points.
Speaker Change: You came in better than expected here and now Youre looking at a guide Thats basically mid teens. So I'm just trying to figure out now number one what's embedded in the outlook for this year that might be sort of a layover impacts of the customers that were delayed and still go on is still being worked through combined with anybody that might have changed their model with you a little bit last quarter.
Speaker Change: And so that gap between gross profit growth and expense growth is gonna stay relatively wide. And as we compound over the quarters, that's what drives the gap profitability.
and Michael Milotich.
Speaker Change: And then similarly, I mean, when you think of the improvement in launching the lead programs you called out was that internal or was that regulatory overhangs lifted is that going to continue to just probably improve from here.
Speaker Change: Our next question comes from Darian Peller with Wolf Research. Please proceed with your question.
Darian Peller: Hey guys, thanks. Good to see things getting back on track here. I just want to start off with, you know, again, from last quarter, obviously, we had a cut to your numbers of around nine points.
Speaker Change: Sure.
Darrin Peller: Answer your question Darrin so.
Darrin Peller: What's included in the in the outlook is.
Darrin Peller: No.
Darian Peller: You came in better than expected here and now you're looking at a guide that's basically mid-teens So I'm just trying to figure out now number one what's embedded in the outlook for this year that might be sort of the layover impacts of the customers that were delayed and
Darrin Peller: Our business doesn't.
Darrin Peller: Sort of.
Darrin Peller: Change.
Darrin Peller: Significantly in short periods of time, typically unless it's related to new business and whether something launches and ramps. So our existing customers. We're usually in pretty close contact with them. We know what their their growth expectations are and the growth is a little bit in 'twenty five is a little bit lower than our Q4.
Darian Peller: Still going still being worked through combined with anybody that might have changed their their model with you a little bit last quarter and Similarly, I mean when you think of the improvement in launching the delayed programs You called out was that internal or was that regulatory a overhang lifted as that could continue to just probably improve from here
Darrin Peller: <unk> and it has to do with a couple of things that I called out that are very specific to Q4 that raised our growth profile. So we feel pretty good about the growth delivery from in terms of new business. We said that we will get we believe we will get from new programs that launch starting in 2024 and 2025.
Speaker Change: Sure. Thanks for your question, Darren. So what's included in the Outlook is...
you know
Our business doesn't, you know, sort of...
change
Darrin Peller: <unk> will have over $40 million of revenue. So it's about five points of revenue growth contribution for 2025, So it's pretty it's pretty good but it is below our goal we want it to be growing faster and Thats one of the big reasons why we are not in the twenties for from a growth perspective the <unk>.
Speaker Change: significantly in short periods of time, typically, unless it's related to new business and whether something launches and ramps. So our existing customers, you know, we're usually in pretty close contact with them. We know what their their growth expectations are.
Speaker Change: and the growth is a little bit, in 25, is a little bit lower than our Q4 exit and it, you know, has to do with a couple of things that I called out.
Darrin Peller: Piece, that's important Darrin is are the renewals and.
that were very specific to Q4.
Darrin Peller: We again, we always have renewals to do that's the case in any given year.
Speaker Change: that raised our growth profile. So we feel pretty good about the growth delivery. From in terms of new business.
Darrin Peller: And we talked a lot about in the past that.
Speaker Change: You know, we said that we will get, we believe we'll get from new programs that launch starting in 2024 and 2025, you know, we'll have over 40 million of revenue.
In 2022, and 2023, we renewed 80% of our TBD.
Darrin Peller: But we have two customers who are in our top 10.
Speaker Change: So it's about five points of revenue growth contribution for 2025. So it's pretty, it's pretty good, but it is below our goal, you know, we wanted to be growing faster. And that's one of the big reasons why we are not in in the 20s for from a growth perspective.
Darrin Peller: Who are renewing in 2025 and.
Darrin Peller: There are good sized customers and theyre growing fast each of them. Their volumes are are more than double what they were the last time, we signed and so those are also fairly fairly significant we we expect on a combined basis that that is about ways on our growth our gross profit growth by about two percentage points on our <unk>.
Speaker Change: The second piece that's important, Darren, is are the renewals. And, you know, we, you know, again, we always have renewals to do, you know, that's the case in any given year. And we talked a lot about in the past that, you know, in
Darrin Peller: Full year basis, and since we expect them to be in the second half it's about four points in each of those quarters. So those are the two things that are.
Speaker Change: In 2022 and 2023, we renewed 80% of our TPV. But we have two customers who are in our top 10.
Darrin Peller: Hang on us a little bit, but we're still getting strong growth from our existing customers and we're still getting again five points contribution to revenue growth from new business.
Speaker Change: who are renewing in 2025. They're good-sized customers and they're growing fast. Each of them, their volumes are more than double what they were the last time we signed.
Speaker Change: That's really helpful. I guess, it sounds like putting those pieces aside your growth rate, obviously still strong and so Mike just to wrap it up with the underlying segments or sectors, maybe just remind us the top three drivers from a sector or industry vertical standpoint that youre seeing the most momentum with right now.
Speaker Change: And so, you know, those are also fairly significant. We expect on a combined basis that, you know, that is about ways on our growth, our gross profit growth by about two percentage points on a full year basis.
Speaker Change: Yes, so I would say the top three drivers we're seeing in the neo banking space and we've talked about this for a while there is there's more and more companies that are looking to bank of their users. If you will whether thats consumers or small small medium to small businesses that may be operating on their platform and they want to offer.
Speaker Change: And since we expect them to be in the second half, it's about four points in each of those quarters. So those are the two things that are, you know, weighing on us a little bit, but we're still getting strong growth from our existing customers and we're still getting, again, five points contribution to revenue growth from new business.
Speaker Change: Sure.
Speaker Change: A DDA like account so account like features and then offer them spending tools and maybe do some lending so that is a big driver of both for consumers employees in some cases as well as their small medium sized customers.
