Q2 2025 Marqeta Inc Earnings Call
Okay.
Good afternoon, ladies and gentlemen, and thank you for standing by, welcome to the market. A second quarter, 2025 earnings conference call. At this time, the lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will open the line for your questions. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Stacey finerman vice president of investor relations. Thank you. And you may begin.
Thanks operator. Before we begin I would like to remind everyone that today's call may contain forward-looking statements.
These forward-looking statements are subject to numerous risks and uncertainties including those set forth in our filings with the SEC, which are available on our investor relations website, including our annual report on form. 10K for the period ended, December 31st 2025 and our subsequent periodic filings with the SEC.
Actual results May differ materially from any forward-looking statements we make today. These 4 are looking statements, speak only as of the time of this call and the company does not assume any obligation or intent to update them except as required by law.
In addition today is call includes non-gaap Financial measures. These measures should be considered as a supplement to and not a substitute for gaap financial measures, reconciliations to the most directly comparable. Gaap measures can be found in today's earnings, press release or earnings release, supplemental, materials, which are available on our investor relations website.
Hosting today's call is Mike Milotich, Marqeta's Interim CEO and CFO. With that, I'd like to turn the call over to Mike to begin.
Thank you, Stacy and thank you for joining us for marqeta second quarter 2025 earnings call.
To start, I'll briefly highlight our Q2 results followed by our progress, enabling, Innovation and business expansion for our customers.
I'll conclude with more details about our Q2 Financial results and our expectations for the second half of the year.
our second quarter results demonstrate our ability to deliver strong growth while simultaneously increasing our justatee, but de through efficiency and scale,
Total processing volume or tpv was 91 billion in the second quarter, a 29% increase compared to the same quarter of 2024.
22, net revenue of 150 million grew, 20% year-over-year driven by the wide. Variety of use cases. We enable for our customers.
Gross profit was 104 million, a 31% increase versus Q2 2024, resulting in a gross margin of 69%.
This includes an 8.6% growth benefit from the revised accounting policy for estimating and recognizing card network incentives.
Adjusted. I was 29 million in the quarter. Translating into a 19% margin fueled by both gross profit growth and operating expense discipline.
This all-time high for our justed Diva demonstrates the significant progress, we have made on our path to profitability Falling just shy of gaap. Net income break, even for the quarter.
Our Focus this year has been on expanding and deepening our customer relationships while enabling their continued growth through Innovative programs, value added services, and seamless, Geographic expansions with consistent and effective execution.
1 area of strength has been our continued broadening of lending and buy now pay later use cases.
Forefront of helping our bnpl customers deliver Innovative and user-friendly Solutions.
In the early days of our company. We were well ahead of other providers in connecting bnpl providers with retailers via, instant issuance virtual cards. Enabling seamless payment experiences without costly back-end Integrations,
While others eventually caught up on instant issuance. We continue to LEAP ahead enabling bnpl providers with Pay Anywhere card Solutions where they provide their end user, the ability to pay later and anywhere cards are accepted.
Most recently we have enabled, flexible payment experiences for consumers by collaborating with Partners to help launch Visa flexible credentials to the market, where we were the first issuer processor to deliver this functionality in the US.
In June, we supported klarna and their launch of the CLA 1 card. Making them the second. Bnpl provider to offer consumers a flexible credential enabled cards.
This Builds on years of collaboration with klarna and demonstrates how customers can grow in our platform both in offerings and geographies over the past 4 years. Cara has expanded from 3 programs to over 10 programs across many countries.
in the second half of this year, we will continue to innovate in bnpl
As we announced that last year's money 2020, we have been building a new capability that leverages our issuing expertise and bnpl relationships to capitalize on evolving industry trends.
This capability embeds within apps and allows consumers to receive multiple bnpl options at purchase while paying with their existing debit card, increasing both distribution and user engagement.
We currently have multiple issuing partners and bnpl customers integrating and testing this new service with the goal of a limited release before the 2025 holiday season.
The intent is for a broader launched in 2026 with additional partners.
Not only are we helping our customers, expand through new Innovative programs, but we're also delivering more value through additional services.
While showcasing the breadth of our offering, value-added services help make our relationships more durable and bolster the economics of our business.
While the growth is coming off a small base in Q2, our value, added Services, gross profit, more than doubled on a year-over-year basis.
These value added Services, cut across geographies, and use cases as customers further rely on, Marketa for our expertise.
a product that is seeing great traction and adding value for customers is real-time decisioning
We built our real-time decisioning capability to be issuer, Centric and allow customers to create rules and controls to manage transaction fraud based on the expansive and diverse underlying transaction information.
Currently over, 40 customers, who contribute, almost 20% of our non-black tpv are using real-time decisioning, which is a major contributor to our value, added Services, gross profit growth.
We are actively enhancing this product with artificial intelligence and machine learning capabilities to help evaluate transaction risk in real time during the authorization process.
This allows customers to customize risk, tolerance, thresholds and automate transaction acceptance all with millisecond level response times.
We expect machine learning to continuously improve fraud detection through self-learning models that adapt to emerging threats.
1 of our long-standing and top 5 customers in Europe, recently, tap Marketa with this for this product.
while the customer originally worked with a different partner, they needed more flexibility to meet the differing needs of the various geographies, in which they operate
They chose Marquetta not only for the ease of integration, but more importantly, because they believe the flexibility and effectiveness of the tool will help them unlock more growth for their card program on our platform.
