Marqeta Inc.

11/05/2025 | Press release | Distributed by Public on 11/05/2025 16:08

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and in our 2024 Annual Report. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. As discussed in the section titled "Note About Forward Looking Statements", our actual results may differ materially from those discussed in these forward-looking statements as a result of various factors, including those set forth or incorporated by reference under the section titled "Risk Factors" in this Quarterly Report on Form 10-Q and in our 2024 Annual Report.
Overview
Marqeta's mission is modernizing financial services by making the entire payment experience native and delightful. Marqeta's modern platform empowers our customers to create customized and innovative payment card programs with configurability and flexibility. Marqeta's open APIs provide instant access to highly scalable, cloud-based payment infrastructure that enables customers to embed the payments experience into apps or websites for a personalized user experience. Customers can launch and manage their own card programs, issue cards, and authorize and settle payment transactions quickly using our platform. We also deliver robust card program management, allowing our customers to embed Marqeta in their offering without having to build certain complex compliance elements or customer support services.
Marqeta's innovative products are developed with deep domain expertise and a customer-first mindset to launch, scale, and manage card programs. Marqeta provides all of its customers with issuer processor services, and for most of its customers it also acts as a card program manager. Depending on a customer's desired level of control and responsibility, Marqeta can work with companies in a range of different configurations, but generally provides the following offerings:
•Managed By Marqeta: With Managed By Marqeta ("MxM"), Marqeta typically connects customers to an Issuing Bank partner to act as the Bank Identification Number ("BIN") sponsor for the customer's card program, manages the customer's card program on behalf of the Issuing Bank, and provides a full range of services including configuring many of the critical resources required by a customer's production environment. In addition to providing the customer access to the Marqeta dashboard via our APIs, Marqeta also manages a number of the primary tasks related to launching a card program, such as defining and managing the program with the Card Networks and Issuing Bank, operating the program and managing certain profitability components, and managing compliance with applicable regulations, the Issuing Bank, and Card Network rules. Also available are a variety of managed services, including dispute management, fraud scoring, card fulfillment, reconciliation, and cardholder support services.
•Powered By Marqeta: With Powered By Marqeta ("PxM"), Marqeta also provides customers access to the Marqeta dashboard via our APIs, provides payment processing, and assists with certain configuration elements that enable the customer to use the platform independently. Generally, our PxM customers are responsible for other elements of the card program, including defining and managing the program with the Card Networks and Issuing Bank as well as managing compliance with applicable regulations, the Issuing Bank, and Card Network rules.
Given the modularity of the Marqeta platform, certain customers can also opt to incorporate some elements of MxM into their card program to create a custom solution. Many customers adopt some combination of the MxM managed services even when not adopting the full MxM offering.
Impact of Macroeconomic Factors
We are unable to predict the impact macroeconomic factors, including various geopolitical conflicts, uncertainty related to global elections, changes in inflation and interest rates, and uncertainty in global regulatory and economic conditions, including as a result of uncertainty in global trade from potential tariffs and counter tariffs, will have on our processing volumes, and on our future results of operations. A deterioration in macroeconomic conditions could increase the risk of lower consumer spending, including discretionary spending, consumer and merchant bankruptcy, insolvency, business failure, higher credit losses, foreign currency fluctuations, or other business interruption, which may adversely impact our business. We continue to monitor these situations and may take actions that alter our operations and business practices as may be required by federal, state, or local authorities or that we determine are in the best interests of our customers, vendors, and employees. See the section titled "Risk Factors" in this
Quarterly Report on Form 10-Q and in our 2024 Annual Report for further discussion or incorporation by reference of the possible impact of these macroeconomic factors on our business.
Key Operating Metric and Non-GAAP Financial Measures
We review a number of operating and financial metrics, including the key operating metric set forth below, to help us evaluate our business and growth trends, establish budgets, evaluate the effectiveness of our investments, and assess operational efficiencies. In addition to the results determined in accordance with GAAP, the following table sets forth a key operating metric and non-GAAP financial measures that we consider useful in evaluating our operating performance:
Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands unless otherwise noted)
2025 2024 2025 2024
Total Processing Volume (TPV) (in millions) $ 97,962 $ 73,899 $ 273,819 $ 211,192
Net revenue
$ 163,306 $ 127,967 $ 452,771 $ 371,205
Gross profit
$ 114,557 $ 90,132 $ 317,297 $ 253,646
Gross margin 70 % 70 % 70 % 68 %
Net (loss) income
$ (3,624) $ (28,643) $ (12,531) $ 54,405
Net (loss) income margin
(2) % (22) % (3) % 15 %
Total operating expenses (benefit)
$ 124,927 $ 132,363 $ 355,433 $ 240,687
Non-GAAP Measures:
Adjusted EBITDA
$ 30,312 $ 9,019 $ 78,900 $ 16,429
Adjusted EBITDA margin 19 % 7 % 17 % 4 %
Adjusted operating expenses
$ 84,245 $ 81,113 $ 238,397 $ 237,217
Total Processing Volume ("TPV")- TPV represents the total dollar amount of payments processed through our platform, net of returns and chargebacks. We believe that TPV is a key operating metric and a principal indicator of the market adoption of our platform, growth of our brand, growth of our customers' businesses, and scale of our business.
