Marqeta Inc.
02/24/2026 | Press release | Distributed by Public on 02/24/2026 16:03
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
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. 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. 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.
A discussion regarding our liquidity, financial condition, and results of operations for the fiscal year ended December 31, 2025 compared to the fiscal year ended December 31, 2024 is presented below. A discussion regarding our liquidity, financial condition, and results of operations for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on February 26, 2025, which is hereby incorporated by reference.
Overview
Marqeta's mission is modernizing financial services by making the entire payment experience native and delightful. Marqeta's modern platform empowers our customers to create customized and innovative payment card programs with configurability and flexibility. Marqeta's open APIs provide instant access to highly scalable, cloud-based payment infrastructure that enables customers to embed the payments experience into apps or websites for a personalized user experience. Customers can launch and manage their own card programs, issue cards, and authorize and settle payment transactions quickly using our platform. We also deliver robust bank, network, and card program management and value added services, allowing our customers to embed Marqeta in their offering without having to build certain complex compliance elements or customer support services.
Marqeta's innovative products are developed with deep domain expertise and a customer-first mindset to launch, scale, and manage card programs. Marqeta provides the following offerings based on a customer's desired level of control and responsibility:
•Processing: Marqeta provides all of its customers with issuer processor services as our core offering. Payment processing provides customers with access to the Marqeta dashboard via our APIs and webhooks, our JIT Funding feature, and assists with certain configuration elements that enable customers to use the platform independently.
•Bank and Network Management: Marqeta provides a service option to connect customers to an Issuing Bank partner to act as the BIN sponsor for the customer's card program, define and manage a number of the primary tasks related to launching a card program, and can provide a full range of services including configuring many of the critical resources required by a customer's production environment and managing the applicable regulations and the Issuing Bank. In addition, Marqeta provides another service offering to manage compliance with applicable Card Network rules.
•Program Management: Marqeta provides additional program management services that are required as part of a card program, including chargebacks and dispute resolution, reconciliation, and card fulfillment.
•Value Added Services: Marqeta provides value added services that provide a more seamless experience for our customers, which include tokenization, real-time decisioning and fraud management, digital banking, and other customer experience 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.
Impact of Macroeconomic Factors
We are unable to predict the impact macroeconomic factors, including various geopolitical conflicts, uncertainty related to global elections, changes in inflation and interest rates, and uncertainty in global regulatory and economic conditions, including as a result of uncertainty in global trade from potential
tariffs and counter tariffs, will have on our processing volumes and on our future results of operations. A deterioration in macroeconomic conditions could increase the risk of lower consumer spending, including discretionary spending, consumer and merchant bankruptcy, insolvency, business failure, higher credit losses, foreign currency fluctuations, or other business interruption, which may adversely impact our business. We continue to monitor these situations and may take actions that alter our operations and business practices as may be required by federal, state, or local authorities or that we determine are in the best interests of our customers, vendors, and employees. See the section titled "Risk Factors" 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.
Key Operating Metrics and Non-GAAP Financial Measures
We review a number of operating and financial metrics, including the key operating metric set forth below, to help us evaluate our business and growth trends, establish budgets, evaluate the effectiveness of our investments, and assess operational efficiencies. In addition to the results determined in accordance with GAAP, the following table sets forth a key operating metric and non-GAAP financial measures that we consider useful in evaluating our operating performance:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Total Processing Volume (TPV) (in millions) | $ | 382,513 | $ | 291,105 | $ | 222,264 | |||||||||||
| Net revenue (in thousands) | $ | 624,884 | $ | 506,995 | $ | 676,171 | |||||||||||
| Gross profit (in thousands) | $ | 437,272 | $ | 351,849 | $ | 329,514 | |||||||||||
| Gross margin | 70 | % | 69 | % | 49 | % | |||||||||||
|
Net (loss) income (in thousands)
|
$ | (13,925) | $ | 27,287 | $ | (222,962) | |||||||||||
|
Net (loss) income margin
|
(2) | % | 5 | % | (33) | % | |||||||||||
| Total operating expenses (in thousands) | $ | 483,702 | $ | 376,315 | $ | 612,529 | |||||||||||
| Non-GAAP Measures: | |||||||||||||||||
| Adjusted EBITDA (in thousands) | $ | 109,578 | $ | 29,093 | $ | (2,290) | |||||||||||
| Adjusted EBITDA margin | 18 | % | 6 | % | - | % | |||||||||||
|
Adjusted operating expenses (in thousands)
|
$ | 327,694 | $ | 322,756 | $ | 331,804 | |||||||||||
Total Processing Volume ("TPV")- TPV represents the total dollar amount of payments processed through our platform, net of returns and chargebacks. We believe that TPV is a key operating metric and a principal indicator of the market adoption of our platform, growth of our brand, growth of our customers' businesses and scale of our business.