Europe remains a strong driver of our growth, we're tpv continues to more than double year-over-year.
In businesses, diverse and driven by many use cases, just like our business in North America.
Neo banking lending including buy. Now pay later and expense management. Use cases are each growing over 100% year-over-year in Europe.
This growth is driven by both local customers thriving and multi-regional, customers expanding into Europe.
1 of our fastest, growing local customers is planning to expand into 9 new markets in Europe, bringing their total to 26 markets,
Further a us-based expense management. Customer is expanding to Europe.
These are great examples of the strength of our modern card, issuing platform, which allows for greater flexibility and easier expansion into new markets.
Now our platform capabilities in Europe are going to further expand with the acquisition of transact, pay enabling even deeper engagement and delivering more value for our customers.
Required regulatory approvals. We completed the acquisition of transact, pay on July 31st.
We expect this business combination. Will drive value in 3 ways. First, it will enable us to deliver more program management services for customers operating throughout Europe.
Second, it will position us to support larger customers who are looking to have a single provider for processing program, management and Emi license.
And third allows us to standardize our offering across your geography and have more control of delivering solutions that are comparable to North America.
The acquisition is already driving significant customer interests. And we are already in Market with our joint, value proposition since Marquetta and transact, pay have a long work together as partners.
We expect further integration of offerings over the coming quarters.
To wrap up before moving to the details of our financial results. The business has strong momentum as we head into the second half of the Year, our ability to continuously enable Innovation and lending use cases including buy. Now pay later is 1 of the larger drivers of our tpv growth with more expansion opportunities to come in the next few quarters.
As our business and our platform matures, we are expanding the services available and finding new ways to add value and deepen our customer relationships.
Finally our Europe tbv continues to grow over 100% And with the transact, pay acquisition, now complete. We will have a more uniform program management offering across North, America and Europe.
All these expansions of our capabilities when combined with the breadth of our card, issuing expertise positions Market a well to power our customers expansion into new programs, use cases and geographies.
Now, let me transition to our Q2 Financial results.
Q2 was a very strong quarter significantly outperforming our expectations.
Q2 tpv growth accelerated, by almost 3 points from q1 to over 29%.
Net revenue and growth profit growth outperformed, our expectations by approximately 7 points, driven by much higher volume, and a more favorable business mix than we anticipated.
In addition, our adjusted operating expenses were much lower than expected due to better execution, but also investment timing delays.
Delivering a much higher adjusted EBITDA of $29 million in the quarter.
This business outperformance combined with the benefit of increased discipline and managing stock-based compensation. Over the past couple of years, brought us close to gaap profitability, break even in the quarter demonstrating the profitability, potential of our business.
22 tpv was 91 billion an increase of 29% year-over-year.
Is 91 billion of tpv was more than 20 billion higher than Q2 of last year. Demonstrating our ability to continue to grow the business at scale.
Q2 nonblock tpv grey grew nearly 3 times faster than block tpv fueled by a diverse set of use cases and customers.
Financial Services lending including buy now pay later and expense management use cases continue to drive in the majority of our tpv growth.
Growth within Financial Services remains steady compared to last quarter, which means it is now growing a little slower than the overall company.
Block growth. Within this use, case remains as expected and our fast growing non-blocking. Customers continue to grow approximately 5 times faster than blog.
Expense management. Growth was also consistent with last quarter and remains over 30% year-over-year.
In our customer, sustaining strong end user acquisition by leveraging, modern technology to deliver compelling value propositions.
Lending, including buy now pay later year year growth meaningfully accelerated versus q1 to level. That is much faster than the company as a whole
In fact, Q2 growth accelerated versus Q1 for each of our top 10 customers within this use case.
The growth acceleration was primarily driven by a combination of geographic expansion on our platform.
Increase adoption of Pay Anywhere card Solutions in some cases helped by newly available flexible Network credentials.
Increased distribution through wallets.
And strong user growth among SMB Lending Solutions helped by new value propositions.
On demand delivery growth accelerated from last quarter, but remains in the single digits, due to the maturity of this use case.
G2 net revenue was 150 million. Growing 20% year-over-year.
Growth accelerated by 2 points versus q1. Has growth accelerated in each of the 4 major use cases.
blocknet Revenue concentration in Q2 was consistent with last quarter, Rising 20 basis points rounding to 46%
The concentration is down. 1 point from Q2 2024.
We continue to look for ways to add value and support our largest customer with their growth objectives.
Non-b block, net revenue growth with similar to last quarter, and remains nearly 10 points, higher than block net, revenue growth, primarily driven by strong performance of our larger. Non-blocking the ramp up of new programs launched since the start of 2024
G2 growth profit was $104 million, resulting in year-over-year growth of 31%, and a gross margin of 69%.
As a reminder, we revised our accounting. Policy for estimating and recognizing card Network incentives. Starting this quarter.
We are now crewing incentives. Each quarter based on the forecasted annual contract here. We expect to achieve, as opposed to booking the incentives, each quarter as they earned and move through the progressive tears.
As a result, Q2 grows profit growth with lifted by 8.6 points, due to the difference in methodologies, for the year-over-year comparison.
Because our 2, most significant Network, incentive contracts, both have contract years that run April to March. The change in methodology was a benefit in Q2, but will be a drag on growth in the next 3 quarters.
Excluding the year-over-year accounting differences. The normalized growth in Q2 would have been over 22%.
