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What changed in Marqeta, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Marqeta, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+526 added−739 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in Marqeta, Inc.'s 2023 10-K

526 paragraphs added · 739 removed · 340 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

69 edited+49 added−121 removed14 unchanged
Biggest changeFurther, any changes to the rules or practices set by Card Networks, including changes in Card Network fees or Interchange Fees, or our handling of such fees, could adversely affect our business.” Association and Card Network Rules Our Issuing Banks must comply with the bylaws, regulations, and requirements that are set forth by the Card Networks, including the PCI DSS and other applicable data security program requirements.
Biggest changeAssociation and Card Network Rules Our Issuing Banks must comply with the bylaws, regulations, and requirements that are set forth by the Card Networks, including the PCI DSS and other applicable data security program requirements. In providing services through our platform, we are certified and registered with certain Card Networks as a processor for member institutions.
Our contracts with Issuing Banks entitle Marqeta to all of the Interchange Fees generated from our customers’ card programs, which we then share with our MxM customers through Revenue Share payments, and obligate us to pay all Card Network fees associated with our customers’ card transactions.
Our contracts with Issuing Banks entitle Marqeta to all of the Interchange Fees generated from our customers’ card programs, which we then share with our MxM customers through Revenue Share payments, and obligate us to pay all Card Network fees associated with our MxM customers’ card transactions.
Prepaid Card Regulations The prepaid card programs that we manage for our customers are subject to various federal and state laws and regulations, including the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 and the CFPB’s Regulation E, which impose requirements on general-use prepaid cards, store gift cards and electronic gift certificates.
The card programs that we manage for our customers are subject to various federal and state laws and regulations, including the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 and the CFPB’s Regulation E, which impose requirements on general-use prepaid cards, store gift cards, and electronic gift certificates.
For instance, due to our relationships with certain Issuing Banks and certain customers, we may be subject to indirect supervision and examination by the Federal Deposit Insurance Corporation, state banking regulators (such as the California Department of Financial Protection and Innovation), and the Office of the Comptroller of the Currency in connection with our platform and certain of our products and services.
For instance, due to our relationships with certain Issuing Banks and certain customers, we may be subject to indirect supervision and examination by the Federal Deposit Insurance Corporation (the “FDIC”), state banking regulators (such as the California Department of Financial Protection and Innovation), and the Office of the Comptroller of the Currency in connection with our platform and certain of our products and services.
Pursuant to the terms of the Block Agreement, we have agreed to manage Block’s Cash App, Square Card, and Square Card Canada card issuing programs for Block. On January 31, 2022, Block completed its acquisition of our customer, Afterpay Limited.
Pursuant to the terms of the Block Agreement, we have agreed to manage Block’s Cash App, Square Debit Card, and Square Card Canada card issuing programs for Block. On January 31, 2022, Block completed its acquisition of our customer, Afterpay Limited.
Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our investor relations website as soon as reasonably practicable after we file such material electronically with or furnish it to the SEC.
Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available, free of charge, on our investor relations website as soon as reasonably practicable after we file such material electronically with or furnish it to the SEC.
We use our www.investors.marqeta.com and www.marqeta.com websites, as well as our blog posts, press releases, public conference calls, webcasts, our Twitter feed (@Marqeta), our Instagram page (@lifeatmarqeta), our Facebook page, and our LinkedIn page, as a means of disclosing material nonpublic information and for complying with our disclosure obligations under Regulation FD.
We use our www.investors.marqeta.com and www.marqeta.com websites, as well as our blog posts, press releases, public conference calls, webcasts, our X feed (@Marqeta), our Instagram page (@lifeatmarqeta), our Facebook page, and our LinkedIn page, as a means of disclosing material nonpublic information and for complying with our disclosure obligations under Regulation FD.
We have a patent program designed to cover various aspects of our business in the United States and abroad. These patents and patent applications are intended to protect our proprietary inventions relevant to our business. We continually review our development efforts to assess the existence of new intellectual property and our ability to patent new intellectual property.
We have a patent program designed to cover various aspects of our business in the United States and internationally. These patents and patent applications are intended to protect our proprietary inventions relevant to our business. We continually review our development efforts to assess the existence of new intellectual property and our ability to patent new intellectual property.
The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 24 Table of Contents
The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 16 Table of Contents
In addition to providing customer access to the Marqeta dashboard via our APIs and payment processing, Marqeta also manages a number of the primary tasks related to launching a card program, such as defining and managing the program, operating the program and managing certain profitability components, and managing compliance with applicable regulations, Issuing Bank and Card Network rules.
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.
Anti-Bribery Laws We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the U.K. Bribery Act 2010, and other anti-corruption and anti-bribery laws in countries where we conduct activities.
Anti-Bribery Laws We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the U.K. Bribery Act 2010, and other anti-corruption and anti-bribery laws in countries where we conduct activities.
Agreements with Large Customers Block On April 19, 2016, we entered into a master services agreement with Block, Inc., formerly known as Square, Inc., subsequently amended, or the Block Agreement, which includes agreements that provide for the commercial terms of our relationship with Block.
Agreements with Large Customers Block On April 19, 2016, we entered into a master services agreement with Block, Inc., formerly known as Square, Inc., subsequently amended (the “Block Agreement”), which includes agreements that provide for the commercial terms of our relationship with Block.
When our customers engage us for MxM services, we provide an Issuing Bank to act as the BIN sponsor for the customer’s card program and are responsible for managing compliance with the Issuing Bank’s requirements and Card Network rules.
Relationship and Agreements with Issuing Banks When our customers engage us for MxM services, we provide an Issuing Bank to act as the BIN sponsor for the customer’s card program and are responsible for managing compliance with the Issuing Bank’s requirements and Card Network rules.
Other We are subject to examination by our Issuing Banks’ regulators and must comply with certain regulations to which our sponsor banks are subject, as applicable.
Other We are subject to examination by our Issuing Banks’ regulators and must comply with certain regulations to which these banks are subject, as applicable.
Unlike under our Managed By Marqeta card programs, 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, Issuing Bank and Card Network rules.
Unlike under our MxM card programs, 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.
In the United States, the Currency and Foreign Transactions Reporting Act, which is also known as the Bank Secrecy Act, or BSA, and which was amended by the USA PATRIOT Act of 2001, contains a variety of provisions aimed at fighting terrorism and money laundering. Among other things, the BSA and implementing regulations issued by the U.S.
In the United States, the Currency and Foreign Transactions Reporting Act, known as the Bank Secrecy Act (the “BSA”) and amended by the USA PATRIOT Act of 2001, contains a variety of provisions aimed at fighting terrorism and money laundering. Among other things, the BSA and implementing regulations issued by the U.S.
We completed our initial public offering in June 2021 and our Class A common stock is listed on the Nasdaq Global Select Market, or Nasdaq, under the symbol “MQ.” Our principal executive offices are located at 180 Grand Avenue, 6th Floor, Oakland, CA 94612, and our telephone number is (888) 462-7738.
We completed our initial public offering (“IPO”) in June 2021 and our Class A common stock is listed on the Nasdaq Global Select Market (“Nasdaq”), under the symbol “MQ.” Our principal executive offices are located at 180 Grand Avenue, 6th Floor, Oakland, CA 94612, and our telephone number is (877) 962-7738.
Depending on a customer’s desired level of control and responsibility, Marqeta can work with companies in a range of different configurations: • Managed By Marqeta : With Managed By Marqeta, or MxM, Marqeta provides an Issuing Bank partner to act as the Bank Identification Number, or 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.
Depending on a customer’s desired level of control and responsibility, Marqeta can work with companies in a range of different configurations: 8 Table of Contents Managed By Marqeta : With Managed By Marqeta (“MxM”), Marqeta provides 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.
The FCPA includes anti-bribery and accounting provisions enforced by the Department of Justice and the Securities and Exchange Commission, or the SEC.
The FCPA includes anti-bribery and accounting provisions enforced by the Department of Justice and the Securities and Exchange Commission (the “SEC”).
Given our ability to direct processing volume to specific Card Networks, we are able to negotiate certain incentive rebates that effectively reduce the overall Card Network fees. With the scale of the transactions we process on behalf of our customers, we believe we can continue to negotiate favorable incentive rebates. However, if these fees increase, our gross margins will decrease.
Given our ability to direct MxM processing volume to specific Card Networks, we are able to negotiate certain incentive rebates that effectively reduce the overall Card Network fees. With the scale of the transactions we process on behalf of our customers, we believe we can continue to negotiate favorable incentive rebates.
We rely on a combination of patents, trademarks, copyrights, trade secrets, license agreements, confidentiality procedures, non-disclosure agreements, employee confidential information and invention assignment agreements, as well as other legal and contractual rights, to establish and protect our proprietary rights.
Intellectual Property We seek to protect our intellectual property by relying on a combination of patents, trademarks, copyrights, trade secrets, license agreements, confidentiality procedures, non-disclosure agreements, and employee confidential information and invention assignment agreements, as well as other legal and contractual rights.
Due to our relationships with Issuing Banks and Card Networks, we may be subject to indirect supervision and examination by the CFPB in connection with our platform and certain of our products and services. CFPB rules, examinations, and enforcement actions may require us to adjust our activities and may increase our compliance costs.
Due to our relationships with Issuing Banks and Card Networks, we may be subject to direct or indirect supervision and examination by the CFPB. CFPB rules, examinations, investigations, and enforcement actions against us or our Issuing Banks, Card Networks, or customers may require us to adjust our activities and may increase our compliance costs.
Under this agreement we are entitled to receive 100% of the Interchange Fees for processing our customers’ card transactions. Under certain circumstances, the agreement also requires us to pay termination fees, including fees and costs to Sutton Bank, if we terminate the agreement before the end of its term or any automatic renewal term.
Under certain circumstances, the agreement also requires us to pay termination fees, including fees and costs to Sutton Bank, if we terminate the agreement before the end of its term or any automatic renewal term.
See the section titled “Risk Factors—Risks Relating to Our Business and Industry—We participate in markets that are competitive and continuously evolving, and if we do not compete successfully with established companies and new market entrants, our business, results of operations, financial condition, and future prospects could be materially and adversely affected.” 17 Table of Contents Intellectual Property We believe that our intellectual property rights are valuable and important to our business.
See the section titled “Risk Factors—Risks Relating to Our Business and Industry—We participate in markets that are competitive and continuously evolving, and if we do not compete successfully with established companies and new market entrants, our business, results of operations, financial condition, and future prospects could be materially and adversely affected” for additional information regarding the competitive environment in which we operate.
We have an ongoing trademark and service mark registration program pursuant to which we register our brand names and product names, taglines, and logos in the United States and internationally to the extent we determine appropriate and cost-effective. We also have registered domain names for websites that we use in our business, such as www.marqeta.com and other similar variations.
We also have an ongoing trademark and service mark registration program pursuant to which we register our brand names and product names, taglines, and logos in the United States and internationally to the extent we determine appropriate and cost-effective.
While an Issuing Bank ultimately approves each card program, Marqeta is able to configure the program design, negotiate key program terms, and select the Issuing Bank. Marqeta actively “shops” the potential card program to various Issuing Banks to identify the most appropriate bank based on the customer’s needs. We pay volume-based and transaction-based fees to the Issuing Banks.
While an Issuing Bank ultimately approves each card program, Marqeta configures the program design, negotiates key program terms, and selects the Issuing Bank. Marqeta actively works to find the most appropriate Issuing Bank partner for the potential card program based on the customer’s needs and program design. We pay volume-based and transaction-based fees to the Issuing Banks.
We have a deep history of card issuing expertise, enabling us to achieve technical and operating leverage that we believe potential competitors are unable to replicate. However, some of our competitors have greater financial and operating resources. Moreover, as we expand the scope of our platform, we may face additional competition.
We compare favorably with our competitors on the basis of these factors. We have a deep history of card issuing expertise, enabling us to achieve technical and operating leverage that we believe potential competitors are unable to replicate. However, some of our competitors have greater financial and operating resources.
Further, we are subject to network operating rules promulgated by the National Automated Clearing House Association relating to payment transactions processed on our platform using the Automated Clearing House Network and to various federal and state laws regarding such operations.
The Card Networks routinely update and modify their requirements and we, in turn, must work to comply with such updates to continue processing transactions on their networks. 13 Table of Contents Further, we are subject to network operating rules promulgated by the National Automated Clearing House Association relating to payment transactions processed on our platform using the Automated Clearing House Network and to various federal and state laws regarding such operations.
Privacy and data protection is a shared responsibility among all our employees. We also have a privacy team that builds and executes on our privacy program, including support for data protection and privacy-related requests. We are committed to complying with applicable privacy and data protection laws.
We also have a privacy team that builds and executes on our privacy program, including support for data protection and privacy-related requests. We are committed to complying with applicable privacy and data protection laws. We monitor guidance from industry and regulatory bodies and update our platform and contractual commitments accordingly.
Either party may terminate the agreement under specified circumstances, including upon a material breach that remains uncured for a specified period of time. 16 Table of Contents Our Competitors We compete in a large and evolving market.
Either party may terminate the agreement under specified circumstances, including upon a material breach that remains uncured for a specified period of time. Our Competitors We compete in a large and evolving market. Our competitors fall into three primary categories: (1) providers with legacy technology platforms, (2) modern API-based providers, and (3) emerging providers.
We have also entered into a number of subsequent arrangements with Visa, as governed by the strategic alliance framework agreement, including a service evaluation agreement, card partner agreement and certain brand agreements. Under these agreements, we have agreed to cooperate with Visa on a number of initiatives, including international expansion, product, marketing and business development collaboration.
Visa In 2017, we entered into a strategic alliance framework agreement with Visa. The agreement has been periodically amended. We have also entered into a number of subsequent arrangements with Visa, as governed by the strategic alliance framework agreement, including a service evaluation agreement, card partner agreement, and certain brand agreements.
When our customers engage us for PxM services, we do not manage the customer’s relationships with the Issuing Banks and Card Networks and the customer is responsible for managing compliance with the Issuing Bank’s requirements and Card Network rules. Sutton Bank On April 1, 2016, we entered into a prepaid card program manager agreement with Sutton Bank.
When our customers engage us for PxM services, we do not manage the customer’s relationships with the Issuing Banks and Card Networks and the customer is responsible for managing compliance with the Issuing Bank’s requirements and Card Network rules. Certain customers engage us for PxM+ services, where they can combine different aspects of our MxM and PxM services.
We have a separate agreement with Afterpay that provides for the commercial terms of our relationship, however, we now aggregate Afterpay as part of our Block business. Under the agreements to manage these card programs, we agree to share a portion of the net interchange revenue that we earn from processing the volume of these programs.
We have a separate agreement with Afterpay that provides for the commercial terms of our relationship; however, we now aggregate Afterpay as part of our Block business.
Also available to our MxM customers are a variety of managed services, including dispute management, fraud scoring, card fulfillment, and cardholder support services. • Powered By Marqeta : With Powered By Marqeta, or 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.
