Marqeta, Inc.

Good afternoon and welcome to the Marketa second quarter 2023 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Stacey Feinerman. Please go ahead.

Thanks, Operator. Before we begin, I would like to remind everyone that today's call may contain forward-looking statements, including statements regarding anticipated future financial and operating results and further changes in our developments regarding accounting treatment, among others. These forward-looking statements are subject to numerous risks and uncertainties, including the risk that our accounting treatment may be subject to further changes or developments 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, 2022, 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 gap measures can be found in today's earnings press release or earnings release supplemental materials, which are available on our investor relations website. A reconciliation of forward-looking non-gap guidance is not available without unreasonable effort due to the challenges and impracticability with estimating some of the items, such as share-based compensation, depreciation, and amortization expense. and payroll tax expense, the effect of which could be significant. Hosting today's call are Simon Koloff, Marketa's CEO, and Mike Miletic, Marketa's Chief Financial Officer. With that, I'd like to turn the call over to Simon to begin.

Thank you, Stacey, and thank you, everyone, for joining our second quarter 2023 earnings call. We had a strong quarter, and we just renewed our partnership with Cash App for four years. Our second quarter net revenue, gross profit, and operating expenses were better than we expected, resulting in positive adjusted EBITDA for the quarter. In addition, we've once again exceeded our sales bookings. The cash app renewal represents the final major step in a year-long effort to reestablish long-term sustainable growth for Marketo. This effort continues. started by sharpening our go-to-market operation, expanding our product line through the acquisition and fast integration of power finance and reducing our operating expenses. I am proud of the tremendous progress we have made, and I firmly believe that Marketa is extremely well positioned to capitalize on the fast-growing embedded finance market. Let me go back to our financial performance. Total processing volume, or TPV, increased 33% compared to the same quarter of 2022. This was the second consecutive quarter where our TPV exceeded $50 billion. Our net revenue of $231 million a quarter represented 24% growth year-over-year, gross profit with 85 million in the quarter, an 8% increase versus Q2 2022, while our adjusted operating expenses were 84 million, a 5% decrease versus Q2 2022, resulting in positive adjusted EBITDA for the quarter. As we've done in the last few quarters, we continue to grow our business while being very disciplined about our costs. Now moving on to Cash App. We're excited to continue our partnership for another four years. We believe this renewal, as well as our renewal with Afterpay earlier this year, demonstrate the value Block sees in our platform and our partnership. This value is exemplified by the scale, flexibility, innovation, and myriad of services we provide to Cash App and Block. While this will impact our financial results in the short term, it's something we expected and proactively made decisions based on this outcome. It also positions us well for the long term, extending our cash-out partnership through the middle of 2027 so we can focus on maximizing our growth for the years to come. By working together, and continuing to expand the scope of what our two companies can do together, we can both capitalize on this amazing opportunity ahead of us. In addition to the cash-out renewal, we've steadily improved our execution across the company. We've seen considerable sales momentum in the last three quarters after implementing the changes in our go-to-market organization in the fall of 2022. Our bookings for the last three quarters combined grew 150% from the same period a year ago. Notably, we saw a 50-50 split between net new customers and expansion deals with existing customers, setting us up for a durable growth into 2024. On a sequential basis, our bookings for the second quarter grew 60% from the prior quarter, driven by embedded finance, which accounted for two-thirds of our bookings. In addition, one-third of the deals we signed in the quarter were flipped deals, where we replaced an incumbent provider, and that speaks to our superior platform and scale. And similar to the first quarter, our international business continues to be a source of new customers. as over 40% of net new customer bookings came from markets outside the United States. We expect that international momentum will be a key growth driver going forward and represents a key advantage for Marketo. Our single-stack platform allows customers to easily launch in more than 40 countries where Marketo platform is enabled. The most recent expansion is in Brazil with our new partner, FitBank. This partnership gives us a foothold into the largest fintech market in Latin America and one of the fastest-growing fintechs market in the world and where many of our existing customers also have growth aspirations. We also continue to make headway with disruptors, looking to embed financial products into their platforms. We recently signed a partnership with a well-known cloud-based HR, IT, and employment management solutions company. This company sought a new provider for the global expense management product to replace an incumbent and a marketer competitor who couldn't support them outside the United States. This customer also is looking to move their new US volume to Marketo, a further vote of confidence in our platform. Our focus on increased execution has not been limited to our go-to-market strategy. It's also evident in our ability to offer new products to our customers in a rapid manner. As planned, we fully integrated our acquisition of power into the Marketo platform. In late June, We finished integrating PowerScout, and as a result, the APIs are now fully integrated. We are on track to offer general availability of the Marketo credit platform before the end of 2023 with program management, origination, servicing, back office, and ancillary service for consumer and commercial card programs. This improved execution is crucial as we look to unlock additional embedded finance opportunities. As a matter of fact, Marketa has been in the embedded finance game for over 10 years, way before it was even a buzzword, giving us both expertise and a nice competitive advantage. Our modern card issuing platform has been a foundational element for on-demand delivery, accelerated wage access, mobile banking, expense management, and buy now, pay later. Our gains regarding improved efficiency mirror our focus on execution. We have reduced our operating expenses by $40 million to $45 million on an annual run rate basis. In short, we're delivering We're executing, we're winning against the competition, all while being operationally efficient. We're also innovating. We're deploying generative AI tools in our risk, our customer service offering to streamline our support and risk operations. We also use generative AI to make our product teams more efficient. As an example, our credit and banking teams use generative AI to help generate codes reducing the time spent on code generation and testing tasks by up to 75%. We're also working on a purpose-built generative AI tools created to reduce the time to launch for our customers using OpenAI's large-length language learning model. It allows our customers to expedite their integration with Marketa's API and accelerate their time to market. In summary, I'm happy with all we have accomplished this year. We have renewed our partnership with Cash App, Afterpay, and 50% of our non-block volume. We significantly reduced our operating costs and solved our go-to-market problems. We did all this while winning against the competition, acquiring a company, and integrating its product in record time, in five months. These accomplishments, not to mention our strong balance sheet, position us exceptionally well as we look to deliver sustainable, profitable growth in the near future. With that, I'll turn it over to Mike for his prepared remarks.