Marqeta Aktie

Hi, everybody. Thanks for coming. My name is Connor Allen. I'm a payments analyst here at JPMorgan, and we're really happy to have Mike Milotich here, CEO of Marqeta. Mike, thanks for coming.

Thank you so much for having me.

So I thought we could just kick off with the state of the union a little bit. We talked before this about your first quarter and kind of the reaction to it. So maybe you can just start off with what you saw in the print, the recap of the quarter and any surprises you saw.

Sure. We had a very good quarter. In my view, our TPV growth was 33%. Net revenue and gross profit, both 19%. All those were on the high end of our range of expectations. So did well.

Our EBITDA growth was 66%, which was much better. And net income of $8 million, which is a milestone for us, our first quarter on a pure operating basis, generating positive net income. And on top of that, we announced several good wins in terms of customers who are expanding geographically or customers who are doing -- expanding upon what we'll talk more about, I'm sure, the product continuum of credit and debit and then many products that are in between and even started processing for one of the large financial institutions in the U.S. So I would say, overall, we felt very good about the quarter. And no surprises, mostly as expected.

So despite coming in at the high end of gross profit, you didn't raise the full year guide. Could you talk about maybe why that is, maybe your kind of approach to guidance overall?

Sure. Well, when we start the year, I mean, first of all, in the first quarter, our earnings is in late February. So we should be pretty good at that point at understanding what's going to happen in the first quarter. And our thoughts on the full year likely aren't going to change that much. So for us, we ended up on the higher end of our gross profit range. So we were still in the range, but on the high end. And on a full year basis, we also provide a range. And so our view was we haven't seen enough to say we feel any different about the last 3 quarters of the year. So we're still within that original range we gave. It's just a little early in terms of having a lot of new information that changes our perspective.

I think we did raise our EBITDA and our net income because Q1 was materially better. And we -- if you just flowed that through to the full year, it made a difference. And so we made that change. But we try to be transparent and -- with guidance and give a realistic in our actual opinion of how things are going to perform. And in this case, we, again, were a little better than expected, but not enough to change the full year at this point.

So there's maybe a perception that your view of the back half had changed because you hadn't done that. But as you said, there was no change in your view of what the back half could be on the growth?

Not at this point on the growth side.

And maybe just to, like, check the box, was there anything in the macro environment you'd call out that might have contributed? It sounds like no. But anything on the macro you'd highlight?

Macro, I mean, there's a lot of concern and everyone is watching closely. But I would say we see what I think a lot of other payments companies have said, which is a very stable, healthy consumer and SMB spending. We -- the way -- one of the ways we look at it is we break up the market between sort of high, medium and low discretionary spending because that's where we feel like you'll see trade-offs being made or you'll see pullbacks on the more discretionary items, for example. And we're really seeing it -- it's very stable. If you look at Q1 versus Q4, no discernible change. So right now, no -- nothing of concern that we can see in our numbers.

Okay. Great. So stepping back maybe away from the quarter, away from kind of the tactical questions around guidance. Growth is super impressive. It's above 30% on volume, has been for a few quarters now. And I have a whole series of questions here that, I think, we'll go through across the different vectors of kind of where that's coming from.

But maybe one to start out would be kind of how you disaggregate that growth between new and existing customers. And I wanted to talk to the pipeline and all the buildup to that. But at a high level, is there a way that you kind of approach that?

Well, I would say we start a lot of the way we talk about it on our earnings call is by use case. So that's one way we look at it. And clearly, Buy Now, Pay Later and expense management are both the stars. Buy Now, Pay Later growing close to 60%, expense management growing over 40%. And those are good-sized businesses for us, sort of in the mid-teens to high teens as a percentage of our total TPV. And so that's one of the factors.

In terms of looking at it on a new customer basis. The way we typically look at it is when programs launch. So we look at the programs that have launched in the last 2 years, so 2024 and 2025. And among those customers in the quarter, in Q1, that contributed about 10% of our TPV. So a pretty meaningful contribution considering those programs have only been live for, at most, 2 years. And when you look at the breakdown, it's growing well over 100% overall. And how that splits, to answer your question, is that the new customers, so in that time period in '24 and '25, we signed about 40 new logos. And that volume is growing about 100% year-over-year in the quarter. But we also land and expand a lot with our existing customer base. And so one of the other stats we've shared previously is that among our top 15 customers, in that time of '24 and '25, 14 of the 15 launched at least one new program with us. And among those 15, it was over 30 programs total that were launched. And those existing customers that expanded with those new programs were growing well over 200% on a year-over-year basis.

So -- and that's quite common what we see because a new logo, you're still figuring things out and getting the value proposition right versus a lot of our existing customers, they're expanding into a new geography or an adjacent product line, and they already have it down, they have a rhythm. And so -- and obviously, this coincided with the rollout of flexible credentials and things of that nature that have really taken off. And so that's the contribution in terms of how we look at it between sort of newer business versus programs that have been around a while.

So you have a cohort of these existing customers that are large. They're launching programs and those probably ramp faster, like you're saying. And the new logos that are coming on, and those take some time. I did want to ask you about some of those.

So you mentioned a couple of new wins this quarter. You touched on it. Geographic expansion, I think you mentioned Ramp and Sezzle there. Portfolio migration for another customer, I had written down here. Product expansion with another, and then the FI that we'll get back to. The momentum seems really good. Was there anything you'd highlight maybe among those? Like it felt like kind of -- there was a longer list this quarter than most. What would you highlight among them?

I would say the 2 themes that we tried to highlight on the call that, I think, are really important because they're relatively new to the issuing business. One is this concept of multinational issuing. 10 years ago, because everything was dominated by banks, there just are very few truly multinational banks beyond, like, treasury and things like that, like actual card issuing. And -- but that's not the case for fintechs who started in a market, but then now they think about them more -- themselves more like tech businesses. So once they got product market fit in a market, they start to look at adjacent markets and other countries.

And the same thing in embedded finance. So a lot of the larger enterprises we're talking to now, they're all rolling multinationals. And so if they're going to roll out a card product, they're thinking multinational from the beginning. So this expansion with both Sezzle and Ramp is just another extension where we made a comment on our call that of our top 15 customers, 12 of them are in more than 1 country with us. So this concept of multinational issuing, I think, is going to continue to be a bigger and bigger story. And we're uniquely positioned because of the way our platform works.

The other major theme that we tried to highlight with the other 2 wins is this concept of a product continuum. So rather than just it's debit or it's revolving credit, there's actually some products in between where you've got debit with Buy Now, Pay Later infused in a flexible credential format. You've got secured credit, which is really a credit builder-like product. You have charge card, and then you have revolving credit. And I think the way the market is evolving is, again, the way fintechs and embedded finance customers are thinking, they want to serve all their customers who use them regardless of where they are in their financial journey, which is usually not how things worked before. It was either a premium card or it was a very targeted value proposition.

These businesses are, a lot of times, looking for engagement. So they want to serve the whole customer base. And so they want all those products to represent all the demographics of their potential user base. And so the other 2 deals we talked about was a very large debit program, neobank on our platform who rolled out a secured card as an extension. And then I would say the other one was even more interesting because it was -- it sort of has all the ingredients of a very fun win where it's a migration from a competitor. It's a new innovative solution where they're going to pair a Buy Now, Pay Later with a secure card value proposition.

We're going to use Mastercard One credentials. So we're going to be one of the first programs to utilize that and sort of, once again, demonstrate our leadership in flexible credentials. They came to us because the existing program is in the U.S., but they're thinking multinationally. And they think maybe one day they want to do revolving credit. So that's why they're moving to our platform. So it's just one of those fun wins where a lot of the things that we would consider to be some of the things that make us unique is exactly why this business is coming to us.

A bunch of those boxes.

That's right. And then, of course, getting in with a large financial institution in the U.S. is a hallmark. It's -- we're starting small, but we're getting our foot in the door. And I'm sure we'll talk more about that, but that's a very exciting development for us.

Yes, lots of ways to go from that. Maybe I did want to ask kind of on, like, the geographic expansion as a theme. I did want to ask about Europe later, but maybe as we think about it, like I noticed from that announcement that there was quite a few regions. So maybe you could just talk about like the flexibility you have to expand globally with these customers? Because obviously, you have the presence in Europe. You've talked about some in Latin America. Is there anything else you can maybe add about the flexibility you have there?

Yes. I would say the way we -- so we are certified -- because every market, you have to be certified by the network to operate there, and we're certified in over 40 countries. And the way we really think about it is we focus on U.S., Canada, Europe, including U.K., Australia and New Zealand. Those are the places that we will serve local customers. And then we also process in several other countries in Asia and Latin America, but to serve our multinational customers, not to target local business. So that's sort of the delineation.

So we're looking for customers who sort of originate, if you will, in U.S., Canada, Europe, Australia and New Zealand, but then we will help them. Like in the Ramp announcement, we -- there were several countries in Asia, countries in Latin America. So we will -- as they look to expand, we will support that expansion. But in those markets, we're not trying to target local business. And so that's how we think about it.

And again, as this becomes more and more of a trend, as these companies want to go to more and more markets, we're finding -- we're continuing to expand. So even as we mentioned on our earnings call, Ramp, there are several other countries coming later in the year. So because as they sign up more multinational customers to their service, those customers say, well, I have employees in many countries and I would like you to support me there. And that then drives us to try to support them as much as we can.

Got it. And I imagine once you have some presence, some like license in those regions, you're building a muscle that only supports you over time to expand.

That's right. That's right. You do it -- you have to do ROI. Some places are -- they'll ask you to go to a place that's a very challenging market. Payments is a very local business. And so some of these countries, you really have to look at the local laws. And things like disputes, that's something we all sort of take for granted, but the rules can be very different from country to country, and you've got to make sure you know how to abide by them. And there are some markets that are just not very friendly to outsiders, particularly U.S. businesses. So we try to look at countries where we think there'll be broader overlap in our customer base and places where there's meaningful opportunity. In some places, sometimes, we just have to say that it's a lot of work. Unless we're going to have a different economic arrangement, we don't think that's a market we can support you.

So maybe we can shift and talk about a region where you are investing and clearly see ROI, is Europe. I think it's something like mid-teens percent of your revenue. It's not quite doubling anymore, but close, growing really fast. Maybe you can just talk about the success you've had there. And just to like build in a couple of questions, kind of TransactPay and whether that's unlocked what you've hoped it would in the region?

Yes. We're really excited about the Europe business. We see a lot of opportunity. The competitive environment is a little different there. In terms of there are fewer larger entities and you have a lot more, sort of, local processors that you end up competing with. So we have several advantages in terms of scale, capability and innovative capabilities that has a lot of -- that's attractive to a lot of the local European businesses.

The other aspect of it is getting back to this multinational theme. So if you look at our Europe TPV, that's growing quite fast. About 75% of the growth from a contribution perspective is coming from European businesses, but 25% of the growth is coming from multinationals who have expanded into Europe. So that is also -- was one of the big drivers of our TransactPay acquisition.

So with -- before we had acquired TransactPay, which gave us the EMI licenses we needed to do program management, we could process in Europe, but our offering was not consistent with what we could offer in U.S., Canada, Australia, New Zealand in terms of being able to also take on program management.

And that had -- there were 2 reasons why we really wanted that in Europe. One was to serve multinationals. We wanted our service to be more consistent. So as customers expand globally, what we're offering them, it looks and feels similar from place to place. And we didn't have that before without this EMI license.

The second thing that's targeting the more European customer base is the higher end of the market. So the much larger companies want one entity to do processing, program management and bring the license. They don't want to contract with multiple parties. And so acquiring TransactPay, getting that license and having the program management also enables us to serve the high end of the market, which is really where we're focused now as a business. And so that -- so you put those things together with the momentum we have, and we're really excited about the opportunities in Europe.

I think -- yes, I think you've actually mentioned a deal or 2 that has kind of been unlocked because of it, like you've already seen some traction with some announced deals.

Correct. We already have some -- like a long-standing U.S. customer for expense management. Once we got that license, okay, now we'll go to Europe because that's going to be very easy now for me to make that product -- make that geographic expansion versus before they would -- they have a lot more work to have done and beyond processing, which we could have done.

Yes. I'm sure it won't double forever, but it does sound like it's growing well. We'll continue to track it.

Maybe shifting gears a little bit to credit, if that makes sense.

Sure.

Similarly, kind of acquired some capabilities in that part of the market a few years ago. Candidly, I would say the, kind of, rollout has been slower than I would have expected. But turning to you, how would you kind of acknowledge how that's...

Yes. That's very fair. I mean, 2 years ago, if we had sat here and said, okay, where are we going to be at this point in May of 2026, I would have liked us to be a little further along. The credit comes with a lot of complexity, both in terms of -- obviously, there's more financial risk involved for the various players, maybe not us, but our bank partners or our customer. And there's also the compliance and regulatory environment. It also -- there's just a lot more things to consider. And so I would say it hasn't -- maybe we underestimated some of that.

But now we've got some real momentum. We have consumer and commercial programs live on our platform. We've got several additional programs, particularly on the consumer side that are going to be rolling out later this year. And now we have a -- because of that experience, now we have several things in our pipeline that are more what, I think, people -- when we talk about our credit business, could immediately go to a co-brand credit-like offering. So a stand-alone credit offering. So we have more and more of those opportunities now are coming to us, which is great.

But I would say again, getting back to some of the themes, though, I would say where we're maybe seeing more benefit of something that we hadn't really considered a couple of years ago is, again, this product continuum basis. So now we have a lot of people who may not be launching a co-brand credit card yet. But like this deal we won in the quarter, they're saying, well, I'm going to do a secured credit and a Buy Now, Pay Later proposition, but I want to do credit later. So the fact that you're on a single stack and that can be done very easily later is very attractive to me. So we are making more progress in credit than it appears because people just say credit, that must mean the co-brand. But it is fair that we would like to be a little further.

And I mean, internally, our view is that -- I mean, we've seen some neobanks already offer and take advantage of -- it's a win-win in many circumstances. And so our view is that we'll see more secured credit, more -- I like the way you described kind of multiproduct across the kind of consumer stack, and it feels like you would benefit from that.

What's happened over time is the co-brand credit market has really gone premium. So in the -- rewards have gotten so competitive, they've become very premium products, which means the more people are declined for the card than are accepted. And so -- and as again, the market evolves to people who are looking at these cards more to drive engagement in their core business than just a sort of an additional monetization engine, that's not a good equation for them. They don't want to be declining that many people. And so they start looking at -- we're getting a lot more interest in co-brand debit, secured products, integrating Buy Now, Pay Later to set up sort of a path, right, of that can support that customer or SMB as they evolve over time.

Got you. And of course, the Flex credential or the Mastercard One as like a layer on top of and around a lot of that.

Exactly. Because what that allows is that you don't have to recard. So in the past, as that consumer may be moved up the value chain, if you will, you would have had to recard them every time, which then gets you concerned that then maybe they'll change. That's why people don't like to recard. The flexible credential gives you that opportunity to use the same card even while the value proposition is evolving.

Yes. Shift gears again back to something you discussed, which is the kind of financial institution opportunity you did. It was a pretty unique announcement. I think it was a wallet funding kind of like a new construct by my ear. So maybe you could speak about that a little bit, but just -- it's been a long-term opportunity for a long time. And I don't think anyone had expectations that it would move quickly. But just check in on that kind of front.

Yes, there's -- the conversations with banks are becoming more frequent and substantive is what I would say, probably over the last year. And my view of why that's happening is because the fintech winners have been crowned, as I like to say, and they are now expanding their businesses, and they're becoming big companies, many of them are becoming quite big companies. And then what's following in their wake are some large enterprises that are getting into the space. And I think that's creating more and more pressure on the incumbents to potentially modernize.

So there's just a lot more effort to put into and thinking about modernizing because it's becoming clear and clear that the value proposition doesn't stack up, and they're losing share, both on the consumer side and on the commercial side. And so when we're talking to financial institutions, they kind of fall into 3 paths. Well, I used -- I would have told you only 6 months ago, 2, but now a third has emerged.

One is a full migration, right? I'm going to actually get off my old stack and go on to the new. That's probably less common because it's a lot of work and there's risk involved. But there are conversations we have with banks who are considering that. The second is more de novo. So we're going to -- we want to come out with a new commercial card or a new consumer value proposition, and we're going to do that on a more modern stack so we can have the kind of capabilities we want for that product. That's probably the most common.

The third is what we're doing with this bank, which is infusing modern technology into their existing product. So think of this as they don't want to change all their technology and they've got millions of cards issued, and they're like, we don't want to recard, but is there a way you could help us? We want to inject a line of credit, almost like a Buy Now, Pay Later-like transaction-based lending offering into those products. Is there a way to do that without having to do a lot of technology work?

And so we came up with a solution that mirrors a lot of how we supported our Buy Now, Pay Later customers when they move for the point of sale. So it started as a pure online business, and then it started to move to the point of sale where when you're in the store, you see something you want to buy that's out of your price range and you say, "I would like to buy something for x amount, and I would like financing for it. What is your offer?" And then they would get you approved. And if it was a Buy Now, Pay Later, they would push you essentially a virtual card that then you would pay with.

This is a similar solution where you would go into the app, the wallet that this bank has created and you said, "I want to establish a line of credit for this purchase." And if they approve you, what happens is the customer doesn't really -- the cardholder doesn't really understand what's happening. But essentially, there's a virtual card that's kind of in the shadows underneath the transaction, and that's what's being used to pay the merchant without that cardholder actually understanding that's what's happening. And then they've now entered into an arrangement on this line of credit with the bank. So it's allowed the bank to offer something very innovative that has a very good user experience. So it feels very slick because they don't actually understand what -- how it's being executed from a payments perspective, but they didn't have to do a lot of technology work.

And what makes us excited about that is it's always hard, as much as slides and you want to talk about it, to explain to someone how different your technology really is, the best way is for them to experience it. So just to get our foot in the door and now have them processing real volume on our platform and seeing how different that is than maybe what they use for the rest of their business. That's probably more of an incumbent platform. They can start to see the difference, and we think that only plays in our favor over time.

Yes. The foot in the door reminded me because I think you do tokenization for some large financial institutions. It's similar, right, where you can get in and show your capabilities and then land and expand?

That's right. And this is sort of, I would say, the next step because now we're actually doing processing as opposed to just the tokenization.

And something more innovative kind of customer-centric?

Yes.

Exciting. And it sounds like there's -- the way you speak about it, it sounds like this isn't a one-off, like there's a possibility to kind of expand this across?

That's right. They've done this for a certain portion of their business, and assuming success, which, of course, I think both sides are assuming then, yes, they have more surface area essentially to do something similar. We've said for a while that we felt either in commercial card or in Buy Now, Pay Later, the 2 areas where we're particularly strong and differentiated and also where the banks maybe are coming more under pressure are probably the areas we'll break in and that -- sure enough, that Buy Now, Pay Later is the sort of first one.

I don't think we can get through a conversation without talking about Block. Need to talk about it. But it's just over 40% of revenue. Non-Block TPV is growing twice as fast. You've seen -- you've seen Block step down in terms of concentration, but Block's growing fast. So I mean, you're commonly asked, but we'll ask you again, how do you kind of think about the concentration? What -- would you give us an update on there?

So they're 42% of our revenue, which is down 2 points from last quarter. And I would say, if you looked at the last 8, 10 quarters, we've sort of been chipping away at it like that. And a lot of that has to do with they're a very big customer of ours, and they still grow fast. So we don't consider it as much of a problem. We understand the concentration draws some concern from investors. But I think every business would love their largest customer to grow fast, and that's what we have. And we think that's a good thing.

And even though Block, everyone is talking about Cash App starting to maybe diversify some new issuance, we -- at least as of the end of Q1, we haven't seen any impact of that yet. So it's taking a little longer. We think there'll be a small impact in Q2, and then it will be more impactful in the second half. But for now, they are a little bit behind.

And what's also important is that we continue to talk about doing new things together. So it's not as if they're diversifying and they're sort of like we've moved on, all right? We're going in a different direction. It's more standard risk management, which we completely understand. Right now, they essentially only use us for processing across Cash App, Afterpay and Square. So for them to diversify some is the smart decision, but we want to remain their primary partner, process the bulk of their volume.

And then because of our -- the breadth of use cases and flexibility and capabilities we have, we constantly talk to them about new things and continue to expand, and that's what we would hope to do. And so I think we would expect that our non-Block business continues to grow. The TPV has been 2x for a while now. So we're -- that helps us chip away at it. But we don't think there's going to be step function changes because we think there's still a lot of growth opportunity with Block.

The -- for what it's worth, my read of the pace is a sign that what you do is hard, and it's hard to switch, right? There's a certain switching element to it that's challenging to overcome.

Maybe you could just speak a little bit more about the concept of diversification? Like you've mentioned, it's important, it's a sensitive topic. And you've talked in the past about how it's not uncommon for large customers to have some duplications. So just remind us kind of that commentary.

Yes. So almost all of our largest customers, if you looked at our top 10, the majority of them have diversified their processing. It started with virtual card. That's the easier one to do. A single-use virtual card is a much easier use case to diversify. And so we saw that first in Buy Now, Pay Later and in some of the expense management use cases where virtual card's involved. And then I would say, in some other use cases, we've also seen it. So it's quite common among our largest customers.

But in each of those cases, we've maintained the majority of the business. And with almost every one of those customers, they've also continued to do things with us. So it really is about risk management, which, again, we very much understand. I would say we've also helped many of our customers to diversify their banks. So we have -- many of our largest customers are using more than one bank on our platform. So it's not just processing, they're diversifying. They're looking at the whole value chain and spreading out the business to make sure they can have good continuity. And they can, again, a lot of times, it's to keep people honest. So you have a primary partner to maximize your economics, but you do have a second partner to keep your primary partner honest. And so this is something that we believe is common.

We were the first mover. So in this case, we probably -- we haven't -- we're a net -- this is -- we're not a net beneficiary because we were the first mover. So we had most of the business. But I would say, as you think about what's coming in the future, where as we move more into enterprise and ultimately into banks, then the script will be reversed, right? And then now we will be the challenger and not the incumbent. And if people want to look to diversify, then we'll be happy again to get our foot in the door and show what we can do and grow from there.

I wanted to ask a related topic on competition. So we've seen modern processors invest in issuer processing. Patti is familiar with one, among others. And then we've seen Visa obviously invest in the space. Have you seen an impact in RFPs? What would you say on...

Not really. I would say, overall, the competitive intensity is the same. The types of businesses or competitors we see now versus, say, 2 or 3 years ago might be a little different in terms of who we see more frequently. So some have risen up and are stronger, some maybe are struggling more. But overall, I would say the competition is relatively steady.

We also have a unique proposition where most of our competitors only do some segment of the market. So they only do debit or they only do commercial or they only do neobanking or they really only are expense management player. They only do virtual card, right? That's sort of how most of our competitors are. We're the only platform that sort of does it all.

So in some ways, each -- from deal to deal, we tend to see different people because we can respond in almost any setting versus many of our competitors are a little more narrow than we are. And we think that's what gives us an advantage is, again, as we start talking to enterprises, then it's easy for us to talk about. If we start thinking on a 3- or 5-year plan, you're probably going to want credit and debit. You might -- if you're a 2-sided platform, you might have commercial and consumer. You might want to do embedded, sort of, expense management bank your SMBs on your platform, but you also might want to do a traditional co-brand debit or credit card to consumers. And you could do all of that on our platform, and we could give you that scale and help you do it on a multinational basis. So that's where we really feel like is our special sauce is that there really isn't a trade-off to be made. We can do it all, and we think that will serve us well as time goes on.

It goes back to the theme that you mentioned, which is more products, diversification of products and you have the breadth to support it.

That's right.

So we have under 2 minutes left. I thought we'd wrap up with something that you and I have talked about before, which is kind of the merchant versus the issuer side of payments. You've seen both.

I have.

And we've seen the merchant side modernize over many years. Catch us up on where you think kind of the issuer side is. Like how much opportunity is left to kind of modernize that side of payments? What do you think is left?

Yes, there's still so much opportunity. I think the modernization started on the acquiring side. It was really driven by e-commerce and then how that bled into omnicommerce and that created a need for more technology. But I'd say on the acquiring side, it's more like there are almost-events. It's not as much of an evolution. It's like there are revolutions, but they come every 10, 15, 20 years.

Issuing inherently is different because it's on the cardholder. So it's the value proposition of the card, which means it's constantly changing. The competitive dynamics in the market are constantly evolving, which means it's just a much more competitive space that requires constant adjustment for those products to evolve. And that also means there's a lot more work. All the regulatory burden and everything else also falls on the issuing side.

So as I kind of mentioned earlier, I think what an exciting development is that, again, the fintech winners really showed what was possible, right? They've really demonstrated it. And again, several of them, which are on our platform, have become very big businesses. So now there's no kind of disputing that it's a real opportunity, and they're winning. And they're taking share from others. Some are growing the pie, but I would say, for the most part, they are taking share. And that is waking up the rest of the market.

And so I think we're still in the very early days, right, of -- because expense management, for example, like, more, like, embedded platform software businesses are looking at, okay, should that be kind of integrated into my offering. Buy Now, Pay Later, I think it's going to be on more and more debit propositions, not just the Buy Now, Pay Later companies doing it, but lots of businesses having that as a feature of a debit product. And I think SMB is another area where we might start to see more transaction-based lending.

So I think it's still early days. It's -- which is what's exciting for us. There's so much opportunity to go get. And it's just a matter of how fast the market can move and how quickly we can meet those opportunities.

Excited to see you attack it. Mike, thank you. Patti, Sarah. Maria, thank you all.

Thanks so much, Connor. Thanks.

Ladies and gentlemen, welcome to the Marqeta Inc. First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Sarah Barkema, Chief Accounting Officer and Head of Investor Relations. Please go ahead.

Thanks, operator. Good afternoon, everyone, and welcome to Marqeta's First Quarter 2026 Earnings Call. Hosting today's call are Mike Milotich, Marqeta's CEO; and Patti Kangwankij, Marqeta's CFO.

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 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 supplement materials, which are available on our Investor Relations website.

With that, I'd like to turn the call over to Mike.

Thanks, Sarah, and thank you for joining us for Marqeta's First Quarter 2026 Earnings Call. I'll begin with a brief summary of our Q1 results, then provide an update on how the breadth of our platform capabilities are being leveraged by our customers across multiple geographies and a continuum of products, which differentiates us from other issuer processors. I will then turn the call over to Patti, who will cover the details of our Q1 financial results and our expectations for the remainder of 2026.

Our first quarter results demonstrate the continued momentum of our business. Gross profit grew 19%, which was fueled by 33% TPV growth. The increasing scale of our platform was on display as adjusted EBITDA grew to $33 million, achieving a 20% margin. And importantly, we delivered GAAP profitability this quarter. The $8 million of net income is a testament to our strong growth, operating leverage, and disciplined execution.

Marqeta has been at the forefront of modern issuer processing for over a decade, enabling growth and innovation for customers in several diverse use cases and geographies. What makes us unique is how comprehensive and flexible our platform is, spanning debit and credit, consumer and commercial, certified to operate in over 40 countries, combined with the expertise and experience to execute a variety of innovative solutions for our customers.

Our continued momentum this quarter highlights 3 trends that are growing in prominence within card issuing. First, multinational card issuers are becoming more and more common as card growth shifts from local banks to fintechs and enterprises looking to support their customers in many geographies.

Second, there is an integrated continuum of products that span debit and credit that enables our customers to meet the needs of consumers and SMBs across their financial journey. There are many layers to the market, including stand-alone debit, transaction-based lending integrated with debit in a single card credential, secured credit, charge card, and revolving credit. Our customers are often looking to serve several of those needs with a comprehensive offering.

Third, there are early efforts underway to modernize the technology in the card issuing market. Utilizing modern platforms like Marqeta, many fintechs have achieved great success and have become big businesses, which is increasing the need for more established issuers to upgrade their capabilities in order to compete effectively.

Let me start with the growing demand for multinational card issuing capabilities on a single platform. Already 12 of our top 15 customers utilize Marqeta in more than one country, and 6 of those 12 are in at least 5 countries as they continue to expand their businesses without the friction of multiple platform integrations.

One of the latest examples of international expansion is Sezzle, who is now launching its virtual card in Canada. This allows Sezzle's Canadian consumers to enjoy the same BNPL flexibility at participating retailers that accept contactless payments while benefiting from the same seamless checkout experience their U.S. consumers already enjoy.

Another example of our support for a global offering is Ramp, who is expanding its corporate expense management solutions across new international markets. By leveraging Marqeta's modern card issuing platform, Ramp is expanding local card issuing into Australia, Japan, Singapore, Brazil, and Mexico, with further geographic expansion planned for later this year.

This will allow Ramp to provide its customers with flexible financial solutions in new markets, including the ability to issue virtual and physical cards with customized spend limits, helping businesses thrive on a truly global stage. Marqeta enables this rapid international scaling through a single integration, once again demonstrating our ability to operate at scale and enabling disruptors as they take share from legacy providers.

An emerging use case that will be multinational from the start is stablecoin-backed card programs, leveraging stablecoin settlement through our bank and network partners. In addition to extending our support of our crypto-native customers, we are currently forming new partnerships with crypto infrastructure providers to manage on and off-ramping for fiat native customers.

