Okay, sorry we're a little bit late. My name is Tien-Tsin Huang. I'm the Payments and IT Services Analyst at JPMorgan. This is the Marqeta Fireside Chat. Mike Milotich is nice enough to join us here again. He's the Interim CEO and CFO of Marqeta. Thank you for being here, Mike.
Thank you for having me.
Yeah, we have a lot to talk about. I have a long list of questions. If it's okay, we'll take questions from the field and the portal as well. I thought we'd just kick it off for those that haven't studied it as closely as maybe others have, just with the state of the union. I know 2025, we wrote here that it's a little different start to the year than where we were a year ago. What's changed in the last year? Have you reordered some of your priorities, Mike? It sounds a little bit different, but certainly much cleaner and some good things to talk about here.
Yeah, no, thank you. I think in 2025, we're starting to hit our stride a little bit. You know, a few years ago, we were in hyper-growth mode coming out of the fintech boom. And now we're a more mature company operating, even though positive with a lot of different irons in the fire, if you will. We've really diversified the business well. Compared to a year ago, I would say there's a few things that we highlighted on our call that I think are representative of the evolution of the business. One is that we are starting to migrate portfolios from other platforms onto our modern platform, which is an exciting development as you look out into the future of the business. The second thing is that we are in the process of building a white-label app to help customers get to market more quickly.
We're hearing more and more frequently that customers, even with an embedded finance, want help with the user experience, at least initially. If they get traction, they may embed the service later. Finally, we've started offering program management in Europe. A year ago, our offering was different and less comprehensive than it is today. Although three of those things are good developments, I'd say our priorities are mostly focused on execution, really doing the fundamental things well while we also innovate. So far, so good for 2025.
Yeah, it does feel like you're in a good rhythm overall. You mentioned the portfolio migrations. You announced a couple of them. It triggers that age-old question of, does this mean it opens up a lot of opportunities to serve more traditional portfolios, that kind of thing? What does it open up in your mind? How quickly can that happen? Is this more, let's see and wait and watch before it translates?
I think you definitely need to build your muscles and get some reference customers who can speak highly of how seamless the execution was. We want to get as many reps as possible so that down the road, however many years that may be, if a much larger customer wanted to execute a migration, both sides would feel very confident in their ability to do that. I think we migrated a large portfolio for Klarna in Europe, millions of cards in Q4. That was a debit program. We moved Bitpanda debit program to our platform in Q1 and are in the process of migrating a U.S. consumer credit value proposition for Prepay. We are starting to get multiple bites at the apple, if you will, and executing well.
I think if you step back, we built this capability last year because of how we see the market evolving over time. We believe that there will be a wave of modernization that's going to take place on the issuing side. If you went back 10 or 15 years, the acquiring side of the ecosystem is where modernization started first. It got some momentum with e-commerce and then with the explosion of omnicommerce, I would say, is when the modernization really accelerated. The issuing side is more complicated, and so it's a little behind the acquiring side, probably by five to seven years. I would say the inflection point for us was more in the pandemic when a lot of more flexible, engaging user experiences for the card user started to become more prevalent.
Our view is, all the programs that have launched in the last three to five years, as those continue to get bigger and bigger and become a larger share of the market, the people who have programs that predate that are going to want to offer the same kind of experiences to be competitive. In order to do that, they're likely going to have to move on to a modern platform. When that happens, we want to be ready to support them and be able to execute smoothly.
Is that what explains your comment around the more motivated pipeline? Is it as simple as that, Mike, that this modernization shift is here and to compete effectively on the card front, you've got to modernize on the issuing front? Is it as simple as that that's driving that, or is there something else?
I would say it's that. I would say there's two other things that are happening. One is that our existing customers are becoming, many of them are sort of the winners coming out of the fintech boom, and they are starting to expand into a lot more businesses and geographies. They are broadening their offerings, and we make that fairly seamless for them to do. Just to put it in perspective, if you look at our top 10 customers by gross profit, eight of them have more than one program with us. We have an existing customer base that is expanding and knows what it takes to launch a new program and execute. They are able to move a little faster. The second thing is that the other change in our business is we're also talking to a lot more enterprise customers.
If you look at our pipeline, it has a lot more bigger companies with embedded finance ambitions. What we're seeing as we engage with them is that the sales process is actually a little longer. To get to contract signature is a little bit more time-consuming because these are bigger companies with more complex decision-making hierarchies, right? There are more priorities to balance as opposed to in fintech when you were often dealing, we were dealing directly with C-suite individuals. They take a little more time in the sales process, but once they've signed, they also tend to be much more planful. They have a plan, and they're much less likely to deviate from that plan once you're in the onboarding process, which is typically what leads to slowdowns. I always use the analogy.
