Marqeta Inc

NASDAQ:MQ

Earnings Call Transcript 2021-Q3

[Operator]

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Marqeta's Third Quarter 2021 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 call over to Stacey Finerman, Vice President of Investor Relations to begin.

[Stacey Finerman, Vice President, Investor Relations]

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 quarterly report on Form 10-Q for the quarter ended September 30, 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 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 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 supplement materials, which are available on our Investor Relations website.

Hosting today's call are Jason Gardner, Marqeta's Founder and CEO; Vidya Peters, Marqeta's Chief Operating Officer; and Tripp Faix, Marqeta's Chief Financial Officer.

With that I'd like to turn the call over to Jason to begin.

[Jason Gardner, Founder & Chief Executive Officer]

Thank you Stacey. Thank you everyone for joining us for Marqeta's third quarter earnings call. Tripp and I are excited to share Marqeta's third quarter results and the exciting ways we are using modern card issuing to power the digital economy.

First of all this afternoon, I will cover off financial highlights for the quarter. I will then discuss how modern card issuing an industry that Marqeta pioneered is powering the digital economy before I discuss our strategic approach to deepen our moat in this industry. Later, Tripp will discuss the financial results in greater detail.

With that let's begin. Our third quarter results show the impact of modern card issuing is already having a Marqeta's momentum in this market. $28 billion in total processing volume or TPV, a 60% increase compared to the same quarter of 2020; $132 million in net revenue, a 56% increase compared to the same quarter of 2020.

We believe modern card issuing is at the heart of global money movement. When I look back at Marqeta's third quarter, I see a wealth of examples that highlight the breadth and power of modern card issuing. Marqeta's modern card issuing platform enables unique, new payment use cases for companies of all types from digital disruptors who are looking for scale to legacy payment providers looking to launch cutting-edge solutions to stay competitive.

Similar to how we've seen our just-in-time or JIT, funding technology enable on-demand delivery and buy now, pay later services we're now seeing JIT play a key role enabling a new wave of innovative cryptocurrency card products. Just-in-time funding used in tandem with our open API allows Fiat currency to be spent at the point of sale from a crypto wallet and for consumers to earn cryptocurrency rewards on traditional spending highlighted by companies like Coinbase, Bakkt, Fold and Shakepay.

For Coinbase users, swiping a Marqeta powered card at the point-of-sale and having a transaction funded in Fiat currency in real-time based on their cryptocurrency balance is an exciting application of our technology. When you put this side-by-side with our recently announced partnership with Bill.com, it demonstrates the huge possibility for our technology in the market. Our work with Bill.com is an innovative application of modern card issuing in the payments landscape.

Small and medium businesses represent the engine room of the global economy but have had little access to innovation to streamline their payment processes before companies like Bill.com came along. Using our best-in-class open API payment solutions, Bill.com plans to offer virtual card payment capabilities to its financial institution partners and their customers. This will give small and midsized businesses access to enterprise level tools, which can save time and money.

We see our third quarter results as yet another proof point of the tremendous progress and the impact we are already having in global money movement and we are only scratching the surface, when it comes to the many ways Marqeta enables modern card issuing a market we estimate at $30 trillion globally.

As we look at this ocean of opportunity, we see four key strategic pillars to growth, which will help us service this large addressable market in card issuing as well as deepen our competitive moat. Our first pillar adding new customers. Our value proposition for new customers is as strong as it's ever been. We have a proven track record of executing large and innovative payment programs. We've also shown how we can deliver innovation for large financial institutions that legacy card issuers cannot. Simply put Marqeta can outscale new entrants to this market and out-innovate legacy platforms.

We recently added several major new customers to our platform. I've already highlighted our new partnership with Bill.com. The Marqeta platform is also powering Figure's new Figure Pay product, a digital payments account with native buy now pay later functionality. And as spotlighted this quarter, a range of crypto innovators Coinbase Shakepay, Bakkt and Fold chose Marqeta to build great card products. Our second pillar expanding and growing our relationships with our existing customer base. Uber has been a Marqeta customer since 2019 and we recently expanded our relationship. In partnership with Branch, we launched a new card product to power a unique driver card for Uber Freight carriers, which lets them get paid in two hours instead of 30 days.

Our third pillar broadening our global reach. Marqeta is enabled in 36 countries worldwide. We successfully launched our Australian office in Q2 of this year and in Q3 announced our partnership with Zip Co. in the market. Our European business launched in 2018 continues to see considerable growth and momentum in the market. We've seen over 340% year-over-year growth in the number of transactions processed by our European customers in the third quarter. In addition, we've doubled the number of Marqeta's European customers since September 30, 2020.

Our fourth pillar expanding our ecosystem, product offering and partnership network. This is a critical strategic priority for Marqeta to ensure we're properly attacking our total addressable market and continuing to deepen our competitive moat in modern card issuing. Earlier in the year, we announced the launch of our credit product which we believe makes us the first modern platform to offer prepaid, debit and credit card issuing services.

