Marqeta, Inc. (MQ) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Marqeta Investor Day question-and-answer conference call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Stacey Finerman, Vice President of Investor Relations, to begin.

Thanks, operator. Before we begin, I would like to remind everyone that today's call may contain forward-looking statements including statements regarding anticipated future financial and operating results and further changes in/or developments regarding accounting treatment among others. These forward-looking statements are subject to numerous risks and uncertainties and including the risks that our accounting treatment may be subject to further changes or developments as well as those set forth in our filings with the SEC, which are available on our Investor Relations website, including our annual report on Form 10-K for the period ended December 31, 2022, and our subsequent periodic filings with the SEC. Actual results may differ from any forward-looking statements we make today. These forward-looking statements speak only as of the time of this call, and the company does not assume any obligation or intent to update them, except as required by law. In addition, today's call includes non-GAAP financial measures. These measures should be considered as part of the supplement to and not a substitute for GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in our filings with the SEC. A reconciliation of forward-looking GAAP guidance is not available without unreasonable effort due to the challenges and in practicality with estimating some of the items, such as share-based compensation expense, depreciation and amortization expense and payroll tax expense, the effect of which could be significant. Hosting today's call are Simon Khalaf, Marqeta's CEO; and Mike Milotich. Marqeta's Chief Financial Officer. With that, I'd like to turn the call over to Simon.

Thank you, Stacey, and thank you, everyone, for joining us today. With me today is Mike Milotich, the CFO of Marqeta. We hope you were able to review the Investor Day materials on our website where we discussed the bright future ahead of Marqeta and our path to profitability. With that, I'll turn the call over to the operator for questions and answers.

[Operator Instructions] Our first question is from Tien-Tsin Huang with JPMorgan.

I appreciate all the work you guys put in to this content was good to go through. Just the question I had was on price discipline and visibility. I know you highlighted that the bulk of your book has been renewed. And we've been hearing a lot about market buyers being more price conscious, both in payments and across IT services. Has that influenced some of your thinking around pricing or your sales cycles given you do have the premium price in the market. What's the overarching pricing philosophy is the question that I have here.

Thanks, Tien-Tsin, for the question. There's a couple of things I'd say that we have done. One is when we have renewed contracts, we've actually assumed a faster growth than what we've done before, and hence, added more tiers so that -- to the contract. So if and when our partners grow faster than anticipated, they would not be at a disadvantageous tier. So that's one thing we've done on the pricing side. The other one, a lot better discipline in terms of how we price and having models built by multiple teams and reviewed by multiple teams so that we do not have price discrimination between tax of customers. I wouldn't say that there is an overall push towards pricing decreases I would say that there is a conscious effort by folks who do reach volume tiers as and when they grow, they want the concessions on the price that is that is needed for the volumes that they reach.

And I guess if I would just add one thing, Tien-tsin, I think what's also happened in the last year or 2 with sort of the change in the kind of fintech market overall is, yes, people are looking at price more, but there's also a flight to quality. So there is a little bit of an offset there in the market where we are the established player with proven scale and reliability. And so that is something that does benefit us.

Got it. No, I think sharing back the economies of scale makes sense, and I'd like to fight the quality comment. So on that, from my follow-up question, just with M&A. I know you had a slide there talking about $1.3 billion in cash and some of your criteria for doing deals. Do you feel like there could be some consolidation coming. Is there a pipeline for deals? Are you a destination for some of these targets to join and maybe get onto an established platform to go after some of these TAMs that you addressed. I'm just curious really here on the appetite for M&A.

Yes, I would say we're constantly doing work here. As you know, there's always a lot of activity in M&A, even though very few deals necessarily may result from it. But we're quite active doing our homework. I think the important part about the criteria that we shared is the tech DNA match, right? That's pretty important to us. We think it's a huge value add for our customers today that they can launch multiple products in multiple geographies with sort of the single connection to us. And so that's a really important piece, Tien-tsin. So I would say, yes, if funding continues to be sparse and so there are companies looking for homes, if you will, I think there is an opportunity for us to be opportunistic, but the technology that they use will be very important to our criteria. I think for now, we feel very good with the products we have added between risk, banking and money movement and credit all added in the last 2 years. And of course, we have improvements on our road map, but we feel pretty good about our tech, but we are obviously out there watching closely because if there are some good deals to be had, we want to be ready.

