Marqeta, Inc. | SEC Filing

View:

mq-20230930

7/6

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-40465

Marqeta, Inc.

(Exact name of registrant as specified in its charter)


Delaware			27-4306690
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

180 Grand Avenue, 6th Floor, Oakland, California			94612
(Address of principal executive offices)			(Zip Code)

(877) 962-7738

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, $0.0001 par value per share

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 6, 2023, there were 467,456,540 shares of the registrant's Class A common stock, par value $0.0001 per share, outstanding and 54,394,645 shares of the registrant's Class B common stock, par value $0.0001 per share, outstanding.

TABLE OF CONTENTS


		Page
Note About Forward-Looking Statements		3

	Part I - Financial Information
Item 1.	Condensed Consolidated Financial Statements:	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Stockholders' Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48

	Part II - Other Information
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86
Item 3.	Defaults Upon Senior Securities	86
Item 4.	Mine Safety Disclosures	86
Item 5.	Other Information	86
Item 6.	Exhibits	87
	Signatures	88

Note About Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which are statements that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•uncertainties related to U.S. and global economies and the effect on our business, results of operations, financial condition, demand for our platform, sales cycles and customer retention;

•our future financial performance, including our net revenue, costs of revenue, gross profit, and operating expenses and our ability to achieve future profitability;

•the anticipated accounting treatment of our customer agreements and the risk that such accounting treatment may be subject to further changes or developments;

•our ability to effectively manage or sustain our growth and expand our operations;

•our ability to enhance our platform and services and develop and expand our capabilities;

•our ability to further attract, retain, diversify, and expand our customer base;

•our ability to maintain our relationships with our Issuing Banks and Card Networks;

•our strategies, plans, objectives, and goals;

•our plans to expand internationally;

•our ability to compete in existing and new markets and offerings;

•our estimated market opportunity;

•economic and industry trends, projected growth, or trend analysis;

•the impact of increasing geopolitical uncertainty, ongoing instability in the financial services and banking sectors, rising inflation, and increased labor market competition;

•our ability to develop and protect our brand;

•our ability to comply with laws and regulations;

•our ability to successfully defend litigation brought against us;

•our ability to attract and retain qualified employees and key personnel;

•our ability to recognize efficiencies from the restructuring plan executed during the second quarter of 2023;

•our ability to repurchase shares under our share repurchase program and receive expected financial benefits;

•our ability to maintain effective disclosure controls and internal controls over financial reporting, including our ability to remediate our material weakness in our internal control over financial reporting; and

•the increased expenses associated with being a public company.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, results of operations, financial condition, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. Unless otherwise indicated or unless the context requires otherwise, all references in this document to “Marqeta”, the “Company”, the “Registrant,” “we”, “us”, “our”, or similar references are to Marqeta, Inc. Capitalized terms used and not defined above are defined elsewhere within this Quarterly Report on Form 10-Q.

Table of Contents

PART I - Financial Information

Item 1. Financial Statements

Marqeta, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)


	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	947,749	$	1,183,846
Restricted cash	7,800		7,800
Short-term investments	349,395		440,858
Accounts receivable, net	15,656		15,569
Settlements receivable, net	19,505		18,028
Network incentives receivable	34,575		42,661
Prepaid expenses and other current assets	32,535		38,007
Total current assets	1,407,215		1,746,769
Property and equipment, net	17,022		7,440
Operating lease right-of-use assets, net	7,145		9,015
Goodwill	123,000		—

Other assets	48,867		7,122
Total assets	$	1,603,249	$	1,770,346
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,707	$	3,798
Revenue share payable	146,483		142,194
Accrued expenses and other current liabilities	148,677		136,887
Total current liabilities	296,867		282,879

Operating lease liabilities, net of current portion	6,145		9,034
Other liabilities	5,154		5,477
Total liabilities	308,166		297,390
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 100,000,000 and 100,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	—		—
Common stock, $0.0001 par value: 1,500,000,000 and 1,500,000,000 Class A shares authorized, 472,191,347 and 486,530,334 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively. 600,000,000 and 600,000,000 Class B shares authorized, 54,394,305 and 54,833,765 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	53		53
Additional paid-in capital	2,081,689		2,082,373
Accumulated other comprehensive loss	(1,838)		(7,237)
Accumulated deficit	(784,821)		(602,233)
Total stockholders’ equity	1,295,083		1,472,956
Total liabilities and stockholders’ equity	$	1,603,249	$	1,770,346

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

Marqeta, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net revenue	$	108,891	$	191,621	$	557,349	$	544,401
Costs of revenue	36,383		111,519		311,068		311,524
Gross profit	72,508		80,102		246,281		232,877
Operating expenses:
Compensation and benefits	115,846		105,887		390,393		304,103
Technology	13,930		13,422		41,674		37,960
Professional services	4,197		6,620		14,507		17,184
Occupancy	1,074		1,125		3,285		3,388
Depreciation and amortization	3,108		934		7,582		2,834
Marketing and advertising	346		688		1,348		2,133
Other operating expenses	3,833		10,922		14,171		20,760
Total operating expenses	142,334		139,598		472,960		388,362
Loss from operations	(69,826)		(59,496)		(226,679)		(155,485)
Other income (expense), net	15,074		6,333		37,508		(3,542)
Loss before income tax expense	(54,752)		(53,163)		(189,171)		(159,027)
Income tax expense (benefit)	238		5		(6,584)		(573)
Net loss	$	(54,990)	$	(53,168)	$	(182,587)	$	(158,454)
Other comprehensive income (loss), net of taxes:
Change in foreign currency translation adjustment	(200)		(89)		(81)		(289)
Net change in unrealized gain (loss) on short-term investments	(162)		(291)		5,480		(8,054)
Net other comprehensive (loss) income	(362)		(380)		$	5,399	$	(8,343)
Comprehensive loss	$	(55,352)	$	(53,548)	$	(177,188)	$	(166,797)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.10)	$	(0.10)	$	(0.34)	$	(0.29)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	529,488,986		548,990,212		535,797,471		545,614,599