Normalization aside, the underlying business growth in Q2 was approximately 6 points higher than we expected at the end of last quarter.
By driving by far, the largest factor, driving the growth profit. Outperformance was strong tpv growth across all our use cases, particularly lending, including buy. Now pay later.
in some cases, the higher tpv meant customers moved into a lower price tier
But that was a small impact compared to the volume benefit.
Favorable business mix. Also as a contributor to the gross profit outperformance as the tpv, outperformance was all non-b blocked and skewed a bit towards higher gross profit take rate use cases.
Finally, a true-up of an underpaid Network rebate earned in Prior periods, lifted the Q2 growth rate by 1 Point.
After normalizing for the impact of the revised accounting policy for Network incentives. Non-b blocks profit, growth continues to grow faster than the overall company and is growing a little faster than non-b block Revenue growth.
Our gross profit take rate was over 11 basis points, 0.3 points lower than last quarter, due to our tpv, performance being mostly driven by our larger customers who have better pricing.
Q2 adjusted operating expenses were 76 million.
Shrinking 7% year-over-year.
Change was approximately 10 points lower than expected. With a little over half or approximately 4.5 million due, to a combination of investment, timing, delays and non-recurring benefits.
While a little less than half was driven by strong execution of optimization initiatives, and investment discipline.
We had non-recurring tax benefits of 1.1 million largely due to the state sales tax refunds related to the resolution of audits going back. Several years.
These audits lowered adjusted operating expenses because they are related to sales taxes, not income, taxes.
The investment timing impacts are primarily driven by delays in headcount additions later within Q2 and into Q3 as well as shifts in few, a few marketing initiatives to the second half of the year.
The lower operating adjusted operating expenses that are more ongoing in nature, are driven by better organizational design in terms of being less top-heavy and more geographically diverse
Less reliance on outside professional services to support our key initiatives.
And successful, efficient initiatives within our Product and Technology organizations are shifting their time to more value-added activities, leading to a higher level of internally developed software capitalization.
As has been the case for the past several quarters, we continue to increase efficiency in the technology costs. We incur to operate our platform. Also as a reminder, the year of your growth and our adjusted operating expenses was always expected to be the lowest in Q2 due to an easier year-over-year comparison.
Due to adjusted ebit da of 29 million in margin of 19%, were new all-time highs for both metrics. As we make significant progress on our path to profitability.
Portability potential of our business.
The Q2 gaap, net loss was a mere 0.6 million.
Which included 8 million of interest income?
We ended the quarter with a little over 820 million of cash and short-term investments before the closing of the transaction.
Our share repurchase activity remained ongoing. And we continue to believe the current valuation does not fairly represent the company's value or the market opportunity ahead of us.
In Q2, we repurchase 35.2 million shares at an average price of $4.62.
When combined with our q1 repurchase activity, we've purchased 61 and a half million shares at an average price of $4.45. So far this year, which is more than a 12% reduction, in the outstanding shares, as of the 2024 year end.
As of June 30th, we had 107 million remaining on our buyback. Authorization.
Now, let's transition to our expectations for the second half of 2025.
As Q2, demonstrated the business is on a nice trajectory and we are raising expectations for Q3 Q4 and full year.
Tpv growth remains, strong across all verticals, particularly lending, including bnpl and expense management.
But some macroeconomic macroeconomic uncertainty remains based on uneven indicators.
Therefore, we now expect full year, 2025 Revenue, growth gross, profit growth and adjust the Bal margin to each be 3, to 4 Points, higher than what we shared last quarter.
Also keep in mind that the start of the year we said, Q2 had the easiest year-over-year comparison.
There are three items to note for the second half.
First.
The impact of our revised accounting policy for Network incentives will shift from a Tailwind in Q2 to a headwind in both Q3 and Q4.
we expect the impact on gross profit growth to be 2 points of drag and Q3 and 4 Points of drag and Q4
Transact Pay will be a contributor to the business. Starting in August, it is expected to lift both revenue and gross profit growth by 1.5 points in Q3 and 2 points in Q4.
At the beginning of the year, we anticipated, executing 2 renewals mid year.
We made this assumption knowing that we normally execute renewals several quarters before contract expiration.
Now, that we are actively engaged in discussions with the customers. We still expect the renewals to be executed prior to contract expiration, but we now anticipate them to be executed later in the year, which helps Q3 growth
Therefore, we now expect Q3 and Q4 net revenue to grow between 15 and 17%.
As a result, we expect full year 2025 revenue growth to be between 17% and 18%.
Gross profit growth in Q3 is expected to be 15 to 17%.
Q4 growth is expected to be 3 points, lower than Q3, as the drag from the revised. Network incentive accounting policy, increases. And the contract renewals start to impact growth partially offset by the contribution of new programs continuing to ramp.
Therefore we expect full year, 2025 gross profit growth to be between 18 and 19%.
We continue to be focused on our investments, platform capabilities, and innovation.
Based on our success, improving the efficiency. And effectiveness of our resources and Technology Q3 and Q4 adjusted. Operating expenses are expected to grow in the mid single digits.
23. Adjustable margins are expected to be 12 to 13% and Q4 should be 1 Point higher than Q3 as gross profit Rises during the holiday season.
Therefore, we expect the full year 2025 adjusted ebit on margin to be between 14 and 15%.
This equates to over 85 million in adjusted ebit da, and 2025, which is approximately 30 million more than what we anticipated at the start of the year.
