Marqeta (NASDAQ:MQ) Q3 2026 Earnings Call

0:00 Greetings. Welcome to the Marketa, Inc., third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Jessica Miller, head of corporate communications. Thank you, Jessica. You may begin.

0:25 Thank you, operator. Hello, everyone, and welcome to Marketa's third quarter 2026 earnings call. Hosting today's call are Mike Milotich, Marketa's CEO, and Patti Kangwankij, Marketa's CFO. Before we begin, I would like to remind everyone that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our investor relations website, including our annual report on Form 10-K, and our subsequent periodic filings with the SEC. Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only as of the time of this call and the company does not assume any obligation or intent to update them except as required by law.

1:14 In addition, today's call includes non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in today's earnings press release and earnings release supplement materials, which are available on our investor relations website. With that, I'll turn the call over to Mike.

1:37 Thank you, Jessica, and thank you for joining us for Marketo's third quarter of 2026 earnings call. I'll start with a few highlights of our third quarter results. Then I'll cover how customers are using our platform across a range of products, use cases, and geographies. including executing another program migration onto Marketa. I'll also highlight the new capabilities we're adding to our product suite, which are enhancing our end-to-end platform and easing the burden on enterprise customers utilizing Marketa. Finally, I'll turn the call over to Patti, who will walk through our financial performance in the quarter and our outlook for the remainder of 2026.

2:15 Our third quarter results reflect strong fundamental trends.

2:19 TPV was $126 billion and grew 29%, marking the first quarter where annualized TPV exceeded $500 billion. Gross profit growth was on the high end of our expectations at 7%, but below recent levels driven by the discrete items we discussed last quarter. Adjusted EBITDA grew 28%, resulting in a 32% margin based on gross profit, continuing to show the benefits of our scale and efficiency. GapNet income of $115 million included $107 million non-cash tax benefit. These third quarter results demonstrate the continued progress of the durable, differentiated business we are establishing. With many proof points enabling payments innovation for a diverse set of customers operating at scale, we believe we are still only scratching the surface of our addressable market.

3:12 We continue to successfully serve and expand with our longstanding FinTech partners, while broadening our customer base with embedded finance enterprises. In conjunction, we are also enhancing the platform that leading companies trust to build and scale their payment programs. The range and configurability of our offering spanning debit and credit, consumer and commercial sets us apart from other issuer processors and is resonating in the market. Let me share a couple of notable expansions with customers where we are deepening the partnership with new product offerings, adding value across their portfolio and supporting their growth objectives over the long term. First, our relationship with Block remains strong as we continue to expand our work across Cash App, Square, and Afterpay with new programs and services.

4:00 The latest example is our recent announcement that Marketa now enables the Square credit card on the American Express network, extending a relationship that already includes Square's debit program. Originally launched in 2023, The Square Credit Card gives Square sellers access to a credit line that grows with their business volume. By consolidating debit and credit onto Marketa's end-to-end platform, Square now has a single foundation to build and iterate on card products for sellers. Our portfolio migration capabilities allow Square to seamlessly migrate existing accounts and card credentials onto Marketa without any disruption to the cardholder experience. This highlights a major strength of our platform. Marketa's migration engine and white-glove approach help reduce the complexity of moving a program so customers can transition with confidence and keep their focus on their end users.

4:54 This also marks our first program live with American Express, enabling our customers benefits of their network and increasing the breadth of our platform. With the support of all major card networks, Marketa's platform offers increased flexibility and differentiation for customers across credit and debit card programs. With Cash App, we continue to onboard new users, both to our longstanding program and the newer flexible credential offering. However, the diversification of new issuance did progress through the quarter in line with our expectations. This remains a new issuance dynamic only with the large existing card base, including millions of highly engaged users, continuing as is.

5:39 Looking beyond block, The caliber of business we are winning, from expanding with existing customers to signing significant new logos, continues to be a strong signal of our competitive position. We are now providing a new offering in Google Wallet for Kids, an expansion of our long-standing relationship with Google. Marketo's tokenization and spend control functionality enables Google to provide a safer, digital-first way for kids to receive and spend allowances without needing a traditional bank account. Parents are able to set daily spend limits Thank you for joining us today. and offers parents full visibility into spending patterns to help create healthy financial habits from an early age.

