Marqeta at Wolfe Fintech Forum: Strategic Shifts and Growth Prospects

On Tuesday, 11 March 2025, Marqeta (NASDAQ: MQ) presented its strategic direction at the Wolfe Fintech Forum. The company is focusing on achieving profitability and expanding its market presence amid recent leadership changes. While Marqeta faces challenges such as customer onboarding issues, it is optimistic about growth in embedded finance and European markets.

Key Takeaways

• Marqeta plans to achieve GAAP profitability by the end of 2026.
• The company expects revenue growth of 16% to 18% in 2025.
• Expansion in Europe is a major focus, with the acquisition of TransactPay.
• Embedded finance represents two-thirds of Marqeta’s pipeline.
• Marqeta is addressing onboarding challenges with preconfigured solutions.

Financial Results

• 2025 Outlook:

- Revenue growth: 16% to 18%

- Gross profit growth: 14% to 16%

- EBITDA margin: 9% to 10%

• Revenue Growth Contribution:

- New programs: 5 percentage points

- TransactPay acquisition: 1 percentage point

• Gross Profit Headwind:

- Customer renewals: 2 percentage points for 2025

• Quarterly Impacts:

- Q1 2025 Gross Profit Growth: 11% to 13%

- Incentive accounting changes affecting profit in Q2, Q3, and Q4 2025

Operational Updates

• Embedded Finance: Pipeline has increased to two-thirds, highlighting a strategic shift.
• Credit Initiatives: Launch of the first commercial and consumer use cases.
• European Expansion: Acquisition of TransactPay to enhance program management.
• Bank Partnerships: Addition of two new U.S. banks in 2025.
• Customer Onboarding: Improved processes with tighter bank relationships.
• Visa Flexible Credential: Launched in the U.S. with Affirm.

Future Outlook

• Growth Strategy: Focus on embedded finance, credit expansion, and European growth.
• Service Expansion: Additional services expected to contribute more to P&L in 2025.
• Profitability Goal: Targeting GAAP profitability by the end of 2026.
• Customer Program Launches: Streamlining processes to reduce delays.

Q&A Highlights

• Embedded Finance: Seen as a major growth opportunity beyond fintech.
• Valuation Goals: Aiming for a reasonable valuation through success in embedded finance.
• Flexible Credentials: Embedding BNPL into debit cards as a strategic initiative.

For a deeper understanding of Marqeta’s strategic plans and financial outlook, refer to the full transcript below.

Full transcript - Wolfe Fintech Forum:

Mike, Interim CEO and CFO, Marketa: good.

Darren Peller, Analyst, Wolfe Research: All right. First of all, Mike, thank you again for being here.

Mike, Interim CEO and CFO, Marketa: Thank you for having me.

Darren Peller, Analyst, Wolfe Research: All right, guys. Good to see everybody again. Again, I’m Darren Peller. I cover payments and IT services at Wolfe Research. Really happy to have Marketo with us today.

We have Mike, who’s the interim CEO and the CFO of the company, who, you know, Mike and I have go back a long way and I’ve such a huge regard for what you’ve done both at Visa and now Marketa for some years now.

Mike, Interim CEO and CFO, Marketa: Thank you.

Darren Peller, Analyst, Wolfe Research: Just remember, Marketa, even during their IPO, working on it was certainly had some of the better customer diligence calls we did with just customers that really appreciate and needed what you guys offered. So anyway, thank you for being here with us today.

Mike, Interim CEO and CFO, Marketa: Appreciate it.

Darren Peller, Analyst, Wolfe Research: Maybe just start off, I mean, obviously, there’s been an announcement of an interim CEO role now. And so if you could just give us a sense of the change in leadership, why now, what are you seeing differently regarding the strategy or path, Marquette, maybe if there’s any variance from predecessor? And we’ll go from there.

Mike, Interim CEO and CFO, Marketa: Sure. So Simon and the Board mutually decided that it was this was the time, as we start off a new fiscal year, for to do a transition in leadership. And mostly just we’re going to have a renewed focus on execution in 2025 and going forward to make sure that we continue our path to profitability and the kind of growth that we want to achieve. And I we have a sound strategy. I was a big part of kind of creating it, had a big voice in it.