Our next question is from Timothy Chiodo with UBS.

I wanted to see if we could dig into the accelerated wage access opportunity a little bit more. You identified a $2 trillion TAM, and you already have demonstrated this capability with 2 pretty big clients. So some credibility there. Maybe you could just give some insights into some of the discussions you might be able to have with other large employers of hourly workers and staffing agencies, et cetera, and just maybe bring that to life. And then the follow-up to that is, maybe you could just take this as an opportunity to clear up some of the confusion that's in the marketplace around the benefits to the employer. I think it's pretty clear around the recruiting and some of the stats that you gave in the slide deck, but also the concept of the employer actually being able to keep the cash on their balance sheet a little bit longer until the funds are actually spent. I think that would be helpful.

Thanks, Tim. This is Simon. Actually, let me start by your second question, which is the benefits to the stakeholders. So the most important thing that I think is important to employers is the loyalty of the employee or contingent worker. A lot of entities that do use contingent workers spend a lot of energy on training and they flip contingent workers fast. As an example, there is many organizations whose recycling is over 100%. So they swap their entire staff in duty. Their entire staff. So anything that can be done in terms of increasing what is called the dwell time or the employment time is actually would translate to immediate EBITDA because they're not losing time and money training the staff. So that's the, I'd say, the index that most of the, let's say, contingent staffing, whether it is labor -- liquid labor marketplaces or internal teams that are hiring contingent workers, especially in hospitality, retail and entertainment. That's the index that they're trying to move. And we've seen that index moves, not just with Marqeta in general in the industry, when there is no discrepancy or a time delay between the service rendered and the wages or wage equilibrium paid. So having said that, the way we have implemented it, right? Does not require a third party to step in and provide capital. So let me explain how we do it. So let's say there's a large employer or a liquid marketplace, and they have contingent workers. So they issue effectively a wage card, and upon the finishing of a shift or the service, the employee, let's say, swipes on the phone says, "I'm done with my shift". And what happens is the ledger on the card is updated. Money doesn't move. So that person goes home and the money does not move until the person goes and shops with that card. So you do have time in which the working capital of the employer is still in the -- on the balance sheet of the company and earning interest and the employee is comfortable thinking about that the money is in their bank. So that's how we have implemented it. So -- which I think is very good given the high interest rate that large employers do get on their capital. Now in terms of where we are? Yes, indeed, this is a fast-growing use case for us. We have secured directly and indirectly some large employers and labored marketplaces, we have that are live and brand, we've also closed a couple of additional target customers that will be launching and ramping in the first part of 2024. And we feel good about a couple of others that are larger in nature that we will close in the next 60 to 90 days and then hopefully ramp in the H1 time frame as well.

Our next question is from Darrin Peller with Wolfe Research.

Guys. This is great. Thank you for all the incremental data here. When we think about the bookings, and it's great to get the updated actual dollar amounts of the bookings that you're seeing in the last year along with what you expect that to contribute to revenue. I think you said $20 million in 2024 and $60 million from the booking vintage you just did. We calculate somewhere around low double-digit contribution from new business versus low double-digit contribution from existing clients, sort of same-store sales. Is that, A, is that about the appropriate math? And then B -- and that's for the growth rates I'm trying to say, to get to the low to mid-20s gross profit growth. And then B, maybe just touch on the confidence you have around that existing customer growth rate being low double digits. I guess it certainly sounds just following on Tim's question that categories like early wage access and others are growing really well. But it just -- I'd love to get a little more color on the break down.

Yes. So Darrin, so you are sort of doing the math correctly in terms of the split between growth coming from new business. And I would say existing programs is sort of the key label, I think, in one of those charts. So keep in mind that a number of these bookings that we talk about are expansions with existing customers. So for example, one of -- so if we already have business with a customer and they decide to launch accelerated wage access, for example, then that would be something that would -- it's an existing customer, but it's a new booking. So just sort of keep in mind that dynamic. In terms of the growth we see from existing programs, we have pretty good visibility, right? We -- in the use cases we serve, we tend to have many customers, so we can see the trajectory of the market as a whole, and we have a good amount of data to project the business forward. And that's what we use. And then we also, in that will incorporate -- we obviously know when their contracts are going to expire and will assume a couple of quarters before that, we'd probably do a renewal. So all that is baked into the projections where we have that visibility. And then when it comes to the new bookings, that's where we use the timeline it takes if it's a new customer that they would take to get on to the platform and then we used a lot of historical data we have in terms of our booking number is the year one revenue that we expect the customer to generate from after they go live. So that's sort of a number that's set. And then where they grow from there, we can look at a lot of the past cohort data to see how programs ramp, and that's how we determine the numbers.

