Cardlytics, Inc.

Good evening, and welcome to the Cardlytics second quarter 2023 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, including for the third quarter of 2023, adding new partners to the network and increasing our MAUs, our partners' transition to the new ad server and user experience, the growth and expansion of our advertiser base, the impacts of our new product initiatives, including our retail media network, our liquidity, and our growth and profitability, including expectations related to achieving positive operating cash flow, free cash flow, and adjusted EBITDA on an annual basis. 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 June 30, 2023, 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 Cardlytics website. Please note that a supplemental presentation to our second quarter results has also been posted on our investor relations website. Joining us on the call today is Carlytics CEO, Karim Temsamani, and Director of Corporate Development and Investor Relations, Robert Robinson. Following their prepared remarks, we'll open the call to your questions.

With that said, let me turn the call over to Karim.

Good evening, and thank you for joining our Q2 2023 earnings call. This was a solid quarter for Cardelics, as billing, revenue, and adjusted EBITDA all exceeded our expectations for the quarter. The results reflect our team's hard work in transforming the business during a difficult period for the economy and advertising market. Adjusted EBITDA performance in Q2 improved by $11.7 million year over year as our efficiency measures and our new product initiatives took hold. And our operating cash flow for the quarter was positive $5.7 million. These are great outcomes delivered ahead of schedule. While we are excited about the positive changes on the way, and the early momentum we have in driving new customer-facing product innovation, we have much more to accomplish in the business. Every transformation has challenges, but we are making the right long-term decisions for Catalytics, and as our numbers demonstrate, we are clearly making progress. Here are our results for Q2. Billings increased 1.6% year-over-year to $109.4 million. U.S. billings increased 7% year-over-year. Revenue increased 1.7% year-over-year to $76.7 million. Adjusted contribution increased 6.8% year-over-year to $37.5 million. Bridge revenue decreased 3% year-over-year to $6 million. This is in line with our expectations of short-term viability in the business given our focus on Bridges Retail Media Network product. Our focus on sales effectiveness, delivering new products, and making operational improvement led us to exceed expectations despite lukewarm consumer spend and advertiser uncertainty. While restaurant and retail categories are still underperforming versus last year given these trends, the travel entertainment vertical continues to outperform for us. even as consumer spending in that category slows. On the expense side, we continue to make the right financial decisions for the business. We renegotiated several contracts in the quarter and implemented cost optimizations across AWS and Snowflake. The underlying fundamentals in our business continue to show strength. Unique consumers activating offers increased 2% year-over-year in Q2. We saw total activations increase 10% year-over-year and total redemptions 7% year-over-year. Just like last quarter, we increased the number of users activating offers year-over-year, and our current users are engaging more often. While we don't have any significant updates to our partner pipeline, discussions with multiple top 20 U.S. banks and several high upside fintechs remain ongoing. and we are confident we will assign at least one of these major partners by the end of 2023. We will continue to update you as we make progress on these potential partnerships. Now, I would like to discuss our strategic initiatives. As we are making short-term financial progress, we are also becoming a strong product-led organization where our partners and consumers are the center of the decisions we make as a business. First, as you know, we announced this quarter that we renegotiated our contract with Chase. While we cannot discuss financial details outside of what we already presented in last month's 8K, this is a testament to the strategic value of our partnership. Additionally, we are happy to announce that Chase is 100% live on the new user experience. Second, three important product initiatives for our bank partners and advertisers, the new ad server, our new user experience, and cloud migration, are on track to deliver long-term benefits. All our major U.S. banks have data in AWS, and most have systems in AWS. We expect nearly all of major banks to move to the new ad server and user experience by the middle of 2024 versus the end of 2023. As we've said in the past, bank timelines can change quarter to quarter. We're having constructive conversations with our partners, and our goal is for adoption to happen as soon as possible. Our partners continue to adopt our decisioning engine, or ADE, to drive higher monetization and offer relevancy for the business. Most of our banks have now migrated or have agreed to migrate to ADE. Not only this, we are still seeing great results using ADE. Billings using enhanced targeting are up 10%. Activations are up 6.5%. And redemptions are up 5.7%. Third, new advertising product initiatives are showing similarly exciting results. For example, multi-tier offers, which provide variable incentives based on objectives, have been effective in shifting purchase channel behavior. In a pilot over a 21-day period, in-store channels