After launching our first credit program in Q2 of this year, we continued to onboard new credit card programs with our partner Deserve. The Owner's Rewards Card by M1 went live last month. It is a unique credit product that offers its clients up to 10% cash back when they transact at brands they own stock in through their M1 investment portfolio and offers them the ability to reinvest rewards in their portfolio. It's the flexible and innovative card experience we're excited to enable.

Given that credit is a new offering for Marqeta, I'd like to highlight this for a moment. With 52% of card spend happening on credit in the US, this is a massive market opportunity that is underserved by current technology which has done little to modernize the credit card experience. Therefore, our credit card issuing platform is a critical strategic priority for Marqeta. To bring our vision to market, we are working with an ecosystem of partners who have a similar commitment to disrupting the status quo in the credit industry. Our first being Deserve a modern mobile-first credit card platform. Through this ecosystem of partners all card programs launched through Marqeta will be powered by modern underwriting models and incorporate nontraditional signals in mobile-first consumer experiences.

In addition to new products, a robust ecosystem of partners is crucial to Marqeta to capture the significant market opportunity in front of us and embed Marqeta technology into a greater range of use cases. In Q3, we were named as a launch partner for Mastercard's new installments program which leverages the power of Mastercard's merchant network to build in the infrastructure to support buy now pay later payments. This allows banks and Fintechs to more easily tap into a new payment type.

Alongside this, we recently announced partnerships with Payfare, Synctera, and Amount helping us embed our payments technology into driver payout and community Banking-as-a-Service programs.

In addition to our great Q3 results, I would like to inform you a leadership change at Marqeta. Darren Mowry is resigning his position as Chief Revenue Officer effective November 30th, 2021. Darren has decided to return to Enterprise Cloud Software sales where he worked for 10 years prior to joining Marqeta in June. We thank Darren for his contributions and wish him the greatest of success.

With Darren's departure, we feel it's time to combine our entire customer go-to-market functions under one operational leader. I am very excited to announce that Vidya Peters will become Marqeta's Chief Operating Officer. Vidya's professional experience is extraordinary and her success at Marqeta has led us to new heights.

Vidya will lead our marketing, revenue, and program management teams. Combining these three functions lead to a superior customer experience overall. The positions of Chief Revenue Officer and Chief Marketing Officer will be eliminated.

I will now turn it over to Vidya for some brief remarks.

[Vidya Peters, Chief Operating Officer]

Thank you for the introduction Jason. I'm excited to speak with you all today. I'm thrilled at the opportunity to move into this new role as the Chief Operating Officer at Marqeta. In the past two years at Marqeta, I've seen significant growth of the company, engagement with customers across industries, and a massive untapped opportunity in front of us.

Building and scaling marketing, while creating industry excitement for modern card issuing has been an impactful journey. I've also had the opportunity to take on interim leadership positions running our revenue and product organization, overseeing vastly different parts of the business, while unifying them behind a cohesive strategy.

We have a tremendous opportunity ahead of us. We currently process less than 1% of the world's transaction. We believe a unified go-to-market vision and strategy across marketing, sales, customer success, and delivery will create an integrated experience that puts the customer at the heart of all that we do.

I'm excited about the unified experience we can create for our customers from their first interaction with us to their adoption and growth on our platform. I look forward to sharing back with you in future quarters the progress and benefits this change has helped effect.

Thank you and back to you Jason.

[Jason Gardner, Founder & Chief Executive Officer]

Thank you, Vidya. Rolling up our entire go-to-market operation under one leader helps us create an even more unified global vision for Marqeta as we expand. We believe this role expands the scope of what we can achieve as a company and see Vidya as a seamless fit for this new position.

With that, I'd like to turn it over to Tripp Faix, Marqeta's Chief Financial Officer to discuss our third quarter financial results.

[Tripp Faix, Chief financial officer]

Thanks Jason. Good afternoon everyone. I'm excited to discuss our strong third quarter financial results and provide guidance for the fourth quarter. Total net revenue increased by 56% to $132 million in the third quarter of 2021 from $84 million in the comparable quarter of 2020. The increase was primarily driven by 60% growth in total processing volume or TPV compared to the third quarter of 2020, slightly offset by increases in our revenue share payments.

As a reminder, revenue share payments are incentives to customers to increase processing volumes on our platform. As a result, net interchange fees increased 51% to $101 million and processing and other fees increased 73% to $25 million in the third quarter of 2021 versus the same quarter of 2020, primarily due to increased ATM fees.

I'll now discuss some of the key drivers of our TPV growth in the quarter. TPV for the quarter was $28 billion, an increase of 60% compared to the third quarter of 2020. We view TPV as a key indicator of the market adoption of our platform, the growth of our business, and our customers' continued usage of the platform.