That's helpful, Mike. I mean just to be clear, if we calculate the onetime items embedded still growing over in '24, adjust that versus your 6% to 9%, I think we're getting to about mid-20% gross profit growth would have been the assumption without all these onetime items growing over still and then you're guiding to a low-20s, probably to be conservative given growth in the out years gross profit. Is that fair?

That's right. That's exactly right. I think the key there is we you have to also factor in a little bit of the law of large numbers. So I think when you when you do the math, what you'll see is the dollar growth, which is a metric we tend to look at a lot is growing quite nicely and expanding. But because the base is also growing pretty fast. So you can be maintaining the same growth rate, but you are growing in dollars actually faster and faster each year. So that's sort of the way we've looked at it and are comfortable committing to these numbers.

Just very one quick one before I turn it back, this is great, by the way. The information on the Slide 78 that shows the mix of your business. When we think about that mix going forward, does your profit capabilities which you talked about, I think you said middle of 24 effectively turning -- breaking even to turning positive. Is that likely to happen no matter what mix happens? In other words, if one category of your business grows much faster than another, and it surprises you. Are the margins still -- is that doable in almost any scenario or?

Yes. So it is doable in almost any scenario, again, assuming relative stability from a macro perspective, there definitely are differences in the take rates and gross profit take rates depending on the use case, right? So consumer versus commercial or the complexity of the use case and how custom it is, will sometimes determine what kind of premium we can command in the market. But I would say, generally speaking, we look at this from many angles, look at lots of scenarios, and we feel comfortable that we can achieve these numbers. I think what's also important is that we detailed in there is that we really believe that the platform nature of our business will allow us to keep the expense growth at a relatively moderate rate while we can continue to grow that gross profit in the low 20s. And what that does is allow the margins to expand. I think typically, Darrin, you'd see companies get like a 3-year CAGR. But because our '23 numbers are particularly on the revenue are a little bit strange because of the Cash App deal being done midyear. What we've done is give kind of '24 numbers and then almost a 2-year CAGR for '25 and '26. What you see in that EBITDA margin, our range might look a little weird on that slide, but that's because it's ramping up, right? The profitability is going to improve each year going forward. and including reaching over 20% by 2028. So that trajectory should continue to improve in terms of the margin as we get the platform benefits on the expense side but we continue to drive that consistent compounding of gross profit in the 20-plus percent range.

Our next question is from Sanjay Sakhrani with KBW.

I echo great data in all of these slides and presentations. The FI opportunity seems like a longer-term one, but maybe if you could just talk about the path to get there and the types of discussions you're having. Are there any like signature wins that you could have over the next several years?

Thank you for the question, Sanjay. The short answer is yes. We could have some signature wins. And we are having discussions. Some of them are pretty advanced with large financial institutions. And I would say that we are not betting on both nor have we factored in those deals. So if and when they materialize, I'd say, in the next 3 years, that would be upside. So however, the plan, I would say the -- that we put together is continue to grow with Fintech, accelerate growth with embedded finance, given us the economy of scale, I mean, we are now, the fourth largest debit card issuer in the U.S. So if we accelerate that and demonstrate great traction on credit, and given the consumer pressure on the financial institution to get an equally good product, we believe the combination of these will actually position us as a de facto player in about 36 months for the large financial institutions because the conversations that we are having with the [ LSI ] right? Indicate that they are listening to their consumers. It's just that they have to upgrade their stack, and they have to think about the flipping program. So let's say, even if we say, let's go in middle of 2024, it won't be until 2026 until we start seeing the conversion of their installed base happen. Anything, Mike, you'd like to add on that?

Yes. I think that last point is a really important one, Sanjay. I think what -- in this 3-year window that we're providing, we think we're not counting on any contribution from large financial institutions, but in that time, we would expect to maybe announce some business like -- announced some deals that we've done with them. It's just that the financial institutions planned well in advance and they're making investments themselves. So we think it will take more time than 3 years to meaningfully contribute to the P&L. But in that time, we do hope to make a lot of progress in terms of relationships and contracts.

