Cardlytics, Inc.

Hello, and thank you for standing by. Welcome to CollegeLitics' fourth quarter and four-year 2022 financial results conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the conference over to Nick Linton, Chief Legal and Privacy Officer. Sir, you may begin.

Thanks for joining us, and welcome to the Cardlytics fourth quarter and full year 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, upgrades to our current products and processes, and our rollout of new products, the rollout of our new ad server and user experience, our transition to the cloud, and the deprecation of our on-premise data centers, our sales pipeline, our customer concentration and margin profiles, our timeline for achieving positive free cash flow, and our path to profitability, our cost reduction initiatives, and the bridge shareholder dispute and 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 10-K for the year ended December 31, 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 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 the information I have just described in the investor relations section of the Cardlytics website. Please note that a supplemental presentation to our fourth quarter and full year results has also been posted to our investor relations website. Joining us on the call today is Carlytics CEO, Karim Tensamani 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.

Thank you for joining us and welcome to our fourth quarter earnings call. It has been exactly six months since I joined Carlytics and while we still have some short-term issues to resolve, My belief in the incredible long-term potential of this business has only been strengthened. Carlytics is in a unique position at a unique time in the industry. The topics of both performance and brand safe online advertising are top of mind with many of our customers and partners, which align squarely with our value proposition. It is rare to see a model that has so many benefits to so many groups. Brands get to offer their customers ads that are relevant based on past purchases. Customers save on the brands they prefer, and financial institutions increase engagement and loyalty. The cycle is virtuous, but to realize the true potential as a business, we needed to improve our operational efficiency, reduce excess costs, and become a company that is led by the products that we are building. It's still early, but we are starting to see the results of these improvements. On the call, I'd like to highlight our financial results, focus on areas where we have demonstrated operational and cost discipline, and give insights into product enhancements that we expect to positively affect our growth for the year. First, some financial highlights. Our fourth quarter performance delivered billing, revenue, and adjusted contribution in line with our guidance. We navigated a challenging microenvironment where inflation and rising interest rates tampered budgets across the ad tech markets. Despite these headwinds, For the fourth year 2022, we once again delivered double-digit growth across billing, revenue, and adjusted contribution. Additionally, Bridge delivered triple-digit revenue growth. For the fourth year 2022, billings grew 12% to $442.5 million. Revenue grew 12% to $298.5 million. Bridge revenue grew 155% to 21.4 million, and adjusted contribution grew 10% to 143 million. Consumer engagement in the program grew in Q4. Users activating offers increased 8.6% year over year, even with the impact of the large restaurant clients exiting our channels. Our platform is creating an impact for our banking partners and for retailers too. In 2022, our data showed customers engaging with our program spent 1.2 times more on their card and made 1.3 times more shopping trips than unengaged customers. And clearly, it works well for advertisers. we increased the total number of advertisers in the channel by 8% in 2022. Not only that, but we also increased the number of advertisers with billings between 500,000 and 5 million by 17%. And we increased the number with billings greater than 5 million by 44%. We have a great business foundation despite the current state of the economy. In many ways, though, the economy is a good forcing mechanism to improve our business efficiencies even more. When you combine a more efficient business with the numerous product enhancements that we're putting into place, it's clear we are setting ourselves up for long-term success. As mentioned last quarter, we took action to control our costs in this difficult environment. We successfully implemented 35 million in cost reductions at the end of December. The full effect of these actions will appear in Q1 of this year. We're not stopping there. We're improving operational efficiency company-wide. And despite difficult economic conditions, we are focused on achieving positive free cash flow in Q3 of this year. Our team has seen significant changes through this process, and I would like to take a moment to thank all our leaders and team members for their focus, commitment, and hard work. We believe these changes will make us stronger as a team and as a business. I often talk internally about the importance of becoming a product-led company. And our teams are working tirelessly in every department to revamp and improve our workflows across product, engineering, sales, operations, and analytics. Let me give you a few examples to illustrate the impact of these changes. First, we are upgrading our ad decisioning engine to support modern ad ranking models to drive higher monetization and offer relevancy. Based on early results, we believe that these changes can drive a lift in RPMs of 10 to 15% in the back half of 2023. Second, we're exploring pricing models that are more tied to serve or impression events, while still optimizing for advertiser ROAS targets. This approach provides better balance between reach and performance goals. It also gives Cardlytics more control of budget management, delivery, and ad selection, which helps us capture more billing. Third, the processes we have put in place to allow us to better track product performance, averages, adjustments, and campaign launch delays not only allowed us to immediately save $350,000 on redundant tools, but also will increase our overall operational efficiency for the year. I expect the combined impact of the evolved improvements to positively impact our four-year billing margins by around 2%. These are the first of many initiatives that we're putting in place to improve our operations and products. I look forward to sharing more details in the coming months. Product improvements also help from a bank perspective. We created a dedicated operations group within a publisher engineering