Marqeta, Inc. Q3 FY2024 earnings call

• Marqeta's business is on solid ground with strong fundamentals; net revenue, gross profit, and adjusted EBITDA showed positive year-over-year gains after lapping the Cash App renewal.
• Launched portfolio migration to simplify upgrading existing card programs, reducing complexity and disruption. Completed successful migration of millions of Klarna cards.
• Released UX Toolkit to enable customers to create branded front-end experiences for debit and credit programs with fewer development resources.
• Announced Marqeta Flex, a new solution for BNPL in payment apps, planned to roll out in mid-2025.
• Addressed Q4 growth reduction due to increased regulatory scrutiny causing delays in new program launches and some sophisticated customers shifting to in-house program management.

Total processing volume (TPV) in the third quarter was $74 billion, a 30% increase compared to the same quarter of 2023. Net revenue was $128 million, up 18% year-over-year. Gross profit was $90 million, a growth of 24% versus the comparable quarter of 2023. Adjusted EBITDA was $9 million. Net revenue contribution: Net revenue growth is impacted by business mix shifts like lower take rate from 'Powered By' revenue and a headwind from a renegotiated platform partner agreement. Gross profit contribution: Gross profit growth was affected by delays in new program launches and underperformance of some newly launched programs.

• Q4 net revenue growth expected between 10% and 12%, Q4 gross profit growth between 13% and 15%, a reduction from early August guidance.
• Full-year 2024 net revenue growth expected approximately negative 26%, full-year 2024 gross profit growth expected approximately 6%.
• 2025 adjusted EBITDA still expected approximately $50 million, with Q4 2024 seen as a good proxy for 2025 gross profit growth.

• Increased regulatory scrutiny led to delays in new program launches, with average time to launch new programs growing 30%-40% from 2023 and expected to remain for at least two additional quarters.
• Some sophisticated customers shifting to in-house program management, reducing volume or take rate.
• Backlog of programs to launch impacting Q4 and 2025 results as delays push launches into later periods.

Q: Comment on your visibility at this point, given regulatory-driven changes and risk of bookings termination.

A: Simon and Mike discuss that they have visibility, have anticipated changes, but underestimated the impact on onboarding with banks, believe they are over the hump in fixing processes, and don't expect bookings to be terminated as both parties are committed.

Q: Confidence in existing customers not being impacted.

A: Simon and Mike state that Marqeta has reviewed existing programs, put partners through tests, customers are responsive to reducing scope and working in lock-step, and customers are invested in solutions so unlikely to drop off.

Q: Impact of Visa Flexible Credential.

A: Simon mentions Marqeta was first certified for Visa Flex Credential, launch starts in mid-November, reception is great, and it has increased demand in U.S., U.K., and EU.

Q: Hesitancy from new candidates in pipeline and resource shift.

A: Simon says Marqeta has moved resources to help, pipeline continues to grow with two-thirds being embedded finance customers in neobanking, flexible payments, and finance automation areas.