Adjusted EBITDA- Adjusted EBITDA is a non-GAAP financial measure that is calculated as Net (loss) income adjusted to exclude depreciation and amortization; share-based compensation expense; executive chairman long-term performance award; payroll tax related to share-based compensation; restructuring and other one-time costs; acquisition related expenses which consist of due diligence costs, transaction costs and integration costs related to potential or successful acquisitions and cash and non-cash postcombination compensation expenses; non-recurring litigation expense; income tax expense (benefit); and other income, net, which consists primarily of interest income from our short-term investments and cash deposits, impairment of financial instruments and realized foreign currency gains and losses. We believe that Adjusted EBITDA is an important measure of operating performance because it allows management and our Board of Directors to evaluate and compare our core operating results, including our operating efficiencies, from period to period. Additionally, we utilize Adjusted EBITDA as an input into our calculation of our annual employee bonus plans and performance-based restricted stock units. See the section below titled "Use of Non-GAAP Financial Measures" for a discussion of the use of non-GAAP measures, a change in presentation, and a reconciliation of Net (loss) income to Adjusted EBITDA.
Adjusted EBITDA Margin- Adjusted EBITDA Margin is a non-GAAP financial measure that is calculated as Adjusted EBITDA divided by Net revenue. This measure is used by management and our Board of Directors to evaluate our operating efficiency. See the section below titled "Use of Non-GAAP Financial Measures" for a discussion of the use of non-GAAP measures and a reconciliation of Net (loss) income to Adjusted EBITDA Margin.
Adjusted operating expenses- Adjusted operating expenses is a non-GAAP financial measure that is calculated as Total operating expenses adjusted to exclude depreciation and amortization; share-based compensation expense; executive chairman long-term performance award; payroll tax related to share-based compensation; restructuring and other one-time costs; non-recurring litigation expense; 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 adjusted operating expenses is an important measure of operating performance because it allows management and our board of directors to evaluate and compare our core operating results, including our operating efficiencies, from period to period. See the section below titled "Use of Non-GAAP Financial Measures" for a discussion of the use of non-GAAP measures, a change in presentation, and a reconciliation of total operation expenses to adjusted operating expenses.
Components of Results of Operations
Net Revenue
We have two components of net revenue: platform services revenue, net and other services revenue.
Platform services revenue, net. Platform services revenue includes Interchange Fees, net of Revenue Share and other service-level payments to customers, and Card Network and Issuing Bank costs for certain customer arrangements where the Company is an agent in the delivery of services to the customer. Platform services revenue also includes processing and other fees. "Interchange Fees" are transaction-based and volume-based fees set by a Card Network and paid by a merchant bank to the Issuing Bank that issued the payment card used to purchase goods or services from a merchant. We earn Interchange Fees on card transactions we process for our customers and the fees are based on a percentage of the transaction amount plus a fixed amount per transaction. Interchange Fees are recognized when the associated transactions are settled.
Revenue Share payments are incentives to our customers to increase their processing volumes on our platform. Revenue Share is generally computed as a percentage of the Interchange Fees earned or processing volume and is paid to our customers monthly. Revenue Share payments are recorded as a reduction to net revenue. Generally, as customers' processing volumes increase, the rates at which we share revenue increase.
Processing and other fees are priced as either a percentage of processing volume or on a fee per transaction basis and are earned, for example, 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, as well as transaction fees for utilizing other value-added services and program management features, are also included in processing and other fees.
We recognize revenue when the promised services are complete, and our performance obligations are satisfied. Platform services are considered complete when we have authorized the transaction, validated that the transaction has no errors, and accepted and posted the data to our records.
Other services revenue.Other services revenue primarily consists of revenue earned for card fulfillment services. Card fulfillment fees are generally billed to customers upon ordering card inventory and recognized as revenue when the cards are shipped to the customers.
Costs of Revenue
Costs of revenue consist of Card Network fees, Issuing Bank fees, and card fulfillment costs for customer arrangements where we are the principal in providing services to the customer and excludes depreciation and amortization, which is reported separately within the Consolidated Statements of Operations and Comprehensive (Loss) Income. Card Network fees are equal to a specified percentage of processing volume or a fixed amount per transaction routed through the respective Card Network. Issuing Bank fees compensate our Issuing Banks for issuing cards to our customers and sponsoring our card programs with the Card Networks and are typically equal to a specified percentage of processing volume or a fixed
amount per transaction. Card fulfillment costs include physical cards, packaging, and other fulfillment costs.