Darian Peller: That's really helpful. I guess it sounds like, putting those pieces aside, your growth rate obviously still is strong. And so, Mike, just to wrap it up with the underlying segments or sectors, you know, maybe just remind us the top three drivers from a sector, you know, industry vertical standpoint that you're seeing the most momentum with right now.
Speaker Change: The NPL and lending we're seeing a lot of activity. So there's a lot of innovation going on in the buy now pay later space. Some of it is them issuing cards to deliver that value proposition, but you now have wallets, who are starting to to integrate it more.
Mike Milotich: Yeah, so I would say that the top three drivers we're seeing in the neobanking space
Darian Peller: We've talked about this for a while, there's more and more companies that are looking to
Mike Milotich: Bank their users, if you will, whether that's consumers or, you know, small, medium to small businesses that may be operating on their platform.
Speaker Change: And Thats, just really creating additional distribution for the business and we are also of course working on our own solution from our kind of flex to really even provide more distribution to to buy now pay later players. So that's a really exciting part of the business and the only the only other thing I'd mentioned and when it comes to lending. The other thing. We include in there is small.
Mike Milotich: And they want to offer, you know, a DDA-like account, so account-like features, and then offer them, you know, spending tools and maybe do some lending. So, you know, that is a big driver of both for consumers, employees in some cases, as well as their small, medium-sized customers.
Speaker Change: Business lending and we have a couple of customers, who are really doing well as platform businesses to drive really fantastic growth.
Mike Milotich: BNPL and lending we're seeing, you know, a lot of activity. So, you know, there's a lot of innovation going on in the buy now pay later space.
Speaker Change: And then the last one is expense management as I meant that mentioned in my comments, what we're seeing is the.
Mike Milotich: Some of it is them issuing cards to deliver that value proposition, but you now have, you know, wallets who are starting to integrate it more. And that's just really creating additional distribution for the business.
Speaker Change: The more modern corporate card and AP automation.
Speaker Change: <unk> in the.
Speaker Change: That are out there are really taking a lot of share and and theyre doing a lot of that with capabilities that come from platforms like ours, and so were just even though.
Mike Milotich: And we are also, of course, working on our own solution for Marketaflex to really even provide more distribution to to buy now pay later players. So that's a really exciting part of the business.
Speaker Change: The business has gotten quite big continues to compound at a very rapid rate because those those providers are growing significantly faster than the market.
Mike Milotich: And the only other thing I'd mentioned when it comes to lending, the other thing we include in there is small business lending. And we have a couple of customers who are really doing well as platform businesses to drive really fantastic growth.
Speaker Change: Alright, Thanks again guys.
Darren Peller: Thanks Darren.
Speaker Change: Our next question comes from Andrew Bock with Wells Fargo. Please proceed with your question.
Mike Milotich: And then the last one is expense management. As I mentioned in my comments, what we're seeing is
Andrew Bock: Hey, Thanks for taking the question I guess I wanted to touch upon the international and European strength I think.
The more modern corporate card and AP automation
Andrew Bock: This quarter in your prepared remarks, Theres, probably more references to international success, then and we've really hurt in the long time. So is there anything thats changed.
Mike Milotich: players that are out there are really taking a lot of share.
Mike Milotich: and they're doing a lot of that with capabilities that come from platforms like ours. And so we're just, even though it's, you know, the business has gotten quite big, it continues to compound at a very rapid rate because, you know, those providers are growing significantly faster than the market.
Andrew Bock: From where we are now is to say six 912 months ago on the international front that is leading to this incremental momentum.
Andrew Bock: Yes, I would say those two drivers so it's a great question, Andrew I would say one is that we have.
All right. Thanks again, guys.
Thanks, Taryn.
Andrew Bock: It's really hard to increase the capabilities, we offer outside the U S. So.
Speaker Change: Our next question comes from Andrew Bach with Wells Fargo. Please proceed with your question.
Andrew Bock: In Canada in Europe, we're offering a lot more services.
Andrew Bach: Hey, thanks for saving the question. I guess I wanted to touch upon the international and European strength. I think
Andrew Bock: Sure.
Andrew Bock: Delivering them with a lot kind of higher quality and reliability.
Andrew Bach: this quarter, and you've prepared remarks, there's probably more references to international success than we've really heard in a long time. So is there anything that's changed from where we are now, to say, six, nine, 12 months ago, on the international front that is leading to this incremental momentum?
Andrew Bock: We the bank partners that were talking to become really great partners of ours to help meet our customer needs. So so one component of it is definitely.
Andrew Bock: Are we are raising our game and the value proposition is significantly enhanced from where we were two years ago in a lot of those markets outside the U S.
Andrew Bach: Yeah, I would say those two drivers. That's a great question, Andrew. I would say one is that we have
Andrew Bock: The big driver.
Andrew Bock: Is sort of I guess interrelated between the blend of Fintech and embedded finance, what's happening is the fintech customers, who maybe started on our platform five plus years ago.
Andrew Bach: worked really hard to increase the capabilities we offer outside the U.S. So, you know, in Canada and Europe, we're offering a lot more services.
Andrew Bach: We're, you know, delivering them with a lot kind of higher quality and reliability. You know, we, the bank partners that we're talking to, you know, have become really great partners of ours to help meet our customer needs. So, one component of it is definitely
Andrew Bock: Many of them are become big businesses and they are looking to expand into two new markets and doing that on our platform is pretty straightforward and relatively seamless and as we enhanced the capabilities in those markets are making it even easier for those customers to expand to those regions.
Andrew Bach: We're raising our game and the value proposition is just significantly enhanced from where we were, you know, two years ago in a lot of those markets outside the U.S.
Andrew Bock: And doing it on our platform and the same thing is true in embedded finance that usually those companies are already multinational and so some of the some of the deals we're doing it might be a U S company and they actually start with us in Canada or Europe. So they might already be in the market with a competitor of ours in the U S.
Andrew Bach: The second big driver is sort of, I guess, interrelated between the blend of FinTech and embedded finance. What's happening is the FinTech customers who maybe started on our platform five plus years ago,
Andrew Bock: They say well I want to I want to see give mark had a shot and see how different the platform is and so they use us in another market and then we hope to then cross sell and move into the into the U S business and so.