A stablecoin-backed card issued on the Marqeta platform could be linked to a crypto wallet, enabling spend in local fiat from a stablecoin balance. We are building the capabilities and establishing the partnerships to support both existing and new customers to meet the growing demand for this multinational use case.

Now let me shift to the integrated continuum of products. In the past several quarters, we've spoken about the rise of BNPL as a feature of a debit offering, but there is also increasing demand for another offering that bridges the gap for consumers who are looking for greater financial flexibility beyond debit, but don't yet qualify for revolving credit.

A secured credit card enables the consumer to build credit through their daily spend, eventually advancing to unsecured credit. Our continuum of products seamlessly enables fintechs and enterprises to serve consumers throughout their entire financial life cycle.

A compelling example of this continuum involves one of our existing customers, a large and rapidly growing embedded finance brand with an established debit program on our platform. They have launched a new credit builder card with us to help consumers establish and strengthen their credit profiles. This product is designed to make credit building automatic and accessible.

Consumers can use the card for everyday purchases while funds are automatically set aside to pay off the monthly balance, which is then reported to the credit bureaus. Over time, this helps their consumers build credit if they later desire to have an unsecured option, while our customer leverages our platform to grow and retain their user base throughout their evolving needs.

Marqeta's strength across this continuum, particularly our experience with flexible credentials is also attracting new customers with established portfolios. This quarter, we signed a customer that provides consumers with a personal financial assistant to help them better manage their financial lives. They sought a partner that enables innovation and could embed BNPL into a secured credit offering, allowing consumers to toggle between secured credit and installments on a single card for greater flexibility.

This customer will migrate their existing portfolio to Marqeta, and we are one of the early adopters of the issuer-managed Mastercard One credential to support this new customer. The one credential gives consumers a single programmable card spanning debit, credit, installments, and prepaid with spending rules they control in real time.

While the existing program we'll be migrating is from the U.S., this consumer is also looking for a partner who can support rapid geographical expansion and eventually enable them to add revolving credit products to their offering. This win exemplifies the unique value that Marqeta delivers to our customers, program migration to our modern platform, delivering an innovative, multi-threaded comprehensive solution that is a market first, utilizing our leadership in flexible credentials across multiple geographies.

Lastly, I want to highlight the emerging efforts of long established issuers seeking new capabilities to meet the evolving needs of consumers and businesses with the modern agile capabilities embraced by the fintech disruptors. In some cases, it could involve platform migrations, but many issuers are also considering more creative solutions to start their modernization efforts and specific use cases or programs before they take on bigger changes in their infrastructure.

Leveraging Marqeta's virtual card expertise, a large U.S. financial institution has begun to provision a line of credit directly into a consumer wallet, eliminating lengthy and costly integrations. This enhancement will allow the bank's customers to leverage credit to spend seamlessly in physical retail locations, followed soon by online capabilities, driving engagement and unlocking significant value.

This innovative lending use case is a powerful demonstration of Marqeta's modern and flexible platform deploying sophisticated cutting-edge capabilities at scale, which is an early step forward in Marqeta establishing, expanding, and deepening our relationships with large banks.

To wrap up, this quarter reinforces the momentum behind our business and the increasing value of modern card issuing platform delivers for innovators worldwide. Our financial results in Q1, combined with the business being onboarded and the capabilities being deployed reflect how the comprehensiveness and flexibility of our platform is enabling our customers to expand and thrive.

At the same time, our experience, expertise and scale position us well to capture the emerging demand for multinational card issuing, an integrated continuum of products and modern solutions for long-established issuers. Therefore, as we look ahead, we will continue to help fintechs and enterprises grow the pie, but we are also ready to help modernize existing programs with the capabilities that end users are beginning to expect. The current momentum, combined with our expanding capabilities and the enormous opportunity ahead makes us confident that we will drive long-term value for our customers and shareholders.

I will now turn the call over to Patti to discuss our Q1 financial results and expectations for 2026 in more detail.

Thank you, Mike, and good afternoon, everyone. Our financial results for Q1 reflect a solid quarter. Both net revenue and gross profit grew 19% on a year-over-year basis, driven by TPV growth of 33%, with all 3 growth rates at the top end of expectations. Adjusted operating expenses were better than expected, which coupled with strong gross profit growth resulted in adjusted EBITDA growth of 66%. Most notably, we achieved GAAP profitability in the quarter with net income of $8 million.

Q1 TPV was $112 billion with strong growth on a continuously expanding base of 33% year-over-year. This is the second quarter in a row with TPV over $100 billion and the third quarter in a row with growth over 30%. Non-Block TPV continues to grow over 2x faster than block TPV.

Growth within our financial services use case continues to be a little slower than the overall company. We did not see any discernible changes to Cash App new issuance in the quarter. Excluding Block, Financial Services continues to grow meaningfully faster than the overall company, driven by neobanking customers.

Lending, including Buy Now, Pay Later growth remain on par with Q4 growth at nearly 60% on a year-over-year basis. This continues to be driven by the growth in flexible network credential usage and our customers' continued geographic expansion on our platform. Expense management growth remained over 40%.

The robust growth is a result of customers continuing to expand their market share by acquiring new end users, made possible by their utilization of our uniquely configurable capabilities. On-demand delivery growth continues to be in the double digits, but below the company's overall growth rate as this is our most mature use case.

Q1 net revenue was $166 million, growing 19% year-over-year. Block net revenue concentration was 42% in Q1, 2 percentage points less than last quarter as our non-Block revenue is growing 2x faster than Block revenue. Q1 gross profit was $118 million. The 19% year-over-year growth was at the top end of expectations.

Q1 gross profit growth had a headwind of 1.5 percentage points due to the revision of our accounting policy for estimating and recognizing card network incentives, which started in Q2 2025. As a reminder, this is the last quarter in which we will have any impact on the year-over-year comparison related to the accounting change.

Our gross profit take rate was 10.5 basis points, 0.5 basis point lower than last quarter, largely due to business mix. Q1 adjusted operating expenses were $84 million, growing 7% year-over-year. This is several points better than expectations due to the phased implementation of key investment initiatives. We continue to remain focused on operating efficiency and are realizing the benefits from the increased scale of our platform.

Q1 adjusted EBITDA was $33 million, a margin of 20% based on net revenue. Adjusted EBITDA margin based on gross profit was 28% and illustrates the expansion of our business' profitability. Our Q1 GAAP net income was $8 million with an EPS of $0.02 as a result of gross profit growth, platform scale and lower operating expenses and benefiting from lower stock-based compensation. This quarter marks a significant milestone as we achieved GAAP net income profitability and remain confident in our ability to generate positive net income on an annual basis going forward.

We ended the quarter with $712 million in cash and short-term investments. Our share repurchase activity remains ongoing as we continue to believe the current valuation does not fairly represent the company's value or the market opportunity ahead of us. In Q1, we repurchased 9.4 million shares at an average price of $4.16. As of March 31, we had over $52 million remaining on our latest buyback authorization.

Before we transition to our expectations for Q2 and the full year, I wanted to acknowledge that our business continues to grow. EPS will become increasingly important and a better reflection of our business growth. With that, I'd like to briefly touch on the proposed reverse stock split that was included in our proxy statement filed with the SEC in April.

The reverse stock split would reduce Marqeta's common stock at a ratio of 1:4 and will result in higher reported net earnings or loss per share. At approximately 434 million shares, $0.01 of EPS is $4.34 million of net income, while at approximately 108 million shares, $0.01 of EPS is $1.08 million of net income. We believe a lower share count will provide a clearer reflection of changes in our per share performance as our business performance evolves over time.

Now let's transition to the expectations for Q2 2026. Consistent with what we shared last quarter, we expect both Q2 net revenue and gross profit to grow between 14% to 16%. As a reminder, gross profit growth in Q2 is expected to be slower than Q1, primarily due to a tougher comp from last year's remarkable BNPL growth, which started in Q2 as well as renewal activity and evolving business mix.

We continue to be focused with our investments, which are primarily directed towards platform capabilities and innovation. Q2 adjusted operating expenses are expected to grow in the high teens, consistent with the expectations we shared last quarter. As a reminder, the higher growth rate is due to a tougher comparison versus Q2 2025 when the expenses were uncharacteristically low due to investment delays during the CEO transition last year.

Q2 adjusted EBITDA growth is expected to be 10% to 12%, in line with our previous expectations, and we expect to be at breakeven on a GAAP net income basis in Q2. For the full year, while we recognize the increasing levels of macroeconomic uncertainty, we are not currently seeing any notable shift in spend or consumer behavior. As a result, we are assuming consistent spending patterns for the remainder of the year, but noting the risk.

Our expectations for net revenue and gross profit for the year remain consistent with what we shared last quarter. We expect net revenue growth of 12% to 14% and gross profit growth of 10% to 12%. While the Q1 results did come in at the higher end of expectations, this is not enough for us to revise our outlook upwards for the entire year.

And we expect our net revenue and gross profit -- gross profit projections for the remaining 3 quarters and the full year to be consistent with what we guided to at the time of our fourth quarter call. We do, however, expect 2026 adjusted EBITDA growth to be several points higher than we shared last quarter in the mid- to high 20s percent due to the outperformance in Q1.

Lastly, we now expect to generate about $15 million in GAAP net income for the year, up $5 million based on our Q1 outperformance. The breadth and flexibility of our platform is translating directly into customer growth and expansion. The programs being onboarded and the capabilities being deployed this quarter reflect demand across both new and existing customers and demonstrate how the continuum of the products we offer across geographies enables customers to build and scale on a single modern platform. Our expertise and scale position us to capture an evolving set of opportunities that we believe will continue to drive long-term value for customers and shareholders.

In conclusion, we are starting 2026 on a solid foundation, showcasing the momentum of the business, combining gross profit growth and disciplined investment. The ongoing benefits of scale give us confidence that we can sustain this trajectory of profitable growth at scale.

I will now turn it back over to the operator for questions.

[Operator Instructions] We take the first question from the line of Darrin Peller from Wolfe Research.

When you call out the non-Block growth being as strong as it is, and you mentioned the verticals, I guess, we're getting questions, and I'm curious to know what the underlying strength is coming from, let's call it, same-store sales, your existing customer base is really outperforming. And talk a little more about your ability to keep gaining market share in those verticals. What's really been driving the differentiation in expense management in BNPL as such core areas for you? And is there -- do you see more and more barriers to entry around that for you guys to continue that?

Yes. Thanks for the question, Darrin. So on our -- I think we do see pretty broad-based growth across our use cases right now. So you see the highlights of BNPL maintaining its momentum at 60% and then expense management really growing at the 40% this quarter. And so we're very pleased with that. A majority of that is driven by kind of the existing programs because these programs do take some time to launch and grow. But a lot of it is with the existing customers that we have.

We do -- and as we've talked about for several quarters for -- especially for Buy Now, Pay Later, we have seen over 4 quarters of kind of growth over 40% or over 50% actually with kind of VFC, geographic expansion in Pay Anywhere cards and strong user growth among SMB lending solutions. So these continue, and we're -- and we continue to lead innovation here from a product perspective, including kind of a Mastercard One credential program launching later this year and what kind of Mike mentioned. And so while we do see some kind of some -- we're going to be lapping some really tough comps over the next few quarters, we do see some kind of decrease over time.

And in expense management, I think it is -- our capabilities there continue to lead in terms of the way we can uniquely configure a lot of the products. And so we continue to lead. But Mike, would you add anything from a product perspective?

Yes. The only thing I'd add, Darrin, is just that I think the -- some of it is the unique capabilities on our platform. And certainly, we're in the lead when it comes to flexible credentials and have been a leader for some time in expense management. But I think it's also a tribute to our customer base continues to win. And there the adoption of their services is growing much faster than market, and they're taking share.

And so we're an enabler of their success. But as they continue to significantly outperform the market, that's what's continuing to drive our growth along with lots of new business and new programs. I think as Patti, I think, mentioned in our last quarter call, right, our top 15 customers did over 30 new programs with us just over the last 2 years. So what's happening is our customers are successful and they continue to build on our platform, and that's what's driving our success.

One quick follow-up would just be on Block. Just any further incremental learnings you guys have had when you -- relative to what you measured, it could be in terms of impact on your -- on this year's performance by any chance between now and let's call it the last few months?

Yes. So why don't I start with kind of what we are assuming kind of for the forecast and what we've been seeing, and then maybe I'll turn it over to Mike to talk about the broader relationship. But on our last call, we talked about new issuance -- our new issuance assumption being that we would slowly gradually decrease new issuance in the first half, and then have no new issuances in the second half. Obviously, we can't speak to kind of the Block business. But in Q1, we didn't see any discernible changes to new issuances.

And it's still, again, too early to tell for the entire year, but we do still expect to see a decline of new issuances in Q2 and more in the second half. So essentially kind of shifting the curve out to the right a bit in terms of the new issuance assumption. And so we had mentioned 1.5% to 2 percentage points of gross profit kind of growth impact at the -- at our last earnings call. And now I think we're now at the lower end of that, just given kind of the delays here in moving. And so we're probably closer to the 1.5% growth impact as of right now.

And then maybe, Dan, just all I'd add, consistent with what we've said in the past, our relationship is very, very strong. We're communicating on a very regular basis. And the fact that they want to diversify, we understand and have accepted. But I think what's important is we continue to engage in talking about new ideas and new things that we can do together. So the state of the relationship is not such that they have sort of like moved on and we're just sort of the old provider. They are going to do some diversification. But at the same time, we still talk about new things that we can do together to pursue opportunities. So the relationship remains very healthy and strong.

We take the next question from the line of Connor Allen from JPMorgan.

I was curious maybe about the demand more broadly for the secured credit card programs. I caught your comments about the embedded finance brand kind of layering that on. I'm curious how broad that interest is across your customer set.

Thanks, Connor, for your question. So we're seeing more and more demand. And as I sort of said in my remarks, there's really a continuum of products. I think if you went back 10 years, it was like you were either debit or you were credit, revolving credit. Those were sort of the -- and maybe some charge card, I guess, American Express has done that for some time, but it was really one or the other.

And what's -- how the market is evolving now is that there's really this continuum where you could start with someone in debit and then you could start to give them some transaction-based lending, which allows you to really control the risk because it's done on a transaction basis. And with the flexible credential, now you could do that on the same card. And then the next step would be, let me really help this customer consumer start to build credit and do that through a credit builder card, which allows -- it better positions them to get to the revolving credit balance down the road.

And what we're seeing more and more is that if you're a fintech or you're an embedded finance company, you want to be able to serve the entire spectrum of your customer base, right? So you don't want to leave anyone behind, if you will. And so they're much more interested in matching the right customer with the right product. And the reality is on some of the more premium co-brand cards today, if you look at the research, the decline rates, more than half the people, it's quite frequently get declined, and they can get upwards of 75%.

And if that's someone, particularly if you're an embedded finance, and that's already a customer of some other product that you provide, that's not a great experience. And so they're looking for ways to address that. And one of the ways that a lot of people like is not only can I give you a product, but I can actually help you start working towards getting maybe that product you originally really wanted. And so more and more, we are seeing an increase in demand.

And as I talked about, we now have a customer for the first time that we will launch later this year that's going to combine a secured card with embedded Buy Now, Pay Later. So they're sort of skipping past the debit card and doing a secured credit and a transaction -- kind of transactional lending product. So we do think there's a growing market for this capability.

Maybe a quick follow-up on that, if you don't mind, just on the kind of the demand for more flexible card products. You guys were very early to the DFC, Mastercard One. I'm curious whether you've seen competitors kind of step up there. Are you seeing more competition for these Visa Flex Credential and Mastercard One programs?

So not yet, although we know from our network partners that it's coming. So I think as we've said, I think, for a while now, we appreciated the lead, but we knew we weren't going to be the only provider of this capability forever. And so we fully expected that people will enable this capability and start to do the offerings.

I think there are maybe a couple of other people live, but on a very limited basis, at least at this point. And probably by the end of the year, some of that could be a little bit more substantial. But I think it's safe to say we have a pretty significant lead, and that will probably continue to be the case for at least the next several quarters.

We take the next question from the line of Bryan Keane from Citi.

Just want to ask about the outperformance in EBITDA and then obviously, the change in GAAP net income. Kind of what's happening in the business that's driving that? And does that flows -- I know it flows through to the guide for the full year, but is any of that upside in margin continue into the second and third and fourth quarters?

Yes. Thanks, Bryan, for the question. So yes, Q1, we were very pleased with kind of our results there. From a top line and momentum perspective, again, TPV, net revenue and gross profit were all on the high end of the range and EBITDA and net income really beat our expectations. And again, first time true operating GAAP profitability for quarter.

But from an EBITDA perspective, and the reason for the outperformance is really around kind of lower-than-expected adjusted operating expenses. We had a couple of key investment initiatives that were a little bit slower to ramp. We ended the quarter where we wanted to be in terms of trajectory, but we're just a little bit slower on the uptick. So that really was the result of -- that really resulted in the beat on EBITDA. And from a net income perspective, obviously, we got the beat from EBITDA and we're slightly less than expected on stock-based compensation.

For the full year, again, it's very early to tell in the year. We're still early in the year. We're monitoring a number of key initiatives and watching closely the macro environment. So at this point in time, there's not a lot of new information that changes our outlook for the next few quarters. And so at this point in time, just we're reiterating kind of our guide for net revenue and gross profit and then kind of slowing down what we saw in Q1 for EBITDA and net income. So you see a slight kind of increase in our guidance for the year.

Okay. That's helpful. And just as a follow-up, when we think about business mix, I know there was a call out for a little bit lower take rate due to business mix and then in the gross profit. Maybe how -- looking at the pipeline, how should we think about growth rates and take rate going forward as a result of maybe a little change in mix than what we're used to?

Yes. I mean, I'll start. I think -- again, I think on an overall kind of portfolio basis, we're pretty good at estimating. And so we are reiterating guidance around kind of gross profit and growth rate. But sometimes the mix of our customers, obviously, last year with the outperformance of kind of lending Buy Now, Pay Later and some program mixes of between kind of some that we program manage and others that we just process, sometimes the mix kind of changes. But again, I think that it had some modest headwind. But overall, we were still pretty close and I say on the top end of this quarter and still reiterating kind of our guide for the full year.

Yes. I think historically, Bryan, I mean, this has been pretty consistent. What causes some of that and when we're talking about business mix is that we -- some of our largest customers still continue to grow very, very fast, right? So I think it's 5 of our top 10 or approximately that grow over 50% still. So we have very large customers who are still growing quite rapidly. And so as they take a little bit more share within our overall TPV base, that creates a little pressure because obviously, they have slightly better pricing, but we think that's a great outcome. That's exactly what we want.

We're happy to have our largest customers have that kind of success. And we think we structure our pricing in a kind of disciplined way that it creates win-win outcomes for them and for us when they grow like that. And it puts a little pressure on the take rate, but we think that's a good outcome.

We take the next question from the line of Tim Chiodo from UBS.

I wanted to see if we could ask a little bit more of a -- it's a Marqeta specific question, but also an industry-related question. So we're now about a few years deep into the clarification of Reg II to make sure that that has been extended to e-commerce transactions or card-not-present transactions. I was hoping you could do 2 things. #1, talk a little bit about what Marqeta sees in terms of merchants deciding to route to the alternative network that is on the back of cards that you issue. And then #2, what, if anything, that means for Marqeta's unit economics?

Thanks, Tim. Appreciate the question. So I would say that the -- your first question, which is about what we're seeing in terms of merchant routing, I would say for the most part, it's pretty stable, right? A lot of the people have made the moves, right? If there's certain merchants, and we do see this from time to time where clearly, there was some sort of effort on their side or maybe they had to do some work first and you start seeing them route a lot more. But because now it's like fewer and far between, it doesn't really change the mix a lot from month-to-month or quarter-to-quarter. So I'd say things are relatively stable. But occasionally, you do see people using alternative networks a little bit more, but it's not super significant.

From a unit economics perspective, I would say, for the most part, our exposure is pretty minor. We have shifted our pricing model quite a bit over the last few years to really get paid for the service that we provide and sort of disassociate our economics from interchange. And so I would say for the most part, that's how our contracts are structured. And so the nature of the mix does not directly impact us. That doesn't necessarily mean it doesn't come up in the negotiation, of course, but we don't have direct exposure. There are some customers, though, where we still do -- where we might have that difference. But I would say, for the most part, we have moved away from that contract structure. And so every year that goes by, we have -- the exposure continues to shrink.

We take the next question from the line of Sanjay Sakhrani from KBW.

Mike, last year, obviously, BNPL expense management, Europe, were all like good drivers of outperformance. I'm curious, as we look this year, where the opportunities might be to sort of outperform and then obviously, to the extent that there's any risks, especially with some of these events, geopolitical events that are weighing in on consumers with higher fuel prices and stuff. So when you're thinking about the book today and sort of where outperformance could happen versus underperformance, where are they?

Yes. I think -- well, first, starting with BNPL because obviously, that was the real star last year. I mean the business continues to grow really fast. As Patti said, it's still growing nearly 60%. The comps will get tougher as we go, so the growth rate will slow. But oftentimes, when I look at lapping events, I really focus on the dollar growth as opposed to the growth rate. And I would say that growth is still really healthy.

So although the growth rate will come down just because the base obviously got a lot bigger as we went through the year last year, but the overall growth of the business is still strong. I would say expense management is sort of -- is very steady. It's just been growing really quickly. It accelerated the last couple of quarters. Each quarter, it's gotten a little stronger. And a lot of that just has to do with, again, our customers continuing to win share. And the more experience we get with the use case and the more scale that we demonstrate, the better it positions us to win additional pieces of business, right?

It just sort of cements our status as a leader in that space. And so that also means we can attract new programs, new customers. So I would say if I was going to pick an outperformer, I guess, for the year, I'd probably maybe choose expense management. But generally speaking, we're pretty good at predicting how the business is going to go. We have a lot of conversations with our customers. So we're pretty plugged in. I think what happened last year in buy now, pay later was just, I think, surprised maybe everybody.

And in terms of risk, you mentioned, I would say the biggest risk that's out there is more macro related. At this time, I think as you've heard every -- all our, I guess, payment companies talk about, I mean, the consumer and SMB seems quite stable and strong. We're not seeing any impacts to spending trajectory. We're going to continue to watch it. But I would say the risk that I -- if I was going to pick one, I would put that at the top of the list just given the amount of uncertainty that's out there right now.

And then just like a follow-up. I know you mentioned you're working with a large FI. I'm just curious if you feel like the competitive intensity is picking up there a little bit more versus the past. I mean, obviously, Visa announced a big win with Wells Fargo and Pismo. I'm just curious if you feel like anything has changed in the competitive dynamics there? Or do you still see a lot of appetite and engagement with you guys?

Yes. I think what I would say, it's not as much competitive intensity that I would say is different. I would say it's the momentum behind modernizing, which I think Visa also mentioned on their call. We're just seeing the conversations become more frequent and substantive with banks. And I would put it into kind of 3 buckets, right, that approaches that a bank might take.

So one is really a conversion. So modernizing like a whole book of business with through migration. I think that's probably the least likely to be where people start. The second is more of a de novo opportunity. So as they look to do new things and look to roll out new products that may be more competitive with some of the modern players who are fintechs embedded finance companies, they would look for more of a modern platform to help them. And then the third bucket is the one that I called out, which is can we infuse some capabilities from a modern platform without too much heavy lifting.

And so in this case, like what we're doing that is exciting is similar to the way some of our BNPL customers would use a virtual card when you want to do a purchase in store. So if I'm not someone who has the consumer card, kind of the flexible credential card offering, a pay anywhere card, but I'm in a store and I see something and I would like financing, that's quite -- we have a lot of experience than injecting a virtual card in that experience. And essentially, that's what we're doing, a version of that.

It's a little bit different in their case with this financial institution, but that's essentially what's happening where without them disrupting their current program that they have, they're able to inject a line of credit offering into the experience where the -- for the consumer, it will seem very seamless but they are saving a lot of kind of effort and complexity by taking on a lot more technology. And our view of that is that's exactly what we want. We want to get our foot in the door, have them start working with our platform and seeing the capabilities and the flexibility.

And it's our belief that once that happens, then that will get them more and more interested in using us for broader parts of their business. So the more we can do that, the better off we are. So the competitive set, I would say, intensity-wise, I would say, is fairly similar. What's maybe different because we support so many other use cases, like who we see most frequently might be a little different now than it was a couple of years ago. But at a total competitive intensity level, I would say it's been constant, at least in the 4 years that I've been here.

We take the next question from the line of Andrew Schmidt from KeyBanc Capital Markets.

Good to see the GAAP profitability here. I wanted to ask about Agentic for a moment. And maybe you could talk about Marqeta's role. Obviously, there are some use cases where a virtual card can be used and applied successfully. It's still pretty early in protocols. But maybe talk a little bit about how Marqeta can play. And obviously, when we think about players like Ramp, they have been pretty vocal in terms of Agentic being involved in the procurement process. I'm curious, maybe not specifically the Ramp, but just in general, if that's an opportunity for you.

Thanks for your question, Andrew. And yes, we do think Agentic is a good opportunity because, again, to doing things in real time and doing them in a flexible way is something that is sort of native to our platform. And so it positions us well. I think one of the things that our view on Agentic is maybe a little different than, I would say, a lot of the announcements you hear in the market that are a little more mission -- are merchant-oriented, sorry. Our view is that for Agentic to really be successful, it's going to have to be more issuer-led.

And the reason for that is some of the early people who have tried Agentic and have been working on that the last several quarters to do something like an autonomous checkout I think they're finding that in some cases, there's a lot of fraud, there's things to work out. And that's -- and we think that's what better positions the issuers to be successful at this. They already know you, they have KYC view. They know your behavior. They have cookies on your devices, all those fun things. So their ability to authenticate that you are actually you before they sent out someone to -- or an agent to do a purchase on your behalf. They're really well positioned to do that.

And we also believe that a lot of times, virtual cards are going to be used in order to, again, minimize the risk. So you won't send an agent out with your actual card credential, you will essentially provision a virtual card with all the specifications, all the limitations and instructions you're giving that agent you will essentially create a virtual card to do that to sort of remove the exposure to your underlying credential that you use on a day-to-day basis.

So all those capabilities, we feel like position us well, but it is relatively early days. So I think we're having conversations with customers. But at this point, there isn't -- there's a lot of maybe engagement, but not huge things that are out there in market demonstrating this. As usual, maybe Ramp is a little bit ahead of the curve, but I would say we're not seeing it on a broad basis yet.

And then maybe everyone's other favorite topic, digital assets. It was good to see the stable linked card development. If you could just talk a little bit about the opportunity there. Is that in response to the pipeline? Obviously, there is a lot of opportunity. It seem like those are proliferating. Just curious about what you're seeing in terms of demand in the market today specific to Marqeta.

Sure. So what we're seeing is that because of the use cases we serve and we're in mostly mature markets, we don't see stablecoin cards as something that's disruptive to our business. We see it as additive. It's incremental. It's customers who are looking to get new or target new opportunities. And so the kind of the way we see that happening is really where customers are looking for more effective ways to support wallets that would have broad functionality to support a customer in multiple ways. And a lot of times, that's around remittance or a payout.

And so the blockchain and the stablecoin is very effective at moving the money. But to actually then make purchases, we feel like a card as the fronting essentially credential is going to be the most effective way to do that. And so this -- what a lot of people are interested in is I could distribute money quicker, cheaper to others in multiple countries, but still give them a very kind of well-understood, user-friendly credential that can be used to actually put that stablecoin to use.

And so that's the conversations and the demand that we see, which is -- has us moving towards making sure that we have multiple solutions to best support our customers as they look to, again, expand in that way. So it's not something where people are saying, well, instead of doing my debit or secure credit or revolving credit card, I'm going to do this instead. It's more like this product would live alongside other cards they have to support sort of different use cases that might be harder to do or today are more expensive to do with the more traditional rails.

We take the next question from the line of Craig Maurer from FT Partners.

I was curious about the opportunity with earned wage access. It's been about a year since we heard about the product, and we've seen some substantial growth from some issuers in the market, some players in the market in that space. So curious if you could talk about growth in that industry. And also, just if you could talk about continued plans for share repurchases. I believe you purchased about $39 million worth of stock in the first quarter and have about $60 million left on the authorization.

I'll maybe answer the wage access and then hand it over to Patti on share repurchases. Thanks for your question, Craig. So on wage access, so yes, there continues to be good discussions with customers. I think as we -- particularly as we move more and more into embedded finance opportunities. There are companies who are looking to find ways to better sort of distribute earnings or funds to their employees faster, usually for the purposes of retention. And whether that's more of a gig worker, I guess, or an actual employee, that's a very effective and attractive value proposition.

So we are talking to more and more companies and thinking out -- we're still working on the best ways to establish the right partnerships because some of the complexity, again, still comes from all the payroll and tax calculations. So certainly, in the more gig environment, because their business model is almost geared towards every transaction is sort of priced independently. It's a little more seamless, and they're a little more set up for that. I would say when you get into more of a typical employee, it's a little more complicated. And so I would say we continue to try to optimize the solution as best we can, but the customers that we found who are having the most success are taking on a lot of that work to make sure you're getting the tax and payroll piece correct.