We have marketing and incentive arrangements with Card Networks, that provide us with monetary incentives for establishing customer card programs with and routing transaction volume through the respective Card Networks. These incentives are typically calculated as a percentage of the processed transaction volume or the number of transactions routed through the Card Network. We account for these incentives as a reduction of Card Network fees within Costs of Revenue in customer arrangements where we act as the principal. As processing volumes increase, we earn a higher cumulative incentive rate, subject to achieving specific cumulative volume thresholds within an annual measurement period. For certain incentive arrangements, the annual measurement period may not align with our fiscal year.
Prior to the second quarter of fiscal year 2025, we recognized network incentives in the period when cumulative transaction volume thresholds were met, due to insufficient data to reliably estimate the amount of incentives Card Networks would ultimately earn over the respective annual period. This approach resulted in fluctuations in Card Network incentives, particularly when thresholds were reached, as higher incentive rates were applied retroactively to the entire annual measurement period. Historically, we have earned the highest incentive rates in the first quarter of our fiscal year, when annual measurement periods are nearing completion and higher cumulative transaction volume thresholds are achieved. Conversely, the second quarter generally reflected the lowest incentive rates, as the annual measurement periods and cumulative transaction volume thresholds reset to lower levels.
Effective in the second quarter of fiscal year 2025, we revised our accounting policy for estimating and recognizing network incentives. We now estimate and recognize network incentives based on the cumulative incentive rate we expect to earn over the annual measurement period. We estimate the cumulative incentive rates based on our forecasts for the annual measurement periods, which incorporates both historical experience and our expectations of future events, in addition to other qualitative considerations. The estimated cumulative incentive rates are applied to the volume and/or number of transactions processed during the reporting period to calculate the quarterly network incentives recognized. As a result of this policy revision, the Card Network incentives recognized during the year ended December 31, 2025 were $1.5 million higher compared to the amount that would have been recognized under the previous policy.
Operating Expenses (Benefit)
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.
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. 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. 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.
Executive Chairman Long-Term Performance Award.Executive Chairman Long-Term Performance Award consists of share-based compensation related to the Executive Chairman's Long-Term Performance Award, including the impact of forfeiture. The Executive Chairman Long-Term Performance Award was forfeited in fiscal year 2024 as a result of the Company's Executive Chairman transitioning to a non-employee director role on the Board of Directors.
Other Income, net
Other income, net consists primarily of interest income from our short-term investments and cash deposits, and realized foreign currency gains and losses.
Income Tax Expense (Benefit)
Income tax expense (benefit) consists of U.S. federal and state income taxes, and income taxes related to certain foreign jurisdictions. We maintain a full valuation allowance against our U.S. federal and state net deferred tax assets as we have concluded that it is not more likely than not that we will realize our net deferred tax assets.
In July 2025, the One Big Beautiful Bill Act (H.R. 1, the "Tax Act") was signed into law, reinstating certain provisions from the 2017 Tax Cuts and Jobs Act, including 100% bonus depreciation under Section 168(k) and immediate expensing of U.S.-based research costs under Section 174. Due to the full valuation allowance on our deferred tax assets, the Tax Act did not have a material impact on our overall tax expense or effective tax rate for the year ended December 31, 2025.