6:43 We also continue to launch new customers in Europe. This quarter, we enabled Satispay, the Italian fintech that makes money management and financial services simple and accessible, to launch its consumer debit card program, allowing users to pay with Satispay anywhere in the world, in-store and online. With over 6.5 million users, and 450,000 affiliated stores across Italy. StatusPay selected Marketa for its proven scale and trusted infrastructure to help power its expansion into new financial offerings for its broad user base. Turning now to our product suite, we continue to innovate and enhance our platform to support the full range of our customers' needs. We offer an integrated product continuum that enables our customers to meet consumers and businesses wherever they are in their financial journey, whether that's prepaid, Our customers increasingly want to serve several of those needs through a single, comprehensive partner, and that is where Marketa stands apart.

7:51 I'll start with Stablecoin, where interest in digital asset-backed payments is building, and we are enabling Stablecoin-backed card solutions through a strong ecosystem of infrastructure partners. Following our strategic partnerships with BB&K and ZeroHash, we recently announced a similar collaboration with Coinbase, linking stablecoins directly to existing card rails and making it possible to use that funding source for purchases anywhere a card is accepted. Coinbase's infrastructure and global reach strengthen that network and reinforce our position at the intersection of crypto and fiat payments. The collaboration builds on our existing relationship with Coinbase, where we already issue crypto-backed cards. We're also investing in commercial payment capabilities to give users the right payment method for their needs without the cost and complexity of stitching together multiple providers.

8:41 Whether it's a virtual card, a real-time bank transfer, or a push-to-card payment, multiple rails are available on the Marketa platform with a single view of each payment from start to finish. Most recently, we are integrating straight-through processing at the network level, which strengthens our supplier payment capabilities by removing manual payment steps that can stall virtual card acceptance. Suppliers enroll once, and every subsequent card payment can be processed automatically, directly with the supplier's payment processor. No pay-in entry, virtual terminal, or manual intervention is required. Straight-through processing has been around for some time, but not as a service facilitated directly by the networks, and that gives us much broader acquire and supplier reach than before, which our customers can leverage without additional work.

9:31 Another example of additional integrations being incorporated into the Marketa platform is functionality for account linking, balance checking, and identity verification via our open banking partners, MasterCard Open Finance and Plaid. Our customers can offer fast, seamless onboarding and funding for consumer and commercial programs so their users can start transacting right away with authentication and identity verification happening seamlessly in the background. Importantly, We deliver these capabilities and a choice of best-in-class providers through a single integration and contract with Marketa, meaning no separate vendor to manage while leveraging our scale and expertise. Across all these product enhancements, the goal is the same.

10:18 Give our customers one platform that enables them to meet all the payment needs of consumers and businesses while also providing program management and value-added services that reduce our customers' burden and give the customer the tools to provide an elite end-user experience. To wrap up, our business continues to have strong momentum on several fronts. The customers we serve, the geographies where we serve them, and the platform capabilities that power their innovation and end-user engagement. The enhancements we're making to our end-to-end platform bring choice, scale, and expertise to enterprises that run on Marketa, strengthening our position to meet the growing demand for modern card issuing with a comprehensive solution. We are in the very early stages of a wave of modernization in the issuing ecosystem.

11:05 Successful fintechs leveraging modern platforms, many of whom using Marketa, are pushing incumbents to evaluate whether their current capabilities enable them to compete effectively. This early trend has embedded finance enterprises and financial institutions engaging with Marketa more and more to explore their options, both for de novo offerings and existing programs requiring migration. The market can see the quality of the programs we are onboarding, demonstrating how the scale and flexibility of our platform is helping customers build and grow with confidence. I will now turn the call over to Patti to discuss our Q3 financial results and the expectations for 2026.

