Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Marqeta Second Quarter 2022 Earnings Conference Call. At this time, lines have been placed on mute to prevent any background noise. After the speakers' remarks, we will open the line for your questions. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Stacey Finerman, Vice President of Investor Relations, to begin. Please go ahead, ma'am.

Thanks, operator. Before we begin, I would like to remind everyone that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations website, including our annual report on Form 10-K for the period ended December 31, 2021, and our subsequent periodic filings with the SEC. Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only at the time of this call, and the company does not assume any obligation or intent to update them, except as required by law. In addition, today's call includes non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in today's earnings press release or earnings release supplemental materials, which are available on our Investor Relations website. Hosting today's call are Jason Gardner, Marqeta's Founder and CEO; and Mike Milotich, Marqeta's Chief Financial Officer. With that, I'd like to turn the call over to Jason to begin.

Thank you, Stacey. Good afternoon, everyone, and thank you for joining us for Marqeta's second quarter of 2022 earnings call. I'll start with an overview of our results for the quarter, and then I'll discuss an update on our three strategic priorities. Total processing volume, or TPV, was $40 billion in the quarter, representing a 43% increase in alignment with the rise we posted in the first quarter. The scale of our platform continues to increase dramatically. Our TPV for the three months ending June 2022 exceeds our TPV for the 12 months ending June 2020. Our net revenue of $187 million in the quarter represents a 53% increase from the previous year. The main drivers of growth throughout 2021 and into the start of 2022 continue to propel our business. Payment habits that gained traction during the pandemic are still popular with consumers and driving our top-line growth, including digital banking; buy now, pay later; and on-demand delivery. Expense management continues to scale as businesses look for efficiencies and business travel returns. Block accounted for 69% of our net revenue, up from 66% in the first quarter, with Afterpay included for the entire quarter and Cash App volumes continuing to grow meaningfully post-tax season. This percentage represents a decline in concentration from 72% of net revenues in the second quarter of 2021. TPV from customers outside our top 5 grew at three times the pace of our top 5 customers. The revenue associated with customers outside the top 5 more than doubled compared with the comparable quarter of 2021. This continues to be a testament to the impact of the Marqeta platform enabling business growth for our customers. We have again made significant progress on our three critical growth pillars in the quarter: fueling our customers' success, broadening the ways we support our customers, and increasing our global platform's resiliency, reliability, and scalability. First and foremost, we want our customers to succeed. We are always looking to support our customers' businesses as they grow and diversify their revenue streams. In June, we announced our partnership with Western Union, a global leader in cross-border, cross-currency money movement and payments in Europe, demonstrating again the appeal of our offering for established market leaders looking to innovate at scale. Marqeta's modern card issuing platform will allow funds held by Western Union's digital banking customers to be available via a physical or virtual debit card. This will enable Western Union to extend its relationship with its customers with additional flexibility to roll out new features and deliver a wide range of digital banking services. We look forward to growing our partnership with Western Union. We see its scale and commitment to digital banking innovation as a strong match for Marqeta. We continue to leverage an innovative ecosystem of partners to unlock value for our customers' businesses. Last October, we announced a partnership with our customer, Branch, to power faster payouts for Uber Freight carriers, serving as a connection between our customers to help power net new payments innovation. After a successful launch, we've shown the potential for what we can build together and are excited to work alongside Branch to support the launch of the Uber Pro card for drivers. We see the combination of Marqeta's modern card issuing platform and Branch's digital wallet as a natural fit to bring faster payments and flexible rewards to Uber drivers. Enabling brands to unlock this innovation is another excellent example of how Marqeta adds value for customers like Uber as they launch new card programs with us across the breadth of their business. Providing customer support, our second focus area means expanding the Marqeta platform to support our customers with new products, services, and geographies. Marqeta initially prioritized debit and prepaid innovation to help commerce disruptors bring new offerings to the market, ushering in a wave of innovation for these card types. Credit, which represents the other half of total card spend in the market, has not yet experienced the same amount of modernization. Given the massive opportunity to modernize credit, this is a logical step for our product roadmap. Our goal is to enable our customers, leading fintechs, consumer brands, and banks to offer their end consumer experiences that are currently unavailable. We initially launched our credit platform in 2021, allowing us to support any card type through our modern card issuing platform. We recently launched more than 40 new credit APIs, which will power innovations in credit and enable our customers to more quickly design, test, and launch new card experiences. Our flexible rewards engine allows our customers to create programs that reimagine hyper-customized rewards based on merchant category spend and various cardholder behaviors. For example, our customers can offer instant gratification to their end users by supporting the ability to provide the reward as soon as the transaction is cleared rather than at the end of a billing period. Our customers can now provide their users with an instant credit decision via Marqeta's API connection to FPO's decisioning engine. In other words, when a user applies for a card, they will get a decision instantly rather than waiting days for the bank to access their credit history. This encourages users to apply and start using their card immediately, helping card programs cement coveted top-of-wallet status with their customers. We have deepened the capabilities of our credit platform, and that in turn has deepened the experiences that our customers can create. We have also broadened the verticals we support by expanding into transit for the first time. Recently, the New South Wales government in Australia announced its commitment to upgrade its transit card system. Marqeta was named the payment processor of choice for Opal Plus, the new transit program for transport for New South Wales in partnership with Mastercard. The result will be a Mobility-as-a-Service app, allowing subscribers to plan, book, and pay for a tailored commuter experience directly from their mobile devices. This deal is another example of our platform's adaptability to service an ever-broadening array of use cases. Our third focus area, increasing our global platform's resiliency, reliability, and scalability, is critical given the increased demand placed on our platform year after year with exponential growth. As a significant area of investment, we want our platform to keep pace with our growing customers and provide strength and support for our customers' future business goals and innovations. Our resiliency at scale is a key differentiating factor when customers choose the Marqeta platform. Uptime and latency are of the utmost importance in our business. We have delivered at least 4.9 seconds across all of Marqeta's customers weekly this year, which is even more impressive given that our volume increased 50% year-over-year. We also worked diligently in the first half of 2022 to bring faster API connections to our customers and partners to improve their platform experience further. As a result of scalability and resiliency improvements made in May, we saw our API latency improve by up to 60% across all endpoints of the Marqeta platform in the following months. In conclusion, our Q2 results demonstrate the increased breadth and depth of the Marqeta platform. We continue to enable this digital disruption and modern money movement with a base of customers who work on the cutting edge of payments. We believe we are the go-to choice for payments innovation at scale. When paired with our solid financial footing, we are very well positioned to capitalize on the market opportunity and modern money movement in the coming years. I will now turn the call over to Mike.

