Marqeta, Inc. — FY 2022 Form 10-K
Business and period: Marqeta operates a cloud-based, API-driven card issuing and transaction-processing platform. This annual report covers the fiscal year ended December 31, 2022; it is not a standalone Q4 filing. The company reported quarterly results for Q4 2022, included below.
Financial and operating performance
| Metric | FY 2022 | FY 2021 | Change |
|---|---|---|---|
| Net revenue | $748.2 million | $517.2 million | +45% |
| Total processing volume (TPV) | $166.3 billion | $111.1 billion | +50% |
| Gross profit / margin | $320.0 million / 43% | $231.7 million / 45% | Profit +38%; margin down 2 points |
| Operating expenses | $529.8 million | $393.7 million | +35% |
| Operating loss | $209.8 million | $162.0 million | Loss widened |
| Net loss | $184.8 million | $163.9 million | Loss widened |
| Adjusted EBITDA (non-GAAP) | $(41.8) million | $(12.8) million | Loss widened |
| Operating cash flow | $(13.0) million | $57.0 million | Turned negative |
Net loss margin improved to 25% from 32%, while adjusted EBITDA margin declined to negative 6% from negative 2%. Revenue growth reflected higher TPV, partly offset by an unfavorable card-program mix, particularly growth in Powered By Marqeta. Block contributed $173.0 million of the year-over-year revenue increase, including Afterpay from February 2022.
Q4 2022: Revenue was $203.8 million, gross profit $87.1 million, operating loss $54.3 million, and net loss $26.3 million. Other income was $28.5 million, materially reducing the quarter’s net loss relative to its operating loss.
Liquidity and obligations: At year-end, cash and cash equivalents were $1.184 billion and marketable securities were $440.9 million, totaling approximately $1.625 billion; restricted cash was $7.8 million. Current assets were $1.747 billion against current liabilities of $282.9 million. The filing reports no borrowing debt; reported liabilities primarily include revenue-share payable, accrued liabilities, and lease obligations. Total liabilities were $297.4 million. Management stated available cash and marketable securities should fund working capital and capital needs for more than 12 months. Non-cancellable purchase commitments totaled $221.7 million over five years, including $212.6 million in cloud-computing minimum commitments.
Material changes and notable items
- Costs of revenue rose 50%, faster than revenue, and gross margin fell to 43% from 45%; card-network fees, net, increased 56%, reflecting higher volume and timing/revision of network incentives.
- Compensation and benefits rose 30% to $415.1 million, including $160.7 million of share-based compensation. Technology costs increased 56% to $52.4 million.
- Other income, net, was $24.9 million versus expense of $2.6 million in 2021. It included $19.1 million more interest income and a $17.9 million gain on sale of an equity-method investment, partly offset by an $11.6 million impairment of a purchase option.
- Marqeta repurchased and retired 11.7 million shares for $79.2 million in 2022, at an average price of $6.77; $20.8 million remained under the $100 million authorization at year-end.
- After year-end, Marqeta acquired Power Finance for $221.9 million in cash, with up to $53.1 million of additional performance-based earn-out consideration. Approximately one-third of the stated purchase price was payable over two years, subject to conditions.
Outlook, risks, and management commentary
- No specific revenue or earnings guidance is provided. Management expects operating losses to continue for the foreseeable future and plans continued investment in products, infrastructure, customer acquisition, and international expansion.
- Customer concentration is pronounced: Block generated 71% of FY 2022 revenue, compared with 69% in 2021. Block contract terms for Cash App and Square Card run to March 2024 and December 2024, respectively, before automatic renewal provisions.
- Sutton Bank settled 82% of TPV in 2022, down from 90% in 2021. Dependence on this issuing-bank partner creates continuity and negotiating risks.
- Macroeconomic uncertainty, inflation, higher interest rates, consumer spending, interchange regulation, privacy and data rules, cybersecurity, service outages, fraud and transaction-processing errors may affect results. The company disclosed losses in Q3 2022 from a limited number of international transactions processed above customer-authorized amounts.
- Marqeta cited a $5.9 million indemnification cost within higher other operating expenses. It also noted prior service-level credits and customer concessions, without identifying a material legal proceeding at year-end.
- Simon Khalaf became CEO effective January 31, 2023, succeeding Jason Gardner, who remains Executive Chairman. The audited financial statements received an unqualified opinion, and management and the auditor concluded internal control over financial reporting was effective as of year-end.
Investor verification points
- Track Block’s share of revenue, processing trends, contract renewals, and progress in diversifying the customer base.
- Assess whether growth in TPV converts to gross-profit growth, particularly as card mix and network incentives affect margins.
- Review operating cash use, ongoing losses, share-based compensation, and the cash impact of the Power Finance acquisition and remaining repurchases.
- Monitor Sutton Bank concentration and Marqeta’s ability to shift processing volume to other issuing banks if needed.
- Examine the acquisition’s final purchase accounting, any earn-out outcomes, and evidence that Power Finance expands credit products profitably.
- Review the detailed disclosures on transaction-processing controls, network incentives, and the Q3 2022 processing error, as well as regulatory, cybersecurity, and service-availability risks.