Stock Story -
Leading edge card issuer Marqeta (NASDAQ: NASDAQ:MQ) reported Q2 CY2024 results topping analysts' expectations, with revenue down 45.8% year on year to $125.3 million. It made a GAAP profit of $0.23 per share, improving from its loss of $0.11 per share in the same quarter last year.
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Marqeta (MQ) Q2 CY2024 Highlights:
- Revenue: $125.3 million vs analyst estimates of $121.5 million (3.1% beat)
- EPS: $0.23 vs analyst estimates of $0.21 (8.9% beat)
- Gross Margin (GAAP): 63.3%, up from 36.6% in the same quarter last year
- Free Cash Flow of $14.24 million is up from -$765,000 in the previous quarter
- Market Capitalization: $2.53 billion
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.
Payments SoftwareConsumers 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 GrowthAs you can see below, Marqeta's 5.4% annualized revenue growth over the last three years has been weak, and its sales came in at $125.3 million this quarter.
This quarter, Marqeta's revenue was down 45.8% year on year, which might disappointment some shareholders.
Looking ahead, analysts covering the company were expecting sales to grow 22.1% over the next 12 months before the earnings results announcement.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Marqeta has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company's free cash flow margin averaged 15.1% over the last year, better than the broader software sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.
Marqeta's free cash flow clocked in at $14.24 million in Q2, equivalent to a 11.4% margin. This quarter's result was nice as its cash flow turned positive after being negative in the same quarter last year, but we wouldn't put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.
Key Takeaways from Marqeta's Q2 ResultsIt was good to see Marqeta beat analysts' revenue expectations this quarter. On the other hand, its gross margin declined. Zooming out, we think this was a mixed quarter. The stock remained flat at $4.92 immediately after reporting.