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.
We intend to continue to invest in our research and development capabilities to extend our platform. 19 Table of Contents Government Regulation We are subject, directly, or indirectly through our relationships with our Issuing Banks, customers, or Card Networks, to a number of state, federal, and foreign laws and regulations that involve matters central to our business.
Software development is primarily executed by our team of professionals across design, product management, and engineering disciplines. We intend to continue to invest in our research and development capabilities to extend our platform offerings. Government Regulation We are subject, directly, or indirectly through our relationships with our Issuing Banks, customers, or Card Networks, to a number of laws and regulations.
Its provisions, however, are sufficiently far reaching that it is possible that we could be further directly or indirectly impacted. 20 Table of Contents Privacy, Data Protection and Information Security Regulations We provide services that are subject to various state, federal, and foreign laws and regulations relating to privacy, data protection, and information security, including, among others, the Gramm-Leach Bliley Act, the EU General Data Protection Regulation, and the California Consumer Protection Act.
Privacy, Data Protection, and Information Security Regulations We provide services that are subject to various laws and regulations relating to privacy, data protection, and information security, including, among others, the Gramm-Leach Bliley Act, the EU General Data Protection Regulation, and the California Consumer Protection Act.
Either party may terminate the agreements under specified circumstances, including upon a material breach that remains uncured for a specified period of time. Visa In 2017, we entered into a strategic alliance framework agreement with Visa. The agreement has been periodically amended.
As of February 2023, the parties have entered into an extension of the card partner agreement under the strategic alliance framework agreement for a term of five years. Either party may terminate the agreements under specified circumstances, including upon a material breach that remains uncured for a specified period of time.
The current term of the contract expires in 2025 and automatically renews annually thereafter, unless either party provides written notice of its intent not to renew.
The contract provides Marqeta with tiered incentives based on the processing volume of our customers’ transactions routed through PULSE and its affiliated networks. The current term of the contract expires in 2028 and automatically renews annually thereafter, unless either party provides written notice of its intent not to renew.
Either we or Sutton Bank may terminate the agreement under certain specified circumstances, including if the other party commits a material breach that is not cured within 30 days.
Either we or Sutton Bank may terminate the agreement under certain specified circumstances, including if the other party commits a material breach that is not cured within 30 days. Agreements with Card Networks The Card Networks oversee their worldwide payment networks, through which debit, credit, and prepaid card payments are authorized, processed, and settled, and set Interchange Fee rates.
Due to our relationships with Issuing Banks that are directly regulated for AML purposes, we have implemented an AML program designed to prevent our platform from being used to facilitate money laundering, terrorist financing, and other illicit activity. When providing program management services, we ensure that our AML program complies with the requirements of our Issuing Banks.
Treasury Department require certain financial institutions to establish AML programs, to not engage in terrorist financing, to report suspicious activity, and to maintain a number of related records. 14 Table of Contents Due to our relationships with Issuing Banks that are directly regulated for AML purposes, we have implemented an AML program designed to prevent our platform from being used to facilitate money laundering, terrorist financing, and other illicit activity.
The extensive nature of these regulations may result in additional compliance obligations and expense for our business. 21 Table of Contents Anti-Money Laundering Although we are not a “money services business” or otherwise subject to AML registration requirements under U.S. federal or state law, we are subject to certain AML laws and regulations in the United States, the United Kingdom, the European Union, and other jurisdictions.
Anti-Money Laundering Although we are not a “money services business” or otherwise subject to anti-money laundering (“AML”) registration requirements under U.S. federal or state law, we are subject to certain AML laws and regulations in various jurisdictions.
For instance, we are subject to processing fee and transaction fee regulation where our cards are used and may in the future be subject to Interchange Fee regulations in other countries where our cards are used. 22 Table of Contents Security, Privacy, and Data Protection Trust is important for our relationship with our customers, and we take significant measures to protect the privacy and security of their data and the data of their cardholders.
For instance, we are subject to processing fee and transaction fee regulation where our cards are used and may in the future be subject to Interchange Fee regulations in other countries where our cards are used.
Interchange Fees are transaction- and volume-based fees paid by the Acquiring Bank to the Issuing Bank that issued the payment card used to purchase goods or services from a merchant.
“Interchange Fees” are transaction-based and volume-based fees set by a Card Network and paid by an Acquiring Bank to the Issuing Bank that issued the payment card used to purchase goods or services from a merchant and “Revenue Share” refers to provisions in our customer contracts under which we share a portion of Interchange Fees with our MxM customers.
We have not experienced any work stoppages, and we consider our relations with our employees to be good. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and prospective employees. We believe our culture helps us hire and retain best-in-class talent, as we empower employees to do the best work of their lives.
To our knowledge, none of our employees is represented by a labor union or covered by a collective bargaining agreement. We have not experienced any work stoppages, and we consider our relations with our employees to be good. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing and prospective employees.
The Payments Ecosystem A complex ecosystem of Issuing Banks, Acquiring Banks, Acquirer Processors, Issuer Processors, and the Card Networks that facilitate the exchange of information and funds underpins global payment card purchase transactions.
The payments ecosystem of Issuing Banks, Acquiring Banks, Acquirer Processors, Issuer Processors, and Card Networks facilitates the exchange of information and funds and underpins global payment card purchase transactions. • “Acquirer Processors” connect Acquiring Banks and merchants to the Card Networks, to facilitate the flow of card payment information to an Issuing Bank. • “Acquiring Banks” are the financial institutions that merchants use to hold funds and manage their business.
We have also entered into a number of subsequent arrangements with Mastercard, including certain brand agreements. Under these agreements, as amended, we have agreed to cooperate with Mastercard on a number of initiatives, including international expansion, product, marketing and business development collaboration.
Under these agreements, as amended, we have agreed to cooperate with Mastercard on a number of initiatives, including international expansion, product, marketing, and business development collaboration. The contracts provide Marqeta with tiered incentives based on the processing volume of our customers’ transactions routed through Mastercard and its affiliated networks.
We currently partner with a number of Card Networks, including Visa, Mastercard, and PULSE, which is part of the Discover Global Network, and a number of PIN networks, to process our customers’ transactions on our platform. 15 Table of Contents Marqeta arranges for our MxM customers to use one or more of the available Card Networks, and we include the standard Card Network fees in the pricing arrangements with our MxM customers.
Marqeta arranges for our MxM customers to use one or more of the available Card Networks, and we generally include the standard Card Network fees in the pricing arrangements with our MxM customers, which are reflected in our costs of revenue.
In providing services through our platform, we are also subject to such requirements. To provide payment processing services, we are certified and registered with certain Card Networks as a processor for member institutions. As such, we are subject to applicable Card Network rules that could subject us to fines or penalties for certain acts or omissions.
As such, we are subject to applicable Card Network rules that could subject us to fines or penalties for certain acts or omissions.
We also introduced over 40 new credit APIs that enable customers flexibility and control to design, test, and launch differentiated credit card experiences. • In October 2022, we introduced Marqeta for Banking, an expansion of modern card issuing and an extension of our platform that provides our customers with a suite of bank account and money movement features offered through Marqeta’s Issuing Bank partners, including demand deposit accounts, direct deposit with early pay, ACH, cash loads, and fee-free ATMs, bill pay, and instant funding capabilities.
Upon approval, Marqeta automatically moves funds from an identified funding source into the appropriate account. Digital Banking Marqeta for Banking provides our customers with a suite of bank account and money movement features offered through our Issuing Bank partners, including demand deposit accounts, direct deposit with early pay, ACH, cash loads, and fee-free ATMs, bill pay, and instant funding capabilities.
Even if any such third-party technology did not continue to be available to us on commercially reasonable terms, we believe that alternative technologies would be available as needed in every case. Sales and Marketing Our marketing and business development teams work together closely, under the umbrella of one, closely aligned go-to-market, or GTM, organization.
Even if any such third-party technology did not continue to be available to us on commercially reasonable terms, we believe that alternative technologies would be available as needed in every case. See the section titled “Risk Factors—Risks Relating to Intellectual Property” for a more comprehensive description of risks related to our intellectual property and proprietary rights.
Relationship and Agreements with Issuing Banks We partner with Issuing Banks to provide services for our MxM solution that include card issuance, Card Network sponsorship, and creating deposit accounts used to settle our customers’ transactions because we do not have regulatory authority to perform these activities ourselves.
Issuing Banks provide services for our MxM solutions that can include card issuance, Card Network sponsorship, establishing a line of credit and underwriting standards, and creating deposit accounts used to settle our customers’ transactions.
Marqeta works on its customers’ behalf with Card Networks and Issuing Banks to issue cards, authorize transactions, and communicate with settlement entities. Our platform, powered by open APIs, enables businesses to develop modern, frictionless payment card experiences for consumer and commercial use cases.
Our Relationships with Issuing Banks and Card Networks Marqeta works on its customers’ behalf with Card Networks and Issuing Banks to issue cards, authorize transactions, and communicate with settlement entities. Our contractual relationships with Issuing Banks and Card Networks contribute to Marqeta’s ability to create and manage customized card programs for our customers.
The Block Agreement also provides for certain other terms, including representations and warranties of the parties, intellectual property rights, data ownership and security, limitations on liability, confidentiality and indemnification rights, and other covenants. 14 Table of Contents Our Relationships with Issuing Banks and Card Networks Our contractual relationships with Issuing Banks and Card Networks contribute to Marqeta’s ability to create and manage customized card programs for our customers.
Either we or Block may terminate the Block Agreement under certain specified circumstances, including upon a material breach. The Block Agreement also provides for certain other terms, including representations and warranties of the parties, intellectual property rights, data ownership and security, limitations on liability, confidentiality and indemnification rights, and other covenants.
In addition, the Durbin Amendment to the Dodd-Frank Act provides that Interchange Fees that an Issuing Bank or Card Network receives or charges for debit transactions are regulated by the Federal Reserve and must be “reasonable and proportional” to the cost incurred by the card issuer in authorizing, clearing, and settling the transaction.
Prepaid, Debit, and Credit Card Regulations The Durbin Amendment to the Dodd-Frank Act directs the Federal Reserve Board to regulate debit card Interchange Fees so that they are “reasonable and proportional” to the cost incurred by the card issuer with respect to the transaction.
The contracts provide Marqeta with tiered incentives based on the processing volume of our customers’ transactions routed through Mastercard and its affiliated networks. The current term of the strategic relationship agreement expires in 2028 or at an earlier date if Marqeta achieves a certain processing volume milestone through the Mastercard network.
The current term of the strategic relationship agreement expires in 2028 or at an earlier date if Marqeta achieves a certain processing volume milestone through the Mastercard network. Either party may terminate the agreements under specified circumstances, including upon a material breach that remains uncured for a specified period of time.
We comply with applicable obligations under the Payment Card Industry Data Security Standard, or PCI DSS, and provide a trusted environment for card issuing and payment processing with security, transparency, and real-time information. 8 Table of Contents Our Products Marqeta’s innovative products are developed with deep domain expertise and a customer-first mindset to launch, scale, and manage card programs.
Trust : We comply with applicable obligations under the Payment Card Industry Data Security Standard (“PCI DSS”) and provide a trusted environment for card issuing and payment processing with security, transparency, and real-time information. Card Issuing Our customers can issue debit, prepaid, and credit cards, including instant provision of a tokenized card to a digital wallet.
The contracts provide Marqeta with tiered incentives based on the processing volume of our customers’ transactions routed through Visa and its affiliated networks. As of February 2023, the parties have entered into an extension of the card partner agreement under the strategic alliance framework agreement for a term for five years.
Under these agreements, we have agreed to cooperate with Visa on a number of initiatives, including international expansion, product, marketing, and business development collaboration. The contracts provide Marqeta with tiered incentives based on the processing volume of our customers’ transactions routed through Visa and its affiliated networks.
We maintain privacy policies and terms of service, which describe our practices concerning the use, transmission, and disclosure of certain information.
We maintain privacy policies and terms of service, which describe our practices concerning the use, transmission, and disclosure of certain information. Additionally, our platform hosts, transmits, processes, and stores payment card data and is therefore required to comply with the PCI DSS. As a result, we are subject to PCI DSS audits and must comply with related security requirements.
We monitor guidance from industry and regulatory bodies and update our platform and contractual commitments accordingly. We maintain a privacy policy that describes how we collect, use, and share personal information relating to our customers and we implement appropriate contractual provisions relating to our processing of cardholders’ personal information.
We maintain privacy notices that describe how we collect, use, and share personal information relating to our customers and we implement appropriate contractual provisions relating to our processing of cardholders’ personal information. 15 Table of Contents Our Employees and Human Capital Resources As of December 31, 2023, we had a total of 771 employees and we supplement our workforce with contractors and consultants.
In the years ended December 31, 2022, 2021 and 2020, the Marqeta platform processed TPV of $166.3 billion, $111.1 billion and $60.1 billion, respectively, which reflected year-over-year growth of 50% and 85%, respectively. Our products meet the card issuing and transaction processing needs of commerce disruptors, financial technology companies, companies offering new embedded finance solutions, and large financial institutions alike.
In the years ended December 31, 2023, 2022, and 2021, total processing volume (“TPV”) on the Marqeta Platform was $222.3 billion, $166.3 billion, and $111.1 billion, respectively, which reflected year-over-year growth of 34% and 50%, respectively. TPV is the total dollar amount of payments processed through the Marqeta platform, net of returns and chargebacks.
Given the modularity of the Marqeta platform, certain customers can also opt to incorporate elements of MxM into their PxM card program to create a custom “Powered By Plus” solution. Marqeta Issuing We enable our customers to issue physical, virtual, and tokenized cards across a deep and varied customer base.
Given the modularity of the Marqeta platform, certain customers can also opt to incorporate elements of MxM into their PxM card program to create a custom Powered By Plus (“PxM+”) solution. Our Customers Marqeta serves customers in multiple industry verticals including financial services, on-demand services, buy now, pay later (“BNPL”), expense management, and e-commerce enablement.
Card Network fees may not be used directly or indirectly to compensate Issuing Banks in circumvention of the interchange transaction fee restrictions. While we only partner with Issuing Banks who are exempt from the interchange fee restrictions in the Durbin Amendment to provide services, we remain sensitive to changes in the regulation of Interchange Fees.
We generally partner with Issuing Banks who are exempt from the Interchange Fee caps in the Durbin Amendment to provide MxM services for prepaid and debit card programs. We continue to monitor proposed changes to the Durbin Amendment.
Either party may terminate the agreements under specified circumstances, including upon a material breach that remains uncured for a specified period of time. Visa may also elect to terminate the agreements prior to the natural expiration of the then-current term due to our failure to meet certain performance requirements.
Visa may also elect to terminate the agreements prior to the natural expiration of the then-current term due to our failure to meet certain performance requirements. 11 Table of Contents PULSE Network In 2013, we entered into a direct processor agreement with PULSE Network LLC, which has been subsequently amended.
