Marqeta, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Marketer 4th Quarter 2023 Earnings Conference Call. At this time, lines have been placed on mute to prevent any background noise. After the speakers' remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Stacey Feinerman, 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, 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. Hosting today's call are Simon Kulof, Marketas CEO, and Mike Miletic, Marketas Chief Financial Officer. With that, I'd like to turn over the call to Simon to begin.

Thank you, Stacey and everyone. for joining us for Marketa's fourth quarter 2023 earnings call. Last fiscal year was a transformative year for Marketa, and I'm excited about the foundation laid for the future of our company. I'll briefly touch on our results for the fourth quarter and full year 23 before sharing exciting developments at Marketa. The last time we spoke was after we released our investor day materials, which detailed the changes we made throughout 2023 and the opportunity ahead of us in 2024 and beyond. This most recent quarter demonstrates the focused effort made during 2023 is starting to pay off and has set Marketa on a new trajectory. This path will lead to sustainable growth, profitability, innovation, and a great ability to capitalize on the fast-growing embedded finance market. Total processing volume, or TPT, in the quarter was $62 billion, an increase of 33% compared to the same quarter of 2022. Our net revenue of $119 million in the quarter contracted 42% year-over-year, which included a decrease of 59 percentage points from the revenue presentation change related to our cash app contract renewal. Our gross profit of 83 million contracted by 4% versus Q4 2022, primarily due to the cash app renewal pricing. Our gross margin for the fourth quarter was 70%. Our non-GAAP adjusted operating expenses were 80 million, a 16% decrease versus Q4 2022 due to our restructuring, operational efficiencies, and delayed investments, resulting in a positive adjusted EBITDA of $3 million in the quarter. On a full year basis, TPV was $222 billion, an increase of 34% compared to the previous year. The full year net revenue was $676 million, representing a 10% contraction from the previous year. This includes a 31 percentage point decline related to the revenue presentation change resulting from the Cash App renewal. Gross profit for the full year was $330 million, a 3% increase compared to 2022. Gross profit was negatively impacted primarily by several renewals, particularly Cash App, and changes in our Visa incentives at the start of the year. I'm thrilled with these financial results and thankful to all Marketans who have made this possible. Outside our pure financial performance, we've delivered on product innovation, sales growth, and operational efficiencies. In 2023, we greatly enhanced our credit platform. We added credit program management capabilities with the acquisition of power and quickly executed the integration to launch a unified modern credit offering. The two commercial deals we recently signed are characterized by their ability to bring an embedded experience to their end customers, made possible by Marketas flexible platform. The first deal we signed was with International Travel Solutions or ITS, ITS is a successful travel management company with a substantial customer base. ITS plans to use the Marketa credit platform to build an unsecured credit card for its end users. ITS chose us because of our established reputation in modern card issuing, not to mention our ability to offer solutions with a significant amount of customization and control, which is critical to travel management. With our partnership, ITS can launch and innovate faster to meet the ever-changing demands of its travel partners. Additionally, ITS can personalize its offering to its partners, allowing them to run their business more effectively by providing more robust controls over their travel expenses. For example, ITS expects to enable carbon impact tracking to help partners make conscious decisions and provide dynamic rewards to enable more customized incentives. We also signed another commercial credit deal, albeit for a very different use case. AffiniPay, a leader in online payment and software solutions for professionals, will partner with Marketo to launch its planned LawPay Visa credit card embedded within the MyCase platform. the first comprehensive solution in the industry that helps law firms pay, track, and manage firm and client expenses. AffiniPay selected us because of our trusted platform for building card program management at scale that are dynamic, flexible, and tailored to customer needs. By partnering with Marketo, my case smart spend users will have a comprehensive, easy-to-use platform that gives them access to real-time card issuing, transaction data, and spend controls to their credit card offering. This helps cardholders stay on top of business expenses and access capital easily, all from a single dashboard. Smart spend will be rolled out to other Affinity Pay products, KSphere and LawPay, in the end of 2024 and beginning 2025. Let me talk about the progress we made in our go-to-market approach. As we've previously discussed, we have overhauled our go-to-market operations to better capitalize on the embedded finance opportunities. These changes included reorganizing the sales force, realigning our compensation structure, and shifting the focus of the sales organization more towards full solution selling such as accelerated wage access, SMB credit, as well as co-brands. These changes resulted in bookings growth of over 50% in 2023 compared to 2022. Specifically, in the fourth quarter, we capture another solid slate of bookings, generally in line with the makeup of what we saw during the year. Expansion deals with existing customers came in at approximately 60% of total bookings. Although most bookings came from North America, 20% of the deals came from Europe and predominantly from net new customers, which bodes well for the future of that geography for Marketo. Like previous quarters, we also won multiple deals through flipping volumes from our competitors as customers sought out Marketas' proven scale, flexibility, and expertise in modern card issuing, which was lacking through their current provider. In addition to growing our bookings, we also made great strides in accelerating the time to launch for new programs signed to convert these bookings into revenue and gross profits faster. On average, the time between close and launch in Q4 of this year was about 100 days better than the previous year. This was achieved without adding significant resources by focusing on solutions architecture and using pre-configured card constructs. In other words, while we design innovative solutions for our customers, we also rely on our expertise to create a plan that will be approved by other members of the payment ecosystem, such as banks and networks. Moving back to product, another area where we invested in 2023 was our reliability and continued ability to scale. The results from this investment can be seen in our transaction success rate metrics for the 2023 holiday season, which increased by three basis points. This is remarkable when one considers that on our peak day in 2023, our platform saw over 40 million authorizations, up 66% compared to the peak day in 2022. This improvement occurred simultaneously with efficiency initiatives that right-sized our technology spending, but also increased investment on multi-region authorization projects. demonstrating that we are focusing on the right efforts when considering the reliability of our platform. In summary, in 2023, we focused on building the solid foundation for a growing and profitable business in the long run. We went broad, building out our platform and reorienting our sales teams to our proven and winning solutions. In 2024, We plan to accelerate what we started and return to strong revenue and gross profit growth as we bring to life new and exciting solutions with our FinTech customers and prospective embedded finance customers. Our ability to offer credit, debit, banking, and risk solutions at scale positions us well to unlock the massive embedded finance opportunity that's ahead of us. we've only just begun to execute over the strong foundation we have built. With that, I'll turn it over to Mike for a more detailed look at our results for the quarter, the full year, and financial outlook for 2024.