So I think I don’t expect to make any major changes. The one area that I think I will have put a little more emphasis maybe than in the past is on some of the more fundamental elements that are foundational to our success. So a little bit of a back to basics focus on a few more of the little things that help us just deliver more value for our customers and partners, and ultimately, that should drive shareholder value.

Darren Peller, Analyst, Wolfe Research: Okay. That’s really helpful. Look, last year was undoubtedly a busy year for the company, and there was a lot of new growth initiatives, but also some speed bumps, obviously, along the way. So maybe just to level set things, what were some of the key takeaways from last year? And if you could just catch us up maybe from to being current from some of the impacts from third quarter and fourth quarter, whether that was the fintech banks having more friction and underwriting or some of the customers doing a little more in house, especially on the ODD on the on demand side, delivery side.

If you could just help catch us up to what’s still impacting the business and what happened in there.

Mike, Interim CEO and CFO, Marketa: So I would say coming out of ’twenty four and into ’twenty five, there are probably four highlights from 2024 that I would say are going to be impactful as we look ahead. So one is we really laid the foundation for embedded finance. So if you go back to 2023 and 2024, we said roughly about a third of the new sales that we were booking was in embedded were embedded finance customers and use cases. And right now, our pipeline is about two thirds embedded finance. So we see a lot of momentum going in that direction.

We are uniquely situated to help embedded finance customers because of our modern platform, pure API based. It makes it easier for existing businesses to embed a card solution into their platform. And we do both consumer and commercial, credit and debit on a global basis, which is important in embedded finance because many of these are well established businesses who are already multinational and are thinking about multiple use cases, not just a single use case. So the fintech space, at least when those companies start, they’re in sort of a narrow vertical versus embedded finance. These are bigger businesses thinking about multiple options, which makes us a unique partner in terms of the value we can add.

The second area is we started to make some progress in credit. We are purposely going a little bit slow because anytime you rush in credit, you can make some pretty painful mistakes. And also, what we’re doing is different. What not much has changed in the credit space in a couple of decades. What we’re proposing is different.

And so we’re looking to find the right partners. We’ve launched our first commercial use case, so we have a customer up and running, and we just signed our first consumer use case, which is an airline co brand. And so we’re excited about the progress we’re making in credit. The third area I would mention is in Europe. So our Europe business is doing incredibly well.

Our volume there is growing well over 100%. And that’s just an area of the company. It’s now over 10% of our TPV. So it’s growing really quickly. And we’re investing in that area, which I’m sure we’ll talk about with the recent acquisition we just announced.

And so that’s another area of strength that’s going to really help us as we go forward into next year. And then finally, we are getting we’re starting to expand the number of services that we can offer our customers. And so in the past, we were expanding our platform more on a use case basis. And although we’re still continuing to do that, I would say we’re much more focused on providing additional services where we can add more value. And so I think you’re going to hear us talking more about that in 2025 and hopefully have more contribution to the P and L.

In terms of the what you spoke about, which was in our call in November, we highlighted that we had a few long term highly sophisticated fintech customers that were taking on more things themselves and therefore buying fewer services from us. And there was six unique instances of it. Two of them were customers who were taking responsibility for the bank relationship. One of those is done and they have executed, and the other one we expect to happen in the coming months. There was one customer who took their risk services in house and that was executed at the start of Q4 of ’twenty ’4, so that is done.

And then we had three instances of customers connecting directly to their endpoint in on demand delivery and which really doesn’t then removes the need for a card in the transaction. Two of those three are done and one is ongoing. So for the most part, those impacts are in our P and L at this point, and there’ll be a little bit more coming in the first half of ’twenty five.

Darren Peller, Analyst, Wolfe Research: Okay. And so when you think about the dynamics at the end of last year, I mean, there again, the banks, there were some friction in really just on boarding customers. And so where are you in, first of all, adding incremental? I know you talked about hopefully adding a partners. And maybe just as a side on to that, when we talk about banks collaborating with you guys more and just having a more systematic approach, what What does that mean?

And what is that going to do for you onboarding customers going forward?

Mike, Interim CEO and CFO, Marketa: Yes. So first, from a new bank perspective, we are intending to add two new banks in The U. S. In 2025. One of them, we’ve already agreed to financial terms, and we are in the process of doing the technology work.

