Cardlytics, Inc. Q3 FY2024 earnings call

• Data remains a superpower with 50% of U.S. cardholder transactions and ~$4.7T annual consumer spend; expanding network with new partners.
• CLO has evolved; focus on end consumer engagement, improving offer relevance and channels.
• Four key pillars of business:
  • Supply: Broadening relationships with existing and new financial institutions in US and internationally, with a large US financial institution launch expected by year-end.
  • Demand: Honing advertiser growth, with over a quarter of advertisers on Insights portal; scaling advertiser relationships and exploring new verticals.
  • Network performance: Addressing delivery challenges, shifting to engagement-based pricing (84% of new logos and 51% of all logos in US in Q3 on engagement-based pricing), and making progress on dynamic marketplace.
  • Bridge/Ripple: Progress with Ripple's 100 million active unique shopper profiles, valuable for CPG brands.
• Q3 results: Total billings $112M (-2% Y/Y), consumer incentives up 20% to $44.9M, revenue $67.1M (-13% Y/Y), adjusted contribution $36.4M (-11% Y/Y).

US: Revenue decreased 17% due to delivery challenges, but saw growth in total budgets, especially from new brands. UK: Continued strong double-digit revenue growth at 33% with fourth consecutive quarter of profitability, and consumer rewards reached an all-time high. Bridge: Revenue flat year-over-year, but Ripple made progress with 100 million active unique shopper profiles.

• Q4 billings expected between $102M and $108M, revenue between $62M and $67M, adjusted contribution between $33M and $36M, adjusted EBITDA between negative $5M and negative $1M.
• Delivery challenges continuing but improving, pipeline issues with advertiser caution in certain verticals, but UK remains a bright spot with expected double-digit billings growth.
• Expect majority of advertisers to transition to engagement-based pricing by end of 2025.

• Continued delivery disruptions affecting billings.
• Pipeline issues due to advertiser caution in restaurant and travel verticals.
• Churn of large accounts for reasons like reorganizations, marketing strategy shifts, or company performance.

Q: Talk about the key drivers of under-delivery and the plan to address it, as well as trends in billings per logo.

A: Key drivers of under-delivery include ranking under-delivering campaigns differently, better forecasting, etc. Plan is to test and automate these efforts. Billings per logo expected to grow as advertiser count increases and market conditions improve.

Q: Contrast Q3 and Q4 performance, and provide updates on CPE pricing.

A: Q3 delivery improved sequentially, but Q4 has a growth step down due to lapping large accounts from Q4 2023. CPE pricing progress continues, with many new advertisers opting for engagement-based pricing.

Q: Discuss the transition to engagement-based pricing model, including the percentage of customers using it.

A: Engagement-based pricing encompasses various models and is at 38% of total billings in Q3, up sequentially, with expectation to be majority by end of 2025.

Q: Talk about the CEO's top priorities and the rollout of the major US financial institution.

A: Priorities include supply, demand, network performance, and bridge. The major US financial institution rollout is a small initial launch, scaling over time with no material impact in Q4.