Marqeta: Block Contract Finally Lapped, Reentering Growth Mode

Growth - Marqeta's Q2 revenue declined 46% YoY to $125M, primarily due to the Block contract renewal which impacted revenue presentation and reduced pricing, negatively affecting growth rate by 60pp [4] - Despite revenue decline, Total Processing Volume (TPV) grew 32% YoY and 6% QoQ to$ 70.6B in Q2, indicating strong platform performance and durable client base [4] - Non-Block TPV grew more than 15pp faster than Block TPV in Q2, with financial services vertical non-Block TPV growing over 100% YoY [5][6] - Management expects revenue to return to positive growth in Q3 and Q4, with projected growth of 16% to 18% YoY, and TPV growth to remain robust at over 30% YoY [6] Profitability - Q2 Gross Profit declined 6% YoY to $79M, with Gross Margin at 63%, down 8pp QoQ due to reduced pricing from Block renewal and lower card network incentives [7] - Take Rate declined to 0.11% in Q2, down 5bps YoY and 2bps QoQ, reflecting potential pricing power loss [8] - Management expects Gross Profit growth to accelerate in H2, with Q3 growth projected at 25% to 27% and Q4 at 22% to 24%, with Gross Margin expected to be in the low 70s [8] - Adjusted EBITDA turned negative in Q2 at$ (2)M, but is expected to turn positive in Q3 with margins of 4% to 6%, and further improve to 6% to 8% in Q4 [9][10] Financial Health - Marqeta has a Net Cash position of $1.2B with virtually zero debt, representing 40% of its current Market Cap of$ 2.7B [12] - The company has been aggressively buying back shares, repurchasing $59M worth of stock in Q2, reducing shares outstanding by about 6% since May last year [13] - Trailing twelve-month Free Cash Flow reached a record$ 81M in Q2, representing a FCF Margin of 17% [13] Valuation - Marqeta stock is down 80% from its IPO price, trading at EV to Revenue and EV to Gross Profit multiples of 3.3x and 4.9x, respectively, which is considered cheap given its growth trajectory and financial health [14] - A base-case 12-month price target of $8.54 per share is projected, representing an upside potential of about 64% [15][16] Strategic Partnerships - Marqeta signed a 5-year deal with Varo Bank to become its issuer processor, powering over 5M cards [6] - The company partnered with Affirm and Visa to support Visa Flexible Credential, allowing cardholders to toggle between different payment methods [6] - Marqeta also signed with Zoho to deliver expense management and embedded finance solutions for over 700K businesses [6]