Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Marqeta Investor Day Question and Answer 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 up the lines for your questions. As a reminder, this call is being recorded. I would now like to turn the call over to Stacey Finerman, Vice President of Investor Relations, to begin.
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 or 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, as well as 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 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 part of a supplement to and not a substitute for GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in our filings with the SEC. A reconciliation of forward-looking GAAP guidance is not available without unreasonable effort due to the challenges and impracticality with estimating some of the items, such as share-based compensation expense, depreciation and amortization expense, and payroll tax expense, the effect of which could be significant. Hosting today's call are Simon Khalaf, Marqeta's CEO, and Mike Milotich, Marqeta's Chief Financial Officer. With that, I'd like to turn the call over to Simon.
Thank you, Stacey, and thank you everyone for joining us today. With me today is Mike Milotich, the CFO of Marqeta. We hope you're able to review the Investor Day materials on our website, where we discussed the bright future ahead of Marqeta and our path to profitability. With that, I'll turn the call over to the operator for question and answers.
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue, and for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Tien-Tsin Huang with J.P. Morgan. Please proceed.
Hey, thanks. Good morning, and, appreciate all the, the work you guys put in to this content. It was good to go through. Just the, the question I had was on price, discipline, and, and visibility. I know you, you highlighted that the bulk of your, your book has been renewed, and we've been hearing a lot about market buyers being more price conscious, both in payments and across IT services. Has that influenced some of your thinking around pricing or your sales cycles, given you do have the premium price, in the market? What's the overarching pricing philosophy, please, is the, is the question that I have here. Thanks.
Thanks, Tien-Tsin, for the question, and good morning. There's a couple of things I'd say that we have done. One is when we have renewed contracts, we've actually assumed faster growth than what we've done before, and hence added more tiers, so that to the contract. So if and when our partners grow faster than anticipated, they would not be at a disadvantageous tier. So that's one thing we've done on the pricing side. The other one, a lot better discipline in terms of how we price and having models built by multiple teams and reviewed by multiple teams, so that we do not have price discrimination between types of customers. I wouldn't say that there is an overall push towards pricing decreases.
I would say that there is a conscious effort by folks who do reach volume tiers, as in when they grow, they want the concessions on the price that is needed for the volumes that they reach.
Right.
I guess if I would just add one thing, Tien-Tsin, I think what's also happened in the last year or two with sort of the change in the kind of fintech market overall is, yeah, people are looking at price more, but there's also a flight to quality. So there is a little bit of an offset there in the market where, you know, we are the established player with proven scale and reliability. And so, you know, that is something that does benefit us.
Got it. No, I think sharing back the economies of scale makes sense, and I like the flight to quality comments. So on that, from my follow-up question, just with M&A, I know you had a slide there talking about $1.3 billion in cash and some of your criteria for doing deals. Do you feel like there could be some consolidation coming? Is there a pipeline for deals? Are you a destination for some of these targets to join and maybe get onto an established platform to go after some of these TAMs that you addressed? I'm just curious really here on the appetite for M&A.
... Yeah, I would say we, you know, we're constantly doing work here. As you know, there's always a lot of activity in M&A, even though, you know, very few deals necessarily may result from it. But we're quite active doing our homework. I think the important part about the criteria that we shared is the tech DNA match, right? That's pretty important to us. We think it is, it's a huge value add for our customers today, that they can launch multiple products in multiple geographies with sort of the single connection to us. And so that's a really important piece, Simon.
So I would say, yeah, if, you know, funding continues to be sparse, and so there are companies looking for homes, if you will, you know, I think there is an opportunity for us to be, you know, opportunistic. But the technology that they use will be very important to our criteria. I think for now, we feel very good with the products we have added between risk, banking and money movement, and credit, you know, all added in the last two years. And of course, we have, you know, improvements on our roadmap, but we feel pretty good about our tech. But we are obviously out there watching closely because, you know, if there are some good deals to be had, we want to be ready.
That's clear. Thank you.
Our next question is from Timothy Chiodo with UBS. Please proceed.
Great. Thank you. Good morning. I wanted to see if we could dig into the accelerated wage access opportunity a little bit more. You identified a $2 trillion TAM, and you already have demonstrated this capability with two pretty big clients, so some credibility there. Maybe you could just give some insights into some of the discussions you might be able to have with other large employers of hourly workers and staffing agencies, et cetera, and just maybe bring that to life. And then the follow-up to that is, maybe you could just take this as an opportunity to clear up some of the confusion that's in the marketplace around the benefits to the employer.
