The recent Q1 2024 earnings call for Marqeta, the modern card issuing platform, left analysts buzzing with a mix of cautious optimism and lingering questions. While the headlines focused on beating revenue and EBITDA expectations and the company's ambitious plans for the embedded finance market, a subtle shift beneath the surface might hold the key to unlocking truly explosive growth – the departure of founder and Executive Chairman, Jason Gardner.

At first glance, Gardner's move might seem like a cause for concern. After all, he's been the driving force behind Marqeta's rise from a small startup to a major player in the payments industry. He's the largest shareholder, intimately familiar with the company's intricacies, and has been a steady hand at the helm. Yet, diving deeper into the implications of his exit, a compelling narrative emerges, one that suggests his decision could actually be the catalyst for Marqeta to finally break free from its shackles and reach its full potential.

The elephant in the room for Marqeta has been the looming shadow of the Cash App renewal. This pivotal deal, while securing a major client, came at the cost of significant revenue presentation changes and compressed margins. The renewal's impact reverberated through the company's financial statements, obscuring the underlying growth story. Now, as Marqeta prepares to lap the Cash App renewal in Q2, its true performance trajectory will finally come into focus. And Gardner's exit coincides perfectly with this crucial inflection point.

Here's where the plot thickens. Gardner's departure triggers the forfeiture of his pre-IPO long-term performance award, a massive $190 million stock-based compensation package. This accounting windfall has a dramatic impact on Marqeta's bottom line, pushing 2024 net income towards breakeven, if not slightly positive. While this doesn't accelerate the company's path to sustained profitability, it significantly improves the optics and buys precious time for the growth story to take center stage.

Furthermore, Gardner's decision to voluntarily convert some of his Class B shares to Class A shares paves the way for a new $200 million share repurchase program. This move, combined with the stock-based compensation benefit, signals a strong commitment to shareholder value and could put a floor under the stock price, creating a more attractive environment for investors.

But beyond the immediate financial implications, Gardner's exit allows Marqeta to fully embrace a new era – the era of embedded finance. While he has undoubtedly been a visionary leader, his deep ties to the company's past, particularly its focus on fintech clients, might have inadvertently constrained its ability to fully exploit the vast potential of embedded finance.

The embedded finance market, projected to reach $7.2 trillion by 2030, presents a golden opportunity for Marqeta. Companies across industries are seeking to integrate financial services directly into their offerings, creating seamless, personalized experiences for their customers. Marqeta, with its comprehensive platform encompassing debit, credit, banking, and risk solutions, is ideally positioned to capitalize on this trend.

Gardner's departure creates a vacuum, a space for fresh leadership with a laser focus on the nuances of embedded finance. It allows Marqeta to shake off any legacy biases and fully commit to capturing this massive opportunity.

The evidence of this shift is already emerging. Marqeta's recent deals with ITS [1] and Affinipay [2] highlight its growing traction in the commercial credit space, a key segment within embedded finance. The company's accelerated bookings, up 50% in 2023, also suggest a strong pipeline of new customers eager to leverage Marqeta's capabilities.

The mystery, however, remains unsolved. Will Marqeta succeed in transforming itself from a fintech-focused card issuer to a dominant force in the embedded finance landscape? The numbers offer a tantalizing glimpse into the possibilities.

Hypothetical Financial Performance

Hypothesis: Assuming Marqeta maintains its current TPV growth rate of 30%, coupled with a conservative estimate of a 1% increase in gross profit take rate driven by value-added services and credit adoption, the company could generate over $400 million in gross profit by 2025.

Furthermore, if Marqeta successfully manages its expenses to grow at a rate 10 points below its gross profit growth, as Mike Milotich outlined, its adjusted EBITDA could reach $40 million by 2025, representing a margin of 10%. This scenario would translate into an explosive growth story, one that could finally silence the doubters and propel Marqeta to new heights.

Challenges and Opportunities

Of course, challenges remain. Competition in the embedded finance market is fierce, and Marqeta will need to continue to innovate and execute flawlessly to maintain its edge. Additionally, the broader macroeconomic environment could impact consumer and business spending, potentially impacting TPV growth.

But the potential rewards are too significant to ignore. Jason Gardner's exit, while surprising, could be the key to unlocking Marqeta's true potential. It allows the company to shed its past, embrace the future of embedded finance, and rewrite its own destiny. Investors would be wise to pay close attention. The Marqeta mystery is just beginning to unfold.

TPV Growth by Vertical (Q1 2024)

"Fun Fact: Marqeta processed over $1 billion in TPV in a single day during Q1 2024, marking a significant milestone for the company. [3]"