Thank you, Jason, and good afternoon, everyone. We had a great Q2 with TPV and net revenue growth of 53%, which is in line with last quarter. The strong net revenue growth was broad-based with 20 of our top 30 customers growing at least 40%, and the customers outside the top 30 as a group growing much faster. Gross profit and adjusted EBITDA margins were above our expectations as a result at 42% and negative 5.5%, respectively. The net revenue and gross profit outperformance was primarily driven by three factors where results exceeded our expectations for the quarter: first, higher TPV across customers of all sizes; second, higher net revenue take rate due to favorable volume mix both in terms of merchant mix as well as PIN versus signature debit mix; and third, more robust usage of additional services not directly tied to TPV, such as card fulfillment. Favorable volume mix and additional services also lifted the gross profit margin since they don't drive a corresponding increase in our cost of revenue. Adjusted EBITDA also benefited from timing delays in hiring and investments, which will push a few million dollars of expenses into Q3. Let me provide more color on the items that drove our quarterly results. Q2 TPV was $40 billion, growing consistently with last quarter at 53%. Growth accelerated in expense management and on-demand delivery, offset by tough year-over-year comparisons in financial services and BNPL that were helped by the U.S. government stimulus in March of 2021. Although TPV growth was similar to Q1 overall, it did differ on a category basis. In categories that are less discretionary, such as supermarkets, drugstores, fuel, and utilities, which make up roughly one-third of our Q2 TPV, growth accelerated meaningfully versus Q1. In more discretionary categories, such as retail, travel, entertainment, and home improvement, which make up roughly one-sixth of our Q2 TPV, growth decelerated significantly from Q1. While Q2 TPV growth in highly discretionary categories did decelerate, it is still growing more than 15 points faster than medium- and low-discretionary categories. Let me also highlight TPV performance in our top verticals. The financial services vertical continued to grow strongly, slowing only a few points from Q1 despite tough comps due to stimulus and delays in the tax season last year. Spending in less discretionary categories grew more than twice as fast as medium- and high-discretionary categories in this vertical. On-demand delivery accelerated by almost 10 points due to increasing consumer demand and our customers' expansion into new merchant categories. Lending, including buy now, pay later, is still growing very fast. But growth did fall below 100% for the first time this quarter as we begin to lap the incredible ramp in BNPL spending last year. The robust growth is driven by both consumer and merchant adoption and usage. Actual TPV this quarter exceeded Q4 2021, which obviously benefited significantly from holiday spending. Expense management TPV more than tripled year-over-year again this quarter with 8 of our top 10 customers growing over 100%. Spending growth is highest in more discretionary categories, fueled by the rebound in travel. Net revenue was $187 million and grew 53% in the quarter, in line with TPV growth. Our net revenue take rate was in line with last year but improved 1 basis point versus last quarter. On a sequential basis, the improvement was driven by favorable business mix and strong growth in additional revenue streams not directly tied to every dollar of TPV, such as card fulfillment, KYC/KYB services, dispute handling, and cross-border premiums. These benefits were partially offset by the impact of Powered by Marqeta TPV growing faster than the rest of the business. As a reminder, in our Powered by Marqeta business, we primarily have a processing relationship with our customer. Therefore, the take rate is typically lower than in our Managed by Marqeta business. Gross profit grew 66%, 13 points faster than revenue due to a combination of factors. In Q2 last year, we had unusually high network fees, creating an easier comp. Contract amendments in Q3 2021 reflected our increased scale. Therefore, fees to our bank partners are growing significantly slower than TPV, and network incentives are growing a little faster than TPV. We will start to lap these benefits next quarter. While Powered by Marqeta increasing its share of TPV negatively impacts the revenue take rate, it does not have the same impact on gross profit because the Powered by Marqeta gross profit take rate is similar to many of the verticals in our Managed by Marqeta business. Lastly, the favorable volume mix and stronger usage of additional services also contributed. Our Q2 gross profit margin was 42%. As a reminder, Q2 is typically our lowest gross profit margin quarter due to the timing of our network incentive contracts. Q2 adjusted operating expenses were $88 million, growing 53%. Roughly two-thirds of the growth comes from increased technology and product investment focused on broadening our capabilities and increasing our platform's resiliency, reliability, and scalability. About 45% of the growth is driven by technology and product headcount, and about 20% is cloud and software tool-related expenses. Go-to-market headcount, both business development and customer support, drove approximately 10% of the adjusted expense growth. Costs associated with becoming a public company, such as insurance and audit fees, also drove approximately 10% of the growth. This should not be a driver of future expense growth as we will be lapping these costs going forward. The remaining 15% to 20% of expense growth is mostly driven by all other headcount-related increases in support functions. Because so much of our adjusted operating expenses are headcount-driven or tied to business growth via our cloud costs, we consider only a very small portion of our expenses to be discretionary. Therefore, we try to be both thoughtful and thorough in our investment planning. Adjusted EBITDA for the quarter was negative $10 million, resulting in an adjusted EBITDA margin of negative 5.5%. We had positive free cash flow this quarter both in actual terms as well as when you consider the amortization of expense for significant annual cash payments that may occur in other quarters during the year. The Q2 GAAP net loss was $45 million. Now let me share our perspective on the full year. Our business has significantly outperformed in the first half of the year. Many of our top customers expanded their business into new areas with us and are defying the tough comps driven by government stimulus early last year. Smaller customers across several industry verticals and geographies are utilizing our capabilities with great success to expand their businesses rapidly. While our top 10 customer TPV grew about 40% in the first half, which is excellent given their size, our remaining customers grew nearly four times faster. We are also getting more traction with additional services we offer, such as card fulfillment, authentication, and dispute management. All of these factors are helping to diversify our business. As we look ahead to the second half of the year, given the current macroeconomic uncertainty as well as fintech-specific challenges with significant declines in valuation and increasing difficulties in raising capital, we feel it is prudent to be cautious about the next several months. Many fintechs are being less aggressive about their investments in expansion. Therefore, our expectations for the second half of the year remain unchanged from when we last spoke in May. Many of the tailwinds that drove our first-half upside should continue. However, we also believe that many of the customers signed in the last 12-plus months as well as crypto customers will ramp their businesses more slowly than we expected a few months ago. Because these are newer customers ramping up, the impact of less investment by our customers and their programs is more significant in Q3 and Q4 than it was in the first half. Our Q3 quarter-to-date performance is consistent with this perspective. As such, we expect Q3 net revenue growth to be between 36% and 38%. In addition to lower contribution from new customers, the growth is lower than the first half due to much tougher comps, particularly in BNPL and expense management, where those verticals were ramping significantly last year. Q3 gross profit margin is expected to be in the 43% to 44% range, consistent with the first half. Q3 adjusted EBITDA margin is expected to be negative 8% to 9%. This should be our most negative margin quarter. The expense growth will be driven by planned investments shifting from Q2 to Q3; continued hiring, particularly in our technology, product, and go-to-market teams; as well as a charge tied to international processing. We reduced our hiring plans back in February when the macroeconomic warning signs were already evident, and we intend to continue with that revised plan. Our expectations for the full year 2022 have improved a little as a result of our outperformance in Q2. Since we are more than halfway through the year, we can also be more definitive about our expectations. 2022 net revenue growth is expected to be 39% to 40%. Growth should step down in Q4 as we lap the incredible performance in Q4 2021 when year-over-year growth in dollars was almost $15 million higher than the average of the first three quarters, fueled by a robust holiday season and BNPL growth. Full-year gross profit margin is expected to be 43% to 44%, consistent with the first half and Q3. 2022 adjusted EBITDA margin is expected to be negative 7% to 8% as adjusted expense growth steps down from Q2 to Q3 and again, more significantly from Q3 to Q4. In the future, we remain confident the business will operate at a 20%-plus adjusted EBITDA margin once we have captured more of the market opportunity. To wrap up, Marqeta had an excellent Q2 to cap off a strong first half of 2022 as we continue to have success scaling the business. We had almost 20 days in Q2 where we processed over $500 million in TPV. We continue to diversify the business with new products, services, geographies, and use case verticals while maintaining our net revenue take rate and gross profit margins. Although we are cautious about the coming months given the level of macroeconomic uncertainty and the implications for our customers, we are investing prudently in the growth to ensure we capture the modern money movement opportunities ahead of us. I will now turn the call back over to Jason.

