Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Marqeta Second Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 10-K for the period ended December 31, 2025, and our subsequent periodic filings with the SEC. Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only as of the time of this call, and the company does not assume any obligation or intent to update them, except as required by law. In addition, today's call includes non-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 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 adjusted EBITDA 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. Q2 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 EBITDA 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 adjusted EBITDA demonstrates the significant progress we have made on our path to profitability, falling just shy of GAAP net income breakeven 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. One area of strength has been our continued broadening of lending and Buy Now, Pay Later use cases. While BNPL has expanded over the last 5 years, Marqeta remains at the 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…

[Operator Instructions] Our first question comes from Tien-Tsin Huang with JPMorgan.

Really good clean results here. I wanted to ask, Mike, just on the -- on visibility in general, given what you've learned so far year-to- date, it seems like the visibility is a little bit better. I just wanted to check you on that, given the update on the renewal and some of the TPV and mix trends. I'm curious if there's any change in sales cycles given a lot of activity as you called out around credit and BNPL. How are you feeling on visibility?

We feel pretty good. Obviously, there's still some amount of uncertainty out there from a macro perspective, particularly some of the spend and employment trends are a little -- things are shifting quite a bit, but overall, the trajectory of the business is really solid. The pickup in our TPV in the quarter, we did not expect that when the quarter started, that growth would accelerate by 3 points. And lending and Buy Now, Pay Later, in particular, really performed very well. As I mentioned, each of our top 10 customers in that use case, all their growth accelerated their TPV growth. So the customers are doing well. We're having good conversations in terms of pipeline, and we have some good programs that are launching later this year. So we feel pretty good about the visibility for the business and what we're sharing as our expectations for the second half.

Okay. Good. Just my quick follow-up, and you mentioned value-added services that's been a bigger theme across payments in fintech. I realized it's probably small, but is this a new growth vector that we should be asking you more about here, Mike, in the coming quarters? Just curious where that stands with you in the priority list.

Yes, it's fairly high on the priority list. I would say that, yes, it's still fairly small in the grand scheme of things, but it's growing quickly. And this really just has to do with the maturity of our business and our platform. A couple of years ago, particularly during the pandemic, the business was really booming and growing incredibly fast. And so a lot of our energy and efforts were just trying to help the platform sort of keep up with all our customers and make sure we deliver reliably for customers. And so now that we've settled in and we've sort of reached a certain level of scale, we can spend a little more time sort of moving horizontally, if you will, on the platform and starting to build out the services that go around our processing, our core offering. And the other aspect to this, Tien-Tsin, that's important is we -- 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 as their core business, they're really looking for a full solution. So whereas in the fintech space, people wanted a little bit of an a la carte menu, if you will, where they could sort of pick and choose what capabilities they took from you and they might piece together things from other parties as well. In embedded finance, they really want that holistic solution. And that's why we're doing things like building a white label app. We're investing heavily in this kind of risk capabilities, tokenization capabilities. We're enhancing our rewards solutions, not only for 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 whole package. And so value-added services should become a bigger and bigger driver of growth going forward.

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

Great results. I wanted to ask about the increase in your adjusted EBITDA margin guidance, which is a substantial increase. And you did walk through kind of quite a few factors from just flow-through on the top line, potentially mix, cost efficiencies, perhaps renewals timing. I'm just curious if you could kind of help us rank order that cluster of drivers a little bit and so we can determine what are the more -- what are the core sources of upside here.

Sure. So I would say -- thanks for your question, Ramsey. I'd say, first, you always want to drive better profit by driving the top line. So strong gross profit growth is always going to be our preference in terms of how we deliver that. And certainly, we really outperformed there, and it really was driven by strong TPV. And to some degree, the mix of the TPV was also favorable. So the -- 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 always what you want to see. And then you just combine that with -- we just had much lower expenses. And as I kind of mentioned, Ramsey, like roughly half of that is more kind of timing and onetime in nature. We had a tax benefit, but also we did delay some of our investments. And some of this just has to do with -- when I stepped into the interim role, myself and the rest of the executive team really looked at the investment plan and kind of gave it one more look. And so we -- that kind of delayed our hiring just by a couple of months, but that was enough to sort of push some of the hiring. We had a lot of additions sort of laid in Q2 and they're spilling into Q3. So our headcount was just a little bit lower than we would have thought otherwise. And then also, as we look at the year and some of the new capabilities coming in the second half, we've delayed some of our marketing as well. So there's some timing issues to this. But also on top of that, I mean,…

Okay. One quick follow-up for me on the regulatory environment. And I just wanted to check in to see whether -- I know in the past, some of your bank partners sort of operational tempo slowed down a bit in response maybe to regulatory scrutiny. I'm just curious whether you're seeing any changes now. We seem to be in a less highly regulated environment. Is that contributing at all to any of the sort of upside that you're showing here? Or is that still kind of business as usual?

