Cardlytics, Inc.

The conference will begin shortly. To raise your hand during Q&A, you can dial star 1 1. Thank you for standing by and welcome to the third quarter 2022 Cardlytics and Earnings Conference call. I will now hand the conference over to Nick Clinton. Please go ahead.

Good evening and welcome to the Cardlytics third quarter 2022 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 our future financial performance and results, our ability to achieve our key long-term priorities, our future growth, adding new partners, advertisers, and content to the network, the timeline and benefits of our ad server and cloud migration initiatives, our timelines for achieving positive adjusted EBITDA and positive free cash flow, our cost reduction initiatives, and the bridge earn-out payments. 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 30, 2022, which has been filed with the SEC. Also during this 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 and 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 the information I have just described in the Investor Relations section of the Carlytics website. Please note that a supplemental presentation to our third quarter results has also been posted on our Investor Relations website. Joining us on the call today is Carlytics CEO Karim Timsahmani and CFO Andy Christensen. Following their prepared remarks, we'll open the call to your questions. With that said, let me turn the call over to Karim. Karim?

Good evening, and thank you for joining our Q3 2022 earnings call. I'm excited to have joined Catalytics after spending 12 years at Google and nearly four years at Stripe. I spent my first 60 days in the business with our leaders, team members, and banks, and I feel energized about the clear and large opportunity to build a scaled and financially robust business. The strength of our data through partnerships with leading banks and fintechs, combined with a growing customer base of advertisers and agencies, leads me to believe that Cardlytics can become the leading purchase intelligence and incentives platform with the right vision and execution. Later in the call, I will expand on these observations and the state of our business. First though, Let's go through the Q3 results and key highlights. We delivered double-digit growth despite the serious challenges present in the economy. This growth was fueled by solid performance in travel and entertainment, where we grew greater than 100%, and retail, which was supported by both new and existing client growth. Here are the numbers. Billings increased 12% year-over-year to $110.4 million. Revenue increased 12% year-over-year to $72.7 million. Adjusted contribution increased 11% year-over-year to $35.1 million. Bridge revenues increased 86% year-over-year to $5.4 million. Agency grew greater than 85% this quarter year-over-year. And excluding the large client mentioned over the past two quarters, our core Catalytics revenue growth was 30% year over year. I'm also excited to say that we've made significant progress on our key platform enhancement initiatives this quarter. We are proud to announce that four banks are connected to our ad server, including one of our largest banks. we now have connected greater than 50% of our MAUs to the newer server, which surfaces the goal we set for the year. We expect to connect more partners in the coming months, and our goal is to help all our bank partners upgrade to a newer server by the end of 2023. We are also rapidly migrating our bank partners to the cloud and made significant progress in the quarter. We believe we can migrate nearly all of our banks by Q1 of next year, which places us well ahead of our Q3 2023 goal. I personally want to congratulate our team on their progress in delivering the ad server and cloud migration to our partners. Both are important initiatives in realizing our long-term strategic goals. The next step for the banks that have moved is to launch the new user experience, and we have already received a firm commitment from one of our largest bank to do this by Q1 of 2023. As a reminder, banks do have to incorporate the new capabilities into the UX upgrade cycles, but we are working harder than ever to influence this timing to increase the value of their program. This will allow us to enable new capabilities such as enhanced imagery, as well as new product offerings for our partners and advertisers. Additionally, these enhancements lay the foundation to optimize campaign performance, pricing, and ultimately provide the differentiation our partners need to better serve their customers. We view these developments as strong signals that our bank partners are committed and truly value our relationships. I look forward to providing more positive updates from our bank team in the coming quarters. On a related note, we are taking steps to increase our MAU base by signing new partners. We are in discussions with multiple top 20 US banks and several high upside fintechs. While these conversations are early, our pipeline to increase MAUs over the next two years is strong. Expanding these relationships will further diversify our partner concentration while providing advertisers with further scale to accomplish their marketing goals. We will continue to update you as we make progress on these potential partnerships. We've also made enhancements to advertising content. As we've mentioned in prior quarters, the team has been