Thanks, Mike. My highest aspiration for Marqeta is to fulfill our vision, defining and powering the future of money movement for the world's leading innovators. While I've succeeded in leading Marqeta to its present state as the founder and CEO to maximize the next stage of growth as we diversify the business and the capabilities we offer in the geographies we serve, we want to be very proactive and begin our succession planning process by looking for the next CEO to lead Marqeta. I always knew this time would come. When we went public in 2021, I promised to hand leadership over to the best person at the appropriate time. After thoughtful consideration of what the next phase of growth will require, I've concluded that now is the time to begin the search for this person. We will search for a CEO with deep experience scaling an innovative, high-growth business. I have led Marqeta from 0 to 1, and soon it will be time to pass the baton to the best person to lead it from 1 to infinity. I'm sharing this with you because I've always valued thoughtful transparency, and this transparency will allow me and the Board to attract, select, and hire the best CEO to drive even higher levels of success for our customers, employees, and shareholders. Once we hire the next CEO, I will become Executive Chairman. As Executive Chairman, I plan to spend my time in the three areas I can contribute the most: our people, our products, and our customers. I'm entirely committed to Marqeta and our overall success forever. Along with the CEO succession plan, Vidya Peters, our Chief Operating Officer, is leaving the company. Vidya has contributed greatly to the company over the past three years, and we wish her only the best in her future pursuits. Simon Khalaf, our newest executive and our Chief Product Officer, will assume Vidya's go-to-market responsibilities on an interim basis, and we will begin a search for a Chief Revenue Officer. Simon joined Marqeta from Twilio, where he led their core communication products, including the messaging sales organization focused on strategic accounts. I am as excited as ever about the massive opportunities ahead for Marqeta and very confident we're on a path to sustainable, profitable growth. I firmly believe that these changes will help maximize customer, employee, and shareholder value. With that, I will turn it over to the operator to start Q&A.

