Ladies and gentlemen, welcome to Marqeta, 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. 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.

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, included those set forth in our filings with the SEC which are available on our Investor Relations website, including our annual report on Form 10-K for the period ended December 31, 2023 and our subsequent periodic filings with the SEC. 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. In addition, today's call includes non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in today's earnings press release or earnings release supplemental materials which are available on 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, Stacey and thank you for joining us for Marqeta's fourth quarter 2024 earnings call. Before I get into our quarterly results, first, I'd like to speak about the company's leadership transition. Earlier today, we announced that Simon Khalaf has stepped down as Marqeta's CEO and as a Director. I have been appointed to serve as interim CEO as our Board of Directors conducts a comprehensive search process to identify Marqeta's next CEO. 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 Marqeta. We are appreciative of his contributions to our company and we wish him well in his next endeavor. As many of you know, I joined Marqeta, 3 years ago after witnessing first-hand how the company's innovative platform was enabling new commerce experience that leverage the existing payment ecosystem, while reducing risk and increasing user engagement. Today, those opportunities are more compelling and widespread than ever and I'm confident in our ability to capture them. I'm honored to be taking on this expanded role during such an important time for Marqeta 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. Now, let me turn to our quarterly performance. 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 once again demonstrate our ability to grow at scale while improving our adjusted EBITDA margin and continuing on our path to profitability. Total Process Volume, or TPV, was $80…

Thank you. Our first question comes from Tien-Tsin Huang with JPMorgan.

Mike, you went through a lot of stuff there. I know you have a lot on your plate. I want to ask on this TransactPay and better understand what exactly you're acquiring here that you couldn't build yourself, Mike. 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.

Sure. So let me just explain the business a little bit. What -- TransactPay is a bin sponsorship provider that is licensed with an e-money institution and regulated and authorized to issue e-money and undertake payments in both the U.K. and the EU. And so if -- 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. So the bank controls the bins and they are the member of the network, either Visa or Mastercard. With this license, we actually become the bin sponsor. So we are the member. So TransactPay is a member of the networks and they control the bins. So it makes it -- you have a little bit more control over 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 what we are after. You're right, Tien-Tsin, that we could have done this ourselves but the there's 2 aspects to it. One, you have to show that you're 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 the amount of activity we see in Europe and the momentum we have in that business. The second thing is that once you have that license, the skill set is pretty specialized. So the value here is that TransactPay is already one of the leaders in that market and has the specialized resources and has proven to deliver on a great -- 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. 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 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.

Okay, that's great. My follow-up then just on the -- trying to think what I should ask. I'll ask on the deal front. A couple of nice wins, airline win. I'm curious, 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 more in order. I know it takes -- you said another year for TransactPay to maybe translate for you P&L-wise. But how would you qualify the pipeline at this stage?

Yes, the pipeline is really strong. There's 2 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. And if we look at our pipeline today, roughly 2/3 of it is embedded finance customers. And if you think about -- and over the last several quarters and the last year, we've typically talked about of our new bookings that we've made, roughly 1/3 of them being in embedded finance. So there's a pretty big increase in the funnel. And it's really driven by 2 areas. One is that a lot of these companies -- these are bigger businesses that are in another industry altogether. And so 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 is something we're benefiting from. And then I'd say specifically in credit, we have been purposely going a little bit slow to make sure credit is not something you want to rush. But also 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. 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 of that. It's taking a little bit longer because it's different but particularly customers who have done a traditional co-brand are pretty open to it. So for example, 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. 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.

Our next question comes from Timothy Chiodo with UBS.

Mike, on a little bit of similar note there on embedded finance. So there was a recent other large contract won by one of your competitors that was very public and announced on their earnings call, there was a press release. 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. So not specific to that deal but in general, for these larger embedded finance type deals, do you -- does Marqeta have everything that you need to win one of those RFPs, whether it's 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.

