Q3 2020 Cardlytics Inc Earnings Call

[music].

Ladies and gentlemen, thank you for standing by and welcome to the card analytics third quarter 2020 earnings Conference call.

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I would now like to hand, the conference over to Kirk Summer Chief legal and privacy officer. Thank you and please go ahead Sir.

Good evening and welcome to Karlix third quarter 2020 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 fourth quarter of 2020.

Our ability to achieve our key long term parties the launch of U.S. bank growth in F <unk> and they use our monthly active users the increase in our connectivity to our and they use the use of proceeds from the convertible notes.

Evolution of our platform to a fully operational platform impacted COVID-19 on our business and the economy as a whole, including the stabilization of the economy and potential improvements and they called me in Q4.

The impact of our rise retain and return strategy and the sufficiency of our capital structure.

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 Companys 10-Q for the quarter ended September Thirtyth 2020, and we filed earlier today and in subsequent periodic reports that we file with the Securities and Exchange Commission.

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 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 all the information I've just described on the Investor Relations section of Karlix Web site.

Please note that a supplemental presentation to our third quarter results has also been posted to our Investor Relations website.

Joining us on the call today is Carlin leadership team, including CEO and co founder Lint lobby and CFO Andy Christiansen.

Following their prepared remarks, well open the call for your questions with that let me turn the call over to Lynne Lynne.

Thanks Mark.

And thank you to everyone for joining us on our third quarter 2020 earnings conference call Keith.

Q3 showed increases in spend throughout the quarter. So we're optimistic that the economy is in the middle of a slow recovery. We've also seen signs of this recovery in our business and continued to 16 with high rise retain and return strategy.

For example, prior Q3 every major hotel partner, we had exited our channel by the end of Q3. They had all signed in Iowa hardly next for recovery campaign.

And despite airline travel seeing a persistent decline in demand that's kind of it. We're currently in a national scale recovery campaign with one of our partners.

However, we are still cautious in regards to some aspects of our business as consumer spending in the UK and some of our key verticals, especially travel indicting, while recovery are still dramatically reduced year over year. Our billings in these areas map in a similar way. We're also continuously monitoring Sunday to to make sure were prepared as a company.

For potential new wave of infections this winter with.

With all that in mind here are resolved.

Total billings for the third quarter were $62.1 million down 25% year over year.

Total revenue, which is equal to billings net of consumer incentive was $46.1 million a decline of 18% year over year.

Adjusted contribution was $19.7 million down 20% year over year.

As we said on calls and in meetings throughout the year, we remain optimistic about the future. Our key long term priorities of increasing the number of marketers working with us, bringing our solutions to industry evolving because live platform and demonstrating operating leverage in our business remain fully achievable now.

Now onto several updates in specific areas of the business.

With advertisers, we are seeing increased momentum in both long standing partners and new ones, one of our top retail and dining partners reuse for 2021, with an 11% year over year contract growth and a 2% rate increase.

In the third quarter 10, new direct to consumer brands ran on our platform for the first time all can have resigned he subsequently run in Q4 and several have signed are finalizing annual contracts for 2021.

On a product now we are pleased to report continued progress with our self service platform agencies continue to test and we're working with them to create the best user experience possible. Our partner agencies are providing feedback on how we can improve and simultaneously expanded testing to three new brands, including a CPG client in addition.

The platform is currently connected to over 75% over and they use and we expect to be connected to the vast majority by the first half of 2021.

We're excited about the incremental strides we've made where they fully operational platform this quarter.

Moving to the bank side of her business Wells Fargo continues to scale and our and they you base has grown to 161.6 million or 26% increase year over year. We expect any you growth to stabilize in the low to mid single digits in the future course.

Further our launch preparations with U.S. bank are going as planned and we still expect to launch them with our version one of our new user experience in the first half of 2021.

With that I will turn it over to Andy.

Thanks Lynn.

Despite the challenging environment, we've continued to see month over month improvement in our results since April many.

Many parts of the business continued to track in the right direction, which makes us optimistic about continued improvement throughout the rest of the year.

We remain focused on our longer term initiatives, such as our self service platform and the launch of U.S. Bank and we're looking forward to sharing future updates on our progress just.

Just like last quarter I'll give a quick update on liquidity and our recent capital raised for covering Q3 results and guidance.

As many of you are aware, we completed a $230 million convertible note offering in the quarter. We firmly believe our prior liquidity was sufficient to operate the business, we decided to take advantage of very favorable financing environment.

The net proceeds will be used for working capital or other general corporate purposes, which may include potential acquisitions and strategic transactions to support long term growth our business in.

In addition, this financing I, just even greater financial flexibility to weather unforeseen economic uncertainties and be opportunistic as we evaluate avenues and organic growth.

We ended the quarter with $288 million in cash and cash equivalents compared to 98 million at the end of Q2.

We also continue have access to an undrawn $40 million loan facility.

The economy continues to improve but there's still a lot of near term uncertainty, especially in key verticals and the UK market. So we're making it extremely prudent in regards to our cash strategy.

During the third quarter billings decreased 25% year over year to 62.1 billion and revenue decreased 18% year over year to 46.1 million.

Well U.S. revenue declined 15% year over year UK revenue was down 52% as businesses there had been impacted by much deeper and more prolonged economic contraction in the U.S.