The first question we have is from Tien-Tsin Huang from JPMorgan.

Jason, I appreciate your comments on the interim succession. You seem quite at peace with it, and I admire that. I would like to ask about the recent situation with FIS mentioning their work with the Cash Card or Block on the network side. Could you provide any insights on whether this affects Marqeta and if there are any updates on our relationship, including the renewal timing, considering the recent concerns?

Yes. Thank you, Tien-Tsin. There is no implication for Marqeta. That was just an unfortunate comment, and it does not impact the Cash Card or our specific relationship with Block. Issuing processing is a highly complex industry, and we collaborate closely with Block to offer a wide range of services that support their growth. To reiterate, we have multiple contracts with Block and Afterpay that extend into 2024. Our relationship has only strengthened since we began working with Cash App. We provide many services to Block through our platform, including direct deposit, ATM, Cash App Card, and Tencor, as well as card services in the U.S. and Canada and bank account services on the seller card. Additionally, we power Afterpay. We are uniquely positioned to support this business while traditional processors are not. Marqeta was designed for developers and innovation. We are cloud-based and operate on a single platform, allowing for one integration that can be launched everywhere. Everything is consolidated in one place, making us very flexible in how we support not only Block but all of our customers. You also inquired about the renewal. We recognize that the market is keenly awaiting news on the renewal, and we will provide updates when available. This relationship is crucial for both Block and Marqeta, and our companies work closely together to nurture this important connection.

The next question we have is from Marina Kumar from UBS.

You mentioned that you have some investments that moved from Q2 to Q3. Could you specify what types of investments that are at your top priorities of investments for '22?