Yes. No, Tim, thank you for the question. And yes, we are seeing -- we're talking to many large companies that are interested. And I think that the few things that the embedded finance companies are looking for is, one, they want it packaged through APIs. So they want to be easily -- make it easily to integrate into their existing business. 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 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. And last but not least, almost all of them are already global companies. So they don't think about payments. We all understand that each country sort of have it unique flavors and 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 they're often 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 operate at scale, right? We have some very large customers. So it's hard for someone to look at our platform and say, you may not be able to handle our success. 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.

Our next question comes from Ramsey El-Assal with Barclays.

This is actually John [ph] on for Ramsey. Just one 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 TransactPay in Q3. Is that right, Mike?

That's correct. That's correct. So we have filed the applications required to -- for the license transfer but -- so it's with the regulators. And so that's our estimate for sort of financial planning purposes. It should be around that time, plus or minus a month or 2. But to make it a little bit easier for financial purposes, we assumed sort of a July 1 close.

All right. Perfect. And just my other question was, I think you said, you expected to exit 2026 with GAAP 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 GAAP profitability?

Yes. So -- and just to be clear, when we say that, we mean sort of the -- like 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, the -- 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. And there's a few reasons for that. One, again, we feel like embedded finance is gaining momentum. 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 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 -- we are largely -- as most platform businesses are, we're 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 we're simplifying a lot of things, a lot of automation is being done. 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 drives the GAAP profitability.

Our next question comes from Darrin Peller with Wolfe Research.

Good to see things getting back on track here. I just want to start off with, again, from last quarter, obviously, we had a cut to your numbers of around 9 points. 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 still being worked through combined with anybody that might have changed their model with you a little bit last quarter? And then similarly, I mean, when you think of the improvement in launching the delay programs you called out, was that internal? Or was that regulatory overhang lifted as that could continue to just probably improve from here?

Sure. Thanks for your question, Darren. So what's included in the outlook is our business doesn't sort of 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, we're usually in pretty close contact with them. We know what their growth expectations are. And the growth is a little bit in '25 is a little bit lower than our Q4 exit and it has to do with a couple of things that I called out that were 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'll get from new programs that launch starting in 2024 and 2025, we'll have over $40 million of revenue. So it's about 5 points of revenue growth contribution for 2025. So it's pretty good but it is below our goal. We wanted to be growing faster. And that's one of the big reasons why we are not in the 20s from a growth perspective. The second piece that's important, Darren, is are the renewals. And we -- again, we always have renewals to do. That's the case in any given year. And we talked a lot about in the past that in 2022 and 2023, we renewed 80% of our TPV. And -- but we have 2 customers who are in our top 10, who are renewing in 2025. And 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. And so those are also fairly significant. We expect on a combined basis that, that is about -- weighs on our growth -- our gross profit growth by about 2 percentage points on a full-year basis. And since we expect them to be in the second half, it's about 4 points in each of those quarters. So those are the 2 things that are weighing on us a little bit but we're still getting strong growth from our existing customers and we're still getting, again, 5 points contribution to revenue growth from new business.

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, maybe just remind us the top 3 drivers from a sector, industry vertical standpoint that you're seeing the most momentum with right now.

Yes. So I would say the top 3 drivers we're seeing in the neo banking space and we've talked about this for a while. There's more-and-more companies that are looking to bank their users, if you will, whether that's consumers or small -- medium to small businesses that may be operating on their platform. And they want to offer 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. BNPL 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 integrate it more and that's just really creating additional distribution for the business. And we are also, of course, working on our own solution for Marqeta Flex to really even provide more distribution to Buy Now, Pay Later players. So that's a really exciting part of the business. And the only other thing I'd mention 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. And then the last one is expense management. As I mentioned in my comments, what we're seeing is the more modern corporate card and AP automation players that are out there are really taking a lot of share. 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 -- the business has gotten quite big, it continues to compound at a very rapid rate because those providers are growing significantly faster than the market.

Our next question comes from Andrew Bauch with Wells Fargo.