I think it's pretty clear around the recruiting and some of the stats that you gave in the slide deck, but also the concept of the employer actually being able to keep the cash on their balance sheet a little bit longer until the funds are actually spent. I think that would be helpful. Thank you.
Thanks, Tim. This is Simon. Actually, let me start by your second question, which is the benefits to the stakeholders. So, the most important thing that I think is important to employers is the loyalty of the employee or contingent worker. A lot of entities that do use contingent workers spend a lot of energy on training, and they flip contingent workers fast. As an example, there is many organizations whose recycling is over 100%, so they swap their entire staff annually, their entire staff. So anything that can be done in terms of increasing what is called the dwell time or the employment time is actually would translate to immediate EBITDA because they're not losing time and money training the staff. So that's the...
I'd say, the index, that most of the, let's say, contingent staffing, whether it is labor-- liquid labor marketplaces or internal teams that are hiring contingent workers, especially in hospitality, retail, and entertainment, that's the index that they're trying to move. And we've seen that index move, not just with Marqeta, in general in the industry, when there is no discrepancy, or time delay between the service rendered and the wages or wage equivalent paid. So having said that, the way we have implemented it, right, does not require a third party to step in and provide capital. So let me explain how we do it. So let's say there's a large employer or a liquid marketplace, and they have contingent workers.
So they issue, effectively, a wage card, and upon the finishing of a shift or a service, the employee, let's say, swipes on their phone, says, "I'm done with my shift." And what happens is, the ledger on the card is updated. Money doesn't move, so that person goes home, and the money does not move until the person goes and shops with that card. So you do have time in which the working capital of the employer is still on the balance sheet of the company and earning interest, and the employee is comfortable thinking about that the money is in their bank. So that's how we have implemented it. So which I think is very good, given the high interest rate that large employers do get on their capital.
Now, in terms of where we are, yes, yes, indeed. This is a fast-growing use case for us. We have secured directly and indirectly some large employers and labor marketplaces that are live and ramped. We've also closed a couple of additional target customers that will be launching and ramping in the first part of 2024. And we feel good about a couple of others that are larger in nature that we will close in the next 60-90 days, and then hopefully ramp in the H1 timeframe as well.
Great. Thank you, Simon. I appreciate all that context.
My pleasure.
Our next question is from Darren Peller with Wolfe Research. Please proceed.
Guys, this is great. Thank you for all the incremental data here. When we think about the bookings, and it's great to get the updated actual dollar amounts of the bookings that you're seeing in the, you know, last year, along with what you expect that to contribute to revenue. I think you said $20 million in 2024 and $60 million from the booking vintage you just did. We calculate somewhere around low double-digit contribution from new business versus low double-digit contribution from existing clients, sort of same-store sales. Is that A, is that about the appropriate math? And then B. And that's to the growth rates, I'm trying to say, to get to the low to mid-20s gross profit growth.
And then, B, maybe just touch on, you know, the confidence you have around that existing customer growth rate being low double digits. I guess, you know, it certainly sounds, just following on Tim's question, that categories like earned wage access and others are growing really well. But it just—I'd love to get a little more color on the breakdown.
Yeah, so Darren, so you are, you are sort of doing the math correctly, in terms of the split between growth coming from new business. And I would say existing programs is sort of the key label, I think, in one of those charts. So keep in mind that, you know, a number of these bookings that we talk about are expansions with existing customers. So, you know, for example, one of -- so if we already have business with a customer and they decide to launch Accelerated Wage Access, for example, then, you know, that would be something that would -- it's an existing customer, but it's a new booking. So just sort of keep in mind that dynamic. In terms of the growth we see from existing programs, we have pretty good visibility, right?
We in the use cases we serve, we tend to have many customers, so we can see the trajectory of the market as a whole, and we, you know, have a good amount of data to project the business forward. And that's what we use. And then we also, in that, will incorporate. We obviously know when their contracts are gonna, you know, expire, and we'll assume, you know, a couple of quarters before that, we probably do a renewal. So, you know, all that is baked into the projections where we have that visibility. And then when it comes to the new bookings, that's where we use, you know, the timeline it takes, if it's a new customer, that they would take to get onto the platform.
And then we use a lot of historical data we have in terms of our booking number is the year one revenue that we expect the customer to generate from after they go live. So that's sort of a, a number that's set. And then where they grow from there, we can look at a lot of the past cohort data to see how programs ramp, and that's how we determine the numbers.
