Marqeta, Inc. (MQ) is a leading provider of modern card issuing and payment processing solutions, empowering innovation leaders to create customized and innovative payment experiences. The company's platform enables customers to embed payments into their applications and services, delivering a seamless and personalized user experience.

Business Overview

Marqeta's mission is to modernize the financial services industry by making the entire payment experience native and delightful. The company's open APIs provide instant access to highly scalable, cloud-based payment infrastructure, allowing customers to launch and manage their own card programs, issue cards, and authorize and settle payment transactions quickly.

Marqeta operates in two primary business models: Managed by Marqeta (MxM) and Powered by Marqeta (PxM). In the MxM model, Marqeta provides an Issuing Bank partner, manages the customer's card program, and offers a full range of services. In the PxM model, Marqeta provides customers access to its platform via APIs and assists with certain configuration elements, while the customers are responsible for other program management tasks.

Marqeta's innovative products are developed with deep domain expertise and a customer-first mindset, enabling customers to launch, scale, and manage card programs efficiently. The company's platform supports a wide range of use cases, including financial services, on-demand delivery, expense management, and accelerated wage access, among others.

Financials

Marqeta reported annual net revenue of $676,171,000 and a net loss of $222,962,000 in the most recent fiscal year. The company's annual operating cash flow was $21,104,000, and its annual free cash flow was $8,453,000.

In the first quarter of 2024, Marqeta's net revenue was $117,968,000, a 46% decrease compared to the same period in 2023. This decline was primarily driven by a change in the revenue presentation related to the company's largest customer, Block, Inc. (formerly Square), as well as the impact of contract renewals. Gross profit for the quarter was $84,161,000, a 6% decrease year-over-year, with a gross margin of 71%.

The company's total processing volume (TPV) grew 33% year-over-year to $66,666,000,000 in the first quarter of 2024, driven by strong performance across all major verticals, particularly financial services and on-demand delivery. Non-Block TPV grew approximately 15 percentage points faster than Block's TPV.

Marqeta's adjusted EBITDA for the first quarter of 2024 was $9,228,000, representing an 8% adjusted EBITDA margin. The company's non-GAAP operating expenses decreased by 20% year-over-year, reflecting the benefits of the company's restructuring efforts and operational efficiency initiatives.

Guidance and Outlook

For the second quarter of 2024, Marqeta expects net revenue to contract between 47% and 50% year-over-year, with gross profit expected to decline between 7% and 9%. The company anticipates adjusted EBITDA margin to be in the negative 5% to 7% range, an improvement from the company's previous expectations.

For the full year 2024, Marqeta has revised its net revenue growth outlook to a contraction of 24% to 27%, primarily due to the impact of revenue presentation changes and a shift towards the Powered by Marqeta business model. However, the company has increased its expectations for full-year gross profit growth to 7% to 9% and adjusted EBITDA margin to 1% to 3%, reflecting the company's continued focus on operational efficiency and cost optimization.

Geographical Breakdown

Marqeta's net revenue outside of the United States was 8% in the first quarter of 2024, up from 3% in the same period of 2023. The company's long-lived assets located outside of the United States were not material as of March 31, 2024.

Revenue Breakdown and Trends

Marqeta's net revenue is primarily composed of two components: platform services revenue, net, and other services revenue. Platform services revenue, net includes Interchange Fees, net of Revenue Share and other service-level payments to customers, as well as processing and other fees. Other services revenue primarily consists of revenue earned for card fulfillment services.

In the first quarter of 2024, platform services revenue, net decreased by 46% year-over-year, primarily due to the revenue presentation change related to the Cash App program and the impact of contract renewals. Other services revenue decreased by 42% during the same period, mainly due to a one-time card fulfillment order in the prior year.

Risks and Challenges

Marqeta operates in a highly competitive and rapidly evolving industry, facing competition from established payment processors, fintech companies, and other innovative payment solution providers. The company's success is dependent on its ability to maintain and expand its customer base, continue to innovate and enhance its platform, and navigate the complex regulatory landscape.

Additionally, Marqeta's financial performance is subject to macroeconomic factors, such as changes in consumer spending patterns, inflation, and interest rates, which could impact the company's processing volumes and financial results.

Liquidity

As of March 31, 2024, Marqeta had $1,198,681,000 in cash, cash equivalents, and short-term investments, providing the company with a strong liquidity position to fund its operations and strategic initiatives. The company's cash and cash equivalents are primarily held in bank deposits, money market funds, and short-term investments, such as U.S. treasury securities and corporate debt securities.

Marqeta's capital requirements include ongoing investments in product development, platform infrastructure, global expansion, and potential strategic acquisitions. The company believes its existing cash and cash equivalents, as well as its short-term investments, will be sufficient to meet its working capital and capital expenditure needs for the foreseeable future.

Conclusion

Marqeta is well-positioned to capitalize on the growing demand for embedded finance solutions, leveraging its innovative platform, deep domain expertise, and strong customer relationships. The company's focus on operational efficiency and cost optimization, coupled with its robust liquidity position, positions it for sustainable growth and profitability in the years ahead.