And from a share repurchase standpoint, you're right. As the end of -- as of the end of Q1, we had about $52 million remaining of the $100 million authorized by the Board. And so we repurchased about 9.4 million shares at $4.16. So we've been active in the market, and that's kind of decreased the total shares by 2%. We still -- as long as the market value -- we will -- I guess we believe that the current valuation doesn't properly reflect the market opportunity and the differentiation.

And so as long as our market valuation lags, we do believe that we will intend to continue doing this market repurchase. I don't think we're ready to yet commit to systematically doing these repurchasing of shares, but we're going to continue to evaluate as we get closer to depleting the current buyback authorization.

We take the next question from the line of Tien-Tsin Huang from JPMorgan. Since there is no response, we move to the next question, which is from the line of Nate Svensson from Deutsche Bank.

I just wanted to walk through some of the back half growth dynamics. I know last quarter, we had called out, I think, 4 discrete items. There was lapping of TransactPay, lapping of some of the strong growth in things like Buy Now, Pay Later. And then the 2 other factors were the renewals and then the Block issuance comment. I know we've talked about Block issuance before, but can you just reconfirm the expectations for the impact to the back half of the year?

I know for the full year, you're saying it's closer to the 1.5 points rather than the 2 points. Does that mean that the back half is a little bit lower on an absolute basis and some of that got shifted to 1Q? Or should we assume the same headwind in the back half? And then on the renewal assumptions, I think one was supposed to start impacting 2Q gross profit. So I just wanted to confirm the timing on that and the magnitude are still what we were talking about last quarter.

Yes. So for the Cash App impact, yes, I mentioned that for the full year, we had stated 1.5 to 2 percentage points of gross profit growth impact. And then based on kind of the delays and shift and we haven't seen any discernible changes. As of Q1, we are shifting kind of that curve kind of to the right, so closer to the 1.5. So I think it's a fair assumption to say that for the back half, when we say the Cash App new issuances is 2 to 3 percentage points that it is on the lower end of that range as well. But eventually, we'll get there.

And then in terms of the renewals, there were -- we did mention the impact of the 2 renewals, one of which was completed in the fourth quarter of last year. And the second one, we still expect to land this quarter.

And then the other thing I was hoping for more color on was the large financial institution you called out with the provisioning of the line of credit directly into the consumer wallet. Just hoping you could talk a little bit more about what you're doing specifically with that product, that client, how that relationship came about.

I guess, is that a wallet being issued by the financial institution itself or with a separate third-party fintech or something like that? And then, I guess, thoughts on time line to get the product ramp and how you think this relationship might help you go out and win with more large financial institutions going forward?

Sure. Thank you for your question. I think -- so first, this opportunity came to us from some references in the market. So clearly, this bank had talked with networks and other people in the industry, and they said, if this is -- if that's what you're trying to do, you should speak to Marqeta about it. That's how essentially the conversation started.

And the wallet actually already exists. So they already provide this functionality, and they were looking to inject credit into that product they're already providing, but without re-carding, re-platforming, all the other things that would require a lot of investment. So we had experience with a solve that, again, not the exact use case, but something pretty similar that we do for our Buy Now, Pay Later customers. And so that's how the conversation started, and that has started to roll out. So it's starting to be -- it's live in the market right now.

In terms of what that means for future business, again, we feel like the -- any experience we can get doing processing, like as you know, we do tokenization, for example, for a few of the large banks, and that's helpful, but we want to really be doing processing for them to really see the difference of what a platform like ours can do versus maybe what they use today. And so any opportunity to do programs, even if they're relatively small, we see as a big opportunity because that will help them more directly compare functionality on a like-for-like basis.

And the more we do that, the more maybe others will say, well, I'm interested and I might like to do that also. So as I mentioned, the conversations are definitely getting more frequent because the companies that we have typically served in fintechs and embedded finance continue to just get bigger and bigger. And so that's forcing maybe more and more banks to take a look at their technology capabilities and start to at least explore options. What decisions they make and how quickly is still to be determined, but there definitely is more and more interest in understanding paths to modernizing the technology they have related to card issuing.

Ladies and gentlemen, with that, we conclude the question-and-answer session. Thank you for your participation, and you may now disconnect your line.

All right. Thanks, everybody, for joining us. I'm Michael Infante. I'm an analyst covering fintech here at Morgan Stanley. Very pleased to be joined by Mike Milotich, Marqeta's Chief Executive Officer. Before we get started, I do have a quick disclosure for you. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to Morgan Stanley sales representative. So with that out of the way, thanks, Mike, for being here.

Thank you for having me.

So maybe we start with a high level. You guys have shown really impressive progress on both TPV and profitability over the last, call it, 18 to 24 months. How have you thought about your transition into the CEO seat and how you think about some of the pillars in terms of optimizing both growth and profitability?

Well, I think it starts with the business model inherently scales very well. So a platform business, high -- very high upfront fixed costs, which means when you're still small, it's very hard to make money. And then also as you're scaling the platform and making sure you can still deliver the reliability once you're in the hundreds of billions of TPV requires a lot of investment. So we're sort of over that hump, if you will. And so sort of inherent in the model is high fixed cost, low variable cost or low marginal cost. So as we continue to grow, we should be able to do it very profitably. So that's -- it's sort of just a starting principle.

I would say a few things that we do focus on. So the first thing is making sure that we're focused. So we're always making a number of incremental improvements to the platform. That's going on, on a broad basis. But the things where we're really investing in something new or we're materially changing or improving the capability we have and it's a meaningful investment, we try to only take on a few of those at a time. So in the past, when I look back at how -- what the company was doing maybe 4 or 5 years ago, I would say we are being spread a little thin, trying to chase too many things at one time, which then means not only do you -- are you not effective cost-wise, but then it's also hard to execute all those things. So you tend not to do as good of a job. So we're a little more ruthless in our prioritization now in terms of the road map.

The second thing I would say also is that we try to be very thoughtful about what are the things that are truly important that we differentiate on that we need to build ourselves and where does it maybe make more sense to partner. I think it's very easy, particularly at a tech company and maybe a tech company in the Bay Area even worse, is like a tendency to say, "Oh, we could build that, we could do it better than others." But we try to be very disciplined about that. Are there whole companies that do nothing but that thing? And is it something that's incredibly differentiating and important to us? Or is it more of something we just want to include in an overall portfolio of capabilities?

And if it's truly important, then we will do it ourselves. But if not, then we may look to partner, which then makes it much more efficient. So I would say those are maybe two of the things we really focus on a lot that allows us to drive really profitable growth. And if you look at 2025, in particular, was really a standout year because we were able to grow our gross profit 24% and our adjusted EBITDA increased by more than 3.5x. So as we're hitting that level of scale now where if we can grow at that kind of rate, then the profitability can improve by a significant amount.

That's helpful. Maybe just on those internal product initiatives that you mentioned, how do you think about Marqeta's core differentiation today? We obviously have conversations with investors just in terms of how they're thinking about competitive dynamics, et cetera. You have a lot going on internally across processing, some of the credit initiatives, program management, value-added services. Where do you really want to strengthen the platform over the next 12 to 18 months?

Sure. So first, it starts with the platform as we are a platform business, and that's where we think we're very differentiated in a few different ways. So first, we have a lot of flexibility and configurability in our platform. So even as we get quite large, we are quite flexible, which is what allows us to do all the use cases, for example. So if you look at a lot of our competitors, they tend to really only be in one segment of the market. So they do neobanking very well or they do commercial card very well versus the Marqeta platform can do all aspects of card issuing.

And so what makes us unique is that we do both credit and debit, consumer and commercial, and we do those across 40 countries, and we do it at a high degree of scale. And that is a unique combination of factors. So the way we often talk about it with our customers and prospects is that at Marqeta, you don't have to make trade-offs. So with many other platforms you may choose, you have to get either reliability and scale or innovation and flexibility. And we're the one company that has both. And so you don't have to make that trade-off. That's a big differentiator.

I would say the second thing is also that I think is often overlooked is our expertise. We have built a lot of innovative programs and help those businesses scale and see what it takes. And that allows us to add a lot of value for new customers. So we're not sort of passive observers of our customers' success. We're highly engaged with them, and we're constantly working with them to see how our platform can enable their growth. And so that experience of seeing new businesses completely built and more innovative use cases where card hasn't been used in the past and how to do that effectively is a real asset and a real differentiator when we're talking to customers who are either looking to evolve in an innovative way or just starting out as a disruptor from the get-go.

Helpful. Maybe transitioning to Block. Obviously, your largest customer, 44% of net revenue in the fourth quarter. How should investors be thinking about how that relationship is changing and the longer-term durability of it?

Sure. They're a great customer. It's -- I often tell our investors, it's a good problem to have when your largest customer can grow at such a rate. And so -- we don't think it's a bad thing that it's hard for us to diversify. Sure, we would like to be diversifying even faster. But given how significant a piece of our business they are at the rate that they still grow is a good thing, and we're happy to enable that. The relationship is quite deep. And there are many aspects of our organization talking with them on a day-to-day basis, and we're constantly talking to them about new ways we can add value. So the relationship is nowhere near static. We're constantly talking about new things and doing new things together. And I think we're also very well positioned to serve them.

From my perspective, there are still many growth opportunities for us with Block, where less than half of their Cash App active users use the card and only a small percentage of the card users use direct deposit, for example, and direct deposit users spend a lot more. So if there are ways we can help them drive either of those two sort of penetration metrics, that would benefit us. We also could help them expand geographically. Right now, they pretty much have a U.S.-based business. They could expand geographically on our platform very easily. And also, if they wanted to move into more traditional kind of credit card like products, obviously, they do credit, but it's a little bit of a different flavor. If they wanted to do credit, they could also do that on our platform. So we still think there are many areas of growth opportunity.

There are two things in 2026 that, of course, investors are going to be watching. So one is what we talked about on our earnings call last week about Cash App moving into a new price tier. So if I were to take you back to the middle of 2023 when we did our renewal with them, we're very structured and disciplined about as volume grows, how the price changes. And so there's many more than 10 pricing tiers in the contract just given their size. And so it's a very disciplined curve. It's like volume grows, what happens with price. But at that time, when we were renewing, they also had a request that we thought was reasonable. They essentially said, when we get to X size, we think that puts us in a whole new category of customer, and we should get a price break for that.

And so on this very disciplined curve that we created, there's sort of a kink in the line at some point that we're hitting right now in 2026, where the price steps down twice as much as any other tier around it does. So the hit is more significant, and they just moved into that tier in December. So as we look at 2026, we expect them to be in that tier for the year. And so therefore, for 11 of the 12 months, we have a different -- difficult year-over-year comparison. But ultimately, if you think about the long run, we see that as a good thing. We are dynamically adjusting to their size and scale and making sure that they are getting a fair deal. And particularly at a time when they're diversifying, there's no better time for them to have gotten kind of the next price break from us and have to consider that as they think about their business going forward.

And then the second thing for 2026, as I just mentioned, is them diversifying. So they are going to start diversifying their processing. They've told us that and told their investors that. It hasn't really started at this point. We can't see anything discernible in our numbers, but we expect it to start soon. And from our perspective, again, they -- it's very reasonable that they would want to diversify. Most of our largest customers have diversified their bank or their processing or both. And so we find that very reasonable. But everyone -- almost everyone in the payment ecosystem looks to have a primary partner that gets the bulk of your business. And so -- and that's what we want to do with Block, and we think we're well positioned to do so.

That's helpful. A couple of follow-up questions on the nature of the Block relationship. So you alluded to driving increased penetration within the Block ecosystem. How does the sales force or go-to-market relationship between Marqeta and Block work to the extent that both organizations are obviously focused on driving those penetration levels higher?

So we have a dedicated team of many people that just work on Block. And I would say there are components of people on that team are probably talking to someone at Block on a daily basis. So it's a very tight relationship, both from a business perspective, but product to product, even within finance or legal, those teams have a counterpart and they reach out to directly. They don't go through, right, the relationship management channels or whatever. They have a counterpart. They know who that is, and they interact with them on a daily basis. So it's a very tight working relationship where we're meeting all the time to talk about things we can improve, new opportunities to do together and just ways to drive a win-win for both of us. The more successful they are, the better for us. And so we're there to help them.

And to the extent that Block were to want to pursue a more traditional credit type product, what does that mean for your just OpEx? Is that something that the business is already able to deliver from day 1? Is that a fairly complex build and integration process? How should investors be thinking about that?

So it's built. So it would be relatively easy for them to integrate and get that going. Someone of their size, obviously, we'd make some investment behind that as that business scale. But inherently, again, getting back to what we discussed earlier, as a platform business, there wouldn't be a huge amount of incremental investment for us to support them in that effort. And it would be relatively seamless for them from a connectivity perspective. There aren't a lot of changes. It's not like it's a different platform at Marqeta. It would be pretty easy for them to do. And then the last thing that we also do for our customers because most of our largest customers have many -- several programs with us and even 8 of our top 10 customers are in more than one country. So the way we structure that is by having sort of a global pricing structure that incentivizes them to do more and more. So we aggregate all their volume together to give them the benefits of scaling on our platform, and we would do the same in that case if they were ever to pursue a credit card offering.

Helpful. Transitioning to the TPV side of the equation, I think quite underappreciated the scale at which the business is running. I think 4Q, call it, $108 billion in quarterly GMV growing 36%, right? Really impressive growth. How should investors be thinking about just the cohort dynamics underneath that? How much is existing program both? How much is being driven by new cohorts? And then we can also get into the verticals that are driving that as well.

Sure. So yes, as you said, our TPV grew 36% in the quarter. It was over $100 billion for the first time in a quarter in our history. And that was also the third quarter in a row that we'd accelerated by 3 percentage points. So the business is sort of picking up speed and growing at a very fast clip. And it's really being driven by a few things. I would say it starts with buy now, pay later and lending as a vertical. So that vertical is in the high teens of percentage of our TPV, and it grew almost 60% in the quarter. So it's not a small business, and it's growing at an incredibly fast clip.

And there's really three factors that are driving that. So one is the flexible credential. We were the first processor to enable that both in the U.S. and Europe. We have two customers live in the U.S., one in Europe, and that is really catching on with consumers and growing very fast. We did a few billion of volume just in the fourth quarter on that type of credential alone. So it is scaling very quickly. The other area is also in the U.S. outside of the flexible credential is just really two components. We're getting better distribution through wallets for our buy now, pay later customers, and that's driving some growth. And then we, in 2024, had one of our customers diversify some of their virtual card business with us. And so as we lap that, that's also helping our growth rate.

And then finally, in Europe, we not only migrated a Klarna portfolio about last October, so almost 1.5 years ago now, but it's growing really fast on our platform post migration. But also we're getting wallet distribution. And we also have a couple of SMB lending use cases in Europe that are also growing very fast. So all those things are big contributors. The second area that I would say is helping the acceleration is in expense management. That's our other -- one of our other large use cases. It's about mid-teens percentage of our TPV, and it's growing over 40%. That's the first time it's grown over 40% since the first quarter of 2023. So it's been about 3 years. And so -- and that's really about disruptors just continuing to take share and grow really fast. We're one of the primary enablers of many of those disruptors in the market, and that business -- that use case is taking off.

And then the last thing I would highlight is in our financial services, which is really like our neobanking use case, that is over 50% of our TPV. That's where Cash App and Square and many of our other larger customers are in that. And that grew over 30% for the first time in 2025 in Q4. So a very big business growing at a good rate. And so those are the big factors. You mentioned new cohorts. I would say it's a relatively small portion of the growth now. It's more about what's to come. So if you think about our new cohort business, and we highlighted a few things on our call last week. Just since the start of 2024, we've onboarded about 40 new logos and 14 of our 15 top customers have done at least one new program with us. So we've done over 30 new programs for our top 15 customers just in the last 2 years. And so -- but that's more a promise of what's to come. So for example, we said in 2025, that drove about $30 million of gross profit. And in 2026, we expect that number to double. So the new cohorts are contributing, but it takes time for new programs to ramp and scale. And so I would say as you go out 1, 2 years, that's when you'll really start to see a significant benefit to growth coming from those new cohorts.

Helpful. Maybe on the BNPL topic, we're obviously seeing this structural transition, not necessarily away from virtual card issuance, but the benefits that can be provided by the Flex credential itself. You also have the dynamic in the space where wallet concentration is also a larger percentage of GMV structurally. So how do you think about those two dynamics and how it impacts your stickiness with those providers and your ability to monetize the relationship?

Yes. I think the -- it's a pretty significant benefit. I mean the -- we started with virtual card. We were the early pioneer and that really helped the buy now, pay later players scale because they didn't have to do all the complicated kind of technology integration on a merchant-by-merchant basis and the virtual card solve that. But as more and more players in the market sort of caught up with that capability, what it really does is it allows not only diversification of your provider, but it actually allows for true redundancy. So 1 minute, I could be using this platform for my virtual card business. And the very next minute, I could be using a completely different platform.

And so -- and that's something we've talked about for the last couple of years as that's happened, more and more of our customers who use virtual card have diversified because they can do that relatively easily. But as things shift to more of a consumer value proposition where now it's a recurring used card that sits in my physical wallet as well as maybe my digital wallet, that's a much stickier relationship. So you can't -- you certainly can't get redundancy. You could try to diversify it, but it's much harder because now you've got one program that's running on multiple platforms. So hard to make the user experience consistent. And so what it really allows is for us to have a tighter relationship that's just generally stickier. So that's a good thing for us.

Helpful. On the expense management category, obviously, a fairly mature vertical, but showing signs of reaccelerating. We obviously have some very high-growth businesses that sort of are contributing to that dynamic. How should investors think about maybe how concentrated that growth is? And also, we've obviously seen some of the incumbents sort of expressing more of an interest in layering on some expense management capabilities into their ecosystem. Does that sort of provide you with an opportunity to sort of drive deeper into that FI channel?

We believe we're still in the very early stages here of what can be done on the corporate card space with expense management. So it's not incredibly concentrated. We have several customers that are growing very fast on our platform. So it's relatively broad-based. And the way we see it, we're in a little bit of a win-win position. There are two ways that this can play out. The disruptors in the space are growing very fast and taking share, and that can continue to happen. And our capabilities and the way our platform is so configurable is one thing that is quite useful and powerful for this use case. So we would benefit from that.

But the second thing that could happen is the banks start to respond, right, because they are losing business. And -- but they are going to need the technology and the capabilities to respond effectively. And so we do think this is one of the areas in addition to buy now, pay later, where we could initially start to work with banks to help them. And so even what happened now, I guess, it was a month or so ago, Capital One buying Brex that -- Capital One is widely considered a highly innovative tech-forward bank and the fact that they felt like they had to do an acquisition to bolster some of those capabilities to us is a very positive sign in the market that that's where banks are taking that modernization seriously, especially someone forward thinking like that. And there aren't going to be a lot of places for them to turn. We're clearly the established leader. And so if they're going to look -- be looking for a new partner to better compete with the disruptors in the space, then obviously, we would be a good choice.

Makes sense. Maybe before we pivot to the next time question, if there's anyone in the audience has a question, feel free to raise your hand and we can get a microphone around to you. So maybe just on the Europe and international expansion topic, obviously showing strong growth on the TPV side. How are you thinking about the benefits that the TransactPay acquisition has provided you and how that's going to impact both mix and underlying unit economics?

Sure. Yes, the growth in our Europe business is really amazing. I mean our 2025 TPV was 8x the size of our business in 2022. So it basically has doubled every year for 3 straight years, which is really incredible growth that we've seen. And we've done all that essentially just with processing. So our processing capability is very differentiated. But what we see in other parts of the world is people want the full package. They want program management. They want value-added services. And the acquisition of TransactPay allows us to do that. So it's -- what we really think of it as something that just makes our platform that much more attractive, particularly to more scaled players who don't want to have multiple providers. So they want their processing program management and the license you need to operate as sort of a neobank-like structure in Europe that they come to one player for that. And so that's really the boost.

And so what we see is the benefit so far from that acquisition is in our pipeline. So it's not really in our business much right now. But if you look at our pipeline, it's full of opportunities that are much larger, much more comprehensive offerings. So we can drive a higher yield for every dollar of volume. And the launch that we just announced with the Uber U.K. Pro card, where they're giving a banking product to essentially their drivers is really just the beginning of what we can do in Europe with this new capability and assets that we acquired.

Does the composition of growth in the international business, is that -- do you think logically it will sort of skew more to existing client growth versus net new, just given the fact that you do have highly global businesses that you predominantly have only worked with in the U.S. thus far?

I would say for now, that's probably fair because these are already established businesses that are quite large and see the opportunity to expand geographically. And so they can -- not only they have the know-how, but -- and they have some brand recognition, but they also have the ability to lean in and drive marketing and growth. But I would say the great thing about the evolution of our business is that more and more, when you look at the kinds of new logos that are in our pipeline, it's very large companies. We mentioned on our call last week, we signed three Fortune 500 companies in 2025. And I would say that's becoming more and more common. So it's not always going to be kind of upstart businesses that really have to start from scratch. Many of the companies we're talking to now already -- their platform businesses, they already have 30 million, 40 million, 50 million users, and they want to insert a card product into that user base, which should mean that they have -- are just a much better position to hit the ground running than maybe the new customers we were onboarding a few years back.

On value-added services, obviously, a growing percentage of gross profit structurally. Are there items there that you think are key differentiators for Marqeta versus certain items that may be more are table stakes from a competitive perspective? And how should investors be thinking about value-added services in terms of contribution to the P&L on a go-forward basis?

Sure. I think it will continue to grow as a share of our business. So we said it was 7% of our gross profit last year, and we think that will continue to rise. I would say, like almost everything that we do, there are aspects of it that are table stakes, but we just do it differently, and we feel better than typically the people who have come before. So take something like tokenization, right? Tokenization is now very prevalent in the market because of digital wallets as well as big card-on-file providers wanting to tokenize for security reasons. And so most processors have that capability, but the way we do it is quite differentiated, and we hear that very regularly in the market. There are certain things that we can do with tokens that few else can. And so that gives us a leg up in the market for people who are really thinking digital-first like use cases. That's something that does stand out compared to other competitors.

I would say the same thing with our risk products, for example, everyone is going to try to do something to manage risk and fraud, but our real-time decisioning capability that we've built is for issuers very specifically. And we've now enhanced that with machine learning AI to make it even more dynamic in real time in fighting fraud. So again, that's a relatively standard offering, but we feel like we've done it differently and in a differentiated way.

I think there are a few things that I would say you could maybe call table stakes, like one of the areas we think will become a growing part of the business is providing the front end, a white label app, which we just built last year and Uber is using in the U.K. That's something -- we want to do it well, but we're not going to be known -- like people are going to choose us because like, wow, look, how great your app is, like we don't think that's how we're going to win business, but we want it to be good. And I would say the same thing as we move into more like data and analytic type offerings, that's the same thing where people would want that packaged with their platform. And you want to do it well, but it's not something that's going to really drive a decision by a customer.

Helpful. On the profitability side of the equation, obviously, running at the scale at which you are. How do you think about the biggest drivers of margin expansion from here across, just general operating leverage, some of your infrastructure initiatives, contribution of value-added services, et cetera. What is going to be the biggest needle mover as we think about both '26 and beyond?

Yes. I would say that the infrastructure and operating leverage for our business is sort of one of the same. And it goes back to maybe what I highlighted at the beginning, as a platform business, we're very high fixed cost, very low marginal cost. And so really the way for us to drive profitability is just to drive growth. If we're effective at driving growth, then just the nature of the business model will kick in and you can do that -- every incremental dollar, it gets sort of just that much more profitable. And so that's something that I think we will continue to do well as long as we remain disciplined in the way we invest and choose our investments wisely.

I think in terms of looking beyond that, value-added services will certainly be a helpful driver. But there's two things that really aren't part of our business now that should become bigger in the next few years that will also help. One that we already talked about was the addition of program management in Europe. That's something will allow us to make more on every dollar of volume in Europe, and that's something that's coming more near term. And then the second area is credit. So right now, it's a very small part of our business. We're just getting started, but it generally is more lucrative than debit. And so if we were to build a big business there, it would come with better profitability than the debit business.

That's helpful. How should we think about the steady-state margin profile of the business today, particularly as you sort of contemplate a little bit more of a shift upmarket layering in program management internationally. Does that mix shift structurally improve or sort of depress gross margins and therefore, investors should sort of concentrate on dollars versus margins? How do you think about that?

We don't think -- there isn't big mix shifts in that way that would affect our gross margin or even our EBITDA margin. Because again, as we go after bigger and bigger customers, they might start at a low price point right away, but they also come with more volume right away. And again, getting back to our business model, that will inherently drive profitability. So we don't see a big mix impact. We still believe also that the way we look at our business is on a Rule of 40 basis. We think that is a very effective way to sort of show the balancing act between growth and profitability. And we look at that as a combination of gross profit growth and then our EBITDA margin with gross profit as the denominator.

And we believe we can continue to improve that over time. And we also think that our gross profit or our EBITDA margin on gross profit, there's no reason why that over time can't be over 50%. Right now, we have improved that metric a lot. And in the fourth quarter, we were 26%. So we've come a long way, but there's definitely more headroom just again because as the business scales, we think we can grow gross profit meaningfully faster than we grow our expenses. And so if we drive effective growth, then the profitability will come with it.

Couldn't get through a fireside without asking about AI. Sort of how do you think about your ability to sort of layer that into the organization and what that might mean for some of your internal expense initiatives?

Sure. We're obviously very focused on giving our employees the tools they need to do their jobs more effectively and more efficiently. Because if you look at our business, we really are people driven. We have very few assets outside of the great employees that we have that drive the business. And so we always are looking to give them the right tools, and we're seeing huge steps forward in that regard. And what's exciting about it is even what some of those tools can do now, they couldn't do 6 months ago. I mean the rate of progress and change is pretty remarkable. And so we do think that there's pretty significant increases in productivity, particularly in engineering, but even other parts of the business as well, where there are a number of tools and AI tools that are quite helpful.

When we think about externally, there's two product areas that we think AI has a lot of promise. One is in risk and fraud management, and we've just started to incorporate that and have our first customer live on our new enhanced fraud product that's using AI, and we'll continue to make those improvements. The second one is with dynamic rewards. So we still believe that personalization is going to come to the card business. If you and I have the same credit card today, we get the exact same reward. We don't think that will be the case in the future. Everything else is personalized and customized with technology, and we think that's going to come to card. And so we have already been making those investments for the last couple of years, and AI will only take it to the next level to be able to adjust information in real time and offer you things that are unique to you that might be different than what gets offered to me and do it in a way that's a win-win. And so that's another area that we think in the coming years, AI will get applied.

Helpful. To conclude, in your conversations with investors, what is one of the most persistent misconceptions about Marqeta and how investors should be thinking about tracking that dynamic and what to watch for on a go-forward basis?

Yes. I would maybe name two things. I think one is I think investors continually underestimate the know-how, the experience of what it takes to successfully launch and manage a card issuing program. I think because acquiring is just more prevalent, there are many more companies that do it that are covered by investors. I think a lot of people fall into the trap of thinking, well, issuing must be just like acquiring, but it's not. It's -- there's a lot more complexity, a lot more nuances to it. And so that experience we have goes a long way when we're talking to prospects and when we're trying to help customers like we've been there and done that. And in a business that has lots of pitfalls and traps you could fall into, that's a real differentiator for us. And that margin keeps growing as we just keep getting bigger and bigger.

The second thing that I would mention because it's very topical right now with Cash App being such a big part of our business and then talking about starting to diversify, I think there are some people who feel like, oh, well, if they just -- if you lose new issuance, then over time, that book could get very small for you. And of course, that's possible. But I think people underestimate their -- what percentage of their business and their volume is driven by highly engaged users that would create a lot of business risk if they tried to change that. So -- and I think they also maybe underestimate some of the new ways that Block may want to grow that we could very easily facilitate compared to other players. And so I think -- we get it. People are going to be a little bit concerned, but I think we're well positioned to be their primary partner and continue to drive the bulk of their business. And only time will tell if that plays out, but we feel confident in our position.

It's a great place to wrap. Mike, thanks very much for joining us, and thanks, everyone, for attending.

Thank you.

Ladies and gentlemen, welcome to the Marqeta Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Maria Gresier, Director of Investor Relations. Please go ahead.

Thanks, operator. Good afternoon, everyone, and welcome to Marqeta's Fourth Quarter 2025 Earnings Call. Hosting today's call are Mike Milotich, Marqeta's CEO; and Patti Kangwanki, Marqeta's CFO. 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 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.

With that, I'd like to turn the call over for Mike to begin.

Thank you, Maria, and thank you for joining us for Marqeta's Fourth Quarter 2025 Earnings Call. I'm excited to be joined on this call by Patty, our new CFO, who started on February 9. Patty is a proven finance executive with extensive experience across technology, financial services and payments, and we're excited about the value she will have at Marqeta.

To start our call, I will briefly touch on our Q4 results, followed by a few Q4 highlights of the growth in our business across use cases, geographies and value-added services. I will then turn it over to Patty, who will cover the details of our Q4 financial results and our expectations for 2026.