So that one is pretty well on its way. The second one, we’re very close on the financial terms, which would then allow us to start doing the technology work that’s required. So we’re making good progress there. And when we’re adding new banks, not only do we just want more supply, if you will, but the other thing that we’re looking at are the banks’ capabilities, right? What types of use cases are they comfortable with?

Most banks are not going to do everything that we want to provide our customers. They’re not comfortable with certain use cases. So part of when we’re choosing banks is also making sure we’re choosing banks that are want to do what kind of business they want to do, what capabilities they have that we can utilize is an important part of our selection. So we’re excited to bring on those two new banks. In terms of what we’re doing to improve the onboarding process with the banks, we’re trying to have a much tighter relationship.

I would say on the bank side, it’s a little bit easier. We’ve worked really hard with our bank partners to have sort of regular stand up meetings so that we’re communicating much more frequently and have clear escalation paths so that if there are any challenges arise, we quickly kind of swarm them and deal with them. So that’s how we’re working really with our bank partners. I would say more of the changes on the customer side. So we pride ourselves on being very customer centric in our history.

And so we tended to give customers a lot of freedom to make changes and make adjustments. And I think now we’re being a little heavier handed, helping them understand that the environment has changed from a couple of years ago, and they really should spend a little bit more time planning. So once they get going, they don’t make a lot of changes because even small changes, like, we we’ve been spending a lot of time with them helping them understand. Like, if you change your marketing message just a little bit, because of the approval process that has to do with that, it could set you back, like, a month to a month and a half. So just like a small change to how you want to position, the program in marketing.

And so giving them more examples of that helps customers appreciate, wow, I just make a couple of these changes. I could easily lose several months. Right. Right. And trying to educate them about that.

We’ve started to introduce some fees as well to create some disincentive. Yes. And we also because our customers are shifting more to embedded finance, they actually want more of our expertise in they’re asking us, what would you recommend so that we can get up and running? And so we are utilizing more of our preconfigured solutions that the bank and the network have already preapproved, which allows us to then move a little faster with our customers. So those are all the ways we’re trying to streamline the process.

And in November, at our earnings, we talked about several programs that had been delayed. At this point, almost all of them have launched except for three programs that remain, unlaunched. But in each of those three cases, our work and the bank’s work is done, and we’ve really now handed the keys over to our customer, and it’s up to them now to launch the program.

Darren Peller, Analyst, Wolfe Research: That’s great to hear. All right. So hopefully, that’s mostly in a much better position now. When we think about your ’25 outlook, if you could just start by recapping what you just provided for us in your last comment. Also maybe a little bit about the exit growth, how you exited the year versus the guide and then what your assumptions are in there.

Mike, Interim CEO and CFO, Marketa: Sure. So yes, what we just said a couple of weeks ago in late February at our earnings call is our expectations are that we’ll grow revenue 16% to 18%. Our gross profit will grow 14% to 16% and our EBITDA margin will be 9% to 10%. So pretty strong performance, but growth a little bit lower than we would have liked. Some of the key drivers of that are our existing customer volume growth continues to be quite strong.

That’s steady. We are getting increased contribution from new programs. So we’re expecting about five points of revenue growth from new customers that we onboarded either in 2024 or we’ll be onboarding in 2025. We have the pending acquisition of TransactPay that we, at least for financial planning purposes, are assuming will close around mid year. It’s pending regulatory approval.

And that would add about one point of growth for the full year. And then one headwind that we’ve called out is we have a couple of significant renewals with customers this year that we expect to be about two points growth headwind on gross profit in 2025 on a full year basis. So those are some of the key levers. I would say when you’re looking at sort of the opportunities and risks, what could deviate from those numbers? I think on the positive side would be many of our existing customers are still growing at a good pace and are getting bigger and bigger and are interested in other ways we can add value for them.

So we do think our ability to offer more services. Another area would be flip business. So in fourth quarter at the beginning of the fourth quarter, we executed a flip of some business for Klarna in Europe, and that went extremely well. And we actually had two additional flips that we closed in Q4. And so what we see is just more interest in modern processing and the value.