It's just like if any of you have ever done home construction, the first thing your contractor says is, "It's change requests that cost you time and money." Our onboarding is very similar. If you have a good plan and you don't deviate from it, you can actually execute very quickly. We've stood up programs in a matter of a month or two if there are no changes, if everyone is focused and working hard.
Yeah, no, the change orders matter. Okay, no, that's good to hear. Before we drill in on some of the more specifics, I do have to ask you around the macro front. We've been hearing that macro is stable. You called out macro is stable on your call as well and the consumer being healthy. I think that was a pleasant surprise given that your largest customer Block saw some pressure. We did talk to the team a couple of hours earlier. How would you explain sort of that? It seemed like the lesson is you can grow and diversify away from your largest customer. How cyclical is the business overall in your mind, Mike?
We are in the business of, I guess, facilitating people to spend money. Obviously, we have some macroeconomic exposure. I would say compared to most payment companies, ours is a little less, only because if you look at the use cases on our platform, they tend to skew a little bit more toward the underserved and not the affluent. When we analyze our spend, one of the ways we do it is by looking at it by merchant category where the spend is taking place between highly discretionary areas, sort of everyday spending that you would consider very low discretionary, and then you sort of have a middle in-between bucket. In our business, less than a quarter of the spend on our platform is in the high discretionary.
I would say that that's probably different than several of our kind of payment peers because it's the affluent who spend a lot more on a card. The only way they do that is they have more discretionary spending. We are a little bit maybe less exposed than some, but there's no doubt we have macroeconomic exposure as well. So far, we're not seeing any change. The mix of spend between that everyday spending and high discretionary has remained stable for several quarters, not just at the total level, but even within some of the use cases that we track more closely. Even in April, our TPV growth accelerated a little bit from March, and most of that was fueled by actually discretionary spending.
Some of that can be Easter timing and other factors, but at least it's clear at least there isn't a slowdown in discretionary spending at this point. We have a large, diverse business. Even though Block is obviously a big part of our business at 45% of our revenue, that still means we have a large non-Block business that covers a variety of use cases across geographies. It is a little bit of a broader view maybe than what they shared for their Cash App business.
The non-block business, I think, grew 2x that of Block itself. You have to track same-store sales, new sales, of course, product launches across the entire base. I'm just curious around that visibility and the sustainability of that growth from that group of non-block customers.
We think it's pretty sustainable. I think a lot of the, again, the winners of fintech are becoming big businesses. You cover many of them. Even though they're quite large, they can still grow at a pretty healthy clip is what we're saying. We said even our customers outside of our top five, their TPV grew twice as fast as the company. Those are not necessarily a bunch of small businesses. Our customers, six to ten, those are all customers who do well over $1 billion in the quarter of spending. Many of them are still growing at a very fast clip. We just try to remain flexible and offer a variety of use cases for them. That's part of our strategy. They can move into new use cases. They could start doing credit with us. They could expand geographically.
Because we are a single-stack platform, unlike some of our other competitors, that would be a lot of work for our customer to move in some of those new directions versus on our platform, it is relatively seamless. That is something that we really pride ourselves in. Also, the addition of program management in Europe, a big part of that is also to serve multinationals so that the offering is more consistent on a global basis. Those are all things that are helping us drive our non-Block growth.
Yeah, you mentioned Europe. I'll dig in on that. Just with Europe TPV doubling there. I know in the past sessions here when we interviewed Marqeta, there was always this ambition to grow international. It does feel like it's here. Is that really, like you said, more multinationals expanding into Europe? Are you doing de novo deals there? I know there are some local competitors as well. Tell us how competitive you are and what you see out of that segment or that region.
Yeah, so our Europe TPV has been growing over 100% now for several quarters. We're getting a lot of growth. Just to put it in perspective, I guess our non-U.S. TPV as a share is about in the mid-teens. It's less than 20% of the business. The bulk of that is Europe. I would say the use cases we offer are very similar to the U.S., and the way we support our customers is similar. I think there are two components that I would say are important. One is it's not customers who maybe want to go multinational right away, but they definitely are people who have that in mind. Some of this is U.S. or Canadian-based customers going to Europe. Sometimes it's a European business, but it has their sights set on coming to North America.