That's helpful, Mike. I mean, just to be clear, if we calculate the one-time items embedded, still growing over in 2024, adjust that versus your 6-9, it's, I think we're getting to about mid-20% gross profit growth, would've been the assumption without all these one-time, you know, items going, growing over still. And then you're guiding to a low 20s, probably to be conservative, giving growth in the out years gross profit. Is that fair?
That's right. That's exactly right. I think the key there is we, you have to also factor in a little bit of the law of large numbers. So I think when you, when you do the math, what you'll see is the dollar growth, which is a metric we tend to look at a lot, is growing quite nicely and expanding, but because the base is also growing pretty fast, so, you know, you can be maintaining the same growth rate, but you are growing in dollars actually faster and faster each year. So, you know, that's sort of the way we've we've looked at it and are, you know, comfortable, you know, committing to these numbers.
Just a very one quick one before I turn it back. This is great, by the way, the information on the slide 78 that shows the mix of your business. When we think about that mix going forward, does your profit capabilities, which you talked about, I think you said, you know, middle of 2024, effectively turning, breaking even to turning positive. Is that likely to happen, you know, no matter what mix happens? In other words, if one category of your business grows much faster than another and it surprises you, are the margins still... Is that doable in almost any scenario or? Thanks again, guys.
Yes, so it is doable in almost any scenario. Again, assuming, you know, relative stability from a macro perspective. There definitely are differences in the take rates and gross profit take rates, depending on the use case, right? So consumer versus commercial or the complexity of the use case and how custom it is, will, you know, sometimes determine what kind of premium we can command in the market. But I would say, generally speaking, you know, we look at this from many angles, look at lots of scenarios, and we feel comfortable that we can achieve these numbers.
I think what's, what's also important is that we, we detailed in there is that we really believe that the platform nature of our business will allow us to keep the expense growth at a, you know, relatively moderate rate while we can continue to grow that gross profit in the low 20s. And what that does is allow the, the margins to expand. You know, I think typically, Darren, you'd see companies give like a 3-year CAGR, but because our 2023 numbers are, are, particularly on the revenue, are a little bit strange because of the Cash App deal being done mid-year, what we've done is give kinda 2024 numbers and then almost a 2-year CAGR for 2025 and 2026.
What you see in that EBITDA margin, you know, our range might look a little weird on that slide, but that's because it's ramping up, right? The profitability is gonna improve each year going forward... and including reaching over 20% by 2028. So, you know, that trajectory should continue to improve in terms of the margin as we get the platform benefits on the expense side, but we continue to drive that consistent compounding of gross profit in the 20%+ range.
Great. Nice job on this, guys. Thank you.
Our next question is from Sanjay Sakhrani with KBW. Please proceed.
Thanks. Good morning. I echo great data in all of these slides and presentations. You know, the FI opportunity seems like a longer-term one, but maybe you could just talk about the path to get there and the types of discussions you're having. Are there any, like, signature wins that you could have over the next several years?
Thank you for the question, Sanjay. The short answer is yes. We could have some signature wins. And we are having discussions, some of them are pretty advanced with large financial institutions. And I would say that we are not betting on those, nor have we factored in those deals. So if and when they materialize, I'd say in the next three years, that would be upside. So however, the plan, I would say, that we've put together is continue grow with Fintech , accelerate growth with embedded finance, giving us the economy of scale. I mean, we are now the fourth largest debit card issuer in the U.S.
So if we accelerate that and demonstrate great traction on credit, and given the consumer pressure on the financial institution to get an equally good product, we believe the combination of these will, will, will actually position us as a de facto player in about 36 months for the large financial institutions. Because the conversations that we are having with the LFIs, right, indicate that they are listening to their consumers. It's just that they have to upgrade their stack, and they have to think about flipping programs. So let's say, even if we say, "Let's go," in middle of 2024, it won't be until 2026 until we start seeing the conversion of their install base happen. Anything, Mike, you'd like to add on?
Yeah, I think that last point is a really important one, Sanjay. I think in this three-year window that we're providing, we think that we're not counting on any contribution from large financial institutions. But in that time, you know, we would expect to maybe announce some business, like announce some deals that we've done with them. It's just that, you know, the financial institutions plan well in advance, and they're making investments themselves. So, you know, we think it'll take more time than three years to meaningfully contribute to the P&L, but in that time, we do hope to make a lot of progress in terms of, you know, relationships and contracts.
That's very helpful. And then when we think about that credit platform as well, I mean, are you expecting any material contribution from them and from that platform? And then what specific verticals do you target that sort of in the initial phases?