In addition, we take steps to help ensure that appropriate security measures are maintained by third-party vendors we use, which may include conducting security reviews and audits. Privacy and Data Protection The privacy of our customers’ data and our customers’ cardholders’ data is important to our continued growth and success.
Privacy and Data Protection The privacy of our customers’ data and our customers’ cardholders’ data is important to our continued growth and success, and we take significant measures to protect the privacy and security of such data. Privacy and data protection is a shared responsibility among all our employees.
A modern payments ecosystem puts innovation, accessibility, flexibility, control, and scale into the hands of card issuers by delivering all of these benefits in one easy-to-use platform.
Marqeta provides innovation, accessibility, flexibility, control, and scale by delivering all of these benefits in one easy-to-use platform, full of applications and services, along with an Issuing Bank partner. The customer controls its customers’ experience, leveraging the Marqeta platform. Our Platform and Products Marqeta provides a single, global, cloud-based, open API platform for modern card issuing and transaction processing.
ITEM 1. BUSINESS Our Business Marqeta created modern card issuing, and we believe modern card issuing is at the heart of today’s digital economy. Marqeta’s modern card issuing platform empowers our customers to create customized and innovative payment cards, giving them the ability to build more configurable and flexible payment experiences.
ITEM 1. BUSINESS Our Business 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, giving them configurability and flexibility.
Our customers are able to use our simple, data-rich, and accessible platform to build and rapidly scale their card programs, with extensive control and configurability, and with the highest standards of reliability and security.
Marqeta’s modern platform enables customers to build and rapidly scale their card programs with extensive control and configurability, and with high standards of reliability and security. Our platform is designed to reduce complexity for customers, enabling a full spectrum of consumer and commercial card issuing and transaction processing services in a single solution.
Any third-party intellectual property claims against us could significantly increase our expenses and could have a significant and negative impact on our business, results of operations and financial condition. From time to time, we also incorporate certain intellectual property licensed from third parties, including under certain open source licenses.
We have also registered domain names for websites that we use in our business, such as www.marqeta.com and other similar variations. 12 Table of Contents From time to time, we also incorporate certain intellectual property licensed from third parties, including under certain open source licenses.
We believe that the principal competitive factors in our market include: • industry expertise; • ability to design and launch new card programs at broad scale; • security and reliability; • agility; • speed to market; • platform and product features and functionality; • ability to build new technology and keep pace with innovation; • extensibility; • product pricing; and • brand recognition and reputation.
We believe that the principal competitive factors in our market include: • pricing; • multiple program types (debit, prepaid, credit); • multinational reach; • complete solutions at scale; • flexibility and configurability; • reliability; • compliance solutions; • program management; • brand recognition and reputation; and • industry expertise and customer service.
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Marqeta’s open APIs provide instant access to highly scalable, cloud-based payment infrastructure that enable customers to launch and manage their own card programs, issue cards, and authorize and settle payment transactions.
Added
When our customers come to us to build a payments solution, they are not just building a card, they are building a payments experience. Our platform encompasses debit, prepaid, and credit programs, and provides banking and money movement, risk management, and rewards products.
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The following represent examples of modern card issuing: • When a company issues an expense card to its employees, modern card issuing allows for customizable spend controls depending on the employee and employer’s needs. • When you receive money from your friend through a mobile payment app, modern card issuing helps move the funds to your debit card, making it instantly available to you to make purchases. • When you buy a big screen TV and pay for it in installments using a buy now pay later provider, modern card issuing helps move money to an associated payment card that a buy now pay later provider uses to seamlessly pay the merchant.
Added
We deliver a scaled solution to our customers to maximize the benefit of their card programs while also providing the tech layer that bridges the bank and the customer. Marqeta’s open APIs provide instant access to a highly scalable, cloud-based payment infrastructure that enables customers to embed the payments experience into apps or websites for a personalized user experience.
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Our modern architecture allows for flexibility, a high degree of configurability, and accelerated product development, democratizing access to card issuing technology. It also enables us to rapidly expand our platform’s functionality, creating added value for our customers.
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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 elements or customer support services.
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Marqeta is the first company to offer a platform for modern card issuing and transaction processing and we believe also the first to market with multiple issuing and processing innovations, including the first open APIs, JIT Funding, and Tokenization as a Service. Marqeta’s modern card issuing platform supports prepaid, debit, and credit products.
Added
Our customers can focus on their areas of expertise, with more control over their card programs, while we manage the complexity of running the card programs with our Issuing Bank and Card Network partners (each as defined below).
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Integrated with major global and local Card Networks, modern card issuing enables card issuers to build payment solutions to their specifications and launch them globally. Our platform powers mission-critical experiences for our customers, leading to strong relationships over time as we extend their reach both from a product and geographic perspective.
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See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a more detailed discussion of our strategy and key operating metric. The Payments Ecosystem With every tap, swipe, or payment, a lot happens behind the scenes.
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We become technically integrated within their products and solutions, operationally integrated as customers develop core processes around our tools and platform, and culturally integrated as our partnerships deepen over time.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThis summary should be read together with the more detailed description of each risk factor below. • We have experienced rapid net revenue growth in recent periods and our recent net revenue growth rates may not be indicative of our future net revenue growth. • If we fail to manage our growth effectively, we may be unable to execute our business plan or maintain high levels of customer service and satisfaction, and our business, results of operations, and financial condition could be adversely affected. • Future net revenue growth depends on our ability to retain existing customers, drive increased TPV on our platform, and attract new customers in a cost-effective manner. • We participate in markets that are competitive and continuously evolving, and if we do not compete successfully with established companies and new market entrants, our business, results of operations, financial condition, and future prospects could be materially and adversely affected. • We currently generate significant net revenue from a small number of customers, including our largest customer, Block, and the loss of any of these significant relationships or decline in net revenue from these customers, including as a result of renewals on less favorable terms, could adversely affect our business, results of operations, financial condition, and future prospects. • Our recent growth, ongoing changes in our industry, and our transaction mix make it difficult to forecast our net revenue and evaluate our business and future prospects. • We have a history of net losses, we anticipate increasing operating expenses in the future, and we may not be able to achieve or sustain profitability. • We may experience significant annual or quarterly fluctuations in our results of operations due to a number of factors that make our future results difficult to predict and could cause our results of operations to fall below analyst or investor expectations. • Our business relies on our relationships with Issuing Banks and Card Networks, and if we are unable to maintain these relationships, our business may be adversely affected.
Biggest changeIf we fail to manage growth effectively, our business and financial results may be adversely affected. • Future net revenue growth depends on our ability to attract new customers and retain existing customers in a cost-effective manner. • We participate in markets that are competitive and continuously evolving, and, if we do not compete successfully, our business, results of operations, financial condition, and future prospects may be adversely affected. • We currently generate significant net revenue from a small number of customers, including our largest customer, Block, and the loss of any of these significant relationships or decline in net revenue from these customers, including as a result of renewals on less favorable terms, could adversely affect our business and financial results. • We have a history of net losses and we may not be able to achieve or sustain profitability. • Our results may fluctuate significantly and may not fully reflect the underlying performance of our business, making it difficult to accurately forecast future results.
While we currently operate our business in an effort to ensure our business itself is not subject to the same level of regulation as our Issuing Banks and Card Networks that we partner with, the Issuing Banks and Card Networks operate in a highly regulated environment, and there is a risk that those regulations could become applicable to, or impact, us.
While we currently operate our business in an effort to ensure our business itself is not subject to the same level of regulation as the Issuing Banks and Card Networks that we partner with, Issuing Banks and Card Networks operate in a highly regulated environment, and there is a risk that those regulations could become applicable to or impact us.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • provide that our board of directors will be classified into three classes of directors with staggered three-year terms; • permit our board of directors to establish the number of directors and fill any vacancies and newly-created directorships; • require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and amended and restated bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • provide that only the Chairperson of our board of directors, our Chief Executive Officer, or a majority of our board of directors will be authorized to call a special meeting of stockholders; 56 Table of Contents • provide for a dual class common stock structure where holders of our Class B common stock are able to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter, or repeal our amended and restated bylaws; and • contain advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • provide that our board of directors will be classified into three classes of directors with staggered three-year terms; • permit our board of directors to establish the number of directors and fill any vacancies and newly-created directorships; • require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and amended and restated bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • provide that only the chairperson of our board of directors, our chief executive officer, or a majority of our board of directors will be authorized to call a special meeting of stockholders; • provide for a dual class common stock structure where holders of our Class B common stock are able to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; 39 Table of Contents • prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter, or repeal our amended and restated bylaws; and • contain advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Even if we are not a party to any litigation between a customer and a third party relating to infringement by our solutions, an adverse outcome in any such litigation could make it more difficult for us to defend our solutions against intellectual property infringement claims in any subsequent litigation where we are a named party.
Even if we are not a party to any litigation between a customer and a third party relating to infringement by our products, an adverse outcome in any such litigation could make it more difficult for us to defend our solutions against intellectual property infringement claims in any subsequent litigation where we are a named party.
Moreover, if the financial condition of a customer deteriorates significantly or a customer becomes subject to a bankruptcy proceeding, we may not be able to recover amounts due to us from the customer. Furthermore, weak economic conditions may make it more difficult to collect on outstanding accounts receivable.
Moreover, if the financial condition of a customer deteriorates significantly or a customer becomes subject to a bankruptcy proceeding, we may not be able to recover amounts due to us from the customer. Weak economic conditions may make it more difficult to collect on outstanding accounts receivable.
Our ability to attract new customers and increase net revenue from customers will depend in significant part on our ability to adapt to industry standards, anticipate trends, and continue to enhance our platform and introduce new products and capabilities on a timely and secure basis to keep pace with technological developments and customer expectations.
Our ability to attract new customers and increase net revenue will depend in significant part on our ability to adapt to industry standards, anticipate trends, and continue to enhance our platform and introduce new products and capabilities on a timely and secure basis to keep pace with technological developments and customer expectations.
A change in accounting standards or practices may have a significant effect on our results of operations or financial condition and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future.
A change in accounting standards or practices may have a significant effect on our results of operations or financial condition and may affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future.
We face competition along several dimensions, including providers with legacy technology platforms, such as Fidelity National Information Services (FIS), Fiserv, and Global Payments (TSYS); legacy API-based providers, such as Galileo, i2c, and Visa DPS; and emerging providers, such as Adyen and Stripe.
We face competition along several dimensions, including providers with legacy technology platforms, such as Fidelity National Information Services (FIS), Fiserv, and Global Payments (TSYS); modern API-based providers, such as Galileo, i2c, and Visa DPS; and emerging providers, such as Adyen and Stripe.
Many of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as greater brand name recognition, longer operating histories, larger sales and marketing budgets and resources, more established relationships with vendors or customers, greater customer support resources, greater resources to make acquisitions and investments, lower labor and development costs, larger and more mature intellectual property portfolios, and substantially greater financial, technical, and other resources.
Many of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as greater brand name recognition, longer operating histories, larger sales and marketing budgets and resources, more established relationships with vendors or customers, greater customer support resources, greater resources to make acquisitions and investments, lower labor and development costs, larger and more mature intellectual property portfolios, and other substantially greater resources.
If spending by their customers declines, our customers could process fewer payments with us or, if our customers cease to operate, they could stop using our platform and our products and services altogether.
If spending by their customers declines, our customers could process fewer payments with us or, if our customers cease to operate, they would stop using our platform, products, and services altogether.
The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of net revenue and expenses that are not readily apparent from other sources. Assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition and accounting for share-based compensation.
The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of net revenue and expenses that are not readily apparent from other sources. Assumptions and estimates used in preparing our Consolidated Financial Statements include those related to revenue recognition, accounting for business combinations and share-based compensation.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware is the sole and exclusive forum for any state law claims for: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; • any action asserting a claim arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws; or • any action asserting a claim that is governed by the internal affairs doctrine, or the Delaware Forum Provision.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware is the sole and exclusive forum for any state law claims for: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; • any action asserting a claim arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws; or • any action asserting a claim that is governed by the internal affairs doctrine (the “Delaware Forum Provision”).
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A common stock. 42 Table of Contents Risks Relating to Regulation Our business is subject to extensive regulation and oversight in a variety of areas, directly and indirectly through our relationships with Issuing Banks and Card Networks, which regulations are subject to change and to uncertain interpretation.
Our results of operations may also be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A common stock. 29 Table of Contents Risks Relating to Regulation Our business is subject to extensive regulation and oversight in a variety of areas, directly and indirectly through our relationships with Issuing Banks and Card Networks, which regulations are subject to change and to uncertain interpretation.
Any of these results could harm our brand and adversely affect our results of operations. 53 Table of Contents Risks Relating to Ownership of Our Class A Common Stock The trading price of our Class A common stock has been and is likely to continue to be volatile, which could cause the value of your investment to decline.
Any of these results could harm our brand and adversely affect our results of operations. 37 Table of Contents Risks Relating to Ownership of Our Class A Common Stock The trading price of our Class A common stock has been and is likely to continue to be volatile, which could cause the value of your investment to decline.
Various countries regulate the import of certain encryption technology, including through im port permitting and licensing requirements, and have enacted laws that could limit our customers’ ability to use our products in those countries if our products are subject to such laws and regulations.
Various countries regulate the import of certain encryption technology, including through import permitting and licensing requirements, and have enacted laws that could limit our customers’ ability to use our products in those countries if our products are subject to such laws and regulations.
Accordingly, these customers may have, or may enter into in the future, similar agreements with our competitors, which could adversely affect our ability to drive the level of processing volume and revenue growth that we seek to achieve.
Accordingly, these customers may have, or may enter into in the future, similar agreements with our competitors, which could adversely affect our ability to drive the processing volume and revenue growth that we seek to achieve.
To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the United States District Court for the District of Delaware shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or the Federal Forum Provision, as we are incorporated in the State of Delaware.
To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the United States District Court for the District of Delaware shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”), as we are incorporated in the State of Delaware.
In particular, forecasting our future results of operations can be challenging because our net revenue depends in part on our customers’ end users, and our transaction mix adds further complexity. Our transaction mix refers to the proportion of signature debit versus PIN debit transactions and consumer versus commercial transactions that make up our TPV.
Forecasting our future results of operations can be challenging because of such fluctuations and because our net revenue depends in part on our customers’ end users. Our transaction mix adds further complexity. Our transaction mix refers to the proportion of signature debit versus PIN debit transactions and consumer versus commercial transactions that make up our TPV.
If Sutton Bank terminates our agreement with them or is unable or unwilling to settle our transactions for any reason, we may be required to switch some or all of our processing volume to one or more other Issuing Banks, including to any of the three other U.S. Issuing Banks that we currently contract with.
If Sutton Bank terminates our agreement with them or is unable or unwilling to settle our transactions for any reason, we may be required to switch some or all of our processing volume to one or more other Issuing Banks, including to any of the other Issuing Banks that we currently contract with.