Flips were rare in the past because it was hard to say what the incremental value you were getting if you move from one platform to another versus we think there’s a much bigger difference in capability if you’re on more of a legacy platform and moving to our platform, which is more modern. And as we show our ability to execute that well, we do think that’ll be a growing part of our business. And then I would say on the downside, macro is probably the biggest factor, and certainly the last couple of weeks have gotten a lot of people’s attention. Our model is based on spending like almost every payments company, and so we’re always going to have some risk there. And then the second thing I would say is because we’re relying on our customers to get moving as they launch new programs, right, we can do our part with the bank and get them ready to launch.

But then at that point, we really turn it over to our customer, and they’ve got to get the program going, do the marketing and get the momentum. So there’s always a little bit of risk for us that our customers don’t move as quickly as we would like or don’t execute as well as we would like.

Darren Peller, Analyst, Wolfe Research: So when we think about what’s still impacting your growth this year from the layover effect of some of those items last at the end of last year, you called out even in the third quarter, what is that? I mean, is there a basis points or percentage point impact?

Mike, Interim CEO and CFO, Marketa: Yes. I mean, it’s definitely a couple of points of growth. I would say the bigger factor is that when we have new business that’s launching, it ramps at a very steep trajectory. So and as we some of those programs got delayed and some programs didn’t ramp as quickly as we’d like, it sort of pushed out that curve. And so that’s really the biggest factor why we’re not growing quite as fast as we would like.

We’re targeting to grow over 20%, and we’re really in the mid teens from a gross profit growth perspective. And again, just to kind of reiterate what that ramp looks like, based on all our history, when we throw out the outliers of incredible successes and some companies that were maybe not quite as successful, what we typically see is in the first six months of a program, 90% of the volume happens in months four to six. And then from months seven to twelve, the volume is 6x what we saw in the first six months. And then in months ’thirteen to ’eighteen, the volume is 3x what we saw in months seven to twelve. So it’s a very steep curve.

And so when you start shifting that out, it sort of delays the realization of that value, and that’s still weighing on us as well as some of the renewals. The other thing that’s unique about Q1, we said our growth, we expected to be 11% to 13% in gross profit, whereas in Q4, our growth rate was 18%. So it’s roughly a six point decline. There’s really two reasons for that. One is in Q4, we benefited from two things that were about one point each, so two points total, which was we earned an incentive based on annual performance that we earned in the fourth quarter.

And then also, we had favorable mix during the holiday season. So both those things we don’t think will are not going to translate to Q1. And then the second factor has to do with the timing of incentives, which we’ll probably also talk about because it impacts ’25. But particularly in Q1, in the previous year, we qualified for an incentive in Q1 of twenty twenty four based on the contract year of the incentive. But in the most recent contract year, we earned that incentive in Q4 of twenty twenty four.

So essentially lifted Q4, and then we’re going to have a tough comp in Q1, and that’s about four points. So it’s really an incentive timing change that we’re going to actually be fixing in 2025 and should become should not be a problem anymore after tax.

Darren Peller, Analyst, Wolfe Research: I mean, on that note, you had some accounting changes, obviously, in the incentives and the way you approach or you have to account for incentives starting this year in Q2, I think, right, which I know coincides with your partner’s fiscal year as well. Just help us can you explain that for folks here just to help us understand what that means for gross profit growth trajectory throughout the year?

Mike, Interim CEO and CFO, Marketa: Sure. So just as a reminder, our two largest incentive contracts run April to March. So that’s the contract year. And going leading up to the IPO, we did not have the history to show that we could accurately project incentives. And so therefore, a determination was made that we would account for our incentives on a cash basis.

So essentially, as we earned them, we would book the benefit, but that also meant we had lots of catch ups as we move through the tiers of our incentive contracts from April all the way through March. And so it created a lot of lumpiness in our gross profit, essentially, as we recognize that. The approach we’re moving to in 2025 is really the accrual method, which is the proper way to account for the incentives if you show the ability to accurately project it. So with now sort of four years post IPO, we have a lot of history, and we can we’ve shown, proven that we can accurately project it. So I think the important thing is that this is not an election.