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

Marqeta, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share amounts)

(unaudited)


	Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (loss)		Accumulated Deficit		Total Stockholders’ Equity
		Shares			Amount
Balance as of December 31, 2022		541,364,099	$	53		$	2,082,373	$	(7,237)	$	(602,233)	$	1,472,956
Issuance of common stock upon exercise of options		803,333	—			1,051		—		—		1,051


Issuance of common stock upon net settlement of restricted stock units		1,469,996	—			(3,746)		—		—		(3,746)

Vesting of common stock warrants		—	—			2,102		—		—		2,102
Share-based compensation		—	—			47,027		—		—		47,027
Repurchase and retirement of common stock, including excise tax		(3,205,808)	—			(20,993)				—		(20,993)
Change in accumulated other comprehensive income (loss)		—	—			—		4,054		—		4,054
Net loss		—	—			—		—		(68,801)		(68,801)
Balance as of March 31, 2023		540,431,620	$	53		$	2,107,814	$	(3,183)	$	(671,034)	$	1,433,650
Issuance of common stock upon exercise of options		827,683	—			1,310		—		—		1,310

Issuance of common stock under employee stock purchase plan		446,228	—			1,775		—		—		1,775
Issuance of common stock upon net settlement of restricted stock units		2,679,165	—			(6,324)		—		—		(6,324)

Vesting of common stock warrants		—	—			2,372		—		—		2,372
Share-based compensation		—	—			45,419		—		—		45,419
Repurchase and retirement of common stock, including excise tax		(10,168,020)	(1)			(48,496)		—		—		(48,497)
Change in accumulated other comprehensive income (loss)		—	—			—		1,707		—		1,707
Net loss		—	—			—		—		(58,797)		(58,797)
Balance as of June 30, 2023		534,216,676	$	52		$	2,103,870	$	(1,476)	$	(729,831)	$	1,372,615
Issuance of common stock upon exercise of options		1,189,094	—			1,675		—		—		1,675
Repurchase of early exercised stock options		(2,625)	—			(6)		—		—		(6)

Issuance of common stock upon net settlement of restricted stock units		2,645,082	2			(8,483)		—		—		(8,481)
Issuance of common stock upon exercise of common stock warrants		—	—			—		—		—		—
Vesting of common stock warrants		—	—			2,284		—		—		2,284
Share-based compensation		—	—			46,796		—		—		46,796
Repurchase and retirement of common stock, including excise tax		(11,462,575)	(1)			(64,447)		—		—		(64,448)
Change in accumulated other comprehensive income (loss)		—	—			—		(362)		—		(362)
Net loss		—	—			—		—		(54,990)		(54,990)
Balance as of September 30, 2023		526,585,652	$	53		$	2,081,689	$	(1,838)	$	(784,821)	$	1,295,083

Table of Contents

Marqeta, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share amounts)

(unaudited)


	Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (loss)		Accumulated Deficit		Total Stockholders’ Equity
		Shares			Amount
Balance as of December 31, 2021		541,383,518	$	54		$	1,993,055	$	(2,230)	$	(417,453)	$	1,573,426
Issuance of common stock upon exercise of options		1,604,022	—			2,285		—		—		2,285
Repurchase of early exercised stock options		(22,751)	—			—		—		—		—

Issuance of common stock upon net settlement of restricted stock units		642,827	—			(4,702)		—		—		(4,702)

Vesting of common stock warrants		—	—			2,102		—		—		2,102
Share-based compensation		—	—			37,005		—		—		37,005
Change in accumulated other comprehensive income (loss)		—	—			—		(5,886)		—		(5,886)
Net loss		—	—			—		—		(60,598)		(60,598)
Balance as of March 31, 2022		543,607,616	$	54		$	2,029,745	$	(8,116)	$	(478,051)	$	1,543,632
Issuance of common stock upon exercise of options		1,314,467	—			1,543		—		—		1,543
Repurchase of early exercised stock options		(28,268)	—			—		—		—		—
Issuance of common stock under employee stock purchase plan		368,955	—			2,775		—		—		2,775
Issuance of common stock upon net settlement of restricted stock units		670,960	—			(3,878)		—		—		(3,878)

Vesting of common stock warrants		—	—			2,102		—		—		2,102
Share-based compensation		—	—			35,148		—		—		35,148
Change in accumulated other comprehensive income (loss)		—	—			—		(2,077)		—		(2,077)
Net loss		—	—			—		—		(44,688)		(44,688)
Balance as of June 30, 2022		545,933,730	$	54		$	2,067,435	$	(10,193)	$	(522,739)	$	1,534,557
Issuance of common stock upon exercise of options		3,113,941	—			2,356		—		—		2,356
Repurchase of early exercised stock options		—	—			—		—		—		—
Issuance of common stock under employee stock purchase plan		—	—			—		—		—		—
Issuance of common stock upon net settlement of restricted stock units		772,585	—			(2,996)		—		—		(2,996)
Issuance of common stock upon exercise of common stock warrants		—	—			—		—		—		—
Vesting of common stock warrants		—	—			2,315		—		—		2,315
Share-based compensation		—	—			43,509		—		—		43,509
Repurchase and retirement of common stock		(1,958,882)	—			(13,855)		—		—		(13,855)
Change in accumulated other comprehensive income (loss)		—	—			—		(380)		—		(380)
Net loss		—	—			—		—		(53,168)		(53,168)
Balance as of September 30, 2022		547,861,374	$	54		$	2,098,764	$	(10,573)	$	(575,907)	$	1,512,338