Sequential basis, billings and revenue were up 57% and 63% respectively in the third quarter compared to Q2 2020.

Adjusted contribution was 19.7 million in the quarter down from 20% from Q3 2019.

Adjusted EBITDA was a loss of 600000 in the quarter compared to a gain of 3 million in Q3 of 2019, reflecting the $5 million decline in adjusted contribution offset by 2.6 million of incentive compensation that was shifted from cash to equity as part of an effort to preserve cash during pandemic.

The strategic investments, we continue to make across the business to support our long term growth alongside the effects of the pandemic and the programs. We put in place to preserve cash may cause fluctuations in our EBITDA over the coming quarters.

And they use group at 26% year over year 128.3 million in the third quarter of 2019 to 161.6 million in Q3 of 2020, reflecting the wells Fargo launch and an increase and they use for existing if I partners.

ARPU during the third quarter was 29 cents and 34% year over year.

As expected ARPU continues to experience pressure year over year, you are significant and they you gross and decline in revenues.

We had 27.5 million shares outstanding at the end of Q3 weighted average shares outstanding during the quarter was $27.3 million compared to $23.6 million during Q3 of 2019.

Now turning to guidance.

The economy is clearly in a more stable position that was in the first half of the year, but there's still a lot of uncertainty related to infection trends of the U.S. and UK that could disrupt the economic recovery.

We recognize the importance of guidance to the investment community. So we've decided to provide some direction on billings and revenue.

Well our guidance is a bit wider range than usual it reflects the wider range of potential outcomes. Please.

Please note that depending on the circumstances, we may decide with old guidance in the future.

As mentioned, we foresee sequential improvement in our results continuing in Q4, and expect billings between 79, and $89 million and GAAP revenue between 55 and $62 million.

Overall, we've been pleased to see the business adapt to recover in a rapidly evolving landscape and were eager to see continued progress towards a more normal operating.

Which will help us achieve our long term financial goals.

And if things get worse before they get better we're confident that our liquidity provides us the flexibility to maintain a long term mindset and act opportunistically.

With that I'll hand, it back to Lynn for closing remarks before we open for questions.

Then.

Thanks, Andy Q3 was a solid quarter as we said in the past we remain excited about our opportunities for growth and feel like our momentum is increasing we are cautiously optimistic that sequential improvements will continue into Q4, but we have plans in place to address any scenario like always I remain proud of our team's response in the workplace.

The community and we continue to remain focused on their health and wellbeing with that I'll open the call up for your questions.

As a reminder, you asked the question at this time, please press star and the number one on your Touchtone telephone.

If your question has been answered or you wish to move yourself from the queue. Please press the pound key.

Just one moment, while we compile the <unk> roster.

Our first question comes from the line of Youssef Squali with a true Securities. Your line is open.

Excellent. Thank you very much hi, guys. Two quick questions for me first can you just speak to the October trend. If you can maybe just quantify that for US I think you did out of Q2 and you spoke to July. So if he can speak to that and just generally what kind of a mess.

[music] environment is baked into your guidance in terms of the UK versus kind of what you're seeing in the U.S. and second the delta between bookings growth and revenue growth seems to two.

We have increased again this quarter basically implying fewer incentive to customers. Maybe can you speak to the reason for that and if they're basically a structural difference between maybe offline versus online offers going going on or is it I'd just say product mix.

Based on what you guys are our you know what's what's what's most popular at this point from an offer standpoint. Thank you.

Yeah, Hey use the thinks its Lynn I I'm going to let Andy answer most of that but I will just sort of referred to the month over month billings guidance that we were giving in previous quarters, because we're giving guidance in Q4 were not going to do that and this quarter, but I can tell you. We have continued to see subsequent to that sequential month over month improvement and expect to see that in Q.

For but I think we're going to we're going to kind of be landing harder on our guidance and less on how we ended the month in October.

Yeah, that's exactly right and then I'm sure. Your second question on the UK, Yeah. We actually have you know what our expectations are pretty substantially. So we certainly are concerned.

Concerned with what's going on over there, but yeah, we've seen a lot of strength in the U.S., a which is really driving the numbers and not so much about any type of material rebound in UK. So we feel like we're covered there pretty pretty well and to your last point on rewards you know sort of we've talked about this in the past.

Yeah, we we had certain areas of the business that had perhaps a bit more margins and as those areas have really come down to UK and also some some travel you know we've certainly seen that change in mix occur we actually are seeing a lot of change.

Is from account to account historically, but it's much more around mix, we are actually riet reevaluating the margins. There I think that it's it's fair to say that this is Ben one of the higher margin quarters that we've had in a while so you will actually I think see this come back down into a normal trend as the bid.

This continues to adapt and pivot it over the next probably you know a couple of course, yeah, I definitely wouldn't put the margins this quarter and your long term model.

Got it that's helpful. Thank you.

She says.

Our next question comes from the line of Chris Shutler with William Blair. Your line is open.

Hi, everybody good afternoon.

Would you mind, giving us a I guess, a an earlier look into the sales funnel I know one of the challenges with current Ltchs is that advertisers tend to test and learn and it takes time to ramp up the budgets, but [noise].

I know when you did give the the 10, new DTC brands, which is great to see but anything else that you can you can say or or quantify around kind of new number of new advertisers using the platform relative to what you normally would see.

