Marqeta CFO eyes fintech ‘winners’ after mixed results

After a change in revenue recognition practices at Marqeta that led to headline metrics “looking a little weird,” the card-issuing platform is “pleased that our P&L is back to normal… and just continuing to execute on targets to drive expected growth,” CFO Mike Milotich told CFO Dive.

The Oakland, California-based card company, which provides debit, prepaid and loyalty cards to fintechs, neobanks and mobile banking providers, released its second-quarter results in early August — where it reported a 46% year-over-year drop in net revenue to $125 million. Its net income also fell 6% year-over-year for the quarter ended June 30 to $79 million, according to its earnings results. It also reported net income of $119 million.

But those numbers cloud the card issuer’s successful quarter, Milotich said, because they are largely due to a change in revenue recognition practices related to its partnership with Cash App, a peer-to-peer payments app operated by Block and by far Marqeta’s largest customer. Block accounted for 47% of the platform’s revenue in the second quarter, with much of that coming from Cash App, Milotich said.

“Even though our revenue is down 46% year over year, the impact of this change in revenue presentation is 60 percentage points,” Milotich said of Cash App.

Maintaining growth

The final quarter will be the last fiscal period in which Block’s revenue recognition change will impact the company’s results in this way, Milotich said.

The platform renewed its partnership with Cash App last year for a five-year term, a renewal that included a change in who appoints decision-makers for some elements of the program, Milotich explained. “It wasn’t a big change in terms of the day-to-day management of the program, but by committing to it in the agreement, it changed the way we recognize revenue,” he said.

A longtime payments industry veteran, Milotich joined the company as CFO in 2022 after a decade at card provider Visa, where he held a number of positions, including senior vice president, head of corporate finance and investor relations, according to his LinkedIn profile. His previous payments industry experience also includes stints at companies like PayPal and American Express.

The CFO said that, taking into account the impact of the Cash App renewal, Marqeta saw strong growth.

The company’s total data processing volume — the “lifeblood” of any payments company, Milotich noted — grew 32% to $71 billion year over year in the most recent quarter ended June 30.

“Even going back to the beginning of last year, we’ve been growing steadily in the low to mid-30s, even as our base has gotten much, much larger,” he said. “So we’ve been able to maintain that growth even as the comparisons have gotten more difficult.”

Striving for Fintech “Winners”

Marqeta is committed to maintaining stable growth at a time when the fintech and neobanking market in which it operates has changed significantly since its early days.

Throughout its development, fintech has demonstrated the “art of what is possible” in the context of the potential offering of financial services by non-bank entities, he added.

But now there are more players “who already have a platform business, for example, and have tens of millions of users,” he said. “They just want to introduce some form of card offering to that user base.”

For Marqeta, “one of the benefits or one of the outcomes of … the upheaval in fintech over the last two years … is that winners have been crowned,” Milotich said. That means many of the leaders in the space are “becoming big business,” which means growing opportunities for Marqeta with both existing and new customers, he said.

The platform is focused on growth in several key areas, including financial services, buy now, pay later and expense management, Milotich said. Its recent partnerships include a five-year deal with neobank Varo Bank to serve as its U.S. processor, according to a press release. Meanwhile, in July, the company announced a deal with Swiss4 to provide digital payment options.