Similar to the second quarter of 2021, growth was driven by outperformance from both our digital banking and BNPL customers. This growth was offset in part by some reductions in our on-demand delivery volume from considerable peaks we saw last year in the midst of the COVID pandemic.

We want to call out that our top customer concentration decreased from 72% in Q3 of 2020 to 68% in Q3 of 2021 as we continue to both add new customers to the platform and expand with our existing customers as they add additional programs in volume. Furthermore, we continue to benefit from the key secular tailwinds within payments accelerated by government stimulus and the COVID pandemic.

I will highlight that our non-top five customers grew 226% from a volume perspective in Q3 of 2021 as compared to Q3 of 2020 and we're very pleased with this result. Gross profit increased by 67% year-over-year to $59 million compared to $35 million from the third quarter of 2020.

Gross margin increased from 42% in the third quarter of 2020 to 45% in the third quarter of 2021. As we stated on the Q2 call, we did expect this to be in line with our long-term gross margin target. Of note, we amended one of our card network incentive agreements which will result in higher incentives to Marqeta going forward and provided a $2 million catch-up benefit in the third quarter of 2021.

These incentive agreements are a testament to both our strong alignment with our network partners in these strategic relationships and a powerful operating leverage that can be achieved in the payments business. Excluding this onetime benefit, our gross margin would have been 43% in the quarter. Furthermore for the nine month period ended September 30, we have achieved a gross margin of 43%.

As we discussed during our second quarter call, our margins can vary quarter-to-quarter as interchange and network fees can vary considerably by merchant, MCC code, transaction type, card present or not and the like. Therefore, rather than pay too-strict attention to quarterly gross margin results, we maintain that we remain committed to our long-term gross margin target of between 40% and 45%.

Overall, our GAAP net loss was $46 million driven by our continued investment in people as well as an increase in stock-based compensation. In fact the third quarter represented our largest hiring quarter-to-date as we welcomed 77 net new Marqetan employees from a quarter-over-quarter perspective.

As of the end of the quarter, we had a total of 696 Marqetans. On a non-GAAP basis, adjusted EBITDA for the quarter was negative $4.9 million compared to positive $686,000 in the comparable quarter of 2020. The change was largely driven by compensation-related costs, excluding stock-based compensation which increased 61% from the same quarter of 2020. We view this spending as critical as we look to invest back into the business to support future growth.

Our four key strategic pillars of growth are: adding new customers; growing with our existing customers; broadening our global reach; and expanding our ecosystem. We ended the quarter with over $1.7 billion in available liquidity in cash and marketable securities which is constant from the end of the second quarter.

We believe that we are just scratching the surface of a large addressable market. Therefore, we feel that the best way to capitalize on that opportunity is to invest in our products our technology and our people.

I'll now move on to guidance. As we noted in our press release, we are providing the following guidance for the fourth quarter of 2021 based on our current assumptions. Net revenue for the quarter is expected to be in the range of $134 million to $139 million.

At the midpoint, this would represent growth of 55% on a year-over-year basis. Our top line guidance for the fourth quarter reflects continued strength from the BNPL and digital banking sectors which we believe will be especially strong owning to the consumer spending and consumers financing their holiday purchases.

From a full year 2021, perspective net revenue would be in the range of $496 million to $501 million. At the midpoint this would represent growth of 72% on a year-over-year basis.

Our range for adjusted EBITDA for the quarter is negative $10 million to negative $7 million. Also, for the full year 2021 perspective, adjusted EBITDA would be in the range of negative $24 million to negative $21 million. This guidance takes into account increased headcount investment as we look to add additional talent primarily in our product and technology teams to deepen our moat within modern card issuing.

In summary, we are very pleased with our strong Q3 results overall and are optimistic about our business, our customers and the opportunity ahead of us in modern card issuing.

[Jason Gardner, Founder & Chief Executive Officer]

Thanks Tripp. It's a theme you're going to hear from us a lot the huge opportunity we see in front of Marqeta. During the remarkable events of 2020, Marqeta supported mission-critical sectors of the economy that consumers turned to in large numbers out of necessity. The question we got throughout all of this: Is this growth sustainable? We sit here one year on and are seeing considerable year-over-year growth from what at the time we felt like a peak people question would be sustained.

When we look out at the next year, we are more energized than ever. We look forward to reporting back on new customers we've signed to our platform, new geographies where we're enabled and an ever-deepening stack of money in money out technologies that would empower modern global money movement.

Now I'd like to turn the call over to the operator and open the line for Q&A. Operator?

[Operator]

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

[Tien-Tsin Huang, JPMorgan]

Thank you. Strong results here. It sounds like buy now pay later remains really, really strong. I think you said especially strong. So I was wondering if you can give us an idea how fast it's growing now. I think it was up 350% last quarter if I remember correctly. And curious how broad-based it is from a customer perspective?