I mean, I can give you anecdotal information I'm not going to be able to give you other specific stats other than what we discussed already but what I would say and I've said this for a couple of quarters is we're now at the scale, where most advertisers what we take our call doesn't mean, we can't get to the right person immediately doesn't mean, they still have to go through a test and learn cycle.

So we are engaged with more advertisers than ever before simply because of the scale that we now bring to the table and the fact that we can move the needle even for the largest some move very fast the D to C. Ran for example that we referenced cabin is very fast in a much faster sales cycle than we see with the traditional you know large big box retailer for example.

But we feel good about the engagement that we have with new advertiser well see how long it takes for them to go through that testing cycle. So at this point I wouldn't give you a I would not say you should assume acceleration, even though we have seen for my points, where we are seeing acceleration and then as we continue to watch.

It is if we feel good about singling acceleration will you know.

Okay, and then on the self service tool just a I know, it's early days still but any any kind of early feedback learnings from the the agencies that you're working with and do you expect to expand the number of agencies, you're working with here in the near term.

Question. So we have told you guys not to expect us to ban the agencies were working with this year that is the 2021 initiative to start going to more agencies. What we are doing is expanding the number of clients with the two test agency. So we've already done that and that continues to stand in terms of the number of clients within those agencies.

That are testing on the platform you know the biggest feedback that we're getting from the agencies is specific reporting that they wouldn't like that is more consistent were similar with reporting that they get on other platforms. So for example, we don't overly emphasize quit because we are a true returned for investment dollar ad spend.

Form it's a pay for performance platform. So quick don't matter, but the agencies would like some of those standard metrics that they get in other platforms. So we're working on that as well as more customized the boat reporting for them to import and create their own report using some of their own data those are probably the two biggest point the feedback that we're getting from.

Mm.

But nothing major nothing that is not easily addressable and that we continue to work on so we're still very confident with our beginning of rollout in early 2021 too. Many other agencies and of course as we discussed it will take many quarters for them to do you know yet you scale, but we're confident that we're going to get started.

Okay. Thank you very much.

Hi, Chris.

And our next question comes from the line of Tim Willi with Wells Fargo. Your line is open.

Hi, Thanks, good afternoon everybody.

A couple of quick questions a couple of housekeeping and then one other just on the housekeeping side Andrew.

How should we think about interest expense in the upcoming quarters, what the convert raise is what we saw in Threeq you a decent run rate or should we think about adjusting that number a little bit as we build out the quarterly from this point.

Yeah, that's right. So we would not have had much much time here, we close that I'm kind of in the middle to towards the end wants to the 18th of September. So we would not have reflected a full quarter of interest expenses. So certainly the $230 million convert 1% you're going to have an annualized $2.3 million.

It's out there you also going to have some some or non noncash interest as well just get the the accounting and so without accrete up that discount will accrete up. So you know you will certainly see that here in the next quarter, but Mr to build that in.

So sort of started to take the 2.3 and divide that by point I'll be a good starting point be accretion won't be that material.

Yes, that's right, so you're going to get that and that will be that the cash interest that's right Yep yep perfect.

Yeah.

The second question was just around the stock comp number and I know that can move around the share price. So that is a moving target at times the way that formula.

Works, but I guess, we sort of got two quarters here sequentially, where you could average it out to 10 million and I know you brought on a bunch of people and things like that that probably help push that number up but assuming no real.

Volatility around the share price is this again sort of a good nominal number to work with them at 10 million a quarter or is there something we need to again sort of think about from a perspective of add backs and adjustment for stock comp.

Yeah, there's there's actually you're right there's quite a few moving parts on their as well the it would be the underlying kind of accounting, which creates a little bit of noise. Sometimes so we did have a little bit of a unusual charges that we don't take every every quarter that are running through their book of a couple of million dollars. It also know over the last.

Couple of quarters, right Weve been talked a little bit about that we we have diverted some of our cash compensation into equity and so it is a bit inflated within Q2 and Q3 in the prepared remarks, I think we actually quoted the $2.6 million number.

So these numbers here for Q3, and Q4 are not truly represented there a bit a bit higher than you know they they would be otherwise, but but we we do can.

I continue to think that you know over the coming quarters barring I, excluding the effects of the incentive comp, which will come back into cash at some point.

You know that that we're probably going to have some additional quarters here in 21, where it will continue to be noisy. Unfortunately, but that's that's that's.

That's kind of Directionally, what what I have.

Okay Perfect and then the question Tom just the last one and I'll hop back in the queue.

When I think you said you see a CPG was part of one of the test groups with the agencies around self service is that correct.

I'm sorry.

Yes that is right we had our first CPG brand testing the activate platform via the agencies are that phrase senior to self service platform, we haven't seen certainly work.

[laughter] it just out of curiosity I mean, obviously the models generally been sort of driven around you know Uh huh.

A purchase amount at a retailer or a market or time of day dollar amounts frequency what have you.

I know you've referenced before in the grocery channel a little bit harder because the groceries sort of have their own type of approach and they want the cpgs to a lot of promotional activity as opposed to the store.

And I guess thinking about skew level, you know awards et cetera, I think you've talked about just any thoughts there and I don't know if the CPG test is actually around a particular item and getting into sort of the skew type level redemption activity, but I guess any thoughts around that task and or just the broader concept of truly very.

The specific items, especially if you're talking about like the grocery channel, where I know you guys still sort of try to crack the code versus somebody other verticals, where as a bit easier.

