Marqeta, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Marketo second quarter 2024 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise. After the speaker's 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. 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, 2023. 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 are Simon Kuloff, Marketas CEO, and Mike Miletic, Marketas CFO. With that, I'd now like to turn over the call to Simon to begin.

Thank you, Stacey. And thank you for joining us for Marketta's second quarter 2024 earnings call. Our second quarter results came in ahead of expectations. And once again, we demonstrated significant discipline in operating expenses without compromising our growth trajectory, scale, service, or innovation. I'll now briefly discuss a quarter of the results before diving into company updates. The second quarter's net revenue, gross profit, and adjusted EBITDA exceeded our expectations. Total processing volume, or TPV, was 71 billion in the second quarter, a 32% increase compared to the same quarter of 2023. Our net revenue of 125 million in the quarter contracted 46% year-over-year, which included a decrease of 60 percentage points from the revenue presentation change related to our Cash App contract renewal. Gross profit was $79 million in the quarter, a contraction of 6% versus the comparable quarter of 2023, primarily due to the Cash App renewal pricing. This will be the last quarter the Cash App renewal will affect our year-over-year comparison. We believe Q3 2024 will represent a turning point for our business where our P&L will better reflect the true business momentum we see. Our non-gap adjusted operating expenses were $81 million, representing a 3% decline year-over-year due to the effective cost discipline, optimization, and lower average headcount. This resulted in an adjusted EBITDA of negative 2 million in the quarter. Our second quarter results demonstrate the continued demand for what has differentiated Marketa's platform, our ability to deliver solutions for diverse consumer and commercial use cases while continuously innovating and expanding value-added program management services. As discussed in our recent State of Payments report, which we released two weeks ago, consumers continue to branch out in financial services, looking for alternatives to traditional banks. A third of consumers surveyed said they were using digital-only banks, with 63% of 18 to 34-year-olds saying they would be open to banking with non-traditional financial service providers. These trends have given modern and digital banks a genuine foothold in the market. These findings align with the volume growth we see on our platform. Our second quarter TPV for our financial services customers, excluding block, grew well over 100% year over year. Our track record of scale with customers like Cash App and One Finance in the U.S., as well as Lydia and Trade Republic in Europe, has served as a powerful testimony to the level of personalization and innovation we can serve at scale for businesses looking to offer new bank-like services to their large customer bases. We anticipate more momentum to come in 2025. I'm thrilled to share that Varo Bank, which has five million cards in the market, recently chose Marketo as their partner for its card processing business. Varo will trust us to migrate their customers over from their current processor in 2025 for a five-year exclusive contract. Varo is uniquely positioned as a tech bank with its own bank charter, giving it greater control over its product stack and user interface. To realize this advantage, Vara sought a nimble and sophisticated partner to help them innovate quickly as they look to offer their consumers real-time insights into their transactions. The TPP growth and momentum goes well beyond financial services. In fact, 10 out of our top 20 customers grew over 50% year over year during the quarter. Their use cases include expense management, SMB working capital, buy now, pay later, in addition to financial services. This speaks to the strength of the Marketa platform and its ability to support innovation at scale across a variety of use cases, solidifying Marketa's platform play. While we have anticipated demand for consumer use cases, we are thrilled by the demand in the commercial space as well, especially with SMBs. The proliferation of marketplaces and platforms that help SMBs reach bigger markets has driven great business growth. However, these platforms have introduced many challenges, requiring these SMBs to ramp up their systems and access affordable working capital to handle the elasticity of demand coming from these marketplaces. This is where Markera's solutions come into play. We offer solutions ranging from expense management to commercial credit and working capital to help these businesses operate with improved efficiencies and capitalization. Investing more in their business and having more time to execute and innovate rather than having them manage antiquated back office applications. This has driven the continued growth in expense management as TPV for this vertical grew slightly more than our average TPV growth during the quarter. To add to that growth, we have signed Zoho during the quarter. Zoho is a global technology company serving over 700,000 businesses from SMBs to enterprises with a comprehensive suite of business management applications. Zoho chose Marketa as their partner because of our expertise in launching card solutions that enables businesses to manage expenses efficiently. Marketa was also chosen because of the breadth and depth of our platform, which enables businesses to accelerate growth globally. While digital banking and expense management continue to perform well on our platform, we continue to innovate in e-commerce and digital payments. We recently announced that we are the first U.S. issuer processor certified by Visa to support Visa Flexible Credential. With some Visa Flex cards, consumers can allow a single card product to toggle between payment methods, on each transaction, bringing multiple funding sources to one card. Cardholders can choose whether to use debit, credit, pay in four, with buy now, pay later, or even pay using rewards points. Currently, we're partnering with Affirm, the first in the US to offer Visa Flexible Credential, to enable this capability for that Affirm card. This reinforces Marketa's commitment to innovation and provides us with further differentiation in the BNPL space. In the future, we believe this technology will be utilized more broadly by Marketa's debit and credit customers in use cases beyond BNPL. The combination of the innovation we power with the ability to execute at scale truly differentiates Marketa. As our customers reach scale, and the regulatory environment change, the guidance we provide our customers becomes a true differentiator. That's why we continue to enhance both program management and compliance. With the launch of our new office in Warsaw, Poland, we're now equipped to support more program management capabilities for our European customers, allowing us to deepen our already successful offering in the market. Broker management is important to our long-term growth for the following reasons. First, increased services add incremental net revenue, typically with higher gross profit margins. In the second quarter, net revenue driven by our suite of risk solutions, such as 3DS and risk control, increased by 61% year over year. Second, it improves our customer speed to market and our time to realize gross profits. As an example, if a customer looks to secure a bank partner without assistance, this can take 9 to 12 months. However, without assistance, we can bring this time down dramatically. Third, it positions us well with companies looking to offer embedded finance. These companies can focus on their brand and their customer experience while leaving cumbersome details around offerings such as dispute to market up. All these updates speak to our platform's breadth, depth, and scale, while our ability to innovate demonstrate our expertise. Delivering solutions for consumer and commercial, debit and credit, in countries around the world with modern, flexible architecture is very appealing to both existing customers and new prospects. For example, we're already hearing from existing customers who want to leverage Visa flexible credentials for the business. In addition, our pipeline contains large digital brands with significant consumer adoption that are looking for a comprehensive and global payment solution encompassing debit, revolving credit, and BNPL. Before I turn it over to Mike, I wanted to mention one last milestone. We believe the second quarter represents the last quarter of negative adjusted EBITDA. We have now proven our ability to support TPV growth and our customers' innovation while managing our costs effectively. The results this quarter, combined with this improved financial profile, gives us confidence that the company can grow in a sustainable and profitable way in the years to come. I will now turn it over to Mike to discuss our financials in more depth.