In addition, issuing additional shares of our Class A common stock or securities convertible into our Class A common stock or debt or other securities may dilute the economic and voting rights of our existing stockholders and would likely reduce the market price of our Class A common stock both upon issuance and conversion, in the case of securities convertible into our Class A common stock.
In addition, issuing additional shares of our Class A common stock or securities convertible into our Class A common stock or debt or other securities may dilute your economic and voting rights and would likely reduce the market price of our Class A common stock both upon issuance and conversion, in the case of securities convertible into our Class A common stock.
If our net revenue and TPV growth rates decline, we may not achieve profitability as expected, and our business, financial condition, results of operations, and the price of our Class A common stock would be adversely affected.
If our TPV and net revenue growth rates decline or continue to decline, we may not achieve profitability as expected, and our business, financial condition, results of operations, and the price of our Class A common stock would be adversely affected.
Any changes in tax legislation, regulations, policies, or practices in the jurisdictions in which we operate could materially increase the amount of taxes we owe, thereby negatively impacting our results of operations as well as our cash flows from operations.
Any changes in tax legislation, regulations, policies, or practices in the jurisdictions in which we operate could increase our effective tax rate and materially increase the amount of taxes we owe, thereby negatively impacting our results of operations as well as our cash flows from operations.
However, when a customer does not have sufficient funds to settle a transaction, we are liable to the Issuing Bank to settle the transaction, including a fraudulent or disputed transaction, and may incur losses as a result of claims from the Issuing Bank.
However, when a customer does not have sufficient funds to settle a transaction, we may be liable to the Issuing Bank to settle the transaction, including fraudulent or disputed transactions, and may incur losses as a result of claims from the Issuing Bank.
If our estimates or judgments relating to our accounting policies prove to be incorrect, our results of operations could be adversely affected. The preparation of financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
If our estimates or judgments relating to our accounting policies prove to be incorrect, our results of operations could be adversely affected. The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” (generally defined as a greater than 50-percentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period) is subject to limitations on a company’s ability to utilize its NOLs to offset taxable income.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” (generally defined as a greater than 50-percentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period) is subject to limitations on a company’s ability to utilize its NOLs and other tax attributes to offset taxable income.
If we fail to maintain an effective system of disclosure controls and procedures or internal control over financial reporting, our ability to report timely and accurate financial results or comply with applicable regulations could be impaired, and our business, operating results, and the market price of our Class A common stock may be adversely affected.
If we fail to maintain an effective system of disclosure controls and procedures or internal control over financial reporting, or remediate our existing material weaknesses, our ability to report timely and accurate financial results or comply with applicable regulations could be impaired, and our business, operating results, and the price of our Class A common stock may be adversely affected.
Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively continue to control a majority of the combined voting power of our common stock and therefore control all matters submitted to our stockholders for approval and may continue to control such matters until the tenth anniversary of our initial public offering, when all outstanding shares of Class A common stock and Class B common stock will convert automatically into shares of a single class of common stock.
The holders of our Class B common stock collectively continue to control a majority of the combined voting power of our common stock and therefore control all matters submitted to our stockholders for approval and may continue to control such matters until the tenth anniversary of our initial public offering, when all outstanding shares of Class A common stock and Class B common stock will convert automatically into shares of a single class of common stock.
We have in the past, and may in the future, experience high attrition and turnover rates across the Company, including key employees. The loss of these employees may lead to a decrease in institutional knowledge which may adversely affect our business.
We have in the past, and may in the future, experience high attrition and turnover rates across the Company, including executive officers and other key personnel. The loss of these employees may lead to a decrease in institutional knowledge which may adversely affect our business.
From time to time, we may make decisions that may reduce our short-term operating results if we believe those decisions will improve the experiences of our customers, end users, and other users of our products and services, which we believe will improve our operating results over the long term.
From time to time, we may make decisions that may reduce our short-term operating results if we believe those decisions will improve the experiences of our customers and their end users, which we believe will improve our operating results over the long term.
A successful assertion by one or more states, or foreign jurisdictions, requiring us to collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest.
A successful assertion by one or more states, or foreign jurisdictions, requiring us to collect sales, value added, or similar indirect taxes where we presently do not do so, or to collect more of such indirect taxes in a jurisdiction in which we currently do collect some indirect taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest.
We may have exposure to greater-than-anticipated tax liabilities, which may materially and adversely affect our business, results of operations, and financial condition. The determination of our worldwide provision for income taxes, value-added taxes, and other tax liabilities requires estimation and significant judgment, and there are many transactions and calculations where the ultimate tax determination is uncertain.
We may have exposure to greater-than-anticipated tax liabilities, which may materially and adversely affect our business, results of operations, and financial condition. The determination of our worldwide provision for income taxes, value-added taxes, and other tax liabilities requires estimation and significant judgment, and the ultimate tax determination is uncertain.
We anticipate our operating expenses to continue to increase in the foreseeable future as we hire additional personnel, adjust compensation packages to hire new or retain existing employees, expand our operations and infrastructure, continue to enhance our platform and develop and expand its capabilities, expand our products and services, and expand and improve our APIs.
We anticipate our operating expenses to continue to increase in the foreseeable future as we hire additional personnel, adjust compensation packages to hire new or retain existing employees, expand our operations and infrastructure, and continue to enhance and expand our platform, products, and services.
To maintain and improve the effectiveness of our disclosure controls and procedures and our internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.
To maintain and improve the effectiveness of our disclosure controls and procedures and remediate the material weaknesses in our internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including technology- and accounting-related costs and significant management oversight.
We currently generate significant net revenue from a small number of customers, including our largest customer, Block, and the loss of any of these significant relationships or decline in net revenue from these customers, including as a result of renewals on less favorable terms, could adversely affect our business, results of operations, financial condition, and future prospects. 28 Table of Contents A small number of customers account for a large percentage of our net revenue.
We currently generate significant net revenue from a small number of customers, including our largest customer, Block, and the loss of any of these significant relationships or decline in net revenue from these customers, including as a result of renewals on less favorable terms, could adversely affect our business, results of operations, financial condition, and future prospects.
As of December 31, 2022 and December 31, 2021, our accumulated deficit was approximately $602.2 million and $417.5 million respectively. We expect to continue to incur net losses for the foreseeable future and we may not achieve profitability.
As of December 31, 2023 and December 31, 2022, our accumulated deficit was approximately $825.2 million and $602.2 million, respectively. We expect to continue to incur net losses for the foreseeable future and we may not achieve profitability.
Disruptions in the credit markets or other factors, such as the current inflationary environment and rising interest rates, could adversely affect the availability, diversity, cost, and terms of funding arrangements.
Disruptions in the credit markets or other factors, such as inflation or rising interest rates, could adversely affect the availability, diversity, cost, and terms of funding arrangements.
We cannot be certain that our insurance coverage will be adequate for privacy, information security, and data protection liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that an insurer will not deny coverage as to any future claim.
We cannot be certain that our insurance coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that an insurer will not deny coverage as to any future claim.
We can be held liable under anti-corruption, anti-bribery, AML, and similar laws for the corrupt or illegal activities of our third-party intermediaries and our employees, representatives, contractors, partners, and agents, even if we do not authorize such activities.
We can be held liable under AML, AB&C, sanctions, and similar laws for the corrupt or illegal activities of our third-party intermediaries and our employees, representatives, contractors, partners, and agents, even if we do not authorize such activities.
Furthermore, our implementation of new practices and processes designed to comply with changing tax laws and regulations could require us to make substantial changes to our business practices, allocate additional resources, and increase our costs, potentially negatively affecting our business, results of operations, and financial condition.
Furthermore, compliance with changing tax laws and regulations could require us to make substantial changes to our business practices, allocate additional resources, and increase our costs, potentially negatively affecting our business, results of operations, and financial condition.
In addition, this concentrated control may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may believe are in your best interest as one of our stockholders.
In addition, this concentrated control may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may believe are in your best interest as a stockholder.
If we fail to comply with open source licenses, we may be subject to certain requirements, including requirements that we offer our products that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating, or using the open source software and that we license such modifications or derivative works under the terms of applicable open source licenses.
If we fail to comply with an open source license, we may be required to offer our products that incorporate the open source software for no cost, make available the source code for modifications or derivative works we create based upon, incorporating, or using the open source software, and license such modifications or derivative works under the terms of the open source software.
Our dual class structure may also depress the trading price of our Class A common stock due to negative perceptions by market participants and other stakeholders. Certain index providers have announced restrictions on including companies with multiple class share structures in certain of their indexes.
Our dual class structure may also depress the trading price of our Class A common stock due to negative perceptions by market participants and other stakeholders. Certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indices. Similarly, several stockholder advisory firms have announced their opposition to the use of multiple-class structures.
We may be subject to governmental export controls and economic sanctions regulations that could impair our ability to compete in international markets and could subject us to liability if we are not in compliance with applicable laws. Certain of our products and services may be subject to export control and economic sanctions regulations, including the U.S.
We may be subject to governmental export controls and economic sanctions regulations that could impair our ability to compete in international markets and could subject us to liability if we fail to comply. Certain of our products and services may be subject to export control and economic sanctions regulations, including the U.S.
In addition, our amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder. 57 Table of Contents The Delaware Forum Provision and the Federal Forum Provision in our amended and restated bylaws may impose additional litigation costs on stockholders in pursuing any such claims.
In addition, our amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder.
A significant portion of our payment transactions are settled through one Issuing Bank, Sutton Bank. For the years ended December 31, 2022, 2021 and 2020, 82%, 90% and 96%, respectively, of TPV was settled through Sutton Bank.
A significant portion of our payment transactions are settled through a small number of Issuing Banks. For the years ended December 31, 2023, 2022, and 2021, 76%, 82%, and 90%, respectively, of TPV was settled through one Issuing Bank, Sutton Bank.
We would seek to recover such losses from the customer, but we may not fully recover them if the customer is unwilling or unable t o pay due to their financial conditio n. Additionally, when a chargeback request is approved, the purchase price of the transaction is refunded to the customer’s end user’s account through our platform.
We would seek to recover such losses from the customer, but we may not fully recover them if the customer is unwilling or unable to pay. 25 Table of Contents Additionally, when a chargeback request is approved, the purchase price of the transaction is refunded to the customer’s end user’s account through our platform.
As litigation is inherently unpredictable, we cannot assure you that any potential claims or disputes will not have a material adverse effect on our business, results of operations, and financial condition.
We cannot assure you that any actual or potential litigation, claims, disputes, investigations, or proceedings will not have a material adverse effect on our business, results of operations, and financial condition.
If we fail to make such changes or otherwise resolve the issue with the Card Networks, the Card Networks could charge us additional fees or prohibit us from processing transactions. We have been charged such additional fees in the past, and expect to continue to be charged such fees in the future. These additional fees are considered costs of revenue.
If we fail to make required changes or otherwise resolve an issue with the Card Networks, the Card Networks could charge us additional fees. We have been charged such additional fees in the past, and expect to continue to be charged such fees in the future as Card Network rules change. These additional fees are considered costs of revenue.
If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including: the possible loss of export privileges; fines imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers. 47 Table of Contents In addition, changes in applicable export or economic sanctions regulations may create delays in the introduction and deployment of our platform, products, and services in international markets, or, in some cases, prevent the use of our platform and products or provision of our services in certain countries or with certain end users.
If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export privileges, fines imposed on us and responsible employees, and, in extreme cases, the incarceration of responsible employees. 32 Table of Contents Changes in applicable export or economic sanctions regulations, shifts in the enforcement or scope of existing regulations, or change in the countries, governments, persons, or technologies targeted by such regulations may create delays in the introduction and deployment of our platform and existing or future products and services in international markets, or, in some cases, prevent or decrease the use of our platform and existing or future products or provision of existing or future services in certain countries or with certain end users.
If we do not properly process the chargeback, the customer may request that we fund the refunded amount to their end user. We have in the past, and may in the future, incur costs relating to the improper processing of chargeback requests.
If we do not properly process the chargeback, the customer may request that we fund the refunded amount to their end user. We have in the past, and may in the future, incur costs relating to the improper processing of chargeback requests. The costs we incur related to our settlement obligations may adversely affect our business and financial condition.
Our revenue is impacted, to a significant extent, by general economic conditions, their impact on levels of spending by businesses and their customers, and the financial performance of our customers. Our business, the industry, and our customers’ businesses are sensitive to macroeconomic conditions.
Our net revenue is impacted, to a significant extent, by general economic conditions, their impact on levels of spending by businesses and their customers, and the financial performance of our customers.
If any of these new or improved controls and systems do not perform as expected, we may experience material weaknesses in our controls. In addition, testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business.
If any of our controls and systems do not perform as expected, we may experience additional material weaknesses or we may be unable to remediate the existing material weaknesses. In addition, testing and maintaining internal controls and disclosure controls may divert management’s attention from other matters that are important to our business.
Our directors, executive officers, and their affiliates, beneficially own in the aggregate 50.1% of the voting power of our capital stock as of December 31, 2022.
Our directors, executive officers, and their affiliates, beneficially own in the aggregate 52.4% of the voting power of our capital stock as of December 31, 2023.
We are subject to, and have an obligation to comply with, anti-corruption, anti-bribery, anti-money-laundering, and similar laws, and non-compliance with such laws and their obligations can subject us to criminal penalties or significant fines, significantly and adversely affect our business and reputation , or have other adverse consequences for us.
We are subject to anti-money laundering, anti-bribery and corruption (“AB&C”), sanctions, and similar laws, and non-compliance with such laws and regulations can subject us to criminal penalties or significant fines, adversely affect our business and reputation, or have other adverse consequences for us.
If we fail to comply with laws and regulations applicable to our business in a timely and appropriate manner, or if this is perceived or reported to have occurred, we may be subject to litigation or regulatory investigations or other proceedings, we may have to pay fines and penalties or become subject to additional obligations or restrictions imposed upon our business or operations, our reputation may be harmed, and our customer relationships and reputation may be adversely affected, which could have a material adverse effect on our business, results of operations, and financial condition.
If we fail to comply or are alleged or perceived to have failed to comply with applicable laws and regulations, we may be subject to litigation or regulatory investigations or other proceedings, we may have to pay fines and penalties or become subject to civil or criminal liability or have additional obligations or restrictions imposed upon our business, and our customer relationships and reputation may be adversely affected, which could have a material adverse effect on our business, results of operations, and financial condition.
We may not have sufficient protection or recovery plans in certain circumstances, such as a significant natural disaster, and our business interruption insurance may be insufficient to compensate us for losses that may occur.
We may not have sufficient protection or recovery plans in certain circumstances, such as a significant natural disaster, and our business interruption insurance may be insufficient to compensate us for losses that may occur. 42 Table of Contents Item 1B. Unresolved Staff Comments None.
