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Marqeta(MQ) - 2024 Q4 - Annual Report
MQMarqeta(MQ)2025-02-26 22:18
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Financial Performance - Total net revenue for the year ended December 31, 2024, was 507.0million,adecreaseof25507.0 million, a decrease of 25% from 676.2 million in 2023 and a decrease of 10% from 748.2millionin2022[117].−TotalPaymentVolume(TPV)fortheyearendedDecember31,2024,was748.2 million in 2022[117]. - Total Payment Volume (TPV) for the year ended December 31, 2024, was 291.1 billion, an increase of 31% from 222.3billionin2023andanincreaseof34222.3 billion in 2023 and an increase of 34% from 166.3 billion in 2022[118]. - The company has experienced significant growth in the number of customers and card programs managed, but future net revenue growth depends on attracting new customers and retaining existing ones[121]. - The company relies heavily on a small number of significant customers, including Block, and any loss or decline in revenue from these relationships could adversely affect financial results[115]. - The company has a history of net losses and may not achieve or sustain profitability in the future[115]. - Block accounted for 47%, 68%, and 71% of the company's net revenue for the years ended December 31, 2024, 2023, and 2022, respectively[126]. - The company reported a net income of 27.3millionfortheyearendedDecember31,2024,primarilyduetotheforfeitureoftheExecutiveChairmanLong−TermIncentiveAward,whilenetlosseswere27.3 million for the year ended December 31, 2024, primarily due to the forfeiture of the Executive Chairman Long-Term Incentive Award, while net losses were 223.0 million and 184.8millionfor2023and2022,respectively[129].−AsofDecember31,2024,theaccumulateddeficitwasapproximately184.8 million for 2023 and 2022, respectively[129]. - As of December 31, 2024, the accumulated deficit was approximately 797.9 million, down from 825.2millionasofDecember31,2023[129].−Thecompanyexpectstocontinueincurringnetlossesfortheforeseeablefutureduetoincreasingoperatingexpensesrelatedtopersonnelandplatformenhancements[129].PlatformandProductDevelopment−Totalprocessingvolume(TPV)ontheMarqetaPlatformreached825.2 million as of December 31, 2023[129]. - The company expects to continue incurring net losses for the foreseeable future due to increasing operating expenses related to personnel and platform enhancements[129]. Platform and Product Development - Total processing volume (TPV) on the Marqeta Platform reached 291.1 billion in 2024, reflecting a year-over-year growth of 31% from 222.3billionin2023[18].−Theplatformsupportsacombinedofferingofdebit,prepaid,andcreditcards,allowingcustomerstocreatemultiplecardprogramsonasingleplatform[25].−MarqetaintroducedtheUXToolkitin2024,enablingcustomerstocreatebrandedfront−endexperienceswithpre−builtUIcomponents,optimizingdevelopmentresources[40].−ThecompanylaunchedPortfolioMigrationin2024,simplifyingtheupgradeofexistingcardprogramsontoitsplatformwithanautomatedmigrationtool[44].−MarqetaFlex,announcedin2024andexpectedtoreleasein2025,aimstotransformbuynow,paylater(BNPL)optionswithinpaymentapps,enhancingconsumeraccesstopersonalizedBNPLoptions[45].−Marqeta′splatformenablesdynamicspendcontrolsandJust−in−TimeFunding(JITFunding),enhancingtransactionprocessingcontrolforcustomers[32].−Marqeta′sRiskControlproductmitigatesriskandcomplianceconcernswhileprovidingreal−timedecisioningcapabilitiestocustomers[36].−ThecompanyisincorporatingAIsolutionsintoitsplatform,whichmayincreasecybersecurityrisks[148].−Thecompanyannouncednewtechnologiesinfiscal2024,includingportfoliomigration,UXToolkit,andMarqetaFlex,withnetrevenuegrowthdependentonincreasingcustomeradoption[157].−ThecompanyacquiredPowerFinanceinQ12023andpubliclylauncheditscreditcardissuingcapabilitiesinOctober2023,withrevenuegrowthreliantoncustomerusageofthesecapabilities[159].CustomerandMarketDynamics−Thecompanyservescustomersacrossvariousindustries,includingfinancialservices,on−demandservices,ande−commerceenablement,withafocusonembeddedfinanceasagrowthdriver[52].−Thecompanycompetesinalargeandevolvingmarket,focusingonfactorssuchaspricing,programtypes,andindustryexpertisetodifferentiatefromcompetitors[74].−Thecompanyacknowledgestheneedforhigh−qualitycustomersupporttoretainexistingcustomersandattractnewones,asfailureinthisareacouldharmitsreputation[155].−Thecompanymayexperiencehighattritionandturnoverrates,whichcouldadverselyaffectitsbusinessandstrategicobjectives[186].RegulatoryandComplianceRisks−Thecompanyissubjecttovariouslawsandregulations,includingthoserelatedtoconsumerprotection,privacy,anddatasecurity,whichmayincreasecompliancecosts[85][87].−Thecompanyissubjecttovariousregulationsandcompliancerequirements,whichcouldresultinadditionalcostsandimpactbusinessoperations[115].−ThecompanyhasimplementedanAnti−MoneyLaundering(AML)programtocomplywithregulationsandmanagerisksassociatedwithillicitactivities[96].−TheRetailPaymentActivitiesAct(RPAA)willrequirepaymentserviceproviders,includingasubsidiaryofthecompany,tocomplywithnewregulationsbySeptember8,2025[212].−Regulatoryscrutinyoverbankssponsoringfinancialtechnologyprogramsincreasedinfiscal2024,leadingtofewerprogramlaunchesthanprojected,adverselyaffectingoperationalresults[213].−TheFederalBankingAgencieshaveissuedenforcementactionsregardingpartnershipsbetweenbanksandfinancialtechnologycompanies,whichmayaffectthecompany′soperations[215].−Newlawsorregulationscouldleadtosignificantcompliancecostsandmanagementattention,potentiallyalteringrelationshipswithIssuingBanks[216].