That's very helpful. And then when we think about that credit platform as well, I mean are you expecting any material contribution from them and from that platform? And then what specific verticals do you target that sort of in the initial phases?

Let me answer your second question and then hand it over to Mike about the contribution. So I'd say that the -- our pipeline has a combination of consumer deals around co-brands as well as commercial credit deals. To be perfectly honest, we expected the demand from the consumer. We did not actually anticipate such healthy demand on the commercial side. So -- and we believe that we are much closer to close the commercial credit which is effectively SMB credit that is in embedded finance. So I believe that the segment that we will start capturing faster revenue because it tends to move faster. And that would be in the SMBs around services, travel, so on and so forth. And then the consumer credit is focused around your traditional co-brand in marketplaces that are kind of like Digital First, I'd say, or Digital Savvy.

And in terms of the contribution, Sanjay, we do expect to sign our first credit deal here in the next couple of months, that then there will be time for them to get on board and everything and start ramping that program. So really almost no contribution in 2024, and then it starts to grow from there. So 2025, there's some help there. And then by 2026, it's starting to become more meaningful.

Our next question is from Ramsey El-Assal with Barclays.

Thanks for taking my question and echoing a great detail here. I wanted to follow up on the last question. How do the economics of credit transaction or duty economics of credit transactions kind of differ from debit in terms of what you capture. If that business were to ramp, would we see any different type of a P&L impact relative to the existing business?

Yes, great question, Ramsey. So the economics are a little bit different, mostly because there are more things you have to do to sort of manage the credit aspects. And so what we see is that there is a -- if you think about our price, our true price as the gross profit take rate, like how much gross profit do we make for every dollar of volume that is generated on our platform, that is higher in credit than in debit. So, we believe it is a -- so it's a more lucrative business. That said, the cost of revenue is also higher. So to support that business, you also incur more costs because it's more expensive with the bank, you use more tools and things to be monitoring credit and other aspects. And so it is a lower gross margin business, even though it's a higher gross profit take rate. So one of the things as you go into the out years, the growth of credit will actually weigh a little bit on our gross margin as a business, but it's still very accretive to us from a premium for every dollar of volume we generate. So that's the dynamic of credit that's really important to remember, is that it will -- it is a little bit lower margin, but higher price.

Got it. Okay. And I also wanted to ask you to comment a little further on the revenue and gross profit model in international markets where interchange is regulated or lower than relatively speaking. You'd mentioned that the gross profit take rates are similar, given in Europe, particularly this powered by businesses more prevalent along with smaller customers. Just talk a little bit about how you navigate that -- how you will navigate that kind of expanding internationally in different sort of interchange environments and how you maintain a similar gross profit profile?

Yes. So there's a few dynamics there yet and you highlighted some of the comments that we made. So right now, in Europe, the gross profit take rate is similar to the U.S. The revenue take rate would be much lower because it's mostly powered by, but it does have smaller customers. So that's what makes it similar. I think one thing that -- I would highlight two specific things. So one is -- one of the other things in the materials showed that about 2/3 of our revenue and gross profit today is driven by a fee structure that is not tied to interchange at all, and what we call fee-for-service. And so I would say, in general, we're moving much more in that direction where we're pricing for the capabilities that we bring and our customer sort of takes all the interchange and then pays us a price. And that lends itself also to regulated markets in the interchange where you're pricing for the value that you add. I think the other thing that we're doing to drive international growth is, right now, we do program management in the U.S. and in Canada, but we're bringing those capabilities to Europe. So those are sort of investments that are ongoing right now. And we do expect then in the next, say, 12 to 18 months to have that capability up and running in Europe, which will allow us to make an even enhanced premium then to what we're doing now in Europe as a processor only. And so that's really a big part of the strategy that we have for international markets.

Our next question is from Bryan Keane with Deutsche Bank.

Simon, I just want to ask on embedded finance. What makes the market a platform unique to offer more customer loyalty and more engagement that's going to drive the business forward?