They know that they can do that seamlessly on our platform. That is one component of it. The second thing is just as we have been successful in the U.S., we have a highly flexible, highly capable platform that operates at scale. We have proven that we can support very large businesses, and that means a lot to prospective customers. That is something that is really resonating in the European market in addition to the U.S.. We think the growth that we have there is sustainable, particularly with the addition of our program management capabilities, which is why initially we started by partnering with TransactPay. We then moved to acquire the business, and we believe we will be able to close before the end of Q3.
That allows us to be a member of Visa and Mastercard and have control of the BINs through EMI licenses, two different EMI licenses. That will only enhance our offering there and help us continue the success that we've had to date.
Is this a playbook that you can apply to other regions, Mike?
Mostly, mostly. I would say what's different about Europe is it's a little more homogeneous. Once you move into Asia, Middle East, Africa, or even Latin America, each country is different. What does make Europe unique is you have sort of an E.U. infrastructure that allows you to cover a lot of countries. There are still some nuances within those countries, but it's relatively minor compared to Latin America or Asia, where as you move from country to country, there could be meaningful differences. We pick our spots. We've gone into a few countries in Latin America. We are in a few countries in Asia. For the most part, we are mostly focused on U.S., Canada, and Europe for now.
I know a few quarters ago, growth was impacted because of some regulatory and onboarding challenges. I figured we should ask that now before we open it up. I know some things have changed. I think it came up on the call again, but update us. What's changed? Is there a different pacing of regulatory impacts and how that's impacting the onboarding process?
We haven't seen any impact to the onboarding process at this time. I think the only change is that everyone has adjusted to sort of the new bar that's been set. We have adjusted, our banks have adjusted, and even how we work together and partner, we have adjusted to speed up the process. I would say there's even more recognition among customers. They're more aware of the fact of, and we're doing a better job educating them about the implications of making certain changes and how that can impact time to market. We're not seeing a big impact in that regard. We talked about last quarter that some of the backlog we had from delays has largely been evaporated at this point. For us, our view is that the change in the regulatory climate more has an opportunity to unlock innovation.
That there were people, particularly in embedded finance, where you have a core business and a brand that you're looking to preserve. The last thing you want to do is start dipping your toes in some hot water, where you might get under a lot of scrutiny. I think in this new environment, there are more people who are willing to lean in. If that happens, we think that's to our benefit as one of the handful of players where sort of innovators and disruptors would go to do something different in the card space in particular. We think that plays to our benefit.
Yeah. Maybe building on that, I know in the past we've talked about some safety with Marqeta. Having been in the market for so long, invented modern card issuing, that kind of good stuff. Competitively, we've seen a lot of changes, Mike, with Visa. We'll have Ryan speak tomorrow. I'll ask him about Pismo. They'll have issuing and some core built in. We just had Global Payments right before you, and they're spinning out or divesting their Thesis asset. Stripe Sessions talked a lot about issuing and some of the changes they've made. Competitively, have you observed some shift? Is there a potential for maybe the larger incumbents that are maybe a little bit late in the game, but can bring a lot in terms of safety and security versus Marqeta, how do you see that?
We're not seeing a shift in the competitive market, at least at this point. I think what makes us a little bit unique in that regard is we really support a wide range of use cases. We tend to see, depending on what the opportunity is, we'll see a common set of competitors for that use case. The next opportunity, that might be a different use case. We would see different types of people. Like in the past, I know Stripe just announced they're going to start to do consumer.
Consumer credit.
But in the past, we might see Stripe when we're in a commercial opportunity. But then when we start talking to something in consumer, we don't see them. I would say also among the more established players, we also don't really see them. They mostly focus on the bank and the business. We almost exclusively target businesses that's coming from non-banks. We don't tend to see them at this time. That may happen in the future. That's the direction we are headed. At least for now, we don't run into each other that often.
Are most of these deals, as a follow-up, are most of these deals RFP? Is it more sole sourced versus six, twelve months ago?
I wouldn't say there's any change. Many people run RFPs. It also depends on the nature of what they're trying to do. If it's a little bit different, we get a lot of referrals from the networks and other customers where they might not run a process. They might go to the network as their first stop and say, this is what we're trying to do. Oftentimes the networks will say, if that's something you're interested in, Marqeta is definitely a company you should talk to. We also have other customers that will refer people to us. There are obviously many RFPs, but there are also just as many instances where we get a referral from someone within the ecosystem.
Okay. Any questions before I keep going? Happy to take some questions if there are any. Otherwise, I'll keep going. Just to fire off a few, Mike, before we get into some of the numbers and put your CFO hat on. Just on stablecoin, it's been a popular subject in a lot of different settings, including here. Just stablecoin cards. I would say you were pretty early. Marqeta was pretty early on that. It's the friend, foe, risk, opportunity question, I suppose. How would you answer it?