I guess, I wanted to touch upon the international and European strength. I think this quarter in your 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, 6 months, 9 months, 12 months ago on the international front that is leading to this incremental momentum?

Yes. I would say there's 2 drivers. That's a great question, Andrew. I would say, one is that we have worked really hard to increase the capabilities we offer outside the U.S. So in Canada and Europe, we're offering a lot more services. We're delivering them with a lot kind of higher quality and reliability. We -- the bank partners that we're talking to have become really great partners of ours to help meet our customer needs. So one component of it is definitely are -- we're raising our game and the value proposition is just significantly enhanced from where we were 2 years ago in a lot of those markets outside the U.S. 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 5-plus years ago, 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 and relatively seamless. And as we enhance the capabilities in those markets, we're making it even easier for those customers to expand to those regions 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 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. and they say, well, I want to see -- give Marqeta 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 U.S. business. And so I would say those are the factors that are really fueling our international growth. And 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 we are really seeing a lot of rapid growth outside the U.S.

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 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?

Sure. The Board is -- one, they take succession planning very seriously. So this leadership transition is the succession plan in action. And what -- the way the Board is thinking about it is really this should be a relatively seamless transition with myself and the rest of the executive team members and all the talented Marqetans 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 gives the Board a little bit of space to conduct a deliberate and thoughtful search process to identify the right next CEO. What they're 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 that's someone who is a little bit of an innovative thinker and has 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 the kind of candidate that the Board will be looking for. And -- but 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.

Our next question comes from Sanjay Sakhrani with KBW.

Definitely very encouraging that you've made some improvements on the launch time lines, etc. and all the new wins. As we look for the year, Mike, like where are the risks? Obviously, lots of positive things happening now after some disappointment. As we look at where the land mines are, where could they be?

Yes. So -- thanks for your question, Sanjay. I mean, I think the areas that could go wrong, 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 5 points of revenue growth from new programs that launched in either '24 or '25. And once Marqeta and the bank partner have delivered everything that is required for launch, it's really up to our customer at that point to launch the program, start onboarding their customers, execute marketing and drive engagement, etc. 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. And if they don't move quickly, then that means the revenue may not come as quickly as we thought. And so a great example 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 3 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. 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 some of the tailwinds that we have behind us, right? We have an ever-growing installed 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 finance, our leadership with the flexible credentials. 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 BNPL and ultimately revolving credit. And so there are a number of things that are pretty unique to us that we're excited about.

Just a follow-up on the addition of American Express. I guess, like can you just define sort of what the opportunity is there? Like do you get better terms? Can you sell that into existing customers? Like can you just dimensionalize how additive -- like how it is additive to you guys?

Yes. So for sure. So there's a few ways. So one is that Amex is really known for some of their capabilities in credit, particularly B2B lending and loyalty cards. And so they are also out there talking to customers and about from making a brand decision. And if those customers want a highly flexible modern platform, today, they may -- they can't necessarily turn to Marqeta for that. But going forward, by the end of 2025, they will. And so that experience and expertise that they have in credit we think, combined with our modern capabilities will be very additive to us where we can go sell customers together. And then, the second piece of it is Amex wants to continually 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 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.

Our next question comes from Chris Kennedy with William Blair.

Can you just give us an update on the accelerated wage access initiative and the opportunity there?

Yes. Sure. So our accelerated wage access, it continues to -- we have a few programs live. We have the 2 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, what we do, although for customers, 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. We 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 sort of round out or fill out our value proposition to make it appeal to many more prospects.

And just a quick follow-up. Any thoughts on the regulatory environment around accelerated wage access?

Yes. I think the -- when it comes to that, our view is that the solution that we're offering is -- especially the vision that we have for the space 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, what we're saying is more you've earned the money already and it's distributed to you sooner. And so our view is that's a better approach and it avoids some of the sticking points that the existing solutions in the market today, there's some concern about how sustainable those are.

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.