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

Marqeta, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(182,587)	$	(158,454)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	7,582		2,834
Share-based compensation expense	135,712		115,662
Non-cash postcombination compensation expense	32,430		—
Non-cash operating leases expense	1,870		1,689
Amortization of premium (accretion of discount) on short-term investments	(5,525)		449
Impairment of other financial instruments	—		11,616
Other	1,068		445
Changes in operating assets and liabilities:
Accounts receivable	(1,108)		271
Settlements receivable	(1,477)		916
Network incentives receivable	8,086		3,336
Prepaid expenses and other assets	7,760		(11,596)
Accounts payable	(4,350)		(891)
Revenue share payable	4,289		(5,084)
Accrued expenses and other liabilities	3,331		13,144
Operating lease liabilities	(2,499)		(2,231)
Net cash provided by (used in) operating activities	4,582		(27,894)
Cash flows from investing activities:
Purchases of property and equipment	(722)		(1,700)
Capitalization of internal-use software	(9,488)		—
Business combination, net of cash acquired	(135,630)		—
Purchases of patents	—		(600)
Purchases of short-term investments	(972,430)		(21,660)
Sales of marketable securities	637,913		—
Maturities of short-term investments	437,034		24,900
Realized gain/loss on investments	(73)		—
Net cash (used in) provided by investing activities	(43,396)		940
Cash flows from financing activities:

Proceeds from exercise of stock options, including early exercised stock options, net of repurchase of early exercised unvested options	4,081		5,733
Payment on acquisition-related contingent consideration	(53,067)		—

Proceeds from shares issued in connection with employee stock purchase plan	1,775		2,775
Taxes paid related to net share settlement of restricted stock units	(18,553)		(11,576)
Repurchase of common stock	(131,519)		(12,702)

Net cash used in financing activities	(197,283)		(15,770)
Net decrease in cash, cash equivalents, and restricted cash	(236,097)		(42,724)
Cash, cash equivalents, and restricted cash- Beginning of period	1,191,646		1,255,381
Cash, cash equivalents, and restricted cash - End of period	$	955,549	$	1,212,657

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

Marqeta, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2023		2022
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	947,749	$	1,204,857
Restricted cash	7,800		7,800
Total cash, cash equivalents, and restricted cash	$	955,549	$	1,212,657
Supplemental disclosures of cash flow information:

Cash paid for operating lease liabilities	$	3,158	$	3,071
Cash paid for income taxes	$	915	$	84
Supplemental disclosures of non-cash investing and financing activities:
Purchase of property and equipment accrued and not yet paid	$	77	$	715
Share-based compensation capitalized to internal-use software	$	3,530	$	—
Repurchase of common stock, including excise tax, accrued and not yet paid	$	2,417	$	1,153

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

Marqeta, Inc.

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(unaudited)

1. Business Overview and Basis of Presentation

Marqeta, Inc., (“the Company”) creates digital payment technology for innovation leaders. The Company's modern card issuing platform places control over payment transactions into the hands of its customers enabling them to develop modern, state-of-the-art product experiences.

The Company provides all of its customers with issuer processor services and for most of its customers it also acts as a card program manager. The Company primarily earns revenue from processing card transactions for its customers.

The Company was incorporated in the state of Delaware in 2010 and is headquartered in Oakland, California, with offices in the United States and United Kingdom and a legal entity in Australia, Brazil, Canada, and Singapore as of September 30, 2023.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission, (“SEC”), for interim reporting. Certain information and note disclosures included in the Company’s annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The Condensed Consolidated Balance Sheet as of December 31, 2022 has been derived from the Company’s audited consolidated financial statements, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 28, 2023. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Annual Report on Form 10-K.

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments of a normal, recurring nature considered necessary for a fair presentation of the Company's consolidated financial position, results of operations, comprehensive loss, and cash flows for the interim periods presented. The interim results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, or for any other future annual or interim period.

Use of Estimates

The preparation of the financial statements requires management to make estimates and assumptions relating to reported amounts of assets and liabilities, disclosure of contingent liabilities, and reported amounts of revenue and expenses. Significant estimates and assumptions include, but are not limited to, the fair value and useful lives of assets acquired and liabilities assumed through business combinations, the estimation of contingent liabilities, the estimation of variable consideration in contracts with customers, and the reserve for contract contingencies and processing errors. Actual results could differ materially from these estimates.

Business Risks and Uncertainties

The Company has incurred net losses since its inception. For the three and nine months ended September 30, 2023, the Company incurred net losses of $55.0 million and $182.6 million, respectively, and had an accumulated deficit of $784.8 million as of September 30, 2023. The Company expects to incur net losses from operations for the foreseeable future as it incurs costs and expenses related to creating new products for customers, acquiring new customers, developing its brand, expanding into new geographies and developing the existing platform infrastructure. The Company believes that its Cash and cash equivalents of $947.7 million and Short-term investments of $349.4 million as of September 30, 2023 are sufficient to fund its operations through at least the next twelve months from the issuance of these financial statements.

Table of Contents

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in “Consolidated Financial Statements—Note 2. Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There have been no significant changes to these policies during the three and nine months ended September 30, 2023, except for the addition of new policies relating to business combinations, goodwill and intangible assets, restructuring, and certain revenue arrangements requiring updates to the revenue recognition policy as described below.

