All right. Okay, I'm gonna get started. Thanks, everybody, for joining us. I'm Michael Infante. I'm an analyst covering Fintech here at Morgan Stanley. Very pleased to be joined by Mike Milotich, Marqeta's Chief Executive Officer. Before we get started, I do have a quick disclosure to read. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. With that out of the way, thanks, Mike, for being here.
Thank you for having me.
Maybe we start with the high level. You guys have shown really impressive progress on both TPV and profitability over the last, call it 18-24 months. How have you thought about your transition into the CEO seat and how you think about some of the pillars in terms of optimizing both growth and profitability?
I think it starts with the business model inherently scales very well. A platform business, you know, very high upfront fixed costs, which means when you're still small, it's very hard to make money. Also as you're scaling the platform and making sure you can still deliver the reliability once you're in the hundreds of billions of GMV, you know, requires a lot of investment. We're sort of over that hump, if you will. Sort of inherent in the model is high fixed cost, low variable cost or low marginal cost. As we continue to grow, we should be able to do it very profitably. It's sort of just a starting principle. I would say a few things that we do focus on. The first thing is making sure that we're focused.
We're always making a number of, you know, incremental improvements to the platform that's going on on a broad basis. The things where we're really investing in something new or we're materially changing or improving a capability we have, and it's a meaningful investment, we try to only take on a few of those at a time. In the past, when I looked back at, you know, what the company was doing maybe four or five years ago, I would say we were being spread a little thin, trying to chase too many things at one time, which then means not only are you not effective cost-wise, but then it's also hard to execute all those things, so you tend not to do as good of a job.
We're a little more ruthless in our prioritization now in terms of the roadmap. The second thing I would say also is that we try to be very thoughtful about what are the things that are truly important that we differentiate on, that we need to build ourselves, and where does it maybe make more sense to partner. I think it's very easy, particularly as a tech company, and maybe a tech company in the Bay Area even worse, is like a tendency to say, "Oh, we could build that. We could do it better than others." We try to be very disciplined about that. Are there whole companies that do nothing but that thing?
Is it something that's incredibly differentiating and important to us, or is it more of something we just wanna include in an overall portfolio of capabilities? If it's truly important, then we will, we'll do it ourselves. If not, then, you know, we may look to partner, which then, you know, makes it much more efficient. I would say those are maybe two of the things we really focus on a lot that allows us to drive really profitable growth. If you look at 2025 in particular, was a, you know, really a standout year because we were able to grow our gross profit 24% and our adjusted EBITDA increased by more than 3.5x. Y ou know, as we're hitting that level of scale now, where if we can grow at that kind of rate, then the, you know, the profitability can improve by a significant amount.
It's helpful. Maybe just on those internal product initiatives that you mentioned, how do you think about Marqeta's core differentiation today? We obviously have conversations with investors just in terms of how they're thinking about competitive dynamics, et cetera. You have a lot going on internally across, you know, processing some of the credit initiatives, program management, value-added services. Where do you really wanna strengthen the platform over the next 12 to 18 months?
Sure. First, it starts with the platform as we are a platform business, and that's where we think we're very differentiated in a few different ways. First, we have a lot of flexibility and configurability in our platform. Even as we get quite large, we are quite flexible, which is what allows us to do all the use cases, for example. If you look at a lot of our competitors, they tend to really only be in one segment of the market. They do neobanking very well, or they do commercial card very well.
Sure.
Versus the Marqeta platform can do all aspects of card issuing. What makes us unique is that we do both credit and debit, consumer and commercial, and we do those across 40 countries, and we do it at a high degree of scale. That is a unique combination of factors. The way we often talk about it with our customers and prospects is that at Marqeta, you don't have to make trade-offs. With many other platforms you may choose, you have to get either reliability and scale or, you know, innovation and flexibility.
Sure.
You know, we're the one company that does both. You don't have to make that trade-off. That's a big differentiator. I would say the second thing is also that I think is often overlooked is our expertise. We have built a lot of innovative programs and helped those businesses scale and seen what it takes. That allows us to add a lot of value for new customers. We're not, you know, sort of passive observers of our customers' success. We're highly engaged with them, and we're constantly working with them to see how our platform can enable their growth.