In conclusion, our strong financial results in Q2, as well as a small delay of a couple of key customer contract renewals to later, this year, has led to a significantly raising our full year 2025 expectations for net revenue, gross profit, and adjusted Ava.
The current trajectory of the business, the additional platform capabilities on the road map to be delivered in the second half.
And the completed acquisition of transact pay. Make us confident that we can deliver on our 2025 growth objectives, while rapidly improving the profitability of the business and position the company for long-term success.
I will now turn the back, the call, back over to the operator for questions.
Thank you. We
Part 2. If you would like to remove your question from the queue, for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
We asked analysts to limit themselves to 1 question and a follow-up so that others may also have an opportunity to do so 1. Moment please while we pull for questions
Our first question comes from tensen. Hang with JP Morgan please proceed with your question.
Hi, I really a good clean results here. I wanted to ask my just on the on visibility in in general given. What you've learned so far.
Uh year to date. It seems like the visibility is a little bit better. I just want to check you on that given the update on the renewal and and some of the tpv and and mixed Trends and I'm curious if there's any change in sales Cycles, given a lot of activities you called out around credit and bmpl. How are you feeling on visibility?
Yeah, we feel, um, pretty good. Obviously, there's still some amount of uncertainty out there. Um, you know, from a macro perspective, particularly, you know, some of the spend and employment trends are, you know, uh, a little little, um, um, things are shifting quite a bit, but overall, the trajectory of the business, uh, is really solid. The, you know, the pickup in our tpv in the quarter, you know, we did not, um, expect that when the quarter started, that growth would accelerate by 3 points and, um, you know, lending and buy now pay later in particular, you know, really performed, uh, very well.
As I mentioned, you know, each of our top 10 customers and that use case, they're all their growth accelerated, their tpv growth. So um the customers are doing well, you know, the we're having good conversations in terms of Pipeline and we have some you know, good programs that are launching later this year. So we feel pretty good about the the visibility for the business and you know what, we're sharing as our expectations for the second half.
Okay good. Just by quick follow-up. And you mentioned value added services that there's been a bigger theme across payments and and fintech I realize is probably small. But is this a, a new growth factor that?
That we should be asking you more about here, Mike in the coming quarters. Just curious. Where that stands with you in a priority list
Yeah. It's um, it's a fairly High On That priority list. I would say that. Um, yeah, it's still fairly small in the grand scheme of things, but it's growing quickly, and its really just has to do with the, you know, the maturity of our of our business and our platform, you know, a couple years ago, um, particularly during the the pandemic the, you know, the business was was really booming and growing incredibly fast and so a lot of our energy and efforts were, you know, just trying to help the, the platform sort of keep up with with all our customers and make sure we deliver, you know, reliably uh, for customers. And so now that we've settled in and we sort of reached a certain level of scale
You know, we can spend a little more time, um, you know, sort of moving horizontally. If you will on the platform and starting to build out the services that go around, uh, our, you know, our processing, our core offering and the other aspect that to this, uh, tingen that's important, is we, you know, as we move more, and more into embedded, finance and talk to those types of prospects because they're not payment experts and they're really in another business uh, as their Core Business, they're really looking for a full solution. So, you know, whereas in the fintech space, people wanted a little bit of an icy cart menu, if you will, where they could sort of pick and choose what capabilities, they they took from you and they might piece together. Um, you know, things from other parties, as well and embedded Finance. They really want that holistic solution, and, you know, and that's why we're doing things like building, you know, a white label app, where you know, investing heavily in these kind of risk capabilities, tokenization capabilities. Um, you know, we're enhancing our our reward Solutions, not only for credit credit, but we're starting
to integrate that into debit because we're getting some interest from customers. So we're really trying to bring that that whole package and um, and so value, added Services, should become a, you know, bigger and bigger driver of growth going forward.
All right, good. I appreciate all that. Thanks, Mike.
Thanks CJ.
Our next question comes from Ramsey.
Proceed with your question.
Hi, thanks so much for taking my question this evening and and great results. Um, I wanted to ask about the increase in your adjusted epitomes, which is a substantial increase and, and you did walk through kind of quite a few factors from just flow through on the top line. Um, you know, potentially mix, uh, cost efficiencies, perhaps renewals timing. I'm just curious. If you could kind of help us rank order that that cluster of drivers a little bit and so we can determine what are the more, you know, what are the core, uh, the core sources of upside here,
Say, you know, first you, you always want to drive better profit by, you know, driving the top line. So, um, you know, strong gross profit growth is, is always going to be our our preference in terms of how we deliver that. And um, you know, certainly, you know, we really outperformed their and it and it really was driven by a strong tpv. Um, and, and to some degree, the mix of the tpv was also favorable. Uh, so the, you know, some of the outperformance came from higher gross profit take rate customers, but really the bulk of it was sort of just very high quality driven by volume which is, you know, always what you want to see.
