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Marqeta (NASDAQ:MQ) Exceeds Q2 Expectations But Gross Margin Drops


Adam Hejl /
2022/08/10 4:10 pm EDT
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Leading edge card issuer Marqeta (NASDAQ: MQ) reported Q2 FY2022 results that beat analyst expectations, with revenue up 52.6% year on year to $186.6 million. Marqeta made a GAAP loss of $44.6 million, improving on its loss of $68.5 million, in the same quarter last year.

Is now the time to buy Marqeta? Access our full analysis of the earnings results here, it's free.

Marqeta (MQ) Q2 FY2022 Highlights:

  • Revenue: $186.6 million vs analyst estimates of $180.1 million (3.62% beat)
  • EPS (non-GAAP): -$0.08 vs analyst estimates of -$0.11 (26.2% beat)
  • Free cash flow of $22.5 million, up from negative free cash flow of $47.3 million in previous quarter
  • Gross Margin (GAAP): 41.8%, up from 38.4% same quarter last year

“Marqeta’s platform continues to enable customers across many different verticals to build products on the cutting edge of payments, and serve as an accelerator for their growth. Our second quarter results are testament to that breadth and depth, as we again launched new products and bought on major new customers globally,” said Jason Gardner, Founder and CEO of Marqeta.

Founded by CEO Jason Gardner in 2009, Marqeta (NASDAQ: MQ) is an innovative card issuer that provides companies with the ability to issue and process virtual, physical, and tokenized credit and debit cards.

Consumers want the ability to make payments whenever and wherever they prefer – and to do so without having to worry about fraud or other security threats. However, building payments infrastructure from scratch is extremely resource-intensive for engineering teams. That drives demand for payments platforms that are easy to integrate into consumer applications and websites.

Sales Growth

As you can see below, Marqeta's revenue growth has been exceptional over the last year, growing from quarterly revenue of $122.2 million, to $186.6 million.

Marqeta Total Revenue

This was another standout quarter with the revenue up a splendid 52.6% year on year. On top of that, revenue increased $20.5 million quarter on quarter, a very strong improvement on the $10.6 million increase in Q1 2022, and a sign of acceleration of growth, which is very nice to see indeed.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 30.2% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Marqeta's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 41.8% in Q2.

Marqeta Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.41 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and it has dropped significantly from the previous quarter, which is probably the opposite of what shareholders would like it to do.

Key Takeaways from Marqeta's Q2 Results

With a market capitalization of $5.65 billion Marqeta is among smaller companies, but its more than $1.66 billion in cash and positive free cash flow over the last twelve months give us confidence that Marqeta has the resources it needs to pursue a high growth business strategy.

We were impressed by the exceptional revenue growth Marqeta delivered this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, it was less good to see the pretty significant deterioration in gross margin. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. But investors might have been expecting more and the company is down 2.08% on the results and currently trades at $10.81 per share.

Should you invest in Marqeta right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.