A few months ago, I discussed how Marqeta, Inc. (NASDAQ: MQ ) stock would be stuck in another limbo as the company dealt with increased regulatory scrutiny that clouded its near-term outlook.My goal is to help you find the companies of tomorrow.I am a long-term growth investor in search of innovative companies that make the world a better place. My investment strategy revolves around finding what I call "divergent stocks" — disruptive companies that have strong fundamentals and long growth runways, but depr ...

Marqeta (MQ) Q4 2024 Earnings Call February 27, 2025 03:08 AM ET Company Participants Stacey Finerman - Vice President, Investor RelationsMike Milotich - Interim CEO & CFOTimothy Chiodo - Managing DirectorDarrin Peller - Managing DirectorAndrew Bauch - Director - Equity ResearchSanjay Sakhrani - Managing Director Conference Call Participants Tien-tsin Huang - Senior AnalystNone - AnalystCristopher Kennedy - Research Analyst - Financial Services & Technology Operator Ladies and gentlemen, welcome to Marqeta ...

Financial Data and Key Metrics Changes - Total Process Volume (TPV) reached $80 billion in Q4 2024, a 29% increase compared to Q4 2023 [10] - Q4 net revenue was $136 million, growing 14% year-over-year [10] - Gross profit for Q4 was $98 million, an 18% increase year-over-year, resulting in a gross margin of 72% [11] - Adjusted EBITDA was $13 million in Q4, translating into a 9% margin, marking new all-time highs for the company [43][67] Business Line Data and Key Metrics Changes - Financial services, lending (including Buy Now, Pay Later), and expense management all grew at rates slightly faster than the overall company in Q4 [36] - Non-Block TPV grew roughly twice as fast as Block TPV, driven by various customer use cases [35] - The European business saw TPV growth well over 100% in Q4, with notable wins contributing to future momentum [16] Market Data and Key Metrics Changes - The company secured a consumer co-brand credit partnership with an established airline outside the U.S., indicating strong international market engagement [14] - The European market is experiencing significant growth, with a focus on enhancing program management capabilities to match U.S. offerings [18][119] Company Strategy and Development Direction - The company aims to establish itself as the preferred partner for embedded finance and fintech innovations through three strategic pillars: deepening platform breadth, expanding solutions, and strengthening leadership in payments innovation [20] - The acquisition of TransactPay is intended to enhance program management offerings in Europe, allowing for a more seamless service for customers [55][79] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in capturing compelling opportunities in the payment ecosystem, emphasizing the importance of operational improvements and customer experience [8][12] - The company expects full-year 2025 net revenue growth between 16% and 18%, driven by TPV growth in the mid- to high 20s [48] - Management highlighted the importance of maintaining a strong focus on compliance while driving profitable growth [30] Other Important Information - The company has $80 million remaining on the Q2 2024 share buyback authorization and plans to restart share repurchase activity soon [46] - An additional $300 million share buyback authorization has been approved, bringing the total to $380 million [47] Q&A Session Summary Question: What exactly is being acquired with TransactPay? - The acquisition involves a bin sponsorship provider licensed with an e-money institution, allowing the company to have more control over offerings in Europe [73][74][78] Question: How does the pipeline look now? - The pipeline is strong, with roughly two-thirds consisting of embedded finance customers, indicating significant momentum in this area [82] Question: Does Marqeta have everything needed to win large embedded finance deals? - Yes, the company is fully modern and operates at scale, providing a unique and differentiated offering that appeals to global companies [92] Question: Is the guidance for 2025 based on the acquisition of TransactPay? - Yes, the guidance assumes the acquisition will close around Q3 2025 [96] Question: What is the path to GAAP profitability? - The company expects to drive gross profit growth at a faster rate than expense growth, leading to quarterly GAAP profitability by the end of 2026 [98][100]

