Marqeta, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Marqeta provides a cloud-based card issuing and payment processing platform. It completed its IPO in June, issuing 52.3 million Class A shares at $27 per share and receiving approximately $1.3 billion in net proceeds.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Net revenue | $122.3 million | $69.4 million | $230.2 million | $117.8 million |
| Total processing volume (TPV) | $26.52 billion | $15.08 billion | $50.52 billion | $24.08 billion |
| Gross profit | $47.0 million | $27.6 million | $96.8 million | $46.2 million |
| Gross margin | 38% | 40% | 42% | 39% |
| Operating loss | $68.0 million | $6.8 million | $78.6 million | $21.8 million |
| Net loss | $68.6 million | $7.1 million | $81.4 million | $21.6 million |
| Adjusted EBITDA (non-GAAP) | $(10.6) million | $(3.0) million | $(9.0) million | $(13.4) million |
| Operating cash flow | Not presented quarterly in the supplied filing text | $5.8 million | $14.7 million |
At June 30, cash and cash equivalents were $1.579 billion, marketable securities $105.1 million, and restricted cash $7.8 million. Current assets were $1.756 billion and current liabilities $171.6 million. Total liabilities were $194.3 million; the filing does not report borrowings. Operating lease liabilities totaled $16.8 million. Management said available cash and marketable securities were sufficient for at least the next 12 months.
Material changes versus the prior period
- Q2 revenue increased 76%, alongside 76% TPV growth; six-month revenue rose 95% and TPV 110%.
- Growth was concentrated: Square generated $41.8 million of the Q2 year-over-year revenue increase and accounted for 72% of Q2 revenue, compared with 66% a year earlier. For the six months, Square accounted for 73% of revenue.
- Q2 gross margin declined to 38% from 40%; six-month margin increased to 42% from 39%, helped by $4.8 million of network incentives.
- Q2 operating expenses rose to $115.0 million from $34.4 million. Compensation and benefits included $55.5 million of share-based compensation, up from $2.9 million, including IPO-triggered RSU expense and CEO performance-award expense.
- Net loss widened substantially. Adjusted EBITDA loss also widened in Q2 but narrowed for the six-month period.
- The IPO increased cash and stockholders’ equity; preferred stock converted to Class B common stock. Class B shares carry ten votes per share, versus one vote for Class A.
Outlook, commentary, and risks
The filing gives no specific revenue, earnings, or margin guidance. Management expects operating losses to continue for the foreseeable future, citing investment in products, customer acquisition, infrastructure, and geographic expansion. It expects operating expenses to rise, including public-company costs.
Management said COVID-19 had not adversely affected the business to date, while noting uncertainty around future customer volumes, economic conditions, and live events. It attributed some growth to shifts toward online payments, buy-now-pay-later, and on-demand delivery, and said stimulus payments may have contributed to higher TPV and revenue. Visa and Mastercard had postponed most interchange-rate changes through April 2022; future changes could affect revenue.
- Customer and settlement concentration: Sutton Bank handled 92% of Q2 TPV; Square supplied 72% of Q2 revenue. Reduced volume or loss of either relationship could materially affect results.
- Control weakness: the company reported ineffective disclosure controls due to a material weakness involving timely reconciliation of certain customer settlement bank accounts. Remediation was ongoing; management said additional procedures supported the fair presentation of the statements.
- Contingency: Marqeta had not recorded a liability for disputed state and local indirect taxes; the potential range was $1.6 million to $6.7 million if authorities determine the services are taxable and the company does not appeal.
- The company reported no material pending legal proceedings and no legal contingencies expected to materially affect its financial position or results. It also disclosed settlement exposure if customer prefunding is insufficient and amounts cannot be recovered.
- Other risks include platform outages or security incidents, regulation and interchange changes, COVID-related disruption, and dilution or selling pressure from equity awards and the post-IPO share overhang.
Important facts for investors to verify
- Track Square’s share of revenue and TPV, customer diversification, and the renewal terms of its agreements.
- Assess whether the company remediates the settlement-account reconciliation material weakness and improves disclosure controls.
- Monitor gross margin, network incentives, interchange-rate developments, and the effects of transaction mix and revenue sharing.
- Separate recurring operating costs from IPO-related and other share-based compensation; consider the remaining unrecognized compensation expense.
- Review operating cash generation against continuing losses and planned investment, notwithstanding the IPO-funded liquidity position.
- Evaluate Sutton Bank dependence, potential settlement losses, indirect-tax exposure, and equity dilution and lock-up expirations.