Yes, absolutely. Thanks for the question. So if you look at -- I mean, I've run direct-to-consumer businesses for a long time of my career. And if you look at what you usually optimize for is called like a dwell time or engagement, which is measured in active daily -- so daily active users. That's going to -- you live and die by your DAUs, basically. That's what we used to say in those industries. And financial services by themselves are very sticky services. Like if you look at what brands attempted to do is, first, be kind of like your home page. That's kind of the EatUp!, Yahoo!, Google and What Have You. Second is they wanted to be the app you think about in the morning. Like when you wake up, that's the app you launch. But more importantly, what all brands have been trying to do is be in your wallet. And I think that's what we are giving them. The opportunity to embed more financial services in their application and not have their audience or their customers go to another application for their services, which everybody does. So if you keep that customer in, that consumer in your application, you have increased the daily active user and hence, it would move the ARPDAU, which is the average revenue per daily active user higher. So, I give you a very simple example to illustrate this concept, which is very important. So if you look at credit card statement thing. So let's say, I have a co-brand from a brand and I get a statement, you got a tax notification or an e-mail that the statement is there. And when you click on that link, it takes you to the bank's app. So you don't get that daily active user in the retailer's app. So -- but if the statement thing, which could be modernized and could be an opportunity to upsell a customer, happens in the retailer's app, you've gained the daily active user and you have gained the chance to monetization. So that's what would drive loyalty and engagement significantly higher. So engagement will increase DAUs and loyalty will increase both DAUs and average revenue per daily active users. And that -- those are the metrics that we work with our customers to measure in addition to the revenue they will generate by them either doing a card with us or a point-of-sale lending with us or supplier payments with us.

The same thing applies on the commercial side as well, right? A number of companies we're talking too, might have a software platform that they serve their customers for something that is not financial services, and they're talking to us about, okay, "how could I help those customers maybe make payments to their suppliers on our platform in a seamless way, right?" So I think everything that Simon just said also can apply in more of a B2B context as well, where those companies also want to make it easier for their customers to their small -- their suppliers essentially to interact with them and make things seamless.

Got it. Got it. And then I just had a follow-up for you, Mike, just on thinking about the 3-year guide. How conservative is that guidance? And I'm trying to think about maybe drivers that would help you guys beat these estimates? Or maybe on the flip side, any things to watch out for weakness that could be an issue for the guide?

Yes. I mean obviously, Bryan, we want to be confident in the numbers that we're committing to. So that's part of it. In terms of how -- what could meaningfully expand these numbers, I think -- there's a couple of different levers. So we assume a certain mix of new customers and expansion with existing customers when we project the new sales going forward. If it's -- if there was -- if we were more successful in cross-selling, for example, you shorten your time to value because you don't have the approximate 6 months time for the -- that company to onboard to your platform. So you get to market much faster and that customer is already familiar with our platform, and they've already done a card program, so they typically can ramp faster as well. So our ability to cross-sell if we were to sort of overdeliver in that metric, that could accelerate things. I think the second one, too, is flipping business. The last few quarters, we have flipped a number of customers to our platform. Those are customers who don't have to ramp business. They already have an installed base of business they bring to the platform. And so you get revenue and gross profit on a much quicker time period once they go live. Now flips are still relatively unusual. So that's not something you want to sort of count on in your numbers, but those are the -- those would be a couple of variables. I would say that the third thing would be, we tend to be relatively reasonable about what the year run booking value could be for a customer. And we do then the growth from there based on historicals, but if we were to get one or two real home runs here going in this window of time, businesses that far exceed those numbers, like we've seen from some customers in the past who have really established new segments or gotten a lot of traction, that would be another way that these numbers could accelerate?

Yes. I think there's a slide in the deck that just shows how you guys have outgrown the revenue versus the bookings. I think it's Slide 85, in the past. So that's helpful.

Our next question is from Craig Maurer with FT Partners.

Mike, Stacey and Simon. Two questions. First, just to put a finer point on the pricing question. How long has the new pricing construct been in place, meaning, is the in pricing construct valid for the new contracts and renewals you've signed over the last 12 months, 18 months? I'm just trying to understand how long that's been in place? And secondly, you mentioned that when pursuing the embedded finance opportunity that you feel you're far ahead of competitors. What gives you that confidence? Who are you seeing in those deals as competitors? And why do you think it's going to take them a long time to catch up with their tech stacks?

