Marqeta, Inc. (MQ) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary presents a generally positive outlook, with strong international growth, especially in Europe, and a promising pipeline for credit products. Adjusted EBITDA margin guidance has improved, and the company anticipates GAAP breakeven by 2026. Although there are slight revenue guidance reductions, the overall financial health and strategic initiatives, such as the TransactPay acquisition and BNPL capabilities, are favorable. The market cap suggests moderate sensitivity to these developments, likely resulting in a positive stock price movement.

Key Financial Performance

Total Processing Volume (TPV) $91 billion in Q2 2025, a 29% increase compared to Q2 2024. Growth driven by diverse use cases and customer expansion.

Net Revenue $150 million in Q2 2025, a 20% year-over-year increase. Growth attributed to higher TPV and favorable business mix.

Gross Profit $104 million in Q2 2025, a 31% increase year-over-year. Includes an 8.6% growth benefit from revised accounting policy for card network incentives.

Gross Margin 69% in Q2 2025, supported by strong TPV growth and favorable business mix.

Adjusted EBITDA $29 million in Q2 2025, translating to a 19% margin. Growth driven by gross profit increase and operating expense discipline.

Non-Block TPV Growth Nearly 3x faster than Block TPV growth, driven by diverse use cases like financial services, lending, and expense management.

Value-Added Services Gross Profit More than doubled year-over-year in Q2 2025, driven by real-time decisioning and other services.

European TPV Growth More than doubled year-over-year, driven by diverse use cases and customer expansion.

Adjusted Operating Expenses $76 million in Q2 2025, a 7% year-over-year decrease. Reduction due to investment timing delays, nonrecurring benefits, and efficiency initiatives.

GAAP Net Loss $0.6 million in Q2 2025, including $8 million of interest income.

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Operating Highlights

Visa Flexible Credentials: Marqeta collaborated with partners to launch Visa Flexible Credentials in the U.S., becoming the first issuer processor to deliver this functionality. This enables flexible payment experiences for consumers.

KlarnaOne Card: Supported Klarna in launching the KlarnaOne Card, making them the second BNPL provider to offer flexible credential-enabled cards.

Real-time decisioning: Introduced real-time decisioning capabilities, allowing customers to manage transaction fraud with AI and machine learning. Over 40 customers, contributing 20% of non-Block TPV, are using this feature.

European market expansion: Klarna expanded from 3 to over 10 programs across multiple countries in Europe. A local customer plans to expand into 9 new markets, bringing their total to 26. A U.S.-based expense management customer is also expanding to Europe.

TransactPay acquisition: Completed the acquisition of TransactPay, enabling deeper engagement in Europe and standardizing offerings across geographies. This acquisition is expected to support larger customers and drive value through program management services.

TPV growth: Total processing volume (TPV) reached $91 billion in Q2 2025, a 29% increase year-over-year. Non-Block TPV grew nearly 3x faster than Block TPV.

Adjusted EBITDA: Achieved an all-time high adjusted EBITDA of $29 million in Q2, translating to a 19% margin. This was driven by gross profit growth and operating expense discipline.

Value-added services: Gross profit from value-added services more than doubled year-over-year, driven by offerings like real-time decisioning and AI-enhanced fraud detection.

Focus on BNPL innovation: Marqeta is building a new capability to embed BNPL options within apps, allowing consumers to pay with existing debit cards. A limited release is planned before the 2025 holiday season, with a broader launch in 2026.

Share repurchase program: Repurchased 35.2 million shares in Q2 at an average price of $4.62, reducing outstanding shares by over 12% year-to-date.

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Risk or Challenges

Regulatory Approvals: The acquisition of TransactPay required regulatory approvals, which could pose challenges in terms of compliance and delays in integration.

Macroeconomic Uncertainty: The company acknowledged ongoing macroeconomic uncertainty, which could impact TPV growth and overall financial performance.

Customer Contract Renewals: Delays in executing key customer contract renewals could impact revenue growth in Q4 and beyond.

Network Incentive Accounting Policy: The revised accounting policy for network incentives will shift from a tailwind in Q2 to a headwind in Q3 and Q4, potentially dragging down gross profit growth.

Competitive Pressures in BNPL: While Marqeta has been a leader in BNPL, competitive pressures from other providers catching up on instant issuance and other innovations could impact market share.

Dependence on Block: Block remains a significant contributor to revenue, and any slowdown in Block's growth could adversely affect Marqeta's financials.

Geographic Expansion Challenges: Expanding into new markets, particularly in Europe, involves complexities such as adapting to local regulations and operational hurdles.

Fraud and Transaction Risk: The company is enhancing real-time decisioning with AI and machine learning to combat fraud, but emerging threats could still pose risks.

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Guidance & Outlook

Revenue Growth: Full year 2025 revenue growth is expected to be between 17% and 18%, with Q3 and Q4 net revenue growth projected between 15% and 17%.

Gross Profit Growth: Full year 2025 gross profit growth is expected to be between 18% and 19%. Q3 gross profit growth is projected to be 15% to 17%, with Q4 growth expected to be 3 points lower than Q3.

Adjusted EBITDA Margin: Full year 2025 adjusted EBITDA margin is expected to be between 14% and 15%, equating to over $85 million in adjusted EBITDA for the year. Q3 adjusted EBITDA margin is projected to be 12% to 13%, with Q4 expected to be 1 point higher than Q3.

TransactPay Acquisition Impact: The acquisition of TransactPay is expected to contribute 1.5 points to revenue and gross profit growth in Q3 and 2 points in Q4.

Network Incentive Accounting Policy Impact: The revised accounting policy for network incentives will shift from a tailwind in Q2 to a headwind in Q3 and Q4, with a 2-point drag on gross profit growth in Q3 and a 4-point drag in Q4.