Segment Information

The Company operates as a single operating segment. The Company's chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, allocating resources, and evaluating the Company's financial performance.

For the three and nine months ended September 30, 2023 and 2022, revenue outside of the United States, based on the billing address of the customer, was not material. As of September 30, 2023 and December 31, 2022, long-lived assets located outside of the United States were not material.

Restricted Cash

Restricted cash consists of deposits with financial institutions that issue payment cards (credit, debit, or prepaid) either on their own behalf or on behalf of businesses that issue customized card products to their end users (“Issuing Banks”) to provide the Issuing Bank collateral in the event that customers’ funds are not deposited at the Issuing Banks in time to settle customers’ transactions with the networks that provide the infrastructure for settlement and card payment information flows (“Card Networks”). Restricted cash also includes cash used to secure a letter of credit for the Company’s lease of its office headquarters in Oakland, California.

Capitalized Internal-use Software Development Costs

The Company capitalizes certain costs incurred in developing internal-use software when capitalization requirements have been met. Internal and external costs incurred in the preliminary project stage of internal-use software development are expensed as incurred. Once the software development process reaches the application development stage, qualifying internal costs including compensation and benefits costs of employees who are directly associated with and devote time to the software project as well as external direct costs are capitalized. Capitalization of costs ends when the developed software is substantially complete and ready for its intended internal use, which is typically upon completion of all substantial testing. Capitalized internal-use software development costs are included in property and equipment, net, and then amortized on a straight-line basis over the estimated useful life of the software. The amortization of these costs is recorded within Depreciation and amortization expense on the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Business Combinations

The Company allocates the purchase consideration for acquired companies to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded to goodwill. These estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed with the corresponding offset to goodwill. 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 Condensed Consolidated Statements of Operations and Comprehensive Loss. Acquisition-related expenses and postcombination integration and employee compensation costs are recognized separately from the business combination and are expensed as incurred.

Table of Contents

Goodwill and Intangible Assets

The excess purchase price over the fair value of assets acquired is recorded as goodwill. Goodwill amounts are not amortized. Intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis. Goodwill and intangible assets are tested for impairment at least annually, and more frequently whenever events or changes in circumstances indicate its carrying value may not be recoverable.

Deferred Contract Costs

Deferred contract costs mainly consist of sales commissions and related fringe benefits that are incremental costs of obtaining contracts with customers. The Company amortizes the costs incurred on initial contracts on a straight-line basis over an estimated period of benefit determined to be approximately four years. The period of benefit is determined based on a review of customer contract terms and churn rates. The Company utilizes the practical expedient to expense commissions on arrangements in which the amortization period is expected to be one year or less. Deferred contract costs that will be recognized during the succeeding 12-month period are recorded as Prepaid expenses and other current assets, and the remaining portion is recorded as Other assets on the Condensed Consolidated Balance Sheets. The amortization of these costs is recorded within Compensation and benefits expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss.

The Company's contracts with customers include certain service level agreements which could require the Company to make payments to customers if service levels are not met. Any service level payment is recorded as a reduction to Net Revenue in the Condensed Consolidated Statements of Operations and Comprehensive Loss. Historically, the Company did not capitalize material costs to acquire contracts.

Restructuring

Restructuring costs stem from employee related severance charges and include both cash and non-cash compensation. The Company generally recognizes restructuring costs upon communication of the plan to the identified employees or when payments are probable and amounts are estimable, depending on the region an employee works. Restructuring liabilities are classified in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

The Company’s contracts with customers typically include two performance obligations: 1) providing access to the Company's payment processing platform and 2) providing card fulfillment services. Certain customer contracts require the Company to allocate the transaction price of the contract based on the relative stand-alone selling price of the performance obligations, which are estimated using an analysis of the Company’s historical contract pricing and costs incurred to fulfill its services.

The Company generates revenue from providing platform services and other services as described below.

Platform Services

The Company delivers an integrated payment processing platform to its customers. The Company’s primary performance obligation is to provide customers continuous access to the Company’s platform used to process all customers’ transactions as needed. This obligation includes authorizing, settling, clearing, and reconciling all transactions under Managed By Marqeta (“MxM”) and Powered By Marqeta (“PxM”) arrangements. Additionally, for MxM arrangements, the performance obligation also includes managing the interactions with the Issuing Banks and certain Card Networks on behalf of its customers. All these services are collectively considered a single performance obligation.

The Company’s platform services revenue is primarily derived from Interchange Fees generated by customer card transactions and other transaction fees collected from customers. The Company accounts for these Interchange Fees as revenue earned from its customers because the Company controls the

Table of Contents

services before delivery to the customer.

The Company’s platform services revenue consists of a stand-ready service of distinct transaction processing services that are substantially the same, with the same pattern of transfer to customers. As such, the stand-ready obligation is accounted for as a single performance obligation that is a series of distinct services whereby the variability of the transaction value is satisfied daily as the performance obligation is satisfied. The Company satisfies its performance obligation to provide platform services over time as customers have continuous access to the Company's platform and the Company stands-ready to process customer transactions throughout their term of access.

The Company recognizes revenue when the underlying transactions are complete, and its performance obligation is satisfied. Transactions are considered complete when the Company has authorized the transaction, validated that the transaction has no errors, and accepted and posted the data to its records.

The Company allocates variable consideration to the distinct month in which the platform services are delivered. When pricing terms are not consistent throughout the entire term of the contract, the Company estimates variable consideration in its customer contracts primarily using the expected value method. The standard term of the customer contracts ranges from three to five years, with automatic renewal for successive one-year periods thereafter unless either party provides written notice of its intent not to renew. The Company develops estimates of variable consideration on the basis of both historical information and current trends and does not expect or anticipate significant reversal of revenue in the future periods.