Thanks for your question, Craig. So I'll take the first one and then pass it to Simon for your second question. So, we instituted our new pricing over -- a little over a year ago. So since our sort of acceleration in sales bookings, they all have been using this new pricing construct where not only are we doing our contracts tend to be a little longer, 3 years used to be standard. Most of our contracts are now longer than 3 years. And we're building in more tiering so that our customers are happy. Like if you're -- we're running the business for the long term. If you're more short-term oriented, then you don't put as many tiers because it allows you to extract more value as that program matures. But what you also find is if a customer has that kind of success, then when you come time for renewal, they're almost a little bit bitter, right? It's not -- and then you're going to have a big step down anyway in that performance. So we'd much rather have a customer who feels really good that if they're having success, their price is sort of adjusting along the way. It will lead to less volatility for us, but also we think better for long-term relationships. So we instituted that pricing a little over a year ago and pretty much all this new sales is using that philosophy.

And on your second -- I'm glad and want to thank to Mike's comments. When we institute those new pricing constructs, we have also changed the compensation structure of our own sales reps in line with that pricing construct, so they are incentivized -- fully incentivized in order to adopt it and grow with it. In terms of the embedded finance markets, there are many dynamics that gives us the good comfort. The first one is embedded finance customers do not have program management capabilities. So they are not the ones that can pick a point solution and drive the relationship with the financial institutions and deploy what I say, program management that are compliant with all the regulations that are out there. So a player who does not have a strong program management capability is not going to be able to play in the embedded finance market. On other hand, we do have a very strong program management capability. So that's number one. Number two is the completeness of the solution Again, they're not seeking upgoing solution like the fintech players. And Marqeta has that complete stack. We have debit. We've got prepaid, we've got credit, we've got risk, we've got banking and money movement and we've got the program management layer on top. And the third thing I'd say is a lot of the embedded finance customers happen to be, I'd say, digitally savvy. And also they want the global nature, like they want to build a widget and distribute it on a global basis. And our ability to serve outside the United States has become a very strong competitive advantage for us. So -- and last but not least, is how we package our product. By definition, embedded means you do need strong API so they can integrate it into their application and into their plug and that's how we deliver our solutions. And the last thing I'd say is also the ability to serve commercial and consumer is also very powerful because if you think of a marketplace, there are 3 or 4 things they want from us. The first one is they want a co-brand. Second one, which is a consumer program. They want to pay their, let's say, their contractors and their employees. So that's a consumer program. They want a point-of-sale lending solution. That's a commercial program, and they want supply payments. That's a commercial program. So that, I think, will give us a good level of confidence.

Just a follow-up. Who are some of the competitors you see in that space that you see repeatedly? Or is there -- is it one-offs?

There is again, since we have disputed use cases, we do have different sets of competitors for use case. But I'd say the area that we do see more competition than others is in the single card commercial space. So the single-use commercial cards. And we see competition from the likes of Stripe and Adyen in this market. On the consumer side, we'd say we -- like we don't have, I'd say, the -- a lot of competitors, if you look at debit and credit and the ability to serve domestically and overseas. There are modern players and kind of the traditional players, but I'd say we're not feeling that competition be an inhibitor to our growth yet.

Our next question is from James Faucette with Morgan Stanley.

Wanted to go back to the earned wage access programs that you're engaging on. And just had a couple of questions functionally and then kind of appetite from employers. Just functionally, as most employers or potential customers are looking at this, are they anticipating then for their employees that the earned wage access would be just in that period between they earn wage and when it would normally be deposited into a bank account? Or do they anticipate that they will hold the funds in perpetuity until they're spent by the employee?

It's actually the latter.

Okay. And that makes sense. And I can see the attractiveness for the employer, et cetera. I'm wondering if any of your potential employer customers or even ones that you've signed, have expressed any apprehension about potential regulatory concerns simply because in that kind of structure, you're depriving the employee of the ability to earn interest on their wages firstly. Secondly, they're holding their earned wages in a non-FDIC insured account. And as cost of capital goes up, risk of bankruptcy of those employers also goes up. So from a regulatory perspective, I could see where there may be some concerns. Have the employers at all expressed any apprehension about that potential interference?

No. I mean, quite the contrary. This is more of a safe construct because of that interest, they wouldn't have gotten any way. So the second thing is, there is no lender...

Wait. Wait. Wait. Why wouldn't they have gotten any interest? I mean if I'm an employee and I get money deposit to my bank account, I can earn that interest, right?

