Cardlytics, Inc. Q2 FY2025 earnings call

Pillar 1: Increasing and diversifying supply - Focused on growing partnerships with financial institutions and merchants. Saw early progress with new bank partners, robust pipeline of prospective partners. Worked with a top 5 bank partner to increase user engagement, resulting in 92% increase in activations and 48% increase in redemptions. Launched Cardlytics Rewards platform to diversify publisher base beyond FIs, collecting data from pilot and refining platform. ### Pillar 2: Strengthening and growing advertiser demand - U.K. business had highest billings quarter in history with 29% revenue growth. Signed 20 new logos in U.K., saw strength in everyday spend and specialty retail in U.S. Reorganized sales organization, accelerating go-to-market efforts. ### Pillar 3: Maximizing the performance of our network - Launched new dashboards in Cardlytics Insights portal for advertisers to access customer insights. Migration to engagement-based pricing models implemented for 79% of advertisers, 96% of new business in Q2 ran on this model. ### Pillar 4: Accelerating growth in Bridg - Strong client interest in identity resolution, signed new partnership with a restaurant chain. Rippl saw over double revenue quarter-over-quarter, welcomed Hy-Vee's RedMedia, with 10% growth week-over-week on Trade Desk. Pilot for CPG offers showed positive impact on shopper behavior and basket size.

In Q2, total billings were $104 million, a 5.7% decrease. U.S. revenue excluding Bridg decreased 13% due to lower billings and pricing pressure. U.K. revenue saw 29% growth driven by higher billings and increased supply. Bridg revenue decreased 8% due to the loss of a major account. Adjusted contribution was $36.1 million, down 0.6% from prior year, but margin as a percentage of revenue expanded to 57.1% due to a more favorable partner mix. Adjusted EBITDA was positive $2.7 million, an increase of $5 million.

Q3 Outlook - Expected billings between $87 million and $95 million, revenue between $52.2 million and $58.2 million, adjusted contribution between $30.3 million and $34.3 million, and adjusted EBITDA between negative $2.3 million and positive $2.7 million. Billings guidance represents a negative 15% to negative 22% decrease year-over-year. ### Diversification Strategy - Importance of diversifying across banks and nonbanks, and continuing to diversify demand. U.K. expected to continue strong growth in Q3. ### Operational Cost - Operating expenses expected to be sustained at or below $33 million per quarter for remainder of year, excluding stock-based compensation.

Content Restriction - Largest FI partner restricted a large amount of content from running on their channels starting July 1, posing significant limitations for the business. Impact includes users receiving less content and value, concerns from advertisers about efficacy of their programs. ### Supply Limitations - The content restriction from the largest FI partner has led to a decrease in billings and potential challenges in shifting volume to other partners in the short term.

Q: Jacob Stephan asked about Q3 outlook and content restrictions, specifically how much of the billings decrease is from the content restrictions.

A: Alexis DeSieno said a large portion of the decrease is due to the supply change from the partner, which represents a large portion of billings, and they are still learning how much volume can be shifted. Amit Gupta added that bank and advertising partners have been leaning in.

Q: Ben asked about Cardlytics Rewards platform and AI.

A: Amit Gupta said the pilot for Cardlytics Rewards was positive, collecting data and optimizing, and AI is being considered in engineering for code dev and QA, and in analytics for identifying patterns, though reprioritizations may slow some initiatives.

Q: Cal Bartyzal asked about local offers and Rippl.

A: Amit Gupta said they've invested in geo-targeted offers for local offers, seeing traction in QSRs and restaurants, and with Rippl, the win with Hy-Vee is due to scale and quality of data, accelerating interest and adoption.

Q: Robert Coolbrith asked about MQUs, nature of restriction, and brand concerns.

A: Amit Gupta said broader bank partners represent over 50% of MQUs, the concern from brands is due to limitation of coming to one platform for CLO needs, but advertisers appreciate measurement efforts, engagement-based pricing, sales team reorganization, and Cardlytics continues to compete aggressively.