In arrangements where the Company is both the Issuer Processor and Program Manager , the Company is the principal in providing the services under its contracts with customers. To deliver the services required by its customers, the Company contracts with Card Networks for transaction routing, reporting, and settlement services and with Issuing Banks for card issuing, Card Network sponsorship, and regulatory compliance approval services. The Company controls these integrated services before delivery to its customers; it is primarily responsible for the delivery of the services to customers, and it has discretion in vendor selection. As such, the Company records fees paid to the Issuing Banks and Card Networks as Costs of Revenue within the Condensed Consolidated Statements of Operations and Comprehensive Loss. In certain customer arrangements, the customer is directly responsible for defining and managing the Card Network relationship for their card program. In these instances, the Company is considered an agent in providing services to the customer thus fees owed to Issuing Banks and Card Networks related to these programs are recorded within Net Revenue such that Net Revenue in the Condensed Consolidated Statements of Operations and Comprehensive Loss reflects the net amount of consideration that the Company retains. In arrangements where the Company acts solely as the Issuer Processor, the Company does not integrate the services of Issuing Banks or Card Networks.

3. Revenue

Disaggregation of Revenue

The following table provides information about disaggregated revenue from customers:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Platform services revenue, net	$	104,332	$	185,837	$	540,862	$	527,940
Other services revenue	4,559		5,784		16,487		16,461
Total net revenue	$	108,891	$	191,621	$	557,349	$	544,401

Table of Contents

Contract Balances

The following table provides information about contract assets and deferred revenue:


Contract balance	Balance sheet line reference	September 30, 2023		December 31, 2022
Contract assets - current	Prepaid expenses and other current assets	$	1,771	$	621
Contract assets - non-current	Other assets	6,416		1,323
Total contract assets		$	8,187	$	1,944
Deferred revenue - current	Accrued expenses and other current liabilities	$	12,180	$	17,048
Deferred revenue - non-current	Other liabilities	4,501		4,202
Total deferred revenue		$	16,681	$	21,250

Net revenue recognized during the three months ended September 30, 2023 and 2022 that was included in the deferred revenue balances at the beginning of the respective periods was $3.8 million and $3.3 million, respectively. Net revenue recognized during the nine months ended September 30, 2023 and 2022 that was included in the deferred revenue balances at the beginning of the respective periods was $10.6 million and $11.9 million, respectively.

Remaining Performance Obligations

The Company has performance obligations associated with commitments in customer contracts for future stand-ready obligations to process transactions throughout the contractual term.

4. Short-term Investments

During the second quarter of 2023, the Company renamed the Marketable securities financial statement line item to Short-term investments in the Condensed Consolidated Balances Sheets to more accurately align with the Company’s current investment portfolio. The Company's short-term investments are accounted for as securities available-for-sale and are classified within current assets in the Condensed Consolidated Balance Sheets as the Company may sell these securities at any time for use in its operations, even prior to maturity.

The amortized cost, unrealized gain (loss), and estimated fair value of the Company's short-term investments consisted of the following:


	September 30, 2023
	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Short-term Investments
U.S. treasury securities	$	258,048	$	—	$	(1,345)	$	256,703
U.S. agency securities	53,947		2		(37)		53,912
Commercial paper	5,482		—		—		5,482
Asset-backed securities	10,437		—		(104)		10,333
Corporate debt securities	2,972		—		(21)		2,951
Certificate of deposits	20,000		14		—		20,014
Total short-term investments	$	350,886	$	16	$	(1,507)	$	349,395

Table of Contents


	December 31, 2022
	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Short-term investments
U.S. treasury securities	$	384,951	$	—	$	(6,949)	$	378,002
U.S. agency securities	29,012		47		—		29,059
Commercial paper	28,815		—		—		28,815

Corporate debt securities	5,049		—		(67)		4,982
Total short-term investments	$	447,827	$	47	$	(7,016)	$	440,858

The Company had thirty-one and thirteen separate short-term investments in unrealized loss positions as of September 30, 2023 and December 31, 2022, respectively. The Company does not intend to sell any short-term investments that have unrealized losses as of September 30, 2023, and it is not more likely than not that the Company will be required to sell such securities before any anticipated recovery of the entire amortized cost basis.

There were an immaterial amount of realized gains or losses from short-term investments that were reclassified out of accumulated other comprehensive loss for the three and nine months ended September 30, 2023. There were no realized gains or losses from short-term investments that were reclassified out of accumulated other comprehensive loss for the three and nine months ended September 30, 2022. For short-term investments that have unrealized losses, the Company evaluated whether (i) the Company has the intention to sell any of these investments, (ii) it is not more likely than not that the Company will be required to sell any of these available-for-sale debt securities before recovery of the entire amortized cost basis and (iii) the decline in the fair value of the investment is due to credit or non-credit related factors. Based on this evaluation, the Company determined that for its short-term investments, there were no material credit or non-credit related impairments as of September 30, 2023.