Adjusted EBITDA- Adjusted EBITDA is a non-GAAP financial measure that is calculated as Net (loss) income adjusted to exclude depreciation and amortization; share-based compensation expense; executive chairman long-term performance award; payroll tax related to share-based compensation; restructuring and other one-time costs; acquisition related expenses which consist of due diligence costs, transaction costs and integration costs related to potential or successful acquisitions and cash and non-cash postcombination compensation expenses; non-recurring litigation expense; income tax expense; and other income, net, which consists primarily of interest income from our short-term investments and cash deposits, impairment of financial instruments, and realized foreign currency gains and losses. We believe that Adjusted EBITDA is an important measure of operating performance because it allows management and our Board of Directors to evaluate and compare our core operating results, including our operating efficiencies, from period to period. Additionally, we utilize Adjusted EBITDA as an input into our calculation of our annual employee bonus plans and performance-based restricted stock units. See the section below titled "Use of Non-GAAP Financial Measures" for a discussion of the use of non-GAAP measures, a change in presentation, and a reconciliation of Net (loss) income to Adjusted EBITDA.
Adjusted EBITDA Margin - Adjusted EBITDA Margin is a non-GAAP financial measure that is calculated as Adjusted EBITDA divided by Net revenue. This measure is used by management and our Board of Directors to evaluate our operating efficiency. See the section below titled "Use of Non-GAAP Financial Measures" for a discussion of the use of non-GAAP measures and a reconciliation of Net (loss) income to Adjusted EBITDA Margin.
Adjusted Operating Expenses- Adjusted operating expenses is a non-GAAP financial measure that is calculated as Total operating expenses adjusted to exclude depreciation and amortization; share-based compensation expense; executive chairman long-term performance award; payroll tax related to share-based compensation; restructuring and other one-time costs; acquisition-related expenses which consists of due diligence costs, transaction cost and integration costs related to potential or successful
acquisitions, and cash and non-cash postcombination compensation expenses; and non-recurring litigation expense. We believe that Adjusted operating expenses is an important measure of operating performance because it allows management and our Board of Directors to evaluate and compare our core operating results, including our operating efficiencies, from period to period. See the section below titled "Use of Non-GAAP Financial Measures" for a discussion of the use of non-GAAP measures, a change in presentation, and a reconciliation of total operating expenses to Adjusted operating expenses.
Components of Results of Operations
Net Revenue
We have two components of net revenue: platform services revenue, net and other services revenue.
Platform services revenue, net. Platform services revenue includes Interchange Fees, net of Revenue Share and other service-level payments to customers, and Card Network and Issuing Bank costs for certain customer arrangements where the Company is an agent in the delivery of services to the customer. Platform services revenue also includes processing and other fees. "Interchange Fees" are transaction-based and volume-based fees set by a Card Network and paid by a merchant bank to the Issuing Bank that issued the payment card used to purchase goods or services from a merchant. We earn Interchange Fees on card transactions we process for our customers and the fees are based on a percentage of the transaction amount plus a fixed amount per transaction. Interchange Fees are recognized when the associated transactions are settled.
Revenue Share payments are incentives to our customers to increase their processing volumes on our platform. Revenue Share is generally computed as a percentage of the Interchange Fees earned or processing volume and is paid to our MxM customers monthly. Revenue Share payments are recorded as a reduction to net revenue. Generally, as customers' processing volumes increase, the rates at which we share revenue increase.
Processing and other fees are priced as either a percentage of processing volume or on a fee per transaction basis and are earned when payment cards are used at automated teller machines or to make cross-border purchases. Minimum processing fees, where customers' processing volumes fall below certain thresholds, are also included in processing and other fees.
We recognize revenue when the promised services are complete, and our performance obligations are satisfied. Platform services are considered complete when we have authorized the transaction, validated that the transaction has no errors, and accepted and posted the data to our records.
Other services revenue.Other services revenue primarily consists of revenue earned for card fulfillment services. Card fulfillment fees are generally billed to customers upon ordering card inventory and recognized as revenue when the cards are shipped to the customers.
Costs of Revenue
Costs of revenue consist of Card Network fees, Issuing Bank fees, and card fulfillment costs for customer arrangements where we are the principal in providing services to the customer and excludes depreciation and amortization, which is reported separately within the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Card Network fees are equal to a specified percentage of processing volume or a fixed amount per transaction routed through the respective Card Network. Issuing Bank fees compensate our Issuing Banks for issuing cards to our customers and sponsoring our card programs with the Card Networks and are typically equal to a specified percentage of processing volume or a fixed amount per transaction. Card fulfillment costs include physical cards, packaging, and other fulfillment costs.