That experience of seeing new businesses completely built and more innovative use cases where card hasn't been used in the past and how to do that effectively, is a real asset and a real differentiator when we're talking to customers who are either looking to evolve in an innovative way or just starting out as a disruptor from the get-go.
Helpful. Maybe transitioning to Block. Obviously, your largest customer, 44% of net revenue in the fourth quarter. How should investors be thinking about how that relationship is changing and the longer term durability of it?
Sure. You know, they're a great customer. It's, you know, I often tell our investors it's a good problem to have when your largest customer can grow at such a rate. You know, we don't think it's a bad thing that it's hard for us to diversify. Sure, we would like to be diversifying even faster, but given how significant a piece of our business they are at the rate that they still grow is a good thing, and we're happy to enable that. The relationship is quite deep and, you know, there are many aspects of our organization talking with them on a day-to-day basis, and we're constantly talking to them about new ways we can add value. The relationship is nowhere near static.
We're constantly talking about new things and doing new things together. I think we're also very well positioned to serve them. You know, from my perspective, there's still many growth opportunities for us with Block.
Sure.
Where, you know, less than half of their Cash App active users use the card, and only a small percentage of the card users use direct deposit, for example. Direct deposit users spend a lot more. If there are ways we can help them drive either of those two sort of penetration metrics, that would benefit us. We also could help them expand geographically. Right now, they pretty much have a U.S.-based business. They could expand geographically on our platform very easily. And also if they wanted to move into more traditional kinda credit card-like products, obviously they do credit, but it's a little bit of a different flavor. If they wanted to do credit, they could also do that on our platform. We still think there are, you know, many areas of growth opportunity.
There are two things in 2026 that, of course, investors are gonna be watching. One is what we talked about in our earnings call last week about Cash App moving into a new price tier. If I were to take you back to the middle of 2023 when we did our renewal with them, we're very structured and disciplined about as volume grows, how the price changes. There's, you know, many more than 10 pricing tiers in the contract just given their size. It's a very, like, disciplined curve. As, like, volume grows, what happens with price? At that time, when we were renewing, they also had a request that we thought was reasonable.
They essentially said, "When we get to X size, we think that puts us in a, in a whole new category of customer, and we should get a price break for that." On this very disciplined curve that we created, there's sort of a kink in the line at some point that we're hitting right now in 2026, where the price steps down twice as much as any other tier around it does.
Interesting.
The hit is more significant, and they just moved into that tier in December. As we look at 2026, we expect them to be in that tier for the year. Therefore, for 11 of the 12 months, we have a different difficult year-over-year comparison. Ultimately, if you think about the long run, we see that as a good thing. We are, you know, dynamically adjusting to their size and scale and making sure that they're getting a fair deal. Particularly at a time when they're diversifying, there's no better time for them to have gotten kind of the next price break from us and have to consider that as they think about their business going forward. The second thing, for 2026, as I just mentioned, is them diversifying.
They are going to start diversifying their processing. They've told us that and told their investors that. It hasn't really started at this point. We can't see anything discernible in our numbers, but we expect it to start soon. From our perspective, again, it's very reasonable that they would wanna diversify. You know, most of our largest customers have diversified their bank or their processing or both.
Yeah.
We find that very reasonable. What everyone in, you know, almost everyone in the payment ecosystem looks to have a primary partner that gets the bulk of your business. That's what, you know, we wanna do with Block, and we think we're, you know, well-positioned to do so.
It's helpful. A couple of follow-up questions on the nature of the Block relationship. You alluded to, driving increased penetration within the Block ecosystem. How does the sales force or go-to-market relationship between Marqeta and Block work to the extent that, you know, both organizations are obviously focused on driving those penetration levels higher?
We have a dedicated team of many people that just work on Block. I would say there are people on that team are probably talking to someone at Block on a daily basis. It's a, it's a very tight relationship, both from a business perspective, but product to product. Even within finance or legal, those teams have a counterpart, and they reach out to directly. They don't go through, right, the relationship management channels or whatever.
Sure.
They have a counterpart. They know who that is, and they interact with them on a daily basis. It's a very tight working relationship where we're meeting, you know, all the time to talk about things we can improve, new opportunities to do together, and just ways to drive a win-win for both of us. You know, the more successful they are, the better for us. We're there to help them.