The following table summarizes the stated maturities of the Company’s short-term investments:


	September 30, 2023				December 31, 2022
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due within one year	$	137,506	$	137,389	$	447,827	$	440,858
Due after one year through two years	213,380		212,006		—		—
Total	$	350,886	$	349,395	$	447,827	$	440,858

Table of Contents

5. Fair Value Measurements

The following tables present the fair value hierarchy for assets and liabilities measured at fair value:


	September 30, 2023
	Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents
Money market funds	$	780,712	$	—	$	—	$	780,712
U.S. Treasury bills	31,811		—		—		31,811
Short-term investments
U.S. government securities	256,703		—		—		256,703
U.S. agency securities	—		53,912				53,912
Commercial paper	—		5,482		—		5,482
Asset-backed securities	—		10,333		—		10,333
Corporate debt securities	—		2,951		—		2,951
Certificate of deposit	—		20,014		—		20,014
Total assets	$	1,069,226	$	92,692	$	—	$	1,161,918


	December 31, 2022
	Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents
Money market funds	$	462,459	$	—	$	—	$	462,459

Short-term investments
U.S. government securities	378,002		—		—		378,002
U.S. agency securities	—		29,059		—		29,059
Commercial paper	—		28,815		—		28,815

Corporate debt securities	—		4,982		—		4,982
Total assets	$	840,461	$	62,856	$	—	$	903,317

The Company classifies money market funds, U.S. Treasury bills, commercial paper, U.S. government securities, U.S. agency securities, asset-backed securities, corporate debt securities, and certificate of deposits within Level 1 or Level 2 of the fair value hierarchy because the Company values these investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

There were no transfers of financial instruments between the fair value hierarchy levels during the three and nine months ended September 30, 2023 and the year ended December 31, 2022.

Table of Contents

6. Certain Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	September 30, 2023		December 31, 2022
Prepaid expenses	$	8,352	$	9,082
Inventory	4,672		5,150
Prepaid hosting and data costs	2,562		6,443
Accrued interest receivable	6,354		3,983
Prepaid insurance	3,053		3,729
Card program deposits	128		2,128
Contract assets, current	1,771		621

Other current assets	5,643		6,871
Prepaid expenses and other current assets	$	32,535	$	38,007

Property and Equipment, net

Property and equipment consisted of the following:


	September 30, 2023		December 31, 2022
Leasehold improvements	$	8,110	$	8,110
Computer equipment	8,832		9,115
Furniture and fixtures	2,519		2,542
Internally developed and purchased software	16,095		3,082
	35,556		22,849
Accumulated depreciation and amortization	(18,534)		(15,409)
Property and equipment, net	$	17,022	$	7,440

Depreciation and amortization expense related to property and equipment was $1.6 million and $0.9 million for the three months ended September 30, 2023 and 2022, respectively, and $3.7 million and $2.8 million for the nine months ended September 30, 2023 and 2022, respectively.

The Company capitalized $4.3 million and $13.0 million as internal-use software development costs during the three and nine months ended September 30, 2023, respectively. Internal-use software development costs during the three and nine months ended September 30, 2022 were not material during the respective periods.

Other Assets

Other assets consisted of the following:


	September 30, 2023		December 31, 2022
Contract assets, noncurrent	$	6,416	$	1,323
Deferred tax assets	336		1,240
Other noncurrent assets	5,020		4,559
Developed technology intangible assets, net	37,095		—
Other assets	$	48,867	$	7,122

Table of Contents

The amortization period for developed technology intangible assets is 7 years. Amortization expense for developed technology was $1.5 million and $3.9 million for three and nine months ended September 30, 2023, respectively.

Expected future amortization expense for developed technology was as follows as of September 30, 2023:


Remainder of 2023	$	1,464
2024	5,857
2025	5,857
2026	5,857
2027	5,857
Thereafter	12,202
Total expected future amortization expense for developed technology	$	37,095

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:


	September 30, 2023		December 31, 2022
Accrued costs of revenue	$	68,623	$	57,191

Accrued compensation and benefits	34,701		41,268
Due to issuing banks	8,529		—
Deferred revenue	12,180		17,048
Accrued tax liabilities	4,699		4,978
Accrued professional services	4,066		4,784
Operating lease liabilities, current portion	3,784		3,394
Reserve for contract contingencies and processing errors	3,409		2,494
Other accrued liabilities	8,686		5,730
Accrued expenses and other current liabilities	$	148,677	$	136,887

Other Liabilities

Other liabilities consisted of the following:


	September 30, 2023		December 31, 2022
Deferred revenue, net of current portion	$	4,501	$	4,202
Other long-term liabilities	653		1,275
Other liabilities	$	5,154	$	5,477

7. Commitments and Contingencies

Operating Leases

The Company has a lease agreement for its corporate headquarters in Oakland, California for a total of 63,000 square feet. The non-cancellable operating lease expires in February 2026 and includes options to extend the lease term, generally at the then-market rates. The Company excludes extension options that are not reasonably certain to be exercised from its lease terms. The Company’s lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms. The Company is responsible for operating expenses that exceed the amount of base operating expenses as defined in the original lease agreement.

Table of Contents

The Company's operating lease costs are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease cost	$	843	$	843	$	2,529	$	2,529
Variable lease cost	131		121		359		319
Short-term lease cost	48		99		195		318
Total lease cost	$	1,022	$	1,063	$	3,083	$	3,166

The Company does not have any sublease income and the Company’s lease agreements do not contain any residual value guarantees or material restrictive covenants.

The weighted average remaining operating lease term and the weighted average discount rate used in the calculation of the Company's lease assets and lease liabilities were as follows:


	September 30, 2023	December 31, 2022
Weighted average remaining operating lease term (in years)	2.3	3.1
Weighted average discount rate	7.7%	7.7%

Maturities of the Company’s operating lease liabilities by year are as follows as of September 30, 2023:


Remainder of 2023	$	1,081
2024	4,472
2025	4,599
2026	781


Total lease payments	10,933
Less imputed interest	(1,004)
Total operating lease liabilities	$	9,929

Letters of Credit

In connection with the lease for its corporate headquarters office space, the Company is required to provide the landlord a letter of credit in the amount of $1.5 million. The Company has secured this letter of credit by depositing $1.5 million with the issuing financial institution, which deposit is classified as Restricted cash in the Condensed Consolidated Balance Sheets.