Results of Operations
The following table sets forth our results of operations for the periods presented:
| Year Ended December 31, | ||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Net revenue | $ | 624,884 | $ | 506,995 | $ | 676,171 | ||||||||||||||
| Costs of revenue | 187,612 | 155,146 | 346,657 | |||||||||||||||||
| Gross profit | 437,272 | 351,849 | 329,514 | |||||||||||||||||
|
Operating expenses (benefit):
|
||||||||||||||||||||
| Compensation and benefits | 340,419 | 397,595 | 446,381 | |||||||||||||||||
| Technology | 65,005 | 60,059 | 55,612 | |||||||||||||||||
| Professional services | 21,879 | 20,057 | 21,679 | |||||||||||||||||
| Occupancy | 3,766 | 5,995 | 4,361 | |||||||||||||||||
| Depreciation and amortization | 27,163 | 17,460 | 10,741 | |||||||||||||||||
| Marketing and advertising | 5,073 | 2,986 | 2,566 | |||||||||||||||||
| Other operating expenses | 20,397 | 16,780 | 17,975 | |||||||||||||||||
|
Executive chairman long-term performance award
|
- | (144,617) | 53,214 | |||||||||||||||||
| Total operating expenses | 483,702 | 376,315 | 612,529 | |||||||||||||||||
| Loss from operations | (46,430) | (24,466) | (283,015) | |||||||||||||||||
|
Other income, net
|
33,101 | 52,546 | 52,440 | |||||||||||||||||
|
(Loss) income before income tax expense (benefit)
|
(13,329) | 28,080 | (230,575) | |||||||||||||||||
|
Income tax expense (benefit)
|
596 | 793 | (7,613) | |||||||||||||||||
|
Net (loss) income
|
$ | (13,925) | $ | 27,287 | $ | (222,962) | ||||||||||||||
Comparison of the Fiscal Years Ended December 31, 2025 and 2024
Net Revenue
| Year Ended December 31, | ||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||
| Net revenue: | ||||||||||||||||||||||||||
| Total platform services, net | $ | 594,137 | $ | 481,665 | $ | 112,472 | 23 | % | ||||||||||||||||||
| Other services | 30,747 | 25,330 | 5,417 | 21 | % | |||||||||||||||||||||
| Total net revenue | $ | 624,884 | $ | 506,995 | $ | 117,889 | 23 | % | ||||||||||||||||||
| Total Processing Volume (TPV) (in millions) | $ | 382,513 | $ | 291,105 | $ | 91,408 | 31 | % | ||||||||||||||||||
Total platform services, net revenue increased by $112.5 million, or 23%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The overall increase in platform services revenue was primarily driven by a 31% increase in TPV, partially offset by unfavorable shifts in our card program mix, particularly the expansion of programs where we provide processing services with minimal or no program management services.
Other services revenue increased $5.4 million, or 21%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. This growth was driven by a rise in card-related fulfillment activities, reflecting an overall increase in customer card shipments compared to the prior year.
The increase in TPV was driven by strong performance across all of our major use cases, particularly financial services, lending, including buy-now-pay later, and expense management. TPV from our top five customers, as determined by their individual processing volume in each respective period, grew 21% for the year ended December 31, 2025 compared to the year ended December 31, 2024. TPV from all other customers increased 69% over the same period. Note that the composition of the top five customers may differ between the two periods.
Costs of Revenue and Gross Margin
| Year Ended December 31, | ||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||
| Costs of revenue: | ||||||||||||||||||||||||||
| Card Network fees, net | $ | 147,498 | $ | 123,332 | $ | 24,166 | 20 | % | ||||||||||||||||||
| Issuing Bank fees | 17,692 | 13,408 | 4,284 | 32 | % | |||||||||||||||||||||
| Other | 22,422 | 18,406 | 4,016 | 22 | % | |||||||||||||||||||||
| Total costs of revenue | $ | 187,612 | $ | 155,146 | $ | 32,466 | 21 | % | ||||||||||||||||||
| Gross profit | $ | 437,272 | $ | 351,849 | $ | 85,423 | 24 | % | ||||||||||||||||||
| Gross margin | 70 | % | 69 | % | ||||||||||||||||||||||
Costs of revenue increased by $32.5 million, or 21%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily driven by higher Card Network and Issuing Bank fees related to the 31% growth in TPV. This increase was partially offset by $1.5 million of higher network incentives recognized in 2025 due to the revised accounting policy for estimating incentives as Card Network fees are presented net of monetary incentives received from Card Networks.
Gross profit increased by $85.4 million, or 24%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, as net revenue growth outpaced the increase in costs of revenue. As a result, gross margin improved to 70% during the year ended December 31, 2025 from 69% in the prior year.