Andrew Bach: Many of them have become big businesses, and they are looking to expand into new markets.
and doing that on our platform is pretty straightforward.
Andrew Bach: and Relatively Seamless, and as we enhance the capabilities in those markets, making it even easier for those customers to expand to those regions.
Andrew Bock: I would say those are the factors that are really fueling our international growth.
Andrew Bock: The TPB growth for our non U S business was over 100% this quarter and Europe as well past that in Europe as the bulk of it. So we are really seeing a lot of rapid growth outside the U S.
Andrew Bach: and do it on our platform. And the same thing is true in embedded finance, that usually those companies are already multinational.
Andrew Bach: And so, you know, some of the some of the deals we're doing, it might be a US company, and they actually start with us in Canada or Europe, so they might already be in the market with a competitor of ours in the US.
Speaker Change: Got it and then I guess for my follow up.
Andrew Bock: I'd like to ask about the CEO search.
Andrew Bock: Is it are you kind of leaning towards external internal potential candidates are there characteristics or quality qualities.
Andrew Bach: and they say, well, you know, I want to, I want to see.
Andrew Bach: give Marquette a shot and see how different the platform is, and so they use us in another market.
Andrew Bach: and then we, you know, hope to then cross-sell and move into the U.S. business.
Andrew Bock: The potential CEO to have come on board.
Andrew Bock: We're looking for just any incremental color on what this process would look like.
Andrew Bach: I would say those are the factors that are really fueling our international growth. And, you know, the TPV growth for our non-U.S. business was over 100% this quarter, and Europe is well past that, and Europe is the bulk of it. So, you know, we are really seeing a lot of rapid growth outside the U.S.
Andrew Bock: Sure.
Andrew Bock: Board is.
Andrew Bock: One they take succession planning very seriously. So this leadership transition as the succession plan in action.
Andrew Bock: Yeah.
Andrew Bock: What the way the board is thinking about it is is really this should be a relatively seamless transition with myself and the rest of the executive team members and all the the talented mark curtains that we have across the company that we really shouldnt Miss a beat.
Got it. And then I guess for my follow-up,
I'd like to ask about the CEO search.
Is it, are you kind of leaning towards external, internal,
Andrew Bach: potential candidates, are there characteristics or qualities in the potential CEO to have come on board that you're looking for, just any incremental color on what this process could look like.
Andrew Bock: Because you still have the continuity of the whole team and that gives the board.
Andrew Bock: A little bit of space to conduct a deliberate and thoughtful search process to identify the right next CEO.
Andrew Bach: Sure. The board is, you know, one, they take succession planning very seriously. So this leadership transition is the succession plan in action. And, you know, the what the way the board is thinking about it is, is really
Andrew Bock: They are what they are really going to be looking for is someone who can help execute on our goal of being the preferred partner for embedded finance and Fintech. So.
Andrew Bock: That's someone who is a little bit of an innovative thinker and has.
Andrew Bock: Some technology experience, but also understand some of the payment ecosystem and has that the operational capabilities to drive that sustainable profitable growth. We are seeking so I.
Andrew Bach: This should be a relatively seamless transition with myself and the rest of the executive team members and all the talented Marquettans that we have across the company that we really shouldn't miss a beat because you still have the continuity of the whole team. And that...
Andrew Bock: I think thats.
Andrew Bock: The kind of candidates that the board will be looking for and and.
Andrew Bach: gives the board a little bit of space to conduct a deliberate and thoughtful search process to identify, you know, the right next CEO.
Andrew Bock: And they're going to have a thorough process and so I'm not going to jump ahead of it here, we'll let that play out.
Speaker Change: Understood. Thank you Mike.
Andrew Bach: What they're really going to be looking for is someone who can...
Andrew Bock: Yes.
Andrew Bock: Our next question comes from Sanjay <unk> with Ronnie.
help execute.
Andrew Bach: on our goal of being the preferred partner for Embedded Finance and FinTech.
Speaker Change: Ronnie with <unk>. Please proceed with your question.
Andrew Bach: That's someone who is a little bit of an innovative thinker and has...
Speaker Change: Thank you.
Speaker Change: Definitely very encouraging that you've made some improvements on the launch timelines et cetera, and all the new wins as we look for the year Mike.
Andrew Bach: some technology experience, but also understands some of the payment ecosystem and has the operational capabilities to drive that sustainable, profitable growth we're seeking. So, I think that's...
Speaker Change: Where are the risks obviously lots of positive things happening now after some discipline and then as we look at where the land mines are where could they be.
Andrew Bach: the kind of candidate that the board will be looking for. And but, you know, they're going to have a thorough process. And so, you know, I'm not going to jump ahead of it here. We'll we'll let that play out.
Speaker Change: Yes so.
Sanjay: Thanks for your question Sanjay I mean, I think that the areas that could go wrong.
Understood. Thank you, Mike.
Yep.
Sanjay: Macro of course is always a factor since we're very dependent on spending but the second area that I would say is as I mentioned, we're expecting about five points of revenue growth from new programs that launched in either 'twenty four 'twenty five.
Speaker Change: Our next question comes from Sanjay Sakrani with KBW. Please proceed with your question.
Sanjay Sakrani: Thank you. You know, definitely very encouraging that you've made some improvements on the launch timeline, etc., and all the new wins. As we look for the year, Mike, like, where are the risks? You know, obviously lots of positive things happening now after some disappointment. As we look at, you know, where the landmines are, where could they be?
Sanjay: Once mark header and the bank partner have delivered everything that is required for launch it's really up to our customer at that point too.
Sanjay: Launch the program start Onboarding onboarding their customers execute marketing and drive engagement et cetera. So we we really sort of hand, the keys off to them and of course, we try to be helpful and consultative, but.
Yeah, so...
Speaker Change: Thanks for your question Sanjay. I mean, I think the the areas that could go wrong You know macro of course is always a factor since we're very dependent on spending But the second area that I would say is as I mentioned we're expecting about five points of revenue growth from new programs that launch in either 24 or 25
Sanjay: They are in the driver's seat and.