Purchase Obligations

As of September 30, 2023, the Company had non-cancellable purchase commitments with certain service providers and Issuing Banks of $198.9 million, payable over the next 5 years. These purchase obligations include $185.5 million related to minimum commitments as part of a cloud-computing service agreement. The remaining obligations are related to various service providers and Issuing Banks processing fees over the fixed, non-cancellable respective contract terms.

Defined Contribution Plans

The Company maintains defined contribution plans for eligible employees, including a 401(k) plan that covers substantially all of its U.S. based employees and to which the Company provides a matching contribution of 50% of the first 6% of eligible compensation that an employee contributes. During the three months ended September 30, 2023 and 2022, the Company contributed a total of $1.4 million and $1.2 million to its defined contribution plans, respectively. During the nine months ended September 30, 2023 and 2022, the Company contributed a total of $5.1 million and $4.6 million to its defined contribution plans, respectively.

Table of Contents

Legal Contingencies

From time to time in the normal course of business, the Company may be subject to various legal matters such as threatened or pending claims or proceedings. As of September 30, 2023 and December 31, 2022, there were no legal contingency matters, either individually or in aggregate, that would have a material adverse effect on the Company’s financial position, results of operations, or cash flows. Given the unpredictable nature of legal proceedings, the Company bases its assessment on the information available at the time. As additional information becomes available, the Company reassesses the potential liability and may revise the estimate.

Settlement of Payment Transactions

Customers deposit a certain amount of pre-funding into accounts maintained at Issuing Banks to settle their payment transactions. Such pre-funding amounts may only be used to settle customers’ payment transactions and are not considered assets of the Company. As such, the funds held in customers’ accounts at Issuing Banks are not reflected on the Company’s Condensed Consolidated Balance Sheets. If a customer fails to deposit sufficient funds to settle a transaction, the Company is liable to the Issuing Bank to settle the transaction and would therefore incur losses if such amounts cannot be subsequently recovered from the customer.

Indemnifications

In the ordinary course of business, the Company enters into agreements of varying scope and terms pursuant to which it agrees to indemnify customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties. With respect to Issuing Banks, the Company has received requests for indemnification from time to time and may indemnify the Issuing Bank for losses the Issuing Bank may incur for non-compliance with applicable law and regulation, if those losses resulted from the Company’s failure to perform under its program agreement with the Issuing Bank.

In addition, the Company has entered into indemnification agreements with its directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No demands have been made upon the Company to provide indemnification under such agreements and there are no claims that the Company is aware of that could have a material effect on its Condensed Consolidated Financial Statements.

The Company also includes service level commitments to its customers, warranting certain levels of performance and permitting those customers to receive credits in the event the Company fails to meet the levels specified.

8. Stock Incentive Plans

The Company has granted share-based awards to employees, non-employee directors, and other service providers of the Company under the Amended and Restated 2011 Equity Incentive Plan (“2011 Plan”) and the 2021 Stock Option and Incentive Plan (“2021 Plan”, collectively, the “Plans”). The 2011 Plan was terminated in June 2021 in connection with the Company’s initial public offering (“IPO”) but continues to govern the terms of outstanding awards that were granted prior to the IPO. Additionally, the Company offers an employee stock purchase plan (“ESPP”), which allows employees to purchase shares of common stock at 85% of the fair value of the Company’s Class A common stock on the first or last day of the offering period, whichever is lower. The offering periods are six months long and start in May and November of each year.

Table of Contents

The following table presents the share-based compensation expense recognized in the Condensed Consolidated Statements of Operations and Comprehensive Loss:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Restricted stock units	$	25,021	$	22,246	$	74,991	$	52,669
Stock options	6,858		7,318		19,651		21,136
Executive Chairman Long-Term Performance Award	13,413		13,413		39,801		39,801
Employee Stock Purchase Plan	256		532		1,269		2,056

Total	$	45,548	$	43,509	$	135,712	$	115,662

Restricted Stock Units

Restricted stock units (“RSUs”) granted under the Company’s Plans generally vest over three or four years.

A summary of the Company's RSU activity under the Plans is as follows:


	Number of Restricted Stock Units	Weighted-average grant date fair value per share
Balance as of December 31, 2022	34,146,546	$	9.74
Granted	29,140,902	4.54
Vested	(10,305,399)	8.81
Canceled and forfeited	(10,636,399)	8.23
Balance as of September 30, 2023	42,345,650	$	6.62

As of September 30, 2023, unrecognized compensation costs related to unvested RSUs was $261.5 million. These costs are expected to be recognized over a weighted-average period of 2.7 years.

Stock Options

Under the Plans, the exercise price of a stock option shall not be less than the fair market value per share of the Company’s common stock on the date of grant (and not less than 110% of the fair market value per share of common stock for grants to stockholders owning more than 10% of the total combined voting power of all classes of stock of the Company, or a 10% stockholder). Options are exercisable over periods not to exceed ten years from the date of grant (five years for incentive stock options granted to 10% stockholders).

Table of Contents

A summary of the Company's stock option activity under the Plans is as follows:


	Number of Options	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value(1)
Balance as of December 31, 2022	36,156,445	$	16.37	7.67 years	$	29,101
Granted	6,080,148	5.35
Exercised	(2,820,110)	1.40
Canceled and forfeited	(2,197,285)	13.33
Balance as of September 30, 2023	37,219,198	$	15.97	7.76 years	$	18,522
Exercisable as of September 30, 2023(2)	10,257,006	$	11.69	7.66 years	$	14,507
Vested as of September 30, 2023	7,688,183	$	9.99	7.18 years	$	13,141

(1) Intrinsic value is calculated based on the difference between the exercise price of in-the-money-stock options and the fair value of the common stock as of the respective balance sheet dates.