Our fourth quarter results were once again demonstrating our outstanding growth as we reached new levels of scale while continuing to increase our adjusted EBITDA as we trend towards GAAP profitability. Total processing volume, or TPV, was $109 billion in the fourth quarter, crossing the $100 billion threshold in a quarter for the first time in Marqeta's history.

With a year-over-year increase of 36%, this was the third straight quarter in which our TPV growth has accelerated by 3 points from the previous quarter, demonstrating our strong business momentum as we exit 2025. Q4 net revenue of $172 million grew 27% year-over-year, driven by strong TPV growth across the use cases we enable. Q4 gross profit growth was $120 million, a 22% year-over-year increase, exceeding our expectations by several points.

Our adjusted EBITDA was $31 million in the quarter, which was another all-time high, translating into an 18% margin and more than doubling the dollars on a year-over-year basis. This was fueled by strong gross profit growth and the benefit of our scale platform and efficiency initiatives. This quarter and throughout 2025, we drove significant growth by deepening our existing customer relationships through seamless geographic, use case and value-added service expansion while also successfully onboarding and ramping new customers.

Our leadership and expertise powering innovative offerings continues to attract established brands seeking a proven partner to drive growth and user engagement by leveraging card programs. One area we highlighted throughout 2025 is the growth and traction we are seeing in Europe. TPV in Europe grew more than twice as fast as the overall company in the fourth quarter, which is the first quarter in nearly 2 years that the growth has been below 100% on a year-over-year basis due to the rapidly expanding base.

As a testament to the scale we have achieved in Europe in a relatively short period of time, the TPV in Q4 2025 was nearly 40% higher than our annual TPV in 2023 and spans the breadth of the use cases we serve. In Q3 2025, we completed the acquisition of Transact Pay, which enables us to deliver a complete offering in the U.K. and the EU across processing, program management and the EMI license comparable to what we offer in the U.S., Canada and Australia.

The ability to offer an end-to-end solution across geographies is becoming increasingly important in serving enterprise customers, whether they are large fintechs or embedded finance multinationals. One such customer is Uber, a long-standing Marqeta customer. Our relationship started with enabling couriers for delivery in the U.S., which has since grown across many geographies.

We then expanded into new use cases such as the Uber Pro card to support the financial needs of Uber drivers, which we are now helping to expand geographically to the U.K. Marqeta solution now live allows Uber drivers in the U.K. to access their funds immediately, get rewards and keep their money in a high-yield savings account with a partner bank, all within an Uber-branded app developed by Marqeta.

Last year, we highlighted our work on a white label app designed to give customers a fully branded out-of-the-box solution managed by Marqeta that accelerates customer time to market. This program is the first to deploy the white label app, utilizing the preconfigured flows for onboarding, account setup, transaction monitoring and support, all of which reflect Uber's brand. This exemplifies the breadth and depth of the Marqeta offering by delivering the full spectrum of processing, program management and value-added services.

This includes banking and money movement with seamless integration with our banking partner in the U.K., processing, fraud monitoring, real-time decisioning, risk management and our white label app. The holistic approach enables Uber to work with one partner to deliver a robust solution with full banking functionality. This expansion also highlights the confidence and trust that a discerning customer like Uber has in Marqeta to deliver a scalable and comprehensive product to their target market.

This solution showcases our ability to offer a complete end-to-end solution, which is important for enterprise and embedded finance customers who are looking for a single best-in-class provider operating at scale with a full offering across geographies.

Lending, including Buy Now, Pay Later, continues to be one of the most compelling and fastest-growing use cases. We continue to see strong growth in demand in Q4, which is driven by our ability to support customers with innovation at scale across many geographies. BNPL started with Marqeta enabling virtual cards for seamless payment experiences without costly and time-consuming back-end integrations.

The category has continued to evolve, and we have been at the forefront of enabling seamless geographic expansion and newer innovative solutions such as the Visa flexible credential and Pay any where cards, which allow our customers to deliver a better value proposition that is clearly resonating with their users.

In a testament to our leadership in BNPL and the unique combination of capabilities we enable globally, in Q4, we added yet another BNPL customer who will be flipping an established program to our platform. For Technologies, a BNPL provider that allows shoppers to split online purchases into 4 payments, was looking for a tech-forward partner with a proven track record and the expertise to support their ambitious growth goals. As a result, they are moving their business to Marqeta.

In addition to helping existing customers expand into geographies and use cases with new programs, we continue to strengthen our offering by delivering additional value-added services, which helps create more durable relationships and bolster the economics of our business. In Q4 2025, value-added services contributed over 7% of our gross profit with 18 of our top 20 customers utilizing at least one of our value-added services.

As we have highlighted in the past, our real-time decisioning product within our suite of risk services was built to be issuer-centric and allow customers to create rules and controls to manage transaction fraud by leveraging actual transaction data.

In Q4, we launched an enhanced version of this product with a long-standing customer using artificial intelligence and machine learning capabilities for real-time risk evaluation during the authorization process. Our enhanced model uses many transaction level attributes and historical behavior patterns to predict risk at the time of the transaction, all with millisecond level response times.

We sought the input of several of our existing customers to create these models, which are self-learning and will work to continuously improve fraud detection and adapt to emerging threats. In Q4, we also signed 2 additional customers for this enhanced real-time decisioning capability. Both customers were looking for a flexible solution to help meet the different needs for neobanking and lending use cases across multiple geographies as they scale, appropriately balancing the expansion of their target audience and credit lines with fraud mitigation.

By embedding AI-powered controls and advanced machine learning into the authorization process, we enable customers to expand confidently while also strengthening their fraud defense as they scale.

To wrap up, as I reflect on our many accomplishments in 2025 and the efforts that are currently underway, I'm excited about our business momentum as we look forward into 2026 and beyond. First, given the long lead times in onboarding new business and the time it takes for new programs to ramp up, deal activity provides good insight into business momentum that takes time to impact the P&L.

We are successfully shifting to targeting enterprise customers with embedded finance use cases, signing 3 Fortune 500 customers in 2025, and the average deal size increased over 20% year-over-year. We also executed a flip in each quarter, both credit and debit products, demonstrating our competitive differentiation. And over the past 2 years, we have signed approximately 40 new logos, while our top 15 customers are adding over 3 programs to our platform, with 14 of our top 15 customers adding at least 1.

Second, our leadership in lending and buy now, pay later use cases continues to be a source of strength as commerce continues to shift toward these payment methods. Our success in lending and BNPL clearly illustrates what makes the Marqeta platform unique, modern, flexible processing that can support a wide range of value proposition from anywhere cards, distribution through wallets and virtual card solutions. We enable innovation for our customers, such as being the first to support flexible credentials in the U.S. and Europe, multinational reach that enables geographic expansion and reliability at scale to handle rapid growth even among very large programs.

Third, our traction in Europe, where 2025 TPV was 8x the size of 2022 and should continue to be a source of strong growth. The addition of TransActPay significantly enhances our offering, enable us to deliver a full solution set in Europe aligned with U.S., Canada and Australia. The launch of the Uber U.K. program this past quarter is just the beginning.

Lastly, we continue to expand and enhance the solutions we offer, both within program management and value-added services, increasing the value we deliver for customers and strengthening our customer relationships. This should continue to be a growth vector for us going forward, particularly value-added services, which are still only 7% of gross profit exiting 2025, but more than doubled year-over-year.

Our financial performance in 2025 demonstrates what can be delivered when the business is firing on all cylinders. Our 24% gross profit growth and 26% adjusted EBITDA margin on gross profit has us on the cusp of GAAP profitability.

We believe the market is evolving in favor of modern multinational processors operating at scale, which is reflected in our recent deals and our sales pipeline. Although we expect although we expect 2026 gross profit growth to be impacted by 2 specific factors whose timing really weighs on 2026, make no mistake that the structural components of our business remains strong as we look to reach larger milestones in the years to come.

With that, I will turn the call over to Patty to discuss our Q4 financial results and 2026 guidance in more detail.

Thank you, Mike, and good afternoon, everyone. I look forward to getting to know all of you moving forward. I'm excited to be stepping into this role at a time when Marqeta is building the business for scale and on the cusp of GAAP profitability.

Our financial results for Q4 reflect another great quarter and an even stronger-than-expected finish to the year. Both net revenue and gross profit growth were approximately 4 percentage points higher than expected due to the business momentum reflected in our TPV growth.

For the third straight quarter, TPV growth accelerated by 3 percentage points on a sequential basis, reaching 36% in Q4. With adjusted operating expenses roughly in line with our expectations, the higher gross profit led to another record quarter for adjusted EBITDA, and we approached GAAP net income breakeven for the third quarter in a row.

Let me start by providing some color on our incredibly strong TPV, which was $109 billion in Q4, growing 36% year-over-year, with 3 of our 4 major use cases delivering accelerated growth. Non-Block TPV continues to grow over 2x faster than block TPV.

Growth within our financial services use case accelerated from last quarter, and the growth rate continued to be a little slower than the overall company. Lending, including buy now, pay later growth slowed from Q3, but remained very robust, growing just shy of 60% on a year-over-year basis, mostly due to the growth in flexible network credential usage and our customers' continued geographic expansion on our platform.

The growth slowed versus Q3 because we lapped the Klarna migration in Europe, which was executed in October of 2024. Expense management growth accelerated several points from last quarter, with growth exceeding 40%. This performance is driven by customers continuing to acquire new end users as their platforms gain share while utilizing our uniquely configurable capabilities.

On-demand delivery growth also accelerated and continues to be in the double digits, but below the company's overall growth rate. Q4 net revenue was $172 million, growing 27% year-over-year. Block net revenue concentration was 44% in Q4, in line with last quarter. Q4 gross profit was about $120 million.

The 22% year-over-year growth was approximately 4 points higher than we expected, primarily driven by 2 factors. First, TPV growth outpaced expectations across all use cases. Second, the addition of TransactPay added 4 percentage points to gross profit growth, which was 1 percentage point higher than expected. TransactPay contribution can fluctuate from quarter-to-quarter based on implementation fees and several projects were delivered in Q4 ahead of expectations.

As a reminder, we revised our accounting policy for estimating and recognizing card network incentives starting in Q2 of 2025. As a result, Q4 gross profit growth had a headwind of 5 percentage points due to the difference in methodologies for the year-over-year comparison.

Our gross profit take rate was 11 basis points, a little bit more than 0.5 basis point lower than last quarter, largely due to the impact of the major renewal completed in the quarter. Q4 adjusted operating expenses was $89 million, growing 4% year-over-year, in line with our expectations.

We continue to remain focused on operating efficiency and are realizing the benefit from the increased scale of our platform. Q4 adjusted EBITDA was $31 million, a margin of 18% based on net revenue. Adjusted EBITDA margin based on gross profit was 26% and illustrates the profitability potential of our business.

Our Q4 GAAP net loss was just over $1 million, which included $7 million of interest income. We ended the quarter with approximately $770 million in cash and short-term investments. Our share repurchase activity remains ongoing as we continue to believe the current valuation does not fairly represent the company's value or the market opportunity ahead of us.

In Q4, we repurchased 20.2 million shares at an average price of $4.76. For the full year 2025, we repurchased 84.8 million shares at an average price of $4.59, which is a reduction of nearly 17% of the outstanding shares as of 2024 year-end. As of December 31, we had over $91 million remaining on our latest buyback authorization.

Let me briefly summarize our full year 2025 performance, which was a fantastic year. TPV growth was 31%, adding over $90 billion of volume versus 2024. Net revenue grew 23% and gross profit grew 24% on a year-over-year basis, fueled by strong TPV growth, the delay of 2 major contract renewals and a significant increase in adoption of our value-added services starting in Q1.

Gross profit growth was 8 percentage points higher than the high end of our expectations at the start of the year, primarily for 3 reasons. First, we had spoken all year about 2 major renewals that we expected to be completed mid-2025. Both renewals were delayed as we engaged in discussions around additional opportunities as part of the contracts, which added 2 percentage points to gross profit growth. Ultimately, one was completed in Q4, while the other is shifting to 2026.

Second, we had nonrecurring benefits in each quarter, except for Q4, which added approximately 1.5 percentage points of growth. The remaining upside was driven by stronger TPV growth across multiple use cases, particularly lending, including BNPL. Adjusted EBITDA was $110 million for the year, which is more than 3.5x what we delivered in 2024.

Our strong gross profit growth was paired with adjusted operating expense growth of only 1.5% due to success in our efficiency initiatives, increased platform economies of scale and investment delays in the first half of the year following the CEO transition in Q1.

Now let's transition to our expectations for 2026. I will start with our full year 2026 expectations before sharing more details on the quarterly cadence. Let's start with TPV. In 2026, we expect the growth to moderate into the high 20s due to increasingly tough comps, particularly in the second half. This growth is expected to add $100 billion in TPV. We expect 2026 gross profit growth between 10% to 12% with an implied gross profit dollar range of $481 million to $490 million.

There are 2 specific factors that uniquely pressure gross profit growth by 7 percentage points combined with their impact amplified by their timing. First, the 2 large renewals we have been discussing for the last year are expected to reduce our growth by 4 percentage points in 2026. The delay in these renewals benefited 2025, but increases the grow-over impact in 2026.

As a reminder, these are the last 2 renewals where we expect to meaningfully adjust our pricing coming out of the fintech boom a few years ago. Second, based on the level of block TPV exiting 2025, we expect them to shift to the next pricing tier in their contract, reducing growth by 3 percentage points. At the time of the block contract renewal in the second half of 2023, we agreed on the next level of scale for their business on our platform. To incentivize their growth, we included a price tier that steps down 2x the size of other pricing tiers in the contract.

Block just reached that tier in December 2025, and we expect them to remain there for all of 2026, creating an unfavorable year-over-year comparison. Those 2 factors weigh on 2026 growth because of their timing, but we don't expect them to be impactful to our growth trajectory in 2027 and beyond.

In addition, Cash App's diversification of new issuance is expected to lower our 2026 gross profit growth by approximately 1.5 to 2 percentage points. This assumes we gradually lose new issuance in the first half of the year and receive no new issuance in the second half.

Before moving on, let's take a step back. At the start of 2025, we expected gross profit growth to be 14% to 16% in 2025 and in the low 20s for 2026. We outperformed in 2025 with 24% gross profit growth. The key factors driving the outperformance in 2025, such as the TPV growth momentum and the timing of the renewals, onetime items and the jump in adoption of our value-based value-added services in Q1 2025 are some of the same reasons that gross profit growth in 2026 is lower.

However, the 2-year expected CAGR from 2024 to 2026 of 17% to 18% and the absolute dollar amount of 2026 gross profit have not changed. Coupled with the strong execution of our efficiency efforts and platform scale, we now expect both adjusted EBITDA and GAAP net income to be ahead of our projections for the start of last year -- from the start of last year.

Full year 2026 net revenue growth is expected to be 12% to 14% 2026 adjusted operating expenses are expected to grow in the mid- to high single digits. We remain disciplined with our investments in growth initiatives and continue to benefit from efficiency and platform scale. Investment delays that materially lowered our first half of 2025 expenses are lifting our growth rate in 2026. Therefore, we expect full year 2026 adjusted EBITDA to grow in the mid-20s, more than twice our gross profit growth rate.

As a result, we now expect to generate a modest amount of GAAP net income in 2026, likely around $10 million.

Let's now turn to the quarterly cadence. TPV growth is expected to be in the low 30s in the first half of 2026, then moderating and exiting Q4 2026 in the healthy mid-20s as we grow over strong year-over-year comps. For Q1, we expect gross profit to grow between 17% to 19%, representing approximately a 4 percentage point step down from Q4 2025. This is primarily driven by a 3 percentage point headwind from Block price tiering and a 1 percentage point lower contribution to growth from TransactPay. Q2 gross profit growth is expected to be approximately 3 percentage points lower than Q1, mostly due to the second major renewal going into effect.

We expect gross profit growth in the second half of the year to moderate to the high single digits, slowing from Q2, primarily driven by 4 factors: Lapping the inclusion of TransactPay will lower growth by 3 points. lapping the strong growth in our lending, including BNPL use cases in the second half of 2025 will lower growth by approximately 1 point. Incentive timing is benefiting the first half and decreasing second half growth by approximately 1 point.

The assumed loss of Cash App new issuance will reduce growth by 2 to 3 points. Q1 net revenue growth is expected to be 17% to 19%. Q2 net revenue is expected to be approximately 3 percentage points lower than Q1, in line with gross profit and in the low double digits for the second half of the year.

Our 2026 investments are primarily focused on technology and product innovation as well as increasing our go-to-market and compliance resources to meet growing demand.

Q1 adjusted operating expenses are expected to grow in the low double digits before jumping into the high teens in Q2 due to a tough comparison from investment delays in 2025. As you may recall, the Q2 2025 expenses were uncharacteristically low. Growth in the second half is expected to be in the low to mid-single digits as we grow over the inclusion of TransactPay and more typical investment levels. Q1 adjusted EBITDA growth is expected to be 45% to 50%.

We expect Q2 growth to be approximately 10% to 15% due to the tough expense comparison, while the second half should grow 20% to 25%.

Lastly, we expect to be approximately GAAP breakeven in the first 2 quarters of the year and then start generating net income in the second half. In conclusion, our achievements in 2025 have built a strong foundation for continued success in 2026 and beyond.

Our ability to migrate customers in both credit and debit and flip several portfolios helps accelerate time to value and translates to gross profit and bottom line growth. We have great traction in Europe, and we are already seeing increased demand and bookings with the acquisition of TransactPay and our ability to now offer a full end-to-end solution in Europe. Not only does this increase our pipeline and opportunities for growth, but we expect this to help bolster our gross profit take rate.

Lastly, the traction we are seeing with value-added services not only helps create stickier customer relationships, but also helps gross profit. As we head into 2026, we are excited about the momentum of our business.

Our deep expertise and ability to enable innovation at scale are paying off and these growth areas, coupled with our scale, position us to achieve GAAP net income profitability in 2026, a pivotal milestone that launches our next phase of value creation.

I will now turn it back over to the operator for questions.

[Operator Instructions] Our first question is from Timothy Chiodo with UBS.

Pat, great to be on the call with you. The Cash App topic, so I apologize for just getting right at this, but I did notice a little bit of a change there. So gradual on the new issuance in first half and then turning off the new issuance in the second half. I was wondering if there was any update you could provide investors around maybe the longer-term messaging around to what extent this diversification might persist? Would it persist into 2027, '28, '29? Will there be some kind of a limit to it where we hit a happy medium across the various providers that Cash App is using?

And then related to that, I also noticed that you mentioned the tiering that Block is hitting this year, and you expect them to be at that tier for the entirety of the year, which somewhat implies that the second half lack of new issuance isn't overly material to 2026 numbers as you've previously guided. But the follow-up question that if that lack of new issuance starts to catch up to the block volumes next year, does block potentially slip back into a lower tier and therefore, your take rate with block returns to norms rather than the headwind that it sees this year?

Thanks, Tim. I'll try to cover -- you covered a lot of ground there. So let me kind of dive in. So yes, we have changed our assumptions a little bit on the impact of them diversifying their new issuance. Up until this point, and we're almost at the end of February, we see no discernible impact on the new issuance we're receiving. So at this point, it's minimal to really not being able to see anything. And so -- but we do expect them to be getting started.

So what we've assumed now is that through the first half, it will sort of gradually -- we'll be receiving less new issuance. But then by the second half, we will no longer see any new issuance.

In terms of the second part of your question in terms of the longer-term impact of diversification, as you know, Tim, in payments, a lot of people have -- well, they see multiple providers, but they tend to have a primary provider, right, where you have 80% to 90% of your volume and then you have a second provider who you really use for diversification purposes. And how that plays out for us with Cash App remains to be seen, but we feel really good about our ability to remain their primary partner. one, we feel that our platform capabilities are quite differentiated in terms of what we can do and what we can provide them.

The second thing is that our relationship goes very deep and goes back very many years. And so we have -- we're accustomed to working together and have just a very deep relationship and are quite responsive in terms of how we work with them.

And then finally, and maybe most importantly, the -- there's a lot of very engaged users that remain on our platform and would be quite disruptive for them to look to maybe move those off of our platform. And when you look at the contribution to the spend from those users, we feel that's really going to benefit us to remain the primary partner. And we continue to also provide option value. So it'd be very easy for them to consider international expansion, for example, or move into more of a traditional credit card product on our platform that may be more difficult to do with the partners they're using for diversification purposes.

So we -- it remains to be seen, Tim, but we feel good that we have a very strong relationship, and we continue to add value, and we'll just have to continue to assess it as we get through this year.

In terms of your second question on the tiering, so yes, you're correct. I mean if you go back to the renewal 3 years ago, what really we set out to do at that time was with -- together with Cash App and the negotiation, we said, okay, when does the business hit sort of like the next level of scale, like truly get to even a completely different level of operating.

And at that point, we should maybe have a little bit of a price adjustment to reflect that new kind of level of scale they've achieved. And they just moved into that in December. And so -- but the tiers are relatively big. So just given the size of the business, and there are more than 10 tiers in the contract, but the blocks of volume are relatively good size.

So there's a lot of room in there for them to remain in that tier. But you're right that even with losing some new issuance, we still expect some growth and they would remain in that tier for the year.

And if they were really to start diversifying away more significantly, then that's the benefit of price tiering. It would start to get more expensive, and that would be the cost of diversification on their side. So we'll see how it plays out, but we feel good about our relationship and our ability to continue to add value there.

Our next question is from Connor Allen with JPMorgan.

Patty, congrats on your role. Maybe a question for you, if you don't mind. Can you talk a little bit more about your choice to join Marqeta? I'm curious, considering your background across cards and payments, just what stood out for you in your diligence? What makes you the most excited here?

Yes. No. Well, thanks, Connor, and it's nice to meet you. So I've been in and around payments for over a decade now across, as you mentioned, across acquiring, issuing and banking and across a bigger kind of like within a bank as well as kind of Stripe and then subsequently at Rooftop, which I was trying to implement embedded finance within that. So I've known about Marqeta for years, and I was at Stripe when they launched issuing and really recognized Marqeta as a category creator at that time.

So when the call came in, I spent some time with Mike and the Board and the leadership team, and I got very excited about the combination of kind of the team I'd be working with, but also kind of listened to a lot of their track record in 2025 and kind of the growth they've been seeing and kind of all the opportunities ahead.

And then also the customers that they worked with DoorDash, Klarna, Uber, Block, having worked with these customers across different organizations, they don't take these decisions lightly and really, it kind of validated what's been built here. And so -- and as you know, payment platforms are kind of complex and hard to build. So -- and they require deep relationships.

And so I just felt like my experience was especially relevant at a time and place where there was just a lot of growth and investment ahead. And so I'm excited to be here today to join the team.

Great. Appreciate that and share the same view on our side. Maybe one for you, Mike, if you don't mind. I wanted to ask a little bit about competition. There's been some discussion in the market about newer entrants competing for larger deals. I mean we gather that it's not necessarily happening where Marqeta typically participates. But I'm just curious at a high level, if you've seen any shift in the competitive environment, new faces and RFPs, et cetera?

We are not seeing any significant change in the competitive environment. I would say it's relatively stable. I think what is more changing from our perspective is a few years ago, in the fintech boom times, right, there were a lot more deals, a lot more uncertainty where you were making bets on customers and whether they would succeed. That was a big part of the sort of process. Not only are you bidding for the business, but you're also trying to assess the chances of success.

What's now happening is there are fewer deals, but they're much more substantial in size. And there are customers who already have a user base and a brand. And so from our perspective, have a much higher likelihood of success because they're really just looking to insert a card value proposition into an existing user base.

And so the fact that then there are more established companies has changed a little bit the dynamics of who we see because usually, they're only going to include players who have more substantial scale, and that's a much bigger part of the decision-making process because they're confident they're going to reach several billions of volume or maybe even to double-digit billions of volume annually and who has the platforms and the experience and track record of delivering on that kind of scale. And so it's mostly stable, but there is a slight change as we move upmarket, so to speak.

Our next question is from Darrin Peller with Wolfe Research.

Patty, nice to connect and congrats also, to connect again. I guess when I just think about the underlying trajectory of the business, Mike, I know we talked about 7 points of impact to your gross profit outlook really associated with the items that you discussed on Block as well as the renewals.

And I guess there's another few points on pricing, which I think is a little bit more newer to us just given the scale of Cash App. And so the combination, you're really still growing your Cash App by somewhere over 20% when you look at your guide and those variables. A, is that how you want us to think about the trajectory? And B, if that's true, maybe remind us of what you're seeing as the top drivers. I mean you're talking about flips in the business, where are you seeing the most strength? Just rank the top few strengths you're seeing driving that 20% plus algorithm.

Yes. Thanks, Darrin. And you're exactly right. There is the 2 impacts we called out that are 7 points, the renewals and the Cash App tiering, those to us are very timing specific. It's almost like they're almost perfectly lining up to hit our 2026 growth in a way if they were -- the timing was a little different, these impacts would be spread it out and our growth wouldn't be kind of where it is in the lower double digits.

So those 2 things, we really think are very specific to timing and therefore, go away. And then we have a little bit of 1.5 to 2 points of the Cash App diversification. And then just in general, the TPV growth is just moderating, right? The second half, our growth has really been particularly impressive given our scale, and we don't -- we still expect it to be strong, but not growing over 30%. And so you put all those things together, and there's sort of 7 points of timing and call it, 4 to 5 points of other factors.

I think when we look at what is -- what's exciting to us, I would put it in a few different areas. Like there's 4 things where we really have strong momentum. Like the TPV growth, again, is very impressive, particularly buy now, pay later, and we just think that's going to be a growing use case that's just going to continue to get wider adoption.

Europe is not only fast growing, but we've added capabilities there with TPL just in the last 6 months. Our value-added services, the size of that business doubled in 2025, and that tends to be a stickier, higher-margin business.

And then the new cohorts, the new customers we're bringing on, as I mentioned, 40 new logos, 14 of our 15 top customers have done a new program with us in the last 2 years. So our existing customers are expanding with us. And so those are all the things that make us feel confident of just the underlying momentum in the business.

And then when you combine that with some things that are more on the come, a pipeline that's full of enterprise customers who are looking to move into card payments and looking for established scale players. We have innovative new products that we're experimenting with and we're hoping we'll get some traction in 2026.

And then, of course, credit is something that we've been taking our time with making sure we do it the right way, but we're going to start leaning in more and more in kind of the next year or 2. So those are all things that I consider to be on the come.

And then the last piece I would just highlight is the beneficial mix as Europe and value-added services, which are growing much faster than the company, and we think will continue to do so, as they gain share of gross profit, it will lift the overall gross profit growth rate.

So that's why I mentioned in my comments, I think the growth we're seeing in 2026 is very specific. We think that actually the underlying components and structural elements of the business are actually quite strong and on a good trajectory, and we feel good about the path that the business is on.

Yes. Okay. Guys, just one quick follow-up would be to double check that you reviewed the portfolio and don't feel any risk of incremental renewals, large renewals. I just want to see if there's anything else we should just keep an eye out for, for the year that would impact maybe guidance even into the next year. It may be too early to know the end of the year, but anything you see where your transparency is?

Yes. I think it's probably a little too early to be talking about 2027. But I think, yes, we do, on a normal way basis, have renewals all the time. But really, these 2 that we're highlighting here are the 2 remaining from coming out of the fintech boom. But I think you'll always see as we're kind of growing with these users and you would see -- you would naturally see some pricing step down as they grow with us, but that's, again, to incentivize them to grow with us.

Yes, I would say, we have pretty good visibility. And I think we -- as Patty just said, I mean, we've included sort of the BAU things that we would expect to see. So we feel pretty good that we've incorporated everything.

Our next question is from Sanjay Sakhrani with KBW.

Welcome, Patty. I'm just curious, I know, Mike, you talked a little bit about the expectations for moderating TPV growth in the second half. Obviously, you're growing over some difficult comparisons. But curious, is that sort of conservative given you have the pipeline and then obviously, BNPL is doing well? Or do you feel like there will be a little bit of a scale back in terms of issuance there?

Yes. It's a great question, Sanjay. I think the performance we're seeing in this past quarter, I would say, is just -- is pretty remarkable. Like when you -- just to step back a minute, our lending and buy now, pay later use case is growing almost 60%, and that's despite us lapping the conversion with Klarna that started -- that we executed in October of '24. So we're growing almost 60% with like a tougher comp. Expense management is growing over 40%. That's a pretty big use case for us. So that's the first time it's grown over 40% in 3 years.

Financial services, which is by far our largest use case, is growing over 30% in Q4, and it hasn't -- that's the first time that's happened in 2025 on, again, a very large base. And even on-demand delivery, which for the last couple of years has been more of a single-digit grower, is now double digits the last couple of quarters and accelerated. So we really are seeing incredible performance. We've tried to be reasonable.

As we said, we think in the first half, our growth will remain over 30% as there's just so much momentum. But as we get to the second half, it's just we have really tough comps. And if some of these things can keep rolling at that level, obviously, that would be great for the business, but that's not what we've assumed for now. We think those tougher comps will slow the growth a little bit, but growing in kind of the mid- to high 20s on a base of almost $400 billion of volume, we feel pretty good about the growth of the business.