I would say it's more business as usual. That wasn't a source of upside. I would say, although the -- you're right, I mean the environment has changed a little bit, but the things don't pivot really quickly with the banks. So I would say it's more that they're starting to emerge from the fog, if you will. So it's getting a little better, but it's still a little bit slower than we would like, but we're making good progress. And we are, I would say, in general, sort of partnering just better, like better communication, better coordination. And so that helps. But we think in the next couple of quarters, we'll continue to make more strides there. For now, it's not a -- it's a small difference. It's not a big factor.

Our next question comes from Timothy Chiodo with UBS.

I want to talk a little bit about the broader Visa Flexible Credential topic, but also expanding that a little bit to just the topic of being able to do BNPL via a card in general. So Mike, correct me if I'm wrong, but I think maybe 2 ways that we could break it down is the pre-purchase decision and then the post-purchase or the retroactive BNPL. And I was wondering if you could take us through just some of the mechanics. What's different in terms of the prepurchase or the toggling ahead and then the post-purchase decision? My understanding is that you're currently 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?

Yes. So thank you, Tim, always have good questions, challenging questions for us. So on the first one, so I would say the -- a lot of the activity we're talking about is more in -- so I would say that the post purchase is not necessarily as impactful for us. I would say it's more the prepurchase activity. What used to happen in prepurchase, Tim, is that one 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 know I'd like to buy now, pay later. So I go into the app or the website of my preferred provider and sort of ask them to allow me to finance that, and they would essentially generate a card for that person to walk in and use for that purchase. So that was a classic kind of prepurchase mechanics of how it worked. Now what's happening more and more is our providers are just putting cards in your hand that is the combination of a debit card and something that you can use 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 cleaner user experience, and that's where the flexible to credential comes involved and where we're seeing now we're supporting 2 customers with that, and we're seeing good performance, strong adoption. Clearly, the value proposition is resonating. And then in terms of your question on interchange, so it does depend on what happened with the transaction, how they chose to pay. But there is a component of the interchange that then becomes more credit-oriented based on the flexible credentials. So there -- we are seeing with those flexible cards that some of the qualification is for credit interchange.

Our next question comes from Darrin Peller with Wolfe Research.

Mike, I just want to touch on the international success and you're having in Europe in particular, and now on the back of TransactPay in particular, I mean, what you foresee as the potential over the next 1.5 years 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, 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, obviously, a big beat on EBITDA. And so I'm curious if 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?

Yes. Thank you, Darrin, for your question. So yes, in terms of international, the bulk of our international business is in Europe. We operate Canada, Australia, a few other markets, but the bulk of it is Europe. And as I mentioned, it continues to grow over 100%, and it has for many quarters now. And what's interesting is 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 broad- based success there. And what we really are hoping or we believe will be the benefit of TransactPay is that there's really 3 areas. So one is that we haven't offered program management in Europe in the past. And so not only was our take rate lower, but our ability to just sort of add more value and more holistically support the customer was not there. So we think even business that maybe last year, we won the processing, next year, a similar prospect like that would take not only processing, but program management from us. So that's sort of just incremental value that we would capture from each customer. The second area is that the much larger players in the market are looking for a single provider who provides processing, program management and the license, the EMI license that you need. 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 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 third piece that's also very important is because…

Our next question comes from Sanjay Sakhrani with KBW.

This is Vasu Govil for Sanjay. I guess, Mike, you called out strength in the BNPL vertical in credit. I was expecting you'll also call out crypto as a driver given just the renewed interest in the space. Anything to call out in terms of the sales pipeline or demand picking up in that vertical?