We think it's opportunity. Yes, we were early in this space with the Coinbase card. The Bitpanda business that we just onboarded in Q1 in Europe is very similar. They're a crypto platform in Europe. We were very early in that use case of allowing the consumer to transact in fiat for the merchant and the rest of the ecosystem. The conversion is more done just like FX by the platform, like a Coinbase or a Bitpanda. We think that is directly translatable and scales very quickly. I think the mistake that people often make in payments is that things tend to evolve fairly slowly because it's a very complex ecosystem with lots of different people involved.
Our view is that stablecoin getting sort of merchant acceptance and getting a proliferation of wallets that would allow you to transact in those, that will take time. Usually, that kind of change in the payment ecosystem tends to evolve over many years. We may get there. In the meantime, we have built a very nice bridge to that endpoint that is proven and established. From our perspective, we should be in a great position to help people if they want to pursue a product like that.
Okay. I also wanted to ask about Flex Credential. I know there is a product drop from Visa recently. Expanded on it a little bit, but the themes are the same. Same thing, Marqeta is early as a partner, and you have Affirm as a customer there. Do you see demand there? How long will this take before we start to see it in force?
We are seeing good demand. People are very interested in it. I think the BNPL use case is the first one and is quite logical. It is happening on two fronts. What is initially happening, Affirm being first, but others coming, is the BNPL providers offering what we have always termed a Payanywhere card, where they will offer you a card that delivers buy now, pay later wherever Visa or Mastercard is accepted. Certainly, Affirm debit is on the forefront of that. That is one use case. One of the opportunities that we see that we have been pursuing is using, because of the unique position we have with our BNPL customers, actually bringing BNPL to other debit cards that are issued on the Marqeta platform.
Where we essentially give the buy now, pay later customers of ours distribution from our other customers, that would be a very differentiating capability if they could come out with a debit card that has BNPL functionality, but yet they do not have to have all the underwriting expertise and everything that people like Affirm and Klarna have built. We think both of those use cases have a lot of demand. I think you will see these decisions take some time, and then the rollout also takes time. What you are seeing in the market now are the people who were in the know maybe before it was public, who were working on this behind the scenes. It is going to take a year or two for, I think, you to see it more broadly in the market, but there is definitely demand and a lot of interest.
How about agentic commerce and everything going on there? I think Visa, Stripe, and others have made some announcements around enabling commerce through agents and tokens playing a big role. Of course, Marqeta has got a big token play there. How much of that is on your radar, Mike, as you're thinking about investing and pushing for the future as a card issuer processor?
It's definitely on our radar. We are having conversations with a lot of AI-focused companies. The good news for us is that we don't believe there's a lot of additional work to do because we already are quite sophisticated and at scale with our token capabilities and then also our virtual card capabilities. The way a lot of this is going to, we think, is going to work is when you have a machine going and doing this purchase for you, the way it might get executed is with actual virtual card. Maybe a card on file, but it could also be a single-use virtual card. Our platform, if you think about what we already do in the BNPL space, our platform is getting pinged in very high volume in rapid succession, and we're able to manage that quite well.
We think we're positioned well to support this. We are definitely talking with companies who are doing their homework.
Okay. Good. No, it seems like it's something that's interesting early, but has some interesting use cases down the road. Any other questions from the field before I go into the finance stuff? No? Happy to keep going. I don't want to geek out on the number stuff. Let's think about the next few quarters. There's a lot going on with incentives and then renewals. You've got the acquisition piece that'll come in. Maybe starting with this renegotiated platform partner agreement. I know it drives some confusion in the numbers, but it's not that complicated underneath it all. Walk us through that first.
Sure. Within our cost of revenue is where we pay partners who help us execute our service. That is where the costs related to our bank partners, all our network costs and incentives are. That is not just the major networks. That would also include PIN networks and ATM networks and other partners like that that we utilize, as well as card fulfillment providers. We are constantly leveraging our scale to renegotiate and get better deals. We recently executed an amended agreement with one of those providers.
As part of the Cash App renewal, one of the things that we agreed to, we thought it was quite reasonable on their ask, was what they asked for was, look, when you go and get a better deal, and part of that you achieved with the volume that we're contributing to your platform, we would like the proportional savings to accrue to us. The way it works is when we generate that savings for our non-Block business, that's value for us that we keep in our gross profit. If it's tied to Cash App volume, essentially we pass that benefit on to them. The way that works mechanically from an accounting perspective is our price actually goes down to Cash App with a corresponding decrease in our cost of revenue.