11:45 Thank you, Mike, and good afternoon everyone. Our third quarter results reflect consistent execution and the operating leverage inherent to our business, which allows us to drive adjusted EBITDA margin expansion and increasing profitability over time. Net revenue grew 8% and gross profit grew 7% on a year-over-year basis, both at the high end of our expectations, driven by TPV growth of 29%. Adjusted operating expenses were down 1% year-over-year, a bit lower than we expected. We achieved this while continuing to invest in the priorities we've outlined and those investments remain on track. The combination of gross profit and adjusted operating expense outperformance resulted in adjusted EBITDA growth of 28% year-over-year, which was above our guide. Gap net income of $115 million included $107 million non-cash tax benefit related to the release of a significant portion of the valuation allowance on our deferred tax assets.

12:52 Q3 TPV was $126 billion. Growing 29% year-over-year, marking our first quarter with annualized TPV of more than $500 billion. Non-block TPV continue to grow more than twice as fast as block TPV. Growth within our financial services use case continues to run a little slower than the overall company, but excluding block, financial services growth is meaningfully faster than the overall company. Cash App new issuance slowed through the quarter as expected, and we continue to expect little to no new issuance by the end of December. Lending, including buy now, pay later, grew nearly 40% year-over-year, still very strong against a tough year-over-year comparison.

13:43 Growth in this use case continues to be driven by expanding flexible network credential usage and our customers' ongoing geographic expansion on our platform. Expense management growth accelerated for the fifth consecutive quarter with volume growth rate in the high 50s year over year. This robust growth reflects our fastest growing customers continuing to take share by acquiring new end users made possible by their utilization of our uniquely configurable capabilities. On-demand delivery grew in the high single digits year over year. Below the company's overall growth rate, as this is our most mature use case. Turning to the P&L, Q3 net revenue was $176 million, growing 8% year over year, at the high end of our expectations.

14:37 Block net revenue concentration was 41% in Q3, down from 44% a year ago, and consistent with Q2, as block programs continue growing well on our platform. Q3 gross profit was $122 million, growing 7% year-over-year at the high end of our expectations. As we expected, the renewal we discussed last quarter was signed in Q3. That renewal, together with lapping the TransactPay acquisition, lapping very strong lending, including buy-now-pay-later growth, and the expected diversification of Cash App new issuance, accounts for the roughly 10-point deceleration from Q2 that we outlined last quarter.

15:24 Q3 adjusted operating expenses were $83 million, down 1% year over year, slightly better than our outlook of nearly flat. Adjusted operating expenses have consistently been $83 to $84 million in each of the first three quarters this year, following the step-up in the second half of 2025. and reflect the benefits of scale. While we remain focused on efficient execution, we are continuing to invest at the pace we feel positions us well for future growth while maintaining the flexibility to pursue additional attractive investment opportunities to drive profitable growth. Q3 adjusted EBITDA was 39 million, up 28% year over year, ahead of our 20 to 25% outlook.

16:16 This represented a margin of 22% based on net revenue and 32% based on gross profit, both representing new highs for Marketa. Q3 gap net income was $115 million, including a discrete non-cash tax benefit of $107 million. from the release of a significant portion of the valuation allowance on our U.S. federal and certain state deferred tax assets. This is a milestone. The release reflects our judgment that these assets will be realized based on our cumulative U.S. income and the consistency of our profitability over the last few quarters and our confidence that it will continue.

17:05 Profitability has been running well ahead of our expectations this year, and we have raised our adjusted EBITDA and net income outlook at every earnings call since the start of the year. As a reminder, this is a GAAP accounting item with no cash impact. We still hold considerable deferred tax assets, and our cash tax outlook is unchanged. GAAP diluted EPS was $1.096. in Q3, including a benefit of $1.01 per share from the release of our tax valuation allowance. EPS reflected a weighted average diluted share count of 106 million shares down 6% year-over-year, adjusted for the one-for-four reverse stock split that became effective on June 30th.

17:54 Our share repurchase activity remained ongoing. In Q3, we repurchased 700,000 shares at an average price of $16.25. We continue to believe the current valuation does not fairly represent the company's value or the market opportunity ahead of us. As of September 30th, we had $140 million remaining under the $150 million share repurchase authorization approved by the Board in August. We ended the quarter with $698 million in cash and short-term investments. Now let me turn to our outlook. For the fourth quarter of 2026, we expect gross profit to grow between 5% and 7%, consistent with the third quarter. We now expect net revenue to grow between 3% and 5%, lower than we shared last quarter.