Operating Expenses (Benefit)
| Year Ended December 31, | ||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||
|
Operating expenses (benefit):
|
||||||||||||||||||||||||||
|
Salaries, bonus, benefits, and payroll taxes
|
$ | 235,631 | $ | 261,033 | $ | (25,402) | (10) | % | ||||||||||||||||||
| Share-based compensation | 104,788 | 136,562 | (31,774) | (23) | % | |||||||||||||||||||||
| Total compensation and benefits | 340,419 | 397,595 | (57,176) | (14) | % | |||||||||||||||||||||
| Percentage of net revenue | 54 | % | 78 | % | ||||||||||||||||||||||
| Technology | 65,005 | 60,059 | 4,946 | 8 | % | |||||||||||||||||||||
| Percentage of net revenue | 10 | % | 12 | % | ||||||||||||||||||||||
| Professional services | 21,879 | 20,057 | 1,822 | 9 | % | |||||||||||||||||||||
| Percentage of net revenue | 4 | % | 4 | % | ||||||||||||||||||||||
| Occupancy | 3,766 | 5,995 | (2,229) | (37) | % | |||||||||||||||||||||
| Percentage of net revenue | 1 | % | 1 | % | ||||||||||||||||||||||
| Depreciation and amortization | 27,163 | 17,460 | 9,703 | 56 | % | |||||||||||||||||||||
| Percentage of net revenue | 4 | % | 3 | % | ||||||||||||||||||||||
| Marketing and advertising | 5,073 | 2,986 | 2,087 | 70 | % | |||||||||||||||||||||
| Percentage of net revenue | 1 | % | 1 | % | ||||||||||||||||||||||
| Other operating expenses | 20,397 | 16,780 | 3,617 | 22 | % | |||||||||||||||||||||
| Percentage of net revenue | 3 | % | 3 | % | ||||||||||||||||||||||
|
Executive chairman long-term performance award
|
- | (144,617) | 144,617 | (100) | % | |||||||||||||||||||||
|
Percentage of net revenue
|
- | (29) | % | |||||||||||||||||||||||
| Total operating expenses | $ | 483,702 | $ | 376,315 | $ | 107,387 | 29 | % | ||||||||||||||||||
| Percentage of net revenue | 77% | 74% | ||||||||||||||||||||||||
Salaries, bonus, benefits, and payroll taxes decreased by $25.4 million, or 10%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. This decrease was primarily driven by lower year-over-year post-combination compensation expenses for former Power Finance employees and higher capitalization of salaries, bonus, and benefits costs associated with internal-use software development activities during 2025. These savings were partially offset by an increase in year-over-year bonus expense and severance and one-time retention bonuses awarded to certain key employees during the year ended December 31, 2025 for which there were no comparable expenses in 2024.
Share-based compensation decreased by $31.8 million, or 23%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. This decrease was mainly due to higher year-over-year forfeitures of stock based awards, including those related to the departure of our former CEO in the first quarter of 2025, as well as the full vesting of older stock option grants outpacing the expense from newer restricted stock unit awards.
Technology expenses increased by $4.9 million, or 8%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. This increase was mainly driven by higher software license and hosting costs to support system and tool implementations amid ongoing business growth.
Professional services expenses increased by $1.8 million, or 9%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. This increase was primarily due to an increase in administrative consulting services.
Occupancy expense decreased by $2.2 million, or 37%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease primarily resulted from a non-recurring impairment charge related to the right-of-use assets for our Oakland office recorded in the fourth quarter of 2024, with no comparable charge in 2025, as well as lower ongoing lease costs resulting from the downsizing of our operating lease footprint.
Depreciation and amortization increased by $9.7 million, or 56%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily driven by higher amortization of internally developed software as additional projects were capitalized and placed into service during the year ended December 31, 2025. To a lesser extent, amortization of the customer relationships intangible asset acquired from the TransactPay acquisition, which started in the third quarter of 2025, contributed to the increase.
Marketing and advertising expenses increased by $2.1 million, or 70%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, which was driven by our continued investment in brand awareness and customer acquisition initiatives to support business growth.
Other operating expenses increased by $3.6 million, or 22%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily due to legal contingency expense recognized during the year ended December 31, 2025 in connection with the Securities Actions.
The executive chairman long-term performance award decreased by 100% for the year ended December 31, 2025 compared to December 31, 2024 due to the forfeiture in the second quarter of 2024 following the Executive Chairman's transition to a non-employee director role on the Board of Directors.
Other Income, Net
| Year Ended December 31, | ||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||
|
Other income, net
|
$ | 33,101 | $ | 52,546 | $ | (19,445) | (37) | % | ||||||||||||||||||
| Percentage of net revenue | 5 | % | 10 | % | ||||||||||||||||||||||
Other income, net decreased by $19.4 million, or 37% for the year ended December 31, 2025 compared to the year ended December 31, 2024. This decrease was primarily driven by lower interest income on our short-term investment portfolio and cash balances, reflecting lower average balances primarily due to $391.4 million of share repurchases completed during the year ended December 31, 2025, as well as lower average yields during the year ended December 31, 2025 compared to the prior year.
Income Tax Expense (Benefit)
Income tax expense decreased by $0.2 million or 25% for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to an increase in research and development tax credits generated in Canada.
