MQ Q1 Earnings Call: Product Migrations and Platform Expansion Offset Guidance Shortfall

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2 days ago

Leading edge card issuer Marqeta (NASDAQ: MQ) reported Q1 CY2025 results beating Wall Street's revenue expectations , with sales up 17.9% year on year to $139.1 million. On the other hand, next quarter's revenue guidance of $140.3 million was less impressive, coming in 3.8% below analysts' estimates. Its non-GAAP loss of $0 per share was 93.1% above analysts' consensus estimates.
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Revenue: $139.1 million vs analyst estimates of $135.8 million (17.9% year-on-year growth, 2.4% beat)
Adjusted Operating Income: $14.75 million vs analyst estimates of -$29.34 million (10.6% margin, significant beat)
Revenue Guidance for Q2 CY2025 is $140.3 million at the midpoint, below analyst estimates of $145.8 million
Operating Margin: -13.3%, up from -42.3% in the same quarter last year
Market Capitalization: $2.57 billion
Marqeta's first quarter performance was shaped by ongoing momentum in customer migrations and platform breadth, as management highlighted. Interim CEO and CFO Mike Milotich pointed to accelerated migrations, including Klarna and Perpay, as evidence of the company's ability to win established programs seeking modern processing capabilities. The quarter also reflected progress in expanding non-block (non-Square/Block) customer volumes, with TPV (Total Processing Volume) for non-block clients growing at more than twice the company average. Milotich credited successful launches in Europe, such as with Bitpanda, and the deepening of capabilities—like the UX Toolkit—for supporting this growth. He noted, 'Perpay had already found product market fit and a significant client base. However, they were looking to switch from their processing provider to one that had more sophisticated, scalable, and responsive capabilities.'
Looking ahead, Marqeta's guidance incorporates both the impact of a renegotiated platform partner agreement and continued investment in innovation and product launches. Milotich stated that while the revised agreement lowers reported revenue, it does not impact gross profit, keeping the company's underlying business trajectory intact. He emphasized ongoing expansion in Europe, the planned integration of TransactPay, and the ramp of new credit and debit programs as key growth drivers for the year. Addressing potential macroeconomic risks, Milotich cautioned, 'We are assuming consistent macroeconomic conditions for the remainder of the year, but noting the risk.' Management reiterated that gross profit projections remain steady despite uncertainties and that adjusted EBITDA margin guidance has been raised due to ongoing expense discipline and operational efficiencies.
Management linked the quarter's revenue growth and margin improvements to new program wins and the company's ability to execute complex card migration projects. The renegotiation of a platform partner agreement also affected reported revenue but improved profitability.
Customer migration capability: Marqeta completed notable migrations, including Klarna and Perpay, demonstrating the platform's ability to onboard existing credit and debit programs from other providers. These projects were highlighted as critical to attracting more established brands seeking advanced issuer processing.
European expansion and acquisitions: The company continued to see strong TPV growth in Europe, with the Bitpanda program launching across 26 countries in 10 currencies. Management expects the pending acquisition of TransactPay to enhance its European program management offerings, facilitating seamless cross-border solutions for clients.
Product innovation focus: Marqeta introduced its UX Toolkit, a set of pre-built user interface components optimized for regulatory compliance, to accelerate customer onboarding and product launches. The company also announced plans for a white-label app to further reduce time-to-market for new card programs.
Diversification away from block: Non-block customer volumes and gross profit grew much faster than block-related business, driven by neobanking, lending, and expense management use cases. Management noted that TPV growth among customers outside the top five outpaced the company average, indicating broader adoption.
Expense discipline and operational scale: Adjusted operating expenses grew only modestly, reflecting continued hiring discipline and geographic talent sourcing. Margin expansion was attributed to operating leverage and a favorable mix shift toward higher-margin products and customers.
Marqeta expects growth to be driven by expanded platform capabilities, new customer migrations, and continued European momentum, while monitoring macroeconomic risks and customer spending trends.
Platform expansion and migrations: Management believes that expertise in migrating established card programs will position the company to capture more business from traditional issuers and large brands. The planned launch of additional credit and commercial programs is expected to support volume growth in late 2025 and beyond.
European market and acquisitions: The anticipated close of the TransactPay acquisition is seen as a catalyst for further European growth. Management expects that program management capabilities, now in demand from multinational clients, will increase cross-border adoption and drive new business.
Macroeconomic and regulatory factors: While guidance assumes stable economic conditions, management acknowledged the risk of deterioration in customer spending or delays in program launches. Potential shifts in financial regulation or consumer behavior could impact the pace of growth, but Marqeta's exposure to less discretionary spending categories may help mitigate downside risk.
Over the next few quarters, the StockStory team will be monitoring (1) the pace and success of additional program migrations, especially in credit and commercial segments, (2) progress on closing the TransactPay acquisition and scaling European program management, and (3) the rollout and adoption of new product offerings such as the white-label app and expanded risk and rewards features. The ability to sustain non-block growth and navigate macroeconomic uncertainty will also be closely watched.
Marqeta currently trades at a forward price-to-sales ratio of 4.5×. At this valuation, is it a buy or sell post earnings? See for yourself in our full research report (it's free).
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