Sanjay: If they don't move quickly then that means that the revenue may not come as quickly as we thought and so <unk>.
Sanjay: Good example are is as you mentioned the delivery improvements that we made we were ready to launch all the programs that had been delayed but there are three that still remain on launch.
Speaker Change: And once Marquetta and the bank partner have delivered everything that is required for launch, it's really up to our customer.
Sanjay: Does the customer is still working through some things. So we do have that aspect to our business, where we're not in complete control as to when a program may launch and how aggressively they tried to ramp the business.
at that point to...
Speaker Change: launch the program, start onboarding their customers, execute marketing and drive engagement, et cetera. So we really sort of hand the keys off to them. And of course, we try to be helpful and consultative, but they're in the driver's seat.
Sanjay: And we do our best to stay close to them and align on assumptions and use some of our history to also make our own projections, but that is something that can catch us a little bit off guard, but we feel like those things are more than outweighed by the.
You know, if they don't.
move quickly.
Speaker Change: then, you know, that means that the revenue may not come as quickly as we thought. And so, you know, a great example is, as you mentioned, the delivery improvements that we made.
Sanjay: Some of the tailwind that we have behind US right. We we have an ever growing install base and we have more and more services to offer them and so like for example, as I mentioned, our real time Decisioning risk service, where the revenue has more than doubled in 2024 versus 2023, and the pipeline growing with embedded financing.
Speaker Change: We were ready to launch all the programs that had been delayed, but there are three that still remain unlaunched because the customer is still working through some things. So, we do have that aspect to our business where we're not in complete control as to when a program may launch and how aggressively they try to ramp the business.
Sanjay: Our leadership with the flexible credentials.
Speaker Change: and we do our best to stay close to them and align on assumptions and use some of our history to also make our own projections but you know that is something that can catch us a little bit off guard but we feel like those things are
Sanjay: We do think that there are a number of people who are interested as we talk to prospects in the market that ability to have one credential that's flexible between debit maybe offer some of the NPL and ultimately revolving credit and so there are a number of things that are pretty pretty unique to us.
Speaker Change: more than outweighed by the you know the some of the tailwinds that we have
Sanjay: We're excited about.
Speaker Change: behind us, right? We have an ever-growing install base, and we have more and more services to offer them. And so, you know, like, for example, as I mentioned, our real-time decisioning risk service, where the revenue has more than doubled in 2024 versus 2023.
Speaker Change: Okay, Great just a follow up on the addition of American Express.
Speaker Change: Can you just define sort of what the opportunity is there like do you get better terms can you sell that into existing customers, but could you just dimensionalize how additive like how it is additive to you guys. Thanks, Yeah. So for sure. So there's a few ways. So one is that.
and the pipeline growing with embedded finance.
Speaker Change: Our leadership with the flexible credentials, you know, we do think that there are a number of...
Speaker Change: people who are interested as we talk to prospects in the market, that ability to have one credential that's flexible between debit, maybe offer some BNPL, and ultimately revolving credit. And so there are a number of things that are pretty, you know, pretty unique to us that we're excited about.
Speaker Change: Amex is is really known for some of their capabilities in credit, particularly BTB lending and loyalty cards and so they are also out there talking talking to customers.
Speaker Change: About from making a brand decision and if those customers want a.
Speaker Change: Okay, great. Just a follow-up on the addition of American Express.
Speaker Change: Highly flexible modern platform.
Speaker Change: Can you define what the opportunity is there? Do you get better terms? Can you sell that into existing customers? Can you dimensionalize how it is additive to you guys?
Today.
Speaker Change: They may say, they can't just they turn to mark header for that but.
Speaker Change: Going forward by the end of 2025, they will and so that that experience and expertise. They have in credit we think combined with our modern capabilities.
Speaker Change: So, for sure. So, there's a few ways. So, one is that, you know, Amex is really known for some of their capabilities in credit, particularly B2B lending and loyalty cards.
Speaker Change: We will be very additive to us where we can go sell customers together.
Speaker Change: And then the second piece of it is amex once to continually expand.
Speaker Change: And so, you know, they are also out there talking, talking to customers and about from making a brand decision. And if those customers want a, you know, highly flexible, modern platform, you know,
Speaker Change: Expand their debit business right, that's something that's much smaller for them, but that's an area, where we have a lot of expertise and we have a lot of track record. So that's an area, where we can really help them.
Speaker Change: To grow that opportunity. So we see this one is a win win and it's the last major network that we didn't have on the platform and so it gives our customers the ultimate choice to make a brand decision.
Speaker Change: Today, they can't necessarily turn to Marketa for that, but going forward, by the end of 2025, they will. And so that experience and expertise they have in credit, we think, combined with our modern capabilities,
Speaker Change: Okay. Thank you so much Mike good luck. Thanks Sanjay.
Speaker Change: will be very additive to us where we can go sell customers together.
Speaker Change: Our next question comes from Chris Kennedy with William Blair. Please proceed with your question.
Speaker Change: And then the second piece of it is, you know, Amex.
Chris Kennedy: Good afternoon. Thanks for taking the question can you just give us an update on the accelerated wage access initiative.
Speaker Change: wants to continually expand their debit business, right? That's something that's much smaller for them.
Speaker Change: The opportunity there.
Speaker Change: But that's an area where we have a lot of expertise, and we have a lot of track record. So that's an area where we can really help them to grow that opportunity. So we see this one as a win-win, and it's the last major network that we didn't have on the platform. And so it gives our customers the ultimate choice to make a brand decision.
Yes sure so.
Speaker Change: Our accelerated wage access it continues to.
Speaker Change: Have a few programs live we have the two big ones that we've talked about many times and then we have a few.
Speaker Change: Labour marketplaces that have also launch so the business is still growing relatively quickly we've been doing a lot of work to enhance our value proposition there as we've talked about in the past what we do although for.
Thank you. Thank you.