hard at work in bringing third-party content to our platform through various pilots and proof of concepts. In Q3, We fully enabled the ability to bring in external content to our platform and delivered over 600 local offers across the United States. We're expecting to scale to thousands of local offers with our banking partners over the coming quarters. Let me turn to market trends. This should be no surprise, but consumers are increasingly being impacted by high inflation and rising interest rates. For the first time since Q4 of 2020, the year-over-year growth in basket size exceeded the growth of transaction frequency. We saw higher basket size across all key verticals, but the highest increases were within gas and travel. While household spending increased 9% year-over-year, it decreased 2% from Q2 2022. The sequential quarterly decline in household spending was seen across all our key verticals. Gas and travel were both down 6%. Entertainment was down 3%. Retail was down 2%. And restaurants and grocery were both down 1%. This data matches what we're hearing from our clients across all our verticals and is consistent with trends we identified last quarter. Outside of the impact of the large restaurant clients exiting our channel, the primary reason we saw reduced budget in Q3 was due to fears of a recessionary environment impacting consumer demand. While we have performed well year to date, we believe these trends will impact our business moving forward. In response, we are cautiously guiding Q4 billings to be between $120 and $132 million. With this in mind, we are doing everything in our power to exceed this range. We are also highly encouraged by the strong pipeline we have for 2023. Our goals of delivering sustainable positive adjusted EBITDA by Q2 2023 And positive free cash flow by Q3 2023 will be more challenging in a difficult art market. But we are committed to remain on track by making the necessary steps to lower our cost. A key priority in my first two months has been to evaluate the status of our current cost structure in a challenging environment. And we have already identified several areas of additional cost savings. Andy will provide more details in his remarks. Now that we've discussed our results and the macroeconomic environment, I want to lay out key learnings from my first 60 days at Carlytics. It's very clear to me, Carlytics achieves what many thought impossible, an advertising platform that delivers positive outcomes for consumers, banks, and advertisers. Since the IPO, We've extended our reach to include the three largest banks in the U.S., increased customer loyalty and value for our bank partners, and improved our ad sales while diversifying our customer base. And we are well on our way to delivering the new ad server to our largest bank partners, which will provide better offers for consumers, more engagement for our partners, and unlock broader advertising opportunities. We truly have a large opportunity in front of us. That said, I've identified several areas that we must improve to successfully execute on this next phase of the business. First, we are good partners to banks, but we must obsess over achieving their goals and providing value to their customers. Banks are the most important assets of our business. The only way to create strong outcomes for Cardlytics is to create stronger outcomes for our partners. Second, I believe Cardlytics can better optimize the monetization of its assets to support long-term profitable growth across the business. We are already thinking about various revenue models that better leverage our capabilities analytics, and the idiosyncrasies of the verticals we serve. Third, bridge, DOSH, and attainment are great assets, and we must integrate, invest, and scale them faster. A combined value proposition is much more powerful than just showing up at Cardlytics alone. By doing this, we'll become more important to current and future bank partners open the doors to new offer constructs, enhance the measurement capabilities, and deliver more content from the longer tail of advertisers. Fourth, to maintain a competitive position and drive long-term value, we must continue to upgrade our tech stack and be relentlessly focused on operational excellence. The ad server and cloud migration progress reflect this. But our operational processes are overly time consuming. Improvement, efficiency, and automation will unlock the vast opportunity ahead of us and allow us to profitably grow the business. Fifth, we must remain hyper-focused on profitability to deliver on the goals with promise to our investors. The ability to control our destiny will fuel our growth strategy and ultimately be a key step in becoming the leading purchase intelligence and incentives platform. I see tremendous opportunity to scale Cardlytics profitably by layering in best-in-class systems, technologies and processes. We'll be faster and more agile, data-driven, ambitious and accountable. In turn, we can make commerce smarter and more relevant for everyone. My number one priority in the short term is to protect our balance sheet against the possibility of a long-term recession. With a more resilient expense base and responsible internal investments, the good news is that through hard work, these key areas are firmly within our control to change. With that, I will hand it over to Andy to provide more details on our results and financial strategies.