To the extent that Block were to want to pursue a more traditional credit type product, what does that mean for your just OpEx? Is that something that the business is already able to deliver from day one? Is that a fairly complex build and integration process? How should investors be thinking about that?
It's built, so it would be relatively easy for them to integrate and get that going. you know, someone of their size, obviously, we'd make some investment behind that as that business scaled. Inherently, again, getting back to what we discussed earlier. As a platform business, there wouldn't be, you know, a huge amount of incremental investment for us to support them in that effort. It would be relatively seamless for them from a connectivity perspective. There aren't a lot of changes. It's not like it's a different platform at Marqeta. It'd be pretty easy for them to do.
The last thing that we also do for our customers, because, you know, most of our largest customers have several programs with us, and even eight of our top ten customers are in more than one country. The way we structure that is by having sort of a global pricing structure that incentivizes them to do more and more. We aggregate all their volume together to give them the benefits of scaling on our platform, and we would do the same in that case, if they were ever to pursue a credit card offering.
Helpful. Transitioning to the TPV side of the equation, I think quite underappreciated the scale at which the business is running. I think 4Q, call it $108 billion in quarterly GMV growing 36%, right? really impressive growth. How should investors be thinking about, you know, just the cohort dynamics underneath that? How much is existing program both? How much is being driven by new cohorts? Then we can also get into the, into the verticals that are driving that as well.
Sure. Yeah, as you said, our TPV grew 36% in the quarter. It was, you know, over $100 billion for the first time in a quarter in our history. That was also the third quarter in a row that we'd accelerated by 3 percentage points. The business is sort of picking up speed and growing at a very fast clip. It's really being driven by a few things. I would say it starts with buy now, pay later and lending as a vertical. You know, that vertical is in the high teens of percentage of our TPV, and it grew almost 60% in the quarter. It's not a small business and it's growing at an incredibly fast clip.
There's really three factors that are driving that. One is the Flexible Credential. We were the first processor to enable that, both in the U.S. and Europe. We have two customers live in the U.S., one in Europe, and that is really catching on with consumers and growing very fast. We did, you know, a few billion of volume just in the fourth quarter on that type of credential alone. It is scaling very quickly. The other area is also in the U.S., outside of the Flexible Credential, is just really two components. We're getting better distribution through wallets for our buy now, pay later customers, and that's driving some growth. Then we, in 2024, had one of our customers diversify some of their virtual card business with us.
Sure.
As we lap that's also helping our growth rate. Finally, in Europe, we not only migrated a Klarna portfolio, about, you know, last October, so almost a year and a half ago now, but it's growing really fast on our, on our platform post-migration. Also we're getting wallet distribution, and we also have, you know, a couple of SMB lending use cases in Europe that are also growing very fast. All those things are big contributors. The second area that I would say is helping the acceleration is in expense management. That's one of our other large use cases. It's about mid-10s% of our, of our TPV.
Yeah.
It's growing over 40%. That's the first time it's grown over 40% since the first quarter of 2023, so it's been about three years. That's really about disruptors just continuing to take share and grow really fast. We're one of the, you know, the primary enablers of many of those disruptors in the market, and that use case is taking off. The last thing I would highlight is, in our financial services, which is really like our neobanking use case. You know, that is over 50% of our TPV. That's where Cash App and Square and many of our other larger customers are in that. That grew over 30% for the first time in 2025 in Q4. A very big business growing at a good rate. Those are the big factors. You mentioned new cohorts. I would say it's a relatively small portion of the growth now.
It's more about what's to come. If you think about our new cohort business, and we highlighted a few things on our call last week. You know, just since the start of 2024, we've onboarded about 40 new logos. 14 of our 15 top customers have done at least one new program with us. We've done over 30 new programs for our top 15 customers just in the last two years. That's more a promise of what's to come. For example, we said in 2025 that drove about $30 million of gross profit. In 2026, we expect that number to double. The new cohorts are contributing, but it takes time for new programs to ramp and scale. I would say as you go out one, two years, that's when you'll really start to see a significant benefit to growth coming from those new cohorts.