No. It's a great question him. So this particular test they want to be clear. It's a CPG brand. We are testing the brand influence and and brands kind of drive that we can have as a result of this platform. It is not redeemed at the brand level. However, they are still able to.

You know, we deem within a variety of stores and by a variety of number of products underneath the CPG brands.

So it's not equal skew level offering and redemption that is absolutely something that we've all discussed over and over again you know if you could combine skew level data with transaction level data that is a game changer in our opinion, we are constantly looking at companies that we can either partner with or acquire.

Air that half skew level information, but this is call. It a very very baby step. It is not the full skew level targeting and redemption, you know a product that we'd ultimately like to build but it is a very important baby step to have a major brand and this is a brand everyone on the phone with no well I'm to have a major brand come.

In and say, let us try to test out the channel.

And in a more of a nontraditional way, it's exciting and then just very quickly I do want to talk about the stock based comp as a reminder, a lot of the variability is because we have an awful lot of our stock based comp is our performance. They not time based and so we've got a number of performance based brands out there that we may trigger and 22.

Anyone which is a big part of what makes it variable, but you know there their performance numbers that I think everyone. On this phone call would be thrilled if we get so just keep that in mind.

That's great. That's a that's helpful to have that as well. So thanks, I'll just get back in the queue. Thanks.

Our next question comes from the line of Doug <unk> with JP Morgan Your line is open.

Great. Thanks for taking the questions.

I was just hoping you could share some of your latest thoughts kind of going into the holidays. This year just on any patterns, you're seeing around consumer spending and anything that you think will will influence marketers spend on the platform and then secondly, just.

Just on the new user experience can you give us an update there are you still expecting a U.S. bank to be the first banks to see kind of the early version is and is that still on track for the first half of the year. Thanks.

Thanks, Doug Let me take your last question first the answer is yes. He was bank is on track for first half of next year, a new user experience you know it'll be version one of the new user experience, but it will be noticeably different in terms of trends that we're seeing obviously, we see the spend we watch it very closely we continue to see recovery in all spend categories, even including.

Travel, although it's still down quite a bit what I think the difference is too I think to both as we go into Q4, one is well it's looking like we're going to have another wave of some form of potential partial shutdown even in the U.S. I think most of our advertisers are more prepared to think of.

About that and to handle that shut down in a way that is very different than what they did in Q2, which was panic first and shut everything off and then try to figure things out so.

So I feel good about that I also feel good about the pivot if you will that we've had with the right return retain strategy I think we are more coded insulated with our with some of our brands than we were in the past you know the D to C brands as an example, a much more co bid resistant than.

So for example, a large dining out establishment. So we feel we feel good about Q4.

Even if there is another you know disruption I mean, if it's massive and completely unprecedented you know all things off the table, but we are generally expecting disruption in both the U.S. and the UK and still feel good about the numbers we get.

Okay, and just following up on and it's on the U.S. Bank part any any insight on what kind of the early version of the new user experience will will include what that will look like.

It's laying the foundation for having different types of offer constructs. So that's the way you need to think about it as you know today all ever offer constructs are the same as you see low now you can shop at that retailer whenever and however, you choose online offline and you get the you get the cash back.

This new user experiences completely trying to lay the foundation for there are different kinds of offers that required different kinds of consumer experiences for you to get the cash back and so you're going to see you know much more of a popular kinda feature where you can find certain kinds of offers where the offers actually.

Look a little bit different where you can sort of categorize said laying that foundation that you won't necessarily see lots of different kinds of opera constructs, but you'll see the foundation laid so that overtime, we can bring those in.

Got it okay very helpful. Thank you.

Our next question comes online of Jason Kreyer with Craig Hallum. Your line is open.

Hi, good afternoon. Thank you.

Just piggybacking here, but you talked about potentially another wave of cases or shutdowns that could be on the horizon. Just curious if you're seeing anything in your data and consumer behavior in any geography is there any uniqueness that may be showing up in the numbers that you guys see.

Nothing nothing like we were before I you know before in Q2 and into early Q3 that differences you see between states and cities and ZIP code then categories was dramatic it's a lot more leveled out now so California is not much different than New York right now.

Now you know the categories are still down some categories are still up but you don't see massive geography differences right now I anticipate that's going to start to change again quite frankly, but you know right now what you see is everything is recovering some are almost fully recover if not fully recover.

Our you know several are still not but everything is recovering and its covering pretty consistently across all areas of the U.S. right now.

Got it. Thank you and then we've seen some some changes start to trickle out just in terms of like imagery or format any of the offers from some of these bank partners. Just curious you know what goes into that on your on like how many how much of these changes are you know things.

At Cardtronics has driven working with the with your financial partners and what comes directly from the bank in terms of just making platforms updates to you know like their mobile experiences yeah.

Yeah, No I mean, all of the changes that you see to our offer constructs are driven by now the banks are friendly you know engaged partners in it but they are driven by our the changes you've seen so far are you know small test and learn types of changes nothing too material, but you know you got to start somewhere but the bank.

Do you have a decent view of where we'd like to get to ultimately and so they're all trying to put their foot in the water to test little things here and there where they can to get ready for it you know more and more so you should see that as a very positive sign up you know bank engagement willing to work with us to get some of these ideas out.

There as soon as possible.

Okay last one quick for me just going.