This is a requirement that we make this change now that we’ve proven our ability to forecast the incentives accurately. So essentially, what happens is now at the start of every contract year, we make a projection of to which tier we believe we will be in, and then we apply that rate to the volume in each quarter, which essentially smooths it out over the year. And so in 2025, there’s going to be noise as we have an apples to oranges meeting. Right, comps

Darren Peller, Analyst, Wolfe Research: are going to be weird, but otherwise. Exactly.

Mike, Interim CEO and CFO, Marketa: So in Q2, we expect so no impact in Q1 of ’twenty five. In Q2, we expect to get eight points of lift to our gross profit because of the difference in the year over year comparison. Q3, we expect one to two points of drag. Q4, ’3 to four points of drag on gross profit. And then in Q1 twenty twenty six, I mean, it’s early right now, so but based on everything we know at this point, we would expect the impact to be low single digit growth drag on gross profit.

So overall, this is neutral on an overall annual basis, but right now it’s a timing factor.

Darren Peller, Analyst, Wolfe Research: And an accounting dynamic. You’ll show us the normalized, what it would have been apples to apples.

Mike, Interim CEO and CFO, Marketa: We’ll be very, very transparent. Expect us to bang the drum. Yeah, we grew mid-20s because that’s what we said we’re going to grow. We’re going to be very transparent. Yes, we’re going to grow faster, but that’s with eight points

Darren Peller, Analyst, Wolfe Research: incentive. It’s an interesting dynamic because you guys have the demand is there. I mean, you have a lot of customers asking for help, obviously, and yet we’re seeing just nuances with banks or friction with onboarding or now the accounting. There’s still a lot of noise. Yes.

And when it comes when you think about the actual guide, correct me if I’m wrong, there’s two points of, I guess, call it, headwind from some of the layover effect of timing from last year of what you expect for new business this year versus what you would have expected to have. And then there’s also, I guess, a couple of points from repricing, right? So maybe just quickly touch on so that would have gotten you to almost 20%, right? Call it high teens 20% without those two items. But first of all, the two new the programs you talked about, the top 10 that you’re repricing, just quick update on that and how you’re approaching those negotiations.

Sure. Again, I think you said two points is what we’re saying.

Mike, Interim CEO and CFO, Marketa: Correct. Two points. So and we expect them to happen mid year. So it’s about four points of drag in Q3 and Q4 each. Okay.

So annualized. And essentially, the way we think about renewals is the renewals and contract pricing, when you’re working on the tiering, it’s an opportunity to align your interests and incentivize customers to grow on your platform. And that’s how we look at it. And we also try to insert enough tiering and volumes that the next renewal is sort of a nonevent. So we’re always trying to allow for much more growth than we anticipate in the five or seven year period of the contract so that our pricing is already well established and the next renewal is a nonevent.

So that’s sort of what we look to do. And in from the middle of ’twenty two to the end of ’twenty three, we talked a lot about that time that we renewed over 80% of our TPV. So there was a lot of activity because there were a lot of our customers who were coming out of the pandemic and had experienced just a boom of business. And their business had grown many multiples, 10, 15x in some cases. And so there was a pretty significant repricing.

And 2024, we had some reprieve from that. And in 2025, we sort of have the last two where we feel like this is the last time that we’re going to have to sort of materially rebase the price for customers based on the way their business has grown in the last few years. And so after these two going forward, there’ll always be renewals in the business, and there’s always a little bit of price compression. But that’s very manageable, and that’s BAU from here on out.

Darren Peller, Analyst, Wolfe Research: Okay. If we take it a step back, Mike, I mean, the demand in Europe for your business, if we could just revisit the key verticals again, I know that you and I have talked about it quite a bit, and some of them are a little bit more mature in your business like on demand delivery. But BNPL still, you would think it’s more mature. It still has a lot of room in what we’re seeing in terms of the card offerings. Expense management is a key area.

Just revisit for the folks in the room, if you don’t mind, the areas you see the most demand for.

Mike, Interim CEO and CFO, Marketa: Sure. We really have four use cases kind of at a high level that we kind of try to group our business in to give people some color on what’s happening. Three of them are growing at roughly the same rate, which is in the low to mid-30s from a volume perspective, which is neo banking. Our biggest customer there is obviously Cash App. But our non block kind of neobanking business is growing rough in Q4, grew roughly 100%, so it’s growing very fast.

And that’s from both U. S. And European customers. The second area is BNPL, as you mentioned. And BNPL growth is really being fueled by a few things.