[Jason Gardner, Founder & Chief Executive Officer]

Hey Tien-Tsin, it's Jason. Buy now pay later grew over 300% in Q3. We continue to see our customers Klarna, Affirm, Sezzle, Zip, Afterpay really focused on creating new payment types at the point of sale whether that's in person here in -- where I live close to Walnut Creek, we're seeing lots of Klarna signs to pay in the offline world.

The payment type is here to stay. So we're really seeing just strong sustained growth in this area. We've also talked about we've seen 71% of buy now pay later user survey said they're going to increase their usage from last year based on what we've seen in the market. 40% of consumers even tried buy now pay later last year. So the buy now pay later usage is definitely here to stay.

[Tien-Tsin Huang, JPMorgan]

Yes. I know it's getting a lot of news. Mastercard talked about it today and Affirm was talking about it as well. So as my follow-up if you don't mind, I get this question a lot Jason and team just with Affirm and Debit+ I know, it's caught a lot of attention. I'm curious are you involved with that in any way? Anything you can say on that front?

[Jason Gardner, Founder & Chief Executive Officer]

Yes I can confirm that we are powering Affirm's Debit+ card. I can't comment any more beyond that until it's in market, but Affirm has been a great partner of Marqeta for many years and continuing that partnership with the Debit+ card.

[Tien-Tsin Huang, JPMorgan]

Perfect. Thanks a lot guys.

[Operator]

Our next question is from Bob Napoli with William Blair. Please proceed.

[Bob Napoli, William Blair]

Thank you. Nice job on the quarter. Great to see the diversification especially from -- your largest customer is growing very well, but -- and Tripp the number you gave on the non-top five and can you other than buy now pay later what are the other sectors that are showing the most growth? And I get a lot of questions on after your largest customer what is the mix percentage that's maybe buy now pay later versus expenses versus on-demand delivery? I don't know if you can give any color on that would be helpful?

[Tripp Faix, Chief financial officer]

Good to hear from you Bob. I hope you and everyone is doing well. And so, I'll maybe comment a little bit on growth. Jason already commented on BNPL which grew over 300% year-over-year in Q3 of 2021.

I'll also highlight that, we have seen strength from our digital banking group which we believe is because of continued user engagement. I'd say the third item that I'll comment on is we have seen strength, in our expense management vertical which we saw grow 164% year-over-year for the quarter.

We did highlight that we have seen some reduction in ODD, from the considerable peaks that we saw last year. That being said, we strongly believe that ODD is here to stay. People want better experiences which we believe that they can achieve on our platform.

[Bob Napoli, William Blair]

Thank you. And as a follow-up on the international good to hear the growth doubling your customers in Europe year-over-year, maybe a little Jason if you could give some more color on the strategy? And where you think international can be over the next five years? And where you're having success and with which products.

[Jason Gardner, Founder & Chief Executive Officer]

Yeah. And also just to draft off of Tripp's comments, we're also seeing growth in crypto. We've talked about really creating a gateway between cryptocurrencies and fiat currencies and the ability for companies like Coinbase to spend at the point of sale.

So as we talked about modern card issuing Bob is a global phenomenon. Visa and Mastercard have interconnected every single merchant in the globe, whether online or offline that wants to accept cards.

So we see this happening not only in the U.S. and Canada. We definitely see it happening in Europe. We see it happening in Australia, New Zealand new countries that we launched this year.

And we'll continue to operate and drive modern card issuing flowing into global money movement in the next five years, and one thing that you and I will keep doing and probably for next 10,000 years is the exchange of value.

So consumers are paying each other, or people paying each other, consumers paying businesses, businesses and businesses paying each other, and when we think about the growth specifically in Europe we have found nothing like Marqeta existed in Europe before we launched.

Under Ian Johnson's leadership who runs Europe, we've seen obviously tremendous growth in that area. So, that will continue. We've talked about we've launched in 36 countries. That is absolutely growing. And specifically in numbers we have 340% year-over-year growth in the number of transactions processed in Europe. And we've doubled the number of customers signed with Marqeta on a year-to-year basis.

This is all geared towards modern card issuing the category that we invented and are going to continue launching around the world, certainly over the next five years. And as we talked about in the opening statements is just build more money-in, money-out services and service to not only modern card issuing but global money movement.

[Bob Napoli, William Blair]

Thank you. I appreciate it.

[Jason Gardner, Founder & Chief Executive Officer]

You're welcome.

[Operator]

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

[Ramsey El-Assal, Barclays]

Hi. Thank you for taking my question this evening. You've announced such a strong slate of new deal wins. And I was wondering if you can kind of help us think through the process and specifically as it pertains to the competitive environment, were these kind of competitive situations, or is your value proposition such that or your capabilities such that it becomes kind of more of a one-on-one dance between you and whoever you're going after?

[Jason Gardner, Founder & Chief Executive Officer]

So well, thanks for the question. So we're the leader in modern card issuing. Companies like Bill.com choose Marqeta and Uber Freight choosing Marqeta in partnership with our customer Branch because we know scale.