Let me answer your second question and then hand it over to Mike about the contribution. So, I say that our pipeline has a combination of consumer deals around co-brands as well as commercial credit deals. To be perfectly honest, we expected the demand from the consumer. We did not actually anticipate such healthy demand on the commercial side. So... And we believe that we are much closer to close the commercial credit, which is effectively SMB credit that is in embedded finance. So I believe that's the segment that we will start capturing faster revenue because it tends to move faster, and that would be in the SMBs around services, travel, so on and so forth.
Then the consumer credit is focused around your traditional co-brand in marketplaces that are kind of like digital-first, I'd say, or digital-savvy.
Mm-hmm. And in terms of the contribution, Sanjay, we, we do expect to sign our first credit deal here in the next couple of months. That... Then there will be time for them to get on board and everything and start ramping that program. So, so really, almost no contribution in 2024, and then it starts to grow from there. So 2025, you know, there's, there's some, some help there, and then by 2026, it, it's starting to become more meaningful.
Okay. Wonderful. Thank you, guys.
Our next question is from Ramsey El-Assal with Barclays. Please proceed.
Hi, thanks for taking my question and echoing great, great detail here. I want to follow up on the last question. How do the economics of credit transaction, or do the economics of credit transactions kind of differ from debit in terms of what you capture? If that business were to ramp, would we see any different type of a P&L impact relative to the existing business?
... Yeah, great question, Ramsey. So, the economics are a little bit different, mostly because there are more things you have to do to sort of manage the credit aspects. And so what we see is that there is a—if you think about our price, our true price as the gross profit take rate, like how much gross profit do we make for every dollar of volume that is generated on our platform? That is higher in credit than in debit. So, we believe it is a—so it's a more lucrative business. That said, the cost of revenue is also higher. So to support that business, you also incur more costs. Because it's more expensive with the bank, you use more tools and things to be monitoring credit and other aspects.
And so it is a lower gross margin business, even though it's a higher gross profit take rate. So one of the things as you go into the out years, the growth of credit will actually weigh a little bit on our gross margin as a business, but it's still very accretive to us from a premium for every dollar of volume we generate. So that's the dynamic of credit that's really important to remember, is that it will... It is a little bit lower margin, but higher price.
Got it. Okay. And, you know, I also wanted to ask you to comment a little further on the revenue and gross profit model in international markets, where interchange is regulated or lower than, you know, relatively speaking. You'd mentioned that the gross profit take rates are similar, given in Europe, particularly, this powered by business is more prevalent along with smaller customers. Just talk a little bit about how you navigate that, how you will navigate that kind of expanding internationally in different sort of interchange environments and what, and how you maintain a similar gross profit margin profile.
Yeah, so there's a, there's a few, few dynamics there. Yeah, and you highlighted some of the comments that we made. So right now, in Europe, the gross profit take rate is similar to the U.S. The revenue take rate would be much lower because it's mostly powered by, but it does have smaller customers, so that's what makes it similar. I think one thing that I would highlight two specific things. So one is, one of the other things in the materials showed that about two-thirds of our revenue and gross profit today is driven by a fee structure that is not tied to interchange at all, in what we call fee for service.
And so I would say, in general, we're moving much more in that direction, where we're pricing for the capabilities that we bring, and our customer is sort of takes all the interchange and then pays us a price. And that lends itself also to regulated markets and interchange, where you're pricing for the value that you add. I think the other thing that we're doing to drive international growth is, right now, we do program management in the U.S. and in Canada, but we're bringing those capabilities to Europe. So those are sort of investments that are ongoing right now.
And we do expect then in the next, you know, say, 12-18 months, to have that capability up and running in Europe, which will allow us to make an even enhanced premium then to what we're doing now in Europe as a processor only. And so that's a really big part of the strategy that we have for international markets.
Perfect. Thank you so much.
Our next question is from Brian Keane with Deutsche Bank. Please proceed.
Hi, good morning. Simon, just want to ask on embedded finance, what makes the Marqeta platform unique to offer more customer loyalty and more engagement that's going to drive the business forward?
Yeah, absolutely. Thanks for the question. So, if you look at... I mean, I've run direct-to-consumer businesses for a long time of my career. And if you look at what we usually optimize for is called, like, dwell time or engagement, which is measured in active daily, so daily active users. That's kinda you live and die by your DAUs, basically. That's what we used to say in those industries. And financial services by themselves are very sticky services. Like, if you look at what brands attempted to do is first be kind of like your homepage. That's kind of the era of Yahoo, Google, and what have you. Second is they want it to be the app you think about in the morning.