Helpful. Maybe on the BNPL topic. We're obviously seeing this, you know, structural transition, not necessarily away from virtual card issuance, but, you know, the benefits that can be provided by the flex credential itself. You also have the dynamic in the space where wallet concentration is also a larger percentage of GMV structurally. How do you think about those two dynamics and how it impacts, you know, your stickiness with those providers and your ability to monetize the relationship?
Yeah. I think it's a pretty significant benefit. I mean, we started with virtual card. We were the early pioneer, and that really helped the buy now, pay later player scale because they didn't have to do all the complicated kind of technology integration on a merchant-by-merchant basis. The virtual card solved that. As more and more players in the market sort of caught up with that capability, what it really does is allows, you know, not only diversification of your provider, but it actually allows for true redundancy. One minute I could be using this platform for my virtual card business, and the very next minute I could be using a completely different platform.
That's something we've talked about for the last couple of years as that's happened, more and more of our customers who use virtual card have diversified because, you know, they can do that relatively easily. As things shift to more of a consumer value proposition, where now it's a recurring use card that sits in my physical wallet as well as maybe my digital wallet, that's a much stickier relationship. You certainly can't get redundancy. You could try to diversify it, but it's much harder because now you've got one program that's running on multiple platforms. Hard to make the user experience consistent. What it really allows is for us to have, you know, a tighter relationship that's just generally stickier. That's a good thing for us.
Helpful. On the expense management category, obviously a fairly mature vertical, but showing signs of re-accelerating. We obviously have some very high growth businesses that sort of are contributing to that dynamic. How should investors think about maybe how concentrated that growth is? Also, you know, we've obviously seen some of the incumbents sort of expressing more of an interest in layering on some expense management capabilities into their ecosystem. Does that sort of provide you with an opportunity to sort of drive deeper into that FI channel?
We believe we're still in the very early stages here of what can be done on the corporate card space with expense management. It's not incredibly concentrated. We have several customers that are growing, you know, very fast on our platform. You know, it's relatively broad-based, and the way we see it, we're in a little bit of a win-win position. There are two ways that this can play out. The disruptors in the space are growing very fast and taking share, that can continue to happen. Our capabilities and the way our platform is so configurable is one thing that is quite useful and powerful for this use case. We would benefit from that. The second thing that could happen is the banks start to respond, right?
Because they are losing business and, but they are gonna need the technology and the capabilities to respond effectively. We do think this is one of the areas, in addition to buy now, pay later, where we could initially start to work with, work with banks to help them. You know, even what happened now, I guess it was one month or so ago, you know, Capital One buying Brex, that, you know, Capital One is widely considered a, you know, highly innovative tech-forward bank. The fact that they felt like they had to, you know, do an acquisition to, you know, bolster some of those capabilities to us is a very positive sign in the market that that's where, you know, banks are taking that modernization seriously, especially someone forward-thinking like that.
You know, there aren't gonna be a lot of places for them to turn. We're, you know, we're clearly the established leader. If they're gonna be looking for a new partner to better compete with the disruptors in the space, then obviously we would be a good choice.
Makes sense. Maybe before we pivot to the next line of questioning, if there's anyone in the audience has a question, feel free to raise your hand and we can get a microphone around to you. Maybe just on the, on the Europe and international expansion topic, obviously showing strong growth on the TPV side. How are you thinking about the benefits that the TransactPay acquisition has provided you and how that's gonna impact both mix and underlying unit economics?
Sure. Yeah. The growth in our Europe business is really amazing. I mean, our 2025 TPV was eight times the size of our business in 2022.
Yeah.
It basically has doubled every year for three straight years, which is really incredible growth that we've seen. We've done all that essentially just with processing. Our processing capability is very differentiated, but what we see in other parts of the world is people want the full package. They want program management. They want value-added services. The acquisition of TransactPay allows us to do that. It's what we really think of it as something that just makes our platform that much more attractive, particularly to more scaled players who don't wanna have multiple providers. They want their processing program management and the licensing you need to operate as sort of a neobank like structure in Europe, that they come to one player for that.
That's really the boost. What we see is the benefit so far from that acquisition is in our pipeline. It's not really in our business much right now. If you look at our pipeline, it's full of opportunities that are much larger, much more comprehensive offerings. We can drive a higher yield for every dollar of volume. You know, the launch that we just announced with the Uber UK Pro Card, where they're giving a banking product to essentially their drivers is really just the beginning of what we can do in Europe with this new capability and assets that we acquired.