We started this business over 11 years ago. The numbers and the volume that we process is significant. We have busted through scale all the time over the years. So when companies like Bill.com on a scale they think about, okay what about Marqeta's success in modern card issuing.

We need virtual card issuing capabilities, alongside the ability to see spend data, inject metadata into the transaction set spend controls. It was very much a powerful sort of differentiator for us versus our competitors.

So as you can imagine, when a Bill.com goes out to the industry to go build these new products there's a range of customers that they can talk to, a range of companies they can speak to and they chose Marqeta. It's not just about one product. And I think you see this with companies like Square and others on our platform. The surface area of our platform is very vast. So as they begin to pick one product, they want to go build, they test that product in market, find success, want to go build other products. They can build that on top of our platform.

Customers choose Marqeta because we've seen scale. We know modern card issuing, whether they want to build virtual cards or tokenized cards that fit into Apple Pay or Google Pay or Samsung Pay or they wanted to build physical plastic cards, they're able to do that based on what we've already proven in markets.

So the Bill.com choose Marqeta because of who we are and what we've been able to accomplish, absolutely. Are we always a single-source provider when companies come to us? Sometimes. And we definitely see competitors in the market but we're obviously winning a lot of strong businesses, who believe and trust Marqeta's platform for their future.

[Ramsey El-Assal, Barclays]

Okay. As a follow-up, I know it's a bit early but I wanted to see if you could provide any kind of preliminary thoughts on fiscal 2022.

[Tripp Faix, Chief financial officer]

Yes. Thank you. On this topic, I'll talk more about 2022 and our Q4 earnings call but we'll share a few comments today. We are absolutely encouraged by our Q3 2021 performance and our progress as we finish out the year and move into 2022. Whether it's recent wins like Uber, Freight or Bill.com or strengthen our verticals like BNPL or emerging verticals like crypto along with our partnerships that will take some time to ramp and then accelerate our go-to-market motion.

As you know 2021 was stronger than we anticipated benefiting from both stimulus and the macro COVID environment. We will be starting 2022 with a larger revenue base than we anticipated. And I would not expect growth rates in 2022 to be as high as 2021. Business inputs remain strong and our view of the long-term growth rates has not changed. Our focus is on building this business for the long term, same strategy, same expectations.

[Ramsey El-Assal, Barclays]

Got it. Super helpful. Thank you so much.

[Operator]

Our next question is from Ashwin Shirvaikar with Citi. Please proceed.

[Ashwin Shirvaikar, Citi]

Yes. Congratulations on the very strong quarter. And Vidya congratulations, especially to you, double congratulations I guess. I wanted to – you have many good announcements here in the last several weeks. I wanted to pick out one of them the Temenos marketplace, because it seemed to me it gave you an opportunity to get embedded within a long list of potential financial services clients. Am I looking at it the right way, if I consider it like that? I mean could you talk a little bit more about the opportunity through marketplaces?

[Jason Gardner, Founder & Chief Executive Officer]

Yes. So Temenos creates the marketplaces where we're providing our APIs through their platform. This allows us to focus on partnerships. So I think as you've seen us grow especially on modern card issuing partnerships is a big part of what we do and how we grow around the world. So trust is the foundation of every single relationship. If you look at what we've been able to create in modern card issuing, we have created very long-term trusting relationships. And these partnerships really help us really spread our wings in areas, where people maybe don't know about us want to learn about us and Temenos' platform helps us do that.

[Ashwin Shirvaikar, Citi]

Got it. Okay. And Tripp, if I can ask you a little bit more color on 2022 from the perspective of seasonality or what to watch for from a year-over-year basis. I would imagine that in spite of the higher base 1Q probably is a tougher comp just because of stimulus. Is that a good way to think of it? Any details with regards to how quarters should be set up for 2022? I know it's a little early but still.

[Tripp Faix, Chief financial officer]

It is a little early and you're absolutely right. In Q1 of 2022 – or excuse me in Q1 of 2021, we did have stimulus. And we also highlighted – Q4, this year we highlighted on the Q2 earnings call in addition to today it's the holiday season. And so I am happy to talk more about, what I'll call quarterization, after we close the year. But hopefully, that's some good color for you.

[Ashwin Shirvaikar, Citi]

Okay. Got it. Thank you.

[Operator]

Our next question is from Darrin Peller with Wolfe Research. Please proceed.

[Darrin Peller, Wolfe Research]

Thanks, guys. Nice job on the revenue growth outside of Square accelerating, what looks like to us up to over 70% from the 40% plus rate last quarter. It just underscores the diversification of the business and the strength in the categories you're talking about, whether it's BNPL, or expense management, or crypto. So really just on that topic, what I really just would love to hear is more examples of what Marqeta has been doing that's truly technologically differentiated that's resonating, so well with the likes of maybe customers in each of those areas, or maybe just pick one or two of them given, there's so many. But just enough to give us a sense of how sustainable the barriers to entry for you guys are that this can keep going, because obviously looking at this quarter.