18:52 One factor is how our customers choose to structure their programs. Choice across banks and networks is a top priority for our customers and an important source of competitive advantage for us. We structure our customer, bank, and network contracts to accommodate these choices. Our top 10 customers by gross profit work across 17 banks and 11 primary and secondary networks globally. which our platform enables seamlessly. Many of our large customers evaluate our pricing after bank and network fees so whether those fees run through us or are paid directly generally doesn't change what we earn from them. In some cases, our scale with bank partners also benefits our customers. In this case, one customer is choosing to contract directly with another issuing bank which is a bank we already support.

19:50 We continue to process their volume, and the related bank and network fees no longer run through our P&L. Therefore, for this customer, net revenue and cost of revenue both come down by the same amount with no impact on gross profit. This is another example of why we emphasize gross profit as the best measure of our performance. We expect Q4 adjusted operating expenses to increase sequentially and be nearly flat on a year-over-year basis as we continue to efficiently manage our investment initiatives against the second-half 2025 base that stepped up meaningfully last year. Adjusted EBITDA growth is expected to be in the mid-20s. We expect Q4 gap net income in the mid-to-high single-digit millionths.

20:41 For the full year, we are maintaining our gross profit growth expectations of 11 to 12%. We are reducing our full year net revenue growth expectations by one point to a range of 11 to 12%, reflecting our Q4 net revenue outlook. We are not currently seeing a notable shift in spend or consumer behavior and are assuming consistent spending patterns for the remainder of the year. Given the Q3 outperformance on the bottom line, we are raising our full-year adjusted EBITDA percentage growth rate expectations from the low 30s to the low to mid 30s. We expect full-year gap net income in the $135 to $140 million range, including the $107 million discrete non-cash tax benefits.

21:34 We are continuing to strengthen our end-to-end platform by enhancing our product suite, including stable coin-backed card solutions, supplier payment features, and seamless onboarding and funding capabilities. We believe this continues to support and advance customer growth and expansion. We see that in the programs we are onboarding, which reflect demand across both new and existing customers. Our continuum of products across geographies and use cases, along with our expertise and scale, positions us to capture an evolving set of opportunities that we believe will drive long-term value for customers and shareholders. In conclusion, we delivered strong third quarter results with gross profit growth at the high end of expectations and adjusted EBITDA and profitability above our expected ranges.

22:27 Adjusted EBITDA grew 28% and adjusted EBITDA margin expanded to 32% of gross profit, a new record for Marketa. Looking ahead, our sizable market opportunity, strong competitive position, and scalable financial model give us confidence that we can sustain healthy top and bottom line growth. I will now turn it back over to the operator for questions. Thank you. We will now be conducting a question and answer session. We ask that you please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

23:13 For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Sanjay Sakrani with KBW. Please proceed with your question. Thank you. Congrats on the credit card issuing partnership with Square. I guess, Mike, when we think about the potential from here for that business, given it validates it in some ways, are you seeing more interest pick up? Maybe you can just talk about how we should think about this win.

23:56 Thanks for your question, Sanjay. What's really interesting about this win that, again, we're seeing more and more demand for is the optionality that our platform provides allows our customers to do lots of different things and use our platform as the sort of one place that they see everything that keeps it simple for them. So if you think about with the Square American Express credit program coming over to us, We already have their debit program, so that means they have a debit and credit program on different banks with different networks, but the one glue that brings it together is the Marketa platform that allows that to be very easy for them.

24:45 That's really where a lot of Thank you for joining us. As I mentioned in the call, they originally, or in my remarks, they allegedly launched this program about three years ago. And at the time, we didn't support American Express, and so it really wasn't an option for us to be able to support it. But I think now that it's come onto the Marketa platform, which is very capable and something they're very familiar with, I think they believe it can be a very successful program that now – that will drive a lot more interest because of the capabilities that they'll be offer.