Financial Data and Key Metrics Changes - Total Process Volume (TPV) reached $80 billion in Q4, a 29% increase compared to the same quarter of 2023 [7][22] - Q4 net revenue was $136 million, growing 14% year over year [7][25] - Gross profit for Q4 was $98 million, an 18% increase year over year, resulting in a gross margin of 72% [8][27] - Adjusted EBITDA was $13 million in Q4, translating into a 9% margin, marking new all-time highs for the company [29][30] Business Line Data and Key Metrics Changes - Financial services, lending (including buy now pay later), and expense management all grew at roughly the same rate in Q4, slightly faster than the overall company [24] - Non-block neo banking customers' TPV grew approximately 100% year over year [25] - Growth in expense management accelerated due to strong end-user acquisition as AP automation and modern corporate card platforms gained share [25] Market Data and Key Metrics Changes - The European business saw TPV growth well over 100% in Q4 [12] - The company secured a deal to provide commercial card processing and program management to a fast-growing technology company in Europe [12] - The pipeline for embedded finance customers has increased significantly, with roughly two-thirds of the current pipeline being embedded finance customers [55] Company Strategy and Development Direction - The company aims to establish itself as a preferred partner for embedded finance and fintech innovations through three strategic pillars: deepening platform breadth, expanding solutions, and strengthening leadership in payments innovation [15][44] - The acquisition of TransactPay is expected to enhance program management offerings in Europe and streamline operations [18][36] - The company plans to leverage the American Express network for credit and debit card programs starting later in 2025 [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in capturing compelling opportunities in the payment ecosystem while focusing on profitable growth and value creation [6][15] - The company anticipates net revenue growth of 16-18% for 2025, driven by TPV growth in the mid to high 20s [32] - Management highlighted the importance of maintaining a strong focus on compliance while driving profitable growth [21][43] Other Important Information - The company ended Q4 with $1.1 billion in cash and short-term investments [29] - A share buyback authorization of $300 million was approved, bringing the total authorization to $380 million [31] Q&A Session Summary Question: What exactly is being acquired with TransactPay? - TransactPay is a BIN sponsorship provider licensed with an eMoney institution, allowing the company to have more control over offerings in Europe [48][50] Question: How does the pipeline look now, especially after recent wins? - The pipeline is strong, with a significant increase in embedded finance customers, indicating growing momentum in the market [55][56] Question: Does Marketa have everything needed to win larger embedded finance deals? - Yes, the company has a full solution that includes money movement, issuer processing, and program management, which positions it well for larger deals [62][64] Question: Is the guidance for 2025 based on the acquisition of TransactPay? - Yes, the guidance assumes the acquisition will close around Q3 2025 [68] Question: What is the path to GAAP profitability by 2026? - The company expects to drive gross profit growth at a faster rate than expense growth, leading to GAAP profitability on a quarterly basis by 2026 [70][73]

Marqeta posted solid fourth-quarter results highlighting its growth in processing volume, but faced challenges due to changes in a key contract.Marqeta (MQ -6.65%), a financial services company known for its innovative credit and payment card issuing platform, reported solid fourth-quarter results on Feb. 26. Revenue increased 14% to $136 million, surpassing analyst predictions of $132 million. However, its annual revenue dropped 25% due to contract changes. The quarter was notable for the company's strong ...

