Marqeta Reports Mixed Q2 Results Amid Strategic Growth

Marqeta, Inc. Reports Mixed Q2 Results Amid Strategic Growth Initiatives

Marqeta, Inc., a prominent card issuing platform, released its second-quarter financial results, showcasing mixed outcomes. Although the company experienced a year-over-year decline in net revenue and gross profit, it emphasized the significance of recent strategic partnerships and industry certifications that pave the way for future growth.

The company reported a total processing volume (TPV) of $71 billion, marking a 32% increase compared to the same quarter last year. However, net revenue plummeted by 46% due to a change in revenue presentation stemming from the Cash App contract renewal. Despite these challenges, Marqeta remains optimistic about its path to profitability and sustainable growth.

Key Takeaways:

• Q2 TPV grew by 32% year over year, reaching $71 billion.
• Net revenue fell by 46% year over year largely due to changes associated with the Cash App contract.
• Gross profit contracted by 6%, with adjusted operating expenses decreasing by 3%.
• Adjusted EBITDA showed a loss of $2 million.
• Strategic partnerships with Varo Bank and Zoho, along with a certification from Visa for flexible credential support, highlight the company’s progress in financial services.
• Marqeta anticipates achieving sustainable growth and becoming adjusted EBITDA positive in the latter half of the year.

Company Outlook:

• For Q3 and Q4, Marqeta projects net revenue growth of 16% to 18%.
• Anticipated gross profit growth is expected to be in the mid-20s percentage range.
• Adjusted EBITDA margins are projected to be 4% to 6% in Q3 and 6% to 8% in Q4, with an aim for non-GAAP profitability in 2024 and GAAP profitability by the end of 2026.

Bearish Highlights:

• Continued contractions in net revenue and gross profit attributed to the Cash App contract renewal.
• Reporting of negative adjusted EBITDA for Q2.

Bullish Highlights:

• Customers in the financial services sector saw TPV growth of over 100% year over year.
• A new $200 million buyback authorization was announced in May.
• Marqeta became the first US issuer processor certified by Visa to support flexible credentials, collaborating with Affirm for the launch.

Challenges Noted:

• Despite the growth in TPV and strategic developments, Marqeta fell short of expectations regarding net revenue and gross profit.

Earnings Call Insights:

During the earnings call, the CEO discussed Varo Bank’s partnership with Marqeta, emphasizing the importance of innovation and real-time transaction capabilities. The benefits from Visa’s Flex certification are expected to materialize in Q4 2023, with revenue from new customers tracking towards $20 million in 2023, rising to an estimated $60 million in 2024.

Marqeta’s earnings call painted a complex picture—signaling ongoing revenue contraction while also positioning itself strategically for future growth through partnerships and innovative technology. As the company prepares for the holiday season, it expects a shift towards buy now, pay later (BNPL) options, anticipating benefits from existing customer growth and cross-selling opportunities.

Conclusion:

Marqeta’s recent financial performance illustrates a mixed but potentially promising outlook. Despite facing certain financial headwinds, the company’s strategic initiatives and robust growth in processing volume suggest a strong foundation for future expansion within the embedded finance market and beyond.