25:50 So we're pretty excited about the potential of bringing the credit program now together with the debit program for Square. Perfect. And I guess just a follow-up question, and I know I don't want you to give guidance necessarily for next year, but just thinking about the growth algorithm for next year, you have some renewals. Maybe you can just talk about how you think The confidence in the underlying growth trajectory for next year is panning out. You have some easier comparisons. You have some momentum here. Maybe you can just talk a little bit about how you're thinking about it. Thank you.

26:25 Yeah, why don't I kick off with that? Thanks for the question. So we're, yeah, as you mentioned, we're not going to be giving expectations for 2027 today. We'll do that in February. But let me give you a sense of how we're thinking about it. First, we've discussed a few times this year, there are a few specific things for 2026 that won't repeat again. The first being the two renewals of the deals negotiated during the fintech boom, one of which had been in place for the full year, and the second, which will affect the second half. And then the block reaching its larger price step down as Cash App scaled to kind of this next level of growth. Those won't repeat.

27:10 And then more broadly, we continue to be very confident about the underlying business. As we mentioned, our fast-growing customers continue to perform well and grow on us and in many cases expand with us. And the new deals that we're signing are bigger and with more established companies. And Europe and value and added services are continuing to scale very nicely for us. But at the same time, Cash App's diversification of new business is still phasing in, and we expect little to no new issuance by the end of December. And that will be a bigger drag next year. So there are still a number of factors that are working through, and that will affect timing and the size of what shows up in the P&L. So we'll share more in February.

28:00 Okay. Thank you very much. Our next question is from Connor Allen with JP Morgan. Please proceed with your question.

28:16 Hi, thanks for taking my questions. I also wanted to ask about the Square credit card win, but maybe just more broadly, it feels like Marquette has been scaling the ability to migrate portfolios for a few years now. And I was curious if you could just talk about that a little bit, whether your ability to migrate portfolios more effectively has changed the win rate on some of these migrations versus de novo programs. Have you seen any of that shift in the last few years?

28:41 Sure. Thanks, Connor. I'll take that question. So, I agree that, as I mentioned in my remarks, that there's a wave of modernization that's underway, and it's in the very early stages. You know, more than 90% of the card volume still runs on legacy platforms, which makes it difficult for issuers to compete with fintechs and more and more embedded finance companies. as they grow larger and get more aggressive utilizing more modern infrastructure like ours. And so our migrations reflect that sort of wave of modernization arriving. So programs are looking to come off the older platforms and they see the benefit of what we can provide. And we do that without disrupting the cardholder experience.

29:27 So the The square migration onto our platform is the fourth migration we've done in the last 24 months, two in credit, two in debit. And we have more signed that are underway as we speak. And so this continues to be a major strength and differentiator for Marquetta. In the past, doing a migration was pretty scary and relatively unheard of. I would say as we do more and more of these, and customers are happy and they feel it went very smooth, you know, we're seeing more and more people receptive to it. We can talk them through, you know, kind of the migration, almost product. We've created a product to facilitate this and that combined with our white glove approach and all our expertise about how to do this because the two most complex parts of this, Connor, are related to kind of the data mapping and all the cryptography shifting that over and The more of these we do, obviously, the better and better we get, which we think should lower the barriers for other companies looking to take on a migration to get to a modern processor.

30:41 Perfect. Thanks. And I did want to ask separately, if you don't mind, just about this revenue revision. If you wouldn't mind just talking a little bit more about it, it sounds like on a gross profit level, the economics aren't shifting with this customer, but does Their engagement directly with the issuer, the network change, the way that you're engaging with them, just maybe a little bit more on this revenue revision dynamic would be helpful for us, I think. Thanks, team.

31:04 Yeah, so why don't I start? So, yes, for Q4, we expect our gross profit to grow 5% to 7%, and we expected slightly slower net revenue growth for 3% to 5%. and the important thing here is that our gross profit growth didn't change relative to kind of the net revenue that we're talking about. One of the reasons that we cite is how our customers set up their programs and one of the stats that we talked about was of our top 10 gross profit customers by gross profit, they work across 17 banks and 11 primary and secondary networks globally. When we double-click on the U.S., these top 10 customers utilize 10 banks. Seven of them use more than one U.S. bank and then four use at least three banks.