And then just a follow-up on value-added services and Europe. I guess when we think about the growth there, can you just maybe help us dimensionalize sort of what you're expecting this year versus last year? And what maybe the broader product rollouts are that could actually maybe accelerate the growth there as well?

Sure. So let me start in Europe. Europe is now I don't know, about a little bit -- maybe a little bit more than mid-teens of our TPV. And this is the first quarter in a couple of years that it hasn't grown over 100% just as that base is growing. As I mentioned in my comments, 2025 is 8x the size of 2022 in terms of our business in Europe. So we have a lot of momentum there, and that was all done with a relatively limited value proposition of just our -- we have great processing.

And of course, we're quite proud of our processing capabilities, but we didn't really have many other services around that capability. And with the TransactPay acquisition, we now have a much more robust value proposition to sell and market. And so we are expecting Europe to still meaningfully outpace the overall company, both in terms of TPV growth as well as gross profit growth. So we expect that to be a pretty major contributor.

In terms of value-added services, we continue to add new capabilities and more and more customers are looking for scaled solutions. I would say the growth, we think, will moderate a little bit in 2026 only because we really had a pretty significant step-up in 2025.

We had a few of our largest customers adopt offerings from us, which then meant that the gross profit doubled in 2025 versus 2024. And although we think it will keep growing at a nice clip faster than the company, it's not going to keep up that pace. But we do think it will be a meaningful contributor.

And typically, those are higher-margin products and they increase the stickiness with the customer as well. So we're quite excited about kind of our expanding portfolio and the increased penetration that we have with those products into our customer base.

Our next question is from Craig Maurer with FT Partners.

Welcome, Patty. I wanted to put a finer point on Tim's question earlier considering a lot of what I had has already been asked and answered. Visa was pointed on their call to call out the win in cash for Cash App. They've been putting a lot of emphasis on their Issuer Services business. So I was wondering what you're seeing differently from them? Are they increasing their presence in the market in terms of what they're doing for fintechs? How is this changing how you're looking at the market, if at all?

Sure. Obviously, I don't know exactly. I can only see what Visa says publicly. But in my view, what Visa DPS particularly offers is, obviously, they have a lot of credibility to say they can handle your business at scale with great reliability, right? So when you've gotten to that size, then they become an option, and they're used to managing customers of that size.

And just because of the size of their platform and how long it's been around, my perception would be they're probably just not quite as flexible. So catching customers earlier in their life cycle is probably not kind of prime hunting ground for them. But talking to or talking to prospects who have already achieved a lot of scale and have a lot of maturity, that's a good match for them and where their strengths, it sort of plays into their strength, so to speak.

So I would say I think they have made platform improvements. I have no doubt they have more capabilities than they did a few years ago. But I think there's still a relatively small group of people that kind of have that kind of scale that they would target. I think we would still have big advantages, I think, in terms of nimbleness and thinking of more creative solutions to solve very specific problems for customers as opposed to something that's pretty stable processing and they know what they want. And so we may see them a little bit more a couple of years ago, we didn't really see them much.

And I think as we go after bigger and bigger business, then that would be maybe a competitor we'll see a little more frequently. But we still feel very good that our value proposition is that we also can support a lot of scale and have programs that are quite big, but we still have a lot of agility and a lot of unique capability and configurability that allows people to do things that are a little bit different and differentiate themselves in the market, and that's really what sets Marqeta apart.

Our next question is from James Faucette with Morgan Stanley.

It's [ Michael fonte ] on for James. Mike, I'd be curious to hear how you're thinking about the mix shift we're seeing in BNPL broadly with respect to a larger percentage of volume originating on Flex credential cards as well as within digital wallet. So as that mix shift continues, what's the impact on your unit economics, if at all?

Yes. I would say not a big impact on our unit economics. I would say they're relatively similar. I would say, typically, more of a consumer value proposition is going to have a little bit of a premium versus a single-use virtual card. But at least at this point, the people -- the first movers with the flexible credentials are quite large players who have a lot of volume. So I would say the economics are relatively similar.

But the big difference is the lack of -- I don't know, maybe I'll just say stickiness that comes when you shift from a virtual credential to a consumer credential. That's going to be a much more sticky relationship, harder to diversify because there isn't a lot of precedent for people trying to run a single program on multiple stacks. And versus in virtual card, every transaction that occurs, you could send it to a different platform if you wanted.

And so I think the real benefit to us in addition to just having leadership in this space and being able to handle consumer value propositions, which some of our competitors don't have a lot of experience with. But in that shift to something that's more consumer-oriented, it also becomes a little bit of a stickier business for us and a little bit more challenging for customers to diversify, which should be good for us given our early leadership here.

That's helpful, Mike. And then maybe just secondly, any quick update you can share just on the nature of your conversations with some of the larger financial institutions and in the areas that they're diligent in?

Sure. I would say we -- our conversations with financial institutions, I would say, are more frequent and substantive now than they were a couple of years ago. I think there's a real shift in the market towards people really looking at modernization. I think the -- as we've said before, the fintech winners have been crowned and they're becoming big businesses. And so what I think maybe a few years ago, maybe people saw as growing the pie are now starting to become real competitive threats and real competition for the banks for not only deposits, but also spending, both consumer and commercial.

And so I think there's a broader recognition that to successfully compete with some of those value propositions, you're probably going to need a little bit more sophisticated technology and more more ability to be flexible and configurable. And so we are having more and more conversations. We still believe, though, that these are inherently cautious organizations, and we're likely to break in still with a specific use case.

And I would say the 2 probably at the top of the list from our standpoint would be something in commercial, just given our success and proven track record at supporting many of the disruptors and then also in some sort of lending buy now, pay later use case where a lot of banks also are interested in providing that kind of capability on their cards.

And we clearly, again, have established leadership and track record and ability again to support big scale. So we're working to get our foot in the door. And I would say the conversations, there's a lot more promising than maybe a couple of years ago where it felt like it was still pretty far off.

Our next question is from Andrew Schmidt with Citi.

Welcome, Patty. So I just wanted to dig in on the implementation time frames and partner bank diversification. Maybe you could just give us an update there. And then for the enterprise customers for embedded use cases, if you could just elaborate on what implementation time frame looks like for that type of customer, that would be helpful.

Sure. So in terms of new bank partnerships, we added a new -- well, a new U.S. bank and then a U.K. bank last year. We're in the process of implementing another U.S. bank and a European bank in the first half of this year. So we are diversifying our bank offering. In Europe, it's purely because now we have the capability to sort of offer a combined value proposition. So those are new.

And in the U.S., the diversification more is targeting 2 things. Either it's a use case, not all of the banks are comfortable with all the types of use cases that we can serve. So some of it is about -- as our business diversifies, we might need different partners. And then some of it is also capability, right? Some of these banks have been investing and have some unique capabilities that we think pairs well with ours to meet a customer need. So that's why we're expanding our bank kind of portfolio.

In terms of the implementation time, I think we've gotten to a good place there, where we have solidified the processes. We've taken out a lot of the the challenges we had with things moving slower. And I think also we've done a good job educating customers about the impact of changes that they make along the way and what that can do to time line. So I think we've stabilized that pretty well.

But maybe what you're signaling in the second part of your question is true. As we're moving into more enterprise deals, they do move a little slower, right, than our previous customer base who -- a lot of times, our value proposition or the card they were doing with us was critical to their business and what they're trying to achieve. So they're ready and willing to move very fast, and it's one of the top priorities going on at the entire company.

When you're dealing with a much larger organization, there's just more complex decision hierarchy, there -- even just the kind of scrutiny that we get in terms of tech and security and all these things, it just takes a little more time. So I would say, in general, they're moving a little slower.

But as I mentioned earlier, we're okay with that trade-off because we feel the probability of success is much higher and their ability to hit the ground running is also much higher given they're going to be bringing this value proposition into an already established very large user base as opposed to a few years ago when it was a new fintech, they were going to be building it mostly from scratch.

Got it. I appreciate those comments. And then maybe we could just chat on value-add services for a moment. It's good to see the uptake on the enhanced risk product. Can you just talk about just expectations for attach there, monetization, that would be helpful.

And then obviously, a more important point of all this is just the pipeline for other value-add services. It's important to keep iterating these. Maybe you can talk about kind of what you're sort of targeting, what types of areas in the future.

Sure. I think the biggest change that we're seeing is that, again, with the fintech customer base, they almost prided themselves in piecing together kind of best-in-class solutions, right? They viewed it as their modern tech stack, they're going to take best-in-breed and pull it together to something that's quite unique in the market and best-in-class. And so they were a little bit willing to choose a la carte.

I think as we're talking to more and more enterprise customers, if you've got a good solution, they're happy to take it from you. They don't want to connect to 5 different people to push -- pull together their value proposition. So if you have a good offering to make and you're going to be the process and program manager, they are -- I see what we see are more inclined to take that solution from you just to make their life a little bit easier and to be able to move faster. And so that's really the difference that we're seeing in the uptake.

And in terms of the areas, I think our strength is clearly in tokenization. We have capabilities there that we think are very differentiated. And then in our risk services. Those are the 2 areas. Everyone in issuing is going to want -- is going to have to do some level of fraud management and fraud monitoring, right? And so those are the 2 areas that I think we're going to continue to invest and make sure we remain strong.

But we are moving into new areas related to rewards, our white label app, more kind of data and analytics services as we continue to get bigger and have more scale. And so those are some of the things that are relatively small now, but we think have a lot of potential to be larger in the future.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you again for your participation.

Okay. Welcome, everyone. We're going to get started here. So we're going to start off, first of all, thank you and congratulations to Mike Milotich, who was recently named CEO, so now CEO and CFO, at least temporarily. But congratulations to Mike on the appointment, and thank you for being here in Arizona.

Thank you for having me.

All right. Also I want to say thanks to Maria, who also made the trip. So the IR team from Marqeta here in Arizona as well. So thanks to both of you guys for year in and year out being such a big part of our conference here. All right. So we mentioned that Mike was recently named as the CEO, and we wanted to, again, congratulate you on that. And just talk a little bit about some of the strategic initiatives that are top of mind for you. We fully appreciate that you were already a part of a lot of the planning. So not a ton is changing, but it's just a good way to kick things off.

Yes. Thanks, Tim. I would say, agree, I was very involved in the business as CFO and then have been interim CEO since February. So not a lot. It feels like I've very much settled into the role. I would say my focus really lies on continuing to make sure that we progress in the areas that what truly makes Marqeta different, which is that we are a full modern platform that's operating at scale that does both credit and debit, consumer and commercial across 40-plus markets.

That really is something that separates us and we think is going to be a big driver of our growth going forward because we are -- we feel differentiated in the market. I would say the couple of things that are top of mind then based on that is really twofold. So one is the platform itself. So that's something that I spend a good amount of my time on and trying to ensure that we continue to progress to make our capabilities more extensive. We are trying to become more and more of a -- have a full offering where we provide kind of front-end user experience. We provide, of course, processing and program management, banking and money movement capabilities. So that full stack and then more and more making sure the platform continues to scale well.

Like this year, we're going to add about $100 billion of volume to our platform. And so really making sure that the platform is ready to support many very large enterprises and 1-day FIs. So really focusing on making sure that our platform can scale appropriately. The second area that I focus a lot on is just how we work, making sure that we are efficient in how we're doing things so that we can remain nimble and responsive to our customers because that is something that separates us now where we leverage our expertise to do unique things for our customers, and we want to make sure that even as we get larger, that we continue to provide that kind of service.

All right. That's a great intro. Thank you, Mike. Let's talk a little bit about the holiday season. So coming out of the earnings call this past quarter, you did talk about some really strong performance in BNPL, which is also a big category for the holiday season. Maybe you could just talk a little bit about your BNPL business and how that's going.

BNPL was definitely one of the stars of our earnings this last quarter, where our overall TPV growth was 33% in the quarter and accelerated 3 points. But what we said about our lending and buy now, pay later use case is that it accelerated 10 points from Q2, and it's growing about twice the rate of the company, so growing over 60% -- and the highlight there is that from Q1 of this year and last year, the run rate trajectory of our lending and buy now, pay later use cases was in the growth in the 30s.

So the growth has accelerated about 30 points since then. And it's really driven by 3 factors that are each roughly similar in weighting. So the first is that the adoption of Visa's flexible credential within the buy now, pay later use case, and we now have 2 of our customers live in the U.S. utilizing it. And this shift has been happening for some time. We've been talking about it for probably a year or 2, what we call pay anywhere cards and buy now, pay later, where the value proposition is shifting from a bug you click on the merchant website to the buy now, pay later provider, providing you a card that can be used anywhere Visa, Mastercard accepted and buy now, pay later is a feature on that card itself.

And the flexible credential is just improving that value proposition, and we're seeing incredible adoption. We were the first to make the flexible credential a reality in the U.S. And as far as I know, we're still the only processor with a program live using it. So that's a big factor in the U.S. The second component is also U.S.-based, but outside of the flexible credential, where there's 2 things happening.

One is the buy now -- our buy now, pay later customers are getting additional distribution through wallets. So there's a lot more volume that they're tapping into that was maybe happening in the buy now, pay later space, but outside of our customers' purview. And as they're picking up that volume, so are we. And that's one aspect of it. And then the second, and we've talked a lot about this in the past. In early 2024, one of our U.S. buy now, pay later customers was diversifying some of their virtual card business. And so we are now lapping that and our growth rate is benefiting. The third piece is Europe. So our Europe business is growing fast in general, but particularly in lending and buy now, pay later, and it's driven by 3 factors.

One is also the wallet distribution is helping Europe there. The second piece is Klarna migrated between 4 million and 5 million cards to our platform last October. And so we'll be lapping that in Q4. But up until now, it's growing very strongly. And since it got on to our platform, it's also been performing very well. So that's a big factor. And then the third piece is we have a very large SMB lending customer in Europe that has businesses is very much thriving and they're doing new offerings on our platform. And so -- those are the things that are driving the growth.

Most of it, we feel is sustainable. In Q4, we will lap the client migration in Europe. So we expect the growth rate to slow a little bit. But the -- overall, it's going to grow meaningfully faster than the overall company. In terms of the holiday season, I mean, it's a little too early to say. I would say we're about halfway through. And yesterday, obviously, is a big day, a big part of the holiday season. But we expect that use case to perform quite well and again, faster than the overall company.

All right. Excellent. That sounds good. Thank you, Mike. These next 2, we're going to combine a little bit. So you did talk about some favorable business mix, right, that was benefiting gross profit growth. And related to this, you also have some contract renewal updates coming, right? Some shifted a little bit into next year. But maybe those 2 can go together, and you can just talk about what that means as it relates really to the difference between volume growth and gross profit growth.

Sure. So in addition to buy now pay later, which we just discussed, the second area of our business that was performing -- performed quite well in Q3 was our on-demand delivery business, where it hasn't grown in the double digits in many quarters and over a year. And this quarter, the growth rate doubled and it's into the double digits growth. And that's being driven by our customers are expanding in terms of the merchant categories and also geographically. So they are moving into new markets also on our platform. And so that's helping the growth rate there. So that's part of the beneficial -- the mix that we're seeing.

The other components that are also important is we have been expanding our value-added service capabilities. And in doing that, we're getting more and more adoption from our customers. So in years past, that was a very small part of our gross profit stream. In Q3 or in 2025, maybe I would say is maybe a better way to look at it, we expect it to be about 5% of our gross profit. And so it's becoming a more meaningful part of the business, and that's all in the same volume.

So that's something that is also helping the business as some of our larger customers adopt new capabilities from us. In terms of the renewals, we talked at the beginning of the year that we have 2 major renewals that we're doing this year. If you step back for a minute, in 2022 and 2023, we renewed about 80% of our volume. So they're coming out of the pandemic, there was a lot of activity and our customers had grown quite a bit, many of them by many multiples, and we were resetting pricing. This year, these are the last 2 of our top 10 customers who we haven't done renewals yet. Both of them their business has more than doubled since the last time that we did a contract. And so we do expect the pricing to reset to some degree.

At the beginning of the year, we thought it would be done by midyear. It's just taking longer. We're still pretty far away from the contracts expiring. A lot of what's causing it to just take a little bit longer is we're also talking about new opportunities to do together as part of the renewal. So we're trying to broaden the relationship. And as we discussed that, it's just taking a little bit longer. We expect one to get done in Q4, and it will impact our growth by about 2 points and the second one to get done early in 2026 and again, also impacting our growth by about 2 percentage points.

All right. Thank you, Mike. And these topics are kind of all somewhat related. So you did raise the recent gross profit guide, right? And I was hoping you could just put a little context on what this means in terms of the exit rate gross profit. And for next year, just what are some of the items that we should be considering as we model out gross profit for next year, a few of them you've already mentioned?

Sure. The growth is definitely going to be stronger this year. I mean 2024 is a little bit hard to look at as well as 2023 because in the middle of '23, we did our big Cash App renewal, which had a significant impact on our gross profit growth. So the easiest way, I think, to look at it would be in Q4 of last year, we exited the year growing at 18% gross profit. So that is where we exited last year. And this year, we're now expecting to grow over 20%.

The acceleration is really coming from some of the things we've already just talked about. So the incredible strong performance in buy now, pay later, On-demand delivery is doing better, and we expect in Q4 will still be relatively strong. Even in our expense management use case, that's another area where our platform showcases very well because of the flexibility and the controls we give our customers. That use case has consistently grown faster than the company overall, and that continues to be the case. And then even in our financial services, which is our largest use case, but when you look at our financial services use case, excluding Block, that is growing at about twice the rate of the company. So it's still growing quite fast.

So everything related to our growth is first going to be driven by volume, and there's very strong factors. The second thing that's helping acceleration is our international business and particularly Europe. So Europe TPV continues to grow over 100% in Q3. And our international business as a share of volume is now in the high teens, and it's up 5 percentage points from last year. So as that very fast-growing business becomes a larger and larger part of the company, it's just lifting the growth rate for the overall business. And we're still bullish on Europe.

It's not going to grow 100% forever, and that's probably going to end here soon. But it's still going to grow very, very fast. It's becoming a larger piece of the business. The last thing is what I already also briefly mentioned, which is our selling of value-added services. We're just much more effective at adding additional value for our customers and charging for those things. And we think that will continue as we continue to build out a portfolio of services to offer.

Excellent. Thank you for that, Mike. All right. Let's move on to next, which is your largest customer in Block. So to set the stage, Block-related gross profit has already decreased from kind of north of 50% to now down. We think it's roughly in the 40%-ish range of gross profit. And you have a long-standing relationship with them, many services, many products. It's not just the Cash App. But recently, and this is a natural thing in the industry for large customers to diversify processors. But recently, you received notice that Block was going to be diversifying processors for Cash App.

And if I understand correctly, they stated intentions to have all the new card issuance come under the Bancorp and handled by a different processor beginning on January 1. You called out a roughly 200 basis points gross profit impact to 2026, assuming that all new issuance went to this new processor starting January 1, which in reality, that might not be the case. It might not go 100. It might not all go on day 1. But I was hoping we could talk a little bit about that for 2026, but maybe more importantly, what this means over the longer term if we were to take those statements simply at face value and having the lack of renewed cards coming into the business over time?

Sure. What I would say, as you mentioned, this is a very natural and Common Risk Management approach in the industry and lots of industries to diversify your providers. And most of our top 10 customers now are using more than one provider. So this is not a surprise in that sense. I think what's important, the way we look at it is what's typical in the industry, both within processing, but even how the issuers will utilize the different networks is most people in the space tend to have a primary partner.

So you give the bulk of your business to one partner and then you have a secondary provider who keeps your primary partner honest. And so what Cash App is doing in diversifying is not a surprise to us. This is something they've been working on and we were aware of. And so -- and it is perfectly understandable. So the key for us now is to continue to deliver and focus on just maintaining the primary partner.

So the key is that what they've told us is we should expect they're going to try to do new issuance on another platform in 2026. But the key is how long will that last? Like one of our other large customers, for example, who diversified between 1 and 2 years ago, they stopped at about 10%. And so clearly, in that case, we remain the primary provider, and they have a secondary provider who is roughly 10% of the business. And so what's unclear is how it's going to unfold after 2026 because it will take some time for them to build a meaningful amount of volume on [another] platform.

And so in the meantime, we continue to work together. I think what's important from my point of view is that we continue to talk about new things we're doing together, and we're doing new things currently. So it's not like we -- they've sort of said, okay, our relationship is -- you're just in maintenance mode, and we're moving on. We're still very much engaged. The companies interact quite a bit. And we also think there are areas that we can really help them continue to grow because of the way our platform is structured, new growth areas for them potentially could be, for example, moving outside of the U.S. They're pretty U.S.-centric right now. They could do that seamlessly on our platform. If they were to move more into credit card issuing, they obviously do some credit today, but not on like a true sort of revolving credit card.

If they were to go down that path, again, we could seamlessly deliver that for them. So we think there's still a lot of ways that we can add value and drive growth together. And we'll see what happens. We have to earn the business every day, and that's what we intend to do.

All right. Thank you, Mike. I think many investors will appreciate you having cleared that up. All right. Let's move on to another big topic, which is the Klarna card. So it launched in 15 new countries in Europe. It had a U.S. launch, and Marqeta is enabling, as you mentioned earlier, live programs on Visa Flex credentials. So maybe just talk a little bit about this. This is another marquee customer for Marqeta and this program specifically.

It's very exciting what's happening with Klarna and how we're enabling their growth. I would say it started in October of last year when they migrated between 4 million and 5 million cards in 3 countries to our platform. So they moved that debit business onto our platform. So that was -- and we obviously have a long-standing relationship with them, but that was in this journey in terms of them doing what we call pay anywhere cards, really shifting their value proposition to being a card that they put in the consumers' hands as opposed to a checkout at the merchant. That shift really started last October in Europe.

And then in the summer, they launched the flexible credential in the U.S. And then what's now happening is -- those 3 markets we did for them in the migration last year, they are shifting to the flexible credential and they're expanding that into 15 markets. So additional markets on top of those 3. So I think what that really showcases in terms of what makes Marqeta unique is that -- we bring obviously a lot of scale to support them because those businesses are growing very fast. But we still have the flexibility to really innovate as the first provider of the flexible credential in the U.S. and now helping them expand into 18 countries in Europe, all within 6 months' time because the U.S. program only launched in June. So it really shows the kind of value that we can bring. And Klarna has been a great partner for many years, and we're excited to keep supporting them as they grow their business.

All right. Excellent. Thank you, Mike. All right. Well, let's move on to a little bit of a different topic, which is OpEx. So the way we word it is that cost containment has been a hallmark of the Mike Milotich era. And I think you've done a really good job in letting some of the EBITDA come through. So maybe you could just talk a little bit about how investors should be thinking about modeling costs into 2026 and also specifically stock-based comp.

When I joined in early 2022, we just were not very efficient in the way we approach things. So there was a lot of opportunity. So that's really what we've been focused on. I would say there's really 4 areas where we've made a lot of progress. So first is we've just made -- we've invested in a lot of sort of tools and processes and ways of working that allows our internal resources to be much more efficient than they had in the past.

We were a little bit unstructured and intended to kind of throw bodies at problems kind of pre-IPO versus now we're being a lot more disciplined about it. The second thing is we're definitely adopting AI. It's making us do things much more efficiently, particularly in engineering. The third area is from an org structure perspective, we were a little bit top heavy in the past, and we've created a much more sustainable and sort of fluent org design. And then finally, we also were -- as a platform company, we were very U.S.-centric at the time of the IPO, and we have now diversified our talent. We're finding great talent in both Poland and Canada.

So we've diversified our workforce quite a bit, and that's a lot of what's improving the profit trajectory of the company. And we've come an incredible way. I mean, last year, we had $29 million of adjusted EBITDA, and it was about a 6%, 7% margin. This year, we now expect it to be over $100 million, so more than 3x and at about a 17% EBITDA margin. So we've come a long way. And we think that this business can be a 50% EBITDA margin business. It will take time. It's going to take a long time to get there. But the nature of our business is that it's very high fixed cost. So we have to make a lot of investment. And if we make the right investments and we execute well, then it scales very well with very low marginal cost.

And so as long as we continue to do that well, we think we can grow expenses materially slower than gross profit. This year, our adjusted expenses are going to grow in the low single digits. So this year was a little bit of an anomaly. It's a particularly strong year. But we would expect to grow in sort of the high single digits on a go-forward basis, which should be significantly slower than our gross profit growth, which means we should continue to see margin expansion on a go-forward basis.

Excellent. Well, you kind of covered one of the questions. So in the interest of time, we're just going to see you hit the 50% maybe longer term. You talked about the OpEx growth maybe in the high single digits. Do you mind just putting a finer point on the stock-based comp component?

Sure. Again, another area where at the time of the IPO, maybe we're not quite as disciplined as we have been in the last couple of years. I think the key whenever I'm talking with investors about our stock-based compensation is just for people to understand that what shows up on the P&L is based on vesting. So even though we had changed our practices several years ago, you still had grants that were done in 2021, 2022 that were still flowing through our P&L based on the vesting cycle.

And now we're really getting to the end of that. And really, what you see in our P&L now are more grants that have been done in the last couple of years. that we feel we've done much more appropriately. And so that run rate of stock-based comp that we're at now, which is around roughly $110 million a year is where we think it will really settle for at least the time being.

So we don't think there'll be further improvement from here because stock-based comp is still a very critical component to attract and retain key talent. And ultimately, for our business, it is very talent-driven as a tech platform company and roughly 2/3 of our employee base are in product and technology. This is just a big part of how we remain competitive and continue to be differentiated. But that new run rate we've established now, we feel good about, and that's something that's going to help us as we've said in 2026 to at a minimum, have -- be GAAP breakeven. So we're on the verge of GAAP profitability.

All right. Excellent. Thank you, Mike. We only have a few minutes left, but I think we can probably squeeze in this last one. You touched on this a little bit earlier in terms of the acquisition of TransactPay and what's going on in Europe. But specifically, you recently made some comments around it driving significant customer interest. You're seeing inbound referrals, some enterprise-type opportunities coming your way. Maybe you could just expand upon these inbounds that you're receiving.

Sure. TransactPay, there's really 2 sources of value that we looked at. So one is we want to be able to serve customers on a multinational basis and do it in a very consistent way. And prior to the TransactPay acquisition, we could do that in processing consistently between, say, North America and Europe, but we did not have the program management

capabilities. So if our customer wanted to expand into Europe, they had to bring on additional partners to support them in areas that we do -- for services we do for them in North America. The inclusion of TransactPay allows us to now have a much more consistent value proposition. And we just this in Q3, announced that one of our long-standing U.S.-based customers in expense management is now expanding to Europe and taking advantage of the fact that we can do processing program management with the EMI license and make that seamless.

The second aspect of value is that we've been got consistent feedback over the years in Europe that the very high end of the market, the very large players only want one partner for processing, program management and the license. And so that was a part of the market we really couldn't serve effectively. So that's another aspect that we're hoping to see value, and that's exactly what's happening. So in our pipeline now, we have both European-based customers, but as well as U.S.-based companies that are looking to deploy a card product on a multinational level in relatively short order. And the size of those companies and the opportunities that exist, we just don't think would have been coming our way had we not made that acquisition. So it's looking very promising in terms of realizing the value that we expected.

And is it safe to say that those U.S. companies that are looking to go to Europe, it's a lot easier just to pick you now because it's one less meeting, one less negotiation, one less everything.

Absolutely. The shift that we're making, we've been talking about for a couple of years now from fintech to embedded finance. The embedded finance customers is -- think of these as large companies. These are Fortune 500 companies that are not in financial services, but want to launch a card product. And those companies are usually going to be multinational already. So they don't think about -- in fintech, a lot of them were new companies. So they were starting in one country, and then they might try to expand. These are businesses that day 1 say, well, I mean, I might launch in the U.S. first or I might launch in the U.K. first, but then I very quickly, within a year, want to be on a multinational level, sort of like what we're seeing with Klarna and the flexible credential, right? In 6 months' time, they're going to be in 19 markets.

So people with that kind of mindset, again, it just -- it one of those things that really sets Marqeta apart where we have the modern platform that has all the capabilities, but we have proven scale to support a very large customer, and we can do it across all these different use cases of credit and debit, consumer and commercial and do it on a multinational basis in really the most attractive card markets. I mean we're 40-plus countries. We don't have true global coverage, but we are in the really attractive card markets. And so we really think that's what sets us apart and should be driving our growth for years to come.

All right. We made it just on time. Again, to Maria, to Mike, thank you so much for being here. On behalf of our old team in UBS, we really are glad to host you guys here many years here in Arizona.

Thank you, Tim.

All right. Let's do that again. We'll restart that, reboot. So good morning, everybody. Thanks for being here. I'm Bryan Keane. I head up the fintech practice here at Citi, and we're excited to have Mike Milotich, who's the CEO of Marqeta.

I will run through a list of questions here with Mike. And then if anybody has any questions, just feel free to raise your hand. So for the second time, Mike, thanks for being here.

Thank you for having me.