Does the composition of growth in the international business, do you think logically it will sort of skew more to existing client growth versus net new, just given the fact that you do have, you know, highly global businesses that you predominantly have only worked with in the U.S. thus far?
I would say for now that's probably fair because these are already established businesses that are quite large and see the opportunity to expand geographically.
Okay.
You know, not only they have the know-how, and they have some brand recognition, but they also have the ability to lean in and drive, you know, marketing and growth. I would say the great thing about the evolution of our business is that more and more when you look at the kinds of new logos that are in our pipeline, it's very large companies. You know, we mentioned on our call last week, we signed three Fortune 500 companies in 2025, and I would say that's becoming more and more common. It's not always gonna be kind of upstart businesses that really have to start from scratch. Many of the companies we're talking to now already, they're platform businesses.
They already have 30, 40, 50 million users, and they wanna insert a card product into that user base, which should mean that they are just a much better position to, you know, hit the ground running than, you know, maybe the new customers we were onboarding a few years back.
On value-added services, obviously a growing percentage of gross profit structurally. Are there items there that you think are key differentiators versus Marqeta versus certain items that may be more are table stakes from a competitive perspective? How should investors be thinking about, you know, value-added services in terms of contribution to the P&L on a go-forward basis?
Sure. I think it will continue to grow as a share of our business. We said it was 7% of our gross profit last year, and we think that will continue to rise. I would say, like almost everything that we do, you know, there are aspects of it that are table stakes, but we just do it differently and we feel better than typically the people who have come before.
To take something like tokenization, right? Tokenization is now very prevalent in the market because of digital wallets as well as big card on file providers wanting to tokenize for security reasons. Most processors have that capability, but the way we do it is quite differentiated, and we hear that very regularly in the market. There are certain things that we can do with tokens that few else can. That gives us a leg up in the market for people who are really thinking digital-first like use cases. That's something that does stand out compared to other competitors. I would say the same thing with our risk products, for example. You know, everyone's gonna try to do something to manage risk and fraud, but our real-time decisioning capability that we've built is for issuers very specifically.
We've now enhanced that with machine learning AI to make it even more dynamic in real time in fighting fraud. Again, that's a relatively standard offering, but we feel like we've done it differently and in a differentiated way. I think there are a few things that I would say you could maybe call table stakes. Like, one of the areas we think will become a growing part of the business is providing the front end, a white label app, which we just built last year and Uber is using in the U.K. You know, that's something we wanna do it well, but we're not gonna be known. Like, people aren't gonna choose us 'cause like, "Wow, look how great your app is." Like, we don't think that's how we're gonna win business, but w e want it to be good.
I would say the same thing as we move into more like data and analytic type offerings. That's the same thing where people would want that packaged with their platform, and you wanna do it well, but it's not something that's gonna really drive a decision by a customer.
It's helpful. On the profitability side of the equation, obviously running, you know, at the scale at which you are, how do you think about the biggest drivers of margin expansion from here across just general operating leverage, some of your infrastructure initiatives, you know, contribution of value-added services, et cetera? What is gonna be the biggest needle mover as we think about both 2026 and beyond?
Yeah. I would say the infrastructure and operating leverage for our business is sort of one and the same, and it goes back to maybe what I highlighted at the beginning. Just as a platform business, we're very high fixed cost, very low marginal cost. Really the way for us to drive profitability is just to drive growth. If we're effective.
Yeah.
At driving growth, then, just the nature of the business model will kick in and you can do that, every incremental dollar, it gets sort of just that much more profitable. You know, that's something that I think we will, you know, continue to do well as long as we remain disciplined in the way we invest and choose our investments wisely. I think in terms of looking beyond that, value-added services will certainly be a helpful driver. There's two things that really aren't part of our business now that should become, you know, bigger in the next few years that will also help. One that we already talked about was the addition of program management in Europe.
You know, that's something will allow us to make more on every dollar, of volume in Europe, and that's something that's coming more near term. The second area is credit. Right now it's a very small part of our business. We're just getting started, but it generally is more lucrative than debit. If we were to build a big business there, it would come with better profitability than the debit business.