Like, when you wake up, that's the app you launch. But more importantly, what all brands have been trying to do is be in your wallet. And I think that's what we are giving them, the opportunity to embed more financial services in their application and not have their audience or their customers go to another application for their services, which everybody does. So if you keep that customer in, that consumer in your application, you have increased the daily active user, and hence, it will move the ARPDAU, which is the average revenue per daily active user, higher. So to give you a very simple example to illustrate this concept, which is very important.
If you look at credit card statement thing, so let's say I have a co-brand from a brand, and I get a statement, you get a text notification or an email that the statement is there. When you click on that link, it takes you to the bank's app. So you don't get that daily active user in the retailer's app.
... So but if the statementing, which could be modernized and could be an opportunity to upsell a customer, happens in the retailer's app, you've gained a daily active user, and you've gained a chance to monetization. So, that's what would drive loyalty and engagement significantly higher. So engagement will increase DAUs, and loyalty will increase both DAUs and average revenue per daily active user, users. And those are the metrics that we work with our customers to measure in addition to the revenue they will generate by them either doing a card with us or a point-of-sale lending with us or supplier payments with us.
Got it.
Yeah, the same thing, the same thing applies on the, on the commercial side as well, right? A number of companies we're talking to might have a software platform, that they serve their customers for, for something that is not financial services, and they're talking to us about, okay, how could I help those customers maybe make payments to their suppliers, you know, on our platform in a seamless way, right? So I think everything that Simon just said also can apply in a, in more of a B2B context as well, where those companies also wanna make it easier for their customers to their, you know, small, their suppliers, essentially, to, to interact with them and, and make things seamless.
Got it. Got it. And then I just had a follow-up for you, Mike, just on thinking about the three-year guide. You know, how conservative is that guidance? And I'm trying to think about maybe drivers that would help you guys beat these estimates or maybe on the flip side, you know, any things to watch out for, weakness that could, you know, be an issue for the guide. Thanks.
Yeah, I mean, obviously, Brian, we, we wanna be confident in the numbers that we're committing to. So you know, that, that's part of it. In terms of how, you know, what could meaningfully expand these numbers, I think, there's a couple different levers. So, you know, we assume a certain mix of new customers and expansion with existing customers when we project the new sales going forward. If we were more successful in cross-selling, for example, you, you shorten your time to value because you don't have the approximate six months' time for that company to onboard to your platform. So you get to market much faster, and that customer is already familiar with our platform, and they've already done a card program, so they typically can ramp faster as well.
So, you know, our ability to cross-sell, if we were to sort of over-deliver in that, in that metric, that could accelerate things. I think the second one, too, is flipping business. The last few quarters, we have flipped a number of customers to our platform. You know, those are customers who don't have to ramp business. They already have an install base of business they bring to the platform, and so you get revenue and gross profit on a much quicker time period once they go live. Now, flips are still relatively unusual, so that's not something you wanna sort of count on in your numbers, but those would be a couple of variables.
I would say that the third thing would be, you know, we tend to be relatively reasonable about what the year-one booking value could be for a customer, and we do then the growth from there based on historicals. But if we were to, you know, get one or two real home runs, here going in, in this window of time, businesses that far exceed those numbers, like we've seen from some customers in the past who have, you know, really established new segments or gotten a lot of traction, that would be another way that these numbers could accelerate.
Yeah, I think there's a slide in the deck that just shows how you guys have outgrown, you know, the revenue versus the bookings. I think it's slide 85, you know, in the past, so that's helpful.
That's right.
Thanks for all the detail.
Yep.
Our next question is from Craig Barr with FT Partners. Please proceed.
Yeah, good morning. Hi, Mike, Stacey, and Simon. Thanks again. Two questions. First, just to put a finer point on the pricing question, how long has the new pricing construct been in place? Meaning, is the new pricing construct valid for the new contracts and renewals you've signed over the last 12 months, 18 months? I'm just trying to understand how long that's been in place. And secondly, you mentioned that when pursuing the embedded finance opportunity, that you feel you're far ahead of competitors. You know, what gives you that confidence? Who are you seeing in those deals as competitors, and why do you think it's going to take them a long time to catch up with their tech stacks? Thanks.
Yeah. So, thanks for your question, Craig. So I'll take the first one, then pass it to Simon for your second question. So we instituted our new pricing over a little over a year ago. So since our sort of acceleration in sales bookings, they all have been using this new pricing construct, where not only are we doing... Our contracts tend to be a little longer. Three years used to be standard. Most of our contracts are now longer than three years. And we're building in more tiering so that our customers are happy. Like, if you're -- we're running the business for the long term.
