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Marqeta (NASDAQ:MQ) Q1: Beats On Revenue, Stock Soars


Kayode Omotosho /
2022/05/11 4:15 pm EDT
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Leading edge card issuer Marqeta (NASDAQ: MQ) announced better-than-expected results in the Q1 FY2022 quarter, with revenue up 53.8% year on year to $166.1 million. Marqeta made a GAAP loss of $60.5 million, down on its loss of $12.8 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) Q1 FY2022 Highlights:

  • Revenue: $166.1 million vs analyst estimates of $161.2 million (3% beat)
  • EPS (GAAP): -$0.11
  • Free cash flow was negative $47.3 million, down from positive free cash flow of $53.5 million in previous quarter
  • Gross Margin (GAAP): 44.9%, down from 46.1% same quarter last year

“Our results for the first quarter of 2022 put the fundamentals of Marqeta’s modern card issuing platform on strong display, as we powered our customers to new milestones of scale and enabled their global expansion, while launching new products and partners that further enrich the value we provide them,” 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 incredible over the last year, growing from quarterly revenue of $107.9 million, to $166.1 million.

Marqeta Total Revenue

This was another standout quarter with the revenue up a splendid 53.8% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $10.6 million in Q1, compared to $23.9 million in Q4 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 31.8% 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 44.9% in Q1.

Marqeta Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.44 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 Q1 Results

With a market capitalization of $3.82 billion Marqeta is among smaller companies, but its more than $1.19 billion in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

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. The company is up 5.42% on the results and currently trades at $7 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.