I want to ask you, Marqeta, obviously reported impressive third quarter metrics. TPV was up 33%; net revenue, up 28%; gross profit, 27%. So all great metrics, 19% EBITDA margin was really impressive. But before we get into the numbers, the one question I keep thinking to myself is you're now running 2 jobs as CEO and CFO. So you had the whole quarterly call by yourself. And I kept thinking like, poor Mike, you need some help. So I hope you're getting paid 2 salaries, but I was hoping you can maybe update us first on the CFO search.

The search is going well. So when I was named CEO in September, we started the search, and we have a firm that's helping us. So I'm starting to meet a lot of great candidates. So we're trying to move quickly so that I can have a partner to help capture the incredible opportunity that's ahead of Marqeta. I'm mostly looking for, obviously, a great finance professional, but also someone with very high business acumen because we do have this just incredible market opportunity ahead of us and having someone who can help us drive growth but also do it in a sustainably profitable way is what we're looking for.

And the hope is the next 3 months, 6 months, 9 months?

I mean the -- I'm hoping sooner rather than later, but you need to find a candidate. So that's what's most important.

All right. All right. Good. Wanted to dive in on some of the business segments. Obviously, the one that stands out is BNPL growth. And I wanted to talk about that, in particular, I think it was growing double the company average. What's -- how do you see the outlook in the BNPL business going forward? And how does Marqeta differentiate itself in this market?

Yes. Our lending Buy Now -- which we include Buy Now, Pay Later, that use case, as you said, it's growing over 60% and the growth -- the TPV growth accelerated 10 points from last quarter. So clearly, it's performing very well. I would say the easiest way to talk about what's causing that very strong performance is to compare it to our growth in Q1 of this year and most of 2024, this use case was growing in the 30s, right? So the growth has accelerated by roughly 30 points since that run rate of where we were for several quarters prior to Q2 of this year. And that 30-point acceleration is really driven by 3 factors that are all roughly the same in terms of weighting.

So the first is the launch of the Visa Flexible Credential a little over a year ago. This allows in Buy Now, Pay Later for them to offer what we call a Pay Anywhere card. So rather than the value proposition in Buy Now, Pay Later being driven by the merchant where you see the checkout button, the Buy Now, Pay Later customers of ours are providing a card that allows you to pay in full or Buy Now, Pay Later anywhere that Visa is accepted. And we were the first processor to enable this capability in the U.S. And to our knowledge, we're still the only processor who has a program live. And so we have two customers who have launched and that's driving quite a bit of growth. That's one component.

The second is, again, still in the U.S., but outside of the flexible credential. We are seeing really there's two factors. So one is the Buy Now, Pay Later customers we have are getting increased distribution through wallets. And so that is driving more volume to our customers, which then in turn comes to our platform. And then the second factor is also that we -- several of our customers in this area have diversified providers over time. One of our customers did some diversification in 2024. And so we're starting to lap that. And so that is accelerating our growth as we -- the year-over-year comparisons get a little easier.

And then the third component that's driving this acceleration is in Europe. So there's a few factors that are going on there. One is we migrated 3 or really 5 programs in 3 countries for Klarna last October. And so -- that is not in our base yet. So that's fueling a lot of growth. Same as in the U.S., increased distribution through wallets is another factor. And then also in Europe, there's -- we have a couple of customers in the SMB lending space that use our product and their businesses are thriving and they're doing quite well. So those are all the factors that are driving the incredible acceleration.

And our view is that this growth will remain elevated, maybe not quite at these levels for the next several quarters, but it will continue to grow much faster than the overall company because a lot of these advantages are sustainable. So there will be other processors who will support flexible credentials, but we have a significant lead, and it does require some expertise and experience, which we now have and others won't. Our ability also to support people in a multinational way with one platform is a unique advantage. So not just for flexible credential, where we're doing both credit and debit, but being able to support over 40 countries on one platform makes it just very easy for our customers to expand geographically. And that is a huge factor in many of our use cases in terms of our growth.

Yes. I want to ask about the -- when you say BNPL increased distribution through the wallets, what are you exactly talking about there?

So there are a couple of very large wallet players, one in particular that used to offer their own Buy Now, Pay Later, and they decided to stop doing it themselves and instead offer the Buy Now, Pay Later companies as the option. So they got out of the business of doing it directly and leveraging the companies that are dedicated to that space.

Yes. Yes. We know who that is. And then -- so what is the -- is there a same-store sales growth to think about because some of that business is new volume that you're getting landing from, especially in Europe?

Yes, I would say on a same-store sales basis, it still would be growing, I don't know, well over 50%. There's still a lot of new growth that's coming. It's hard for us to exactly discern how much -- like, for example, when it comes to wallet distribution, is there even incremental usage because customers are accustomed to using the Buy Now, Pay Later company that they have a good relationship with. So it's hard to know exactly for us from our perspective. But a lot of this elevated growth, we feel can sustain at least for several quarters.

Got it. I want to turn to expense management. I think that's growing faster also than the corporate average in the third quarter. What are the prospects for growth there?

Sure. That -- the growth in Expense Management has been very consistent. It's been growing in the 30s for many, many quarters and consistently is growing a few points faster than the overall company. So it's been a real area of strength for us. The real factor in expense management is that our customers are leveraging the flexibility of our platform to offer capability that just the traditional providers don't. And so our customers continue to gain share. And so that is fueling a lot of our growth. So this is in areas like AP automation and in corporate card issuance. One of the things that's very unique about our platform is not only do we operate at incredible scale with -- this quarter, we approached sort of $100 billion in quarterly TPV, but it's incredibly flexible. And so in these use cases where the card controls come into play where our customers can extend the capability to their users to really control and configure the card very specifically so that it minimizes fraud. It really controls spend. And then because it's all done with card, it really eases the reconciliation on the back end. So their value proposition is quite valuable, and it's driving a lot of growth, and that's then in turn fueling growth for us.

We think this use case will continue to grow faster because also as we -- which I'm sure we'll talk about in a little while, this is one of the natural areas of growth in embedded finance. So we're starting to talk to a lot of companies who are outside of financial services, but have a platform business and they want to start offering Expense Management like capabilities within their platform. So this quarter on our call, we talked about a Fortune 500 company that supports the SMB space, and they want to start embedding more of this sort of AP automation and Expense Management capabilities into their platform. And again, that scale and flexibility that our platform allows is very attractive to our customer base and this customer who just launched with us.

This is also another area that as we go forward in several years into the future, which again, we'll probably talk about. But as we work to break into banks and start supporting banks directly, this is also an area that again, we think is maybe one of the use cases they would use us for sooner rather than later because of the impact on their commercial card business is probably suffering a little bit at the expense of these more modern players who are growing really quickly.

Got it. Got it. On-demand delivery growth, double digits in the third quarter. So maybe a little slower than the overall -- the company average. Maybe you can talk about that growth rate.

Sure. The growth rate doubled. So that has been growing in the single digits for many quarters. And in this quarter, it doubled, and it's now in the double digits, which is great. The -- what's really driving that is the -- our customers are expanding both into new merchant categories and they're expanding geographically. So those are the 2 things that are really fueling the growth for their business and then in turn ours. We feel that in Q4, we might be able to stay in the double digits, but from a kind of medium- to long-term perspective, this is our most mature use case and we think it will probably grow in the single digits as you look further out. But for the meantime, there is good growth here, and we're happy to enable it.

Got it. I want to talk -- we'll talk about Block in a second, but the non-Block business, ex Block, when you look at that financial service segment, how is that growing? And how is the progress in expansion?

So the growth is strong. It's growing about twice the overall company, our financial service use case, excluding Block. So this is really our neobanking use case, and this is driven by both U.S. and European customers, in particular. So both sides and -- of the Atlantic. And with the financial services, it's really the quintessential embedded finance use case right now where most of our fast-growing customers are not -- financial services is not their core business. So they are looking to either bank the consumers who use their platforms or support the small businesses that may be also on their platform. And so -- that is what is fueling the growth. So they're looking for increased engagement from those users, offering them some capabilities that might either through rewards or spending capabilities drives engagement in their core business, which is what they're after. Wage Access is another tool that is used to drive adoption. And so that is something that we think we're still in the pretty early days. What we're seeing as a trend is the -- there are very large companies out there that have this big base of users, and they want to drive engagement. And offering sort of banking-like services and a card product is a very good way to do that.

International and -- International volumes, I think, are now high teens as a percentage of volume. I think that was up 5 points as a percentage year-over-year. Your volume has grown almost 100% and now you guys bring in TransactPay to unlock even more. Can you talk a little bit about expansion. Why is international going so well? And bringing in TransactPay into the fold, what does it mean for the overall growth of the business and the take rates?

Sure. Yes, Europe is continuing to grow over 100%, and it has for many quarters. We're having a lot of success there. The capabilities, again, of our platform, I would say, stand out even more so in Europe, just the combination of the scale and flexibility we provide is more unique in that market than it is in the U.S., where we have a few competitors who are solely U.S. based. So that's certainly helpful. The other thing that is quite helpful is there are many customers who want to be both in Europe and North America. So we have many customers who are on both sides of the Atlantic, and our platform enables them to do that versus there are many competitors in the U.S. or in Europe who really only operate in those geographies, so they don't allow that geographic expansion that our platform does.

The addition of TransactPay is significant for us because it allows us to offer program management in Europe with the help of our EMI licenses to help us support both the U.K. and the EU. And why that is so significant is because in the past, even though our -- we are a single stack platform for processing, if a customer of ours was in the U.S. and wanted to go to Europe, we could help them with processing, but we'd have to tell them for all the other aspects of program management, we do for you here in the U.S., you're going to have to find someone else to do that for you in Europe. We can't support you. And so what this allows is a much more seamless transition from people going from the U.S. to Europe or Europe to the U.S. And in fact, this quarter, we announced a long-standing U.S. customer of ours in expense management is now expanding into Europe because it's going to be much easier for them. They can essentially utilize the same service we provide them in the U.S., we can now translate to Europe, and it just makes that expansion much less work on their part.

The second value of TransactPay besides that ease of expansion is that in Europe, the largest players are looking for one company to provide processing, program management and the EMI license that's required. So the real high end of the market wants a single partner. And so we were really kept out of that segment of the market, which, of course, is the portion of the market we would most want to be and where the largest players are and the most volume is available. And so that's the second part of the TransactPay acquisition. That's quite important. It opens up the market to us to support the very largest opportunities. And this is something that -- we even consistently heard from the networks who are often a source of referrals for us that this was something that would significantly increase our chances of winning some big pieces of business.

The last thing I'd say about TransactPay, that's important is that in Europe, traditionally, our gross profit take rates were much lower than the overall company because we only provided processing. And so what TransactPay allows us to do is offer program management and offer the EMI license. Those are both sources of value that we can monetize, and it should significantly improve the gross profit take rates in Europe. And then in addition to that, we've been, over the last year or 2 really rolling out our value-added services. And in Europe, we're seeing, again, a strong degree of uptake because in Europe and just like in the U.S., the customers ideally don't want to connect to lots of different parties for services. So if you have an attractive offering and they already use us for processing, it just makes it much easier for them to adopt a fraud tool, for example, from us. And so we're starting to get good traction in Europe from that as well.

So given that -- I don't know about 100% growth, but what is the outlook for International expansion for comparatively? I assume it's going to grow way above company average.

It will. I mean we can't sustain 100% forever. Like it's still over 100%, but it's ticking down as the rising base is quickly catching up with us. So yes, we won't grow 100% forever, that will likely maybe stop in the next quarter or two, but it's still going to grow meaningfully faster than the overall company as there's just a lot of momentum. And with the acquisition of TransactPay, also, our pipeline really reflects what we expected, which is -- there are a lot of people interested, much bigger opportunities are coming our way. And so we do feel that the very elevated growth in Europe is sustainable for some time.

So BNPL expense management on-demand delivery now doing even better the Financial Services segment, the non-Block business and International, all really carrying a lot of growth for the company. So -- there's always the flip side. So let's figure out what's holding back even growth from going further. There were a couple of drags that you called out on the earnings call. One of them was two renewals, one is expected in the fourth quarter and the other, let's call it, in the first quarter '26. I mean they're not too material, but I think there are about two points each maybe to gross profit growth. How do you think about renewals in general at Marqeta being a drag for growth rates every year? And how -- I know we made some changes to the pricing model. So renewals will have less of an impact going forward because -- what we don't want or at least when you don't want the investors to think about it is there's always a renewal coming and there's always pricing pressure, these aren't that material, but at least it kind of holds people back that there are renewals and there are some drags. So a long-winded way of saying, how do we think about the renewal process in these particular two clients?

Sure. These are 2 of our top 10 customers. So they are more significant customers than they're the last 2 that we have to do in terms of resetting the level of pricing that we had sort of coming out of the pandemic. You may remember, in '22 and '23 in those 2-year period, we renewed about 80% of our volume. So that was where we took on an initiative to really sort of reset our pricing in the market. And then there was a little bit of a lull there and these are the last two that need to be done. So -- going forward, we don't expect there to be in renewals, there'll always be -- you typically will have to give a little bit on price. That's sort of the way the market works. And you try to offset that by offering additional services like value-added services, but more meaningful resetting of pricing. These are the last two for us. Both these customers have -- their business has more than doubled since the last time we did a renewal, so they're significantly bigger. Our approach since we started embarking on this effort in 2022 has been to make sure there are aspirational tiers in all of our contracts. So what we mean by that is that we want there to still be a couple of tiers left in their pricing at the time their contract expires. So that when we're in the renewal, the next time it comes, it really becomes a non-event because we've already agreed to pricing at volume levels that are far higher than where they already are 4, 5 years down the road when we're renewing again. So -- that's the way we've tried to manage it going forward, which we think will really stabilize things and make it much more stable.

The other thing that we've done in a lot of these renewals is -- as we've mentioned before, most of our top 10 customers now are in more than one geography with us. So -- and by geography, I mean, sort of U.S., Canada, Europe, Australia. So most of our customers are multinationals. And what we've started to do is offer global price tiering. So our pricing by program might be different because it -- the use case may be different or the degree to which we're offering program management or U.S. versus Europe, like the dynamics and the pricing going to be different in each case. But we will aggregate their volume to set the price tier. And really what that does is encourage our customers to keep expanding on our platform. So not only do we -- does our technology make that easy, but we're giving them a financial incentive also to grow with us. And we've seen that, that is -- has been effective in enabling our customers to expand in a way that's a win-win for both companies.

But it sounds like the likelihood that we -- in further years that we need to call out particularly renewal drag, it's probably just going to be more normal course of business.

Correct. Correct. You're unlikely to hear a lot about renewals besides just normal course of business after the midpoint of next year.

Yes. Great. And then the other obvious headwind was the Block relationship. I think it's now 44% of revenue in the third quarter. And I think they're moving to new issuance for Cash App to a different bank. Can you talk us a little bit about their diversification and what it means for Marqeta?

Sure. Their desire to diversify is very understandable and is a standard risk management approach in our industry and in many other industries. So most of our largest customers, if you looked at our top 10 customers, for example, most of them utilize more than one processing platform or they use more than one bank or both. So this is a very typical approach that's completely understandable from our perspective. The potential impact to us is that if they were to do all new issuance on another platform in 2026, what we've said is that would likely impact our gross profit in the high single-digit millions, so about 2 points of growth. And that's what they have told us to potentially expect. So -- we'll see how that goes. We have a very strong relationship. The two of us are very important parts of each other's businesses, and so we're communicating on a very regular basis. And I would also say that we are continuing to do new things together. So we continue to explore new business opportunities. And so just like our other customers who have diversified, our goal is really to be the primary provider. So typically, when people diversify, they still keep the bulk of their business with one provider to maximize their economics. And so again, we fully understand that Block would want to diversify, but we would -- our goal would be to maintain their primary provider and then enable their growth, right? Like we -- Cash App is still only U.S.-based. So we think on our platform, we could make geographic expansion easier. They do -- are doing transactional lending and a lot of lending, but they haven't done a true like revolving card yet, that could also something we could help them with in the future. So -- there's still a lot of opportunity for us to help their business and enable growth for the two of us.

So it doesn't feel like or sound like then this will be a headwind -- a multiple year headwind on this diversification?

Well, we'll see. That would be our objective, and we'll have to see how it goes. Yes.

Embedded finance, you talked a little bit about expense management there. But obviously, the use cases are expanding. Can you talk a little bit about that pipeline?

Sure. The pipeline is really rich. The way I always think about expense management is that the fintech companies showed the art of the possible of what nonbanks can do in financial services. So they -- what's happening is what made challenging for fintechs is they had to grow the user base, right? So they had very high acquisition costs. So what we're seeing now is a trend in the market is very established companies that are often digital-first or digitally native businesses that have -- may have tens of millions of users already on their platforms. They're saying, well, I could insert a card product into that user base at a very low cost of acquisition. But in turn, in doing that, I'm creating new revenue streams for myself on increasing engagement and stickiness with that customer, which drives other sources of value for me. And so we're seeing that across all our different use cases. The two most significant are expense management and then a neobanking like use case are the two that we're seeing, but there's quite a bit of opportunity there, and we think this is going to be a growth engine for us for several years going forward.

Got it. How is the credit offering resonating with clients?

Credit, it's going well. So we now have -- the key is in credit, we want to move relatively slowly because when you rush in credit, sort of unintended consequences can happen. So we're being fairly deliberate. We have both consumer and commercial programs live on our platform now. So we are getting the experience. I mean it's off a small base, but just as an example, our September credit payment volume was about 4x what it was in January at the start of the year. So it's a small base, but we're growing pretty quickly. We're getting the experience. We also completed a migration earlier this year for [ per pay ] a customer. So we have now experienced migrating both debit and credit programs, which we think will be very valuable experience as we go forward and look to take on volume from companies who may be using a more legacy provider and are looking for more capabilities in a modern platform. So we're getting good experience, and we have a good pipeline of people who are looking to do something different. What makes our platform unique is that they can truly embed the experience in their platform. And that also were enabling flexible rewards or dynamic rewards. So our view of rewards and credit is that today, they're one-size-fits-all. So everyone who gets the card has the exact same reward structure. But if you look at almost everything else in technology and in the digital world, personalization is a key factor for engagement, and that's what we think is going to happen in the credit card business as well. And so we've invested a lot of time and effort to create a dynamic rewards platform that would allow for more customized experiences for each individual user, and that would be a really critical way to drive engagement.

If I'm a company that controls my inventory, then I'm used to marking down and giving special offers. I could do that in a very dynamic way or also if I am a digital platform, so I have an advertising revenue stream, then I could utilize sort of dynamic rewards to drive spend behavior in a way that would be very advantageous to my advertising business. And so those are some of the conversations we're having, and we're excited to capture more and more business and drive growth through credit.

Do they usually come for credit? Do they usually come with an existing relationship already, like they were doing debit and then they add credit? Or are they coming separate to do credit first?

It's both. It's both. And in fact, one of the things we're talking to people who are completely new to Marqeta is what also something that makes us unique because it's all one platform is to offer both debit and credit. So it's quite common in a co-brand use case that a lot of people who apply get declined for the card because they don't qualify. And again, if you're targeting people who are already on your platform, so they're already customers of yours that might not be the most ideal customer experience. And so we're -- one of the unique approaches that we have is to say, you could come up with also offer a debit card that maybe doesn't have quite the same reward structure, but would be the fallback option. And then from that debit card, maybe do some transactional lending through our Marqeta Hub product, which allows you to inject Buy Now, Pay Later into that debit card then maybe you start doing some credit building and then ultimately move them up into the revolving credit card that they originally wanted, but you help the customer get there. So that would be something that we could offer fairly uniquely in the market because of the breadth of our platform.

All right. I got three questions, and we got a little over 3 minutes, Mike. So we're going to speed round.

We're doing a little speed round here.

I want to ask about the FIs because that's always been a thing at the back of my mind of seeing if any FIs will adopt Marqeta's kind of modern platform services. Can you talk about the adoption there?

Sure. Our discussions with FIs are becoming more frequent and more substantial, I would say. So we're definitely having more engagement with them. We don't expect this -- the banks are going to be pretty methodical in their approach and thorough. And so we expect it to take some time. But our strategy is really twofold. One is by enabling the fintech customers we have that are now big businesses as well as embedded finance, that's just continuing to put pressure on the bank's business. And if they're falling behind in terms of the capabilities they can offer, that just puts pressure on them to modernize, which would open the door for us to start working with them. And so that's one aspect of it.

The second is just making sure that they understand the use cases that we can support them in. So I think some of the early ones, I mentioned one earlier, which is really on the commercial side of the bank where we feel that if they are starting to lose some deals to the more modern players who are offering more dynamic capabilities that we could provide that same thing through our processing. And then the other use case is on the consumer side of the bank in more Buy Now, Pay Later like use cases, lending use cases. So both credit and Buy Now, Pay Later, we think there's a lot of opportunity for us to help the banks kind of increase the breadth of their offering that to be more similar to some of the newer entrants into the space over the last 5 or 10 years.

Take rates, the gross profit take rate, I think, was up in the third quarter maybe 12 basis points. How do we think about take rate going forward?

Yes. There's -- we don't expect it to move a whole lot. The mix is always an important part of our factor for us in our gross profit take rate because -- each use case is priced a little differently. The degree to which we provide program management can also affect our take rate. So the pressure that could come on the gross profit take rate is mostly has to do with renewals and price tiering. If customers are moving through our price tiers, that's a good thing. We see that as a good thing. We're very careful to make sure it's accretive as people grow like that and they get better pricing that is still accretive to us. So -- to us, that's a little bit of a cost of doing business and to be expected. The offsets, though, to increase our gross profit take rate, there are three. So TransactPay, we talked about. So offering program management and an EMI license in Europe will help bring our take rates up in Europe.

We are also offering a lot more value-added services than we previously did. We have a white label app, a lot of risk capabilities, tokenization are some of the areas where we're seeing a lot of growth. And then the third piece is credit, as we talked about. The gross profit take rates tend to be better in credit because there's a lot more complexity and you're adding a lot more value. And so as that business grows, that should also help the business mix. So -- those are the levers, and we'll just have to see how the business does going forward.

Last one, I can't leave this conversation without talking about the margins, the EBITDA margins beat expectations handily so far in 2025. I think you're now expecting $100 million in adjusted EBITDA for 2025. I think that was double maybe your original expectations. Where can EBITDA margins go? And then where are we on the whole GAAP profitability?

Sure. Last year, our adjusted EBITDA was $29 million, and this year, we expect it to be a little over $100 million. So we're going to have increased that by more than 3x on a year-over-year basis. So our path to profitability is sort of really gaining steam. So the last couple of quarters, our EBITDA margin has been in the high teens percent. Our view is that because of the nature of a platform business where you have very high upfront investment, but you inherently get a lot of scale. We don't see any reason in the long run, why our EBITDA margin couldn't approach 50%. We think that, that would be several -- many years from now in terms of we have to reach a different level of scale. But -- we believe that is sort of the long-term goal from a margin perspective. And we believe we can get there.

From a GAAP profitability perspective, we've said in 2026, so -- I mean, maybe it was our last earnings call in Q2, our expectation is that we'll be at least GAAP breakeven in 2026. So we're excited about the progress that we're making from a profitability perspective.

Okay. With that, we'll keep it there. Thanks so much, Mike.

Thank you.

Ladies and gentlemen, welcome to the Marqeta Third Quarter 2025 Earnings Conference Call.

[Operator Instructions]

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Maria Greiser, Investor Relations. Please go ahead.

Thanks, operator. Good afternoon, everyone, and welcome to Marqeta's Third Quarter 2025 Earnings Call. Hosting today's call is Mike Milotich, Marqeta's CEO and CFO.

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, 2024, 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.

With that, I'd like to turn the call over to Mike to begin.

Thank you, Maria, and thank you for joining us for Marqeta's Third Quarter 2025 Earnings Call.

To start, I'll briefly highlight our Q3 results, followed by an update on our progress growing the business across the full spectrum of debit and credit products, consumer and commercial offerings in a wide variety of use cases and geographies with both new and existing customers.

I'll conclude with details about our Q3 financial results and our expectations for the remainder of the year. Our great third-quarter financial performance continues to demonstrate tremendous growth, resulting in our ability to deliver higher adjusted EBITDA through both efficiency and scale.

Total processing volume, or TPV, was $98 billion in the third quarter, a 33% increase compared to the same quarter of 2024 and an acceleration of over 3 points from last quarter.

Since this is the second consecutive quarter with accelerating TPV growth despite our increasingly larger base to grow over. To put this performance in perspective, this is our highest TPV growth rate since Q1 2024, despite the base we are growing over this quarter being almost 50% larger than the base we grew over in Q1 2024.

Q3 net revenue of $163 million grew 28% year-over-year due to robust growth across a broad spectrum of use cases we enable. Gross profit was $115 million, a 27% increase year-over-year, largely in line with the net revenue growth.

Adjusted EBITDA was $30 million in the quarter, a 19% margin, fueled by both exceptional gross profit growth and continued expense discipline while we make strategic investments in new capabilities and scale to fuel future business growth.

This is another all-time high for adjusted EBITDA dollars as we progress on our path to profitability. This year, we remain focused on expanding and deepening our customer relationships by enabling innovative programs and seamless geographic expansion while also increasing our bank supply.

One factor driving our performance is a remarkable growth in our lending use cases, including Buy Now, Pay Later. The growth is a testament to our ability to support customers in many markets, including North America, Europe, and Australia, but also to the innovation at scale that we enable.

Once again, we are adding unique value to our customers in support of this use case. While BNPL started with Marqeta enabling virtual cards for seamless payment experiences without costly back-end integrations, the category continues to evolve.

We have been at the forefront of enabling the new wave of growth in the space with what we call pay anywhere cards that allow end users to pay anywhere that cards are accepted, with the flexibility to split a purchase over time.

We were also the first to support the Visa flexible credential in the U.S., which gave us a significant lead, as it has been rapidly adopted over the past year and now includes Klarna's recent expansion into Europe.

The newer solutions enable our customers to deliver a better value proposition to their consumers with more flexibility to expand the availability of credit.

Our unique combination of capabilities, geographic reach, and scale has helped broaden the category significantly, with TPV and lending, including Buy Now, Pay Later use cases, growing much faster than the overall company TPV growth.

Another area where we have continued to see increased growth and demand is in commercial programs, particularly platforms that enable SMBs to reach bigger markets with money movement and access to working capital.

In Q3, we signed a Fortune 500 customer to enable electronic supplier payments for the small- and medium-sized businesses they serve. Our customers' global platform has a comprehensive suite of financial and business management applications, serving millions of users.

They were looking for a partner who would allow them to stay at the forefront of the needs of their end users with easier and more modern payment options.

They saw Marqeta as a leader and enabler of innovation and expense management use cases and selected Marqeta for both our flexibility and ability to execute at scale.

In Q4, this program will be the first to launch with one of our new U.S. bank partners. At the start of the year, we talked about our desire to expand our bank supply with partners who prioritize new capabilities and technology, maintain a strong focus on regulatory compliance, and can support our full range of offerings across debit and credit.

In the U.S., Cross River Bank is now live, and we are in the process of technically integrating Coastal Community Bank to support programs starting in 2026.

We are excited to grow with both banks going forward. With the addition of TransAPay, enabling us to provide program management in the U.K. and the EU, we are also adding bank partners in Europe.

Griffin Bank in the U.K. is now live in support of a new program currently in testing, which will launch broadly in Q1 2026. We also plan to add a new bank partner for the EU in the first half of 2026.

In order to seamlessly interface with multiple banks, this year, we built our business integration platform with the flexibility to rapidly onboard additional partners around the world.

It serves as the orchestration layer that connects our internal money movement systems with external banking and payment partners through secure APIs and web hooks, ensuring every transaction remains synchronized end-to-end.

This approach makes our platform bank-agnostic and reduces the time for bank integration by more than 50%, enabling us to scale new products and geographies without heavy engineering work or custom integrations.

Centralizing business logic and routing across banks also reduces operational complexity, improves resiliency, and creates leverage in our cost structure as we expand with more banks and payment partners globally.

Europe continues to deliver strong results with momentum across a diverse set of use cases, driving TPV growth to remain over 100% year-over-year.

This quarter, we completed the acquisition of TransActPay on July 31. This transaction has driven significant customer interest and increased referrals from the payment ecosystem, including our network partners, as well as increasing our TAM to pursue more enterprise customers looking for a single provider for processing, program management, and EMI license in both the U.K. and the EU.

This enables us to deliver a complete offering comparable to what we offer in North America, so customers don't have to navigate the complexity of working with multiple partners.

In Q3, we signed one of our top 5 expense management customers that we have supported in North America for many years to expand into Europe.

The acquisition of TransactPay was the catalyst, as they can now deliver their offering in Europe at parity with North America through the Marqeta platform without a lot of incremental work.

We also continue to gain steady traction as we seek out the right partners for our innovative credit solutions. We are having productive conversations with prospects who are looking to differentiate their offering and work with a single modern provider who can support multiple use cases.

This quarter, we were selected to power a credit solution for our company's loyalty programs, which enable small and mid-sized companies. This customer has millions of monthly active users and the underlying data to help companies capitalize on trends through analytics and a credit product to drive incremental loyalty benefits, both in stores and through their app.

They chose Marqeta because they were looking for a modern partner who could grow and scale with them, given their significant embedded customer base.