Going through the slide deck, you know interesting you talk about like greater touch points with consumers and it's kind of implied in there. This is based on email communication curious how those conversations go with the F.I. I mean, it seems like one or two of the Pfizer had been more aggressive with email campaigns that then the rest.

The the NAV, so just wondering how that that dialogue progresses.

Yeah, I mean, I think the vast majority of our at least larger institutions are pretty aggressive aggressive may not be the right word, but email is a routine part of how they market. This program to their customers and so I think most of our emails are fairly.

They're just hard they're just an expectation that the bank has that we're gonna email our customer is quite routinely on this program. Some banks are more willing to do sort of test and learn with any email constructs, but I believe all of our banks consider email a huge part of the marketing of this program and we'll continue to do so and the comp.

Relations or you know I.

I mean, we've talked about this we have some of the highest open rates if not the highest open rates of email sent by these banks over any other product that they have so they are excited to continue to use email to engage with customers and I do think you'll even see some of them trying to sell other products and services within the email, but still using the card ltchs content too.

The the thing that encourages the initial engagement.

Great. Thank you.

Our next question comes from the line of hair, Aaron Kessler with Raymond James Your line is open.

Great. Thanks, a lot I have a couple of questions. Maybe just first on the traditional retail category in restaurants or verticals, where are we in terms of the recoveries are you seeing kind of similar recoveries across the merchant in these categories or is it really depends from from one retailer or restaurant to another.

And just to maybe also in any EPS, maybe trends and advertiser ROI and your sense of to me how that compares to other channels as well I think these to quote kind of an incremental return on that spend number. Thank you.

Yeah. It just doesn't have the yeah, what we're actually seeing a very broad based recovery to be honest when we look at all of the spend that we see a macro level, we see very healthy gains across retail and restaurant you know, even even travel it started to pick up a little.

But it's still down significantly, but you know we're benefiting from from all of those Tailwinds as well you know when you look at our results on a vertical basis, and we don't share details there, but now it's it aligned very closely with with the overall economy and restaurant in particular for us isn't very very strong.

So I think that's that's one of the very very encouraging thing for us, which gives us a lot of comfort. When you go into two two reintroducing guidance for Q4 and you see it on a broad basis like that is it really is it really is helpful.

I do want to get the Aro ROI question is yeah, I mean, the ROI is it.

This is going to sound sillier than I mean, it's you, but it is easy to obtain it is a very simple math formula if we're running a little hot on ROI, we simply bring offer values and offer impressions down if we're running a little low on ROI, we bring impressions often sometimes offer a mount up as well it is very easy for us to hit whatever ROI we need.

It's just a simple math formula and the Big machine. So we continue to try and be at the top of the stack or most of our advertisers you know they don't.

Exactly where we rank in the stack, but you know our general sales approaches we want to be the best option you have out there at least the best option digitally and I think we we are you know you may not hear that broadly from every advertiser because they like to kind of keep up little bit Brett, but we continue to deliver incredibly strong our lives forever.

Kaiser's across every vertical.

Got it thanks Caitlyn anyway.

Our next question comes from the line of Josh Beck with Keybanc. Your line is open.

Yes, thanks for taking the question team when I wanted to follow up on one of your comments with which I found interesting.

It sounds like the advertiser.

Attitude has changed a little bit obviously, you know everyone's learned a lot in the last three to six months certainly it seems like maybe how they will re prioritize things. If there were another big slowdown has changed so I'm wondering if that's favoring.

He is very clear ROI channels like yourselves or I'm, just kind of curious to hear a little bit more about that change.

No great question and the change I was referring to is more at the macro level I don't know that it's necessarily unique to us but at the macro level I think what you have is advertisers to know that there's likely another version of some wave coming they're thinking about what their strategies are for handling that they're thinking about you know how.

They can push on mine more ore in store delivery more you know things like that and they're not in an instant reaction oh, okay I have to shut everything down and figure out what I'm going to do so that comment was much more macro I think all channels are going to see you know all all advertising platforms are going to see something similar I do.

I think where we are somewhat uniquely advantage, but it is different by vertical is because we see the spend sooner than others. We can certainly, particularly on the recovery campaign as we can tell them. When it's time to start launching a recovery in a way that other platforms. Maybe can't so we continue to believe that we're advantaged on that sort of return strategy.

Ah, but the comments were much more men at the macro level, you're just not going to see the same panicked reaction that you saw in Q2 in Q4, <unk> I might complete disaster strikes I mean, certainly if there's rioting mistreatments cities are burning after election day that you know [laughter], who knows but I think every.

Every major advertiser, we talk to know that theres going to be some bumps in Q4, and they are sort of trying to figure out how they still do business, despite bumps and regional shut downs and things like that we have adapted and pivoted our business and our clients are doing the exact same thing as well their businesses. This well much more prepared to deal with it.

Okay. That's very helpful context, and I certainly appreciate the engagement metrics.

Yeah, I think it's probably a little tough to look at them sequentially, but it does seem like there was a little bit.

Of an improvement in the after offer activation rates for restaurant and retail. So I'm. Just wondering is there anything to read into that or those verticals yes.

Starting to recover in your view just anything that really stood out to you as you look that somebody's engagement metrics.

Yeah, I I don't think there's anything really noteworthy in the activation rates one thing that that was kind of interesting I think was the uptick in the travel.