Financial Performance - Total net revenue for the year ended December 31, 2024, was $507.0 million, a decrease of 25% from $676.2 million in 2023 and a decrease of 10% from $748.2 million in 2022[117]. - Total Payment Volume (TPV) for the year ended December 31, 2024, was $291.1 billion, an increase of 31% from $222.3 billion in 2023 and an increase of 34% from $166.3 billion in 2022[118]. - The company has experienced significant growth in the number of customers and card programs managed, but future net revenue growth depends on attracting new customers and retaining existing ones[121]. - The company relies heavily on a small number of significant customers, including Block, and any loss or decline in revenue from these relationships could adversely affect financial results[115]. - The company has a history of net losses and may not achieve or sustain profitability in the future[115]. - Block accounted for 47%, 68%, and 71% of the company's net revenue for the years ended December 31, 2024, 2023, and 2022, respectively[126]. - The company reported a net income of $27.3 million for the year ended December 31, 2024, primarily due to the forfeiture of the Executive Chairman Long-Term Incentive Award, while net losses were $223.0 million and $184.8 million for 2023 and 2022, respectively[129]. - As of December 31, 2024, the accumulated deficit was approximately $797.9 million, down from $825.2 million as of December 31, 2023[129]. - The company expects to continue incurring net losses for the foreseeable future due to increasing operating expenses related to personnel and platform enhancements[129]. Platform and Product Development - Total processing volume (TPV) on the Marqeta Platform reached $291.1 billion in 2024, reflecting a year-over-year growth of 31% from $222.3 billion in 2023[18]. - The platform supports a combined offering of debit, prepaid, and credit cards, allowing customers to create multiple card programs on a single platform[25]. - Marqeta introduced the UX Toolkit in 2024, enabling customers to create branded front-end experiences with pre-built UI components, optimizing development resources[40]. - The company launched Portfolio Migration in 2024, simplifying the upgrade of existing card programs onto its platform with an automated migration tool[44]. - Marqeta Flex, announced in 2024 and expected to release in 2025, aims to transform buy now, pay later (BNPL) options within payment apps, enhancing consumer access to personalized BNPL options[45]. - Marqeta's platform enables dynamic spend controls and Just-in-Time Funding (JIT Funding), enhancing transaction processing control for customers[32]. - Marqeta's RiskControl product mitigates risk and compliance concerns while providing real-time decisioning capabilities to customers[36]. - The company is incorporating AI solutions into its platform, which may increase cybersecurity risks[148]. - The company announced new technologies in fiscal 2024, including portfolio migration, UX Toolkit, and Marqeta Flex, with net revenue growth dependent on increasing customer adoption[157]. - The company acquired Power Finance in Q1 2023 and publicly launched its credit card issuing capabilities in October 2023, with revenue growth reliant on customer usage of these capabilities[159]. Customer and Market Dynamics - The company serves customers across various industries, including financial services, on-demand services, and e-commerce enablement, with a focus on embedded finance as a growth driver[52]. - The company competes in a large and evolving market, focusing on factors such as pricing, program types, and industry expertise to differentiate from competitors[74]. - The company acknowledges the need for high-quality customer support to retain existing customers and attract new ones, as failure in this area could harm its reputation[155]. - The company may experience high attrition and turnover rates, which could adversely affect its business and strategic objectives[186]. Regulatory and Compliance Risks - The company is subject to various laws and regulations, including those related to consumer protection, privacy, and data security, which may increase compliance costs[85][87]. - The company is subject to various regulations and compliance requirements, which could result in additional costs and impact business operations[115]. - The company has implemented an Anti-Money Laundering (AML) program to comply with regulations and manage risks associated with illicit activities[96]. - The Retail Payment Activities Act (RPAA) will require payment service providers, including a subsidiary of the company, to comply with new regulations by September 8, 2025[212]. - Regulatory scrutiny over banks sponsoring financial technology programs increased in fiscal 2024, leading to fewer program launches than projected, adversely affecting operational results[213]. - The Federal Banking Agencies have issued enforcement actions regarding partnerships between banks and financial technology companies, which may affect the company's operations[215]. - New laws or regulations could lead to significant compliance costs and management attention, potentially altering relationships with Issuing Banks[216]. - The regulation of cryptocurrency is rapidly evolving, which may impact the net revenue associated with cryptocurrency business customers[217]. Strategic Relationships and Agreements - Marqeta's contracts with Issuing Banks entitle the company to 100% of the Interchange Fees generated from customer card programs, which are shared with customers through Revenue Share payments[65]. - The fees paid to Issuing Banks are typically structured based on volume tiers, with fees as a percentage of processing volume declining as processing volumes grow[63]. - Marqeta has strategic agreements with major Card Networks, including Mastercard and Visa, which provide tiered incentives based on processing volumes routed through their networks[70][71]. - The current term of the strategic relationship agreement with Mastercard expires in 2028, with potential early termination if certain processing volume milestones are achieved[70]. - As of February 2023, the card partner agreement with Visa has been extended for an additional five years[71]. - The current term of the contract with PULSE Network expires in 2028 and automatically renews annually unless either party provides notice of intent not to renew[72]. - The company relies on relationships with Issuing Banks and Card Networks, with potential risks if these relationships are not maintained[136]. Operational Challenges - The company has experienced performance issues and system failures that could adversely affect business operations and financial condition[140]. - The company relies on third-party vendors for certain services, and any disruptions could significantly impact its platform performance[197]. - The company may incur losses from payment transaction settlements due to errors in processing, chargebacks, or insufficient customer pre-funding[174]. - The company is expanding internationally, with offices in the U.S., Poland, and the U.K., but faces increased business, economic, and regulatory risks in new markets[171]. - The company may experience difficulties in hiring and retaining qualified personnel, which could impact its operational efficiency and future growth[181]. - The company anticipates potential impacts on foreign national employees' ability to travel and obtain visas, which could affect workforce retention[183]. - The company has $1.1 billion in cash and highly liquid short-term investments on its balance sheet, but may seek additional funds for product development and operational expansion[187]. - The company may require additional capital to support business growth, and disruptions in credit markets could affect funding availability[188]. - The company faces risks related to regulatory compliance, which could result in additional costs and operational challenges[207]. - The company has indemnification provisions in various agreements that could expose it to substantial liability[201]. - The company may not successfully integrate acquired businesses or technologies, which could dilute stockholder value[192]. - The company’s liability insurance may not cover all potential claims, leading to unanticipated costs[196].