We believe our net revenue growth depends on several factors, including, but not limited to, our ability to: • acquire new customers and retain existing customers on favorable terms; • achieve widespread acceptance and use of our platform and the products and services we offer, including in markets outside of the United States; • increase the use of our platform and our offerings, TPV, and the number of transactions on our platform; • effectively scale our operations; • expand our product and service offerings; • diversify our customer base; • maintain and grow our network of vendors and partners, including Issuing Banks and Card Networks; • hire and retain talented employees at all levels of our business; • maintain the security and reliability of our platform; • adapt to changes in laws and regulations applicable to our business; • adapt to changing macroeconomic conditions and evolving conditions in the payments industry; and • successfully compete against established companies and new market entrants.
We believe our net revenue growth depends on several factors, including, but not limited to, our ability to: • acquire new customers and retain existing customers on favorable terms; • achieve widespread acceptance and use of our platform and the products and services we offer, including in markets outside of the United States; • increase our offerings, TPV, and the number of customers and transactions on our platform; • effectively scale our operations, including successfully integrating acquired businesses and technology; • expand our product and service offerings; • diversify our customer base; • maintain and grow our network of vendors and partners, including Issuing Banks and Card Networks; • maintain the security and reliability of our platform; • adjust for the impact of the anticipated accounting treatment of our customer agreements and the risk that such accounting treatment may be subject to further changes or developments; • adapt to changes in laws and regulations applicable to our business; • adapt to changing macroeconomic conditions and evolving conditions in the payments industry; and • successfully compete against established companies and new market entrants.
Such investments are generally illiquid and may never generate value. Further, we may invest in companies that do not succeed, and our investments may lose all or some of their value, which could result in us recording impairment charges reflected in our results of operations.
If we invest in companies that do not succeed, our investments may lose all or some of their value, which could result in us recording impairment charges reflected in our results of operations.
In addition, as of December 31, 2022, we had 36,156,445 option shares outstanding that, if fully vested and exercised, would result in the issuance of an equal number of shares of Class B common stock or Class A common stock, as well as 34,146,546 total shares of Class B or Class A common stock subject to RSU awards.
In addition, as of December 31, 2023, we had 36,670,638 option shares outstanding that, if fully vested and exercised, would result in the issuance of an equal number of shares of Class A or Class B common stock, as well as 38,177,072 total shares of Class A or Class B common stock subject to RSU awards.
In the past, stockholders have often instituted securities class action litigation against a company following periods of overall market volatility and volatility in the market price of that company’s securities.
In the past, stockholders have often instituted securities class action litigation against a company following periods of overall market volatility and volatility in the market price of that company’s securities. Securities litigation can result in substantial costs and divert resources and the attention of management.
While we have programs and controls designed to ensure compliance with all applicable AML, and anti-bribery laws and regulations, we cannot assure you that none of our third-party intermediaries and our employees, representatives, contractors, partners, and agents will take actions in violation of those controls and laws.
While we have programs and controls designed to comply with applicable AML, AB&C, and sanctions laws and regulations, we cannot assure you that our programs and controls will be effective in ensuring compliance and that none of our third-party intermediaries or employees, representatives, contractors, partners, and agents will take actions in violation of those controls and laws.
As a result, new or expanded regulation focusing on business customers or changes in interpretation or enforcement of regulations may have an adverse effect on our business, results of operations, and financial condition due to increased compliance costs and new restrictions affecting the terms under which we offer our Platform or our products and services.
New or expanded regulation or changes in interpretation or enforcement of existing regulations may have an adverse effect on our business, results of operations, and financial condition due to increased compliance costs and new restrictions affecting the offering of our platform, products and services.
The Court of Chancery of the State of Delaware and the United States District Court for the District of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.
The Court of Chancery of the State of Delaware and the United States District Court for the District of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders. 40 Table of Contents We cannot guarantee that our share repurchase program will enhance long-term stockholder value.
Our total net revenue was $748.2 million, $517.2 million and $290.3 million for the years ended December 31, 2022, 2021, and 2020, respectively, an increase of 45% and 78% from the prior years, respectively.
Our total net revenue was $676.2 million, $748.2 million, and $517.2 million for the years ended December 31, 2023, 2022, and 2021, respectively, a decrease of (10)% and an increase of 45% from the prior years, respectively.
We may not be able to respond quickly or effec tively to regulatory, legislative, or other developments, and these changes may in turn impair our ability to offer our existing or planned features, products, and services and/or increase our cost of doing business.
We may not be able to respond quickly or effectively to, or accurately predict the scope or applicability of, regulatory, legislative, or other developments, which may in turn impair our ability to offer our existing or planned features, products, and services and/or increase our cost of doing business.
We have from time to time experienced, are currently experiencing, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications, at a speed that is consistent with our business needs, and at an appropriate cost.
We have from time to time experienced, are currently experiencing, and we expect to continue to experience difficulty in hiring and retaining employees with appropriate qualifications, at a speed that is consistent with our business needs, and at an appropriate cost. Our labor expenses may increase as a result of a shortage in the supply of qualified personnel.
If any such claim is valid, we may be compelled to cease our use of such intellectual property or other proprietary rights and pay damages, potentially adversely affecting our business. Even if such claims were not valid, defending them could be expensive and distract our management team, adversely affecting our results of operations.
If any such claim is valid, we may be required to stop using such intellectual property or other proprietary rights and pay damages, which could adversely affect our business. Even if such claims were not valid, defending them could be expensive and distract our management team.
We have a history of net losses, we anticipate increasing operating expenses in the future, and we may not be able to achieve or sustain profitability. 29 Table of Contents We have incurred significant net losses since our inception, including net losses of $184.8 million, $163.9 million and $47.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.
We have a history of net losses and we may not be able to achieve or sustain profitability. We have incurred significant net losses since our inception, including net losses of $223.0 million, $184.8 million, and $163.9 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Accordingly, we may be unable to prepare accurate internal financial forecasts, and our results of operations in future reporting periods may differ materially from our estimates and forecasts or the expectations of investors or analysts, causing our business to suffer and our Class A common stock trading price to decline.
Accordingly, we may be unable to prepare accurate internal financial forecasts, and our results of operations in future reporting periods may differ materially from our estimates and forecasts or the expectations of investors or financial analysts, causing our business to suffer and our Class A common stock trading price to decline. 20 Table of Contents We rely on our relationships with Issuing Banks and Card Networks, and if we are unable to maintain these relationships, our business may be adversely affected.
If we fail to adapt to rapid technological changes and develop enhancements and new capabilities for our platform, our ability to remain competitive could be impaired. We compete in an industry that is characterized by rapid technological changes, frequent introductions of new products and services, and evolving industry standards and regulatory requirements.
If we fail to anticipate, adapt to, or keep pace with new technologies and develop new services and capabilities for our platform, our business and future growth could be harmed. We compete in an industry that is characterized by rapid technological changes, frequent introductions of new products and services, and evolving industry standards and regulatory requirements.
We could also issue shares of our Class A common stock or securities convertible into our Class A common stock or debt or other securities in connection with acquisitions or other strategic transactions. Additionally, we expect to grant equity awards to employees, directors, and consultants under our stock incentive plan.
For example, we could issue shares of our Class A common stock or securities convertible into our Class A common stock or debt or other securities in connection with acquisitions or other strategic transactions or in an attempt to obtain financing or to further increase our capital resources. 38 Table of Contents Additionally, we expect to grant equity awards to employees and directors under our stock incentive plan.
Harm to our brand can arise from many sources, including failure by us or our partners and vendors to satisfy expectations of service and quality, inadequate protection or misuse of sensitive information, compliance failures and claims, litigation and other claims, and misconduct by our vendors or other counterparties.
Harm to our brand can arise from many other sources as well, including inadequate protection or misuse of sensitive information, compliance failures, litigation, and other claims, and misconduct by our employees, contractors, or vendors.
We may require additional capital to support our business, and this capital might not be available on acceptable terms, if at all. We intend to continue to make investments to support our business and may require additional funds.
Additionally, we do not maintain any key person insurance policies. 26 Table of Contents We may require additional capital to support our business, and this capital might not be available on acceptable terms, if at all. We intend to continue to make investments to support our business and may require additional funds.
Our customer support team also helps increase awareness and usage of our platform while helping customers address inquiries and issues. If we do not devote sufficient resources or are otherwise unsuccessful in assisting our customers effectively, it could adversely affect our ability to retain existing customers and could prevent prospective customers from adopting our platform.
If we do not devote sufficient resources or are otherwise unsuccessful in assisting our customers effectively, it could adversely affect our ability to retain existing customers and could prevent prospective customers from adopting our platform.
We have in the past and may in the future seek to acquire or invest in businesses, products, or technologies that we believe could complement our platform, products, and services or expand the breadth of our platform, enhance our products and capabilities, expand our geographic reach or customer base, or otherwise offer growth opportunities.
We have in the past and may in the future acquire or invest in businesses, products, or technologies that we believe could complement our platform, products, and services, expand our geographic reach or customer base, or otherwise offer growth opportunities. For example, we acquired Power Finance Inc. in February 2023.
While we have established reserves based on assumptions and estimates that we believe are reasonable to cover such eventualities, these reserves may prove to be insufficient.
While we have established reserves based on assumptions and estimates that we believe are reasonable to cover such eventualities, these reserves may prove to be insufficient, which may have an adverse effect on our business, results of operations, and financial condition.
We may also be the target of incomplete, inaccurate, and misleading or false statements about our company and our business that could damage our brand and deter customers from adopting our services.
We may also be the target of incomplete, inaccurate, and misleading or false statements about our company and our business that could damage our brand and deter customers from adopting our services. As a result, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.
Adoption of these types of accounting standards and any difficulties in implementation of changes in accounting principles, including the ability to modify our accounting systems, could cause us to fail to meet our financial reporting obligations, potentially resulting in regulatory discipline and weakening investors’ confidence in us.
Changes to existing rules or practices may adversely affect our reported results of operations or the way we conduct our business. 33 Table of Contents Adoption of these types of accounting standards and any difficulties in implementation of changes in accounting principles, including the ability to modify our accounting systems, could cause us to fail to meet our financial reporting obligations, potentially resulting in regulatory discipline and weakening investors’ confidence in us.
Weak economic conditions or a significant deterioration in economic conditions, including the current inflationary environment and the possibility of a recession could result in a reduced volume of business for our customers and prospective customers, and demand for, and use of, our platform, products, and services may decline.
Weak economic conditions or a significant deterioration in economic conditions could result in a reduced volume of business for our customers and prospective customers, demand for, and use of, our platform, products, and services may decline, and prospective customers could delay adoption or elect not to adopt our platform.
We participate in markets that are competitive and continuously evolving, and if we do not compete successfully with established companies and new market entrants, our business, results of operations, and financial condition, and future prospects could be materially and adversely affected. We operate in a highly competitive and dynamic industry.
We participate in markets that are competitive and continuously evolving, and, if we do not compete successfully, our business, results of operations, and financial condition, and future prospects may be adversely affected.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters is located in Oakland, California, where we currently lease approximately 63,284 square feet pursuant to a lease agreement that expires in 2026. We also lease and purchase service memberships to additional facilities in London and Manchester, United Kingdom as well as Melbourne, Australia.
Biggest changeItem 2. Properties Our corporate headquarters is located in Oakland, California, where we currently lease approximately 63,284 square feet pursuant to a lease agreement that expires in 2026. We also lease an additional facility in London, United Kingdom. We believe that our facilities are suitable to meet our current needs.
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We believe that our facilities are suitable to meet our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings We are not currently a party to any legal proceedings that we believe to be material to our business or financial condition. From time to time, we may be subject to legal proceedings and claims arising in the ordinary course of business. Item 4. Mine Safety Not applicable. 60 Table of Contents PART II
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Item 3. Legal Proceedings From time to time, we may be subject to legal proceedings and claims arising in the ordinary course of business. We are currently involved in the following matter: On August 24, 2023, a putative class action and shareholder derivative lawsuit was filed in the case captioned Stephanie Smith v. Jason Gardner, et al.
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(Case No. 2023-0872-MTZ) in the Court of Chancery for the State of Delaware against each of the members of our board of directors and naming Marqeta as a nominal defendant.
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The complaint alleges that the individual defendants breached fiduciary duties in approving the 2023 Share Repurchase Program by failing to implement measures to prevent Marqeta founder Jason Gardner from acquiring control of the Company or to ensure that unaffiliated stockholders receive a control premium. The plaintiff seeks damages and injunctive relief in the case, among other relief.
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On February 24, 2024 the parties entered into a Standstill and Release Agreement (the “Standstill Agreement”) in which (i) the plaintiff agreed to file a stipulation of dismissal of the lawsuit, (ii) Mr.
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Gardner agreed not to take unilateral, affirmative action to increase his voting power above 49.99% of the total voting power of the Company’s outstanding stock for the period of time between and including February 24, 2024 and September 11, 2024, and (iii) the parties agreed to releases and related provisions. The stipulation of dismissal has received court approval.
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The summary of the Standstill Agreement is qualified in its entirety by reference to the full text, which is filed as Exhibit 99.1 to this Form 10-K and is incorporated herein by reference. Item 4. Mine Safety Not applicable. 44 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchase of Equity Securities The following table contains information relating to the repurchases of our common stock made by us in the three months ended December 31, 2022: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) October 1 - October 31, 2022 3,050,868 $ 7.25 3,050,805 63,969,722.39 November 1 - November 30, 2022 2,802,531 $ 6.69 2,798,972 45,195,438.19 December 1 - December 31, 2022 3,848,712 $ 6.32 3,848,712 20,799,675.89 Total 9,702,111 9,698,489 (1) Represents share repurchased as part of a publicly announced program and shares of unvested common stock previously issued upon early exercise of unvested stock options that were repurchased by us from former employees upon their termination in accordance with the terms of their stock option agreements.
Biggest changeThe returns shown are based on historical results and are not intended to be indicative of future performance. 45 Table of Contents Purchase of Equity Securities by the Issuer The following table contains information relating to the repurchases of our common stock made by us in the three months ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) October 1 - October 31, 2023 3,804,287 $ 5.47 3,804,287 67,271,767 November 1 - November 30, 2023 4,091,046 $ 5.72 4,091,046 43,858,299 December 1 - December 31, 2023 1,779,177 $ 6.53 1,779,177 32,244,882 Total 9,674,510 9,674,510 (1) On May 8, 2023, our board of directors authorized a share repurchase program of up to $200 million of our Class A common stock beginning May 11, 2023.
Under the repurchase program, we were authorized to repurchase shares through open market purchases, in privately negotiated transactions or by other means, in accordance with applicable federal securities laws, including through trading plans under Rule 10b5-1 of the Exchange Act. The share repurchase program has no set expiration date.
Under the repurchase program, we are authorized to repurchase shares through open market purchases, in privately negotiated transactions or by other means, in accordance with applicable federal securities laws, including through trading plans under Rule 10b5-1 of the Exchange Act. The share repurchase program has no set expiration date.
Because many of the shares of our Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners of our Class A common stock represented by the record holders. Dividend Policy We have never declared or paid any cash dividend on our capital stock.