Customer Contract Renewals: Two key customer contract renewals are anticipated later in the year, which will impact Q4 growth.

Platform Capabilities and Innovation Investments: Investments in platform capabilities and innovation will continue, with Q3 and Q4 adjusted operating expenses expected to grow in the mid-single digits.

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Shareholder Return Plan

Share Repurchase Activity: Our share repurchase activity remained ongoing, and we continue to believe the current valuation does not fairly represent the company's value or the market opportunity ahead of us. In Q2, we repurchased 35.2 million shares at an average price of $4.62. When combined with our Q1 repurchase activity, we have repurchased 61.5 million shares at an average price of $4.45 so far this year, which is more than a 12% reduction in the outstanding shares as of the 2024 year-end. As of June 30, we had $107 million remaining on our buyback authorization.

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Key Q&A

Q:How is the visibility for the business given the update on renewal and TPV trends?

A:Michael Milotich stated that the visibility for the business is solid despite some macro uncertainties. The TPV growth accelerated by 3 points in the quarter, driven by strong performance in lending and Buy Now, Pay Later (BNPL). All top 10 customers in the BNPL use case saw accelerated TPV growth. The company has good pipeline conversations and programs launching later this year.

Q:Is value-added services a new growth vector for the company?

A:Michael Milotich confirmed that value-added services are a high priority, though still small in scale. The company is focusing on building services around its core processing platform, such as risk capabilities, tokenization, and enhanced rewards solutions. These services are expected to become a bigger growth driver as the company moves into embedded finance.

Q:What are the core drivers of the increase in adjusted EBITDA margin guidance?

A:Michael Milotich explained that the increase was driven by strong gross profit growth from higher TPV and favorable mix, as well as lower expenses. About half of the expense reduction was due to timing and one-time factors, such as delayed hiring and marketing investments. The other half was due to improved efficiency, including the use of AI and better processes in engineering and technology provider utilization.

Q:Is the regulatory environment contributing to the company's upside?

A:Michael Milotich stated that the regulatory environment is more business as usual and not a source of upside. While the environment has improved slightly, banks are still slow to adapt. The company is making progress in partnering better with banks, but the impact is small.

Q:What are the mechanics and interchange implications of BNPL via a card?

A:Michael Milotich explained that the company supports both pre-purchase and post-purchase BNPL. Pre-purchase involves generating a card for a specific purchase, while newer flexible credentials combine debit and BNPL functionality. Interchange depends on the transaction type, with some qualifying for credit interchange.

Q:What is the potential for international growth, particularly in Europe, with TransactPay?

A:Michael Milotich highlighted that Europe is the bulk of the company's international business, growing over 100%. TransactPay adds program management capabilities, enabling the company to capture more value, serve larger players, and support customers moving between North America and Europe. Investments are focused on platform capabilities like banking, money movement, and credit enhancements.

Q:Has the view on GAAP profitability by 2026 changed?

A:Michael Milotich confirmed that the company now expects to be GAAP breakeven for the full year 2026, rather than just exiting the year at breakeven. This is due to better expense management and efficiency, despite no significant changes in gross profit assumptions.

Q:Is crypto a driver of growth, and what is the company's stance on stablecoins?

A:Michael Milotich noted that crypto has been volatile but is performing better. The company's solution allows transactions with fiat currency funded by crypto, which could also apply to stablecoins. However, stablecoins are not expected to significantly impact the business in the near term.

Q:What is the progress in selling to traditional banks?

A:Michael Milotich stated that selling to traditional banks is still several years away. While there is ongoing dialogue, banks need modernization before broader collaboration is possible. The company may start with small, specific use cases.

Q:Are there any noticeable shifts in TPV by discretionary spend categories?

A:Michael Milotich reported no noticeable shifts in TPV by discretionary spend categories. The outperformance was broad-based, with lending and BNPL standing out. BNPL is expanding into less discretionary areas as consumers adopt flexible credential cards.

Q:What are the new BNPL capabilities being tested?

A:Michael Milotich described a vision for BNPL as a feature on any debit card, offering consumers multiple provider offers for transactions. This would differentiate issuing partners' products and provide distribution for BNPL partners. Limited release is expected by the end of the year, with broader rollout in 2026.

Q:What is the pipeline for credit and progress with American Express?

A:Michael Milotich stated that the company is close to certification with American Express and has completed 97% of the Perpay migration. Another co-brand with an airline is expected to launch later this year. The pipeline is strong, but the company is cautious about rushing into credit.

Q:What is the impact of delayed investments on expenses and profitability?

A:Michael Milotich explained that about half of the lower expenses were due to timing, such as delayed hiring and marketing. The other half was due to better efficiency and optimization, including improved org design and technology cost management. This has improved the expense run rate and profitability outlook.

Q:What is the progress in embedded finance?

A:Michael Milotich noted that embedded finance is moving slower than expected due to the complexity of working with large, established companies. The company is investing in a full-stack solution, including banking and money movement products, to better serve this market. A large embedded finance customer is expected to launch later this year.

Q:What is the impact of JPMorgan charging aggregators for data access?

A:Michael Milotich stated that the direct impact is minimal, but it could create friction for customers relying on real-time account data for verification, risk decisioning, and underwriting. If other banks follow, it could change the cost structure for these capabilities.

Q:Review of Unclear Management Responses

A:Management appeared to avoid giving a direct answer or lacked clarity on the following topics: 1. The specific timeline and scale of embedded finance opportunities, as the progress is slower than expected and details on customer launches were vague. 2. The exact impact of JPMorgan's decision to charge aggregators for data access, as the response was speculative and lacked concrete implications for the business.

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