We have marketing and incentive arrangements with Card Networks, that provide us with monetary incentives for establishing customer card programs with and routing transaction volume through the respective Card Networks. These incentives are typically calculated as a percentage of the processed transaction volume or the number of transactions routed through the Card Network. We account for these incentives as a reduction of Card Network fees within Costs of Revenue in customer arrangements where we act as the principal. As processing volumes increase, we earn a higher cumulative incentive rate,
subject to achieving specific cumulative volume thresholds within an annual measurement period. For certain incentive arrangements, the annual measurement period may not align with our fiscal year.
Prior to the second quarter of fiscal year 2025, we recognized network incentives in the period when cumulative transaction volume thresholds were met, due to insufficient data to reliably estimate the amount of incentives Card Networks would ultimately earn over the respective annual period. This approach resulted in fluctuations in Card Network incentives, particularly when thresholds were reached, as higher incentive rates were applied retroactively to the entire measurement period. Historically, we have earned the highest incentive rates in the first quarter of our fiscal year, when annual measurement periods are nearing completion and higher cumulative transaction volume thresholds are achieved. Conversely, the second quarter generally reflected the lowest incentive rates, as the annual measurement periods and cumulative transaction volume thresholds reset to lower levels.
Effective in the second quarter of fiscal year 2025, we revised our accounting policy for estimating and recognizing network incentives. We now estimate and recognize network incentives based on the cumulative incentive rate we expect to earn over the annual measurement period. We estimate the cumulative incentive rates based on our forecasts for the annual measurement periods, which incorporates both historical experience and our expectations of future events, in addition to other qualitative considerations. The estimated cumulative incentive rates are applied to the volume and/or number of transactions processed during the reporting period to calculate the quarterly network incentives recognized. As a result of this policy revision, the Card Network incentives recognized during the three months ended June 30, 2025 were $1.3 million lower compared to the amount that would have been recognized under the previous policy. The cumulative impact of the revised policy on Card Network incentives recognized from April 1, 2025 through September 30, 2025 was $5.5 million higher than the amount that would have been recognized under the previous policy.
Operating Expenses
Compensation and Benefitsconsists primarily of salaries, employee benefits, severance and other termination benefits, incentive compensation, contractors' cost, and share-based compensation.
Technology consists primarily of third-party hosting fees, software licenses, and hardware purchases below our capitalization threshold, and support and maintenance costs.
Professional Services consists primarily of consulting, legal, audit, and recruiting fees.
Occupancy consists primarily of rent expense, repairs, maintenance, and other building related costs.
Depreciation and Amortization consists primarily of depreciation of our fixed assets and amortization of capitalized Internal-use software and developed technology intangible assets.
Marketing and Advertising consists primarily of costs of general marketing and promotional activities.
Other Operating Expenses consists primarily of insurance costs, indemnification costs, travel-related expenses, indirect state and local taxes, and other general office expenses.
Executive Chairman Long-Term Performance Awardconsists of share-based compensation related to the Executive Chairman Long-Term Performance Award, including the impact of forfeiture. The Executive Chairman Long-Term Performance Award was forfeited in the prior year as a result of the Company's Executive Chairman transitioning to a non-employee director role on the Board of Directors.
Other Income, net
Other income, net consists primarily of interest income from our short-term investments and cash deposits, impairment of financial instruments, and realized foreign currency gains and losses.
Income Tax Expense
Income tax expense consists of U.S. federal and state income taxes, and income taxes related to certain foreign jurisdictions. We maintain a full valuation allowance against our U.S. federal and state net deferred tax assets as we have concluded that it is not more likely than not that we will realize our net deferred tax assets.
In July 2025, the One Big Beautiful Bill Act (H.R. 1, the "Tax Act") was signed into law, reinstating certain provisions from the 2017 Tax Cuts and Jobs Act, including 100% bonus depreciation under Section 168(k) and immediate expensing of U.S.-based research costs under Section 174. We are currently evaluating the impact of these tax law changes on our financial condition and results of operations. Due to the full valuation allowance on our deferred tax assets, we do not expect the Tax Act to have a material impact on our overall tax expense or effective tax rate for the year ending December 31, 2025.