Because many of the shares of our Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners of our Class A common stock represented by the record holders. Dividend Policy We have not declared or paid any cash dividend on our capital stock.
Use of Proceeds On June 11, 2021, we closed our initial public offering, or the IPO, of 52,272,727 shares of our Class A common stock at an offering price of $27.00 per share, including 6,818,181 shares pursuant to the exercise of the underwriters’ option to purchase additional shares of our Class A common stock, resulting in aggregate net proceeds to us of $1.3 billion after deducting underwriting discounts and commissions of $91.6 million, and offering costs of $7.5 million.
Use of Proceeds On June 11, 2021, we closed our IPO, of 52,272,727 shares of our Class A common stock at an offering price of $27.00 per share, including 6,818,181 shares pursuant to the exercise of the underwriters’ option to purchase additional shares of our Class A common stock, resulting in aggregate net proceeds to us of $1.3 billion after deducting underwriting discounts and commissions of $91.6 million, and offering costs of $7.5 million.
There has been no material change in the planned use of the IPO proceeds as discussed in our final prospectus filed with the SEC on June 10, 2021, pursuant to Rule 424(b) of the Securities Act. Item 6. Reserved 62 Table of Contents
There has been no material change in the planned use of the IPO proceeds as discussed in our final prospectus filed with the SEC on June 10, 2021, pursuant to Rule 424(b) of the Securities Act. Item 6. Reserved 46 Table of Contents
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our Class A common stock has traded on the Nasdaq Global Select Market under the symbol “MQ” since our initial public offering on June 9, 2021. Prior to that date, there was no public market for our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our Class A common stock has traded on the Nasdaq Global Select Market under the symbol “MQ” since our IPO on June 9, 2021. Prior to that date, there was no public market for our common stock.
The following stock performance graph compares the cumulative total return on our Class A common stock to the cumulative total returns of the Nasdaq Composite Index and the S&P Information Technology Index during each monthly period from June 9, 2021 (the date our Class A common stock began trading on the Nasdaq Global Select Market) through December 31, 2022.
The following stock performance graph depicts the cumulative total return on our Class A common stock relative to the cumulative total returns of the Nasdaq Composite Index and the S&P Information Technology Index during each monthly period from June 9, 2021 (the date our Class A common stock began trading on the Nasdaq Global Select Market) through December 31, 2023.
There is no public trading market for our Class B common stock. Stockholders As of February 17, 2023, we had 52 holders of record of our Class A common stock and 69 holders of record of our Class B common stock.
There is no public trading market for our Class B common stock. Stockholders As of February 23, 2024, we had 43 holders of record of our Class A common stock and 57 holders of record of our Class B common stock.
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The returns shown are based on historical results and are not intended to suggest future performance. 61 Table of Contents Company/Index (1) 06/09/21 06/30/21 09/30/21 12/31/21 03/31/22 06/30/22 09/30/22 12/31/22 Marqeta, Inc. $ 100.00 $ 91.97 $ 72.48 $ 56.26 $ 36.17 $ 26.57 $ 23.33 $ 20.02 Nasdaq Composite Index $ 100.00 $ 104.29 $ 104.05 $ 112.84 $ 102.75 $ 79.86 $ 76.73 $ 76.13 S&P Information Technology Index $ 100.00 $ 105.62 $ 107.03 $ 124.90 $ 114.46 $ 91.29 $ 85.62 $ 89.68 (1) Prepared by Zacks Investment Research, Inc.
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Used with permission. All rights reserved. Index Data: Copyright NASDAQ OMX, Inc. Used with permission. All rights reserved. Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
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We purchased the shares from the former employees at the respective original exercise prices. (2) On September 14, 2022, our board of directors authorized a share repurchase program of up to $100 million of our Class A common stock beginning September 15, 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

60 edited+31 added−48 removed12 unchanged
Biggest changeA reconciliation of net loss to adjusted EBITDA and non-GAAP operating expenses for the periods presented is as follows: Year Ended December 31, 2022 2021 2020 (dollars in thousands) Net revenue $ 748,206 $ 517,175 $ 290,292 Net loss $ (184,780) $ (163,929) $ (47,695) Net loss margin (25) % (32) % (16) % Total operating expenses $ 529,809 $ 393,711 $ 164,994 Net loss $ (184,780) $ (163,929) $ (47,695) Depreciation and amortization expense 3,853 3,534 3,498 Share-based compensation expense 160,743 142,660 28,211 Payroll tax expense related to share-based compensation 1,977 1,956 — Acquisition related expenses 1,439 1,089 — Other expense (income), net (24,926) 2,563 521 Income tax expense (benefit) (102) (640) 87 Adjusted EBITDA $ (41,796) $ (12,767) $ (15,378) Adjusted EBITDA Margin (6) % (2) % (5) % Total operating expenses $ 529,809 $ 393,711 $ 164,994 Depreciation and amortization expense $ (3,853) $ (3,534) $ (3,498) Share-based compensation expense $ (160,743) $ (142,660) $ (28,211) Payroll tax expense related to share-based compensation $ (1,977) $ (1,956) $ — Acquisition related expenses $ (1,439) $ (1,089) $ — Non-GAAP operating expenses $ 361,797 $ 244,472 $ 133,285 73 Table of Contents Liquidity and Capital Resources Since our inception through June 30, 2021, we financed our operations primarily through sales of equity securities and payments received from our customers.
Biggest changeWe 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. 55 Table of Contents A reconciliation of net loss to adjusted EBITDA and GAAP operating expenses to non-GAAP operating expenses for the periods presented is as follows: Year Ended December 31, 2023 2022 2021 (dollars in thousands) Net revenue $ 676,171 $ 748,206 $ 517,175 Net loss $ (222,962) $ (184,780) $ (163,929) Net loss margin (33) % (25) % (32) % Total operating expenses $ 612,529 $ 529,809 $ 393,711 Net loss $ (222,962) $ (184,780) $ (163,929) Depreciation and amortization expense 10,741 3,853 3,534 Share-based compensation expense 183,630 160,743 142,660 Payroll tax expense related to share-based compensation 2,211 1,977 1,956 Acquisition-related expenses (1) 75,473 1,439 1,089 Restructuring 8,670 — — Other (income) expense, net (52,440) (24,926) 2,563 Income tax benefit (7,613) (102) (640) Adjusted EBITDA $ (2,290) $ (41,796) $ (12,767) Adjusted EBITDA Margin (0.3) % (6) % (2) % Total operating expenses $ 612,529 $ 529,809 $ 393,711 Depreciation and amortization expense (10,741) (3,853) (3,534) Share-based compensation expense (183,630) (160,743) (142,660) Payroll tax expense related to share-based compensation (2,211) (1,977) (1,956) Restructuring (8,670) — — Acquisition-related expenses (1) (75,473) (1,439) (1,089) Non-GAAP operating expenses $ 331,804 $ 361,797 $ 244,472 _______________ (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. 56 Table of Contents Liquidity and Capital Resources Since our inception through June 30, 2021, we financed our operations primarily through sales of equity securities and payments received from our customers.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
The preparation of these Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses, and 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.
Issuing Bank fees compensate our Issuing Banks for issuing cards to our customers and sponsoring our card programs with the Card Networks and are 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.
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.
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 total operation expenses to non-GAAP operating expenses. 65 Table of Contents Components of Results of Operations Net Revenue We have two components of net revenue: platform services revenue, net and other services revenue.
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 total operation expenses to non-GAAP operating expenses. 48 Table of Contents Components of Results of Operations Net Revenue We have two components of net revenue: platform services revenue, net and other services revenue.
Under the repurchase program, we were authorized to repurchase shares through open market purchases, in privately negotiated transactions or by other means, in accordance with applicable federal securities laws, including through trading plans under Rule 10b5-1 of the Exchange Act. The share repurchase program has no set expiration date.
Under the 2023 Share Repurchase Program, we are authorized to repurchase shares through open market purchases, in privately negotiated transactions or by other means, in accordance with applicable federal securities laws, including through trading plans under Rule 10b5-1 of the Exchange Act. The 2023 Share Repurchase Program has no set expiration date.
A discussion regarding our liquidity, financial condition and results of operations for the fiscal year ended December 31, 2022 compared to the fiscal year ended December 31, 2021 is presented below.
A discussion regarding our liquidity, financial condition, and results of operations for the fiscal year ended December 31, 2023 compared to the fiscal year ended December 31, 2022 is presented below.
We continue to monitor the situation 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.
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.
At December 31, 2022, we had $7.8 million in restricted cash which included a deposit held at an Issuing Bank to provide the Issuing Bank collateral in the event that our customers' funds are not deposited at the Issuing Bank in time to settle our customers' transactions with the Card Networks.
At December 31, 2023, we had $8.5 million in restricted cash which included a deposit held at an Issuing Bank to provide the Issuing Bank collateral in the event that our customers' funds are not deposited at the Issuing Bank in time to settle our customers' transactions with the Card Networks.
A discussion regarding our liquidity, financial condition and results of operations for the fiscal year ended December 31, 2021 compared to the fiscal year ended December 31, 2020 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 11, 2022, which is hereby incorporated by reference.
A discussion regarding our liquidity, financial condition, and results of operations for the fiscal year ended December 31, 2022 compared to the fiscal year ended December 31, 2021 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 28, 2023, which is hereby incorporated by reference.
Item 7. 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 consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.
You should read the following discussion and analysis of our financial condition and results of operations together with our Audited Consolidated Financial Statements and the related notes included elsewhere in this Annual Report on Form 10-K.
Other Income (Expense), net Other income (expense), net consists primarily of interest income from our marketable securities, gain from from sale of equity method investments, impairment of equity method investments or other financial instruments, equity method investment share of loss, realized foreign currency gains and losses, and changes in the fair value of the redeemable convertible preferred stock warrant liabilities (for periods prior to the IPO).
Other Income (Expense), net Other income (expense), net consists primarily of interest income from our short-term investments and cash deposits, gain from sale of equity method investments, impairment of equity method investments or other financial instruments, equity method investment share of loss, realized foreign currency gains and losses, and changes in the fair value of the redeemable convertible preferred stock warrant liabilities (for periods prior to the IPO).
On September 14, 2022, our board of directors authorized a share repurchase program of up to $100 million of our Class A common stock beginning September 15, 2022.
On September 14, 2022, our board of directors authorized a share repurchase program (the “2022 Share Repurchase Program”) of up to $100 million of our Class A common stock beginning September 15, 2022.
Adjusted EBITDA - Adjusted EBITDA is a non-GAAP financial measure that is calculated as net income (loss) adjusted to exclude depreciation and amortization; share-based compensation expense; payroll tax related to share-based compensation; acquisition related expenses which consists of due diligence costs related to potential acquisitions, and transaction costs, integration costs and amortization of intangible assets related to successful acquisitions; income tax expense (benefit); and other income (expense) net, which consists of changes in the fair value of redeemable convertible preferred stock warrant liabilities (for periods prior to the IPO), realized foreign currency gains and losses, interest income from our marketable securities, our share of equity method investments’ profit or loss, impairment of equity method investments or other financial instruments, and gain from sale of equity method investments.
Adjusted EBITDA - Adjusted EBITDA is a non-GAAP financial measure that is calculated as net income (loss) adjusted to exclude depreciation and amortization; share-based compensation expense; payroll tax related to share-based compensation; restructuring charges; 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; income tax expense (benefit); and other income (expense) net, which consists of changes in the fair value of redeemable convertible preferred stock warrant liabilities (for periods prior to the IPO), interest income from our short-term investments, realized foreign currency gains and losses, our share of equity method investments’ profit or loss, impairment of equity method investments or other financial instruments, and gain from sale of equity method investments.
In June 2021, we completed our IPO in which we received aggregate net proceeds of $1.3 billion after deducting underwriting discounts and commissions of $91.6 million, and offering costs of $7.5 million. At December 31, 2022, our principal sources of liquidity included cash, cash equivalents, and marketable securities totaling $1.6 billion, with such amounts held for working capital purposes.
In June 2021, we completed our IPO in which we received aggregate net proceeds of $1.3 billion after deducting underwriting discounts and commissions of $91.6 million and offering costs of $7.5 million. At December 31, 2023, our principal sources of liquidity included cash, cash equivalents, and short-term investments totaling $1.2 billion, with such amounts held for working capital purposes.
The growth in TPV for our top five customers, as determined by their individual TPV in each respective period, was 50% for the year ended December 31, 2022 compared to the year ended December 31, 2021. This growth was mirrored by a 46% increase in TPV from all other customers for the same period.
The growth in TPV for our top five customers, as determined by their individual TPV in each respective period, was 33% for the year ended December 31, 2023 compared to the year ended December 31, 2022. This growth was mirrored by a 37% increase in TPV from all other customers for the same period.
We record these incentives as a reduction of Card Network fees included in costs of revenue. Generally, as processing volumes increase, we earn a higher rate of monetary incentives from these arrangements, subject to attaining certain volume thresholds during an annual measurement period.
We record these incentives as a reduction of Card Network fees in customer arrangements where the Company is the principal. Generally, as processing volumes increase, we earn a higher rate of monetary incentives from these arrangements, subject to attaining certain volume thresholds during an annual measurement period.
Net cash used in operating activities was $13.0 million for the year ended December 31, 2022 compared to a net cash provided of $57.0 million in the year ended December 31, 2021.
Net cash provided by operating activities was $21.1 million for the year ended December 31, 2023 compared to a net cash used of $13.0 million in the year ended December 31, 2022.
Other services revenue increased $7.7 million, or 52%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 due primarily to the increase in card fulfillment revenue. The increase in TPV was mainly driven by growth across all our major verticals, particularly financial services, and PxM customers.
Other services revenue decreased $1.0 million, or 4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 due primarily to a decrease in card fulfillment revenue. The increase in TPV was mainly driven by growth across all our major verticals, particularly financial services, and PxM customers.
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.
Card fulfillment fees are generally billed to customers upon ordering card inventory and recognized as revenue when the cards are shipped to the customers.
Operating Expenses Compensation and Benefits. Compensation and benefits consist primarily of salaries, employee benefits, incentive compensation, contractors’ cost and share-based compensation. Technology. Technology consists primarily of third-party hosting fees, software licenses, and hardware purchases below our capitalization threshold, and support and maintenance costs. Professional Services. Professional services consist primarily of consulting, legal, audit, and recruiting fees. Occupancy.
Operating Expenses Compensation and Benefits. Compensation and benefits consist primarily of salaries, employee benefits, severance and other termination benefits, incentive compensation, contractors’ cost, and share-based compensation. 49 Table of Contents Technology. Technology consists primarily of third-party hosting fees, software licenses, and hardware purchases below our capitalization threshold, and support and maintenance costs. Professional Services.
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 under the section titled “Risk Factors” under Part I, Item 1A.
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 under the section titled “Risk Factors” under Part I, Item 1A.
Other operating expenses consist primarily of insurance costs, indemnification costs, employee travel-related expenses, employee training costs, indirect state and local taxes, and other general office expenses.