If you're more short-term oriented, then you don't put as many tiers because it allows you to extract more value as that program matures. But what you also find is if a customer has that kind of success, then when you come time for renewal, they're almost a little bit bitter, right? Like, it's not— And then you're going to have a big step down anyway in that performance. So we'd much rather have a customer who feels really good that if they're having success, their price is sort of adjusting along the way. It will lead to less volatility for us, but also, we think, you know, better for a long-term relationship. So we instituted that pricing a little over a year ago, and pretty much all this new sales is using that philosophy.
And on your second, I'm glad you want to, thanks to Mark's comments. When we've instituted those new pricing constructs, we've also changed the compensation structure of our own sales reps in line with that pricing construct. So they are incentivized, fully incentivized in order to adopt it and grow with it. In terms of the embedded finance markets, there are many dynamics that give us the good comfort. The first one is, embedded finance customers do not have program management capabilities. So they are not the ones that can pick a point solution and drive the relationship with the financial institutions and deploy what I say program management that are compliant with all the regulations that are out there.
So a player who does not have a strong program management capability is not going to be able to play in the embedded finance market. On our end, we do have a very strong program management capability. So that's number one. Number two is the completeness of the solution. Again, they're not seeking a point solution like the fintech players, and Marqeta has that complete stack. We have debit, we've got prepaid, we've got credit, we've got risk, we've got banking and money movement, and we've got the program management layer on top. And the third thing I'd say is a lot of the embedded finance customers happen to be, I'd say, digitally savvy, and also they want the global nature. Like, they want to build a widget and distribute it on a global basis.
Our ability to serve outside the United States has become a very strong competitive advantage for us. Last but not least, is how we package our product. By definition, embedded means you do need strong API, so they can integrate it into their application and into their flow, and that's how we deliver our solutions. The last thing I'd say is also the ability to serve commercial and consumer is also very powerful, because if you think of a marketplace, there are three or four things they want from us. The first one is they want a co-brand. Second one, which is a consumer program. They want to pay their, let's say, their contractors and their employees, so that's a consumer program.
They want a point-of-sale lending solution, that's a commercial program. And they want supplier payments, that's a commercial program. So that's, I think, will give us a good level of confidence.
Okay, and thank you. Just to follow up, who are some of the competitors you see in that space that you see repeatedly or is it one-offs?
There's... Again, since we have disparate use cases, we do have different sets of competitors per use case. But I'd say the area that we do see more competition than others is in the single card commercial space. So the single-use commercial card. And we see competition from the likes of Stripe and Adyen in this market. On the consumer side, we'd say, like, we don't have, I'd say, a lot of competitors, if you look at debit and credit and the ability to serve it domestically and overseas. There are modern players and kind of traditional players, but I'd say we're not feeling that competition be an inhibitor to our growth yet.
Okay. Thank you. I appreciate all the detail.
Our next question is from James Faucette with Morgan Stanley. Please proceed.
Thanks. Wanted to go back to the earned wage access programs that you're engaging on, and just had a couple of questions functionally and then kind of appetite from employers. Just functionally, as most employers or potential customers are looking at this, are they anticipating then, you know, for their employees, that the earned wage access would be just in that period between the earned wage and when it would normally be deposited into a bank account? Or do they anticipate that they will hold the funds in perpetuity until they're spent by the employee?
It's actually the latter.
... Okay. And that makes sense, and I can see the attractiveness for the employer, et cetera. I'm wondering if any of your potential employer customers or even ones that you've signed have expressed any apprehension about potential regulatory concerns. Simply because in that kind of structure, you're depriving the employee of the ability to earn interest on their wages, firstly. Secondly, you're holding their earned wages in a non-FDIC insured account, and as cost of capital goes up, risk of bankruptcy of those employers also goes up. So, you know, from a regulatory perspective, I could see where there may be some concerns. Have the employers at all expressed any apprehension about that potential interference?
No, I mean, quite the contrary. This is more of a safe construct, because that interest they wouldn't have gotten anyway. So the second thing is-
Wait, wait, can I, can I cut in?
There is no lender-
Wait, wait, wait.
Sure.
Why wouldn't they have gotten-
Yeah.
Why wouldn't they have gotten any interest? I mean, if I get... If I'm an employee and I get money deposited in my bank account, I can earn that interest, right?
That's right. But if you traditionally you would be paid, if let's say you're an employer, effectively two weeks in a year, and if you are a contractor, you ask them to submit invoices, and sometimes the terms are net 15 and net 30. So here you're getting paid immediately, and then you can spend. Now, in terms of their ability to, like, your first question is interesting, as in, like, if they're gonna hold the funds, whatever, right? How long before this contract work against the employee? Actually, the vast majority of the constituents that are taking advantage of this live paycheck to paycheck, so they would have drawn out those funds in a 15- or 10-day pay period.