Results of Operations
The following table sets forth our results of operations for the periods presented:
Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2025 2024 2025 2024
Net revenue $ 163,306 $ 127,967 $ 452,771 $ 371,205
Costs of revenue 48,749 37,835 135,474 117,559
Gross profit 114,557 90,132 317,297 253,646
Operating expenses (benefit):
Compensation and benefits 84,871 100,964 252,330 299,120
Technology 16,942 16,317 47,855 44,204
Professional services 5,518 4,759 15,432 13,437
Occupancy 1,058 1,178 2,818 3,476
Depreciation and amortization 7,019 4,448 19,003 11,941
Marketing and advertising 895 582 2,075 1,688
Other operating expenses 8,624 4,115 15,920 11,438
Executive chairman long-term performance award
- - - (144,617)
Total operating expenses
124,927 132,363 355,433 240,687
(Loss) income from operations
(10,370) (42,231) (38,136) 12,959
Other income, net
7,244 13,703 26,544 41,845
(Loss) income before income tax expense
(3,126) (28,528) (11,592) 54,804
Income tax expense
498 115 939 399
Net (loss) income
$ (3,624) $ (28,643) $ (12,531) $ 54,405
Comparison of the Three Months Ended September 30, 2025 and 2024
Net Revenue
Three Months Ended September 30,
(dollars in thousands) 2025 2024 $ Change % Change
Net revenue:
Total platform services, net $ 155,774 $ 121,800 $ 33,974 28 %
Other services 7,532 6,167 1,365 22 %
Total net revenue $ 163,306 $ 127,967 $ 35,339 28 %
Total Processing Volume (TPV) (in millions) $ 97,962 $ 73,899 $ 24,063 33 %
Total platform services, net revenue increased by $34.0 million, or 28%, for the three months ended September 30, 2025, compared to the same period in 2024. The overall increase in platform services revenue was primarily driven by a 33% increase in TPV, partially offset by unfavorable shifts in our card program mix, particularly the expansion of programs where we provide processing services with minimal or no program management.
Other services revenue increased $1.4 million, or 22%, in the three months ended September 30, 2025, compared to the same period in 2024, driven by higher card-related fulfillment, including one-time card replacements and increased customer card shipments.
The increase in TPV was driven by strong performance across all our major use cases, particularly financial services, lending including buy-now-pay later, and expense management. TPV for our top five customers, based on their individual processing volumes in each respective period, increased by 22% in the three months ended September 30, 2025, compared to the same period in 2024, while TPV from all other customers, as a group, grew by 72% over the same period. Note that the composition of the top five customers may differ between the two periods.
Costs of Revenue and Gross Margin
Three Months Ended September 30,
(dollars in thousands) 2025 2024 $ Change % Change
Costs of revenue:
Card Network fees, net $ 38,822 $ 29,676 $ 9,146 31 %
Issuing Bank fees 4,500 3,388 1,112 33 %
Other 5,427 4,771 656 14 %
Total costs of revenue $ 48,749 $ 37,835 $ 10,914 29 %
Gross profit $ 114,557 $ 90,132 $ 24,425 27 %
Gross margin 70 % 70 %
Costs of revenue increased by $10.9 million, or 29%, for the three months ended September 30, 2025, compared to the same period in 2024. This increase was driven by higher Card Network and Issuing Bank fees related to the 33% increase in TPV.
As the increase in costs of revenue was outpaced by the net revenue growth discussed above, gross profit increased by $24.4 million, or 27%, and gross margin remained flat for the three months ended September 30, 2025, compared to the same period in 2024.
Operating Expenses
Three Months Ended September 30,
(dollars in thousands) 2025 2024 $ Change % Change
Operating expenses:
Salaries, bonus, benefits and payroll taxes $ 59,167 $ 65,310 $ (6,143) (9) %
Share-based compensation 25,704 35,654 (9,950) (28) %
Total compensation and benefits 84,871 100,964 (16,093) (16) %
Percentage of net revenue 52 % 79 %
Technology 16,942 16,317 625 4 %
Percentage of net revenue 10 % 13 %
Professional services 5,518 4,759 759 16 %
Percentage of net revenue 3 % 4 %
Occupancy 1,058 1,178 (120) (10) %
Percentage of net revenue 1 % 1 %
Depreciation and amortization 7,019 4,448 2,571 58 %
Percentage of net revenue 4 % 3 %
Marketing and advertising 895 582 313 54 %
Percentage of net revenue 1 % - %
Other operating expenses 8,624 4,115 4,509 110 %
Percentage of net revenue 5 % 3 %
Total operating expenses
$ 124,927 $ 132,363 $ (7,436) (6) %
Percentage of net revenue 76% 103%
Salaries, bonus, benefits, and payroll taxes decreased by $6.1 million, or 9%, for the three months ended September 30, 2025, compared to the same period in 2024. This decrease was primarily driven by lower post-combination compensation expenses for former Power Finance employees and an increase in capitalized salaries, bonus, and benefits costs related to internal-use software development in 2025. These savings were partially offset a year-over-year increase in bonus expense and expenses incurred during the three months ended September 30, 2025 related to one-time retention bonuses given to certain key employees following the departure of our former CEO in the first quarter of 2025, which were not incurred in the same period in 2024.
Share-based compensation decreased by $10.0 million, or 28%, for the three months ended September 30, 2025, compared to the same period in 2024, mainly due to higher year-over-year forfeitures of stock based awards and the full vesting of older stock option awards exceeding the expense associated with newer restricted stock unit awards. No new stock options have been granted in recent years.
Technology expenses remained relatively flat for the three months ended September 30, 2025, compared to the same period in 2024.