It's neutral to gross profit, but it lowers our revenue related to the Cash App business.
Okay. Thanks for going through that. Renewals, you've been through that with Cash App and Block. Thankfully, you don't have to talk about that. You've been going through this renewal process. As these customers get bigger, I know we're accustomed to sharing economics back to the users in payments. You know that very well coming from the Visa side. Impact on take rate, is there going to be more function changes in take rate in your mind? Can we see things be a little bit more smooth as you go through the renewal process the next time around?
Yeah, we think we're in a much different position because we have reset our economics with most of our providers. We think it's definitely much smoother. What we typically will do in a renewal is, assuming the customer has had success, which is often the case, we'll add some additional tiers. You do it in a way that is always accretive to you. You're giving them a better price, but that additional volume is still accretive. Those are sort of marginal step down, so it can be managed. We do have two renewals that we've called out with top 10 customers this year that are sort of our last two where we expect a more significant reset of the economics. We think after those are past us, then it'll be much smoother and much more small increments on the renewal.
I would say the other thing that we're doing a much better job of, we have another renewal we're working on right now with a top 10 customer whose economics were already redone several years ago and their contract is up. That is the playbook we're using. We're giving them a couple of additional tiers. They'll get some reduction of sort of our core pricing. They are going to buy an additional two or three services from us. Our overall take rate is we're probably going to be able to maintain roughly stable with just lower core pricing, but more services being offered.
That's one of the things that as we have matured as a business and we've kind of come out of that phase of having to support incredible volume growth from a rate perspective, we now have a much bigger portfolio of value-added services to offer our customers. Because of our scale, we can deliver it usually for a fair price. We can do it well. They do not want a contract with multiple parties. We are getting more and more customers to buy additional services from us. That should help balance some of the take rate pressure that we've had. I would say we also, as our newer customers ramp more and contribute more, we're also going to have a little bit more balance in our business.
The last few years, again, as the fintech winners were crowned, those existing customers have been growing really fast in our platform. Some of those largest ones have good pricing. As a mix, it has been pulling down our take rate a little bit. As the newer customers grow and ramp, then we are going to have a little bit more of a balance in terms of the sources of our growth in terms of level of take rate.
Okay. Cool. We're about two minutes left. I'll get you out of here. One last question, Mike. Just thinking about this renewals and you talked about some of the partner agreements, you've got acquisitions. When you clean all of that out, do you think of it as still just an underlying 20% grower? You've got a lot of fast growth clients. We talked about non-Block growing at 2x the Block rate. Is the final output 20%? How do you get to that final number when it's all cleaned?
Yeah, we still believe that we can get to that kind of growth trajectory and sustain it. It is really driven by a few factors, most of which we've touched on. One is that we are growing our non-U.S. business really quickly. As we diversify geographically, we think there's still a lot of room for growth. Particularly with the inclusion of now program management in Europe, even how we will our take rates in Europe as we onboard this business will be better than it was in the past when we were only delivering processing. That is one factor that will absolutely benefit us. Also, the addition of all these additional services. In the past, we didn't really have those because we were focused on the core platform and scaling with the incredible growth that our customers were experiencing and delivering for them.
With having focused on that and established that that's not going to be a challenge, we've been able to add a lot more value-added services. That is an additional way of growing that we haven't had before. I think there's some misconception among some investors that as our customers get large, they want less from us. That's not true. That's not what we're seeing. We had a very specific instance a couple of quarters ago where we called it out and we talked specifically that these were very specific situations. I would say in general, even our largest customer, Block, we are required to disclose our contracts with them and they're heavily redacted. You can see just in the last two quarters, there's been activity, additional services that we can even offer them.
I do think that that is going to be an additional tailwind for our growth that we haven't had in the past.
Okay. Good. I'll add one more quick one, Mike. Any update on the CEO search? I think we've said we'd love to see you drop the interim title, but I'm curious, any update there, timing, that kind of thing?
No, thank you for saying that. There is no update. The search process is underway. The board has selected a firm and it is ongoing, but they are going to take their time. They feel comfortable that with myself in the interim role and the rest of the executive team in place, the business can thrive in that environment so they do not need to feel like they have to rush. They can run the search they want to run. No updates now. I am not sure necessarily there will be updates in the near future. I think they are going to take their time.
Okay. No, they're very fortunate that they can take their time. All right. Thank you for the update, Mike.
Thank you for having me, Tien-Tsin.
Appreciate you. Yep.