Customer Concentration
We generated 45% and 47% of our net revenue from our largest customer, Block, during the years ended December 31, 2025 and 2024, respectively.
Use of Non-GAAP Financial Measures
Our non-GAAP measures have limitations as analytical tools and you should not consider them in isolation. These non-GAAP measures should not be viewed as a substitute for, or superior to, measures prepared in accordance with GAAP. In evaluating these non-GAAP measures, you should be aware that in the future we will incur expenses similar to the adjustments in the presentation of our non-GAAP measures set forth under "Key Operating Metric and Non-GAAP Financial Measures". There are a number of limitations related to the use of these non-GAAP measures versus their most directly comparable GAAP measures, including the following:
•other companies, including companies in our industry, may calculate adjusted EBITDA and operating expenses differently than how we calculate these measures or not at all; limiting their usefulness as comparative measures;
•although depreciation and amortization are non-cash charges, the assets being depreciated or amortized may require future replacement, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditures; and
•adjusted EBITDA does not reflect the effect of income taxes that may represent a reduction in cash available to us.
We encourage investors to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures.
A reconciliation of Net (loss) income to adjusted EBITDA and GAAP operating expenses to Adjusted operating expenses for the periods presented is as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (dollars in thousands) | |||||||||||||||||
| Net revenue | $ | 624,884 | $ | 506,995 | $ | 676,171 | |||||||||||
|
Net (loss) income
|
$ | (13,925) | $ | 27,287 | $ | (222,962) | |||||||||||
|
Net (loss) income margin
|
(2) | % | 5 | % | (33) | % | |||||||||||
| Total operating expenses | $ | 483,702 | $ | 376,315 | $ | 612,529 | |||||||||||
|
Net (loss) income
|
$ | (13,925) | $ | 27,287 | $ | (222,962) | |||||||||||
|
Share-based compensation expense (1)
|
104,788 | 136,562 | 130,416 | ||||||||||||||
| Depreciation and amortization expense | 27,163 | 17,460 | 10,741 | ||||||||||||||
|
Acquisition-related expenses(2)
|
9,437 | 41,584 | 75,473 | ||||||||||||||
|
Restructuring and other one-time costs(3)
|
7,840 | - | 8,670 | ||||||||||||||
|
Non-recurring litigation expense (4)
|
4,297 | - | - | ||||||||||||||
| Payroll tax expense related to share-based compensation | 2,483 | 2,570 | 2,211 | ||||||||||||||
|
Executive chairman long-term performance award
|
- | (144,617) | 53,214 | ||||||||||||||
|
Other income, net
|
(33,101) | (52,546) | (52,440) | ||||||||||||||
|
Income tax expense (benefit)
|
596 | 793 | (7,613) | ||||||||||||||
| Adjusted EBITDA | $ | 109,578 | $ | 29,093 | $ | (2,290) | |||||||||||
| Adjusted EBITDA Margin | 18 | % | 6 | % | - | % | |||||||||||
| Total operating expenses | $ | 483,702 | $ | 376,315 | $ | 612,529 | |||||||||||
|
Share-based compensation expense(1)
|
(104,788) | (136,562) | (130,416) | ||||||||||||||
| Depreciation and amortization expense | (27,163) | (17,460) | (10,741) | ||||||||||||||
|
Acquisition-related expenses(2)
|
(9,437) | (41,584) | (75,473) | ||||||||||||||
|
Restructuring and other one-time costs(3)
|
(7,840) | - | (8,670) | ||||||||||||||
|
Non-recurring litigation expenses (4)
|
(4,297) | - | - | ||||||||||||||
| Payroll tax expense related to share-based compensation | (2,483) | (2,570) | (2,211) | ||||||||||||||
|
Executive chairman long-term performance award
|
- | 144,617 | (53,214) | ||||||||||||||
|
Adjusted operating expenses
|
$ | 327,694 | $ | 322,756 | $ | 331,804 | |||||||||||
_______________
(1) Restructuring includes a net reduction of $2.9 million of stock-based compensation related to the forfeiture of certain equity awards during the year ended December 31, 2023. See Note 13, "Restructuring" for additional information.
(2) 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.
(3) Restructuring and other one-time costs consist primarily of severance expenses and other one-time expenses related to executive transitions. For the year ended December 31, 2025, these costs were associated with the transition of our former CEO and other key executives and retention bonuses given to certain key employees. Retention bonuses are subject to service requirements and are recognized as expense ratably over the requisite service period. For the year ended December 31, 2023, these costs were incurred in connection with an approved restructuring plan. See Note 13, "Restructuring" for additional information.