Well, so yes, it's a good question, and good to hear from you, Vasu. We -- there is -- that use case, I would say, has been fairly volatile over the last couple of years, as you can imagine, kind of with the ups and downs of the perception in that market. And it is definitely performing better. And as we announced, I believe, last quarter or the quarter before, Bitpanda, who is a great customer of ours, is starting to get up and running in Europe, which is also helpful. The solution we have in crypto right now, which is that you have a card that allows you to transact essentially in the ecosystem with fiat currency. So no one else has to change the way it works. But your funding source is more of a crypto funding source, and that's done more like as an FX conversion by the issuer. That, we think, is a very compelling use case, even more so today, not just for crypto, but also for stablecoin. So if stablecoins get adoption, and there's a lot of people who are talking about stablecoin, I think things for the whole ecosystem to evolve, it takes time. And so it's going to be a couple of years, I guess, in my view, before 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 very good option for those who maybe want to take advantage of stablecoin. We don't -- to be honest, when it comes to stablecoin, just since I brought it up, we don't think that's going to be really impactful to our business, at least in the near term just because of the markets we operate in, North America and Europe, and we're not huge in cross- border flows, we're probably less exposed to some of the initial use cases of stablecoin, 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. That was great color. And then just for my follow-up, I wanted to revisit your efforts about selling into traditional banks and how that's going. I know that was something you guys back at the Investor Day sounded optimistic about. And so just curious if you're getting any traction on that front.

So I would say we -- the conversations continue to be ongoing. At the time of our Investor Day, what we said was we thought it was probably about 5 years out, and that was about 1.5 years ago. So I'd say we still feel like it's still a ways into the future. The banks are fairly cautious and there's probably some modernization that needs to be done on their side before we could really effectively work together. So we still think it's a ways off, but there are -- there is dialogue. There is some activity. So our plan is to try to get our foot in the door with maybe some small or very specific use cases. And that could happen maybe sooner rather than later 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 is several years away.

Our next question comes from Nate Svensson with Deutsche Bank.

Last quarter, you kind of talked and gave us a breakdown of TPV by low, medium and high discretionary spend, and you pointed out there was no meaningful shift in 1Q. Just wondering if there's any update to that breakdown for 2Q or maybe a month or so here into 3Q. I think you mentioned in response to Tien-Tsin's question that there was some shifting spending patterns. So just wondering what specifically those were.

Yes. So no, I would say no noticeable shifts to point out. As I mentioned, the TPV outperformance that we saw was fairly broad- based. And maybe the only maybe use case that stood out more than the others was lending and Buy Now, Pay Later. And -- but even within that, 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. So those -- again, as you give people more of a card product that's both a debit and a Buy Now, Pay Later card and as consumers get more used to using those use cases, they're applying it many more places where cards are accepted, not just the traditional sort of retail and e-commerce that -- where that use case began. So there aren't really noticeable shifts. It's really just better performance by our customers and the use cases that we support are just really resonating in the market, both for commercial like expense management, but also neobanking and lending and Buy Now, Pay Later.

Yes, makes a ton of sense, and I appreciate the color. I wanted to ask another one on Buy Now, Pay Later. Great to hear all the success there, including the KlarnaOne Card. You mentioned in the prepared remarks some new Buy Now, Pay Later capabilities that multiple providers are testing with new releases and in-app options that you think are going to be launched on a more broad basis in 2026. Any more color on that specific product capability, what Marqeta is providing and kind of what you think the benefit for both Marqeta and your BNPL customers could be as that gets fully rolled out?

Yes. So what our vision for this product is that in our view, there's no reason why Buy Now, Pay Later couldn't be a capability that's on any debit card product as a feature of the product. And so think about this 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 platform providing a service and you as a consumer, then if you say within the app, I would like to Buy Now, Pay Later, then it might bring up multiple providers that say, here's our offer. And maybe one of them offers you to pay in interest free. And another one offers you, you pay over 6 months at this rate. And so you would get choice. And so what this does is for 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 for them so they get higher engagement. And for our Buy Now, Pay Later customers who are partners in this effort, we're really bringing them distribution. These are users that then in transactions that they maybe not have had the opportunity to participate in that now they are. And so we really see it as a win-win. And so we have -- so it's sort of a 2-sided platform that we're building, and we have a couple of partners on both sides who are testing and we're trying to -- because the holiday season is always a big time for this type of use case. So we're trying to be there in a limited release by the end of this year and then roll it out more broadly next year. But that's the vision for the product, and we think it has a lot of potential because where you can also see it going is there are also more and more players who provide lending for very specific types of use cases. So this really could become something very powerful where the consumer, depending on what they're buying, they might see offers from different types of players and that gives them the flexibility they want and brings the distribution to our BNPL partners.

Our next question comes from Craig Maurer with FT Partners.

I wanted to ask about how the pipeline for credit is building and where you are with the launches with American Express?