−Theregulationofcryptocurrencyisrapidlyevolving,whichmayimpactthenetrevenueassociatedwithcryptocurrencybusinesscustomers[217].StrategicRelationshipsandAgreements−Marqeta′scontractswithIssuingBanksentitlethecompanyto100222.3 billion in 2023[18]. - The platform supports a combined offering of debit, prepaid, and credit cards, allowing customers to create multiple card programs on a single platform[25]. - Marqeta introduced the UX Toolkit in 2024, enabling customers to create branded front-end experiences with pre-built UI components, optimizing development resources[40]. - The company launched Portfolio Migration in 2024, simplifying the upgrade of existing card programs onto its platform with an automated migration tool[44]. - Marqeta Flex, announced in 2024 and expected to release in 2025, aims to transform buy now, pay later (BNPL) options within payment apps, enhancing consumer access to personalized BNPL options[45]. - Marqeta's platform enables dynamic spend controls and Just-in-Time Funding (JIT Funding), enhancing transaction processing control for customers[32]. - Marqeta's RiskControl product mitigates risk and compliance concerns while providing real-time decisioning capabilities to customers[36]. - The company is incorporating AI solutions into its platform, which may increase cybersecurity risks[148]. - The company announced new technologies in fiscal 2024, including portfolio migration, UX Toolkit, and Marqeta Flex, with net revenue growth dependent on increasing customer adoption[157]. - The company acquired Power Finance in Q1 2023 and publicly launched its credit card issuing capabilities in October 2023, with revenue growth reliant on customer usage of these capabilities[159]. Customer and Market Dynamics - The company serves customers across various industries, including financial services, on-demand services, and e-commerce enablement, with a focus on embedded finance as a growth driver[52]. - The company competes in a large and evolving market, focusing on factors such as pricing, program types, and industry expertise to differentiate from competitors[74]. - The company acknowledges the need for high-quality customer support to retain existing customers and attract new ones, as failure in this area could harm its reputation[155]. - The company may experience high attrition and turnover rates, which could adversely affect its business and strategic objectives[186]. Regulatory and Compliance Risks - The company is subject to various laws and regulations, including those related to consumer protection, privacy, and data security, which may increase compliance costs[85][87]. - The company is subject to various regulations and compliance requirements, which could result in additional costs and impact business operations[115]. - The company has implemented an Anti-Money Laundering (AML) program to comply with regulations and manage risks associated with illicit activities[96]. - The Retail Payment Activities Act (RPAA) will require payment service providers, including a subsidiary of the company, to comply with new regulations by September 8, 2025[212]. - Regulatory scrutiny over banks sponsoring financial technology programs increased in fiscal 2024, leading to fewer program launches than projected, adversely affecting operational results[213]. - The Federal Banking Agencies have issued enforcement actions regarding partnerships between banks and financial technology companies, which may affect the company's operations[215]. - New laws or regulations could lead to significant compliance costs and management attention, potentially altering relationships with Issuing Banks[216]. - The regulation of cryptocurrency is rapidly evolving, which may impact the net revenue associated with cryptocurrency business customers[217]. Strategic Relationships and Agreements - Marqeta's contracts with Issuing Banks entitle the company to 100% of the Interchange Fees generated from customer card programs, which are shared with customers through Revenue Share payments[65]. - The fees paid to Issuing Banks are typically structured based on volume tiers, with fees as a percentage of processing volume declining as processing volumes grow[63]. - Marqeta has strategic agreements with major Card Networks, including Mastercard and Visa, which provide tiered incentives based on processing volumes routed through their networks[70][71]. - The current term of the strategic relationship agreement with Mastercard expires in 2028, with potential early termination if certain processing volume milestones are achieved[70]. - As of February 2023, the card partner agreement with Visa has been extended for an additional five years[71]. - The current term of the contract with PULSE Network expires in 2028 and automatically renews annually unless either party provides notice of intent not to renew[72]. - The company relies on relationships with Issuing Banks and Card Networks, with potential risks if these relationships are not maintained[136]. Operational Challenges - The company has experienced performance issues and system failures that could adversely affect business operations and financial condition[140]. - The company relies on third-party vendors for certain services, and any disruptions could significantly impact its platform performance[197]. - The company may incur losses from payment transaction settlements due to errors in processing, chargebacks, or insufficient customer pre-funding[174]. - The company is expanding internationally, with offices in the U.S., Poland, and the U.K., but faces increased business, economic, and regulatory risks in new markets[171]. - The company may experience difficulties in hiring and retaining qualified personnel, which could impact its operational efficiency and future growth[181]. - The company anticipates potential impacts on foreign national employees' ability to travel and obtain visas, which could affect workforce retention[183]. - The company has 1.1 billion in cash and highly liquid short-term investments on its balance sheet, but may seek additional funds for product development and operational expansion[187]. - The company may require additional capital to support business growth, and disruptions in credit markets could affect funding availability[188]. - The company faces risks related to regulatory compliance, which could result in additional costs and operational challenges[207]. - The company has indemnification provisions in various agreements that could expose it to substantial liability[201]. - The company may not successfully integrate acquired businesses or technologies, which could dilute stockholder value[192]. - The company’s liability insurance may not cover all potential claims, leading to unanticipated costs[196].