And then you just combine that with you know we just had much lower expenses and as I kind of mentioned Ramsay like roughly half of that is more kind of timing and 1 time in nature we you know we had a you know a tax benefit but also we did delay some of our investments and some of this just has to do with um when I stepped into the interim role. Um, you know myself and the rest of the executive team really looked at the investment plan and and kind of gave it 1 more look. And so we, you know, that kind of delayed our hiring of just by a couple of months, but that was enough to sort of push, some of the hiring, you know, we had a lot of additions, sort of late in Q2 and they're spilling into Q3. So, you know, our headcount was just a little bit lower than we would have thought. Otherwise,
And then also as we look at the year and and some of the new capabilities coming, um, in the second half, we've delayed some of our marketing as well. So there's some timing issues to this but but also on top of that, I mean we just doing uh, a really great job executing on making um, things much more efficient and just doing things much more effectively. Um, you know, part of that is AI. I mean, we're we're helping people be a lot more efficient, but, but some of it is just, you know, we're starting to have, um, more tools, more processes to just help everyone be more effective and that's coming in the form of, you know, across the organization. But particularly in engineering where
In engineering, when we look at that we have people really work kind of in 3. Buckets the way we think about it we have people who are just keeping the platform running. We have people who are improving, what exists sort of making sort of incremental changes and then you have people building new capabilities, um, and and the new capabilities really is what drives a lot of the, the capitalization also of those efforts. And so, as we're getting people to be more efficient, their time is Shifting more to building new capabilities, which is exactly what we want. And so that's also helping us lower, the, in addition to things like, how we work with the technology providers, who support our platform, you know, we're just getting a lot more efficient in how we utilize those players to make sure that we're getting the full benefits of our scale with those.
Players.
Okay. Um, thank you for that 1. Quick, follow-up from me on the regulatory environment and I just wanted to check in to see whether, you know, I know in the past some of your bank Partners sort of operational Tempo, slowed down a bit in response maybe to to regulatory uh uh uh scrutiny. Uh, I'm just curious whether you're seeing any changes. Now we seem to be in in a less highly regulated environment is that contributing at all to any of this sort of upside that you're uh you're showing here uh, or or is that still kind of business as usual?
I would say it's more business as usual. That wasn't a, um, a source of upside, I would say, although the you're right, I mean, the, the environment has changed a little bit, but, you know, the things don't pivot really quickly with the bank. So I would say it's more that they're starting to emerge from the fog, if you will. Uh, so it's getting a little better, but it's still, um, a little bit, a little bit slower than we would like, but we're making good progress. And and we are, I would say in general sort of partnering, just better like better communication better coordination and so that helps. But you know, we think in the next couple of quarters, we'll we'll continue to make more strides there for now. It's not a, you know, it's it's a small difference, it's not a big factor.
Got it. Thank you very much.
Yep.
Our next question comes from Timothy chiodo with UBS, please. Proceed with your question.
Supporting both clearly cash app card has the retroactive bnpl product. Maybe you could talk a little bit about the mechanics there. Lastly, though, if you don't mind the interchange. So is this
Debit credit does it depend on what you toggled and how that interchange rate might evolve or be some sort of a hybrid down the road?
Yeah, so uh, thank you. Uh, Tim always uh, always have good questions. Uh, challenging questions for us. So on the first 1. Um, so I would say the, a lot of the activity you were talking about is more in, um, like it. So I would say the, the post-purchase um, is not necessarily as, as impactful for us, I would say. It's it's more the, um, the pre-purchase activity. What used to happen that the the um, in pre-purchase Tim is that, um, 1 of the use cases used to be okay, I haven't even gone to the merchant yet but I know I'm going to go make a large purchase say of $500 and I I know I'd like to buy now pay later so I go into the the app or the website of my we preferred provider and sort of ask them to um allow me to finance that and they would essentially you know, generate a card for that person to walk in and use uh for that purchase.
so that was a classic kind of pre-purchase uh,
You know, mechanics of how it worked. Now, it's happening more. And more is our providers are, you know, just putting cards into your hand. That is the combination of a debit card and something that you can use, um, buy now pay later. So it's a little more seamless in terms of how the user communicates to say. Okay, I'm going to pay in full or I'd like to pay in installments and but it's just a much uh, cleaner user experience. And that's where um, you know, the flexible to credential comes involved. And you know where we're seeing now, we're supporting 2, 2 customers uh with that. And and you know we're seeing you know good good performance uh strong adoption, clearly the the value proposition is resonating.
And then, in terms of your, your question on interchange, so it does depend on uh, what happened, uh, with the transaction, how they chose to to pay. But there is a component of The Interchange that then becomes, um, you know, more credit oriented, uh, based on the, the flexible credentials. So, you know, there are, um, we are seeing with those flexible cards that, you know, some of the qualification is for credit interchange.
Excellent. Thank you. Mike.
Yep. Thanks Tim. Our next question, comes from Darien Peller with wolf research, please proceed with your question.
Guys, thanks Mike. Um, I just want to touch on the international success and you're having and and you're up in particular and now on the back of transact pay in particular, I mean what you foresee is
the potential over the next year and a half or so. Just when we think about what your capabilities are now around program management capabilities there, what it means for the business both in terms of your growth opportunity, there above and beyond your anchor customers. Uh, but also, your investment needs in those areas and then, just on the topic of Investments and profitability that I know, I think was brought up earlier, um, obviously a big beat on ebida and so I'm curious if you your view of gaap profitability by the end of the, I think it was the end of 26 has changed at all. Maybe you moved up a little bit.
Thanks guys. Uh, yeah, thank you Darren, uh, for your questions. So, yes, in terms of international, you know, the bulk of our international business is in Europe. We you know we operate uh you know Canada Australia, a few few other markets but the bulk of it is Europe. And and as I mentioned it continues to grow over 100% and it has for, you know, many quarters now. And what's interesting is, you know, both sort of financial services lending and buy now pay later and expense management. All those use cases are all growing over 100%. So it's not sort of just a narrow area of success. We're really having um broad-based success.