That's right. But if you traditionally you -- traditionally, you would be paid, if let's say, you're an employer effectively 2 weeks in arrear. And if you are a contractor, you have to have to submit invoices and sometimes the terms are net 15 and net 30. So here, you're getting paid immediately and then you can spend. Now in terms of their ability to -- like your question -- your first question is interesting, as in like, if they're going to hold the funds whatever, right? How long before this contract work against the employee. Actually, the vast majority of the constituents that are taking advantage of this lift paycheck to paycheck. So they would have grown out those funds in a 15 or a 10-day pay period. So that should not pause any challenges from a regulatory perspective. The other thing I'd say is the -- since there is no lending here, you're not introducing a third-party lender. So there is very little, I'd say, there is a huge distinction from, I'd say, payday loans or anything like that. So I don't anticipate at all, I'd say, regulatory challenges on what we have on the construct we offered.

One thing, James, to you that I would say is, with the banking capabilities that we have on our platform, there'll be nothing stopping one of our customers from offering interest or even an additional savings account in other products, right? So it could be a sharing mechanism where the company gets some benefit from the working capital, but is also sharing some of that benefit with their employee, right? So all those things would be very doable within the capabilities we have already.

Got it. Got it. Got it. As far as -- and then I appreciate that. And then I wanted to go back to the credit opportunity and capabilities there. As that becomes a more important piece of the story, do you anticipate being able to shorten the time between bookings to revenue given faster time to market? Or is there something there that we're missing in terms of how quickly those programs can come online?

It's a good question. So as Mike mentioned, the short answer is yes, especially if those credit programs are upsell to the existing debit programs we have. So we do have a nice established installed base and some of the some of the accounts we have in the pipeline are cross-sell into the base, and that will ramp faster.

But we haven't assumed that since we don't have any sort of track record to make that as an assumption. But yes, that could very well be the way it plays out. If -- particularly if some -- many of our early credit customers, for example, as Simon said, end up being people who are already on our platform.

Right. All right. And then just to be clear, I think you had indicated that -- would that fit then within kind of the -- these categories that you said could be upside or expansion of growth opportunities beyond what you've laid out?

That's right. That's right. So if credit were -- if we were to -- one of our existing customers were to do a credit program with us, then just the 6 months that we have for customers to just onboard onto our platform wouldn't be there, right? So it just inherently pulls forward the opportunity. And then they also -- that would also suggest their experience working with us, their experience with card programs, which also means it's much more likely to be successful in the early months of launch because they have some experience.

Our next question is from Ashwin Shirvaikar with Citi. Ashwin please unmute your line.

Okay. Thank you for doing this. Have -- I guess, go-to-market question, obviously, you pointed out in your presentation, selling Embedded Finance very different than selling into the core traditional fintech ecosystem. I was wondering if you can put some parameters on sort of the sizing of your solutions team as that gets -- that has been built out solutions and sales and talk about some of the metrics that you're kind of using to track success and determine success?

Sure. The solutions -- so we've reorganized the team at the beginning of the year in order to prepare ourselves for the change in the market. So we do have something called a sells pod which is effectively called the basic selling unit, which does have, let's say, a need that is highly steep in the market segment, and they have account executives that hunt, and then they have account managers that farm. And then they are also mapped to approval of solution engineers, financial experts, as well as, I say, program managers in the traditional word and not the financial program manager. It's somebody who can -- an operations program manager. So the account lead, account manager and the account executives, are dedicated to the account, and they have regional responsibilities, while the solutions engineer, the financial experts and the operational manager are pulled together to drive economies of scale. So the North Star that I've personally always adopted is that the gross profit that is generated from a hub divided by the fully loaded cost of the hub, including everything allocated should be higher than 2. That's kind of like what was the past 20 years have kind of adopted. And I'd say with Marqeta, we are -- we're almost there. I'd say, in some cases, we exceeded when the staff is slowly ramped and we're building towards it. That's kind of a North Star that I adopt independent of kind of the industry you play in. It's like every sales exact optimizes to that. So I feel very good about where we are. And the other thing I'd say is the vast majority of our team that are in the front line have been recruited the last -- not even the last year, the last 9 months. So they're coming up to speed, and they are being productive as we speak.

Understood. And then really interesting to see sort of how much time it takes to go from chasing a deal, signing a deal, revenue conversion and so on. Having said that, I think that between the renewals and the bookings and sort of the information you provided on the staging of revenue conversion, I was hoping you could provide some idea of like a quantitative measure of visibility that you have when you think of 2024 exiting this year? And then the cadence of it with regards to just how we should think of cadence for next year and normal seasonality?