Okay, thank you so much, Mike. Good luck. Thanks, Sanjay.
Speaker Change: Our next question comes from Chris Kennedy with William Blair. Please proceed with your question.
Speaker Change: For customers if they are willing to do some of the pieces themselves. What we offer is pretty unique but they definitely have some some heavier lifting to do on their side and we are actively taking steps to enhance our value proposition. So it's more complete and it's a little bit easier for our customers.
Chris Kennedy: Good afternoon. Thanks for taking the question. Can you just give us an update on the Accelerated Wage Access Initiative and the opportunity there?
Yes.
here.
Chris Kennedy: So, our accelerated wage access, it continues to, you know, we have a few programs live. We have the two big ones that we've talked about many times, and then we have a few labor marketplaces that have also launched, so the business is still growing relatively quickly. We've been doing a lot of work to enhance our value proposition there, as we've talked about in the past.
Speaker Change: Announced a partnership earlier this year with rain for example that helps enhance our capabilities. So we're starting to work more closely with them and so we're still making progress to.
Speaker Change: Sort of round out our fill out our value proposition to make it appeal to many more prospects.
you know, what we do, although for customers...
Speaker Change: Thank you for that and just a quick follow up any thoughts on the regulatory environment around accelerated wage access.
Chris Kennedy: If they're willing to do some of the pieces themselves, what we offer is pretty unique, but they definitely have some heavier lifting to do on their side. And we are actively taking steps to enhance our value proposition so it's more complete and it's a little bit easier for our customers.
Speaker Change: Yes, I think the.
Speaker Change: When it comes to that our view is that the solution that we're offering is.
Speaker Change: Especially the vision that we have for this space.
Chris Kennedy: You know, we announced a partnership earlier this year with RAINN, for example, that helps enhance our capabilities. So we're starting to work more closely with them. And so we're still making progress to
Speaker Change: Is better and avoid some of the regulatory scrutiny because its not actually alone.
Speaker Change: But generally is done today right is even though you've earned those wages.
Speaker Change: The <unk> provider is actually providing you alone that then you payback when you get paid with our solution.
Chris Kennedy: sort of round out or fill out our value proposition to make it appeal to many more prospects.
Speaker Change: What we're saying is more you've earned the money already and it's distributed to us sooner.
Speaker Change: Thank you for that. And just a quick follow-up, any thoughts on the regulatory environment around accelerated wage access?
Speaker Change: And so our view is that that's a better approach and it avoids some of the sticking points that the existing solutions in the market today.
Speaker Change: Yeah, I think when it comes to that, our view is that the solution that we're offering
Speaker Change: There is some concern about how sustainable those are.
Speaker Change: is, or especially the vision that we have for the space.
Speaker Change: We have reached the end of our question and answer session, which concludes today's conference. Thank you for your participation you may disconnect your lines at this time.
Speaker Change: is better and avoids some of the regulatory scrutiny because it's not actually a loan. What generally is done today, right, is even though you've earned those wages, the EWA provider is actually providing you a loan that then you pay back when you get paid.
with our solution.
Speaker Change: what we're saying is more you've earned the money already and it's distributed to you sooner and so you know our view is that's a that's a better approach and it avoids some of the sticking points that you know the existing solutions in the market today you know there's some concern about how sustainable those are.
Speaker Change: We have reached the end of our question and answer session, which concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.
[music]
Philip King, Simon Khalaf, Michael Milotich
Speaker Change: Ladies and gentlemen, welcome to Marquetta, Inc.'s fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.
Speaker Change: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stacey Finerman, Vice President of Investor Relations. Please go ahead.
Speaker Change: 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 uncertainty.
Speaker Change: included those set forth in our filings with the SEC, which are available on our Investor Relations website.
Speaker Change: including our annual report on Form 10-K for the period ended December 31st, 2023 and our subsequent periodic filings with the SEC.
Speaker Change: Actual results may differ materially from any forward-looking statements we make here 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.
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 gap measures can be found in today's earnings press release or earnings release supplemental materials, which are available on our investor relations website.
Speaker Change: Hosting today's call is Mike Milotich, Marquette's interim CEO and CFO. With that, I'd like to turn the call over to Mike to begin.
Speaker Change: Thank you, Stacey. And thank you for joining us for Marketo's fourth quarter 2024 earnings call.
Speaker Change: Before I get into our quarterly results, first I'd like to speak about the company's leadership transition.
Speaker Change: Earlier today we announced that Simon Khalaf has stepped down as Marquette's CEO and as a director.
Speaker Change: I have been appointed to serve as Interim CEO as our Board of Directors conducts a comprehensive search process to identify Marquette's next CEO.
Speaker Change: On behalf of our board, the management team, and our entire employee base, I'd like to thank Simon for his leadership and dedication to Marquetta.
Speaker Change: We are appreciative of his contributions to our company and we wish him well in his next endeavor.
Speaker Change: As many of you know, I joined Marquetta three years ago after witnessing firsthand how the company's innovative platform was enabling new commerce experience that leveraged the existing payment ecosystem while reducing risk and increasing user engagement.
Speaker Change: Today, those opportunities are more compelling and widespread than ever, and I'm confident in our ability to capture them.
Speaker Change: I'm honored to be taking on this expanded role during such an important time for Marketa and look forward to a seamless transition for our employees, partners, and customers as we execute on our clear strategy to drive profitable growth and value creation.
Subs by www.zeoranger.co.uk
Now let me turn to our quarterly performance.
Speaker Change: To start, I'll briefly highlight our Q4 results, followed by an update on accomplishments for the quarter, and outline our key priorities for 2025. Then I'll conclude the call by going over the quarter's financial results and our 2025 guidance in additional detail.
Our fourth quarter results...
Speaker Change: Once again, demonstrate our ability to grow at scale while improving our adjusted EBITDA margin and continuing on our path to profitability.
Speaker Change: Total process volume, or TPV, was $80 billion in the fourth quarter, a 29% increase compared to the same quarter of 2023.
