Marqeta, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Marqeta provides card issuing, processing and program-management services. Comparisons below are with Q1 2023 unless noted.
Key financial and operating metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Net revenue | $118.0 million | $217.3 million | Down 46% |
| Gross profit / margin | $84.2 million / 71% | $89.2 million / 41% | Profit down 6%; margin up 30 percentage points |
| Operating expenses | $134.0 million | $176.6 million | Down 24% |
| Loss from operations | $49.9 million | $87.4 million | Improved |
| Net loss | $36.1 million | $68.8 million | Improved |
| Adjusted EBITDA (non-GAAP) | $9.2 million; 8% margin | $(4.3) million; (2)% margin | Improved |
| Total Processing Volume | $66.7 billion | $50.0 billion | Up 33% |
| Operating cash flow | $0.4 million | $(10.5) million | Improved |
Balance sheet and liquidity: At March 31, 2024, cash and cash equivalents were $970.4 million and short-term investments were $228.3 million, totaling approximately $1.2 billion. Current assets were $1.35 billion and current liabilities $338.6 million. Total liabilities were $347.7 million; the balance sheet does not show funded borrowings. Cash, cash equivalents and restricted cash declined $10.6 million during the quarter. Management believes available cash and short-term investments can fund operations for more than 12 months.
Material changes and drivers
- Revenue fell $99.4 million, principally because of the August 2023 Block agreement amendment. Marqeta says the amendment reduced pricing and changed presentation: $125.6 million of Cash App-related Issuing Bank and Card Network fees reduced Q1 2024 net revenue, whereas comparable costs had previously been recorded in costs of revenue. The presentation change also materially affects comparisons of reported gross margin.
- Block contributed 49% of revenue, versus 76% a year earlier. Revenue from other customers increased $7.6 million, supported by higher volume. TPV grew across major verticals; the company reported particularly strong growth among customers outside its five largest.
- Operating expenses decreased, primarily due to lower compensation and post-acquisition costs, reduced headcount following 2023 restructuring, and cost optimization. Depreciation and amortization increased 79% to $3.5 million.
- Other income rose to $13.9 million, mainly reflecting interest income. Q1 2023 included a $7.2 million tax benefit related to a partial valuation-allowance release; Q1 2024 recorded $0.1 million of tax expense.
Outlook, risks and unusual items
- No numerical revenue or earnings guidance is provided. Marqeta expects operating losses for the foreseeable future while investing in product development, infrastructure, customer acquisition and geographic expansion.
- Customer and banking concentration remain important risks: Block represented 49% of Q1 revenue, and Sutton Bank settled 74% of TPV. Marqeta may be liable to issuing banks if customers fail to provide funds needed to settle transactions.
- Disclosure controls were assessed as ineffective at March 31, 2024 because of material weaknesses involving Power Finance acquisition accounting and IT general controls over systems supporting revenue and financial reporting. Management reported no resulting material misstatements and is pursuing remediation; the IT weakness remains unremediated.
- On May 6, 2024, the company announced that Executive Chairman Jason Gardner would step down effective June 13, 2024, or the later 2024 annual meeting date, and that Jud Linville would become independent chair. Gardner’s performance award is expected to be forfeited, with a reported expected one-time reversal of $157.8 million in share-based compensation expense in Q2 2024.
- The prior $200 million repurchase program was exhausted in Q1; Marqeta repurchased 5.2 million shares for $32.8 million during the quarter. On May 6, the board authorized a new repurchase program of up to $200 million, with no set expiration date.
- The Delaware shareholder lawsuit concerning the 2023 repurchase program was closed after a $425,000 mootness-fee agreement; defendants denied wrongdoing. The filing reports no legal contingency expected to materially adversely affect the company.
Investor verification points
- Assess underlying growth and unit economics using TPV, customer-level revenue and costs, and the Block agreement’s pricing and accounting presentation; do not interpret the reported gross-margin expansion without considering the reclassification.
- Monitor Block concentration, Sutton Bank settlement dependence, and diversification of revenue and processing volume.
- Track operating cash generation, recurring losses, investment spending and the use of cash for the new repurchase authorization.
- Verify progress in remediating both material weaknesses and whether disclosure controls become effective.
- Confirm the timing and financial-statement impact of the expected $157.8 million share-based compensation reversal and the leadership transition.