Some people have said certainly noticed that travels a very very depressed level right. Now. So one thing that is it's interesting there is that we're referring to capture a little bit a budget there, but it's off a real small base, but the activation activation rates themselves I don't think there's anything to really read into it this quarter.

Okay. That's helpful. And then you know when I know this push came up earlier about the delta between billings and revenue growth. It certainly looks like in Q4.

It's a much smaller delta the that's coming out in your.

Preliminary guidance, so anything that we should be mindful of there in terms of maybe what's a what's behind that.

Yeah, I think we first see that over the next couple of quarters that are going to margins will begin to revert back to historical levels. You know that kind of upper 60 kind of low 70 level is kind of where where we've been historically, where we feel comfortable I think it does remain to be seen how quickly that that does play there, but we are taking.

Some strategic action to to to get that Ah you know down a little bit. So those remain to be seen how far that may may come down, but but you're right. We did certainly guide for that to come down slightly, but but but you know it remains to be seen exactly where that it was going to it's going to land.

Okay, and then if I could just sneak one other quick one in on and they use it you know it certainly seems like.

You around the you know.

You know call 4.4 million level of net adds in Q3 is that maybe what was behind that is that is that a bit of a steady state.

You know for a while just anything you can share with us on on EMEA you trend.

Yeah, I think we are for the most part D Chase and wells launches are behind us at this point, so what you're gonna be see in future quarters is just natural growth rate of and they use as it relates to customers engaging an online banking and mobile banking. So just macro trends that we benefit from versus you know one last push from any of our.

Banks on you know us love them and they use that we don't already have I mean, if the U.S. bank, you'll see some uptick with them, but again on the base that we have 161 million plus.

Even U.S. bank it we're still going to be in that sort of you know.

Low to mid single digit growth rate for many quarters to come on and they use even with the out of the U.S. Bank, which would probably go across you know two quarters, maybe even three which is why we're confident you should take that back down to low to single digit growth.

Really helpful. Thank you.

Thank you and our last question is a follow up from Chris Shutler with William Blair. Your line is open.

Hey, Thanks for taking the follow up once U.S. Bank is live with the new user experience. It's it's going to be the only bank, where marketers can do more than.

Put a logo on the the bank's mobile app or or online banking platform. So what would you allow marketers.

The answer is yes, but what would you allow them to essentially specify that they want to work with the U.S. bank, because they're they're going to be the only ones that.

[noise] blogs allow the showing of imagery and then any update on other large financial institutions expressing interest and then do you Alex.

So the answer to your first question is no initially what we're going to do is allow marketers to you know test and learn with us on having some capabilities available in some banks and not in those banks Ah.

We probably won't raise prices.

So they'll probably get the benefit of some brief testing and learning with no new capabilities like they just didn't agree et cetera.

Is that as a you know eight acre it to get the banks to go faster on rolling out the new user experience.

So I think that answers that question on in terms of where the banks are you know they are all very engaged in wanting this new user experience, they're all in various stages of figuring out how to do the business case and or how to get it into their ice the pipeline for prioritization. So it is going to be many.

Many quarters I wouldn't tell you to conservatively not expect anything any large banks to roll out the new user experience billion 2021, I believe we have a good chance at getting a couple of them to start but you know this is an initiative that goes clearly, it's 2022 and maybe even into early twenties me.

Okay excellent.

Yes.

Thank you and I'm not showing any further questions. So I'll now turn the call back over to limo for closing remarks.

Okay, well. Thank you everyone for joining the call. We appreciate it and get out and vote. If you haven't already.

Bye everyone.

Ladies and gentlemen, this does conclude the program. Thank you for participating and everyone have a wonderful day.

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Ladies and gentlemen, thank you for standing by and welcome to the card analytics third quarter 2012 earnings Conference call.

At this time all participants are in listen only mode. After.

The speakers presentation, there will be a question and answer session.

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If you require any further assistance during the conference. Please press star zero and an operator will be happy to accept show.

I would now like to hand, the conference over to customers Chief legal and privacy officer. Thank you. Please go ahead Sir.

Good evening and welcome to card what external quarter 2020 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.

Putting expectations about future financial performance or results.

Our financial guidance for the fourth quarter and 2020.

Ability to achieve our key long term parties the launch of U.S. bag growth in F <unk> and they use our monthly active users increased Interconnectivity tour and they use the use of proceeds from the convertible notes the evolution of our platform to a fully operational platform.

I could cope with Nike on our business and the economy as a whole, including the stabilization of the economy potential improvements when they called Q4 yeah.

The impact of our rights retained and return strategy and the sufficiency of our capital structure for.

For a discussion of the specific risk factors that could cause our actual results to differ materially from todays discussion. Please refer to the risk factor section of the company's take you through the quarter ended September Thirtyth 2020, and we filed earlier today and in subsequent periodic reports that we file with the Securities and Exchange Commission.

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 8-K that is filed with the FCC.

Today's call is available via webcast and a replay will be available for one week you can find all the information I've just described on the Investor Relations section of critics website.

Please note that a supplemental presentation to our third quarter results has also been posted to our Investor Relations website.

Joining us on the call today is publix leadership team, including CEO and co founder Len lobby and CFO Andy Christiansen.

Following their prepared remarks, well open the call for your questions.

Let me turn the call over to Lynn then.

Thanks, Mark and.

