Payment solutions company Marqeta (MQ -2.66%) unveiled its first-quarter earnings on May 7, and the results displayed significant growth in total processing volume. That hints at expanding market adoption of its payment platform and cards. However, investors looking at its steep dip in net revenue and sharply higher gross margin should take the changes in both metrics with a grain of salt.
| Metrics | Q1 2024 | Q1 2023 | % Change |
|---|---|---|---|
| Net revenue | $118 million | $217 million | (45.7%) |
| Gross profit | $84 million | $89 million | (5.6%) |
| Gross margin | 71% | 41% | 30 percentage points |
| Net earnings | ($36 million) | ($69 million) | 47.6% |
| Total processing volume | $66.7 billion | $50 billion | 33.3% |
| Adjusted EBITDA | $9 million | ($4 million) | N/A |
Data sources: Company results from company.
First-quarter highlights
Marqeta provides innovative payment solutions that enable businesses to issue personalized and efficient payment cards. The company has concentrated on enriching its offerings through strategic global partnerships, platform innovation, and tapping into embedded finance opportunities. These strategic dimensions are vital for Marqeta's continued growth and market differentiation.
In the quarter, Marqeta saw solid growth in its total processing volume, driven by increased platform use across diverse use cases. However, the story was complicated by a sharp 46% revenue decline, largely due to its renegotiated contract with Block's Cash App, which (starting in Q3 2023) changed how Marqeta recognizes revenue from the app, and which also cut its fees. On the other side of that accounting coin, Marqeta's gross margin leaped to 71%, largely due to the way the new Cash App contract reduced its reported revenues. Gross profits only shifted down by 5.6%.
The company also turned a corner with a positive adjusted EBITDA of $9 million, a notable bounce back from the negative result in the prior-year period
Strategic expansions and partnerships continued to play a crucial role this quarter. Collaborations with Uber Eats and Klarna demonstrate not only market confidence in the company, but also reflect Marqeta's strong execution capabilities in supporting global expansions. And management's initiation of a $200 million share repurchase program signals its confidence in the company's valuation and prospects.
Investors should keep a close eye on Marqeta's efforts to diversify its revenue streams and manage the implications of significant contract renewals.