One is the continued adoption of PayAnywhere cards, which a number of our customers are using for us, which essentially brings the BNPL capability into a card that can be used anywhere Visa or Mastercard is accepted. So it essentially increases the places where BNPL could be executed, and we’re getting strong growth there. A second area is also that our customers are getting increased distribution through wallets. So that’s another area of growth. And then it’s something we’re excited about that came like at the end of ’twenty four, but we expect in the next year or two to be much more impactful, is the introduction of flexible credentials.

So Visa announced their version last year, and we launched it with Affirm this year. It’s the first program to go live in The US with a flexible credential, which essentially allows you to have multiple funding options on one card credential. And the early use cases are for BNPL, essentially to insert BNPL into any debit card that Marketa may issue, for example. So that’s something that’s also fueling growth in BNPL. And then the last area is expense management.

And this is think of this as AP automation as well as more modern corporate card issuance. And what’s really fueling the growth there is our customers are winning share in the market, right? So there are several more modern companies that have come to market, say, in the last five to ten years, who offer AP automation and just more sophisticated corporate card spending tools, a lot of which is powered by the capabilities of our platform. And they are absolutely growing their share in the market, and that’s allowing our business to grow at a good clip.

Darren Peller, Analyst, Wolfe Research: I mean, I still think to this day, a lot of investors and certainly, and maybe even just the market broadly, underappreciates the vertical differentiation you guys have and understanding what to do in those categories for an area that’s complex, an issue of processing at times. One thing that I know we still get questions on is just the explanation of Powered By versus when you talk about the business of the Power and the Powered By category versus Managed By and how the growth in Powered By will impact future growth. Can you just explain the difference first and how Power BI can actually impact you guys?

Mike, Interim CEO and CFO, Marketa: Sure. So when we say powered by Marketa, typically what that means is we’re only doing processing. So we’re purely an issuer processor, and we’re not providing many of the program management capabilities a full comprehensive solution that includes processing program management, which is what we call managed by Marketa. And in the past, a couple of years ago, those were really like two ends of a spectrum, and it was fairly black and white. You were in one or the other.

What started to happen in the last year or two and we think is accelerating now is there’s a blurring of those. So we have many more powered by customers who are beginning to take some of our additional services. So almost half of our powered by customers are using at least one of our kind of program management services. So more and more, even if they go that route, they do use some of our additional capabilities. With Powered By, the key is that because we don’t need to factor in network and bank costs into our price, As that business grows faster, it creates a pretty significant disconnect between TBV growth and revenue growth because essentially, our revenue in our price, we don’t need to factor bank and network costs.

The difference between revenue and gross profit growth is much smaller. And what’s been happening is the Powered By business has just been really outperforming largely due to Europe because we’ve only operated really as a Powered By capacity in Europe up until now. But also, we have a couple of programs in The U. S. Are growing really fast.

So just to put it in perspective, in ’twenty four, we had four customers whose volume is over 2,000,000,000 annually that grew over 100%. So pretty good scale and growing really fast. And we had two additional customers that are over $1,000,000,000 in volume that were growing at least 50%. So that’s a lot of growth of additional volume. And that is changing the mix of our business a little bit and creates that bigger disconnect between TPV growth and revenue growth.

Darren Peller, Analyst, Wolfe Research: All right. That’s helpful. You also highlighted quite a bit of traction in Europe recently, and you even mentioned it before in terms of what you saw last year taking off. I think it was over 100% TBV growth recently, right, you highlighted. Correct.

So just maybe what’s driving that success? And if you could touch a little further on the deal you just did with Transact Pay and the BIN sponsorship capabilities and just what that really does would be helpful. Sure.

Mike, Interim CEO and CFO, Marketa: Yes. I mean, our success in Europe, what I would say is Europe is the most advanced market that we operate in in terms of customers understanding how to use a card program to drive engagement, right? The economics are very different in Europe. So they are more advanced in thinking about how is this card brand going to impact broadly my business and how am I going to drive value. And so therefore, to do that, you need much more sophisticated capabilities.

