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Yahoo
a day ago
- Business
- Yahoo
MQ Q1 Earnings Call: Product Migrations and Platform Expansion Offset Guidance Shortfall
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. Is now the time to buy MQ? Find out in our full research report (it's free). 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). The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025. While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver's seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
Yahoo
13-05-2025
- Business
- Yahoo
Marqeta chief focuses on revenue diversity, execution
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. In late February, Marqeta replaced its former chief executive, naming Mike Milotich, the chief financial officer, to the additional role of interim CEO. It's a title he might hold for a while as Milotich says Marqeta's board is comfortable with the current executive team, allowing directors to conduct a thorough, deliberative search. The company focuses on card issuing and embedded finance, to allow its customers – including large fintechs and online retail marketplaces– to profit from interchange fees on transactions. Oakland, California-based Marqeta faces stiff competition from rivals such as Fidelity National Information Services and Global Payments, as well as upstarts such as Adyen and Stripe. Marqeta, which went public in June 2021, has gradually diversified its revenue away from Block, which accounted for nearly three-quarters (73%) of the business in early 2021. Block represented 45% of revenue in the most recent quarter, Marqeta reported Thursday. It's also planning a 'white label app,' rolling out later this year, to allow companies to establish a card program quickly, without spending internal resources or managing cardholders, Milotich said last week on a quarterly earnings call. As the dual CEO-CFO, Milotich is also targeting costs, with a goal of keeping expense growth 10 points below gross profit growth. Milotich joined Marqeta as CFO in February 2022 after prior roles at Visa, PayPal Holdings and American Express. He spoke with Payments Dive on May 9. Editor's note: This interview has been edited for clarity and brevity. MIKE MILOTICH: Not really. Although we've accomplished a lot at Marqeta, we need to improve our execution a little bit. So I think what I'm really focused on is doing the fundamentals, the little things a little better. We have several innovative things that we're doing, and we are constantly growing the capabilities we offer. The key is to do everything, finish everything we start and kind of do it really well, is what I'm a little more focused on than you know, maybe we've been in the past. I think because we have enough great ideas, that's not our problem. Our problem is actually focusing, prioritizing and delivering. You can't really plan for that. It's more that you make sure you have contingency plans. It's more about making sure you have the ability to shift if things change. And sometimes that means the way you execute is slightly different, so that you kind of have some exits and some off ramps if you need to make a change. I think we're trying to make sure every decision we make, there is some flexibility if things change. Otherwise, what we see in our business is that, at least so far, there isn't a shift in the way consumers are spending. For us it's two things. We have one very large customer, Block. This past quarter, they were 45% of our revenue. We're making progress growing our non-Block business, and so I would say that's an area of focus: How quickly is our non-Block business growing? Our non-Block revenue is growing more than 10 points faster than our Block revenue. That's something investors are watching. We still think there's a lot of growth opportunity with Block and so it's more, how quickly can we diversify the business outside of that? Another thing investors want to see is how successfully we move into embedded finance. How successfully were we able to attract these different kinds of companies and get them on our platform and show the difference that we can make, versus maybe what has been done in the past. We still think there's a lot of opportunity at Block and a lot of ways we can help them. We don't necessarily target that percentage. We more target non-Block growth. We want to drive non-Block growth, but if Block grows really fast, that's not a bad thing on our platform. We support Square, we support Afterpay, we support Cash App. They've talked a lot about getting Afterpay inserted more into Cash App directly. So there's things that we can help them with. They haven't done a true credit card yet, and these are all things that they could do seamlessly with us. In addition to that, we obviously are trying to grow our business as much as we can with other partners. We're happy integrating with multiple players, as we sort of speak to larger and larger companies whose core business is not this. They're looking for a more holistic offering. We're providing a lot more value-added services, risk services that they can adopt. We announced we're building a white label app, so that the decision maker for this card program, one day they might want to embed it into their existing company app, but that takes a lot of selling internally to get people to commit resources that way. So a lot of them are saying, I'm going to build a standalone app that looks and feels and easily syncs with our main app. But it can allow me to get traction in the market, and then maybe one day later, embed it directly. Almost everyone now issues a digital, tokenized version of your card along with the physical card. So a lot of people are putting their card into one of the big wallets. I think the big change that we see coming, that a lot of people are interested in, is where you would do more from their experience. You're inside their app, and there are things you can do. If you were an airline, why wouldn't you be able to do some things directly from their application, as opposed to leaving it, and so I think that's personalized rewards. One of the things we're working on in credit is credit platforms. Today, the reward is the same for you as it is for me, but there's no reason why. Just like if you and I pulled up a website, we were sitting right next to each other. What would be on (each) website would be very different, and we believe there's no reason why card benefits and rewards couldn't be similar, where they are somewhat tailored to your preferences and your needs. The board, they feel like with me in the interim role, and the rest of the executive team in place, that the business can thrive in the short-to-medium term, which gives them the luxury of taking the time they need to do a thorough search. So I don't expect it to be fast. That's up for the board to determine. Recommended Reading How embedded payments are changing the way we pay