team that has implemented rigorous monitoring techniques, decreasing partner ticket creation by over 25% from November 2022 to February 2023. Not only does this make us more efficient and cost effective, it also improves our partner satisfaction. Three initiatives I highlighted last quarter are especially important in the product area. Our new ad server, our new user experience, and cloud migration. So let me give you some insights into progress in each of these areas. We have already connected more than 50% of our MAU base to our new ad server. completing one of our key objectives for the year. We remain on track to connect all of our partners to the newer server and user experience by the end of 2023. Regarding the new user experience, we're excited to announce that a major partner is launching a new user experience to its full user base, and it should roll out over the next month. As we mentioned in the past, The scale created by having a major bank partner on our new user experience and ad server will allow us to ship new products, which I will discuss in more detail shortly. We also have news to share on cloud migration. In Q4, we finished moving our core US platform to the cloud. We are now focused on duplicating our on-premise data centers. Deprecating at data centers will create cost savings of nearly $1 million in 2024. Our goal is to have all our banks move to the cloud by Q3 2023. Focusing on product makes us more than just efficient. It also unlocks new capabilities. Here are three specific examples of new offer constructs that we will better in Q1 and Q2. First, spend stretch offers, or the ability to incentivize a set of customers spending in a certain range to increase their spending on their next visit. An example would be a customer who spends $20 on average, receiving a $5 cash discount if they spent $40 or more. Second, merchant category code offers. which allow bank-funded campaigns that are targeted to specific types of transactions, such as gas or grocery purchases. In a test with a large bank partner, we saw around a two-times increase in redemption dollars of a standard campaign. Third, receipt-level offers, which are construct tailored to specific product categories or items. These are the offers we are most excited about, and for good reason. In an early test, 10% of activations came from customers who had never activated an offer before, and 19% of those customers had not shopped at that retailer in 12 months prior to the campaign. Growth isn't just coming from our core business. As many of you know, we hired Amit Gupta as our new COO of Cardlytics and General Manager of Bridge. we're extremely excited to have attracted such an incredible talent to the business. Amit is already hard at work, both on optimizing a long-term platform and on fully realizing the potential of Bridge and Catalytics. Relating to Bridge, Amit is accelerating the evolution of the business from a customer data platform to a retail media network for mid-market and regional retailers. We believe that most smaller retailers cannot build these platforms alone. While Bridge's capability allows us to work with larger retailers, the key to success for Bridge is building a collaborative, scaled data set for mid-market and regional grocery stores, convenience stores, and fuel providers, much in the same way that we built Cold Cardlytics. By building scale for these retailers, we can create a compelling new product for CPGs to get insights, drive incremental sales, and measure campaigns. Admitting the bridge seems hard at work on our go-to-market efforts that will enable this vision of providing a best-in-class retail media network for smaller retailers. And as bridge scales, we will also see improvement to our adjusted contribution margin due to its higher growth margin, which will positively affect our cash flow. Given the numerous improvements and innovative products that are on the horizon, I am incredibly excited for the future of Carlylex. Our move to being a product-led company is expanding our reach and enhancing our capabilities, which will continue to differentiate us in the market and provide better solutions for advertisers and partners. I'd like to close with some observation on consumer spend, the economy, and outlook for the year. For 2022, consumer spend grew 5% over 2021, outpacing transaction growth by over 3%. Inflation clearly affected the consumer in the second half of the year. Outside of travel and entertainment, which enjoyed recovery through 2022, Discretionary spending categories mostly finished down or flat for the year. For 2022, year-over-year, gas and grocery spend was up 9%. Travel and entertainment spend was up 25%. Retail was flat. And restaurant was up 9%. But more discretionary categories such as bars and nightclubs finished down 4% year-over-year. Leading indicators show that consumers remain resilient and inflation is receding from its highs, but the Fed has not yet backed away from its current monetary policy. The threat of an economic slowdown has stalled budgets in Q4 and Q1, much in the same way that we saw pause during the onset of the pandemic. Advertising clients were extremely cautious in Q4 and remained so in the early stages of Q1. That said, I am still encouraged by the continued strength of our new business pipeline, especially for the second half of the year. I believe that once advertisers reassess their cost structures and budgets, we will benefit from the ongoing move to brand-safe, performance-based advertising. We are building a business that is resilient in the long term, regardless of economic conditions. For 2023, we see a path to solid growth, especially after we pass the anniversary of a significant restaurant client exiting our channel in the second half of the year. Our product enhancements and optimization should provide us with around 2% of additional upside to billing margin for the rest of the year. And the growth of Bridge's higher margin business will benefit both our billings and cash flow as we move forward. Even with the muted economic conditions, we have room to get to profitability and control our cash flow by managing the business responsibly. We know our success is dependent on existing with a disciplined approach, and I'm confident that our strategy and priorities are positioning the company for liquidity, long-term growth, and profitability. And while the breach shareholder dispute has been a distraction to the business over the last few quarters, we remain confident in our position and are happy to report that we currently expect the matter to be resolved by the end of April. With that, I will hand over to Andy to provide more detail on our results and financial strategy. Thank you, Karim.