That should not pose any challenges from a regulatory perspective. The other thing I'd say is that since there's no lending here, you're not introducing a third-party lender, so there's very little. I'd say there is huge distinction from payday loans or anything like that. So, I don't anticipate at all regulatory challenges on what we have on the construct we offered.
Got it. Got it.
Yeah, and I would say one thing, James, too, that I would say is, with the banking capabilities that we have on our platform, there'd be nothing stopping one of our customers from offering interest or even an additional savings account in other products, right? So, so it could be a sharing mechanism where, you know, the company gets some benefit from the working capital, but is also sharing some of that benefit with their employee, right? So all those things would be very doable within the, you know, the capabilities we have already.
Got it. Got it. Got it. As far as... And then, appreciate that. And then I wanted to go back to the credit opportunity and capabilities there. You know, as that becomes a more important piece of the story, do you anticipate being able to shorten the time between bookings to revenue, given faster time to market? Or is there something there that we're missing in terms of how quickly those programs can come online?
It's a good, good question. So as Mike mentioned, the short answer is yes, especially if those credit programs are upsells to the existing debit programs we have. So we do have a nice established installed base, and some of the accounts we have in the pipeline are cross-sell into the base, and that will ramp faster.
But you say—but we haven't assumed that since we don't have any sort of track record to make that as an assumption. But yes, that could very well be the way it plays out. If, particularly if many of our early credit customers, for example, as Simon said, end up being people who are already on our platform.
Right. Right, right. And then just to be clear, I think, you had indicated that, would that fit then within kind of the, this, these categories that you said could, be upside or expansion of, of growth opportunities beyond what you've laid out?
That's right. That's right. So if we were to, you know, one of our existing customers were to do a credit program with us, then just the six months that we, you know, have for customers to just onboard onto our platform wouldn't be there, right? So it just inherently pulls forward the opportunity. And then they also—that would also suggest their experience working with us, their experience with card programs, which also means, you know, it's much more likely to be successful in the early months of launch because they have some experience.
Got it. Got it, got it. Appreciate it. Thank you so much, you guys.
Our next question is from Ashwin Shirvarkar with Citi. Please proceed. Ashwin, please unmute your line.
... Hey, thank you for doing this. I guess go-to-market question. Obviously, as you pointed out in your presentation, selling embedded finance is very different than selling into the core traditional fintech ecosystem. I was wondering if you can put some parameters on sort of the sizing of your solutions team as that gets, you know, that has been built out, solutions and sales, and talk about some of the metrics that you're kind of using to track success and determine success.
Sure. The solutions. So we've reorganized the team at the beginning of the year in order to prepare ourselves for the change in the market. So we do have something called a sales pod, which is effectively called a basic selling unit, which does have, let's say, a lead that is highly astute in the market segment, and they have account executives that hunt, and then they have account managers that farm. And then they are also mapped to a pool of solution engineers, financial experts, as well as I say, program managers in the traditional word, and not the financial program manager. It's somebody who can... an operations program manager.
So, the account lead, account manager, and the account executives are dedicated to the account, and they have regional responsibilities, while the solutions engineer, the financial expert, and the operational manager are pooled together to drive economies of scale. So the North Star that I've personally always adopted is that the gross profit that is generated from a pod divided by the fully loaded cost of the pod, including everything allocated, should be higher than 2. That's kind of like what the past 20 years I've kind of adopted. And I'd say with Marqeta, we are—we're almost there. I'd say in some cases, we exceeded when the staff is fully ramped, and we're building towards it.
That's kind of a North Star that I adopt independent of kind of the industry, you play in. It's like every sales exec optimizes to that. So, I feel very good about where we are. And the other thing I'd say is the vast majority of our team that are in the frontline have been recruited the last – not even the last year, the last nine months. So, they're coming up to speed, and they are being productive as we speak.
Understood. And then, you know, it was really interesting to see sort of how much time it takes to go from, you know, chasing a deal, signing a deal, revenue conversion, and so on. Having said that, I think that between the renewals and the bookings and sort of the information you provided on the staging of revenue conversion, I was hoping you could provide some idea of, like, the quantitative measure of visibility that you have when you think of 2024, exiting this year. And then the cadence of it, with regards to just, you know, how we should think of cadence for next year and normal seasonality.