Financial Performance - Total Processing Volume (TPV) for Q4 2024 was $80 billion, a 29% year-over-year increase[2] - Q4 2024 Net Revenue reached $136 million, reflecting a 14% increase year-over-year, while Gross Profit was $98 million, up 18%[2][9] - For the full year 2024, TPV was $291 billion, a 31% increase from 2023, but Net Revenue decreased by 25% to $507 million due to changes in revenue presentation[3][9] - Gross Profit for the full year 2024 was $352 million, representing a 7% year-over-year increase, with a Gross Margin of 69%[3][9] - The company reported a GAAP Net Income of $27 million for the full year 2024, a significant improvement from a loss of $222.96 million in 2023[3][9] - Adjusted EBITDA for Q4 2024 was $13 million, a 285% increase year-over-year, with an Adjusted EBITDA margin of 9%[6][9] - Net revenue for Q4 2024 was $135.79 million, a 14.3% increase from $118.82 million in Q4 2023[24] - Gross profit for the year ended December 31, 2024, was $351.85 million, compared to $329.51 million in 2023, reflecting a 6.8% increase[24] - Net revenue for Q4 2024 was $135.79 million, a 14% increase compared to $118.82 million in Q4 2023[31] - Gross profit for Q4 2024 reached $98.20 million, reflecting an 18% increase from $83.23 million in Q4 2023[31] - Adjusted EBITDA for Q4 2024 was $12.66 million, a significant increase of 285% compared to $3.29 million in Q4 2023[31] Expenses and Losses - Operating expenses for Q4 2024 totaled $135.63 million, down from $139.57 million in Q4 2023, a decrease of 2.1%[24] - The net loss for Q4 2024 was $27.12 million, an improvement from a net loss of $40.38 million in Q4 2023[24] - Total operating expenses for Q4 2024 were $135.63 million, a decrease of 3% from $139.57 million in Q4 2023[31] - Net loss for Q4 2024 was $27.12 million, an improvement of 33% compared to a net loss of $40.38 million in Q4 2023[31] Cash and Assets - Cash and cash equivalents at the end of Q4 2024 were $923.02 million, down from $980.97 million at the end of Q4 2023[27] - Total assets decreased to $1.46 billion in Q4 2024 from $1.59 billion in Q4 2023, a decline of 7.9%[27] - The company reported a net cash provided by operating activities of $58.17 million for the year ended December 31, 2024, compared to $21.10 million in 2023[29] - Total stockholders' equity decreased to $1.09 billion in Q4 2024 from $1.24 billion in Q4 2023, a decline of 12.8%[27] - Cash and cash equivalents at the end of Q4 2024 totaled $923.02 million, a decrease of 6% from $980.97 million at the end of Q4 2023[31] - Stockholders' equity decreased to $1,085.02 million in Q4 2024, down 13% from $1,243.40 million in Q4 2023[31] Strategic Initiatives - Marqeta announced an additional share repurchase program for up to $300 million of its Class A common stock[5] - The company plans to acquire TransactPay to enhance its card issuance capabilities in the UK and EEA, expected to close within 6 months[11][12] - Marqeta's guidance for Q1 2025 includes Net Revenue growth of 14-16% and Gross Profit growth of 11-13%[13] - The company signed new programs in Q4, including its first consumer credit co-brand partnership and several European deals, indicating strong business momentum[5] Liabilities - Total liabilities increased to $378.19 million in Q4 2024, a 9% rise from $346.30 million in Q4 2023[31]