[Jason Gardner, Founder & Chief Executive Officer]

As I've talked about trust is the foundation of every single relationship and the deep moats in very tall walls we've built are truly based on experience. Like, we know how to operate modern card issuing at massive scale. And companies where we're either single threaded, like we are either supporting their core business, or we are their core business, or where they're thinking about entering the market with a card product that could be physical plastic, it could be tokenized to fit into Apple Pay, or Google Pay, or Samsung Pay, or they can be virtual they use our platform like many of our customers use our platform. They think about their constituency, whether that's consumers, or businesses, whether that's small medium businesses like Bill.com, or it's Marcus by Goldman Sachs to create new debit products for consumers.

So as we think about new verticals, we've always been very thoughtful about when we want to go enter a vertical, we want to create the best experience, the best technology, people who really understand that vertical to go and capture that. And that is very clear with crypto. We leveraged JIT. We wanted to create a gateway, because we felt that you have all this cryptocurrency that you want to spend at the point of sale, how do you do it?

You got to create a gateway to go do that. So we focused on that. So as we begin to get more and more companies on our platform, when they get physical cards in the market, when they get tokenized cards in the market, or virtual cards, they're using our technology to build services and practices, and products within their company and we spend a lot of time with them, helping them think about the future.

I mean, we're very much – we're going to hit the puck and we're going to tell you where it's going to go and we're going to help you get there. And we will continue to do that as we enter new verticals, new countries, new products that is what builds the barriers to entry. We see new entrants entering in the market. We see existing entrants, whether they've been here for four years or two years, still attempting to scratch the surface in regards to what we created. We have magic over here. We'll continue to do that and continue to grow the business. And I think that's absolutely evidenced by our third quarter results.

[Darrin Peller, Wolfe Research]

That's really helpful. Just a very quick follow-up is on the – is on engineering talent demand. It's obviously been a tight market, but you guys seem to have very strong talent to differentiate. Just touch for a minute on your ability to keep hiring in this market. And obviously, your growth is going to require some of that. So I appreciate it guys. Thanks.

[Jason Gardner, Founder & Chief Executive Officer]

Yeah, tech hiring and the competition for it is not just a Marqeta problem, it's absolutely a global problem. Because we've built something payments is deceptively complex issuing and processing. If you look at the four pillars of card issuing, acquiring the issuing bank, the acquiring bank, and then issuing and processing itself, we are very complex, complex technology. So we tend to attract really good engineering talent that wants to really dig into the problems of the engineering room, or the engine room of the ship like we've gone and built.

So – and I've also found too is like being a public company, it obviously sort of ups your understanding of what we do, and we're seeing just the attraction of that. We also have a very strong recruiting team led by Ryan Weber, our Chief Talent Officer. He has just done an extraordinary job in the last few months, and we will continue to hire to meet global needs.

[Darrin Peller, Wolfe Research]

Thanks a lot, guys. Good job.

[Jason Gardner, Founder & Chief Executive Officer]

Yes.

[Operator]

Our next question is from Andrew Jeffrey with Truist Securities. Please proceed.

[Andrew Jeffrey, Truist Securities]

Hi. Good afternoon. I appreciate you taking the question guys. You've described a lot of use cases Jason, which I think are great and I'd like to touch on Bill.com in terms of how we should think about attach and what some of the marketing drivers and customer acquisition costs kind of looks like there. But I'm wondering sort of more broadly, when I think about perhaps more traditional consumer cards both debit and credit bank-issued cards. Can you talk a little bit about the opportunity there and the selling cycle and kind of how you see that perhaps emerging over the next several quarters perhaps or maybe it takes longer than that?

[Jason Gardner, Founder & Chief Executive Officer]

Yes. So is the question specifically around consumer debit and consumer revolving credit?

[Andrew Jeffrey, Truist Securities]

Yes. Traditional bank issued cards.

[Jason Gardner, Founder & Chief Executive Officer]

Yes. So our strategy in the very early days of Marqeta was to focus on commerce disruptors; buy now pay later; expense management; on-demand delivery. And we felt there was a good DNA match in regards to the work that we were doing there. And really purpose-built solutions introducing JIT or Just-in-Time, which allowed them to authorize their own transactions, which created a very crisp clean awesome customer experience.

We then went on to digital banking with companies like Square and N26 and Lydia in Europe. We then went on to large tech giants. We talked publicly about Uber and Google. And then in the large financial institutions, we've talked about Marcus by Goldman Sachs and JPMorgan Chase.

So we know the card business extremely well. We know debit extremely well, and we are beginning to scratch the surface within credit and we really wanted to rethink that customer experience and partner with companies like Deserve. We've seen the early success from M1 Finance and their credit card in the market.