Yeah, I would say we have pretty good visibility, Ashwin, in terms of what's really gonna contribute to the P&L. You know, there is a very detailed delivery schedule that's... You know, we're obviously in constant contact with our customer in terms of when they will be ready to launch and when they plan to launch the product. And then in our discussions with the customer and based on our own experience, that's how we come up with the projections for year one and beyond of the business, right? You typically are gonna find that our customers are gonna be more bullish, right?
People tend to be pretty aggressive about how quickly they can get traction, but we have a lot of experience and data, so we form our own opinion for our own projections. And so I would say we have pretty good visibility. And then in terms of what is more on the booking side as opposed to less on the revenue, I would say what we're finding is, even as we're gonna grow our bookings this year by 55%-60%, we're not thinning the pipeline. In fact, actually, the pipeline is growing. So the top of the funnel is much bigger than it used to be, so that's what gives us the confidence that we can continue to grow our bookings over time.
And then, you know, then obviously we have sort of a formula, if you will, that says, "Okay, how is that bookings gonna translate to the P&L?" And I think, you know, as I talked about in my section of the presentation, there's a compounding that comes with that as you start stacking multiple quarters and years of this increased bookings that, you know, can really, you know, lead to exciting growth.
... Got it. And then the quarterly cadence, part of that question, and I'm just gonna throw in my third question right away, is I noticed the Powered by success in international and the linkage to Powered by. Why-
Mm-hmm.
-Powered by? Why is Powered by more popular internationally?
Yeah. So, in terms of the quarterly cadence, I would say we don't have huge seasonality in our sales. You know, Q4 can maybe it tends to be a little bit bigger, almost just because that's when a lot of companies are just thinking about investments and things. But generally, the quarterly cadence is relatively steady. In terms of the powered by internationally, I think it actually, it's more to do with us than it has to do with the market, right? There's gonna be local nuances, associated with providing program management type of capabilities, and so it's just more about our ability and readiness to deliver that kind of capability as we expand to new markets. I would say then it's a, it's something that's market-specific, that they want powered by.
I think it's more about our ability to deliver Managed by. That's why we are in the process of extending that capability to Europe, so that we, you know, hope to be able to offer that, that capability in the near future.
Got it. Got it. Tremendous job preparing all this. I have to say thank you to the IR team as well.
Thanks, Ashwi.
Our final question is from Bob Napoli with William Blair. Please proceed.
Thank you. And, I'll just have to second, I, Simon, Mike, Stacey, and every team, awesome job on the, presentations. Really, really helpful. So a question, I guess, on just the, the flips that you have and the, the growth. And I mean, if you look at the, the incumbents, it looks like they're still growing pretty well in the business and, you know, have good growth plans. Now, how much are... You know, what is, what is your view on your market share, the growth of the market? How much do you think flips are gonna need to play in to hitting the targets that you have?
Good question. There's plenty of markets for everyone, which is how I would start with. So, it is all about focus more than it is about kind of like eating your own, because there's still a lot of cash and checks out there and a lot of cash companies that are converted to cards. So, part of what we're working on is kind of like net new, but and that's what we kinda have planned for. But yes, there will be flips, and we will be participating in those flips, especially on the co-brand side.
So in terms of market share, I mean, if you project out, we will be able to beat our numbers and still be less than 5% of the total processing volume. So there's plenty of markets for many players, but we feel very, very good about us after we achieve, I'd say, those single-digit market share to compound from there, in the next decade.
Great. Thank you. And then my follow-up question, my last question, just is, there's, you know, the regulators are pretty aggressive these days, and if you were at Money 20/20, you'll see that there's a lot of regulators going to Vegas. And there's a lot of focus on embedded finance and banking as a service. Just your thoughts on how the regulatory environment, what your concerns are or where you think there's risk on the regulatory side or how you manage that, would be really helpful.
Yeah, absolutely. I think our early investment in program management and compliance gives us good comfort about how we have approached the problem. And I would say the economy of scale and the discipline we have put together makes us feel good about the regulatory environment. And again, going forward, we are making sizable investments in program management. So from a risk operations perspective, deploying anti-money laundering, banking secrecy. Sorry, banking sanctions, and many other services, in addition to deploying AI around disputes management and risk. All of these are kind of like front, wide, and center of the Marqeta solution, and we feel good about it.
So I'm less worried about this because we have invested and w e have highly scaled programs, so we feel good about it. And I do believe that this is an area where what differentiates Marqeta from others.
Thank you. Appreciate it.
We have reached the end of our question and answer session and will now conclude the conference. Thank you again for your participation. You may now disconnect.