And so, in some ways we were shut out of like the biggest opportunities in the market because we didn't have the full package, so there's, um, also going to be a part of the market. Now that we feel we can serve effectively that was hard for us to do before. And then the, the third piece that's also very important is because it now makes our offering in Europe, much more comparable to North America. It's just much easier for customers to sort of move on either side of the Atlantic, if you will. So whether you're a European customer now and you want to come to the US, it'll feel more similar or if you're a us or Canadian based customer and you go to Europe, you will be able to support those customers in a much more similar way, which not only makes it easier for them, but also makes it much more likely that we capture the business. So that's what we're, you know, we're really excited about, uh, what TPL can do. And, you know, we're already sort of harmonizing our, go to market motion so that we show up as 1 company. Um, as early as, you know, this week. Uh, and then we're going to take the next couple of quarters.
Integrate integrate the rest.
In terms of the, uh, investment needs. So
You know, we there's our our investment are really focused on a couple of different areas. I mean the platform is always going to be the first 1. So, you know, we're, we're investing in a lot of different capabilities. I would say the focus area this year has been around kind of banking and money, movement capabilities. So different account types, um, different ways to kind of, uh, send and receive money. Um,
Bill pay type capabilities. So we're building out those types of solutions that our customers can utilize, we're enhancing our credit platform, you know, we're getting more volume running through. We're enhancing, uh, the rewards capabilities associated with it and we're also enhancing kind of a secured card and, uh, more of a charge card type capability. Um, so that we have that, uh, those, those kind of capabilities and then the, the front end, the, the white label app. Um, just again, bringing that, uh, user experience component, also to our value proposition,
I would say those are the areas where um we're spending the most and then I would say some in value added Services. Although, I would say the investment in value added Services. Really stepped up probably last year. Um, not not as much of an increase this year, we're just starting to see the the fruit uh, of those Investments.
And so, um, but we're, we're getting just a lot more efficient, uh, in the way we operate and that's what's driving. A lot of the, you know, the expense, um, savings and therefore driving the, The ebit Da to levels that, you know, are much higher than we expected on on your last question, you're right that, um, we are ahead on our on our profitability. And so, you know, we do believe that, um, that we had said before, we thought we would exit 2026 Gap profitable. We now believe that, uh, or we would be Gap Break, Even? Sorry. Um, we now believe that the full year 2026, we will be
Gap break, even. Um, and and that's without our
You know our assumptions for our gross profit in dollar terms, changing much. So you know um our our volume is performing better for now but I would say it's not enough of a trend where we're sort of changing the trajectory over the longer term and the delays in the renewals that I highlighted, they don't really affect next year. It's really just a timing factor between when they occur in 25 so it doesn't really affect 26. So our our views of of 26 gross profit, haven't really changed um and but we're head on profitability and you put those 2 things together and uh, we do think we can be Gap break, even for the year, that's great. Great to hear, Mike. Thanks for the help.
Yep.
Our next question comes from Sanjay sake with KBW, please proceed with your question.
Hi. This is vasu govil for Sanjay. Thank you for taking my question, I guess my queue called out strength in the bnpl vertical and credit I was expecting. You'll also call out crypto as a driver of the given, just the renewed interest in this space, um, anything to call out in terms of the sales pipeline or demand picking up in that vertical.
Have you in crypto, um, right now, which is that you have a card that allows you to transact essentially in the ecosystem with Theo currency. So, you know, no one else has to change the way it, um, you know, it works. But, uh, your funding source is more of a crypto funding source, and that's done more like as an FX conversion, uh, by the issuer. You know, that we think is a very compelling.
Uh, use case even more so today.
Not just for crypto but also for stable coins. So if if stable coins, um, get adoption and there's a lot of people who are talking about, uh, you know, stablecoin I think you know, things for the whole ecosystem to evolve it takes time. And so, you know, it's going to be a couple years, I guess, in my view before, you know, merchants and on a broad basis would be accepting those kinds of forms of payment. So in the meantime, we think the solution that we've already had in market for a couple of years is a, is a very good option for those who who maybe want to take advantage of uh, of stable coin. You know. We don't to be honest about when it comes to stablecoin just since I brought it up, I, you know, we don't think that's going to be really impactful to our business, at least in the near term just because of the, the markets we operate in um, more in North, America and Europe and we're not huge in cross-border flows, you know, we're probably, you know, less less exposed to some of the initial use.
Cases of stable coin but it is an area we're looking at investing and partnering but for now we feel like we do have a good solution for that space.
Great, thanks. Mike. That was great caller. Um, and then just for my follow-up I wanted to re revisit your efforts
Um, about selling into traditional Banks and how that's going. I know that was something you guys back at the investor day, um, sounded optimistic about and so, just curious, if you're getting any traction on that front,
so, I would say, um,
We the conversations continue to be ongoing, you know, at the time of our investor day, what we said was we, you know, we thought it was probably you know, about 5 years out um and that was about a year and a half ago. So I'd say we still feel like
It's still a, a ways into the future, you know, the the banks are, um, you know, are fairly cautious and, um, there's probably some modernization, uh, that needs to be done on their side before we could, you know, really effectively work together. So, we still think it's a ways off, but there are, there there is dialogue. Um, there is, you know, there is some activity. So, um, you know, our our plan is to try to get our, our foot, in the door with maybe some small or very specific use cases. And, and that could happen, you know, maybe sooner, uh, rather than later in in sort of very small, very specific niches of the business
But to really support them in a much broader way, from a processing perspective, we still believe it is several years away.