32:01 And this flexibility is a big reason why our customers choose us and keep scaling with us. They can work across various networks and banks and Square is a good example of that here as well. And they can do that all seamlessly on one platform. And then we also have, given our scale, we have sometimes better economics with banks and we pass that on to our customers and our largest customers, they know these bank and network costs in detail. So we think about, they think about this as all in pricing and so they can see where we add value and the pricing very clearly.

32:50 But this is the exact dynamic we see in Q4 with this one customer. They are working with us in the same way. We still have the same volume, but they came with us and asked us to contract with their issuing bank directly, and it was easy for us to move over. And the only thing that changes now is the cost of banking networks comes out of our revenue as well as our cost of revenue, and this didn't impact gross profit at all. And this is probably another good example of why we use gross profit as the key measure of performance.

33:29 Yeah, if I was just going to add, I would say from a business perspective, this is the kind of flexibility exactly we want to provide customers. And many, as Patti just gave some stats, many of our customers take advantage of this. It's just sort of unfortunate that then it can be disrupted to the revenue line on our P&L, which again is why we emphasize gross profits so much, because this is a great example of why that is, where the value we're adding and what we're making from this customer remains unchanged. It's just creating some noise in our revenue.

33:59 Yeah, the pass-through is just changing.

34:00 Okay, thanks.

34:01 Thanks, Mike. Thanks, Patti. Our next question is from Holt Byszynski with UBS. Please proceed with your question. Great. Thanks for taking the question. I was hoping you could help us better understand Marquetta's role across the different Cash App Card programs. So when we think about the traditional Cash App Card, post-purchase BNPL, and pre-purchase BNPLs, How does Marquetta's role and the underlying economics differ across the programs, if at all? Thanks.

34:33 Sure, maybe I'll start with that one. So I would say, Holt, I would classify it two ways. There's a component where there's the traditional Cash App product, which is what's been in the market for many, many years. and then recently in the past year or so they introduced a flexible credential product that brings the afterpay capability directly into Cash App. Both of those we support. The bulk of the traditional business obviously you know the overwhelming majority high 90% of that business still remains on our platform and we still probably have the majority also of the flexible credential business at this time but the you know the diversification of the new issuance is Our share of new issuance has been going down for the last couple of months.

35:23 I think there's a third use case you're talking where they might be providing some lending that happens outside of the card experience, and that is not something that affects our business. That's something that's done with a direct lending agreement between Block and the end user, and it's done outside of the card. I think the flexible credential was introduced so that they could make it a little bit easier to do installment-based lending and integrate that into the cardholder experience. But we are involved in both of those use cases. Great. Thanks so much. Yep. Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question is from Michael Infante with Morgan Stanley Investment Management. Please proceed with your question.

36:18 Hi, guys. Thanks for taking my question. I just wanted to ask, Mike, on your perspective, just in terms of some of the industry commentary around, you know, single-use virtual cards and whether or not they may be, you know, perhaps too restrictive for agentic transactions. Like, where do you generally see the limitations, and how is Marketo positioning to support other credentials and payment mechanisms as that market develops.

36:46 Yeah, that's obviously been a hot topic over the last few weeks. I think the discussion about single-use virtual cards in this case, the challenge is that it's being disconnected from the ultimate cardholder. So What's being lost with the single-use virtual card is who's actually making the purchase, and that's being masked in some of the early experimentation that's going on with agentic payments right now, which is what we think is what some people do not like. Our view is still that virtual cards could be a useful part of agentic commerce, but done from the issuer.

37:34 so that that link is not lost. So you still might want to create a separate credential that then is configured very specifically and limits your risk, but it's done by the issuer itself, which then doesn't disconnect everyone from who's actually making the purchase and allowing them to manage fraud versus some of the early solutions that are in the market now are breaking that into two steps and therefore the ultimate consumer is being lost to everyone else in the ecosystem in terms of who is actually making that purchase and who authorized that agent. So our view is that the issuer, for a GenTech to be very successful, that the issuer is going to have to play a larger role because they hold the context needed to authorize agents' actions.