So we are beginning to spread our wings even more in the credit space. You will hear more from us certainly in the coming quarters and the coming years in regards to how to really rethink that. You and I probably have credit cards within our wallet, and they all pretty much do the same thing, maybe the rewards are different.

We want to try to figure out is, how can we help our customers both on the consumer side and the business side sort of rethink credit cards and capture more of the market. I mean, we talked about approximately 52% of Americans use credit cards today. We definitely see credit cards growing within Europe. It's an untapped part of Asia. And as we begin to grow and spread our wings, you're going to see a lot more of this.

That is not going away in regards to growth and how consumers are going to use it. So we're absolutely investing more and more in our business and our customers to see that early success and then begin to grow upon that with more features and functions just like we've done with our other products.

[Andrew Jeffrey, Truist Securities]

Okay. Yes. I look forward to hearing more. And then with regard to Bill, can you talk a little bit about sort of the go-to market? Do you just piggyback directly on them from a customer acquisition perspective? How can we think about that beginning to contribute to growth?

[Jason Gardner, Founder & Chief Executive Officer]

Well, we -- yes, as I talked about we support our customers' core products or we support products that are part of their ecosystem. So Bill.com's financial institution customers will now be able to pay bills and get paid faster using virtual cards issued through our Marqeta platform. And it represents major new efficiencies over paying with checks. So in 2018, the last -- I think it was the last complete Federal Reserve data that we have. There were 6.8 billion checks written totaling approximately I think $20 trillion in spend, and creating a much faster way of getting paid. And Bill.com, obviously, coding to our APIs using JIT to help them not only generate these cards is the first step in the direction of Bill.com using card products to go service their constituency.

This is a constituency that has been asking for this. Bill.com, we believe is going to be a great partner of Marqeta as they begin to build out. And I love when we land these customers and just see them get started and what they want to go build. I've actually known Rene Lacerte for probably a decade. He's a payment nerd like me and our ability to work together and create some great products for their customers is something I'm super excited about.

[Andrew Jeffrey, Truist Securities]

All right. Look forward to sharing about how that relationship matures and evolves.

[Operator]

[Operator Instructions] Our next question is from Andrew Bauch with CMBC [ph] Nikko Securities. Please proceed.

[Andrew Bauch, SMBC Nikko Securities]

Hey guys. Thanks for taking my question. I just want to touch upon the EBITDA in the quarter. It came in a little bit better than the guide and then fourth quarter looks strong as well relative to original expectations. I mean is this really a function of the revenue strength purely, or is there may be an augmentation of the operating leverage and efficiency that you're seeing in the model relative to where you were last year?

[Tripp Faix, Chief financial officer]

Thanks for the question. We, obviously, finished on an adjusted EBITDA negative $4.9 million for the quarter. That's due to a couple of things. One is, we certainly saw revenue strength higher than we anticipated and we highlighted outperformance in digital banking. We highlighted our BNPL vertical, which grew over 300% this quarter and we highlighted that expense management accelerated to 164%.

I'll start there. In addition we amended one of our card network arrangements and we did receive benefit from that. So we finished with a higher gross profit. As Jason said, we're hiring a number of folks here at Marqeta to support our future growth. And we will continue to invest back in the business, because we have an incredible TAM and an incredible market opportunity in front of us. That is our goal is to build this business for the long-term.

[Andrew Bauch, SMBC Nikko Securities]

No, I definitely heard. And thinking about all these new headlines and new customers you're bringing on to the platform and this may have been asked, but I kind of want to ask it in a different way. When you get a new platform or a new business into your ecosystem, I know that you have an easy to plug-in API that allow your customers to get to market faster. But in addition you also have a white glove-type level of service that you provide to these customers. And so maybe if you can get a sense of what's the timeline usually look like from signing a new client to really seeing those transactions come through the model?

[Vidya Peters, Chief Operating Officer]

I'm happy to take that question. The time it takes for our customers to onboard with us vary significantly by their industry, the complexity of the use case, the size of the program. But what is constant is our level of partnership with them. So right from when we are talking about the program with them very early on, and the discussions we are side by side with them crafting the program alongside them. You have to remember, our customers are not always payments experts so they rely on us to help design the card program and get advice from construct so that their developers can configure it the right way.

And that onboarding time can vary. So it can be fairly quick for a small program that is looking to experiment and market and get something nimble and daring out. And it could be longer, when you're talking about a large financial institution with large volumes of today. So there's a high variance there and we serve both of them, with great scale because it's something that we have taken a lot of pride in really developing our experience over the last few years and we continue to serve these customers across these industries ahead.

[Andrew Bauch, SMBC Nikko Securities]

That's a helpful color and congratulations Vidya, well deserved.

[Vidya Peters, Chief Operating Officer]

Thanks, I appreciate it.

[Operator]

Our last question today is from Josh Beck with KeyBanc Capital Markets. Please proceed.