If you’re going to drive engagement and you’re not just going to offer sort of a basic debit or credit value proposition, then you’re going to need sort of the flexibility and capabilities that we provide. And the fact that we’ve done that at proven scale just makes our offering differentiated in Europe, and so we’ve had a lot of success there. The reason for the acquisition of TransactPay is traditionally, we’ve only offered processing in Europe, and we’ve just started to bring our program management capabilities to Europe. And the Europe market works differently. So just to kind of dimension it for you, in The US, which most people are familiar with, the bank is the one who owns the bins and is the member of the network.

And so you need to have a very close partnership with that bank because what they’re providing is is critical to the value proposition. So it’s it’s much more of a deep partnership. In Europe, they have something called a EMI license, which allows a non bank to own the bins and be members of the network. So TransactPay is a business that’s been around for over a decade, and they are a network member. They own the bins.

So

Darren Peller, Analyst, Wolfe Research: You guys were leveraging them already for that, right?

Mike, Interim CEO and CFO, Marketa: Correct. So they were already a partner of ours, so we know them well. But so you still use banks to, of course, like store your funds somewhere, but they’re more of a service provider as opposed to some a deep partner that’s critical to the value proposition. And so it just gives us a lot more control and makes our solution a lot more seamless if we have a customer in U. S.

Or Canada and wants to move or even Australia and wants to move into Europe. Our offering is much more similar will be much more similar going forward than it has been in the past. Again, pending regulatory approval because they have two licenses, one for The U. K, One for Europe, and those two regulators need to approve the transfer of the license before we can close the acquisition. But the reason why we’re buying them is because to apply for that license and then build the very specialized resources that you need would take us several years.

And given the pipeline we have and the success we’ve been having

Darren Peller, Analyst, Wolfe Research: In Europe, yeah.

Mike, Interim CEO and CFO, Marketa: In Europe and the consistent feedback we get from both customers and prospects that they really want a bundled offering of someone who can offer processing, program management and the license. They don’t want to contract with multiple parties. And so to capitalize on that momentum, we decided to acquire TransactPay.

Darren Peller, Analyst, Wolfe Research: Makes sense. So putting that in perspective now with global offering, I mean, what do you think you guys can offer or bring to the table for customers from a global standpoint that differentiates you from others out of APAC or Europe or others?

Mike, Interim CEO and CFO, Marketa: Yes. I mean, I think the biggest differentiator for us is we believe we are the only platform that can say we do credit and debit, consumer and commercial, and we do them at scale. And we’re a fully modern platform that can support you in all these markets. So if you’re a multinational and you want to do different types of use cases, again, credit and debit, consumer and commercial, and you want a flexible platform, a modern platform, then we really are the only option that has proven that we can do that at significant scale. And so that’s really what differentiates us kind of in every market because I think gone are the days of more localized, specialized like in the fintech boom, that was quite common, right?

There were many companies targeting certain use cases, and so you had lots of players. And so there was a little more localized. And I think now what’s happening is some of the winners have been crowned. They’re getting bigger businesses. And then with embedded finance, these are already established multinational companies who want those kind of they want to target multiple parts of the world and multiple use cases.

Darren Peller, Analyst, Wolfe Research: Just quick topic that came up for a couple of investors also was Visa’s flexible credential. And I know you guys were one of the first, if not the first, to be certified for it. How does that impact? And maybe how does that shape Marchetta’s role in the market more broadly, especially as these programs start launching more next year?

Mike, Interim CEO and CFO, Marketa: Yes. So we are the many, I guess, processors have been announced, but we’re the only one who have a live program out there. So in The U. S, which was with Affirm, we partnered with Affirm and Visa to get off the ground. And again, the power of a flexible credential is that you can have multiple funding sources for one card.

And Mastercard has now announced their, something similar called Mastercard One, which again is a similar concept that we’re going to partner with them as well. Okay. And so what it really allows you to do is a couple of things. The biggest thing for us is that it would allow us to embed BNPL in any card any debit card that we issue. So think of it, we become more of a platform business where a customer comes to us to issue their debit card.

We can offer them BNPL capabilities that they can embed in that value proposition, which would be unique in the marketplace.

Darren Peller, Analyst, Wolfe Research: Yep.