Thank you, Mike.
Yep, thanks vasu.
Our next question comes from Nate senson with Deutsche Bank, please proceed with your question.
Hi, thanks for the question. Um, last quarter, you kind of talked and gave us a breakdown of ppv, Buy Low medium and high discretionary spend and you'd be pointed out. There was no meaningful shift in 1 Q. Just wondering if there's any update to that breakdown for 2 Q or maybe a month or so here into 3 Q. Um I think he mentioned in response to tamson's question that there was some shifting spending patterns so just wondering what specifically those were
Yeah, so um, no, I would say they no noticeable. Um shifts to point out, you know the um as as I mentioned the tpv outperformance that we saw was fairly broad-based and um, maybe the, the only, you know, maybe use case that stood out, more than the others was lending and buy now pay later. And, but even within that, um, as as I'm sure you've heard in the market, even some of the big growth areas within buy. Now pay later are actually areas that are not highly discretionary. Um, so you know, those again, as you give people more of a, you know, a card product, that's both a debit and a buy. Now pay later
Expense management but also you know, Neo Banking and and lending and buy now pay later.
Yeah. Makes a ton of sense and appreciate the color. Um wanted to ask another 1 on on buy. Now pay later. Great to hear all of the success there including the uh Corona 1 card. You mentioned in the prepared remarks, some new buy. Now pay later capabilities that multiple providers are testing um, with new releases and and in-app options that you think are going to be launched, uh, on a more broad basis in 2026. Any any more color on that specific product capability what Marquetta is providing and kind of what you think the benefit for both Marquetta. And your, your bmpl customers could be, uh, at that gets fully rolled out.
Yeah. So, what are our vision for this? Uh, this product is that there, in, in our view, there's no reason why buy now pay later couldn't be a capability. That's on any debit card product, uh, as a, as a feature of the product. And so, um, think about this and and when it does, you actually get offers from multiple providers. So think of this, as you want to make a transaction, and you're on our our platform, providing this service, and you as a consumer, then if you say within your within the app, I I would like to buy now pay later, then it might bring up multiple providers. That say, here's our offer and maybe 1 of them offers you to pay in 4, interest free. And another 1 offers you, you pay over 6 months at at this rate and so you would
Get Choice. Um, and so, what this does is for our, our issuing Partners, it just differentiates their product and allows them to offer more value to their consumers. So it just becomes a better value proposition from them. So they get higher engagement, and for our buy, now, pay later our customers who are Partners in this effort, we're we're really bringing them distribution. These are our users that then in transactions, that they may maybe not have had the opportunity to, to participate in, uh, that now they are. And so we we really see it as a, as a win-win. And so we have, um, so it's, it's sort of a 2-sided, uh, platform that we're building. And we have a, a couple of Partners on both sides who are are testing. And we're, we're trying to, because the holiday season is always a big time for this type of use case. So we're trying to um be there in a limited release by the end of this year.
And then roll it out uh more broadly next year. But that that's the vision for the product. And we think it um it has a lot of potential because um where where you can also see it going is there are also more more and more players who provide lending for very specific types of use cases. So this really could become something very powerful where you know the consumer depending on what they're buying. They might see, you know, offers from different types of players and that gives them the flexibility they they want and and brings the distribution to our bnpl partners.
Exciting stuff. Thanks. Mike.
Yep.
Our next question comes from Craig, Mar with ft Partners, please proceed with your question.
Yeah thanks hey. Hey Mike and everybody um wanted to ask about how the pipeline for credit is building and where you are with uh the launches with American Express.
Thanks.
Yep. Thanks Craig. Uh, appreciate your question. So, um the you know, we we feel good about where our credit business is, I would say the, the first, the focus over the last quarter um, has been integrating with with AMX and we're, we're making good progress. I would say we're, we're very close to
You know, kind of certification and and being ready to um, go live. So I would say we're making good Headway there. And then the second area was the uh, migration we were doing for per pay which is a a consumer, uh, credit card and the, the per pay migration is now 97% complete, so it's essentially as of the end of July. So it's
Essentially done. There's a few accounts left to move over but, uh, we feel really good about not only. Now, we're supporting, um, per pay as a as a consumer credit proposition on our platform and it's growing nicely, but we also demonstrated our ability to do do do a migration and credit which is, which is much harder than debit. Uh just because there's just a lot.
A lot more, um, variables that you need to, to take, take into account. So, we feel good kind of about where where things are and we still have another co-brand that we announced in February with an airline that. We still expect to launch later this year.
Of things and they're using Dynamic rewards. And so we're having a lot of good conversations and, you know, there's some interest but it's um, you know, we're we're not rushing. We feel like in in credit when you rush, you know, some some bad things can can happen. So, uh, we we you know, the pipeline is good, but no, um no exciting news to share uh this call.
Okay, thank you.
Our next question comes from James, it's all set with Morgan's family, please proceed with your question.
Hey Mike, thanks for all the details and nice work here. I wanted to ask, um, just on your comments around delayed investment. On one hand, it seemed like, um, you know, obviously that benefit of discourse, it seems like you indicated that there was just some delayed hiring maybe because of uncertainty in the macro earlier in the quarter. But on the other hand, you're suggesting that maybe we're going to be on a lower Opex run rate for in a '26. This gives you more confidence to be GAAP profitable there. Can you just help us parse kind of what's happening there and what your current state of mind is? And has there been any kind of more sustained changes in investment priorities, etc.?