as a percentage of total spend increased from 34% to 71%. The product and engineering teams are also hard at work on new capabilities and improvements. We launched our first campaign with receipt-level reporting. This is important because it opens up incremental demand from CPGs and retailers who need product-level reporting. It also gives consumers access to better content and offers they want to see. We reduced the time it takes to process transactions from 70 hours to 35 hours. This reduction allows us to deliver rewards sooner to our partners' customers. It also makes our billings and ad-serving systems more efficient. We can make more effective adjustments based on budget consumption, meaning we can more efficiently throttle campaigns at risk of over-delivering or boost campaigns that aren't meeting targets. We launched a target return on ad spending pricing pilot in the past month. This pricing model leverages a dynamic marketplace and features bidding on impressions, dynamic pricing adjustments, and immediate reconnection of campaign spend. While early, these capabilities at scale will vastly improve the efficiency of our financials in the long term. Fourth, we continue to diversify our business. we are making fast progress in transforming the bridge business. Our retail media network pilots have received positive responses from major national CPG brands, and the initial feedback we've gathered highlights the excitement around the flexibility they'll have in building sophisticated audiences, seamless access to a national footprint, and user-friendly tools that empower them to get valuable insight, drive substantial incremental sales, and accurately measure the impact of their campaigns. Product is not the only area we are upgrading. We are responsibly investing in our people, too. I want to welcome our new CFO, Alexis De Cieno, to Cardlytics. We are thrilled to have attracted such a talented and capable executive. Alexis' track record of collaboration across business lines and driving financial results through data-driven analysis makes her the perfect fit to drive long-term growth and profitability for Cardlytics. She starts in less than two weeks and is excited to speak with all of you on our next earnings call. Alexis is just one example of the high-level talent we are adding to the business. Cardlytics' potential and the tangible improvements we are making attracting diverse and innovative talent. We saw several senior level hires with exceptional backgrounds join our product engineering and sales teams this quarter, which will continue to elevate our capabilities and bolster our competitiveness in the market. Before I turn to our market trends and outlook, I want to share some additional insight from our platform. To give investors a better idea of our value proposition and our future potential, Each quarter, we'll surface some of the data we share with our advertising customers. This quarter, we will focus on multi-line retail, a category that includes over 100 brands that most often sell items such as apparel, electronics, and home goods. In the quarter, we saw consumers spend $67 billion a decline of 1.3% year over year and an uptick of 6.1% quarter over quarter. Average spend per customer is $196 per month in this category. This is a competitive category where customers exhibit lower loyalty. On average, consumers choose to spend with 2.7 brands per quarter. This loyalty decreases further during the holiday season in Q4, which represents 28% of the yearly spend. On a state-by-state basis for Q2, California represented 16% of multi-line retail spend, followed by Texas at 11% and Florida at 9%. Interestingly, despite the low brand loyalty, this market is not fragmented. Multi-line retail has seen significant consolidation in recent years, with four brands representing over 85% of the spend that we analyzed. This has been maintained year over year, with the top two brands gaining market share largely from the next two brands. These are the kinds of insights that we share with our clients to help them make critical business decisions. And we're excited to continue to share more of these insights with you moving forward. Moving to market trends and outlook. Consumer spend in the first half of the year was flat compared to 2022. Year-over-year spend was down 2% in Q2. Restaurant and retail spend are still struggling, growing 1% and declining 3% year-over-year, respectively. Travel spend also slowed significantly at 1% growth year-over-year. There is positive news, too. The consumer still remains strong based on deposit data, and the July consumer confidence index increased for the third consecutive month, hitting its highest level in two years. Labor markets have softened, but job growth remains solid. Inflation appears to be declining as Fed red hikes have their intended effect. Given the uncertain economy and growth environments, we do expect some bumpiness in our results over the next several quarters. While there will be differences quarter to quarter, we are now on a path to sustain positive operating cash flow, free cash flow, and adjusted EBITDA on an annual basis. Regardless of the economic environment, the teams are focused on improving the business, and we are moving forward with a disciplined approach. The organizational changes we are making continue to give our teams room to operate with speed and a clear focus. Our results this quarter are a great sign that our strategy and priorities are moving the company towards achieving consistent growth and profitability. Now, I will turn it over to Robert, who is filling in this quarter, to discuss our financial results.