(2) The 2011 Plan allows for early exercise of stock options. Accordingly, options granted under this plan are included as exercisable stock options regardless of vesting status.

As of September 30, 2023, aggregate unrecognized compensation costs related to unvested outstanding stock options, excluding the Executive Chairman Long-Term Performance Award, was $49.9 million. These costs are expected to be recognized over a weighted-average period of 2.3 years.

The fair value of stock options granted was estimated using the Black-Scholes option pricing model and the following weighted average assumptions:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023 (1)	2022	2023	2022
Dividend yield	—%	0.0%	0.0%	0.0%
Expected volatility	—%	67.05%	70.78%	61.52%
Expected term (in years)	—	6.08	6.04	6.08
Risk-free interest rate	—%	2.70%	3.78%	2.32%

(1) The Company did not grant any stock options during the three months ended September 30, 2023.

The fair value of the Company’s common stock is determined by the closing price, on the date of grant, of its Class A common stock, which is traded on the Nasdaq Global Select Market.

Executive Chairman Long-Term Performance Award

In April and May 2021, the Company’s board of directors granted the Company’s Executive Chairman and then-Chief Executive Officer equity incentive awards in the form of performance-based stock options covering 19,740,923 and 47,267 shares of the Company’s Class B common stock with an exercise price of $21.49 and $23.40 per share, respectively (collectively, the “Executive Chairman Long-Term Performance Award,” formerly known as the CEO Long-Term Performance Award). The Executive Chairman Long-Term Performance Award vests upon the satisfaction of a service condition and the achievement of certain stock price hurdles over a seven-year performance period following the expiration of the lock-up period associated with the Company’s IPO in 2021. The stock price hurdle will be achieved if the average closing price of a share of the Company’s Class A common stock during any 90 consecutive trading day period during the performance period equals or exceeds the Company stock price hurdle set forth in the table below.

Table of Contents

The Executive Chairman Long-Term Performance Award is divided into seven equal tranches which vest upon the achievement of the following Company stock price hurdles:


Tranche	Company Stock Price Hurdle	Number of Options Eligible to Vest
1	$67.50	2,826,884
2	$78.98	2,826,884
3	$92.40	2,826,884
4	$108.11	2,826,884
5	$126.49	2,826,884
6	$147.99	2,826,884
7	$173.15	2,826,884
Total		19,788,188

The grant date fair value of the Executive Chairman Long-Term Performance Award was estimated using a Monte Carlo simulation model that incorporated multiple stock price paths and probabilities that the Company stock price hurdles are met. The weighted-average grant date fair value of the seven tranches of the Executive Chairman Long-Term Performance Award was estimated to be $10.53 per option share.

As of September 30, 2023, the aggregate unrecognized compensation cost of the Executive Chairman Long-Term Performance Award was $77.2 million, which is expected to be recognized over the remaining derived service period of 2.3 years.

9. Stockholders’ Equity Transactions

Warrants to Purchase Common Stock

In 2021 and 2020, the Company issued warrants to customers to purchase up to 1,150,000 and 750,000 shares of the Company’s common stock, respectively. These warrants vest based on certain performance conditions that include issuing a specific percentage of new cards on the Company’s platform over a defined measurement period and reaching certain annual transaction count thresholds over the contract term, respectively. All warrants have an exercise price of $0.01 per share. These warrants are classified as equity instruments and are treated as consideration payable to a customer. The grant date fair values of these warrants are recorded as a reduction to net revenue over the term of the respective customer contract based on the expected pattern of processing volume generated by the customer and the probability of vesting conditions being met. The aggregate fair values of the warrants issued in 2021 and 2020 were $26.4 million and $5.7 million, respectively.

As of September 30, 2023, 1,002,096 warrants were vested. The Company recorded $0.5 million and $5.0 million as a reduction of revenue during the three and nine months ended September 30, 2023, respectively. The Company recorded $1.7 million and $5.2 million as a reduction of revenue during the three and nine months ended September 30, 2022, respectively. Upon vesting, the fair values of the vested warrants are recorded into the Company’s Additional paid-in capital. Timing differences caused by the pattern of processing volume generated by the customer over the term of the contract and the vesting schedules of the warrants can cause differences in the amount of grant date fair value that is credited to additional paid in capital upon vesting and the amount recorded as a reduction in net revenue during any particular reporting period.

Share Repurchase Programs

On September 14, 2022, the Company’s board of directors authorized a share repurchase program of up to $100 million of the Company’s Class A common stock beginning September 15, 2022 (“2022 Share Repurchase Program”). Under the 2022 Share Repurchase Program, the Company was 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 Securities and Exchange Act of 1934, as amended (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 2022 Share Repurchase Program has no set expiration date; however, repurchases under the program were complete as of March 31, 2023.

Table of Contents

During the nine months ended September 30, 2023, the Company repurchased and subsequently retired 3.2 million shares for $21.0 million under the 2022 Share Repurchase Program, for an average price of $6.46. The total price of the shares repurchased and related transaction costs and excise taxes are reflected as a reduction to Common stock and additional paid-in capital on the Company’s Condensed Consolidated Balance Sheets.

On May 8, 2023, the Company’s board of directors authorized a share repurchase program of up to $200 million of the Company’s Class A common stock (“2023 Share Repurchase Program”