It's helpful. How should we think about the steady-state margin profile of the business today, particularly as you sort of contemplate a little bit more of a shift upmarket, you know, layering in Program management internationally? Does that mix shift structurally improve or sort of depress gross margins and therefore investors should sort of concentrate on dollars versus margins? How do you think about that?
We don't think there isn't big mix shifts in that way that would affect our gross margin or even our EBITDA margin. 'Cause again, as we go after bigger and bigger customers, they might start at a low price point right away, but they also come with more volume right away. Again, getting back to our business model, that will inherently drive profitability. So we don't see a big mix impact. We still believe also that, you know, the way we look at our business is on a Rule of 40 basis. We think that is a very effective way to sort of show the balancing act between growth and profitability, and we look at that as a combination of gross profit growth, and then our EBITDA margin with gross profit as the denominator.
Sure.
We believe we can continue to improve that over time. You know, we also think that our gross profit or our EBITDA margin on gross profit, you know, there's no reason why that over time can't be over 50%. You know, you know, right now we have improved that metric a lot. In the fourth quarter, we were 26%. We've come a long way. There's definitely more headroom just again, because as the business scales, we think we can grow gross profit meaningfully faster than we grow our expenses. If we drive effective growth, then the profitability will come with it.
Couldn't get through a fireside without asking about AI. How do you think about your ability to sort of layer that into the organization and what that might mean for, you know, some of your internal expense initiatives?
Sure. We're obviously very focused on giving our employees, the tools they need to do their jobs more effectively and more efficiently. Because if you look at our business, we really are people-driven. We have, very few assets outside of, you know, the great employees that we have that drive the business. We always are looking to give them the right tools, and we're seeing, you know, huge steps forward in that regard. What's exciting about it is even what some of those tools can do now, they couldn't do six months ago. I mean, the rate of progress and change is pretty remarkable.
We do think that there's pretty significant increases in productivity, particularly in engineering, but even, you know, other parts of the business as well, where there are a number of tools and AI tools that are quite helpful. When we think about externally, there's two product areas that we think AI has a lot of promise. One is in risk and fraud management, and we've just started to incorporate that and have our first customer live on our new enhanced fraud product that's using AI. We'll continue to make those improvements. The second one is with dynamic rewards.
We still believe that personalization is gonna come to the card business. If you and I have the same credit card today, we get the exact same reward. We don't think that'll be the case in the future. Everything else is personalized and customized with technology, and we think that's gonna come to card. We have already been making those investments for the last couple years, and AI will only take it to the next level to be able to adjust information in real-time and offer you things that are unique to you that might be different than what gets offered to me and do it in a way that's a win-win. That's another area that we think, you know, in the coming years, AI will get applied.
Helpful. To conclude, in your conversations with investors, what is one of the most persistent misconceptions about Marqeta and how investors should be thinking about, you know, tracking, you know, that dynamic and what to watch for on a go-forward basis?
Yeah. I would maybe name two things. I think one is, I think investors continually underestimate the know-how, the experience of what it takes to successfully launch and manage a card issuing program. I think because acquiring is just more prevalent. There are many more companies that do it.
Yeah.
That are covered by investors. I think a lot of people fall into the trap of thinking, "Well, issuing must be just like acquiring." It's not. There's a lot more complexities, a lot more nuances to it. That experience we have goes a long way when we're talking to prospects, and when we're trying to help customers. Like, we've been there and done that. In a business that has, you know, lots of pitfalls and traps you could fall into, you know, that's a real differentiator for us. That margin keeps growing as we just keep getting bigger and bigger.
The second thing that I would mention because it's very topical right now with, you know, Cash App being such a big part of our business and then talking about starting to diversify, I think there are some people who feel like, "Oh, well, if you lose new issuance, then, you know, over time, that book could get very small to you." Of course, that's possible, but I think people underestimate their what percentage of their business is, and their volume is driven by highly engaged users. That would create a lot of business risk if they tried to change that. I think they also maybe underestimate some of the new ways that Block may want to grow that we could very easily facilitate compared to other players.
I think, you know, we get it. People are gonna be a little bit concerned, but I think, you know, we're well-positioned to be their primary partner and continue to drive the bulk of their business. Only time will tell if that plays out, but we feel confident in our position.
It's a great place to wrap. Mike, thanks very much for joining us, and thanks everyone for attending.
Thank you.