This customer plans to utilize several services in addition to processing, including tokenization, disputes, and our real-time decisioning risk product.

To wrap up before moving to the details of our financial results, the business continues to have strong momentum as we head into the last quarter of the year, both in terms of our actual performance and the level of engagement from prospects on future opportunities.

What continues to become clear for current and prospective customers is that Marqeta has a unique combination of modern capabilities, scale, geographic reach, expertise, and flexibility to enable its innovations without the need to make trade-offs.

We provide our customers with a level of agility and control in issuing payment credentials that maximizes their ability to deliver value to their users, whether it's through creating new revenue streams, deepening engagement, or improving access to capital.

This will continue to serve us well as we further diversify the business outside of debit and beyond the U.S. to deliver future growth. Now, let me transition to our Q3 financial results.

Q3 was a very strong quarter with performance significantly outpacing our expectations. Q3 TPV growth of 33% accelerated by over 3 points from Q2 after increasing by 3 points in Q2 versus Q1.

This accelerating volume growth, combined with slightly higher net revenue and gross profit take rates versus Q2, drove the P&L outperformance.

Additionally, our adjusted operating expense growth was on the lower end of our expectations, which resulted in adjusted EBITDA of $30 million. For the second quarter in a row, the business outperformance and disciplined investment brought us close to GAAP net income, showcasing how the business can scale and demonstrating the tangible progress we are making on our path to profitability.

Q3 TPV was $98 million, an increase of 33% year-over-year. The Q3 TPV growth acceleration versus Q2 was broad-based, including both block and non-Block growth as well as each of our 4 major use cases.

Non-Block TPV is now growing 2.5x faster than block TPV, helped by Europe TPV continuing to grow over 100%. Growth within financial services continued to be a little slower than the overall company.

Our non-block customers are growing over 3x faster than block within these use cases. Consistent with prior quarters, expense management growth continues to be a little faster than the overall company, driven by our customers continuing to acquire new end users as their modern platforms gain share.

On-demand delivery growth accelerated into the double digits in Q3, growing about twice as fast as last quarter, primarily fueled by both the merchant category and geographic expansion of our customers.

Lending, including Buy Now, Pay Later TPV growth, accelerated 10 points versus Q2, with a year-over-year growth rate that is about double the rate of the overall company.

Six of our top 10 customers within this use case had their growth rate accelerate from Q2 to Q3, with 3 customers growing over 100%, while 2 customers were growing slower than 20%.

This remarkable growth is driven by a combination of trends that accelerated from last quarter, with the 2 most significant being increased adoption of Pay Anywhere card solutions, including growth in flexible network credential usage and geographic expansion, and growth on our platform.

The TPV growth acceleration in Q3 is another demonstration of our ability to grow at scale, processing over $1 billion in volume on about 2/3 of the days in the quarter.

Q3 net revenue growth was $163 million, growing 28% year-over-year. Our Q3 net revenue growth acceleration of 8 points versus Q2 and the outperformance versus expectations was driven by strong TPV growth in all of our major use cases, and our net revenue take rate of 17 basis points was slightly higher than last quarter.

The addition of the TransActPay acquisition for 2 months after closing on July 31 contributed 2 points to growth. Block's net revenue concentration of 44% in Q3 decreased by about 2 points from Q2.

While both block and non-Block net revenue growth accelerated from last quarter, non-Block growth was over 10 points higher than block growth, driven by the strong TPV and the inclusion of TransAPay.

Q3 gross profit was $115 million, growing 27% year-over-year, fueled by strong TPV growth and a gross profit take rate of nearly 12 basis points, slightly higher than last quarter. The addition of TransActPay added 2.5 points to growth.

Gross profit growth was 10 points higher than the top of the expected range we shared with you last quarter. So obviously, there were a few positive surprises in the quarter.

I would classify the outperformance into 4 categories. By far, the most significant factor driving our outperformance is the underlying business growth.

Accelerating TPV growth, combined with a favorable business mix supporting our gross profit take rate, accounted for approximately 6 points of the outperformance.

On our earnings call in August, you might remember we spoke about our Q2 TPV growth accelerating 3 points versus Q1, which was a little unexpected.

So we wanted to see an elevated growth trajectory endure for longer than a couple of months before adjusting our forecast for the remainder of the year, especially considering the macroeconomic uncertainty.

As I just walked through, Q3 TPV further accelerated by more than 3 points versus Q2, driven by a broad cross-section of our customers and use cases.

About 2/3 of this underlying business outperformance was driven by lending, including Buy Now, Pay Later and on-demand delivery. The growth in these 2 use cases meaningfully accelerated in Q3 versus Q2 as we continue to support our customers' business expansion.

Second, approximately 2.5 points of the outperformance were driven by unusual items that were unexpected. The large majority of this impact was driven by recovering fees from smaller customers who previously terminated their card programs. We have worked diligently to recover contractually obligated fees, and it just so happens that several of the larger efforts were resolved during Q3.

Third, approximately 1 point of the outperformance resulted from earning a network rebate from one of our network partners that we did not anticipate.

Based on the Q3 results, we expect this will continue to be a benefit going forward. The final component of our outperformance was the strength of the TransactPay business, which contributed approximately 1 point more to our gross profit growth than expected.

The TransactPay business is on a better trajectory in 2025 than we had expected, and our visibility was limited until we started to consolidate results following the July 31 closing.

As a reminder, we revised our accounting policy for estimating and recognizing card network incentives starting in Q2 of this year. We are now accruing incentives each quarter based on the forecasted annual contract tier we expect to achieve, as opposed to booking the incentives each quarter as they are earned and moving through the progressive tiers.

As a result, Q3 gross profit growth had a headwind of 1.4 points due to the difference in methodologies for the year-over-year comparison. Q3 adjusted operating expenses were $84 million, growing 4% year-over-year, which was on the lower end of our expectations.

This was a timing shift of marketing initiatives from Q3 to Q4, which lowered Q3 growth by approximately 2 points. The addition of Transact Bay contributed approximately 3 points to our year-over-year growth.

Q3 adjusted EBITDA was $30 million, reaching another all-time high in dollars for the second quarter in a row. This resulted in a margin of 19% as we continue to make significant progress on our path to profitability.

Adjusted EBITDA margin based on gross profit, which was 26%, is the metric we look at internally to illustrate the profitability potential of our business.

The Q3 GAAP net loss was $3.6 million, which included $8 million of interest income and a nonrecurring litigation-related expense of $4.3 million. We ended the quarter with a little over $830 million of cash and short-term investments, driven by strong operating cash flows.

With the addition of TransactPay this quarter, one thing to note on our balance sheet is the $235 million of restricted cash and the offsetting liability.

TransactPay must comply with the regulatory safeguarding requirements associated with the EMI licenses, so we account for the customer funds they hold differently than our approach in other geographies, such as the U.S., where our program funding arrangements are structured more optimally.

Our share repurchase activity remains ongoing as we continue to believe the current valuation does not fairly represent the company's value or the market opportunity ahead of us.

In Q3, we repurchased 3.2 million shares at an average price of $6.12. For the year-to-date period ending September 30, 2025, we have repurchased 64.6 million shares at an average price of $4.53, which is a reduction of nearly 13% of the total issued and outstanding shares as of the 2024 year-end.

As of September 30, we had $88 million remaining on our buyback authorization. Now, let's transition to our expectations for the fourth quarter of 2025.

Based on our Q3 results, we are raising our expectations for Q4 and the full year. We now expect Q4 2025 net revenue and gross profit growth to be at least 5 points higher than what we had shared last quarter, and adjusted EBITDA margin to be 2 points higher.

Therefore, we now expect net revenue to grow between 22% and 24% in Q4 and approximately 22% for the full year 2025. Gross profit growth is expected to be between 17% and 19% in Q4 and approximately 23% for the full year 2025.

The expected slowdown in gross profit growth from Q3 to Q4 of approximately 9 points is primarily driven by 3 factors: First, Q3 growth benefited by approximately 2.5 points from unusual items, mostly the recovery of contractually obligated fees.

Second, the impact of our revised accounting policy for network incentives on the year-over-year comparison will be the most significant in Q4. We expect a drag of about 5.5 points on gross profit growth in Q4, which is approximately 4 points more drag than Q3.

Third, as we have discussed all year, we are actively engaged in renewal discussions with 2 large customers. We expect one of those renewals to be in effect in Q4, resulting in a headwind of approximately 2 points.

We expect Q4 adjusted operating expenses to grow in the mid-single digits, in line with what we shared last quarter, despite the timing shift of some marketing expenses from Q3 to Q4.

Adjusted EBITDA margin is expected to be between 15% and 16% in Q4 and approximately 17% for the full year 2025. This equates to a little over $100 million in adjusted EBITDA in 2025, which is more than 3x higher than last year and nearly double what we anticipated at the start of 2025.

In conclusion, our incredible Q3 financial results not only led us to raise our full-year 2025 expectations for net revenue, gross profit, and adjusted EBITDA, but they also reflect the deepening of our customer relationships and expansion of our platform capabilities.

The combination of strong gross profit growth, efficiency increases, and scale benefits is rapidly improving our profitability and foreshadowing the future earnings potential of the business.

We expect to finish the year strong as we position the business for sustainable long-term success through multiple growth vectors and increasing scale.

I will now turn it over to the operator for questions.

[Operator Instructions]

And our first question comes from Bryan Keane with Citi.

Mike, congrats on the very solid results. I guess my question is just trying to figure out new business, new ramping of contracts, and what that pipeline looks like. It looks like a lot of the outperformance is just by the existing business.

And then my follow-up is just kind of thinking about going forward, does it make it tough to figure out how to guide and what the normalized growth rate of the company should be, given that you have areas like BNPL with such outsized growth? It's just hard to predict.

Yes. Thank you, Bryan, for your question. So I would say, first, when we are looking at the growth, we look at it, I guess, slightly differently than the way you characterized it.

We look at new business in terms of new programs and, within those new programs, how many of them are driven by existing customers versus new customers.

So you are right that many of the exciting growth areas of the business are coming from our existing customers, but most of that is being driven by new programs that they are launching with us, either new products or expanding into new geographies.

And whenever they make those decisions, of course, we would like to have deeper relationships with them. But of course, they have other options. And so we still consider that great new business that drives growth.

This year, we've talked a lot about what we call our new cohort business, which includes all programs that have launched since the start of 2024. And those are very much on track with what we believed at the start of the year, excluding the impact of Varo deciding to terminate.

So our programs this year, again, programs that have launched since the start of 2024, are expected to contribute over $40 million in revenue in 2025. So that business is ramping well, and we're excited to continue to see it ramp into next year.

In terms of guiding, I think we do have a complex business. But I feel like, generally speaking, we do forecast the business pretty well. I would say going into the holiday season in Q4, where Buy Now, Pay Later, the volume significantly ramps up.

It is a little bit more difficult in Q4 and particularly with sort of the uncertainty in the macroeconomic environment, it's a little bit tougher to tell, but we feel pretty good about our ability to project the business forward, and we'll see as the quarter unfolds.

And then just as a follow-up, it sounds like TransactPay has been key to kind of develop the European market. Is it just expansion from existing customers that they didn't kind of feel comfortable expanding until you had that solution?

I'm just trying to figure out exactly how big that could be for you guys now that you have that asset under your belt.

Yes. So there are 2 primary sources of value for us with TransactPay. So one thing you mentioned is that it does make it much easier for our customers to move to either side of the Atlantic, so either North American customers going to Europe or European customers coming to North America.

And the reason for that is prior to TransactPay, we couldn't offer the same level of solution that we could in North America, with the biggest difference being program management.

So when a U.S. customer, for example, wanted to go to Europe, we'd be able to tell them, well, from a processing perspective, this will be pretty seamless on our platform, but there's a lot of things that you're going to have to find someone else to do for you in Europe that we take care of for you in the U.S.

So that was not ideal for our customers. And so the TransactPay acquisition removes that barrier, where actually our offering now will be very similar and very seamless to expand going either direction across the Atlantic.

The other source of growth for TransactPay is incremental business. What we repeatedly have heard in the market and even what other ecosystem players tell us is the very large opportunities, the real enterprise customers want one partner, one platform to serve as both processing program manager and bring the EMI license.

So there was a part of the market, which is really the bigger part of the market, the high end of the market, that we really couldn't play in before. And now with the TransactPay acquisition, we can play in that market, and our pipeline reflects that.

So those are the 2 things that are quite exciting about the addition. And we're only 3 months in now, but we've hit the ground running since the close.

And our next question comes from Timothy Chiodo with UBS.

I was hoping we could dig in a little bit more into the Kara Card relationship. So clearly, it's expanding into 15 new markets, I believe, is the number that was put out there.

This is the in-store relationship with the card, but I also understand that the Apple Pay portion would be applicable as well. I was hoping you could help us, one, just put a little bit more detail around the relationship.

But also to the extent, even directionally, you could give us a sense of some of the numbers that we could start to put around this, meaning we certainly have estimates around the number of cards that this could be, given there's a wait list in the U.S., and we could put some kind of an assumption around the markets in Europe.

But volumes per card, what's a reasonable expectation relative to the, call it, 2,000 or so per card that we see with the Affirm Card? And then directionally, if the yield on this business were lower, higher, or about the same, that would be appreciated.

All right. Thanks, Tim. I'll let you throw a lot in there. So let me see how much I can cover. So yes, Klarna is a great partner of ours. They've been a customer for a very long time, certainly going back probably 7 or 8 years.

And we continue to have a great relationship where we can enable innovation together. What's exciting about the expansion of the Visa flexible credential into 15 new markets is that last October, we did a pretty significant migration for Klarna in Europe.

It was in 3 countries, and we converted or migrated over 5 million cards. And so we've been operating with them in 3 markets, and now they're going to add 15 additional markets to that relationship.

So we have, I guess, a good amount of information based on the 3 markets that we see today, but those were businesses that already existed before they got onto our platform. So it's a little bit different than in these new markets where they're starting with the first time of having a card solution.

What I can tell you is that what we see in those 3 markets is that the growth has been really strong. So when you're doing a migration, you move a lot of the historical information from one platform to your own.

And so we had a good sense of the trajectory of the business prior to it coming onto the Marqeta platform. What we're seeing in the quarter since that happened is a significant acceleration in that business. And so part of that, of course, is that Klarna gets all the credit.

They're executing really well and driving a lot of growth. But we'd like to hope that we at least have some hand in the capabilities of our platform and really making it easy and reliable for them to drive that kind of growth.

And so we'll see how the new 15 markets go because we don't really have as good a benchmark because as you said, in the U.S., they had waitlists and other things.

So I can't share those numbers. Maybe they would share them with you. But the yield was your last question. I would say, in general, Europe, the yields tend to be a little bit lower because just the economics in Europe are a little different, but there are still healthy yields for us to drive growth and also allow Klarna to be very competitive and offer a very effective value proposition for their end users.

Moving on to Darrin Peller with Wolfe Research.

There was a lot on the call, but I want to just take a step back. And if we look at the puts and takes of what you look at for 2025 and think about the trajectory of the business that you're on right now relative to what you'd expect and hope for going forward, anything anomalous that we're seeing now in this trajectory that we should think is unsustainable because the growth obviously has done very well this quarter. And I guess we're getting questions on how that can look at the end of the year and into next year already.

So any early indication of what you're seeing in terms of just trends and anything that may not be? You mentioned 2 contracts that might be renegotiated, or anything else you can call out?

Sure. Yes. No, thanks, Darren. I mean, there's no doubt that the trajectory of the business is stronger than we expected.

Just the TPV growth is accelerating again for the second straight quarter. And as I mentioned, this is our fastest TPV growth in about 6 quarters. So clearly, things are on a good trajectory.

I would say, first, from, I guess, the positive aspects that are driving this is certainly the Buy Now, Pay Later use case. And again, this combination of some geographic expansion as well as these, what we call Pay Anywhere cards, but the Buy Now, Pay Later companies offering a card that can be used anywhere a card is accepted to deliver the Buy Now, Pay Later use case. We are getting really strong adoption.

And our lead and leadership, I guess, with the flexible credential from Visa has been something that we're quite proud of as the first to enable that, and that's leading to a lot of growth.

Also, in SMB lending, that part of the market is also doing quite well. I didn't highlight that much, but that's another area. So everything in lending, I would say, is definitely performing better than we expected and driving better growth.

And then the on-demand delivery acceleration this quarter was a little bit of a surprise. Our customers continue to expand into new merchant categories, I guess, as well as geographies, and that's driving strong growth.

And then just in general, I would say the business is doing a little better. The things that can change there are a few. So one is, we talked about the renewals at the start of the year. And as I just mentioned, one of them we expect to be in effect in Q4, and lower our growth by about 2 points in our gross profit growth by 2 points in Q4.

That other renewal, we do expect to get done in the early part of 2026. So what we said at the beginning of the year was we expected those 2 to be a combined 4 points of drag on growth.

The first one is coming out to what we expect it to be, about 2 points; we'll see. So we'll update you on those 2, but that's one thing that's changing.

I think the second thing I would highlight is that we do now expect that Cash App is going to diversify some of their new issuance with Bancorp and use another processor.

So it's the new issuance for now, is our understanding. Even if they do all their new issuance starting January 1, which would be aggressive. But if we just use that as an assumption, we think that would be about 2 points of drag on our growth in 2026.

So that's something that we also expect to change. And then the last thing I would just point out is that in this quarter, we did have 2.5 points of just unusual items that we think are very unique to the quarter, and those wouldn't continue.

So those are a few of the factors that are, I would say, we expect to change in '26, but we'll tell you more about that when we talk again in February.

Our next question comes from Tien-Tsin Huang with JPMorgan.

This is Connor on for Tien-Tsin. Mike, I wanted to ask about Europe a little bit. You talked about it still growing 100% plus or doubling. I was curious if you could just talk about how sustainable you feel like that is?

I think it's across a couple of use cases, and it seems like you've got a couple of clients doing particularly well, but maybe just thoughts on the sustainability of that and mix shifts you're seeing within the use cases, maybe?

Sure. Thanks, Connor. So yes, the international business is doing really well, and a lot of that is being fueled by Europe. Just so you have a sense, our non-U.S. business represents sort of a high teens percentage of our TPV, and that's up 5 percentage points from Q3 of last year.

So that very high growth rate means it's grabbing a bigger share of our business over time. And the European growth remains over 100%. That's probably not sustainable, obviously, as the base gets larger, but we've now done that for several consecutive quarters.

The use cases in Europe, what's great is that it's very similar to our U.S. business. We have very large customers who are growing quickly in neo banking, lending, and Buy Now, Pay Later, as well as in expense management.

So all 3 of those areas are all growing over 100% and are all of substantial size. I would say the only difference in Europe compared to the U.S. is just the on-demand delivery business is much smaller.

It is there, but it's not nearly as significant as it is in the U.S. So that's really the biggest difference. In terms of sustainability, I mean, again, 100% growth is probably a little bit much to expect, as the base just keeps getting bigger and bigger.

But we do think that the TPV growth in Europe can continue to grow at a materially faster rate than the overall company. And that's because we've got TransactPay coming into the fold, which again just makes our offering that much more compelling and allows us to seamlessly support customers who maybe want to move to Europe or European customers who want to move to North America.

And it just allows us to compete in the premium market where the large enterprises play. So the big volumes that can be had are now available to us, and we can be competitive, which really wasn't the case.

So what I would say is in the coming quarters, our growth rate might slow a little, like dip below 100%, but still be very fast, much faster than the overall company.

And then the plan would be in a year or so, as some of these programs with the combination of Marqeta and TransactPay together start to come on board that, that TPV growth could reaccelerate.

So we think it's going to grow much faster than the overall business for at least the foreseeable future.

Perfect. And maybe a follow-up on just like Flexential more broadly. I'm curious, I mean, you talked at some length about within BNPL kind of the use case for Visa Flex Credential. Curious, like outside of BNPL, are you seeing demand for it from any of your customers?

What can you say about adoption curves if we exclude BNPL?

Yes, we are seeing a lot of interest because of the flexible credential beyond just Buy Now, Pay Later, because really, the first use case was this combination of a debit credential with the ability to do essentially transaction-based lending or Buy Now, Pay Later lending.

But what is coming from the networks that, again, you could ask them for more details. I don't want to steal their thunder, but we are going to move to a world where the flexible credential could be debit and more of a revolving credit instrument.

And so then that now has a lot of applicability for people versus today, we probably all have a credit card and a debit card in our wallets. In the future, you might be able to just have one card that allows you to pay now and pay later, or revolve all in one credential.

So the discussions about that type of offering we have a lot of those conversations given that we have the most experience with these flexible credentials. And so we have a lot of conversations about that.

The second area that I'd also say is right now, it's the Buy Now, Pay Later companies who are at the forefront of using this flexible credential, but we also talk to other companies who want to have a debit offering where you might embed Buy Now, Pay Later that comes from one of these major Buy Now, Pay Later customers of ours.

So we do think even the current use case can expand beyond just Buy Now, Pay Later companies, but other issuers as well. And that would be both good for that issuer's value proposition as well as drive distribution for the Buy Now, Pay Later customers of ours.

Moving on to Craig Maurer with FT Partners.

I wanted to ask, when we think about 2026, how does Cross River help with the backlog? Does it open you up to new potential in terms of growing that?

And second, the renewal cadence, you obviously talked about renewing 2 customers in the fourth quarter and the first quarter. How should we think about that going forward?

And just lastly, how are the opportunities with American Express starting to shape up?

Sure. Thanks, Craig. So yes, and just in terms of Cross River Bank, I mean, we're excited to start working with Cross River Bank.

Again, we have a program that is going to go live in Q4 and launch, which we're excited about. And then early next year, we expect to also have Coastal Community Bank up and running.

The key thing is that when we are looking for new potential bank partners, we look for the combination of both with banks that have a lot of capabilities and technology.

So they had made a lot of investments themselves because those are the things that we can utilize seamlessly to deliver value for our customers. We wanted them to have, obviously, a strong regulatory compliance footing.

And then we also wanted banks that could support a broad range of offerings. What makes Marqeta unique is that we do all use cases across debit and credit, consumer and commercial.

And so we really want partners who also have that kind of breadth of offering. And Cross River Bank, we feel like is a great partner, and we're excited to work with them as we go forward.

So it will be more and more part of the new business that we bring on board to our platform, starting in Q4. In terms of the renewal cadence, so yes, originally, we thought these 2 renewals would get done kind of in the middle of 2025. And they've just taken longer.

They're both going to get done before the contract or the current contract expires. So it's not like we're bringing it down to the wire here, but they are just taking a little bit longer.

They're bigger customers, larger relationships. And so there's just more to discuss. And we expect one in Q4 and then the other one in the early part of 2026.

And once they're done, we'll give you updates. And then your last question on American Express. So there are several opportunities that we're talking to customers about with American Express. And we are also talking to American Express about unique things we could do together.

So I would say we had a few things in mind when we started the integration, which is almost complete. And we do continue to partner together to capture some people who are trying to do unique things in the market, where we both bring something unique to the table.

We'll go next to James Faucette with Morgan Stanley.

I wanted to ask, you talked about your ability and opportunity you've had to ramp incremental markets with Klarna, et cetera. Can you talk about how that impacts your ability to add new markets for other partners and things that you can do to accelerate that process operationally for them?

It seems like that would be a good opportunity, especially as people look at different countries around the world where they may want to have a presence.

Totally agree, James. And we're doing this for a broad number of customers. Our view is that a lot of the fintech winners have been crowned, if you will, and many of them are becoming big businesses, and they're expanding in terms of both products and geographic reach.

And we're really helping them do that. If we look at our top 10 customers, 8 of them operate in more than one geography with us, which we would define as sort of the U.S., Canada, Europe, Australia as sort of the primary geographies that, I guess, in 1 or 2 countries in Latin America.

So we already have the majority of our largest customers operating in more than one of those on our platform. And I think it's around in the mid-teens of our top 20 customers are also in more than one market.

So this is something we already do and have been doing for a while, but we think there's even more potential because in a lot of cases, these were maybe smaller efforts, but I think now many of our customers are seeing traction and looking to invest in those markets as there just aren't nearly as many people chasing all the same opportunities as there was 3, 4 years ago.

And so that's creating opportunity, which is part of the reason, as we talked about earlier, for the TransactPay acquisition is just to make our platform and our capabilities on a geographic basis much more consistent.

And when we look at the pipeline of who we talk to now in terms of new customers and new opportunities, this is one of the key criteria when we're looking at who we should target is who are the companies that are already multinational and have the scale that could take advantage of that unique capability that we have.

So the fact that we are 100% modern and operate at scale and can do all kinds of use cases across debit, credit, consumer, and commercial, but that also means that we were one stack.

And so we make it very easy for you to move from market to market, versus many other competitor platforms that might be a whole different platform that requires a different integration.

So this is an area that we're leaning in both with our existing customers, as well as if you were to see our pipeline, it includes a lot of companies that very quickly want to be in more than one market.

[Operator Instructions]

And we'll go next to Jamie Friedman with Susquehanna.

So I was wondering if you could share any perspective on the kind of respective revenue yields, as there's relative growth in some. For example, you called out that revenue yield in Europe might typically be lower.

How should we compare commercial, say, the expense management initiatives relative to consumer? Any perspective that you might have on revenue yield would be helpful.

Sure. Yes. Thanks for your question, Jamie. And I would say I'll talk about our gross profit take rate since we tend to focus on gross profit take rate.

So I would say the yields from use case to use case are not as different as you would think. I would say, generally, they're relatively consistent. What changes the actual yield in each kind of use case has more to do with the size of the customers that we have. So, how big are the very largest customers in that space?

So when we compare our offerings or our gross profit take rate in the various segments, the differences more come from the weighting or the mix of the size of the customers in each, as opposed to us fundamentally charging different amounts for different use cases.

For example, in our financial services and the neo banking, obviously, our largest customer, predominantly their business is there, but we have a couple of other quite significant customers. And so that one tends to be a little bit lower.

And I would say the same thing in expense management. We have 2 or 3 very large customers in that space. And so the gross profit take rate tends to be a little bit lower than in on-demand delivery and lending, and Buy Now, Pay Later, it's a little bit more diversified customer base.

There are a lot more customers who are contributing. And so the gross profit take rates are a little bit higher.

The only other thing that I would just mention about this is one of the other things that I haven't mentioned when we talk about TransactPay is that traditionally in Europe, our gross profit take rate was much lower because we were only providing processing, and we really didn't have much else to offer versus now we'll have processing and program management, including the license, all of which you can monetize. And then also, we're bringing a lot more of our value-added services to Europe.

So we do expect that our gross profit take rates in Europe are going to improve over time, which will maybe also make the difference between, say, North America and Europe, not as significant as it is today.

And that's a good follow-up to my second one, Mike, which is about value-added services. I might have missed it this quarter. I felt like you had more about it in the script earlier in the year. So what is the narrative on value-added services? And I apologize if I missed it earlier.

No, no, you didn't. Yes, we didn't cover it much this quarter, but we spent a lot of time on it last quarter. We continue to expand our value-added services. If you really think back to 2, 3 years ago, a lot of our engineering energy was going into scaling the business.

A payment platform that has to work every time. There's a lot of effort that goes into it when your volume is growing at the rates ours has over the last several years. That was a big part of our efforts.

But I would say in the last 12 to 18 months, we've really broken through that next level of scale. And it's allowed us to then divert some of our resources to adding more value-added services and making the offerings more robust.

So some of the big areas, I would say, right now are related to things related to tokenization, as well as our risk products are both growing quite quickly. So those are 2 areas that we're excited about.

And then the new area that we just started launching this year is our ability to support people with the user experience, so a white label app. A lot of the customers or a lot of prospects on our platform do want that full end-to-end solution because, as we move into embedded finance, just remember that the way we at least define embedded finance is that it's companies whose core business is outside of financial services.

So our traditional customer base in fintech, they wanted to own a lot of these things and build a lot of these things themselves, versus an embedded finance, these customers have another core business, and they're really looking for a full end-to-end solution. which is why we've really been investing in this area because we think more and more of our business going forward will be full solution sets, including lots of different offerings from our platform to make it easier for them.

So it's relatively small right now, but growing quickly and will become a bigger part of the story in the coming years.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.

All right. All right, guys, we're going to get started. Thank you, everyone, for joining. We are very excited to have Mike Milotich with us today. Mike has been the CFO of Marqeta since 2022. He's been serving in the interim CEO role since February. And this morning, Marqeta announced Mike's appointment as permanent CEO and the company's intention to search for a replacement CFO. Mike, thanks for joining us, and also congratulations on the announcement today.

Thank you. Appreciate it.

So look, we -- I think we -- a lot of us saw the news coming. So congratulations, again, on being named for -- CEO officially. Can you tell us where you're focused for the last 6 months and what your goals are for the rest of the year now that you've been kind of formally named official CEO?

Yes. No, thank you, and I'll probably be making some forward-looking statements. So please, look at our 10-K and 10-Q for risk factors. But I would say already before I took the interim CEO role, I was already very involved in the business, really almost all aspects of it. And so there wasn't any sort of change in strategic direction or anything. I was already very much on board and supportive and was involved in the creation of that plan. And so what I've really been focused on in the last 6 months is really execution and just making sure that we narrow down our priorities and then we deliver on those priorities, and we deliver them well.