Professional services expenses increased by $0.8 million or 16%, for the three months ended September 30, 2025, compared to the same period in 2024 due to higher legal and consulting fees.
Occupancy expense decreased slightly during the three months ended September 30, 2025 compared to the same period in 2024, which was largely due to the impairment of the right-of-use asset associated with our Oakland office recorded during the fourth quarter of 2024.
Depreciation and amortization expense increased by $2.6 million, or 58%, for the three months ended September 30, 2025 compared to the same period in 2024. This increase was primarily driven by higher amortization of internally developed software as additional projects were capitalized and placed into service.
Marketing and advertising expenses increased by $0.3 million, or 54%, for the three months ended September 30, 2025 compared to the same period in 2024, which was driven by our continued investment in marketing.
Other operating expenses increased by $4.5 million, or 110%, for the three months ended September 30, 2025 compared to the same period in 2024 primarily due to $4.3 million of legal contingency expense recognized in the three months ended September 30, 2025 associated with the securities class action lawsuit.
Other Income, net
Three Months Ended September 30,
(dollars in thousands) 2025 2024 $ Change % Change
Other income, net
$ 7,244 $ 13,703 $ (6,459) (47) %
Percentage of net revenue 4 % 11 %
Other income, net decreased by $6.5 million, or 47%, for the three months ended September 30, 2025, compared to the same period in 2024. This decrease was primarily driven by lower interest income from our short-term investment portfolio and cash balances, as average balances were lower due to share repurchases completed in 2025. We also realized lower average yields during the third quarter of 2025 compared to the same period in 2024.
Income Tax Expense
Income tax expense increased by $0.4 million, or 333% for the three months ended September 30, 2025 compared to the same period in 2024 due to an increase in foreign deferred tax liabilities.
Customer Concentration
We generated 44% and 47% of our net revenue from our largest customer, Block, during the three months ended September 30, 2025 and 2024, respectively.
Comparison of the Nine Months Ended September 30, 2025 and 2024
Net Revenue
Nine Months Ended September 30,
(dollars in thousands) 2025 2024 $ Change % Change
Net revenue:
Total platform services, net $ 430,778 $ 355,005 75,773 21 %
Other services 21,993 16,200 5,793 36 %
Total net revenue $ 452,771 $ 371,205 $ 81,566 22 %
Total Processing Volume (TPV) (in millions) $ 273,819 $ 211,192 $ 62,627 30 %
Total platform services, net revenue increased by $75.8 million, or 21%, for the nine months ended September 30, 2025, compared to the same period in 2024. The overall increase in platform services revenue was primarily driven by a 30% increase in TPV, partially offset by unfavorable shifts in our card program mix, particularly the expansion of programs where we provide processing services with minimal or no program management.
Other services revenue increased $5.8 million, or 36% in the nine months ended September 30, 2025, compared to the same period in 2024, driven by higher card-related fulfillment, including one-time card replacements and increased customer card shipments.
The TPV increase was driven by robust growth across all major use cases, particularly financial services, lending including buy-now-pay later, and expense management. TPV for our top five customers, based on their individual processing volumes in each respective period, grew by 20% for the nine months ended September 30, 2025, compared to the same period in 2024. TPV from all other customers, as a group, increased by 69% in the nine months ended September 30, 2025, compared to the same period in 2024. Note that the composition of the top five customers may differ between the two periods.
Costs of Revenue and Gross Margin
Nine Months Ended September 30,
(dollars in thousands) 2025 2024 $ Change % Change
Costs of revenue:
Card Network fees, net $ 105,737 $ 94,859 $ 10,878 11 %
Issuing Bank fees 12,997 9,684 3,313 34 %
Other 16,740 13,016 3,724 29 %
Total costs of revenue $ 135,474 $ 117,559 $ 17,915 15 %
Gross profit $ 317,297 $ 253,646 $ 63,651 25 %
Gross margin 70 % 68 %
Costs of revenue increased by $17.9 million for the nine months ended September 30, 2025, compared to the same period in 2024. This increase was primarily driven by a 30% increase in TPV, but was partially offset by $5.5 million of higher network incentives recognized during the second and third quarter as a result of the revised accounting policy. Card Network fees are presented net of monetary incentives from Card Networks for processing volume during the period.
Gross profit increased by $63.7 million, or 25%, with gross margin improving by 2 percentage points, as net revenue growth outpaced the increase in cost of revenue for the nine months ended September 30, 2025, compared to the same period in 2024.