Sure. So it's really just the timing of some technology-related investments as well as the timing of hiring. So we have a lot of pending starts. So they're just people who have been hitting the P&L in the second quarter but are about to start, and so it really is as simple as that. The focus of our investments this year are really, I would say, three primary things, and most of it is almost all geared around product and technology. So one is just increasing the reliability and resiliency that Jason touched on in his remarks. The second is continuing to expand our credit capabilities and launching with more and more customers, which, again, Jason also highlighted. And then the third area is expanding our Banking-as-a-Service-like capabilities. So more cash in, cash out, money in, money out type capabilities in support of our customers is we're just finding more and more of our customers and potential customers have some aspect of neo-bank-like aspirations in their business, where they're taking deposits of multiple forms and then want to offer their customers flexibility to use those in different ways. And so those are really the three primary focus areas of our investment. We're also investing in additional go-to-market resources both in sales in North America as well as Europe. But I would say the bulk of it is mostly geared at product and technology.

And just touching on your credit platform announcement, you mentioned 40 new credit APIs. Do you expect that to help Marqeta gain traction with more traditional financial institutions? And any key milestones we should watch out for?

Yes. So thanks, Marina. So given the massive opportunity to modernize credit, this is a consistent investment in our product roadmap. And you're right, as we recently launched more than 40 new credit APIs, it really enables our customers to more easily design, test, and launch new card programs. And the two, obviously, the aspects of the program pattern are really the flexible rewards engine and the newly announced instant credit decisioning. We also recently announced the GreenLight Family Card, which is an expansion of our FNBO relationship. So I'd say we're still in the early days of our credit journey, but it's important for us to build trust within the space. And then when it comes to large financial institution progress, they want similar capabilities to the disruptors, I mean, making them really great potential partners for Marqeta. Our level of engagement there has increased. Large financial institutions typically have long-standing partnerships that will take time for us to establish ourselves. Our goal with these programs is to get a foot in the door and expand over time and that we can help them in areas where they want to be more innovative. So currently, revenue is not a big driver of our growth. I mean, really, the platform puts us in a great position as financial institutions look to build for the future. And we can do this faster. We can do this with a shorter time to market for a large financial institution. And I think most importantly is lower total cost of ownership to our highly configurable cloud-based platform. So while making inroads will take time in these sales cycles with the large financial institutions, we're encouraged by the fact that these conversations have increased greatly over the last year and many of them specifically around credit and other issuing processing capabilities of Marqeta.

The next question we have is from Darrin Peller from Wolfe Research.

The results this quarter were very strong in terms of volume and gross profit, highlighting the positive trends with your core customers. However, your guidance shows a conservative outlook that doesn’t seem to align with the recent data. Are you noticing any changes in customer behavior based on current trends, or is the conservatism a response to general market conditions? Additionally, could you share which verticals you are most optimistic about for sustainability? Expense management has been one of them, and there are several promising new areas you've explored. It would be great to get some more details on that.

Yes. So Darrin, I believe we are being cautious and carefully evaluating the market situation before making any decisions. It’s not about specific numbers for us, but we have been getting feedback from some customers. We have two types of customers: those for whom our card value proposition is essential to their core business, and those who use the card program for increased engagement or monetization. Some core customers are reconsidering potential product launches or geographic expansions, opting to wait and see what unfolds. In contrast, customers focused on monetization, who are not so dependent on our offering, are scaling back on investments, prioritizing their core business over new initiatives. Although this is not widespread, we've noted it from a select few customers, prompting us to proceed with caution. We anticipated significant growth from newer customers within the last year, including new crypto clients. However, we're now expecting a slower ramp-up as these customers are likely to invest less in launching their programs, which typically requires substantial upfront investment to boost usage. We're watching how this situation develops over the coming months and are hopeful that any hesitation from customers will resolve so we can return to our earlier performance this year. Additionally, I would like to highlight that we are facing challenging comparisons for Q3, which contributes to our lower growth. For instance, last year's Q4 revenue from BNPL exceeded the total of Q1 and Q2 last year, creating a tough comparison. Similarly, Divvy transitioned its business to us from a competitor starting in late 2021, scaling significantly in the first half, creating tough comps for the second half. These factors are critical as we shape our guidance.

Jason, just a quick follow-up. It seems like from all the deals you've been winning, you are gaining an advantage over the neo issuer processor competitors we were hearing more about a year ago. Are you noticing any significant changes in the competitive landscape that suggest you've outperformed them in any way or observed other subtle differences?

We have a proven and scaled platform and are in a strong financial position to keep investing. Regarding the smaller competitors you mentioned, we have significantly more experience and scale. These competitors do not have the same proven track record as we do. To secure large volumes, we need to demonstrate both qualities. In fact, during 20% of the days in Q2 of '22, we processed over $500 million in total payment volume, averaging more than once a week. Marqeta has helped companies grow from start-up to enterprise and has been involved with well-known names like DoorDash, Instacart, Block, and multiple buy now, pay later players. When customers are selecting critical platform partners, experience and expertise are essential. By running their core operations or revenue-generating businesses on our platform, we possess a first-mover advantage in modern card issuing. I should also note that smaller competitors may need to begin conserving cash to extend their runway, while we have $1.7 billion in liquidity and are cash flow-positive this quarter. This allows us to invest in our platform while maintaining our strong financial position. We are actively hiring and plan to bring on the same number of employees as we did in 2021, along with investments in product and technology. Our scale, size, expertise, and liquidity position us as the preferred partner for companies looking for modern card issuing solutions.