Marketing and advertising consist primarily of costs of general marketing and promotional activities. Other Operating Expenses. Other operating expenses consist primarily of insurance costs, indemnification costs, travel-related expenses, indirect state and local taxes, and other general office expenses.
At December 31, 2022, our cash equivalents and marketable securities were comprised primarily of bank deposits, money market funds, U.S. treasury securities, U.S. agency securities, commercial paper, and corporate debt securities. We have generated significant operating losses as reflected in our accumulated deficit. We expect to continue to incur operating losses for the foreseeable future.
Our cash equivalents and short-term investments were comprised primarily of bank deposits, money market funds, U.S. treasury bills, U.S. treasury securities, U.S. agency securities, asset-backed securities and corporate debt securities. We have generated significant operating losses as reflected in our accumulated deficit. We expect to continue to incur operating losses for the foreseeable future.
Net cash used in investing activities consists primarily of purchases of marketable securities, purchases of property and equipment, and equity method investments. Net cash provided by investing activities was $28.7 million for the year ended December 31, 2022 compared to a net cash used of $329.1 million in the year ended December 31, 2021.
Net cash used in investing activities consists primarily of purchases of short-term investments, purchases of property and equipment, and equity method investments. Net cash provided by investing activities was $38.5 million for the year ended December 31, 2023 compared to $28.7 million in the year ended December 31, 2022.
Net cash used in financing activities was $79.5 million for the year ended December 31, 2022 compared to a net cash provided of $1.3 billion in the year ended December 31, 2021.
Net cash used in financing activities was $261.8 million for the year ended December 31, 2023 compared to a net cash used of $79.5 million in the year ended December 31, 2022.
The net cash used in operating activities during fiscal year 2022 was due mainly to the timing of payments for costs of our services and operating expenses, partially offset by the increase in net revenue Investing Activities Net cash provided by investing activities consists primarily of maturities of our investments in marketable securities and sale of equity method investments.
The increase in net cash provided by operating activities during fiscal year 2023 was mainly due to increased non-cash expenses and the timing of payments for costs of our services and operating expenses. Investing Activities Net cash provided by investing activities consists primarily of maturities and sales of our investments in short-term investments and sale of equity method investments.
Impact of Macroeconomic Factors We are unable to predict the impact macroeconomic factors, including the military action against Ukraine launched by Russia , ongoing supply chain shortages, higher inflation and interest rates, and other global economic conditions, will have on our processing volumes, and on our future results of operations.
Impact of Macroeconomic Factors We are unable to predict the impact macroeconomic factors, including various geopolitical conflicts, ongoing supply chain shortages, higher inflation and interest rates, and uncertainty in global economic conditions will have on our processing volumes, and on our future results of operations.
Other Income (Expense), Net Year Ended December 31, (dollars in thousands) 2022 2021 $ Change % Change Other income (expense), net $ 24,926 $ (2,563) $ 27,489 n/m Percentage of net revenue 3 % — % Other income (expense), net increased by $27.5 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase of $19.1 million in interest income earned on our marketable securities portfolio and other cash deposit balances, a gain of $17.9 million from the sale of the Company’s equity method investment in a private company, offset by an impairment of $11.6 million of an option to purchase the remaining equity interests in an equity method investee.
Other Income (Expense), Net Year Ended December 31, (dollars in thousands) 2023 2022 $ Change % Change Other income (expense), net $ 52,440 $ 24,926 $ 27,514 110 % Percentage of net revenue 8 % 3 % Other income (expense), net increased by $27.5 million, or 110%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase of $32.8 million in interest income earned on our short-term investments portfolio and cash deposit balances, offset by a gain of $17.9 million from the sale of the Company’s equity method investment in a private company paired with an impairment of $11.6 million of an option to purchase the remaining equity interests in an equity method investee incurred during the prior year.
Our gross margin decreased to 43% during the year ended December 31, 2022 from 45% during the year ended December 31, 2021.
Our gross margin increased to 49% during the year ended December 31, 2023 from 43% during the year ended December 31, 2022.
Interchange Fees are recognized when the associated transactions are settled. Revenue Share payments are incentives to our MxM customers to increase 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 revenue.
Revenue Share is generally computed as a percentage of the Interchange Fees earned or processing volume and is paid to our 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.
Platform services revenue, net . Platform services revenue includes Interchange Fees, net of Revenue Share and other service-level payments to customers. Platform services revenue also includes processing and other fees. Interchange Fees are earned on card transactions we process for our MxM customers and are based on a percentage of the transaction amount plus a fixed amount per transaction.
Interchange Fees are earned on card transactions we process for our customers and 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.
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. 67 Table of Contents Results of Operations The following table sets forth our results of operations for the periods presented: Year Ended December 31, (dollars in thousands) 2022 2021 2020 Net revenue $ 748,206 $ 517,175 $ 290,292 Costs of revenue 428,205 285,470 172,385 Gross profit 320,001 231,705 117,907 Operating expenses: Compensation and benefits 415,094 318,116 129,802 Technology 52,361 33,637 13,239 Professional services 23,479 18,443 7,188 Occupancy 4,514 4,181 4,337 Depreciation and amortization 3,853 3,534 3,498 Marketing and advertising 3,995 2,284 1,670 Other operating expenses 26,513 13,516 5,260 Total operating expenses 529,809 393,711 164,994 Loss from operations (209,808) (162,006) (47,087) Other income (expense), net 24,926 (2,563) (521) Loss before income tax expense (184,882) (164,569) (47,608) Income tax expense (benefit) (102) (640) 87 Net loss $ (184,780) $ (163,929) $ (47,695) 68 Table of Contents Comparison of the Fiscal Years Ended December 31, 2022 and 2021 Net Revenue Year Ended December 31, (dollars in thousands) 2022 2021 $ Change % Change Net revenue: Total platform services, net $ 725,629 $ 502,296 $ 223,333 44 % Other services 22,577 14,879 7,698 52 % Total net revenue $ 748,206 $ 517,175 $ 231,031 45 % Total Processing Volume (TPV) (in millions) $ 166,260 $ 111,133 $ 55,127 50 % Total net revenue increased by $231.0 million, or 45%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, of which $173.0 million was generated by Block, including Afterpay starting February 1, 2022 following the completion of its acquisition by Block.
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. 50 Table of Contents Results of Operations The following table sets forth our results of operations for the periods presented: Year Ended December 31, (dollars in thousands) 2023 2022 2021 Net revenue $ 676,171 $ 748,206 $ 517,175 Costs of revenue 346,657 428,205 285,470 Gross profit 329,514 320,001 231,705 Operating expenses: Compensation and benefits 499,595 415,094 318,116 Technology 55,612 52,361 33,637 Professional services 21,679 23,479 18,443 Occupancy 4,361 4,514 4,181 Depreciation and amortization 10,741 3,853 3,534 Marketing and advertising 2,566 3,995 2,284 Other operating expenses 17,975 26,513 13,516 Total operating expenses 612,529 529,809 393,711 Loss from operations (283,015) (209,808) (162,006) Other income (expense), net 52,440 24,926 (2,563) Loss before income tax expense (230,575) (184,882) (164,569) Income tax benefit (7,613) (102) (640) Net loss $ (222,962) $ (184,780) $ (163,929) 51 Table of Contents Comparison of the Fiscal Years Ended December 31, 2023 and 2022 Net Revenue Year Ended December 31, (dollars in thousands) 2023 2022 $ Change % Change Net revenue: Total platform services, net $ 654,553 $ 725,629 $ (71,076) (10) % Other services 21,618 22,577 (959) (4) % Total net revenue $ 676,171 $ 748,206 $ (72,035) (10) % Total Processing Volume (TPV) (in millions) $ 222,264 $ 166,260 $ 56,004 34 % Total net revenue decreased by $72.0 million, or 10%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, of which $68.6 million was attributable to our largest customer, Block.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2022 2021 2020 (in thousands) Net cash (used in) provided by operating activities $ (12,966) $ 56,972 $ 50,273 Net cash provided by (used in) investing activities 28,718 (329,121) (57,562) Net cash (used in) provided by financing activities (79,487) 1,299,297 167,378 Net increase in cash, cash equivalents, and restricted cash $ (63,735) $ 1,027,148 $ 160,089 74 Table of Contents Operating Activities Our largest source of cash provided by our operating activities is our net revenue.
Restricted cash also includes cash held at a bank to secure our payments under a lease agreement for our office space. 57 Table of Contents Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by (used in) operating activities $ 21,104 $ (12,966) $ 56,972 Net cash provided by (used in) investing activities 38,516 28,718 (329,121) Net cash (used in) provided by financing activities (261,794) (79,487) 1,299,297 (Decrease) Increase in cash, cash equivalents, and restricted cash $ (202,174) $ (63,735) $ 1,027,148 Operating Activities Our largest source of cash provided by our operating activities is our net revenue.
As MxM customers' processing volumes increase, the rates at which we share revenue generally 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, and under our PxM agreements.
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.
See the section titled “Business” under Part I, Item 1 of this Annual Report on Form 10-K for further discussion of our business, products, business model, and trends.
See the section titled “Risk Factors” under Part I, Item 1A of this Annual Report on Form 10-K for further discussion of the possible impact of these macroeconomic factors on our business .
Technology expenses increased by $18.7 million, or 56%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was due to higher third-party hosting costs to support our continued growth and higher software licensing costs as we added headcount and implemented new internal systems and tools.
The increase was due to higher software as a service costs to support our continued growth and higher software licensing costs as we implement new internal systems and tools. Professional services expenses decreased by $1.8 million, or 8%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Year Ended December 31, 2022 2021 2020 Total Processing Volume (TPV) (in millions) $ 166,260 $ 111,133 $ 60,075 Net revenue (in thousands) $ 748,206 $ 517,175 $ 290,292 Gross profit (in thousands) $ 320,001 $ 231,705 $ 117,907 Gross margin 43 % 45 % 41 % Net loss (in thousands) $ (184,780) $ (163,929) $ (47,695) Net loss margin (25) % (32) % (16) % Total operating expenses (in thousands) $ 529,809 $ 393,711 $ 164,994 Non-GAAP Measures: Adjusted EBITDA (in thousands) $ (41,796) $ (12,767) $ (15,378) Adjusted EBITDA margin (6) % (2) % (5) % Non-GAAP operating expenses (in thousands) $ 361,797 $ 244,472 $ 133,285 Total Processing Volume (TPV) - TPV represents the total dollar amount of payments processed through our platform, net of returns and chargebacks.
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. 47 Table of Contents Year Ended December 31, 2023 2022 2021 Total Processing Volume (TPV) (in millions) $ 222,264 $ 166,260 $ 111,133 Net revenue (in thousands) $ 676,171 $ 748,206 $ 517,175 Gross profit (in thousands) $ 329,514 $ 320,001 $ 231,705 Gross margin 49 % 43 % 45 % Net loss (in thousands) $ (222,962) $ (184,780) $ (163,929) Net loss margin (33) % (25) % (32) % Total operating expenses (in thousands) $ 612,529 $ 529,809 $ 393,711 Non-GAAP Measures: Adjusted EBITDA (in thousands) $ (2,290) $ (41,796) $ (12,767) Adjusted EBITDA margin (0.3) % (6) % (3) % Non-GAAP operating expenses (in thousands) $ 331,804 $ 361,797 $ 244,472 Total Processing Volume (“TPV”) - TPV represents the total dollar amount of payments processed through our platform, net of returns and chargebacks.
Financing Activities Net cash provided by financing activities consists primarily of proceeds from the sale of our equity securities. Net cash used in financing activities consists primarily of net payments related to the share repurchase program, to the payment of tax withholding for RSU settlements and to payments of offering costs related to the IPO.
Financing Activities Net cash provided by financing activities consists primarily of proceeds from the issuance of our equity securities. Net cash used in financing activities consists primarily of net payments related to the share-based compensation activity and share repurchase programs.
Income Tax Expense Income tax expense consists of U.S. federal and state income taxes, and U.K. and Australia income taxes.
Income Tax Benefit Income tax expense consists of U.S. federal and state income taxes, and income taxes related to certain foreign jurisdictions.
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 to Adjusted EBITDA Margin. 64 Table of Contents Non-GAAP operating expenses - Non-GAAP 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; payroll tax related to share-based compensation; and acquisition related expenses which consists of due diligence costs related to potential acquisitions, and transaction costs, integration costs and amortization of intangible assets related to successful acquisitions.
Non-GAAP operating expenses - Non-GAAP 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; payroll tax related to share-based compensation; restructuring charges; and 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.
We believe that this acquisition will allow our customers to launch a wide range of credit products and constructs. We believe our existing cash and cash equivalents, and our marketable securities will be sufficient to meet our working capital and capital expenditure needs for more than the next 12 months.
We believe our existing cash and cash equivalents, and our short-term investments will be sufficient to meet our working capital and capital expenditure needs for more than the next 12 months.
Our primary uses of cash in our operating activities are for Card Network and Issuing Bank fees, and employee-related compensation. The timing of settlement of certain operating liabilities, including Revenue Share payments and bonus payments, can affect the amounts reported as net cash provided by operating activities on the consolidated statement of cash flows.
The timing of settlement of certain operating liabilities, including Revenue Share payments, bonus payments and prepayments made to cloud-computing service providers, can affect the amounts reported as Net cash used in or provided by operating activities on the Consolidated Statement of Cash Flows.
See the section titled “Risk Factors” under Part I, Item 1A of this Annual Report on Form 10-K for further discussion of the possible impact of these macroeconomic factors on our business . 63 Table of Contents 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.
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.
As a result of the increases in net revenue and costs of revenue discussed above, our gross profit increased by $88.3 million, or 38%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
These decreases were partially offset by increases in Issuing Bank and Network fees driven by increased TPV. 52 Table of Contents As a result of the decreases in costs of revenue being less than the decreases in net revenue explained above, our gross profit increased by $9.5 million, or 3%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Other operating expenses increased by $13.0 million, or 96%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily as a result of an indemnification cost of $5.9 million, and an increase in insurance and travel costs of $5.2 million.
Other operating expenses decreased by $8.5 million, or 32%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease was primarily due to cost optimization initiatives and an indemnification cost of $5.9 million that was recognized in the prior year.
Occupancy consists primarily of rent expense, repairs, maintenance, and other building related costs. 66 Table of Contents Depreciation and Amortization. Depreciation and amortization consist primarily of depreciation of our fixed assets. Marketing and Advertising. Marketing and advertising consist primarily of costs of general marketing and promotional activities. Other Operating Expenses.
Professional services consist primarily of consulting, legal, audit, and recruiting fees. Occupancy. Occupancy consists primarily of rent expense, repairs, maintenance, and other building related costs. Depreciation and Amortization. Depreciation and amortization consist primarily of depreciation of our fixed assets and amortization of capitalized Internal-use software and developed technology intangible assets. Marketing and Advertising.