Operating Expenses
Nine Months Ended September 30,
(dollars in thousands) 2025 2024 $ Change % Change
Operating expenses:
Salaries, bonus, benefits and payroll taxes $ 173,641 $ 195,862 $ (22,221) (11) %
Share-based compensation 78,689 103,258 (24,569) (24) %
Total compensation and benefits 252,330 299,120 (46,790) (16) %
Percentage of net revenue 56 % 81 %
Technology 47,855 44,204 3,651 8 %
Percentage of net revenue 11 % 12 %
Professional services 15,432 13,437 1,995 15 %
Percentage of net revenue 3 % 4 %
Occupancy 2,818 3,476 (658) (19) %
Percentage of net revenue 1 % 1 %
Depreciation and amortization 19,003 11,941 7,062 59 %
Percentage of net revenue 4 % 3 %
Marketing and advertising 2,075 1,688 387 23 %
Percentage of net revenue - % - %
Other operating expenses 15,920 11,438 4,482 39 %
Percentage of net revenue 4 % 3 %
Executive chairman long-term performance award
- (144,617) 144,617 (100) %
Percentage of net revenue - % (39) %
Total operating expenses
$ 355,433 $ 240,687 $ 114,746 48 %
Percentage of net revenue 79% 65%
Salaries, bonus, benefits, and payroll taxes decreased by $22.2 million, or 11%, for the nine months ended September 30, 2025, compared to the same period in 2024. This decrease was primarily driven by lower year-over-year post-combination compensation expenses for former Power Finance employees and an increase in capitalized salaries, bonus, and benefits costs related to internal-use software development during nine months ended September 30, 2025. These savings were partially offset a year-over-year increase in bonus expense and expenses incurred during the nine months ended September 30, 2025 related to one-time retention bonuses given to certain key employees following the departure of our former CEO in the first quarter of 2025, which were not incurred in the same period in 2024.
Share-based compensation decreased by $24.6 million, 24%,for the nine months ended September 30, 2025, compared to the same period in 2024, mainly due to higher year-over-year forfeitures of stock based awards, including those related to the CEO's departure during the first quarter of 2025, as well as the full vesting of older stock option awards outpacing the expense from newer restricted stock unit awards. No new stock options have been granted in recent years.
Technology expenses increased by $3.7 million, or 8%, for the nine months ended September 30, 2025, compared to the same period in 2024, mainly driven by higher licensing and hosting costs to support system and tool implementations amid ongoing business growth.
Professional services expenses increased by $2.0 million, or 15%, for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to higher consulting and legal fees.
Occupancy expense decreased by $0.7 million, or 19%, for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to the impairment of the right-of-use asset associated with our Oakland office recorded during the fourth quarter of 2024.
Depreciation and amortization increased by $7.1 million, or 59%, for the nine months ended September 30, 2025, compared to the same period in 2024. This increase was primarily driven by higher amortization of internally developed software as additional projects were capitalized and placed into service.
Marketing and advertising expenses increased by $0.4 million, or 23%, for the nine months ended September 30, 2025, compared to the same period in 2024, which was driven by our continued investment in marketing.
Other operating expenses increased by $4.5 million, or 39%, for the nine months ended September 30, 2025, compared to the same period in 2024 primarily due to $4.3 million of legal contingency expense recognized in the nine months ended September 30, 2025 associated with the securities class action lawsuit.
The Executive chairman long-term performance award decreased by 100% for the nine months ended September 30, 2025, compared to the same period in 2024, due to the forfeiture in the second quarter of 2024 following the Executive Chairman's transition to a non-employee director role on the Board of Directors.
Other Income, net
Nine Months Ended September 30,
(dollars in thousands) 2025 2024 $ Change % Change
Other income, net
$ 26,544 $ 41,845 $ (15,301) (37) %
Percentage of net revenue 6 % 11 %
Other income, net decreased by $15.3 million, or 37%, for the nine months ended September 30, 2025, compared to the same period in 2024. This decrease was primarily driven by lower interest income from our short-term investment portfolio and cash balances, as average balances were lower due to $212.4 million of share repurchases completed during the nine months ended September 30, 2025. We also realized lower average yields during the nine months ended September 30, 2025 compared to the same period in 2024.
Income Tax Expense
Income tax expense increased by $0.5 million, or 135%,for the nine months ended September 30, 2025 compared to the same period in 2024 due to an increase in foreign deferred tax liabilities.
Customer Concentration
We generated 45% and 48% of our net revenue from our largest customer, Block, during the nine months ended September 30, 2025 and 2024, respectively.
Use of Non-GAAP Financial Measures
Our non-GAAP financial measures, such as adjusted EBITDA and Adjusted operating expenses, have limitations as analytical tools and should not be considered in isolation or as substitutes for, or superior to, financial measures prepared in accordance with GAAP. When evaluating these non-GAAP measures, note that we will likely incur expenses in the future similar to the adjustments in the presentation of our non-GAAP measures set forth under "Key Operating Metric and Non-GAAP Financial Measures". There are a number of key limitations related to the use of these non-GAAP measures compared to their most directly comparable GAAP measures including the following:
•other companies, including companies in our industry, may calculate adjusted EBITDA and Adjusted operating expenses differently or not at all, limiting their usefulness as comparative measures;
•although depreciation and amortization are non-cash charges, the assets being depreciated or amortized may require future replacement, and adjusted EBITDA does not reflect cash requirements for such replacements or new capital expenditures; and
•adjusted EBITDA does not reflect the effect of income taxes that may represent a reduction in cash available to us.
