Global fintech specialist Marqeta (MQ 1.71%)reported third-quarter earnings on Monday, Nov. 4, that included a 30% year-over-year increase in Total Processing Volume (TPV) to $74 billion, a key indicator of strong operational growth. Marqeta also reported a net loss of $29 million despite a positive adjusted EBITDA of $9 million, indicating lingering profitability concerns. Analysts had expected a net loss per share of $0.05; Marqeta’s reported loss was slightly worse at $0.06 per share.

Despite these profitability issues, the alignment of its net revenue of $128 million with forecasts suggests stable revenue expectations.

Source: Marqeta. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year.

Business Overview

Marqeta operates as a pioneering fintech company that specializes in modern card issuing and open API platform solutions. Its service offerings allow businesses to launch and manage their credit and debit card programs efficiently, harnessing the power of its configurable platform. A significant focus has been on growing its total processing volume (TPV), which reflects the amount of payments processed via its systems. Partnerships with top players like Visa and Mastercard, alongside large-scale clients such as Block, have aided in expanding Marqeta's market presence.

During recent quarters, Marqeta has concentrated on expanding its service offerings, particularly through innovative credit solutions and enhanced platform configurability. Its partnerships and adaptability to client needs are seen as pivotal success factors. A large part of its strategy revolves around leveraging its platform to offer customized payment solutions, an aspect enhanced by strategic engagements with companies like Klarna and Affirm.

Operational and Financial Highlights

Marqeta continued to show strong growth in TPV in Q3, up 30% from last year, signaling market penetration and robust demand for its services. Strategically, Marqeta achieved key milestones with the integration of Klarna’s card programs through its Portfolio Migration Service, demonstrating its capability to offer competitive solutions that attract global partners.

Marqeta saw a 24% year-over-year rise in gross profit to $90 million, with improving gross margins to 70% from 67%. However, the company continues to face net losses, marking $29 million this quarter. This is despite these losses improving year over year. The shift to a positive adjusted EBITDA of $9 million from a previous $2 million loss reflects enhanced operational efficiencies and cost management.

Despite gains, a notable concern is the 33% year-over-year decline in net revenue over the nine months ending Sept. 30, 2024. Marqeta highlighted its response to changing revenue recognition patterns due to contract renewals -- such as with Block's Cash App -- impacting comparisons. An important aspect of this quarter was the recorded reduction in operating expenses by 7%, illustrating Marqeta’s focused cost-control measures while still investing in technological advancements.

Look Ahead

In its Q4 2024 preview, Marqeta management expects net revenue growth between 10%-12% and gross profit growth in the range of 13%-15%. This trajectory is supported by an expected adjusted EBITDA Margin of 5%-7%, suggesting a strengthened profitability outlook. Marqeta’s forward statements account for the broader banking regulatory landscape and potential program revisions, presenting a prudent and adaptable growth approach.

Investors and stakeholders should monitor Marqeta's pursuit of regulatory compliance and technological advancement, both of which are crucial in maintaining its competitive position. As the fintech landscape continues to evolve, Marqeta's ability to sustain its vision of innovation, particularly in fraud prevention and payment personalization, will be essential in maintaining momentum and shareholder value.