Thank you to everyone for joining us on our third quarter 2020 earnings conference call Q.

Q3 showed increases in spend throughout the quarter. So we are optimistic that the economy is in the middle of a slow recovery. We've also seen signs of this recovery in our business and continued to succeed with our rights retained and recharge strategy.

For example, prior Q3 every major hotel partner, we had exited our channel by the end of Q3, they had all sides and I always heard that extra recovery campaign.

And despite airline travel staying a persistent decline in demand that's kind of it. We're currently on a national scale recovery campaign with one of our partners how.

However, we are still cautious in regards to some aspects of our business as consumer spending in the UK and some of our key verticals, especially travel indicting, while recovery are still dramatically reduced year over year. Our billings in these areas map in a similar way. We're also continuously monitoring spend data to make sure we're prepared as a company.

For potential new wave of infections. This winter.

With all that in mind here are resolved.

Total billings for the third quarter were $62.1 million down 25% year over year.

Total revenue, which is equal to billings net of consumer incentive was $46.1 million a decline of 18% year over year.

Adjusted contribution was $19.7 million down 20% year over year.

As we've said on calls and in meetings throughout the year, we remain optimistic about the future. Our key long term priorities of increasing the number of marketers working with us for HII, our solutions to industry evolving the cards Linux platform and demonstrating operating leverage in our business when they fully achievable now.

Now onto several updates in specific areas of the business.

With advertisers, we are seeing increased momentum in both long standing partners and new ones one of our top retail and dining partners renewed for 2021, with an 11% year over year contract growth and a 2% rate increase.

In the third quarter 10, new direct to consumer brands ran on our platform for the first time.

All can have resigned he subsequently round in Q4 and several have signed are finalizing annual contracts for 2021.

On a product no. We're pleased to report continued progress with our self service cloud agent.

Agencies continue to test and we're working with them to create the best user experience possible.

Partner agencies are providing feedback on how we can improve and simultaneously expanded testing to three new brands, including a CPG client. In addition, the platform is currently connected to over 75% of our and they use and we expect to be connected to the vast majority by the first half of 2021.

We're excited about the incremental strides we've made towards a fully operational platform this quarter.

Moving to the back side of her business Wells Fargo continues to scale and our and they you baked it's grown to 161.6 million or 26% increase year over year, we expect any progress to stabilize in the low to mid single digits in the future quarters.

Further our lunch corporations with U.S. banks are going as planned and we still expect to watch them with our version one of our new user experience in the first half of 2021.

With that I will turn it over to Andy.

Thanks Lynn.

Despite the challenging environment, we've continued to see month over month improvement in our results since April.

Many parts of the business continue to track in the right direction makes us optimistic about continued improvement throughout the rest of the year.

We remain focused on our longer term initiatives such as our self service platform as a wash U S Bank, we're looking forward to sharing future updates on our progress.

Just like last quarter I'll give a quick update on liquidity and our recent capital raised for covering Q3 results and guidance.

As many of you are aware, we completed a $230 million convertible note offering in the quarter. We firmly believe our prior liquidity was sufficient to operate the business, we decided to take advantage of very favorable financing environment.

The net proceeds will be used for working capital or other general corporate purposes, which may include potential acquisitions and strategic transactions to support long term growth our business.

In addition, this financing even greater financial flexibility to weather unforeseen economic uncertainties and be opportunistic as we evaluate avenues and organic growth.

We ended the quarter with $288 million in cash and cash equivalents compared to 98, knowing that you had a few too.

We also constrained you have access to an undrawn $40 million lump facility.

The economy continues to improve but there's still a lot of near term uncertainty, especially in key verticals and the UK market swear meeting extremely prudent in regards to our cap strategy.

During the third quarter billings decreased 25% year over year to 62.1 billion and revenue decreased 18% year over year to 46.1 billion.

While the U.S. revenue declined 15% year over year UK revenue was down 52%.

As I said, there had been impacted by much deeper and more prolonged economic contraction of the U.S.

Sequential basis, billings and revenue were up 57% and 63% respectively in the third quarter compared to Q2 2020.

Adjusted contribution was 19.7 million in the quarter down from 20% from Q3 20 my team.

Adjusted EBITDA was a loss of 600000 in the quarter compared to a gain of $3 million in Q3 of 2019, reflecting the $5 million decline in adjusted contribution offset by 2.6 million of incentive compensation that was shifted from cash to equity as part of an effort to preserve cash during the pandemic.

The strategic investments, we continue to make across the business to support our long term growth alongside the effects of the pandemic and the programs. We put in place to preserve cash may cause fluctuations in our EBITDA over the coming quarters.

And they use grew from 26% year over year 128.3 million than the third quarter of 2019 to 161.6 million in Q3 of 2020.

Reflecting the wells Fargo launch and an increase and they use for existing partners.

ARPU during the third quarter was 29 cents and 34% year over year.

As expected ARPU continues to experience pressure year over year, you are significant and that your gross and decline in revenues.

With 27.5 million shares outstanding at the end of Q3 weighted average shares outstanding during the quarter was 27.3 million compared to 23.6 million during Q3 of 2019.

Now turning to guidance.

The economy is clearly in a more stable position that was the first half of the year, but there's still a lot of uncertainty relates infection trends on the U.S. and UK that could disrupt the economic recovery.