The next question we have is from Ramsey El-Assal from Barclays.

Could you explain your reasoning and the timing behind your transition from your current role? I'm interested in understanding the details and what your future plans might entail.

Yes. When I started the succession planning process, I realized that it would be better for Marqeta to have a new CEO during this next phase of growth. I recognize that I'm not the ideal person to lead at this stage. I'm thinking ahead about what’s best for Marqeta as we grow and diversify, which will add complexity to the business. I want to clarify that I am beginning the succession planning now and will not be stepping away from the CEO role for several months. I will remain actively involved as Executive Chairman. I will fully support Marqeta in this role once we find the new CEO. Over the past few years, I've understood that while I'm a strong entrepreneur, I'm not the best fit for executing in this growth phase. My focus will be on hiring the right person for this stage and dedicating my effort to our people, products, and customers on behalf of Marqeta. I am fully committed to the company’s success, as Marqeta is like my youngest child; I care deeply for it. As its founder and largest shareholder, it is my responsibility to make the most prudent decisions for the benefit of Marqeta, our team, our customers, and our shareholders.

I appreciate that. That's a great and honest response. Maybe I can ask a quick follow-up then, which is on the additional services, meaning the services not tied to TPV. Can you give us a little more sense of the opportunity to kind of expand that part of your business for that to become kind of a bigger long-term driver when we think about how revenues will trend over time?

Certainly. We're seeing benefits from our expertise and scale, particularly for customers who are new to the industry. They prefer to obtain these services from us because we can share our scale and offer our expertise. For example, if someone is launching a new consumer program and needs to manage disputes, conduct identity checks, or order cards for their program, these tasks may not be central to their business. We have extensive experience in these areas that they can utilize. As we continue to grow and enter new markets, more customers are requesting that we take care of these aspects for them. While this represents a smaller portion of our total revenue, it is increasing at a faster rate and contributes positively to our gross margin since it doesn't carry the same cost dynamics.

The next question we have is from Sanjay Sakhrani from KBW.

I have a couple of follow-up questions. First, in response to Darrin's question, Mike, considering the current caution in the fintech sector, have you adjusted the growth expectations you had for the second half of the year? Additionally, how does this impact your outlook for next year? Lastly, Jason, what specific qualities are we seeking in the new person who will help steer the company in the direction you envision?

To address your first question, Sanjay, we're observing the effects of newer customers who generated minimal revenue in the past few quarters but we anticipated significant growth from them. Typically, after signing a deal, it often takes about six months for a customer to connect to our platform, followed by one to three quarters for their business to scale and begin producing a steady revenue stream. However, we believe it may take longer for these newer customers to ramp up because they aren't planning to invest as much as they have historically. This situation could influence our results for 2023. For now, it appears to be a minor impact unless we enter a recession, in which case their investment pause could turn into a more lasting decision. Currently, customers seem to be adopting a cautious approach, indicating they might invest, but at reduced levels compared to their original plans, potentially leading to slower growth. At this moment, we do not foresee major implications for 2023, but we will have to monitor developments over the next couple of months, as they will be crucial in determining our future.

Yes. And Sanjay, so being transparent is a core tenet. It was actually one of the core tenets when I started the business. And I felt really strongly about telling what our plan is today because I felt it just allow us really to attract, select and hire the best CEO possible. So the next stage is really as we begin to diversify our business, we head into more geographies, we add more products and features and functions. To start the succession process now and get sort of way ahead, which is even more complexity in the business in the coming years, I thought was really the right thing to do, right thing to do for the business. And I felt, as I mentioned, it's kind of like my duty as the founder and CEO to make sure that we're setting ourselves up for success in the future. And I want that as Chairman, the founder, and the largest shareholder in the business. So as I think about what's next in regards to the attributes of this person, it's really experience, experience running a large public company or being involved with an executive team of a large public company, understanding the complexities of running a business like payments, really seeing around corners and what's next. And for me, too, is I love our people, I love our products, and I love our customers. I can be far more effective by focusing on those three things and not focusing on the day-to-day duties of running a public company if I can work with somebody in full support of them to go really build for the future with those attributes with that expertise of running a type of business at scale like Marqeta, then we'll all be successful in that process. So that really comes down to as far as the attributes. But I thought the transparency was really important because that really allow us to have really open conversations with a whole host of people out there. And I think there's a lot of great people out there who would be very interested in being the CEO of an amazing business like Marqeta. And I'm really looking forward to having a lot of those conversations in the coming weeks and months.

