Cardlytics, Inc.

Good day and thank you for standing by. Welcome to the Cardlytics fourth quarter 2021 earnings conference call. At this time, all participants are in listen only mode. After the presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star then one on your telephone keypad. Please be advised today's conference may be recorded. If you require operator assistance during the call, please press star then zero. I'd now like to hand the conference over to your host today, Kirk Sommers, Chief Legal and Privacy Officer. Please go ahead.

Good evening, and welcome to Carmelitics' fourth quarter in a full year 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 for the first quarter, our ability to achieve key long-term priorities, the increase in MAUs or monthly active users connected to our ad server, our new user experience, the increase in ARCU or average revenue per user, our cash position, the impact of COVID-19 on our business and the economy as a whole, the sufficiency of our capital structure, economic recovery across verticals by the end of 2022, including the improvement within the travel vertical in 2022, maintaining 30% annual growth rates, achieving positive cash flow by the end of 2023, plans for entertainment in their content, adding new FIs or financial institutions and open banking partners, growth to bridge our margin profile, continued momentum in 2022, and the anticipated benefits of our acquisitions of DOSH, Bridge, and Entertainment. For 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 10-K for the year ended December 31st, 2021, filed with the SEC. Also during this call, we will discuss non-GAAP measures of our performance. GAAP financial reconciliations and supplemental information are provided in the press release issued today and the 8-K 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 the information I've just described on the investor relations section of Cardlytics' website. Please note that a supplemental presentation of our fourth quarter results has also been posted to our investor relations website. Joining us on the call today are Cardlytics' 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?

