Cardlytics, Inc.

Good day, and thank you for standing by. Welcome to the Q3 2023 Cardlytics, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a 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. Please be advised that today's conference is being recorded. I would now like to hand the call over to your speaker for today, Nick Linton, Chief Legal and Privacy Officer. Nick, please go ahead.

Good evening, and welcome to the Cardlytics third 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 fourth quarter and full year 2023, adding new partners to the network, our partners' transition to the new ad server and user experience, the growth of Ripple, improvements to our operations, our platform, and our UK business, international expansion, the bridge earn-out payments, and our liquidity. 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, 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 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 Cardblitz 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 our CEO, Kareem Timsamani, and our CFO, Alexis DiCieno. Following their prepared remarks, we'll open the call to your questions. With that said, let me turn the call over to Kareem.

Good evening, and thank you for joining our Q3 2023 earnings call. To start the call, I'd like to provide some context to this quarter, now that I've spent a year in the business. When I arrived last year, our finances needed to improve. Before I started, our Q2 2022 adjusted EBITDA annual run rate was worth the negative $55 million and adding to the difficulty our teams were facing. My immediate priority was to right-size our cost structure and reinvest in building the foundations of our business, starting with our financial institution relationships. While we have much left to accomplish, I am proud of the work our teams have done so far. The financial foundations of our business is stronger and our banking relationships are in a much better place. We can now think longer term about our growth prospects. Our results this quarter match this sentiment. We were in line with guidance on our top line metrics and better than expected on our profitability metrics. Of note, adjusted contribution grew 22% year over year, and our adjusted EBITDA was positive for the first time in 2023 at $3.9 million. We also had positive operating cash flow for the second straight quarter. Alexis will provide more details later on on our full financial results. Our solid financial performance this quarter points back to our underlying value proposition. For example, gas, grocery, and convenience grew more than 65% this quarter year over year. We saw success because we helped brands target shoppers who buy competing brands. We deliver strong ROI for them, which helps us succeed in this category. Another vertical that saw success was travel entertainment, which grew more than 20% in the quarter year over year. While consumer spend in travel entertainment has softened in the back half of the year, our clients are still leaning into budgets. Our platform helps them reward loyalty and acquire new customers, particularly in environments where spending is volatile. These positive results were balanced by subpar performance in restaurant and retail. We believe these verticals can and should be significant contributors to our business, and we are aiming to drive high growth moving forward by reinvesting in our teams in this category. As we saw with our vertical performance in the quarter, underlying fundamentals were mixed. Unique consumers activating offers decreased 7% year over year in Q3, driven by the loss of the previously mentioned large restaurant clients. That said, unique customers with a reduction or spend per serve in the quarter saw a 13% increase, which indicates we're serving relevant and engaging offers to consumers. Where there will be quarter to quarter variation in activations, we expect unique customers activating to increase over time as we continue to evolve our platform. As we mentioned last quarter, our expectation was to sign one new bank partner by the end of 2023. We are excited to announce that our UK team signed Monzo, one of the fastest growing banks in the UK. We can't wait to launch in 2024 to help their customers save money on the brands that they love. And the teams aren't stopping there. Our partner pipeline remains strong, and we believe we will sign at least one more major bank partner in the U.S. over the next few months. Let's move to our strategic initiative. In the quarter, we spent a considerable amount of time on strategic planning. While I expect an investor day at a later date, I do want to provide initial color on how I see our strategy evolving over the next four years. Our vision for the future of Cardlytics is aligned around four strategic pillars. One, strengthening our core product by driving user engagement and building out demand, supply and marketplace liquidity while simultaneously expanding the core business globally outside of the UK. scaling bridge and repo, and connecting it with the core to unlock a unique data and measurement ecosystem. Three, broadening our reach to non-FIs to diversify supply and access the broader merchant ecosystem. This is a large growth vector for our business, but will require further exploration in the new year. And last, but also most importantly, embedding insights into everything we do, internally and externally, to become the most trusted commerce partner. As a data company, this builds our credibility to reinforce our core and tap into new revenue streams. I'm excited about the future and potential of Cardlytics and can't wait to discuss the detailed initiatives behind our strategy with all of you. And while I could spend most of the call discussing a strategic plan, I do want to move to our near-term initiatives