The next question we have is from Ashwin Shirvaikar from Citi.

Jason, happy for you that you have the choice to do what you're doing. That's great. So because you mentioned sort of the pacing of client decisions and decision-making and ramps and things like that, I just wanted to get more color on a couple of different lines. One is, would you expect is, would you expect sort of more traction with, say, Powered by versus Managed by in terms of your offerings? And then the second thing I want to ask is maybe younger, smaller fintechs are worrying more about their cash flow and stretching out their ramps, but you do have a very large component of clients, such as Block, JPMorgan, Goldman, that don't necessarily worry about that. I wanted to kind of clarify how widespread the concern or caution is from your perspective.

I'll start, and then Jason can add his thoughts. Ashwin, you bring up a valid point. The caution we're observing primarily comes from newer customers in the fintech sector who are opting to wait and see how things develop over the next month or two. However, we believe this situation actually presents us with a competitive advantage as a potential partner. We already possess the necessary scale, sophistication, and liquidity to keep investing. Our larger customers, such as Cash App, those in the BNPL space, and expense management, may see this as an opportunity to be more aggressive and capture market share, especially as smaller startups that typically invest heavily may not be able to do so right now. This is a recent development, and we want to emphasize our cautious approach based on current feedback. Ultimately, how this unfolds in the coming months remains uncertain.

Yes. I would echo Mike. Depending on who you talk to, the myriad of experts out there, they can't tell us whether we're in a recession or not in a recession. Obviously, in the start-up landscape, a lot of the VC money has dried up and it's dried up in a dramatic fashion. So a lot of these companies are just focused on their core products. If that core product is a card, they bet on Marqeta. We have a very strong financial position, massive scale. We operate in 39 countries. So as companies are thinking about right now about the cards they're going to build, whether it supports their core business or is their core business, we believe it's going to be with Marqeta. And then I would add, too, is we power a wide range of business models across both consumer and commercial businesses. I mean that's been our go-to-market strategy since day one, which is commerce disruption, digital banks, large tech giants, and then large financial institutions. I mean, an interesting stat we found was that roughly one-sixth of the volume on our platform is for highly discretionary items, I mean, large electronics, travel, home improvement, entertainment. Consumers will still spend money on things like groceries, gas, and other essentials. So we believe we're the go-to platform. We invented this category called modern card issuing, and we believe now is the time to really invest and hire into our business and allow our customers to really spread their wings. But again, a lot of us don't know what's going to be happening. We're just taking a cautious approach like our customers are, but we're in a lot of healthy conversations with them where they want to invest and where they want to go. And we believe we're obviously very well positioned to grab their business in the future as things change, and there's more clarity in regards to the broader macroeconomic market.

A quick clarification. Square, 69%. If you remove Afterpay, are you able to comment on the sort of apples-to-apples, how it used to be with and without Afterpay? I don't know if you are...

Yes, Ashwin, you have a keen eye as always. Afterpay is indeed a factor; it contributed for only two months last quarter, and now it's included for the full quarter. That’s one aspect to consider. The other aspect is the strong engagement with Cash App, which we discussed last week. We’re seeing robust engagement, partly due to increased inflows from tax refunds. It’s important to note that the strength is coming from Block, and it’s not that our other customers are slowing down; that’s not the case here. As we’ve mentioned, we anticipate a reduction in concentration over time, but we want that to happen through successful diversification of our business rather than a slowdown in Block. Our customers outside the top five are growing significantly faster than those top five. We are expanding rapidly and diversifying effectively. Block not only acquired a company with which we had a strong relationship, but they are also executing exceptionally well, resulting in an increase in revenue concentration on our side.

The next question we have is from Timothy Chiodo from Credit Suisse.

So I think we've covered a lot of the main topics pretty well. So I want to go to something that's more of a product topic, which is around secured credit cards. So Chime, a large neo bank, has had a lot of success with a secured credit card. And I wanted to see if you could maybe talk around your capabilities there, either an offering you might either have or could offer to either your existing neobank customers or potentially bring on new neobank customers. And then the subcomponent to that is maybe you could just talk about the complexity associated with the secured credit card relative to a regular credit card. In other words, would you be able to do program management right upfront for secured credit cards? Maybe it's slightly more similar to debit, maybe not.

A secured credit card allows consumers to build credit. The assumption is that they lack existing credit. Essentially, it works on a two-fold approach where the consumer puts down a deposit of, for example, $500 or $1,000, and then builds credit by spending that amount over time. This is a straightforward method for those with no credit to establish it. It is something we consider part of our product development plans. As a technology company, we aim to explore numerous opportunities. Chime has excelled in the market, led by a strong team. Currently, our customers aren't expressing a need for this feature. Looking to the future, we recognize its importance and may choose to invest, as it's included in our plans. However, at this moment, it isn't a strategic focus among our priorities, particularly regarding credit and the competition from disruptors, digital banks, tech firms, and large financial institutions. While I appreciate the concept, it's not an area we are currently prioritizing for investment.

