5 takeaways from Marqeta’s Q3 results: What you need to know

Here are Tearsheet’s five key points to take away from Marqeta’s November earnings release. 

1. Financials

Marqeta posted strong net revenue growth, up 56% year-on-year to $131.5 million, surpassing consensus estimates of $119.2 million from analysts tracked by FactSet.

One of the key indicators of the company’s growth is total processing volume (TPV), which represents the total dollar amount of payments processed through its platform, net of returns and chargebacks. This went up by 60% to $27.6 million in the quarter, and by almost 90% to $78 million year-to-date. 

The company attributed this increase to its digital banking and BNPL customers, as its top five clients, measured by TPV, grew by 45% year-on-year in Q3. Processing volumes from its other customers rose by 226% for the three months ended September 30, 2021 compared to the same period in 2020.

However, the company still operates in the red, posting a net loss of $45.7 million versus $12.3 million in Q3 2020. On a year-to-date basis, the loss nearly quadrupled to $127.1 million in 2021 compared to $33.9 million in the same period a year earlier. 

The higher loss figures mostly reflect a sharp increase in the company’s expenses, namely compensation and benefits as Marqeta pushes for expansion. The average number of full-time employees rose to 656 in the quarter from 446 a year before. 

2. The Square dynamic

Marqeta continues to generate significant net revenue from its largest customer, Square, which was responsible for 68% of net revenues in the third quarter of 2021. A year before, the same metric was 72%. 

Of Marqeta’s Q3 net revenue growth of $47 million year-on-year, $29 million came from Square, the company said. 

And for the nine months ended September 30, 2021, only $42 million of its yearly net revenue increase of $160 million was from other clients, as the Square partnership generated $118 million.

The fintech’s current term of agreement with Square for Square Card expires in December 2024, while the agreement for Cash App expires in March 2024, and each agreement automatically renews thereafter for successive one-year periods.

Marqeta expects the proportion of net revenues coming from Square to decrease over time.  Nevertheless, it reiterated that the loss or decline in net revenue from Square could adversely affect its business, results of operations, and financial condition. 

3.  New deals

Marqeta announced Bill.com, an invoicing platform for small and medium sized businesses, as one of its new clients. Using Marqeta’s API, the platform can offer virtual card payment capabilities to its financial institution partners and their customers. It also selected Marqeta to power its Figure Pay digital account which has built-in BNPL functionality.

One key aspect of the deal is that it allows Marqeta to tap into a large underserved SMB market where payments are being done through checks, therefore ripe for innovation. 

CEO Jason Garnder said on the company’s Q3 conference call, that according to Federal Reserve data from 2018, there were 6.8 billion checks written, totalling around $20 trillion in spend.

“Small and medium businesses represent the engine room of the global economy but have had little access to innovation to streamline their payment processes before companies like Bill.com came along.

“Bill.com's financial institution customers will now be able to pay bills and get paid faster using virtual cards issued through our Marqeta platform. And it represents major new efficiencies over paying with checks,” Gardner told analysts on the call. 

Marqeta also announced new crypto products and collaborations in recent months. It issued new card products for Coinbase, Bakkt, Fold and Shakepay, allowing customers to spend and earn rewards in a cryptocurrency. 

The fintech’s Just-in-Time funding technology, which allows for authorization decisions at the point of sale, plays “a key role enabling a new wave of innovative cryptocurrency card products,” Gardner said. 

“For Coinbase users swiping a Marqeta-powered card at the point of sale and having a transaction funded in fiat currency in real time, based on their cryptocurrency balance, is an exciting application of our technology,” he added. 

4. Developing existing partnerships

Marqeta posted some relationship updates in the third quarter and reiterated that partnership expansion is one of the company’s key pillars towards success. 

Founder and CEO Jason Gardner confirmed on the company’s Q3 conference call that Marqeta is powering Affirm’s Debit+ card, but wasn’t able to provide any more details until the official announcement. 

“Affirm has been a great partner of Marqeta for many years, and we’re continuing that partnership with the Debit+ card,” Gardner said. 

SPONSORED

The fintech also launched a new product for Uber, which has been a Marqeta customer since 2019. 

“In partnership with Branch, we launched a new card product to power a unique driver card for Uber Freight carriers, which lets them get paid in two hours instead of 30 days,” Gardner noted. 

5. Expanding into credit

Marqeta has largely focused on virtual cards and debit cards, but the company is planning to get more involved in the processing of building credit cards. 

“We know debit extremely well, and we are beginning to scratch the surface within credit.” 

“With 52% of card spend happening on credit in the US, this is a massive market opportunity that is underserved by current technology, which has done little to modernize the credit card experience. Therefore, our credit card issuing platform is a critical strategic priority for Marqeta,” Gardner told analysts.

After launching its first credit program earlier this year, Marqeta continued to onboard new credit card programs, with M1 Finance going live in the third quarter.

“We are beginning to spread our wings even more in the credit space. You will hear more from us, certainly in the coming quarters and the coming years in regards to how to really rethink that,” Gardner noted.