And so as I move now, I guess, into the permanent seat, it -- I've already been operating this way for 6 months, so not a lot changes. I would say the areas that I'm particularly focused in is, one, from a platform capability perspective, I've been digging in to make sure that we are expanding the capabilities of the platform and becoming more of a full stack with a lot of services around our core processing capability. We want to be able to move faster. So we want to be able to deliver new capabilities for customers quicker and onboard them faster. And we just want to make sure we're being -- the platform is just a lot more efficient and can be much faster.

The second area that I'm particularly focused on is making sure we're easier for our customers to interact with. We are in a very complex business, and so a lot of times, there's a lot of complexity because you have a lot of cross-functional collaboration because you need a lot of expertise, both technical, compliance expertise, finance expertise, et cetera. And so what we've been really focused on is making sure that we can do that as effectively as possible. And so therefore, we can move faster for our customers. And then we're also leveraging a lot of AI tools to get more effective, for example.

Yes. You recently reported Q2 results that were ahead of expectations. Could you recap some of the puts and takes there and the overall implications for the rest of the year from the strong results?

Yes. I mean the results were really strong. Our TPV grew 29%, which was a 3-point acceleration, which we had not expected. And it was really strong across the board in our major use cases with lending and buy now, pay later being particularly strong, where we actually saw all 10 of our top 10 customers in that use case, their TPV growth accelerated from Q1 to Q2. And so a really strong outperformance there.

Our gross profit grew 31%, which includes about 8.5 points of a change in accounting related to our network incentives. So on a normalized basis, a little over 22%, which was much stronger, mostly driven by the strong TPV growth, but also favorable business mix as all the TPV upside came from our non-Block business, so a little bit higher take rate on that business.

And then our expenses, our adjusted expenses actually declined year-over-year by 7 points, which was -- or 7%, which is about 10 points better than we had expected. And half of that is timing related where we were just a little slower to onboard some new employees in the areas we're investing, and we pushed some marketing out of Q2 into the second half. So that was about half of the upside. But the other half was really just execution of optimization initiatives, we're really getting very good at sort of taking a lot of the waste out of the business. And so that led to record EBITDA quarter for us, both in terms of dollars and margin. So a really strong performance.

In terms of how it affects the rest of the year, I would just note, I guess, 2 things that are important. One is that 8.5 point benefit we got in gross profit from the accounting change in incentives turns to a headwind in both Q3 and Q4. And so that's a little bit of a change. And then the second thing is that the TPV growth was a little bit unexpectedly strong and again, with a favorable mix. And so we don't expect or we haven't projected the TPV to remain that strong with that type of favorable mix for the rest of the year. We want to see the trend hold for a little while longer before we start including it in our forward-looking projections.

And I think one thing you mentioned was a change in the renewal timing expectation. Could you walk us through how that impacts or flows through the numbers?

Sure. At the beginning of the year, we talked a lot about we have 2 major renewals this year, sort of the last 2 we have for the last 3 years. We've renewed almost all of our business with revised economics, and these were the last 2. We, at the start of the year, said we thought they'd get done probably about midyear. And so therefore, in the second half, it would lower our gross profit growth by about 4 points, and therefore, lower our growth for the full year by about 2 points.

As we've gotten into it and those discussions are ongoing, it's taking a little bit longer than that. We're still going to get them done long before the contracts expire, but the timing is shifting out a little bit. And so now we believe the impact of those renewals will start in Q4 with the full impact really not coming until 2026. And so as a result, that is going to be lifting our performance in 2025, which we have shared in our updated guidance, but without necessarily that carrying over into 2026 because it really has just delayed the timing of these impacts and how they will lower our gross profit.

Got it. Okay. And then I just want to level set on kind of your vision for Marqeta's longer-term growth ambitions. I guess how do you frame the longer-term opportunity, and then what are the 2 or 3 things that you expect to make the most impact over the next kind of 12 to 18 months?

Yes. I would say the growth path for our business is very clear. In my mind, there's sort of 2 ways that we look at it internally. One is just from a pure kind of market outside-in perspective, if you will, where, first, we've had a lot of success with our fintech customers over the years. And now they continue to expand both in their products and services they offer, but also geographically. We want to keep doing that.

We've started to serve the embedded finance use case. So that is a business that's still relatively new on the issuing side. Again, a lot has happened on the merchant side. But on the issuing side of the business, it's early days, and that's sort of the next wave of growth for us. And then ultimately, we want to serve the big banks. But that's several years away.

Another way that we look at the growth is more from an inside-out perspective where we've built -- all of our success has come for the most part in debit and prepaid. We're starting to build a credit business. And credit is half the market here in the U.S. It's a large portion of the market outside the U.S., and so that's a big growth area for us. The second area is geographic expansion. So our Europe business has been growing really quickly. TPV over 100%, and we recently did an acquisition to enhance our offering in Europe. But it's still -- that business is still relatively small. And so we think there's a lot of geographic expansion to be done.

And then the last area is in more value-added services. So traditionally, our business and our growth was very tied to TPV because our program management was really done as a bundle, and we didn't have a lot of additional services surrounding it. But over the last couple of years, we've really built a lot of capabilities. And so whether it's risk or data services, banking and money movement capabilities, tokenization, all these things are now drivers of growth.

And so if I was to focus on just sort of the next 12 to 18 months, I would say Europe and value-added services, bigger drivers of growth. The value-added services are still relatively small, but from a growth perspective, they can contribute and they tend to be higher margin as well. So they help the profitability. Credit, I would say, is probably more of a medium-term opportunity for it to really meaningfully impact the P&L.

I mean you've been talking more about the value-added services opportunity. I mean can you give us a sense for kind of like -- can you frame it in terms of an attach rate opportunity or like an ARPU opportunity with some of your existing clients and what that looks like when you successfully cross-sell?

Yes. I think that in some cases -- like we've said our risk services, for example, are getting a lot of adoption. We have over 40 customers that use them. But I also think that the fintechs prided themselves on saying, "This is my core business, so I'm going to combine best-of-breed services to create a really unique offering." And so they weren't necessarily as interested in buying a whole array of services from you because they were going to piece it together and maybe build some components themselves. I think as we move more into embedded finance, that changes a lot.

The customers are not payment experts. And so it's actually quite the opposite. They want more of a full package that they want to get from one provider. And so I think a lot of what we've been gearing up towards is, sure, we will cross-sell to our existing customer base, and we have done so with some success, but we think the attach rate will be higher in the future as our customer base diversifies.

Got it. That makes sense. So maybe staying on the topic of longer-term growth. how do you think about the growth algorithm for gross profit growth in the business? And what level of growth rate do you think is a sustainable run rate over time?

Yes. I think the -- our gross profit growth is impacted by many factors in the last couple of years with sort of renewal activity and having to reprice some things, it's been a little bit choppy. But also, what's happening is as we -- our business matures, we're getting to a lot more economies of scale, and we're starting to really drive a lot of EBITDA. And what's challenging, I sort of referenced it a little bit earlier, that because of the complexity of our business, it's also a very long-cycle business. So when we make investments, it takes some time for the payoff to show up.

And so the way we've actually been anchoring the business internally is really looking at a "Rule of 40" like metric where we're looking at gross profit growth combined with our EBITDA as a percentage of gross profit, which we feel like is the best way to really assess the profitability of our business. And we're getting -- we're starting to inch up pretty quickly towards a "Rule of 40" metric. But we think that metric captures the balancing act we're doing of driving growth, but also having to manage investment that really won't be a factor in our growth for a couple of years. And once we pass that 40% threshold, then we'll keep raising the bar.

And I guess you mentioned renewals on that. I mean one thing that stuck out over the last year or so was changes in the contracts, kind of lessons learned after the Block renewal to kind of make sure that there are enough kind of incentive tiers, the structures are accommodative of high-growth customers so that when these long-dated contracts come up for renewal, you don't experience this cliff activity. Can you just -- I guess, is the implication that the renewal impacts in any given year will be just a lot lower after you get through these last couple?

That's right. That's right. We've been pretty progressively resetting our contract base and setting it up. Our goal has been that renewals become nonevents in the future. And so we have these last couple to get done, but we expect it to be -- a lot of that noise to be gone from the business. There will still be renewal activity and customers want better pricing as they get bigger, but it won't be as significant as what we've experienced up until now.

Makes sense. So I guess on the Block relationship, the concentration with Block has continued to decrease over time. This quarter, it was relatively flat. It's a very strong partner, growing well. So just how do you think about changes to that relationship or just the longer-term view of the relationship significance to the company?

Yes. I think one of the big misconceptions about our business is that as our customers get bigger, they want less from us. And in some cases, customers have taken on some responsibility. But I would say that's pretty limited, and we have many, many examples where our bigger customers want us to deliver more. And as I mentioned earlier, we have really expanded the services that we offer from risk services, data services, tokenization, banking money movement. Now we're building an app for our customers to utilize. And so we have just a lot more to offer.

And at the same time, traditionally, our program management was also sold with a bundle. And it -- but we've been working hard over the last couple of years to break that apart into more of an a la carte menu and allow our customers to pick and choose. So as this sort of portfolio or this menu of capabilities and services expands, we are increasingly selling some of these capabilities to our customers and in many cases, our largest customers, which would include Block. And when we sell these services, we can get incremental revenue and gross profit without a change in our TPV trajectory. And so that's really what you're seeing as the concentration slowed this quarter. And -- but that's something we think will be a little more common because, again, a few years ago, all of our growth was really driven by TPV.

When you -- the second part of your question in terms of the -- how we think about the long-term relationship, we're very important parts of each other's businesses. So we're talking multiple times a week. So we're really in regular contact with one another and really have a very tight relationship. And we believe there's still many opportunities to drive growth for them on our platform between our, again, broadening capabilities that I've been talking about, our geographic reach and our expertise. We still think there's a lot of ways we can help Block grow, and we can drive growth for us.

But at the same time, we also understand that our large customers also want to diversify providers, right? That has -- several of our large customers have done that. That's a very standard risk management approach in the business and not just in the payments business but in other businesses. And in payments, often what you see is, and some of our customers have done this, they may diversify, but you tend to keep -- have a primary provider that can -- that you keep the bulk of your volume with in order to maximize your economics, but then you -- for risk purposes, you do have a backup provider.

And so I'm sure many of you saw The Bancorp 8-K a couple of months ago where they talked about establishing a relationship with Cash App. At this time, that's not something that we're participating in. So they -- in terms of diversifying like bank and processors, we recently added another bank on our platform for Cash App so that they can diversify bank partners within our stack. And they have had backup processors before. So this is nothing new, but this is not at least something for now that we're participating in.

And our understanding is in order to diversify, they are going to start to do some new issuance at Bancorp starting in 2026. And whether that's a portion of new issuance or all new issuance, only time will tell. But the way that we've looked at it is even if starting on January 1, all their new issuance were to move to Bancorp, the impact on our 2026 gross profit would be in the sort of high single-digit millions of dollars, so would lower our 2026 growth by about 2 points. And as we think about our business, that's factored into our thinking.

So on our last earnings call, we talked a lot about that as our business is changing, that our views of our 2026 gross profit dollars in terms of what we thought at the beginning of 2025 and our views at the time of our earnings call was that the dollars of 2026 hadn't really changed a whole lot, and even as things were changing in 2025. And as we incorporate all this information, that's all factored in. So we still believe that our views of what our P&L will look like in 2026 from a gross profit perspective is pretty consistent in dollar terms to what we thought at the beginning of the year. And we still believe that we can achieve GAAP breakeven. And so that's something that we're constantly refining our assumptions, and that's our interim view at this time.

I would say that the -- one more important thing is that our relationship is quite strong, and we continue to work on new capabilities together. So it's a really constant, ongoing effort for us to figure out ways to help them drive value and growth for their user base.

Yes. No, that makes total sense. So I guess under the new construct, I guess, to the best of your understanding, is there a target mix of kind of processing that you and the new relationship at Block that you think that over time, the overall business will trend towards?

So that, we don't know. And so -- but again, this is not new for us, and we feel like we add a lot of value and have a lot of unique capabilities with them. And so we'll see how it goes. But our view is that not standard risk management and not very impactful to our P&L, at least in 2026.

Makes sense. Okay. Let's talk a little bit about the regulatory environment. Last year, you called out certain regulatory changes that were making go-lives more difficult, extending the time lines. You've also talked about adding new banks. You just mentioned adding new banks to add diversity to the platform in the prior conversation about Block. So can you update us on the progress on additional banks and just the overall regulatory environment in general?

Yes. So in the past, we wanted a number of banks to have enough options for customers. But at the same time, we want to maximize our economics for the benefit of our customers by getting scale with each bank. And so we -- there's sort of this balancing act we're doing between having a number of providers, but also not spreading the volume out too thin.

But as the regulatory environment changed and some of the services and use cases we're targeting evolves, not every bank wants to do every type of use case and service, particularly as we talk about credit, which is even more specialized. So we determined last year that we wanted to bring on 2 additional bank partners. For one of them, the technical integration is almost complete. So we're like right on the verge of completion, and we already have a customer that we expect to go live in 2025. So that one is almost at the finish line. And then the second bank, we just recently signed the contract. And so the technical integration work has started so that we can support programs for customers in 2026.

Very good. Okay. And just the overall regulatory environment?

I would say not a lot has changed. So there's -- you read a lot about what's going on, but I would say that hasn't necessarily trickled down to the banks. Everyone is still operating sort of as usual. But the important thing to mention there, though, is that the bar, if you will, changed almost 2 years ago now. And so we are in a better rhythm and everyone has adjusted to that. It was pretty disruptive 12, 18 months ago, but now everyone's adjusted to that new level and things are working more efficiently.

Got it. Okay. This past quarter, I think one of the highlights was the outperformance across the lending and buy now, pay later space. I guess could you maybe just level set us how large that vertical is today in terms of volume or gross profit or both? And I was hoping you could talk about kind of where you see the BNPL industry headed over time, given that you work with most of the major players in that space.

Yes. So it's a big, fast-growing use case for us. I would say the last several quarters, lending and buy now, pay later has been sort of mid-teens percentage of our TPV. And typically, Q4 because of seasonality is much higher. So as we were highlighting, the business is growing much faster. So even in Q2 that we just had this year, it was actually slightly bigger from a percentage of TPV than Q4 was. So it is in the mid-teens, and it's growing very quickly.

The growth is coming from a few different areas. So it's really the broadening of the use of buy now, pay later capabilities. So particularly, it's not as focused on sort of bigger purchases, like either very large purchases or something very small. It's really starting to be utilized more as a cash flow management tool. And so the diversity in the types of purchases that are being made is increasing. And then it also is just a much broader customer base. You see a lot more adoption. And it also used to be in more specific -- sort of specific geographies, and it's really becoming more broad-based and you're starting to see it in a lot more markets, which is part of what's fueling our growth.

I think the biggest change, though, is that more and more of the BNPL providers are offering what we call a pay anywhere card, which is really our name for them offering their customers a card that says you can use this card anywhere that it -- cards are accepted, and you can be allowed to buy now, pay later with all those purchases. So it becomes a feature of the card itself. And so what that does is drive a lot more engagement.

If you like look at -- we do a lot of consumer surveys and things and what they're saying is that I don't want to have multiple cards, multiple wallets. And so this allows a consumer to have the ability to sort of pay now or pay later in one product. And that's being also helped by the kind of introduction of flexible credentials from the network, which we were the first processor in the U.S. to deploy. And so I would say we see a big shift in the sort of adoption of that capability as well as, in general, just the use of buy now, pay later spreading to many more merchant categories and geographies. And just given the way the flexibility and the reach of our platform, that's what's really benefiting us from a growth perspective.

And should we be thinking about the growth in some of these -- the physical card issuance and the expansion of BNPL networks as the bigger driver of BNPL growth for Marqeta over time? Or will the kind of virtual cards and the plumbing of the transactions even in the online world continue to be a big part of the story?

We still think that will be a big part of the story. If you think about the tens and tens of millions of cardholders that are out there and hold cards, I'm sure our BNPL customers would love to say that all those people will have one of their cards. But even if they are wildly successful and drive a lot of growth, there will still be many, many customers who won't have one of those cards and will more opt to click on their mark in the checkout process.

Makes sense. I wanted to switch gears and talk a little bit about international expansion and the TransactPay acquisition. You've been talking about the pipeline in international deals for a while now. I was wondering if you could talk about what you're seeing on the ground in Europe compared to what we see in the U.S. today. And then maybe also hit on the TransactPay acquisition.

Sure. So our Europe business has really been performing well. The TPV growth has been over 100% for many quarters. And what's interesting about it, at least from my perspective, is that all our major use cases are growing over 100%. So it's not a particular part of the business, but financial services, lending and buy now, pay later, expense management are all growing over 100%. And so there's just a lot of opportunity there.

I think the biggest difference in Europe from our perspective is that they're a little bit ahead of the U.S. from an embedded finance perspective. Because of the way the economics work in card in Europe, they are much further along in thinking about how to use financial services and card products, in particular, to drive engagement in their core business, which is really sort of the core tenet of the embedded finance use case. And so I would say they're a little bit further along.

And because of that, that's really what sort of got us to act on the TransactPay acquisition because what happened before, our service in Europe was somewhat limited. Where we could offer processing, but because of the way the licensing works in Europe, you have providers who have this EMI license, which allows you to be the member of the network and own the bins. And that needed to be part of your solution together with the bank. And what a lot of large enterprise customers, which is most of the embedded finance market, were saying is, "I really want one provider who provides me processing, program management and the license. And if you don't have all 3, then I'm going to have to sign multiple contracts, and I'm not very interested."

So that's really what drove the need for us to make that acquisition. We could have gone through the licensing process ourselves, but it would have taken a lot of time. And there's a lot of expertise involved. So we got both a huge acceleration in the time line as well as a lot of very capable people who know how to manage in that environment. And so not only will this open up deals that we really just weren't going to have access to, particularly on the high end of the market, the very -- larger deal, the bigger deals, but it also makes our service much more similar between North America and Europe.

And so why we think that's important is because the fintechs are becoming these big businesses and expanding geographically. And embedded finance, almost all those companies are already multinational. So we wanted it to be very easy for a European customer to move to expand into the U.S. and have the service we provide be very similar and vice versa. U.S. customers expand to Europe and be able to offer a very similar service, which we weren't able to do before. But with the addition of TransactPay, we were able to do that going forward.

All right. I'm going to try to squeeze in a couple more topics here. On the spend management side, it's been another really high-growth area of the business. You partner with several of the kind of high-profile, high-growth players in the space like Bill and Ramp. How large is the vertical today? And just how do you think about the growth rate of the category over time?

Yes. So it's another big component of our business. The expense management, it's a little smaller than BNPL. So it's in the -- I guess, it's in the teens percentage of our TPV, but it's a little smaller than the lending and buy now, pay later use cases. And the growth is really being driven by kind of newer companies who are really utilizing modern technology, both that they build themselves as well as using modern processing technology that we provide to really offer a service that goes well beyond what the traditional players offer.

So the growth has been -- this past quarter, our TPV growth in this area was over 30%, which has been pretty steady over the last several quarters. And it's really those businesses that are winning share. They just offer a much more compelling value proposition than the traditional players just in terms of its flexibility and the level of control that they offer and how seamless it can be sort of embedded into the rest of your business. And so they are having a lot of strong user acquisition, and that's helping drive the growth, and we are the beneficiary.

I would say we're also enabling geographic expansion. So that's another area. Again, I would say is a consistent theme in our business is now that the fintech winners have been crowned, they are moving into new products and new geographies to continue to grow their business.

Got it. Makes sense. Okay. This summer was kind of dubbed the stablecoin summer. There's been a bunch of announcements from various players in the payments ecosystem. With summer ending, are we now in the fall of stablecoins? Is it over? Or are we still going to be talking about it?

I'm sure we'll still be talking about it. Our view is that the 2 primary benefits of stablecoin is you're either living in a country that has very high inflation and you're looking to protect yourself from that or it's more of a cross-border use case where you're looking for speed of that moving, the costs are fairly high. And so those being the 2 primary sources of value, neither of those are really a big part of our business today. So we don't see this as super disruptive to our business, at least for now. And I think what remains to be seen is if the stablecoin sort of wallets take off, what I think is still unclear is where are you really going to be? How often are you really going to be able to use that wallet to make purchases? And if that's not the case, then also, what is the cost to get the value out of that wallet into something that is more usable? And so I think until there's clarity on that, kind of adoption and usage is a little bit hard to project.

In our view, we already have a solution that works best for this market, which we already do with Coinbase and Bitpanda and crypto and which obviously would apply in stablecoin where they offer their customers a card where you can transact in fiat in the ecosystem, so the rest of the ecosystem doesn't have to change or could evolve slowly over time, which is typically the case, and they're just drawing down on your balance of crypto or stablecoin. So we feel like we have a solution that very much works if the usage of these wallets takes off even if acceptance isn't there. And at the same time, we are engaged with several people about partnerships because that might be the case for the next several years, but thinking out further, we want to make sure we're positioned to support our customers if they want to go down that path.

Got it. Okay. I wanted to talk a little bit about conversations with large FIs. I know this is something you've always been focused on as a longer-term opportunity, but something you do want to address. Maybe you could touch on what the conversations with large FIs look like today and any updated thoughts around time lines?

Yes. I mean they're ongoing. We're in dialogue with them. I wouldn't say constantly, but from time to time with different FIs, we're in conversations. But one, they're thoughtful organizations. They also plan way ahead. So even if something were to happen tomorrow, it would probably be a few years before the volume would come on in a meaningful way. And I think for most banks, there's some investment in their infrastructure that has to be modernized in order to really take advantage of the kind of capabilities that we would offer. And so we still think it's several years away.

For us, the focus is to sort of get our foot in the door with sort of a very specific use case where we have a lot of expertise and are highly differentiated. And then the other area where we think we're likely to get in earlier is in the commercial side of the business because of the success of the players we talked about earlier. For them to respond, they're going to have to upgrade their capabilities. And so we're just trying to get kind of our foot in the door, start building those relationships, and we don't expect the business to be significant in the next 3 to 5 years. But as we look out further, that's definitely the part of the market we want to target.

Got it. Well, Mike, I think we're just about out of time here, but thanks for being here today. Congratulations on the appointment, and I really appreciate you attending the conference.

Yes. No, thank you so much for having me.

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 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 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 U.S.

In June, we supported Klarna in their launch of the KlarnaOne Card, making them the second BNPL provider to offer consumers a flexible credential-enabled card. This builds on years of collaboration with Klarna and demonstrates how customers can grow on our platform, both in offerings and geographies.

Over the past 4 years, Klarna 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 at last year's Money 20/20, 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 launch 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 Marqeta 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-Block 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.

One of our long-standing and top 5 customers in Europe recently tapped Marqeta 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 Marqeta 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, where TPV continues to more than double year-over-year.

Our European business is diverse and driven by many use cases, just like our business in North America. New 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 multiregional customers expanding into Europe.

One of our fastest-growing local customers is planning to expand into 9 new markets in Europe, bringing their total to 26 markets. Further, a U.S.-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 TransactPay, enabling even deeper engagement and delivering more value for our customers. After receiving required regulatory approvals, we completed the acquisition of TransactPay on July 31. 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 the EMI license; and third, allows us to standardize our offering across geographies and have more control of delivering solutions that are comparable to North America.

The acquisition is already driving significant customer interest, and we are already in market with our joint value proposition since Marqeta and TransactPay have long worked 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 in lending use cases, including Buy Now, Pay Later, is one 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 TPV continues to grow over 100%. And with the TransactPay 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 Marqeta 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 gross 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 much higher adjusted EBITDA of $29 million in the quarter.

This business outperformance, combined with the benefit of increased discipline in managing stock-based compensation over the past couple of years, brought us close to GAAP profitability breakeven in the quarter, demonstrating the profitability potential of our business.

Q2 TPV was $91 billion, an increase of 29% year-over-year. This $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 non-Block TPV grew nearly 3x 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 continued to drive the majority of our TPV growth.

Growth within financial services remained steady with 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-Block neobanking customers continue to grow approximately 5x faster than Block.

Expense management growth was also consistent with last quarter and remains over 30% year-over-year, driven by our customers sustaining strong end user acquisition by leveraging modern technology to deliver compelling value propositions.

Lending, including Buy Now, Pay Later, year-over-year growth meaningfully accelerated versus Q1 to a 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, increased 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.

Q2 net revenue was $150 million, growing 20% year-over-year. The growth accelerated by 2 points versus Q1 as growth accelerated in each of the 4 major use cases. Our Q2 net revenue growth acceleration versus Q1 and the outperformance versus expectations was driven by our strong TPV growth as our net revenue take rate of 16 basis points was in line with last quarter.

Block net 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-Block net revenue growth was similar to last quarter and remains nearly 10 points higher than Block net revenue growth, primarily driven by strong performance of our larger non-Block customers and the ramp-up of new programs launched since the start of 2024.

Q2 gross 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 accruing incentives each quarter based on the forecasted annual contract tier we expect to achieve as opposed to booking the incentives each quarter as they are earned and move through the progressive tiers. As a result, Q2 gross profit growth was 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 gross 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 was a contributor to the gross profit outperformance as the TPV outperformance was all non-Block 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-Block gross profit growth continues to grow faster than the overall company and is growing a little faster than non-Block revenue growth.

Our gross profit take rate was over 11 basis points, 0.3 points lower than last quarter due to our TPV outperformance being mostly driven by our larger customers who have better pricing. Q2 adjusted operating expenses were $76 million, shrinking 7% year-over-year. The 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 nonrecurring benefits, while a little less than half was driven by strong execution of optimization initiatives and investment discipline.

We had nonrecurring tax benefits of $1.1 million, largely due to 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 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 efficiency initiatives within our product and technology organizations that is 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-over-year growth in our adjusted operating expenses was always expected to be the lowest in Q2 due to an easier year-over-year comparison.

Q2 adjusted EBITDA of $29 million, a margin of 19% were new all-time highs for both metrics as we make significant progress on our path to profitability. We believe the adjusted EBITDA margin based on gross profit, which was 27%, is a useful data point to illustrate the profitability 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 TransactPay acquisition.

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 repurchased 35.2 million shares at an average price of $4.62. When combined with our Q1 repurchase activity, we have repurchased 61.5 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 30, 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 uncertainty remains based on uneven indicators. Therefore, we now expect full year 2025 revenue growth, gross profit growth and adjusted EBITDA margin to each be 3 to 4 points higher than what we shared last quarter.

Also keep in mind at the start of the year, we said Q2 had the easiest year-over-year comparison. There are 3 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 in Q3 and 4 points of drag in Q4. TransactPay will be a contributor to the business starting in August, lifting both revenue and gross profit growth by an expected 1.5 points in Q3 and 2 points in Q4.

At the beginning of the year, we anticipated executing 2 renewals midyear. 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 with our investments in 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. Q3 adjusted EBITDA margin is 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 EBITDA margin to be between 14% and 15%. This equates to over $85 million in adjusted EBITDA in 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 the small delay of a couple of key customer contract renewals to later this year has led to us significantly raising our full year 2025 expectations for net revenue, gross profit and adjusted EBITDA. 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 TransactPay 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 call back over to the operator for questions.

[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, we're just doing a really great job executing on making things much more efficient and just doing things much more effectively. Part of that is AI. I mean we're helping people be a lot more efficient. But some of it is just we're starting to have more tools, more processes to just help everyone be more effective. And that's coming in the form of 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.

And the new capabilities really is what drives a lot of 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 EBITDA in addition to things like how we work with the technology providers who support our platform. 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. 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 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 U.S., it will feel more similar or if you're a U.S. or Canadian-based customer and you go to Europe, we'll 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 really excited about what TPL can do. And we're already sort of harmonizing our go-to-market motion so that we show up as one company as early as this week. And then we're going to take the next couple of quarters to integrate the rest.

In terms of the investment needs, so we -- there's -- our investments are really focused on a couple of different areas. I mean the platform is always going to be the first one. So 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 different ways to kind of send and receive money, bill pay type capabilities. So we're building out those types of solutions that our customers can utilize.

We're enhancing our credit platform. We're getting more volume running through. We're enhancing the rewards capabilities associated with it. And we're also enhancing kind of a secured card and more of a charge card type capability so that we have that -- those kind of capabilities. And then the front end, the white label app, just again, bringing that user experience component also to our value proposition. I would say those are the areas where 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, not as much of an increase this year. We're just starting to see the fruit of those investments. And so -- but we're getting just a lot more efficient in the way we operate, and that's what's driving a lot of the expense savings and therefore, driving the EBITDA to levels that were much higher than we expected.

On your last question, you're right that we are ahead on our profitability. And so we do believe that we had said before we thought we would exit 2026 GAAP profitable, we now believe that -- or we would be GAAP breakeven, sorry. We now believe that the full year 2026, we will be GAAP breakeven. And that's without our -- our assumptions for our gross profit in dollar terms changing much. So 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 views of '26 gross profit haven't really changed and -- but we're ahead on profitability. And you put those 2 things together, and we do think we can be GAAP breakeven for the year.

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.