The next question we have is from Bob Napoli from William Blair.

Jason, always knew you as a serial entrepreneur, a gold medal winner for sure. Should be job back to you. One thing we haven't discussed is your key focus on international markets. I was wondering if you could provide an update on that. You have significant resources at your disposal, and some of the fintech companies, especially those operating internationally, may be facing liquidity challenges. Could Marqeta potentially utilize its balance sheet to expand its portfolio?

Yes, I believe there are two questions to address. First, regarding international expansion, we are witnessing a significant demand for Marqeta's modern card issuing platform on a global scale. In our prepared remarks, we highlighted several points. Our collaboration with Western Union, a well-established money movement company, is a key example of us leveraging our innovative platform in Europe. After years of robust growth and traction in Europe, we are gaining strong momentum and an excellent reputation in the market, with a notable operation established there as well. Additionally, we discussed partnering with Mastercard in Australia to support the launch of Opal Plus for transportation in New South Wales. This innovative application of our platform within the transport sector marks one of Marqeta's first ventures in the transit vertical, showcasing the adaptability of our platform and its potential to support new use cases. We are actively preparing to enter numerous new markets, using a similar strategy as we did in building our U.S. business. Many of our U.S. customers are looking to expand internationally. A significant advantage of our platform is that customers can integrate once and launch anywhere, which we believe is crucial as they seek to grow globally. Regarding our investment strategy, the first priority is hiring. We are increasing our investment in the platform to develop additional features and functions that align with market trends and our customers' needs. We also see substantial opportunities in the M&A space. Given the current macroeconomic conditions, many fintech companies are navigating challenges, and the level of investment in the fintech sector has been remarkable. There are numerous promising smaller companies that could strategically benefit Marqeta. As a corporate development department, we are actively exploring potential opportunities to enhance our roadmap and introduce new features to our platform, allowing for growth and a stronger competitive position around our technology. We are excited about the potential we are observing and look forward to sharing more updates in the upcoming quarters as we move forward with this plan.

The last question we have is from Andrew Jeffrey from Truist Securities.

Appreciate all the color also on the vertical performance. Jason, you highlight Western Union as a new customer. I wonder if you could comment more broadly on cross-border aspirations, thinking about some of the treasury management or cross-border capital providers, companies like Bakkt or Do. Just generally, is that an area that you think offers fertile growth for Marqeta over time?

Well, specifically DLocal is an acquirer, mostly out of South America. I mean, we don't necessarily focus on the acquiring side of the payments ecosystem. There are thousands of companies that we talked about in that space. There are a few hundred within issuing and processing. It's just orders of magnitude more complex. And then as customers like Bakkt and others, especially in the expense management space, begin to spread their wings globally, this is, as I pointed out several times, the real value proposition of what we provide. And this is a core tenet of how we go and build products, which is we want you to be able to integrate once and then launch anywhere versus the legacy providers. They might have a dozen different systems that you need to integrate with in different parts of the world. So on the international strategy, when we go out and we talk to companies, especially scaled companies that are looking to grow internationally, this is something that we really, really talk about. I mean, we've announced that we're in 39 countries today. We operate businesses all over the world. Customers are building in Australia, coming to the United States, United States to Australia, Australia to Europe, I mean, this is really core to our platform. And our customers are just increasingly relying on the global functionality of our platform. And we see international markets as really a driver of our long-term growth. So we'll continue to invest in those areas as these companies want to build more on our platform. And I think we don't talk about this enough, which is just simply lowering total cost of ownership. To have to go integrate with a dozen different platforms as a provider is very, very expensive. So when you do it once, that total cost of ownership or that soft dollar cost impact to your business is significantly less with Marqeta than anybody else.

And just if I could add just one thing, Andrew, I think that as we look to continue to expand our money movement capabilities, so even today, obviously, we do more than just card issuing. We support a lot of more Banking as a Service and money-moving capabilities. And as we continue to expand those, certainly, some of those opportunities will be in cross-border, and that is something I would say that we definitely are thinking about in the coming years.

Thank you, sir. Ladies and gentlemen, we have reached the end of our question-and-answer session. I would like to turn the call back to Jason Gardner for closing remarks.

Thank you, everybody. As always, I appreciate everyone's time, especially joining us for this call. I'm very much looking forward for the updates in our next quarterly call. Everyone, stay safe and have a great rest of the day. Thank you.

Thank you, sir. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.