Yes. Thanks, Craig. I appreciate your question. So the -- we feel good about where our credit business is. I would say the first -- the focus over the last quarter has been integrating with Amex, and we're making good progress. I would say we're very close to kind of certification and being ready to go live. So I'd say we're making good headway there. And then the second area was the migration we were doing for Perpay, which is a consumer credit card. And the Perpay 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 we feel really good about not only now we're supporting Perpay as a consumer credit proposition on our platform, and it's growing nicely, but we also demonstrated our ability to do a migration in credit, which is much harder than debit just because there's just a lot more variables that you need to take into account. So we feel good kind of about where things are. We still have another co-brand that we announced in February with an airline that we still expect to launch later this year. We're having good conversations about our pipeline. I would say what's important is what we're trying to do is a little bit different in terms of the value proposition that we're offering people where they have a little bit more control of things and they're using dynamic rewards. And so we're having a lot of good conversations, and there's some interest, but it's -- we're not rushing. We feel like in credit when you rush, some bad things can happen. So we're -- the pipeline is good, but no exciting news to share this call.

Our next question comes from James Faucette with Morgan Stanley.

Thanks for all the detail and nice work here. I wanted to ask just on your comments around delayed investment. On the one hand, it seemed like -- obviously, that benefited this quarter. It seemed 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 end of '26 that 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, et cetera?

Yes. Thanks for your question, James. Let me see if I can try to clarify 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. The other half or a little less than half was real just better performance, better optimization of our expenses. So the investments were really driven by 2 things, the delay -- the investment delays. One is that when I stepped into the interim CEO role, we just reassessed things. We took -- the executive team looked at everything and said, okay, where do we really want to prioritize some of our hires. And so that just meant we're 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 headcount additions. It's just they happened much later in Q2 than we had originally thought. And because of that, it just led to some savings in the quarter. And then there are some things around marketing that as we -- as you always do, you have a plan at the beginning of the year, but then as 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, where we have some things to talk about and Money 20/20 is in the second half, which is usually an area where we invest more. So that's -- those are the things causing the timing-related factors. But a little less than half of the upside is just better efficiency and optimization. And then there's a few drivers for that. So one is from just a pure org perspective, we're getting pretty good. We -- in terms of our org shape, if you will, we used to be a little top heavy and very U.S.-centric. Now we are -- we kind of have a better org design where we have more opportunities for people, and we don't quite have as many management layers. And then we also are much more geographically diverse, and that's creating just a much more effective organization. We also are particularly in the technology-related costs. 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 driving a lot of savings. And between those 2 things, it's just putting us on a better expense run rate that we think 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 two ago.

That's great, Mike. That's really clear. And then just back on initiatives and opportunities. Embedded finance has been 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 other mileposts of development?

Yes. Thanks for the question, James. So we're excited about embedded finance, but it's moving a little slower than maybe we initially thought a year ago. And that's just -- these are much larger organizations. Typically, these are very established companies and payments is not their core business. And so what we're finding is it's just we're engaging for longer periods of time before we get to the solution. So we're having some really good conversations. And in the meantime, what we're doing is just making our value proposition much more of a full stack solution because that's what embedded finance 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. 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, 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, why did you choose us? What -- just so we know what we need to enhance to better serve others. And they really said it was a combination of 3 things. One is that we have a very simplified process for launching a new consumer-focused program. 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 value. 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 more complete offering, and they really value that. And then the third thing was just the service and support. We sort of pride ourselves on being a little bit of a white glove treatment. And that's a differentiating factor when you're solving a lot of problems and it gets complex on a new program like this. And so we feel like we're well positioned to win in this space. It's just the opportunity is maybe unfolding a little slower than we would have thought a year ago before we really got into it.

Our last question comes from Cris Kennedy with William Blair.

Just a real quick one on open banking and potentially JPMorgan charging the aggregators for access for the data. Any thoughts on that dynamic?

Yes. So you saw the news. I think that it's not -- in terms of direct impact to us, we think it's minimal. Some of our customers may face some friction, particularly in areas where they want real-time account data. So for account verification, risk decisioning and then certainly underwriting, those are some of the areas where it's common for people to use those capabilities. And so it could become more expensive for them to do so, which they either have to decide then does that sort of, do they change their usage patterns or do they end up tightening up maybe the number of people they'll serve. So it's hard to know the implications. But I would say, for us, right now, based on the use cases we utilize and the maturity of many of our customers in the way they operate that we see it as minimal, but it's certainly something to watch because if the rest of the banks were to follow their lead, then it could change the cost structure for some of these capabilities that people rely on today.

We have reached the end of our Q&A session. This concludes today's teleconference. You may disconnect your lines at this time.