Yes. I would say we have pretty good visibility, Ashwin. In terms of what's really going to contribute to the P&L, there is a very detailed delivery schedule that's -- we're obviously in constant contact with our customer in terms of when they will be ready to launch and when they plan to launch the product. And then in our discussions with the customer and based on our own experience, that's how we come up with the projections for year 1 and beyond of the business, right? You typically are going to find that our customers are going to be more bullish right? People tend to be pretty aggressive about how quickly they can get traction, but we have a lot of experience in data. So we form our own opinion for our own projections. And so I would say we have pretty good visibility. And then in terms of what is more of on the booking side as opposed to less on the revenue, I would say what we're finding is, even as we're going to grow our bookings this year by 55%, 60%, we're not thinning the pipeline. In fact, actually, the pipeline is growing. So the top of the funnel is much bigger than it used to be. So that's what gives us the confidence that we can continue to grow our bookings over time. And then obviously, we have sort of a formula, if you will, that says, okay, how is that bookings going to translate to the P&L? And I think as I talked about in my section of the presentation, there's a compounding that comes with that as you start stacking multiple quarters and years of this increased bookings that can really lead to exciting growth.

Got it. And then the quarterly cadence part of that question. And I'm just going to throw in my third question right away. Is -- I noticed the Powered by the success in international and in linkage to Powered by, why is Powered by more popular internationally?

Yes. So in terms of the quarterly cadence, I would say we don't have huge seasonality in our sales. Q4 can -- maybe it tends to be a little bit bigger almost just because that's when a lot of companies are just thinking about investments and things, but generally, the quarterly cadence is relatively steady. In terms of the Powered by internationally, I think actually, it's more to do with us than it has to do with the market, right? There's going to be local nuances associated with providing program management type of capabilities. And so it's just more about our ability and readiness to deliver that kind of capability as we expand to new markets. I would say it's something that's market specific that they want Powered by, I think it's more about our ability to deliver Managed by. And that's why we are in the process of extending that capability to Europe so that we hope to be able to offer that capability in the near future.

Got it. Got it. A tremendous job preparing all this. I have to say thank you to the IR team as well.

Our final question is from Bob Napoli with William Blair.

And I'll just have to second Simon, Mike, Stacey and now every team, awesome job on the presentation, really helpful. So a question, I guess, on just the flips that you have and the growth, I mean, if you look at the incumbents, it looks like they're still growing pretty well in the business and have good growth plans. How much are -- what is your view on your market share, the growth of the market, how much do you think flips are going to need to play in to hitting the targets that you have?

Good question. There's plenty of markets for everyone, which is how I would start it with. So it is all about focus more than it is about kind of like eating your own because there's still a lot of cash and checks out there and a lot of cash economies that are converted to cards. So product what we're working on is kind of not net new, but -- and that's what we kind of have planned for. But yes, there will be flips and we will be participating in those flips especially on the co-brand side. So in terms of market share, I mean, if you project out, we will be able to beat our numbers and still be less than 5% of the total processing volume. So there's plenty of market for many players, but we feel very, very good about us after we achieve, I'd say, those single-digit market share to compound from there in the next decade.

Great. And then my follow-up question, last question, just is there's a -- the regulators are pretty aggressive these days. And if you were at Money 20/20, you'll see that there's a lot of regulators going to Vegas. And there's a lot of focus on embedded finance and Banking-as-a-Service. Just your thoughts on how the regulatory environment, what your concerns are or where you think there's risk on the regulatory side or how you manage that would be really helpful?

Yes, absolutely. I think our early investment in program management and compliance gives us good comfort about how we have approached the problem and I would say the economy of scale and the discipline we have put together makes us feel good about the regulatory environment. And again, going forward, we are making sizable investments in program management. So from a risk operations perspective, deploying antimoney laundering, banking secrecy -- sorry, banking sanctions and many other services in addition to deploying AI around disputes management and risk. All of these are kind of like front widened center of the Marqeta solution, and we feel good about it. So I'm less worried about this because we have invested and we have highly scaled programs. So we feel good about it. And I do believe that this is an area where what differentiates Marqeta from others.

We have reached the end of our question-and-answer session and will now conclude the conference. Thank you again for your participation. You may now disconnect.