Key Points
- Total Processing Volume (TPV) was $71 billion, up 32% year over year.
- Net revenue of $125 million, fell 46% year over year due to a contract change with Cash App.
- Adjusted EBITDA was a $2 million loss.
Marqeta (MQ -42.52%), a fintech company specializing in modern card issuing and transaction processing, released second-quarter earnings on Wednesday that topped analyst consensus estimates. Along with topping estimates, total processing volume (TPV) of $71 billion jumped 32% year over year.
However, there were also significant year-over-year declines in net revenue and gross profit. That's because the quarter was heavily impacted by a contract change with Block's (SQ -0.43%) Cash App, which contributed to a sharp decrease in reported revenue. That drop had some negative effects as it worked its way through to the bottom line, hitting gross profit and adjusted EBITDA.
| Metric | Q2 2024 | Analyst Estimate | Q2 2023 | Change (YOY) |
|---|---|---|---|---|
| EPS | $0.23 | $0.21 | ($0.11) | N/A |
| Net revenue | $125 million | $121.9 million | $231 million | (46%) |
| Total processing volume | $71 billion | N/A | $54 billion | 32% |
| Gross profit | $79.4 million | N/A | $84.6 million | (6%) |
| Adjusted EBITDA | ($1.82 million) | N/A | $824,000 | N/A |
Source: Marqeta. Note: Analyst consensus estimates provided by FactSet. YOY = Year over year. EBITDA = earnings before interest, taxes, depreciation, and amortization.
Understanding Marqeta
Marqeta operates a global, cloud-based, open API platform for modern card issuing and transaction processing. The company's key services include virtual, tokenized, and physical card issuing, used across various industry verticals such as financial services and e-commerce.
Recently, Marqeta has focused on increasing operational efficiency and expanding its product range. TPV is a critical success factor, reflecting the adoption of Marqeta’s platform by businesses. Another key area is maintaining and growing large customer relationships, like those with Block, which includes managing the company's Cash App card-issuing programs.
Quarterly Highlights
During the quarter, Marqeta signed a five-year deal with Varo Bank, N.A., adding a key customer to its portfolio. This new relationship showcases Marqeta's prowess in providing versatile card-based solutions.
The substantial increase in TPV highlights the expanding use of Marqeta's platform across various applications, including Buy Now Pay Later (BNPL) and on-demand delivery services.
Net revenue fell by 46% year over year to $125 million, primarily due to a change in revenue presentation from a contract renewal with Cash App. This adjustment had a 60 percentage point negative impact on net revenue growth.
Marqeta also achieved certification by Visa (V 0.49%) to support Visa Flexible Credential. This innovation enables multiple payment methods on a single card, marking a significant step forward in the card-issuing landscape. The new feature was launched in partnership with Affirm (AFRM 4.37%), further solidifying Marqeta's position in the BNPL space.
Operating efficiency was a key focus this quarter. Adjusted operating expenses were reduced by 20% year over year. However, adjusted EBITDA was negative $2 million. This negative figure raises concerns about Marqeta's profitability and operational efficiency in the near term.
Looking Ahead
Marqeta Management outlined a cautiously optimistic outlook for the rest of the year, stating an ongoing focus on geographical expansion and innovations in product offerings. Marqeta aims to capture new markets, particularly in Europe, leveraging partnerships with companies like Varo Bank and Zoho.
The company also expects to see long-term benefits from its innovation initiatives, such as the Visa Flexible Credential. However, it will need to stabilize its revenue and improve profitability to ensure sustained growth and investor confidence. The management team projected positive adjusted EBITDA for three out of the four quarters in 2024, showing efforts toward achieving profitability in the future.