Yeah. Uh, thanks for your question James. Yeah, let me see if I can, uh, try to clarify it a little bit. So I would say of the lower expenses we had in the quarter, roughly half of it, a little more than half was more timing in nature, uh, the other half or a little less than half was, was real. Um, just better better performance, uh, better optimization of our expenses. So the Investments were really driven by by 2 things the delay. The investment delays 1 is that um you know when I stepped into the interim CEO role we just reassessed things. We took the executive team looked at looked at everything and said, okay, where do we really want to prioritize some of our hires and so that just meant, we just like, 2 months 3 months behind where we thought we would be. And so a lot of those people are joining the company now so we have pretty good visibility to the the headcount additions. It's just they happen much later in Q2 than we had originally thought. And because of that it it just led to some Savings in the quarter and then there are some things around
Marketing that uh as we, you know, as you always do you have a plan at the beginning of the year? But then as the the year evolves, you look at what kinds of activities, what things we might be doing with customers, what capabilities might be coming live, and we just made the decision that it made more sense to spend the money in the second half, uh, where we have some, um, things to talk about and the money 2020 is in the second half, which is usually an area where we, uh, you know, we invest more. So that's the, those are the things called
Causing the the timing related factors but a little a little less than half. The upside is just just better efficiency and and optimization. Um, and then there's a few drivers for that. So 1 is from a, just a pure org perspective. We're getting, um, pretty good. We in terms of our, our org shape if you will, we used to be a little top-heavy and very us-centric. Now, we are, um, you know, we kind of have a, a better um org design where we have more opportunities uh for people. And we don't quite have as many management layers and then we also are, you know, much more geographically diverse, and that's creating um, you know, just a much more effective organization. We also are particularly in the technology related cost so think of this as like data services cloud services. We use to run our platform. We're just doing a lot better job at making sure, we minimize the waste in how we utilize those partners. And that's, that's driving. A lot of savings and between those 2
things. It's just putting us on a, a better expense run rate that we think, you know, will sustain, which is why we believe 2026. Now will be a little bit better from a profitability perspective than we thought just a quarter or 2 ago.
Straight, Mike, that's really clear. And then just back on initiatives and opportunities.
Embedded Finance has been a a topic for a few years now. It seems like that's still an area of focus for you. How should we think about like what to watch for from a product perspective or or other mild posts of of development?
Yeah. Uh, thanks for your question, James. So yeah. They we we're excited about embedded Finance but it it is, um,
It's, it's moving a little slower than maybe we initially thought a year ago and that's just, um, these are much larger organizations. Um, typically these are very established companies and payments is not their Core Business. And so what we're finding is it's just we, we're engaging for longer periods of time, um, before we get to the get to the solution. So we're having some really good conversations. And in the meantime, what we're doing is,
Much more of a full stack solution because that's what embedded Finance. Uh, customers are looking for. So that's why we're really investing in banking, and money movement products, and the white label app. So, we just have a much more comprehensive sort of out-of-the-box solution, that they can utilize because that's what they're looking for. Um, but like a good example of, like a large customer win. That we recently had was an embedded Finance customer. This is a large Global brand, um, and we expect them to launch later this year and it's really interesting as we get deep into the delivery process, we always ask them, you know, why why did you choose us? What, you know what? Just so we we know what we need to enhance to better, serve others. And and they really said it was a combination of 3 things 1 is that, um, you know, we have a very simplified process for launching a new consumer focused program, you know, a consumer card is just much more complicated than commercial, and they just saw a lot of our expertise and experience there as a real, as a
Real value, you know, the the technical Integrations and the robust solution that we have given the scale of our business, they just allowed them out of the gate to just have a, a more complete offering. And they really value that. And then, the third thing was just the service and support, you know, we sort of pride ourselves on being a little bit of a white glove treatment, and you know, that's a differentiating factor when you're solving a lot of problems. And, you know, it gets complex on a new program like this. And so, you know, we feel like we're we're well positioned to win in this space. It's just
The, the opportunity is maybe unfolding a little slower than we would have thought, you know, a year ago uh, before we, you know, really got into it.
Great. Appreciate all that Mike. Good luck.
Thanks James.
Our last question comes from Chris Kennedy with William Blair please proceed with your question.
It's for squeezing me in just a real quick 1 on open Banking and potential. Uh you know JP Morgan charging the aggregators for Access for the data. Any thoughts on that dynamic?
yeah, so um, you know, saw the news I think that um,
you know, it's not
In terms of direct impact to us, we think it's it's minimal. Um, you know, some of our customers may say face face some friction, particularly, um, you know, in areas where they want real time account data. So, you know, so for account, verification risk decisioning. Um, and then certainly, uh, underwriting. You know, those are some of the the areas where, um, you know, it's common for people to use those capabilities. And, and so it could become more expensive, uh, for them to do so which they either have to decide. Then, does that sort of do, they change their usage patterns, um, or do they, you know, end up, uh, tightening up maybe the number of people, they'll serve. So it's, it's hard to know the implications, but I would say for us right now, based on the the use cases we utilize. And, and the maturity of of, you know,
Many of our, our customers in the way they operate that. We see it as as minimal but it's certainly something to watch because if the rest of the the banks were to follow their lead, then you know it could change the cost structure for some of these um capabilities that people rely on today.
Great. Thanks for taking the question.
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