Mike, Interim CEO and CFO, Marketa: And we’re bringing distribution for our BNPL customers who are also on our platform. And so we think and that can all be done with any debit credential. The second area that we see there are a lot of growth here is if you look at decline rates on co brand credit applications, they tend to be very high. They can be as high as like 70% get declined when they submit an application. So as part of our credit strategy, one of the things we’re talking to a lot of prospects about is you really should launch a credit card as well as a debit proposition that has similar rewards, maybe not quite the same because you want to encourage people to sort of move up, but essentially a fallback position.

If they don’t get approved for credit, you could offer them a debit card. And what’s beauty the beauty of flexible credential is you wouldn’t have to recard later. So you could start someone on a debit card and be so it’s one card, and it’s a debit credential behind the scenes. Then we could start to embed buy now, pay later so they get some transactional credit history. Then maybe we get them into some credit building capabilities with more of a secured credit.

And then eventually, they move up to unsecured full revolving credit. And that could all be done on one credential.

Darren Peller, Analyst, Wolfe Research: That’s pretty cool.

Mike, Interim CEO and CFO, Marketa: Right? So for a business like ours, where, again, we target multiple use cases and we have a lot of those partners already use our platform, we’re in a unique position to leverage the power of these flexible credentials. And we think it’s going to be pretty impactful if you look out a couple of years.

Darren Peller, Analyst, Wolfe Research: Okay. Just in interest of time, I want to hit on profitability. We only have about a minute left. So GAAP profitability, I know you’ve talked about getting there by the end of ’twenty six on a quarterly basis. So just help us remind us of your conviction around that and the path.

Mike, Interim CEO and CFO, Marketa: Yes. We feel good about it. The goal is to exit 2026, so that last quarter with GAAP profitability. And a lot of that has to do with maintaining a spread. We’re targeting to grow our gross profit at least 10 points faster than our expense growth.

And we’re very confident we can do that because we’re a platform business. We naturally get economies of scale. And we feel like we can still invest a lot in innovation because of the investment capacity we already have without having to grow our expenses at a similar rate to our gross profit. So that’s really the primary way that we will drive that capability. And we’ve done a really good job at getting more efficient inside the business as well.

We’ve optimized how we use cloud and data providers. We’re using resources outside The U. S. So we’ve been hiring a lot in Canada and in Poland. We’re finding great talent there.

And so we’re becoming more efficient, but also as we accelerate growth, we believe that in seven, eight quarters time that we can get to GAAP profitability.

Darren Peller, Analyst, Wolfe Research: Got it. Got it. Any questions real quick? Yes.

Mike, Interim CEO and CFO, Marketa: Just with the flexible credit Yes. So that would be the concept. If the bank was willing to extend credit to that customer, then they wouldn’t have to change the they could give them one card. So instead of opening your wallet now and you have to choose, oh, do I want to pay with debit this time or credit, you would have one. And then through your app, you’re actually electing, if I’m going to pay in full or do I want to pay in installments or do I want to pay on a revolving basis?

Darren Peller, Analyst, Wolfe Research: And if

Mike, Interim CEO and CFO, Marketa: any of the remittance companies that are remittance, you might have lost any customers that feel safe? Not at this time.

Darren Peller, Analyst, Wolfe Research: Okay, guys. We’re about out of time. I want to ask one last one and then we’ll wrap it up. I mean, in just your stock is still trading at a level that, in our view, it underappreciates your growth potential. And so if we’re at the end of twenty twenty five or even ’twenty six, I mean, what do you hope to see and the investors to see to recognize what you guys have to offer and really appreciate valuation a little more?

Mike, Interim CEO and CFO, Marketa: Yes. I think success in embedded finance, so showing that the market for us goes beyond fintech. And we do think we’ll eventually penetrate the bank business, but that’s many years away. So embedded finance is sort of the next big growth wave for us. And that path to profitability is showing that we’re on our way to GAAP profitability.

We think those two things combined should help us get a more, I guess, reasonable valuation for what we think the business should be. Agreed. Agreed.

Darren Peller, Analyst, Wolfe Research: All right, guys. Thank you very much.

Mike, Interim CEO and CFO, Marketa: Yes. Thank you, John.

Darren Peller, Analyst, Wolfe Research: Appreciate it. Thanks for being here. Pfizer in the homes room starting in about ten minutes ten, fifteen minutes.

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