that are critical to realizing many elements of this vision. So first, let's discuss the key initiatives for our bank partners and advertisers. On the bank front, like last quarter, all our major US banks have data in AWS, and most have systems in AWS. In the quarter, a large UK bank completed the immigration, moving us closer to 100% completion. We still expect nearly all our major banks to migrate to AWS and the new user experience by the middle of 2024. We continue to have constructive conversations with our partners, and we want to drive to full adoption as soon as possible. One bank-focused area that saw significant progress with adoption of our Ad Decisioning Engine, or ADE. If you recall, ADE drives higher monetization and offer relevancy for the business through improved targeting. This quarter, two of our largest banks fully adopted ADE. We're excited about the increases in overall engagement we see with ADE and can't wait for all of our banks to adopt these new products. We continue to scale our advertising product to provide our partners and advertisers new ways to drive engagement and return on ad spend. Multi-tier offers, which provide variable incentives based on objectives, are seeing rapid adoption and have shown two times better performance than our baseline offering in some campaigns. For example, a customer came to us with an ask to increase premium membership purchases. Historically, this customer saw a split of 50% premium membership to 50% basic memberships. Our multi-tier offers were able to drive consumers to an 80% premium membership split, providing additional value for its advertisers and its consumers. We are also continuing to make improvements to our operations. Several key items were completed in the quarter that we expect to significantly improve our execution, including transitioning legacy processes to our data lake and facilitating new interfaces for onboarding new publishers such as Monzo. We are also continuing to make improvements to our operations. Several key items were completed in the quarter that we expect to significantly improve our execution. including transitioning legacy processors to our data lake and facilitating new interfaces for onboarding new publishers such as Monzo. We've also made process improvements that have significantly reduced the time to onboard a merchant from two weeks to just two days. Moving to Bridge and Ripple. For our customer data platform or CDP product, We re-signed a national retailer to a large, long-term contract. This is a great win for us and evidence that the CDP product can deliver the data enrichment that larger retailers need. Earlier this quarter, we launched Ripple, a retail media network. To remind you, we believe Ripple will provide CPG brand flexibility in building sophisticated audiences, seamless access to a national footprint, and user-friendly tools that empower them to gain valuable insights, drive substantial incremental sales, and accurately measure the impact of their campaigns. While the lumpiness we expected in growth for the platform is materializing, we are making solid progress in transforming the business. We have 33 million profiles live on Ripple, and the initial feedback is strong. We also recently hired a chief revenue officer for the business to help increase our growth. We expect to announce some big wins in the coming quarters, and we see strong potential for repo to scale in 2024 and beyond. Let's move to the global business. While Monzo is the big news, I do have another important update. Please join me in welcoming Ian Carrington, who will serve in a newly created general manager of international roles. Ian helped build several billion dollar global businesses from scratch at Google and has over 25 years of experience in global markets. At Cardlytics, he will be charged with leading a global expansion and strategic business development. We're extremely excited to have attracted him to Cardlytics and I look forward to providing more updates around our global business plans in the near future. Moving to Outlook, on the surface, consumer spend looks solid this quarter with a 5.6% increase year over year, largely driven by gas prices. But despite this persistent spending, inflation is still higher than normal, and some of our financial institutions' partners highlighted elevated interest rates, lower deposits, and higher credit card charges as negative indicators. In our conversations with advertisers, we are seeing elevated cautions around commitments, and the size of advertising budgets given trends that they are seeing in Q4. It appears that some of the moderate optimism in Q2 has sitted ground to renewed recessionary concerns. Economic volatility will impact our Q4 billings and revenue, where our adjusted EBITDA should still be positive in Q4. We can also reach positive adjusted EBITDA for the full year if we execute on our plan. We remain highly focused on our cash flow and profitability as we navigate this choppy environment. The trajectory of our adjusted EBITDA and operating cash flow since Q1 of 2022 is reflective of the incredible efforts and dedication from our team to right-size our business, and I think a great predictor of our future success. And like we've discussed, There are many exciting developments coming over the next few quarters that will drive growth for us in the coming years. By the end of 2024, we expect our platform to look completely different with new large bank partners, a broader and deeper data set, more sophisticated audience targeting, better analytics and reporting, and a variety of ad formats that will drive increased engagement. We're confident in our strategy for the next four years, and our belief in a long-term growth prospect has never been stronger. Now, I will turn it over to Alexis to discuss our financial results.