(4) Non-recurring litigation expense includes a legal contingency expense related to the Securities Actions. See Note 10, "Commitments and Contingencies" for additional information.
Liquidity and Capital Resources
Overview
We have historically financed our operations primarily through the issuance of equity securities, including net proceeds of approximately $1.3 billion from our IPO, and cash generated from operations. In recent years, we have achieved positive cash flows from operations, and a significant portion of our current cash, cash equivalents and short-term investments consists of remaining IPO proceeds supplemented by cash generated from our ongoing business activities.
As of December 31, 2025, we had $771.9 million of cash, cash equivalents and short-term investments, a decrease of $330.5 million from December 31, 2024. This decrease was primarily driven by cash used for share repurchases under our authorized repurchase programs, a business acquisition, and capital expenditures, partially offset by cash generated from operations.
Sources of Cash
At December 31, 2025, our principal sources of liquidity included cash, cash equivalents, and short-term investments totaling $771.9 million, with such amounts held for working capital purposes, and cash provided by operations. Our cash and 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.
Uses of Cash
Our primary uses of cash include operating costs such as compensation and benefits, technology costs, professional services, lease obligations, and other expenditures necessary to support our operations. Our future capital requirements will depend on many factors, including our continued investments in product development, platform infrastructure, share repurchases, and global expansion. We intend to allocate our cash toward ongoing business investments, potential strategic acquisitions, capital expenditures, share repurchases, and investment in our infrastructure, including our non-cancellable purchase commitments with cloud-computing service providers and certain Issuing Banks.
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. 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, with the exception of restricted cash. The majority of our restricted cash amounts are held solely for safeguarding customer funds in connection with TransactPay's card and e-money wallet programs, and are not available for our general corporate purposes or operations.
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. Additionally, we paid $53.1 million in contingent consideration upon achievement of specified performance-based milestones. We also entered into postcombination cash compensation arrangements with certain key acquired employees whereby we agreed to pay them $85.1 million of cash over a weighted-average service period of 2.2 years following the acquisition date (subject to forfeiture upon termination). As of December 31, 2025, $1.0 million of the postcombination cash compensation arrangements remained outstanding.
Our transaction to acquire TransactPay was completed on July 31, 2025 ("Closing") for a total purchase price of approximately $59.9 million, as disclosed in Note 4 "Business Combinations" to the consolidated financial statements. The total consideration primarily consisted of $54.0 million in cash paid at Closing, approximately $3.6 million in contingent consideration payable upon achievement of specified post-closing performance conditions through December 31, 2025, and approximately $2.3 million in holdbacks retained to secure sellers' indemnification obligations and post-closing purchase price adjustments, which will be released within one year upon satisfactory resolution of related matters. In accordance with the procedures outlined in the merger agreement, we paid the sellers approximately $1.1 million of the $1.2 million originally withheld for such adjustments. As of December 31, 2025, $2.4 million of the holdbacks remain outstanding, retained solely for general indemnification purposes, and are expected to be released within one year, subject to any valid indemnification claims asserted prior to the scheduled release date.
Share Repurchase
Our Board of Directors has periodically authorized share repurchase programs for repurchases of shares of our Class A common stock, including most recently on December 4, 2025, when our Board of Directors authorized an additional share repurchase program of up to $100 million of the Company's Class A common stock (the "December 2025 Share Repurchase Program"). Under the December 2025 Share Repurchase Program, the Company is 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 number of shares repurchased and the timing of purchases are based on general business and market conditions, and other factors, including legal requirements. The December 2025 Share Repurchase Program has no set expiration date. As of December 31, 2025, $91.5 million remained available for future share repurchases under the December 2025 Share Repurchase Program.
Restricted Cash
At December 31, 2025, we had $308.5 million in restricted cash of which $306.9 million is related to the cash and cash equivalents held by TransactPay on behalf of its customers related to card and e-money wallet programs. Restricted cash also includes $1.6 million cash held at a bank to secure our payments under a lease agreement for our office space, of which $0.9 million is recorded in other assets in the Consolidated Balance Sheet.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
|
Net cash provided by operating activities
|
$ | 162,623 | $ | 58,170 | $ | 21,104 | |||||||||||
|
Net cash provided by investing activities
|
271,111 | 70,788 | 38,516 | ||||||||||||||
|
Net cash used in financing activities
|
(347,319) | (186,914) | (261,794) | ||||||||||||||
|
Increase (decrease) in cash, cash equivalents, and restricted cash
|
$ | 86,415 | $ | (57,956) | $ | (202,174) | |||||||||||
Operating Activities
Our primary source of cash from operating activities is net revenue. Primary cash outflows include Card Network and Issuing Bank fees, as well as employee-related compensation and technology expenses. The timing of settlements of certain operating assets and liabilities, such as revenue share payments, bonus payments, prepayments to cloud-computing service providers, settlements receivable, and network incentives receivable, may impact the amounts reported as net cash provided by or used in operating activities in the Consolidated Statements of Cash Flows.