Core Insights - Analysts project that Marqeta (MQ) will report a quarterly loss of $0.06 per share, reflecting a 25% increase year over year [1] - Revenue estimates for Marqeta are set at $131.75 million, indicating a 10.9% increase from the same quarter last year [1] - The consensus EPS estimate has remained unchanged over the past 30 days, suggesting a reassessment of projections by covering analysts [1] Revenue Estimates - Total platform services, net revenue is expected to reach $125.73 million, showing a year-over-year change of +10.6% [4] - Other services revenue is projected at $5.96 million, indicating a year-over-year increase of +16.2% [4] Processing Volume - Total Processing Volume (TPV) is anticipated to be $77.32 billion, compared to $61.98 billion reported in the same quarter of the previous year [5] Stock Performance - Marqeta shares have decreased by -3.4% over the past month, while the Zacks S&P 500 composite has declined by -1.8% [6] - Marqeta holds a Zacks Rank 3 (Hold), suggesting it is expected to closely follow overall market performance in the near term [6]

Group 1 - The article introduces FutureRich Investing as a new contributing analyst to Seeking Alpha, encouraging readers to share their investment ideas for publication and potential earnings [1] - The author identifies as a value dividend investor focused on long-term compounding, emphasizing the strategy of investing in heavily undervalued companies with significant upside potential [2] - The author has a long-term investment approach, specializing in growth dividend companies to eventually rely on dividends for income [2] Group 2 - The article includes a disclosure stating that past performance does not guarantee future results and that no specific investment recommendations are provided [3] - It clarifies that Seeking Alpha's analysts are third-party authors, which may include both professional and individual investors who might not be licensed or certified [3]

Core Viewpoint - Bragar Eagel & Squire, P.C. is investigating potential claims against Marqeta, Inc. due to a class action complaint alleging breaches of fiduciary duties by the board of directors during a specified class period [1][2] Summary by Relevant Sections Legal Investigation - The investigation is focused on whether Marqeta's board of directors breached their fiduciary duties to the company [1] - A class action complaint was filed on December 9, 2024, covering a class period from May 7, 2024, to November 4, 2024 [1] Allegations in the Lawsuit - The lawsuit claims that Marqeta made false and misleading statements regarding its business outlook, specifically underestimating regulatory challenges [2] - It is alleged that Marqeta would need to cut its guidance for the fourth quarter of 2024 as a result of these challenges [2] - The lawsuit asserts that the public statements made by the defendants were materially false and misleading throughout the relevant period [2] Contact Information for Stakeholders - Long-term stockholders of Marqeta are encouraged to reach out for more information regarding the claims or their rights [3]