Speaker Change: Our Q4 net revenue of $136 million grew 14% year-over-year. Q4 gross profit was $98 million, an 18% increase versus Q4 of 2023, resulting in a gross margin of 72%.
Speaker Change: Our Justity Bida'a was $13 million in the quarter, translating into a 9% margin.
Speaker Change: In addition to our results, I am excited to share our recent achievements.
Speaker Change: First, let me highlight the significant strides we've made in streamlining our program launch timelines by comprehensively enhancing our bank partnerships and the customer experience.
Speaker Change: We are making progress in adding additional banks while also streamlining our operations and program onboarding with existing bank partners with the introduction of a more structured approach for our customers, emphasizing pre-approved frameworks that align with bank standards and compliance guidelines.
Speaker Change: We've partnered with our customers to adopt to this new approach while also implementing additional fees for mid-process changes to align interests and maintain this efficiency.
Speaker Change: As a result of the previously delayed programs discussed in our last call, three remain pending launch.
Speaker Change: However, for these three, the delays are a result of customer decisions rather than capacity constraints on our part or from our bank partners.
Speaker Change: While this outcome represents great progress, we remain focused on continuously optimizing our launch timelines while enhancing the overall customer experience.
Speaker Change: In addition to these operational improvements, we had several great wins in the fourth quarter that underscore our competitive advantages from product innovation, global reach, and scale.
Speaker Change: First, we secured a consumer co-brand credit partnership with a well-established airline located outside the U.S. that wants to capitalize on its already strong U.S. customer base.
Speaker Change: While airlines cards have existed for many decades, the value proposition and user experience have remained relatively stagnant, which is a view that we share with our customer.
Speaker Change: Rather than implementing a traditional mileage program, this airline sought a partner that could deliver a dynamic loyalty solution integrated throughout the customer journey to drive true customer engagement.
Speaker Change: They selected Marketa for our payment innovation and our comprehensive program management capabilities.
Speaker Change: This includes dedicated support, built-in risk management, and compliance frameworks, allowing our customer to focus on their core business and passenger experience.
Speaker Change: This partnership is representative of a shift from loyalty programs that are more traditional to a daily engagement model.
Speaker Change: Our European business continues to gain momentum, with Q4 TPV growth well over 100%.
Speaker Change: In Q4, we had two notable wins that will contribute to this momentum in the future.
Speaker Change: We've secured a deal to provide both commercial card processing and program management to one of Europe's fastest growing technology companies.
Speaker Change: which has a strong presence in Central and Eastern Europe. This win is the result of our focus on elevating our European program management services to align with our U.S. offering, combined with our proven track record with innovative tech companies and our scalability.
Speaker Change: Although eight of our top ten customers utilize our platform in more than one region, and by region I mean US, Canada, and Europe, typically they launch in one region first and expand over time. So although our global platform might be one of the key reasons they select Marketa, they typically don't utilize it globally from the start.
Speaker Change: We have said we expect this gradual expansion approach to change as we engage with more well-established multinational companies with embedded finance ambitions, and in Q4 we signed our first multinational solution sale.
Speaker Change: A U.S. based B2B payments company has chosen to entrust Marquetta with a portion of their U.S. volume and their European operations in one highly coordinated global effort.
Speaker Change: As we look forward, we are building upon many of our previous year's accomplishments to make significant strides toward an even more transformative 2025. We aim to establish Marquetta as a preferred partner for embedded finance and FinTech innovations through three key strategic pillars.
Deepening our platform breath.
Speaker Change: expanding the solutions we offer and strengthening our leadership in payments innovation.
Speaker Change: Less than two months into 2025, we are already making meaningful progress on all of these fronts.
For platform breath, let me highlight two focus areas.
Speaker Change: We are excited to welcome the American Express Network as a new option for credit and debit card programs.
Speaker Change: for our customers starting later in 2025. With their unique brand, assets, and expertise, offering Ameritech Express will further widen the choices on our platform to differentiate and provide even more options to FinTech and embedded finance partners and prospects.
Speaker Change: We have signed an agreement and are working together to make an American Express Network available to our customers later this year, leveraging the American Express Agile Partnership Platform, which enables FinTechs and other partners to launch cards on the American Express Network.
Speaker Change: We will share more details as we get closer to launch.
Speaker Change: With this edition completed in 2025, the breadth of our capabilities, combined with the ability to leverage all the major card networks, will further differentiate Marketa.
Speaker Change: Platform breadth also means having product parity no matter where our customer chooses to operate or expand their business.
Speaker Change: As I referenced earlier, program management is becoming another key lever to enhance our offering in Europe, especially for companies seeking to offer embedded finance.
Speaker Change: However, unlike the U.S., in the U.K. and Europe, an EMI license is required for companies to issue and manage electronic money, including digital wallets or prepaid cards, and provide payment services such as online transactions, money transfers, virtual cards, and the ability to store customer funds electronically.
Speaker Change: Previously, we partnered with Transact Pay to meet licensing needs. However, customer feedback consistently highlighted the desire to avoid the complexity associated with contracting multiple partners.
Speaker Change: Rather than building our licensing infrastructure, which would take several years, and given the substantial European opportunity we see in our pipeline, we decided to acquire TransactPay to integrate our offering.
Speaker Change: The close is subject to regulatory approvals, which could take up to six months from now. I will share the financial impact of the acquisition later when we discuss our expectations for 2025.
Speaker Change: Next, let me touch on expanding solutions. In 2025, we will continue to deepen our offering and harness our expertise and scale to solve specific customer pain points, specifically around risk, compliance, and business insights.
Speaker Change: Our real-time decisioning risk product exemplifies the success of this approach, with revenue more than doubling from 2023 to 2024, and now serving over 20 global customers.
Speaker Change: This revenue stream carries significantly higher gross margins due to limited transaction costs.
Speaker Change: Over the course of 2025, we plan to offer additional services that will enable business insights into program performance and improve visibility into key compliance activities.
Speaker Change: As a result, we believe this will give more customers the opportunity to use the Marketa platform in a more holistic way.