[Josh Beck, KeyBanc Capital Markets]

Thank you for taking the question. I wanted to ask maybe a high-level question for, Jason. I know that you're coming out of Money 20/20 last month. That's an important event for you over the years. Just curious, if there were any really kind of new learnings for you coming out of it. Obviously, a lot of the big trends whether it's crypto or buy now pay later you're really closely involved with anyway. But just curious if anything stood out there and maybe how you'd characterize the pipeline of leads. Obviously, it's an event you go to every year so just would love to hear a little context there.

[Jason Gardner, Founder & Chief Executive Officer]

Yes. Hi, Josh. Money 20/20 was interesting. So people who on the call who don't know what Money 20/20 is, it's a conference that is in its 11th year. It was actually canceled last year. And it's a conference we started with from the beginning. It really gave a platform for fintech when fintech wasn't even a thing. And it's really helped us grow our business over the years, get our message out meet with new customers and prospects. It's been great.

So about I think a month before Money 20/20, we had actually made a decision not to attend because of the pandemic. I think they went from 2,000 attendees to 8,000 attendees in three weeks. And then we sent 30 people there. We had a number of dinners. We set up a lot of meeting rooms. It was actually the first time that we didn't have a booth. Interestingly enough even during a pandemic, we had the same result, the same number of meetings, the same prospects that we got connected with. It's always been a great event for us.

What I saw that was very different was two things, and it serve us to a third. One was a lot around crypto, around not only creating the gateway to spend crypto with the point of sale but a lot around sort of defy or decentralized finance leveraging blockchain and for blockchains to create new ways of not only moving money, but controlling identity. It was really interesting. I saw some of this stuff two years ago but it was front and center.

The second thing, I saw was a lot around KYC, AML really around sort of the compliance end of things. And it's interesting that's how I'm beginning to see as crypto and the talk about crypto is tying that back to finance. And I think this all leads into the third, which we're finding a lot around trust and verify. So when you're moving money both consumers and businesses' money trust and verify is a very important part of the ecosystem.

So I think when you see crypto and you see compliance it's got to be sped into this whole area of what I like to refer to as really trust and verify.

So, I'm really curious as what's going to happen next year. I definitely think we're going to see more around sort of decentralized finance. We're going to see a lot more around card products. We're going to see a lot more around countries and new networks. But I'm always sort of astounded by what happens next and Money 20/20 has been something we will continue to be a part of in the future for sure.

[Josh Beck, KeyBanc Capital Markets]

Great. Yeah. It's one of those events. It's always fun to see what's going to happen next year.

[Jason Gardner, Founder & Chief Executive Officer]

Yes. Did you attend?

[Josh Beck, KeyBanc Capital Markets]

This year actually I didn't. I had some -- my teammates go, but I'm booking my ticket for next year now. So we'll be there for 2021-2022. Maybe a follow-up for you Tripp. Just wanted to ask about kind of how you're modeling Q4. So you certainly talked a bit about the Buy Now Pay Later strength. Obviously, that's a trend that is well underway.

One of the other things that I think has come up on some of the other earnings calls that are a little bit more e-commerce-oriented is some of the supply chain issues and concerns that the holiday season this year might be more dispersed or it might evolve a little bit differently than prior year. So I'm just kind of curious how you were trying to balance those factors as you build out the forecast for Q4.

[Tripp Faix, Chief financial officer]

Yeah. We're -- first of all, Jeff -- excuse me Josh, great to hear from you again. And we're well aware of the supply chain and the kind of marketplace. And so we tried to factor some of those elements into our forecast and assumptions for Q4. I will say we highlighted that we expect continued strength in Buy Now Pay Later.

Certainly, we're coming off a great quarter of growth. I would also highlight our expense management vertical especially as people start to travel more and return to the office. We do expect continued strength from digital banking. And as we mentioned today on the call, crypto is in early days. We're particularly excited about it but we expect that to be a contributor in Q4.

[Josh Beck, KeyBanc Capital Markets]

Really helpful. Thanks, Tripp.

[Tripp Faix, Chief financial officer]

Thank you.

[Operator]

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Jason for closing comments.

[Jason Gardner, Founder & Chief Executive Officer]

Excellent. Thanks operator. So in closing, I just want to thank everyone for joining us for our third quarter call. We believe that our results for the quarter served as a testament that modern card issuing is powering the digital economy, from scaling buy now pay later to new heights to enabling our customers' cardholders to more easily spend their cryptocurrency balances.

Marqeta's solutions were purpose-built for the shifts we're experiencing in modern global money movement. Our recent customer wins with disruptive companies like Bill.com and Uber Freight are excellent proof points to the competitiveness and possibility of our platform. I'm already looking forward to updating all of you on our fourth quarter. Have a great rest of the year. Happy holidays and best wishes for the new year. Thank you.

[Operator]

Thank you. That does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.