Thanks, Kirk, and thank you to everyone for joining us on our fourth quarter and full year 2021 earnings conference call. We are pleased with our Q4 results, which exceeded the high end of guidance for billing, revenue, and adjusted contribution. The strong performance comes as we continue to make progress across our strategic priorities, which include increasing the number of marketers working with us, bringing our solution to new advertising verticals, including agencies, evolving the Cardlytics platform with the new ad server and ads manager, as well as the integration of Bridge and DOSH, and being strategic in our work with our bank partners. I'm proud of the Cardlytics team for finishing the year strong and continuing to execute our multi-year strategy. Now let's turn to some highlights from the fourth quarter. Billings increased 42.6% year-over-year to $134 million. Revenue increased 34.2% year-over-year to $90 million. And adjusted contribution increased 48.5% year-over-year to $44 million. Our Q4 results reflect year-over-year growth across all of our advertising verticals, and growth over 2019 in every vertical except travel. All sales verticals contributed to Cardlytics achieving its highest billing quarter ever in Q4 and growing the number of advertisers with over $1 million in ad budgets by 46% year over year. Let me share some specific examples of what we accomplished. Our direct-to-consumer team had another strong quarter. The E2C has become a significant part of our business and has grown to represent nearly 30% of our ad budgets. Traditional Cardlytics verticals like restaurants are also realizing synergies as we expand our platform. For example, a top client in the quarter was the result of a cross team effort between our restaurant and agency verticals, which also shows that our agency strategy is bearing fruit in more ways than one. Speaking of agency and our self-service initiatives, we secured our largest annual agency agreement to date in Q4. This multimillion dollar contract brings 90 plus potential advertisers to the table for Cardlytics and is indicative of the broader trend we're seeing. Agencies are increasingly turning to the Cardlytics platform due to the performance-based outcomes we can provide for their clients and the self-service capabilities we're building. In Q4, agencies more than doubled their ad budgets with us year over year. Throughout 2021, we added over 30 advertisers through more than 10 new agency relationships. We expect these tailwinds to continue as ad agencies focus their strategy on achievable, measurable outcomes. Our ad budgets from travel and entertainment are still down almost 45% compared to 2019, but we continue to see positive signs. Today, our travel client base is much more diversified when compared to 2019. And for the first time, every hotel and airline co-brand of our major bank partners included Cardlytics in their 2022 budget. We expect this trend, combined with a continued recovery in consumer spending, to help improve the travel vertical throughout 2022. Our strategic focus on logo expansion is also contributing to our success. During Q4, we had 505 logos on the Cardlytics platform compared to 339 in Q4 of 2020. This logo expansion is having a positive impact on our customer concentration. Revenue concentration from our top five customers decreased from 30% in Q4 of 2020 to 22% in Q4 of 2021, and we saw a similar trend with our top 20 customers. Concentration is always lowest in Q4 due to ad budget seasonality, but Q4 2021 marked our lowest level of concentration ever as a company. While our main focus over the past two years has been on building a strong foundation with national advertisers, we're now beginning to lead into the mid and small business markets to expand and diversify our demand. We're pleased to announce that we acquired a company named Entertainment in January for $15 million in cash and stock. With a transaction multiple of less than two times revenue, this acquisition enables us to continue expanding our current offer content. Entertainment has relationships with tens of thousands of local advertisers across the U.S., and a team with years of experience focused solely on the mid and small business markets. Their results have been significantly impacted by COVID. But with our scale, we see an opportunity to materially grow this business. Our plan is to use entertainment's content on the Cardlytics platform once our bank partners launch our new ad server and roll out the new user experience. Additionally, we think this content will help us penetrate other banks who are hesitant to share their data but still want local content. As we announced last quarter, Nearly 100% of our MAUs in the U.S. are connected to the new ad manager. So we have shifted our focus to optimizing campaigns built on the new ad manager and the adoption of our ad server and our bank partners. We have less than 5% of MAUs connected to our ad server today. Our aggressive goal is to have 50% of MAUs connected by the end of the year. We and our bank partners continue to be excited about the capabilities that will be unlocked by our ad server. In our experience, our bank partners need a lot of time to plan and launch technology updates, so it's difficult to give more precise estimates at this time. The benefits of our product initiatives are starting to become clearer each quarter. As you know, OneBank is currently running the new ad server and launched a pilot of product-level offers in Q4. While the sample size was small, the early results are impressive. We saw a lift in trips of 13.5% and a lift in basket spend of 9.4%. I'd like to point out that seeing basket lift is a meaningful win-win situation. This means we can go after budgets for manufacturers while also proving to stores we're increasing their overall sales. In addition, we saw average activation rates similar to our restaurant vertical, which has the highest activation rates on the platform. We'll have more updates throughout the year as we continue to gain more data and launch our ad server at additional banks. We used Bridge POS data for a portion of this pilot, and we continue to see amazing potential with this acquisition. While the acquisition and integration process did affect the timing of prospect conversion, Bridge pipeline remains extremely strong and includes three late-stage opportunities in CPG and groceries. Overall, Bridge ARR grew 20% sequentially from Q3 to Q4, which is much faster than the prior two quarters and more in line with our expectations. We expect this momentum to continue into 2022. And like we mentioned last quarter, Bridge is entering the entertainment sector with its product. We find a large movie theater chain this quarter. This makes us the only performance-based channel in this industry. With DOSH, we now have 13 publishers live at the program and 19 publishers under contract and scheduled to launch later this year. Additionally, despite a delay, the marquee partner we mentioned last year is scheduled to launch the DOSH program in Q2. While these new partners represent only a small portion of our MAU base today, they represent long-term growth opportunity and enable us to further diversify our base of MAUs. Our UK business posted 67% year-over-year billings growth in Q4. However, UK billings are still below 2019 levels as the economy was hit particularly hard by the effects of COVID. The year-over-year growth in the UK was aided by our open banking solution. The Nectar Connect program now has nearly half a million members, making it one of the largest open banking initiatives in Europe. Due to the success of this program, we've seen strong interest from other large UK brands, and we're on track to launch a second open banking initiative in Q2. We will be running a pilot with Top Cash Back, one of the largest traditional affiliate publishers in Europe with over 15 million UK members. And finally, our bank relationships continue to be strong. We had over 51 million unique MAUs activate over 597 million offers in 2021, creating engagement and value for all of our banks. And of course, engagement grows as we increase ad budgets and add new advertisers to the platform. Our B of A contract renewal is going well, and both parties are confident that our mutually beneficial relationship will continue for years to come. Both parties are working hard to get this done so that we can launch the new ad server and the experience it enables. Given January of 2020 was the last full month before the pandemic, we thought investors would find it interesting to see how spend in January of 2022 compared to January of 2020, a full two years after this started. Most everyday spending categories like gas, grocery, convenience, and retail are exceeding 2020 spend levels. Retail in particular is up 19%, the highest of any category we tracked. And while all broader categories are improving, many subcategories in travel and restaurant are still negative or lagging versus 2020. Airlines and cruise lines are still being hit particularly hard, with each being down 30% and 58% respectively. Additionally, while restaurant spend is up compared to 2020, we believe this is driven largely by inflation, as overall trips to restaurant categories are still down 13% when compared to 2020. Outside of this comparison, another interesting category is gas. the average fuel purchase is up 25% year over year. This will be a category to monitor in regards to consumer behavior, particularly if events in Russia and the Ukraine drive oil prices higher. So while there have clearly been improvements in consumer spending, our advertisers are still feeling the effects from the pandemic, specifically labor and supply chain shortages, as well as new impacts such as inflation. There's also new risk due to the evolving situation in Ukraine, which could impact both our advertising partners, many of which are multinational organizations, and consumer spending. We're cautiously optimistic that we may see a full recovery across all verticals by the end of 2022. And I want to reiterate that we believe this business will maintain annual growth rates of 30 plus percent for many years. But I do want to be clear that the global environment presents several risks to growth in the short term. With that, I'll turn it over to Andy to talk more about the quarter and our thoughts around guidance.