Speaker Change: Lastly, we will continue to be a first mover on payments innovations to help our customers deliver unique value propositions.
Nowhere has this been more evident than with BNPL.
Marquetta: Early on, Marquetta helped ease the burden of merchant adoption with instant issuance virtual cards.
Marquetta: Then, we were the first to help providers deliver the BNPL value proposition via a card that they issue, making BNPL available anywhere a card is accepted.
Marquetta: Recently, we were the first processor to work on Visa Flexible Credentials in the U.S., which have launched and are already showing traction for multiple customers across multiple wallet solutions.
Marquetta: We are excited to partner with MasterCard on their recent announcement of MasterCard One and deliver flexible card credentials to many more of our customers.
Marquetta: We are also making progress on Marketaflex with the goal of enhancing how BNPL payment options can be delivered inside payment apps and wallets, surfacing them when needed within the existing payment flow.
Marquetta: From an operational perspective, Q4 demonstrated our ability to navigate challenges, prioritize customer needs, and maintain a strong focus on scale. Looking ahead, we are focused on leading in fintech and embedded finance by strengthening our platform, accelerating payment innovations, while prioritizing compliance.
Marquetta: However, we are equally focused on driving profitable growth with a trajectory that is sustainable and diversified.
Marquetta: With that, I'm now going to transition over to discussing our Q4 financial results and 2025 guidance in more detail.
Marquetta: Our financial results for Q4 reflect a stronger-than-expected finish to the year.
Marquetta: Q4 TPV growth of 29% remains strong and steady, coupled with outperformance across net revenue, gross profit, and expense, delivering an improved adjusted EBITDA margin of 9%.
Marquetta: Net revenue and gross profit growth outperformed by 3 to 4 points, primarily due to a favorable business mix, new programs performing a little better than expected in the holiday season, and the achievement of a performance incentive with a partner.
Marquetta: The business outperformance, combined with the continued execution of efficiency initiatives moderating expense growth, delivered a much higher adjusted EBITDA of $13 million in the quarter.
Marquetta: Let me quickly share the Q4 highlights before spending more time discussing expectations for 2025.
Marquetta: Q4 TPV was $80 billion, growing 29% year-over-year, one point slower than last quarter. TPV growth has been steady for some time now, growing between 29 and 33% in each of the last seven quarters, resulting in Marqueta achieving new levels of scale.
Marquetta: To put our growth at scale in perspective, in Q1 of 2024, we had our first day of over 1 billion of TPV. And in Q4, there were 17 days where we crossed 1 billion.
Marquetta: Non-block TPV grew roughly twice as fast as block, fueled by customers big and small across several use cases.
Marquetta: Consistent with the last several quarters, financial services, lending including Buy Now Pay Later, and expense management all grew at roughly the same rate in Q4, slightly faster than the overall company.
Marquetta: Growth within our financial services vertical continues to be fueled by block success as well as the rapid expansion of our non-block neobanking customers whose TPV grew roughly 100% year-over-year.
Marquetta: Lending, including Buy Now Pay Later, growth remains strong due to several drivers, including the adoption of our BNPL customers Pay Anywhere card solutions,
Our customers increased distribution through wallets.
Marquetta: strong user growth among SMB lending solutions, and Klarna's migration to our platform in Europe in October, which we discussed on our last call.
Marquetta: Expense management growth accelerated a bit this quarter due to our customers sustaining strong end-user acquisition as AP automation and modern corporate card platforms continue to gain share.
Marquetta: On-demand delivery growth remained in the single digits due to the maturity of this use case as well as three distinct instances of customers reducing card usage by connecting their platforms directly to an individual merchant as we discussed last quarter.
Q4 net revenue was $136 million, growing 14% year-over-year.
Marquetta: Our growth slowed four points versus last quarter primarily due to tougher year-over-year comparisons as well as a greater percentage of volume coming from powered by customers, which have a lower net revenue take rate due to minimal cost of revenue.
Marquetta: This mix shift was partially offset by our Powered by Marketa take rate improving by more than one point due to favorable mix, as consumer use cases are growing much faster than single-use commercial virtual card.
Marquetta: Block net revenue concentration was 46% in Q4, decreasing one point from Q3 of 24 and down five points from Q4 of 2023.
Marquetta: Non-block revenue growth accelerated a bit versus last quarter, helped by the ramping of new programs.
Marquetta: Our net revenue take rate of 17 basis points remains unchanged from last quarter.
Marquetta: Q4 gross profit was $98 million, growth of 18% year-over-year, resulting in a 72% gross profit margin.
Marquetta: This is approximately four points higher than we expected at the end of last quarter, primarily driven by three factors.
Marquetta: First, the growth contribution from new program launches was approximately two points better than we anticipated, mostly due to stronger holiday season TPV among these programs.
Marquetta: But also, the program launch delays that we discussed extensively last quarter were a little less impactful than we expected.
The other two factors were unforeseen benefits.
Marquetta: We earned a performance incentive that contributed one point of growth after achieving an unexpected milestone.
Marquetta: In addition, favorable customer mix also contributed one point of growth upside as several of our higher yielding use cases and customers outperformed our expectations.
Marquetta: Non-block gross profit growth was consistent with last quarter, growing many points faster than the overall company.
Marquetta: Our gross profit take rate was 12 basis points, consistent with last quarter.
Marquetta: Q4 adjusted operating expenses were $86 million, growing 7% year over year, which was a little better than expected. We continue to be focused on our hiring, utilizing multiple geographic locations to find the best talent, in part to rely less on professional services.
Marquetta: We are also benefiting from increased scale as our platform-related costs grow slower than our process transactions and our gross profit.
Marquetta: Q4 Justin Ibida was positive $13 million, a margin of over 9%, which are both new all-time highs for the company as we continue on our path to profitability.
Marquetta: The Q4 gap net loss was $27 million, including a $10 million post-combination expense related to the power acquisition, offset by interest income of $11 million.
Marquetta: We ended the quarter with $1.1 billion of cash and short-term investments.
