Cardlytics, Inc.

Thank you for standing by, and welcome to the Cardlytics Q3 2021 Financial Resource Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question at that time, please press star then 1 when you touch the phone telephone. As a reminder, today's conference call is being recorded. I would now like to welcome to the conference room to your host, Mr. Kirk Summers, Chief Legal and Privacy Officer. So you may begin.

Good evening and welcome to Carblytics' third quarter 2021 financial results call. Before we begin, let me remind everyone that today's discussion will contain forward-looking statements based on our current assumptions, expectations, and beliefs, including expectations about future financial performance or results, our financial guidance and cash position for the fourth quarter of 2021, our ability to achieve key initiatives to drive long-term growth, growth in MAUs or monthly active users, the migration of clients to our ads manager, launches of our new ad server by bank partners and the capabilities and timing thereof, the renewal of the Bank of America contract and contracts with other financial institutions and the timing thereof, the increase in ARPU or average revenue per user, the impact of COVID-19 on our business and the economy as a whole, including the uneven recovery and volatility of the economy, the impact of iOS privacy changes, the growth in agency sales, the impact of product level offers, and the anticipated benefits, expectations, and goals related to the integration of our acquisitions of DOSH and Bridge. For a discussion of the specific risk factors that could cause our actual results to differ materially from today's discussion, please refer to the risk factors section of the company's 10Q for the quarter ended September 30th, 2021, and in subsequent periodic reports that we file with the Securities and Exchange Commission. Also during the call, we will discuss non-GAAP measures of our performance. GAAP financial reconciliations and supplemental financial information are provided in the press release issued today in the 8K that has been filed with the SEC. Today's call is available via webcast, and a replay will be available for one week. You can find all the information I've just described on the investor relations section of Cardlytics' website. Please note that a supplemental presentation to our third quarter results has also been posted to our investor relations website. Joining us on the call today is Cardlytics' leadership team, including CEO and co-founder Lynn Lobey and CFO Andy Christensen. Following their prepared remarks, we'll open the call to your questions. With that, let me turn the call over to Lynn. Lynn?