We encourage investors to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures.
A reconciliation of Net (loss) income to adjusted EBITDA and GAAP operating expenses to Adjusted operating expenses for the periods presented is as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2025 2024 2025 2024
Net revenue $ 163,306 $ 127,967 $ 452,771 $ 371,205
Net (loss) income
$ (3,624) $ (28,643) $ (12,531) $ 54,405
Net (loss) income margin
(2) % (22) % (3) % 15 %
Total operating expenses
$ 124,927 $ 132,363 $ 355,433 $ 240,687
Net (loss) income
$ (3,624) $ (28,643) $ (12,531) $ 54,405
Depreciation and amortization expense 7,019 4,448 19,003 11,941
Share-based compensation expense
25,704 35,654 78,689 103,258
Executive chairman long-term performance award
- - - (144,617)
Payroll tax expense related to share-based compensation 583 440 2,150 2,307
Acquisition-related expenses (1)
1,828 10,708 7,315 30,581
Restructuring and other one-time costs (2)
1,251 - 5,582 -
Non-recurring litigation expense(3)
4,297 - 4,297 -
Other income, net
(7,244) (13,703) (26,544) (41,845)
Income tax expense
498 115 939 399
Adjusted EBITDA $ 30,312 $ 9,019 $ 78,900 $ 16,429
Adjusted EBITDA Margin 19 % 7 % 17 % 4 %
Total operating expenses
$ 124,927 $ 132,363 $ 355,433 $ 240,687
Depreciation and amortization expense (7,019) (4,448) (19,003) (11,941)
Share-based compensation expense
(25,704) (35,654) (78,689) (103,258)
Executive chairman long-term performance award
- - - 144,617
Payroll tax expense related to share-based compensation (583) (440) (2,150) (2,307)
Restructuring and other one-time costs (2)
(1,251) - (5,582) -
Non-recurring litigation expense(3)
(4,297) - (4,297) -
Acquisition-related expenses(1)
(1,828) (10,708) (7,315) (30,581)
Adjusted operating expenses
$ 84,245 $ 81,113 $ 238,397 $ 237,217
(1) Acquisition-related expenses, which include transaction costs, integration costs and cash and non-cash postcombination compensation expense, have been excluded from adjusted EBITDA as such expenses are not reflective of our ongoing core operations and are not representative of the ongoing costs necessary to operate our business; instead, these are costs specifically associated with a discrete transaction.
(2) Restructuring and other one-time costs include the costs associated with the transition of our former CEO and other one-time costs related to retention bonuses provided to other key employees. These bonuses have service requirements and are expensed over the requisite service period.
(3) Non-recurring litigation expense includes a legal contingency expense related to the Securities Actions. See Note 10, "Commitments and Contingencies" for additional information.
Liquidity and Capital Resources
As of September 30, 2025, our primary sources of liquidity consisted of cash, cash equivalents, and short-term investments totaling $830.5 million, held primarily for working capital purposes. Our cash equivalents and short-term investments were comprised primarily of bank deposits, money market funds, U.S. treasury bills, U.S. treasury securities, asset-backed securities, commercial paper, certificates of
deposit, and corporate debt securities. We have historically incurred significant operating losses, as reflected in our accumulated deficit, and anticipate continued operating losses for the foreseeable future.
Our transaction with Neptune International Ltd to acquire TransactPay was completed on July 31, 2025 ("Closing") for a total purchase price of approximately $59.9 million, as disclosed in Note 4 "Business Combinations" to the condensed consolidated financial statements. The total consideration primarily consisted of $53.0 million in cash paid at Closing, approximately $3.6 million in contingent consideration payable upon achievement of specified post-closing performance conditions through December 31, 2025, and approximately $3.5 million in holdbacks retained to secure sellers' indemnification obligations and post-closing purchase price adjustments, which will be released within one year upon satisfactory resolution of related matters.
On February 25, 2025, our Board of Directors authorized a new share repurchase program for up to $300 million of our Class A common stock (the "2025 Share Repurchase Program"). Repurchases may be executed through open market purchases, privately negotiated transactions, or other methods, in compliance with applicable federal securities laws, including Rule 10b5-1 trading plans under the Exchange Act. Repurchase decisions are based on general business and market conditions, legal requirements, and other relevant factors. The 2025 Share Repurchase Program has no set expiration date. During the nine months ended September 30, 2025, we repurchased approximately 45.5 million shares for $212.4 million under this program. As of September 30, 2025, $87.6 million remained available for future share repurchases.
On May 6, 2024, the our Board of Directors authorized a $200 million share repurchase program for our Class A common stock (the "2024 Share Repurchase Program"), following the exhaustion of the $200 million 2023 Share Repurchase Program in the first quarter of fiscal year 2024. Repurchases under the 2024 Share Repurchase Program were made through open market purchases, privately negotiated transactions, or other methods, in accordance with applicable federal securities laws, including Rule 10b5-1 trading plans of the Exchange Act. Repurchase decisions were based on general business and market conditions, legal requirements, and other factors. During the nine months ended September 30, 2025, we repurchased approximately 19.2 million shares for $80.5 million, fully utilizing the 2024 Share Repurchase Program authorization.