Marquetta: To briefly summarize our full-year 2024 performance, TPV growth was 31 percent.
The net revenue contracted 25% and gross profit grew 7%.
Marquetta: which does not reflect the strength of the underlying business due to the cash app renewal and the change in the revenue presentation that impacted our year-over-year comparison in the first half of the year.
Marquetta: The second half of 2024 clearly demonstrates we are on a path to sustainable, profitable growth.
Marquetta: Adjusted EBITDA was $29 million for the year which is a 6% margin on revenue or an 8% margin on gross profit.
Marquetta: This is a milestone for the company as we leave our negative adjusted EBITDA days behind us and drive toward gap profitability exiting 2026.
Marquetta: Before I transition to our expectations for 2025, let me spend a minute discussing share buybacks.
Marquetta: We currently have $80 million remaining on the Q2 2024 authorization.
Marquetta: There was very little buyback activity in Q4, as the prior 10b-5-1 plan expired shortly after our November earnings release.
Marquetta: At that time, the company was not in a position to trade or enter into a new 10b-5-1 plan because of legal restrictions.
Marquetta: However, we expect to restart our share of purchase activity in the coming days as we do not believe the current valuation fairly represents the company's value or the market opportunity in front of us.
Marquetta: To that end, our board has approved an additional $300 million share buyback authorization, bringing our total authorization to $380 million.
Marquetta: We intend to capitalize on this opportunity to return capital to shareholders at prices well below what we believe is fair market value.
Now let's transition to our expectations for 2025.
Marquetta: Let me first start with our full year 2025 expectations before diving into more details on the quarterly cadence.
Marquetta: Full year 2025 net revenue growth is expected to be between 16 and 18 percent, which is relatively consistent with our second half performance in 2024.
Marquetta: This is fueled by our expectation of TPV growth in the mid to high 20s, which assumes a stable macroeconomic environment consistent with the past several quarters.
Marquetta: The TBV growth is partially offset by a lower net revenue take rate, mostly driven by two factors.
Marquetta: First, stronger growth among our Powered by Marketa customers where our take rate is lower.
Marquetta: It is important to note that this factor is much more impactful to net revenue growth than to gross profit growth because a big component of the lower revenue take rate is the minimal cost of revenue, which is not relevant for gross profit.
Marquetta: and second, lower pricing as a result of expected contract renewal activity.
Marquetta: New programs sold since the revitalization of our sales motion late in 2022 and launched since the start of 2024 are expected to contribute over 40 million net revenue.
Marquetta: The contribution to 2025 net revenue growth will be roughly 5% based on our 2024 performance of less than $20 million.
Marquetta: Unfortunately, this is behind our $60 million goal we shared previously, due to fewer new programs launching and ramping in 2024, as well as launch delays, which we believe is partly due to heightened regulatory environment from our bank partners, which we discussed in detail last quarter.
Marquetta: While we did not make great progress in launching delayed programs in 2024, while we did make great progress in launching delayed programs in 2024, we are still not back to our 2023 time-to-value run rate.
Marquetta: 2025 gross profit is expected to grow between 14 and 16 percent, which equates to a gross profit margin in the high 60s.
Marquetta: Gross profit growth is expected to be slightly lower than net revenue growth, mostly due to the contract renewals we expect to execute this year, where our pricing changes but our cost of revenue remains unchanged.
Marquetta: There is always some renewal activity in any given year, but 2025 will be a little more significant than what we should typically see going forward.
Marquetta: We have previously discussed renewing over 80% of our TPV over roughly 18 months in 2022 and 2023, following the FinTech boom.
Marquetta: The last couple of significant remaining contracts are up for renewal in 2025.
Marquetta: Therefore, we expect full year 2025 adjusted EBITDA margin to be in the range of 9-10%.
Marquetta: This equates to a Justy Bidah of well over $50 million.
Marquetta: As I mentioned earlier, we reached an agreement to acquire TransactPay to enhance our program management offering in Europe. For financial planning purposes, we are assuming we close at the start of Q3 2025, which is dependent on when we receive regulatory approval associated with the EMI licenses.
Marquetta: The purchase price was €45 million, with an additional €5 million tied to performance incentives.
Marquetta: Two, we will attract additional customers looking for a single provider of processing, program management, and the EMI license. And three, geographic expansion on our platform will be even more seamless as there will be significantly more parity in our product offerings in the U.S., Canada, and Europe.
Marquetta: Therefore, we believe the value of the acquisition will mostly be visible in new sales, which typically take more than one year to meaningfully contribute to the P&L.
Marquetta: Before I share the quarterly cadence of our 2025 expectations, I want to highlight a change to how incentives will be recorded starting in Q2 2025, which would be the largest driver of quarterly gross profit growth fluctuations.
Marquetta: When our accounting was finalized prior to the IPO, we didn't have enough history to demonstrate an ability to forecast incentives. Therefore, it was determined we would record the benefits as they were earned.
Marquetta: We will provide the impact each quarter so it is clear what our true growth trajectory is on an apples-to-apples basis.
Speaker Change: For quarterly gross profit, let me first share the growth trajectory on an apples-to-apples basis without the change to accrued incentives or the inclusion of transact pay, which is the best reflection of the underlying business performance.
creating an unfavorable year-over-year comparison in Q1.
Speaker Change: Q3 and Q4 growth should be similar, roughly two points slower than Q2 in the mid-teens as expected renewals begin to offset the benefits of accelerating new programs and services.
Speaker Change: Q2 gross profit growth is expected to accelerate into the mid-20s, including an approximately 8-point lift from the incentive accounting change.
Speaker Change: We expect Q2 growth to be roughly 2-3 points lower than Q1 in the mid-single digits due to an easier year-over-year comparison.
Speaker Change: Q1 adjusted EBITDA margin is expected to be 10 to 11 percent, slightly better than Q4 2024. We expect the remaining quarters of 2025 to be one point lower at 9 to 10 percent.
And then I'd say specifically in credit, you know, we have been purposely going a little bit slow to make sure, you know, credit is not something you want to rush.