38:26 So We expect that issuers will play a critical role alongside networks, wallets, merchants, everyone. And it's really that the issuer has two advantages, and they're both related to fraud, which is sort of what is holding back agentic and has everyone nervous, right? And the first is that issuers already know their customers. They know their spending and behavior patterns, which makes them best positioned to use the KYC or KYB that they've already done to ensure that the agent is authorized by the actual account holders. And so that's one aspect of it. The second is that the issuer already has the cardholder's trust, which is very important because the cardholder is also worried about potential fraud if you look at all the surveys and everything done. And so that trust is important.

39:16 So what we're focused on with the GenTech is building with intention and getting it right. There is a lot of things being tried in the marketplace, but with the rules still unsettled, particularly as opposed to fraud and who owns that risk, we think it's good to be deliberate and then pick the right path. We do think a platform like ours has the building blocks that are needed to do a Gentic successfully. We have Deep experience with persistent virtual cards with tight limits, real-time authorization, spend controls, disputes, chargebacks, tokenization, kind of risk decisioning, all the component pieces that you would need.

40:08 We just think ultimately what the solution will be is probably going to have a larger role for issuers than maybe what's being done right now on a limited basis in the market. The last thing I'll just say while we're talking about Gentic that I just wanted to add is that Something that's talked about less, I think, in the market, but we believe there's a real opportunity in commercial payments that, you know, it's not discussed as much, you know, kind of in the public domain. And a lot of that has to do with consumer spending patterns are more random and a little more inconsistent versus in commercial AP and supplier payments. The counterparties are consistent. The flows are pretty predictable. and the compliance is very well understood.

40:54 And there are already instances where businesses delegate, spend the kind of software and user-defined controls. So we expect that things like procurement, bill pay and other expense flows are good candidates for Gen Tech commerce. And so that's also something that we think in the coming quarters and months potentially, You're going to hear more about that that maybe you don't hear as much about today.

41:26 That's really good context. And then maybe just for a quick follow-up on OPEX framework as we sort of think about next year, understanding you guys aren't explicitly guiding to it today, but if I just sort of look at The year-to-date OPEX numbers in terms of trends through the third quarter, I think by my math, you're down 2% in terms of year-to-date OPEX. Roughly, you're guiding to 4Q being basically flat. So as you just sort of think about the investments that you need to make in the business or perhaps not to drive the level of gross profit growth that you ultimately want to deliver, where do you guys think your position, where do you want to lean in, and how do you sort of think about the durability of The recent trend in OPEX as we sort of think about setting models for next year.

42:13 Thanks, guys.

42:15 Yeah, why don't I start on that one? So I'll just emphasize that our planned investments are really on track, and we're managing them very efficiently. Although the growth rate had declined to flattish versus last year, they've been very consistent. through the year at $83 to $84 million, which was step up after the second half of last year during the CEO transition. And that will continue to grow, I think, in Q4 on a dollar basis as we scale. I do think we've talked a lot about OPEX efficiency in general as payment platforms scale nicely.

43:06 We're at a scale right now of $500 billion where we won't need to invest as much for the volume growth and it won't grow proportionally. We do expect to continue to get EBITDA margin expansion from this as well over time. but but right now feel very good about kind of where we're spending and where we're investing and I think we we also have the flexibility of our balance sheet to continue to lean in as we as we see fit.

43:36 Yeah I mean the only thing I'd add I think you know we kind of have happen to have some easy comps here because of the weird pattern of our expenses last year so the as Patti mentioned the growth rate looks odd but the dollars look you know tell a different story and so I think There's definitely investments we want to make, so we will be growing our expenses next year, or at least that's our plan. We'll talk about more how much, obviously, in February. The only other thing I'd just point out is that our investment capacity is also pretty significant. We do have a large engineering team that continues to get more efficient, and so that means we can still make a lot of investment and deliver a lot of new functionality. This now concludes our current question and answer session.

44:42 Thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.