On February 3, 2023, we acquired all outstanding stock of Power Finance Inc. ("Power Finance"). As part of the terms of the acquisition, we entered into postcombination cash compensation arrangements with certain key acquired employees whereby we agreed to pay them $85.1 million of cash over a weighted average service period of 2.2 years from the acquisition date, subject to forfeiture upon termination. As of September 30, 2025, $2.1 million of the postcombination cash compensation arrangements remained outstanding.
We believe our existing cash and cash equivalents, and short-term investments of $830.5 million as of September 30, 2025, will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. As of the date of filing this Quarterly Report on Form 10-Q, we maintain full access to and control over all our cash, cash equivalents and short-term investments, except amounts held as restricted cash. Our future capital requirements will depend on many factors, such as continued investment in product development, platform infrastructure, share repurchases, potential strategic acquisitions, capital expenditures, and global expansion. We plan to allocate cash to support ongoing business investments, infrastructure enhancements, and non-cancellable purchase commitments with cloud-computing service providers and certain Issuing Banks.
As of September 30, 2025, we had $235.4 million in restricted cash, of which $233.9 million is related to the cash and cash equivalents held by TransactPay on behalf of its customers related to card and e-money wallet programs. Restricted cash also includes $1.5 million cash held at a bank to secure our payments under a lease agreement for our office space, of which $0.9 million is recorded in other assets in the September 30, 2025 Condensed Consolidated Balance Sheet.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Nine Months Ended September 30,
2025 2024
(in thousands)
Net cash provided by operating activities
$ 109,301 $ 33,415
Net cash provided by investing activities
258,239 37,041
Net cash used in financing activities (316,394) (165,011)
Net increase (decrease) in cash, cash equivalents, and restricted cash
$ 51,146 $ (94,555)
Operating Activities
Our primary source of cash from operating activities is net revenue. The primary uses of cash in operating activities include Card Network and Issuing Bank fees and employee-related compensation. The timing of settlements of certain operating assets and liabilities, such as revenue share payments, bonus payments, prepayments to cloud-computing service providers, settlements receivable and network incentives receivable, may impact the amounts reported as net cash provided by or used in operating activities in the Condensed Consolidated Statements of Cash Flows.
Net cash provided by operating activities was $109.3 million for the nine months ended September 30, 2025, an increase from $33.4 million for the same period in 2024. The year-over-year increase was primarily driven by higher gross profit and lower operating expenses and the favorable timing of settlements for network incentive receivables and revenue share payable.
Investing Activities
Net cash provided by investing activities primarily consists of proceeds from maturities of short-term investments, while net cash used in investing activities primarily includes purchases of short-term investments, purchases of property and equipment, capitalized costs for internal-use software development, and business combinations.
Net cash provided by investing activities increased by $221.2 million to $258.2 million for the nine months ended September 30, 2025, from $37.0 million in the same period in 2024. This increase was primarily due to $229.7 million in restricted cash acquired in the TransactPay acquisition and $46.2 million in additional proceeds from maturities of short-term investments, partially offset by $44.6 million in net cash used for the TransactPay acquisition and ongoing investments in property, equipment, and internal-use software.
Financing Activities
Net cash used in financing activities consists primarily of net payments related to share-based compensation activities, our share repurchase programs and the net impact of funds payable and amounts owed to customers.
Net cash used in financing activities increased to $316.4 million for the nine months ended September 30, 2025, from $165.0 million in the same period in 2024. This increase was primarily due to repurchases of our Class A common stock under the 2024 and 2025 Share Repurchase Programs.
Obligations and Other Commitments
Except for the lease extension disclosed in Note 9 "Leases" to our condensed consolidated financial statements, there have been no other material changes to our obligations and other commitments from those reported in our 2024 Annual Report.
For additional information about our contractual obligations and other commitments, see Note 10 "Commitments and Contingencies" to our condensed consolidated financial statements.
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements are prepared in accordance with GAAP. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses, and the related disclosures. On an ongoing basis, we evaluate our accounting estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
Except for (i) the revised accounting policy for estimating Card Network incentives and (ii) the new accounting policies associated with restricted cash and funds payable and amounts due to customers, as detailed in Note 2 "Summary of Significant Accounting Policies," to the condensed consolidated financial statements, no other changes have been made to our accounting policies. The new policies for restricted cash and funds payable and amounts due to customers, which were adopted in connection with TransactPay acquisition, specifically address the classification and presentation of customer funds held in segregated accounts as part of TransactPay's program management activities related to card and e-money wallet programs.
Additionally, there have been no material changes to our critical accounting policies and estimates described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in our 2024 Annual Report.
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