Good evening, and thank you for joining our Q3 2021 earnings call. We had a solid quarter and delivered results above our guidance. During Q3, we saw increasing momentum from our investments in sales, and marketers are better managing the ongoing labor and supply disruptions that impacted our results in Q2. Here are the numbers. Cardlytics platform billings were $95.5 million, up 54% year-over-year. Cardlytics platform revenue, which is equal to billings net of consumer incentives, was $62.1 million, an increase of 35% from Q3 2020. And Cardlytic's platform-adjusted contribution was $28.9 million, up 46% year-over-year. Our Q3 results reflect sequential billing growth in all of our industry verticals. The core business continues to gain traction with our clients, and we achieved wins in all of our major verticals, including six new logos within travel and entertainment. We are encouraged by the pace of our billings growth compared to last quarter and expect the momentum in our sales organization will continue. but I want to caution that the now well-documented labor and supply chain disruptions that we noted last quarter continue to impact our clients. It's difficult to estimate the impact this may have on their appetite to drive consumer demand until these conditions improve. On a positive note, I want to remind investors that Apple's iOS privacy changes do not affect our platform, and we believe it will be an additional tailwind moving forward as advertisers look for new ways to engage their customers. Moving on from results, I want to provide an update on our key initiatives. As we've discussed over the past several quarters, we're transforming our entire platform to have features and functionality that are similar to other digital platforms, but still within the brand-safe and responsive bank channels. This is a company-wide initiative that has involved nearly every single employee, and I'm proud of the progress the team continues to make to enable us to open our platform to agencies and SMBs and enable new capabilities such as product-level offers, imagery, dynamic pricing, and self-service. In Q3, we started migrating our campaigns to this new platform, which we refer to as our ads manager. We're excited to report that as of today, 99% of our current campaigns in the U.S. were built on the new platform. We are pleased with the migration, and our current efforts are focused on standardizing processes and optimizing campaign performance. As we've discussed before, agencies will be the first group of clients to leverage self-service, and our agency sales team we built earlier this year continues to gain traction. For example, our largest agency partner has spent over $8 million on behalf of six clients in 2021 and is planning to pilot campaigns with several other new clients. We also signed an MSA with a top five agency group, which will allow us to access performance marketing budgets across all of their operating entities. And as promised, we are reporting agency as a percent of advertiser spend starting this quarter. I'm pleased to say that our agency accounts grew over 150% year over year and now represent nearly 10% of advertiser spending during Q3. Concurrent with launching our new ad manager, we're deploying our new ad server. This is the technology we deploy for our banks that enables the transformation of the user experience. It will allow us to deliver richer and more diverse content. The new ad server will enable new offer constructs at scale, such as product level offers, offers that can only be redeemed at a specific time of day, offers that are local and or store-specific, and other constructs that give advertisers much more choice and features versus our current experience. To provide an example of the benefits, U.S. Bank, the first adopter of our ad server, now has rich imagery live on 20% of its campaigns, and soon we will be piloting product-level offers to U.S. Bank consumers. We're working very closely with our major banks to launch the new ad server and have received significant positive interest thus far. While we expect the full adoption process to be a two-year journey, we aim to have greater than 50% of our MAUs connected to the new ad server by the end of 2022. However, this goal is subject to change given we're dependent on our FI partners, but we will keep you updated on our progress. Once we gain sufficient scale of MAUs live on the ad server, we will be in market selling new products and new offer types. We're excited to expand these offerings as more FIs adopt the new ad server. Finally, we're using the new ad server as a catalyst to update FI contracts and working protocols. We are encouraging our banks to let us do more for them so we can all go faster together. This is an extremely positive development in all of our bank relationships. However, the introduction of the ad server and other new offerings has increased the complexity and time it takes to renew contracts. As a result, we believe the Bank of America contract may not be renewed until early next year. but both teams are still working very hard to get it done before the end of the year. Regardless, we fully expect to reach an agreement with B of A and believe this new contract will be highly beneficial to both parties. We're also focusing on other strategic initiatives, including our recent acquisitions. The DOSH integration continues to proceed as planned. We are leveraging DOSH's technology to speed up our development efforts, extend our network to large fintech platforms, and allow our banks to test and learn new features before they adopt them. We are on track to achieve our planned cost synergies next year, and therefore this will be the last time we discuss DOSH as a separate entity. We will continue to speak about Bridge as a separate entity. They, too, had a solid quarter, and our integration continues as planned. In Q2, we began combining back office functions, and during Q3, we started to invest in Bridge's sales team. We expect Bridge to exceed the first-year ARR that we initially forecasted in our acquisition thesis. This is partially driven by recent wins at a large home improvement retailer and several well-known restaurant brands. Bridge has also entered a new industry vertical, signing their first cinema clients. Bridge's platform allows studios to analyze and market to previously unknown moviegoers, giving studios access to data similar to that of the largest streaming platforms. I also want to highlight that we had a significant restaurant client renew their relationship with Bridge and Cardlytics due to the value of our shared insights and targeting, This still represents a 400% increase in spending compared to when the advertiser was buying from each company separately, and it's a real testament to the value of the combined insights from both organizations. Our early success is proving our acquisition thesis. The value of Bridge is greater when combined with Cardlytics, given our complementary products and data sets. And we expect Bridge to contribute more as we connect the two platforms to enable product-level offer constructs for our clients. Internationally, the open banking program with Nectar continues to make progress. We now have several hundred thousand customers that have connected at least one account. In addition, new business conversations are progressing well, including potential open banking clients in the UK in gas, convenience, and retail. On another note, we're happy to announce that Chris Hsu joined the board of Cardlytics in September of 2021. Chris is currently the corporate vice president and chief financial officer of Microsoft's Cloud AI. He brings an impressive background in accounting and finance to the board. With that, I will turn it over to Andy.