Our future capital requirements will depend on many factors, including our planned continuing investment in product development, platform infrastructure, share repurchases, and global expansion.
As of the date of filing this Annual Report on Form 10-K, we have 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, including our planned continuing investment in product development, platform infrastructure, share repurchases, and global expansion.
The net cash provided by investing activities during fiscal year 2022 was primarily due to the sale of equity method investments and the decrease in purchases of marketable securities, an equity method investment, and a purchase call option to acquire the remaining interest in the equity method investee.
The increase in net cash provided by investing activities during fiscal year 2023 was primarily due to sale and maturities in short-term investments, partially offset by the purchase of short-term investments, the Power Finance acquisition in 2023, the sale of equity method investments in 2022, and capitalization of internal-use software.
The remaining obligations are related to various service providers and Issuing Banks processing fees over the fixed, non-cancellable respective contract terms. 75 Table of Contents Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.
For additional information about our operating leases and non-cancellable purchase commitments, see Note 7 “Leases” and Note 8 “Commitments and Contingencies” to our Consolidated Financial Statements. 58 Table of Contents Critical Accounting Policies and Estimates Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States.
Operating Expenses Year Ended December 31, (dollars in thousands) 2022 2021 $ Change % Change Operating expenses: Salaries, bonus, benefits and payroll taxes $ 254,351 $ 175,456 $ 78,895 45 % Share-based compensation 160,743 142,660 18,083 13 % Total compensation and benefits 415,094 318,116 96,978 30 % Percentage of net revenue 55 % 62 % Technology 52,361 33,637 18,724 56 % Percentage of net revenue 7 % 7 % Professional services 23,479 18,443 5,036 27 % Percentage of net revenue 3 % 4 % Occupancy 4,514 4,181 333 8 % Percentage of net revenue 1 % 1 % Depreciation and amortization 3,853 3,534 319 9 % Percentage of net revenue 1 % 1 % Marketing and advertising 3,995 2,284 $ 1,711 75 % Percentage of net revenue 1 % — % Other operating expenses 26,513 13,516 12,997 96 % Percentage of net revenue 4 % 3 % Total operating expenses $ 529,809 $ 393,711 $ 136,098 Percentage of net revenue 71% 76% Compensation and benefits expenses increased by $97.0 million, or 30%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, predominately due to the $78.9 million increase in salaries, bonus, benefits, and payroll taxes driven by the increase in average headcount, and the increase in compensation rates.
Operating Expenses Year Ended December 31, (dollars in thousands) 2023 2022 $ Change % Change Operating expenses: Salaries, bonus, benefits and payroll taxes $ 318,856 $ 254,351 $ 64,505 25 % Share-based compensation 180,739 160,743 19,996 12 % Total compensation and benefits 499,595 415,094 84,501 20 % Percentage of net revenue 74 % 55 % Technology 55,612 52,361 3,251 6 % Percentage of net revenue 8 % 7 % Professional services 21,679 23,479 (1,800) (8) % Percentage of net revenue 3 % 3 % Occupancy 4,361 4,514 (153) (3) % Percentage of net revenue 1 % 1 % Depreciation and amortization 10,741 3,853 6,888 179 % Percentage of net revenue 2 % 1 % Marketing and advertising 2,566 3,995 $ (1,429) (36) % Percentage of net revenue — % 1 % Other operating expenses 17,975 26,513 (8,538) (32) % Percentage of net revenue 3 % 4 % Total operating expenses $ 612,529 $ 529,809 $ 82,720 Percentage of net revenue 91% 71% Salaries, bonus, benefits, and payroll taxes increased by $64.5 million, or 25%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to a $74.7 million, or 38%, increase in employee salaries, partially offset by a $5.3 million, or 13%, decrease in employee bonuses and a $4.8 million, or 35%, decrease in contractor expense.
Costs of Revenue and Gross Margin Year Ended December 31, (dollars in thousands) 2022 2021 $ Change % Change Costs of revenue: Card Network fees, net $ 380,162 $ 244,387 $ 135,775 56 % Issuing Bank fees 30,160 27,282 2,878 11 % Other 17,883 13,801 4,082 30 % Total costs of revenue $ 428,205 $ 285,470 $ 142,735 50 % Gross profit $ 320,001 $ 231,705 $ 88,296 38 % Gross margin 43 % 45 % Costs of revenue increased by $142.7 million, or 50%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Costs of Revenue and Gross Margin Year Ended December 31, (dollars in thousands) 2023 2022 $ Change % Change Costs of revenue: Card Network fees, net $ 309,453 $ 380,162 $ (70,709) (19) % Issuing Bank fees 21,549 30,160 (8,611) (29) % Other 15,655 17,883 (2,228) (12) % Total costs of revenue $ 346,657 $ 428,205 $ (81,548) (19) % Gross profit $ 329,514 $ 320,001 $ 9,513 3 % Gross margin 49 % 43 % Costs of revenue decreased by $81.5 million, or 19%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The increase in net revenue was primarily driven by a 50% increase in TPV, partially offset by unfavorable changes in our card program mix, particularly the growth of our PxM offering, compared to the same period in 2021.
Revenue from other customers decreased $3.4 million, primarily driven by one customer migrating a portion of one of their programs to a competitor starting in Q3 2022, unfavorable changes in the mix of our card programs, particularly the growth of our PxM offering, and the impact of contract renewals partially offset by a 33% increase in TPV.
As of December 31, 2022, $20.8 million remained available for future share repurchases under this repurchase program. On February 3, 2023, the Company acquired Power Finance Inc. (Power Finance) for a purchase price of $221.9 million in cash, approximately one-third of which is payable over a two-year period subject to certain conditions.
As of December 31, 2023, $32.2 million remained available for future share repurchases under the 2023 Share Repurchase Program. On February 3, 2023, we acquired all outstanding stock of Power Finance. Upon the closure of the acquisition, we paid $135.8 million to the shareholders of Power Finance Inc, net of cash acquired.
Professional services expenses increased by $5.0 million, or 27%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was due to the increase in consulting, accounting, and legal fees.
The decrease was due to the decreased consulting and recruiting fees. Occupancy expense remained relatively flat for the year ended December 31, 2023 compared to the year ended December 31, 2022. Depreciation and amortization increased by $6.9 million, or 179%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
This measure is used by management and our board of directors to evaluate our operating efficiency.
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 to Adjusted EBITDA Margin.
Obligations and Other Commitments Our principal commitments consist of obligations under our operating leases for office space and other non-cancellable purchase commitments.
The increase in net cash used in financing activities is primarily due to payments to repurchase shares under the Share Repurchase Programs, the payment of the contingent consideration from our Power Finance acquisition and share-based compensation activity. Obligations and Other Commitments Our principal commitments consist of obligations under our operating leases for office space and other non-cancellable purchase commitments.
We believe that of our significant accounting policies, discussed in Note 2 to our Consolidated Financial Statements “Summary of Significant Accounting Policies,” the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.
We believe that of our significant accounting policies, the following policies involve accounting estimates and assumptions which we consider to be the most critical to our financial statements.
Compensation and benefits expenses also increased in the year ended December 31, 2022 compared to the year ended December 31, 2021 due to a $18.1 million increase in share-based compensation expense, mainly because of the increase in our headcount and the Executive Chairman Long-Term Performance Award as detailed in the table below: 70 Table of Contents Year Ended December 31, (dollars in thousands) 2022 2021 $ Change % Change Share-based compensation Restricted stock units (1) $ 76,094 $ 59,652 $ 16,442 28 % Stock options 28,816 31,231 (2,415) (8) % Executive Chairman Long-Term Performance Award 53,214 38,189 15,025 39 % Employee Stock Purchase Plan 2,619 1,946 673 35 % Secondary sales of common stock — 11,642 (11,642) n/m Total share-based compensation $ 160,743 $ 142,660 $ 18,083 13 % n/m = not meaningful (1) Includes $23.1 million of expense, for the year ended December 31, 2021, recognized for cumulative prior service as of the IPO completion date for RSUs with both a service and liquidity vesting condition.
Year Ended December 31, (dollars in thousands) 2023 2022 $ Change % Change Share-based compensation: Restricted stock units $ 99,648 $ 76,094 $ 23,554 31 % Stock options 26,323 28,816 (2,493) (9) % Executive Chairman Long-Term Performance Award 53,214 53,214 — — % Employee Stock Purchase Plan 1,554 2,619 (1,065) (41) % Total share-based compensation $ 180,739 $ 160,743 $ 19,996 12 % 53 Table of Contents Technology expenses increased by $3.3 million, or 6%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Customer Concentration We generated 71% and 69% of our net revenue from our largest customer, Block, during the years ended December 31, 2022 and 2021, respectively. 71 Table of Contents Quarterly Results of Operations The following tables set forth selected unaudited consolidated quarterly statements of operations data for each of the eight fiscal quarters ended December 31, 2022.
Customer Concentration We generated 68% and 71% of our net revenue from our largest customer, Block, during the years ended December 31, 2023 and 2022, respectively. 54 Table of Contents Use of Non-GAAP Financial Measures Our non-GAAP measures have limitations as analytical tools and you should not consider them in isolation.
Marketing and advertising expenses increased by $1.7 million, or 75%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was primarily related to conferences, trade shows, and brand awareness investments to further grow our customer base.
The increase was primarily due to the amortization of developed technology intangible assets originating from the Power Finance acquisition. Marketing and advertising expenses decreased by $1.4 million, or 36%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to decreased conference and trade show costs incurred in the current year.
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Overview Marqeta’s modern card issuing platform empowers our customers to create customized and innovative payment cards, giving them the ability to build more configurable and flexible payment experiences. We serve customers in multiple industry verticals including on-demand services, lending (including BNPL financing), expense management, disbursements, online marketplaces, and digital banking.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties.
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Before the rise of modern card issuing, issuing cards was slow, complex, and subject to mistakes. Marqeta helps solve these problems. Our platform, powered by open APIs, enables businesses to develop modern, frictionless payment card experiences for consumer and commercial use cases.
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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.
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Our modern architecture allows for flexibility, a high degree of configurability, and accelerated product development, democratizing access to card issuing technology. It also enables us to rapidly expand our platform’s functionality, creating added value for our customers.
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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.
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In addition, the COVID-19 pandemic had a significant impact on the U.S. economy and the markets in which we operate. Various governmental measures to slow and control the spread of COVID-19 have led to uncertainty related to the labor market, inflation, and fiscal and monetary policy responses.
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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. See the section titled “Business” under Part I, Item 1 of this Annual Report on Form 10-K for further discussion of our business and products.
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Businesses continue to face difficulty in meeting consumer demand, and certain portions of the global supply chain remain challenged by shortages and delays.
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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.
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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.
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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.
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Minimum processing fees, where customers' processing volumes fall below certain thresholds, are also included in processing and other fees. Platform services revenue is recognized as Marqeta satisfies our performance obligations which typically aligns with the period when volumes and transactions are processed. Other services revenue. Other services revenue primarily consists of revenue earned for card fulfillment services.
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Costs of Revenue Costs of revenue consist of Card Network fees, Issuing Bank fees, and card fulfillment costs for customer arrangements where the Company is the principal in providing services to the customer and excludes depreciation and amortization, which is reported separately within the Consolidated Statements of Operations and Comprehensive Loss.
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The increase was primarily due to increased Card Network fees as the result of the 50% increase in TPV and 51% increase in the number of corresponding transactions. Network fees are presented net of monetary incentives from Card Networks for processing volume through the respective Card Networks during the period.
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The decrease in net revenue was primarily driven by the August 2023 Block Amendment which allowed for reduced pricing and impacted the revenue presentation for the Cash App Program as fees owed to Issuing Banks and Card Networks related to the Cash App primary Card Network volume are recorded as a reduction to the revenue earned from the Cash App program within net revenue effective as of July 1, 2023.
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Card Network fees, net increased $135.8 million, or 56% in the year ended December 31, 2022 compared to the year ended December 31, 2021 and reflect an amendment to one of our Card Networks incentive arrangements that was executed in the third quarter of 2021.
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In prior periods, these costs were included within Costs of revenue. The impact of these fees for the year ended December 31, 2023 was a $234.4 million reduction to net revenue, negatively impacting the growth rate by 31 percentage points. These decreases in net revenue were partially offset by increased TPV from Block’s programs.
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This increase was due to a 50% increase in TPV and a decrease in Card Networks incentives mainly due to the timing of annual cumulative incentives for the years ended December 31, 2022 and 2021. 69 Table of Contents Issuing Bank fees increased $2.9 million, or 11%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, as a result of an amendment to one of our Issuing Banks’ arrangements that was executed in the third quarter of 2021.
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The decrease was primarily due to the revenue presentation change for our fees owed to Issuing Banks and Card Networks related to the Cash App primary Card Network volume which are now reflected within net revenue as a result of the August 2023 Block Amendment. In addition, the Company realized improved economics with Issuing Bank partners.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk We have operations within the United States, the United Kingdom, Australia, Canada, Brazil, and Singapore, and we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes and foreign currency fluctuations.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk We have operations within the United States and globally, and we are exposed to market risks in the ordinary course of our business. Information relating to quantitative and qualitative disclosures about these market risks is described below.
A hypothetical 100 basis point increase or decrease in interest rates would not have a material effect on our financial results. Foreign Currency Exchange Risk Most of our sales and expenses are denominated in U.S. dollars, and therefore our results of operations are not currently subject to significant foreign currency risk.
A hypothetical 100 basis point increase or decreas e in interest rates would not have a material effect on our financial results or financial condition. Foreign Currency Exchange Risk Most of our sales and operating expenses are denominated in U.S. dollars, and therefore our results of operations are not currently subject to significant foreign currency risk.
As of December 31, 2022, a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our consolidated financial statements. 78 Table of Contents
As of December 31, 2023, a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our Consolidated Financial Statements. 60 Table of Contents
The fair value of our cash, cash equivalents, and marketable securities would not be significantly affected by either an increase or decrease in interest rates due to the short-term maturities of the majority of these instruments. We have the ability to hold all marketable securities until their maturities.
The fair value of our cash, cash equivalents, and short-term investments would not be significantly affected by either an i ncrease or decrease in interest rates due to the short-term maturities of the majority of these instruments.
Information relating to quantitative and qualitative disclosures about these market risks is described below. Interest Rate Risk We had cash, cash equivalents, and marketable securities totaling $1.6 billion as of December 31, 2022. Such amounts included cash deposits, money market funds, U.S. treasury securities, U.S. agency securities , commercial paper, and corporate debt securities.
Interest Rate Risk We had cash, cash equivalents, and short-term investments totaling $1.2 billion as of December 31, 2023. Such amounts included cash deposits, money market funds, U.S. treasury bills, U.S. treasury securities, U.S. agency securities , commercial paper, and corporate debt securities.
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Because we classify our short-term investments as “available-for-sale”, no gains or losses are recognized in the Consolidated Statement of Operations and Comprehensive Loss due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are due to credit losses. We have the ability to hold all short-term investments until their maturities.

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