Net cash provided by operating activities was $162.6 million for the year ended December 31, 2025 compared to $58.2 million in the year ended December 31, 2024. The year-over-year improvement was primarily driven by higher gross profit, reflecting stronger operational performance, as well favorable changes in working capital, which included the timing of settlements related to revenue share payable, accrued expenses and other liabilities, and network incentive receivables.
Investing Activities
Net cash flows from investing activities primarily consist of proceeds from maturities of short-term investments, offset by purchases of short-term investments, acquisitions of property and equipment, capitalized internal-use software development costs, and cash consideration for business combinations.
Net cash provided by investing activities increased to $271.1 million for the year ended December 31, 2025, from $70.8 million in the year ended December 31, 2024. This year-over-year improvement was primarily driven by $229.7 million in restricted cash acquired as part of the TransactPay acquisition and $28.9 million in additional proceeds from maturities of short-term investments. These inflows were partially offset by $45.7 million in net cash used for the TransactPay acquisition, as well as ongoing capital expenditures for property, equipment, and internal-use software.
Financing Activities
Net cash used in financing activities consists primarily of net payments related to share-based compensation activities, repurchases under our share repurchase program, and the net impact of changes in funds payable and amounts due to customers arising from the TransactPay acquisition.
Net cash used in financing activities increased to $347.3 million for the year ended December 31, 2025, from $186.9 million in the year ended December 31, 2024. This year-over-year increase in outflows was primarily driven by repurchases of our Class A common stock under our share repurchase programs, partially offset by favorable changes in funds payable and amounts due to customers.
Obligations and Other Commitments
Our principal commitments consist of obligations under our operating leases for office space and other non-cancellable purchase commitments. For additional information about our operating leases and non-cancellable purchase commitments, see Note 9"Leases" and Note 10"Commitments and Contingencies" to our Consolidated Financial Statements.
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States. 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.
Our significant accounting policies, including recently issued and adopted accounting pronouncements, are described in "Note 2- Summary of Significant Accounting Policies" in the accompanying notes to our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. 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. An accounting estimate or assumption is considered critical if both (a) the nature of the estimate or assumption is material due to the levels of subjectivity and judgment involved, and (b) the impact within a reasonable range of outcomes of the estimate and assumption is material to our Consolidated Financial Statements.
Revenue Recognition
We interact with third party Issuing Banks and Card Networks to deliver our Platform Services to our customers. For revenue generated from customer arrangements that involve third parties, there is significant judgment in evaluating whether we are the principal, and report revenue on a gross basis, or the agent, and report revenue on a net basis. In this assessment, we consider if we obtain control of the specified goods or services before they are transferred to the customer. The assessment of whether we are considered the principal or the agent in a transaction could impact our Net revenue and Cost of revenue recognized on the Consolidated Statements of Operations and Comprehensive (Loss) Income.
Business Combinations
When we acquire a business, the purchase price is allocated to the acquired assets, including separately identifiable intangible assets, and assumed liabilities at their respective estimated fair values. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates can include, but are not limited to:
•future expected cash flows from acquired licenses, developed technologies and customer relationships;
•useful life assumptions, such as the period of time and intended use of acquired intangible assets in our product offerings;
•probability of achieving the expected performance of the earn-out arrangements;
•uncertain tax positions and tax-related valuation allowances;
•fair value of assumed equity awards; and
•discount rates.
These estimates are inherently uncertain and unpredictable, and unanticipated events and circumstances may occur that could affect the accuracy or validity of such assumptions, estimates, or actual results. During the measurement period, which may be up to one year from the acquisition date, adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed may be recorded, with the corresponding offset to goodwill. We continue to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to our preliminary estimates to goodwill provided that we are within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Consolidated Statements of Operations and Comprehensive (Loss) Income. Earn-out provisions are initially measured at fair value as of the closing date, with subsequent changes in fair value recognized in the Consolidated Statements of Operations and Comprehensive (Loss) Income until settlement.
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