We recognize the importance of guidance to the investment community. So we've decided to provide some direction on billings and revenue.

Well our guidance is a bit wider range than usual it reflects the wide range of potential outcomes. Please.

Please note that depending on the circumstances, we may decide with old guidance on the future.

As mentioned, we foresee sequential improvement in our results continuing in Q4, and expect billings between 79, and $89 million and GAAP revenue between 55 and $62 million.

So overall, we've been pleased to see the business adapt to recover in a rapidly evolving landscape and were eager to see continued progress towards a more normal operating.

Which will help us achieve our long term financial goals.

And if things get worse before they get better we're confident that our liquidity provides us the flexibility to maintain a long term mindset and act opportunistically.

With that I'll hand, it back to lend for closing remarks before we open for questions.

Okay.

Thanks, Andy Q3 was a solid quarter as we've said in the past we remain excited about our opportunities for growth and feel like our momentum is increasing we are cautiously optimistic that sequential improvements will continue into Q4, but we have plans in place to address any scenario.

Like always I remain proud of our team's response in the workplace and the community and we continue to remain focused on their health and wellbeing with that I'll open the call up for your questions.

As a reminder to ask a question at this time, Please press star and the number one on your Touchtone telephone.

If your question has been answered or you wish to move yourself from the queue. Please press the pound key.

Just one moment, while we can barbecue and <unk> roster.

Our first question comes from the line of Youssef Squali with a true with Securities. Your line is open.

Excellent. Thank you very much guys. Two quick questions for me first can you just speak.

Speak to the October trend. If you can maybe just quantify that for US I think you did out of Q2 and you spoke to July. So if you can speak to that and just generally what kind of a macro environment is baked into your guidance in terms of the UK.

This is kind of what you're seeing in the U.S. and second the delta between bookings growth and revenue growth seems to be.

Have increased again this quarter basically implying fewer incentive to customers and maybe can you speak to the reason for that and if they're basically a structural difference between maybe offline versus online offers calling a going on or is it I'd just say product mix.

Based on what you guys are you know what's what's what's most popular at this point from an offer standpoint, Thank you yep.

Yep, Hey use of thinks its Lynn I I'm going to let Andy answer most of that but I will just sort of referred to the month over month billings guidance that we were giving in previous quarters, because we're giving guidance in Q4 were not going to do that in this quarter, but I can tell you. We have continued to see subsequent steps that sequential month over month improvement and expect to see that in Q.

For but I think we're going to we're going to kind of be landing harder on our guidance and less on how we ended the month in October.

Yeah, that's exactly right and then.

Your second question on the UK, we actually have.

Here at our expectations there pretty substantially.

We certainly are concerned.

Concerned with what's going on over there, but yes, we've seen a lot of strength in the U.S.

Which is really driving the numbers and not so much about any type of material rebound in UK. So we feel like we're covered there pretty pretty well.

Your last point on rewards.

So we've talked about this in the past we had certain areas of the business that had perhaps a bit more margins and as those areas have really come down to UK and office, who travel we've certainly seen that change in mix.

Occur we actually are seeing a lot of changes from account to account historically, but it's much more around mix. We are actually reevaluating the margins. There I think that it's it's fair to say that this is Ben one of the higher margin quarters that we've had in a while so you will actually.

I think see this come back down into a normal trend as the business continues to adapt and pivot. It over the next probably couple of course, yeah, I definitely wouldn't put the margins this quarter and your long term model.

Got it that's helpful. Thank you both.

She says.

Our next question comes from the line of Chris Shutler with William Blair. Your line is open.

Hi, everybody good afternoon.

Would you mind, giving us say I guess, an earlier looks into the sales funnel I know one of the challenges with curlin fixes that advertisers tend to test and learn and it takes time to ramp up the budgets, but.

Yes, I know when you did give the the 10, new DTC brands, which is great to see but.

Anything else that you can you can say or quantify a round number of new advertisers using the platform relative to what you normally would see.

I mean, I can give you anecdotal information I'm not going to be able to give you other specific staff other than what we discussed already but what I would say and I've said. This a couple of quarters is we are now at the scale, where most advertisers what we take our call doesn't mean, we can't get to the right person immediately doesn't mean, they still have to go through a test and learn cycle, but we.

Our engaged with more advertisers than ever before simply because of the scale that we now bring to the table on the fact that we can move the needle even with a larger.

Yes, some move very fast so do you just see brands for example that we referenced have lived very fast in a much faster sales cycle than we see with the traditional large big box retailer for example.

But we feel good about the engagement that we have with new advertiser, let's see how long it takes for them to go through that testing cycle. So at this point I wouldn't give you a I would not say you should assume acceleration, even though we have seen for my point, where what we are seeing acceleration and then as we continue to watch it if we feel.

But about signaling acceleration will you know.

Okay, and then on the self service tool just I know, it's early days still but any any kind of early feedback learnings from the the agencies. They are working with and do you expect to expand the number of agencies, you're working once you're in the near term.

Good question. So we have told you guys not to expect us to ban the agencies were working with this year that is a 2021 initiative to start going to more agencies. What we are doing is expanding the number of clients with acute kept agency. So we've already done that and that continues to stand in terms of the number of clients within those ages.

She is that are testing on the platform.

The biggest feedback that we're getting from the agencies is specific recording that they wouldn't like that is more consistent were similar with reporting that they get on other platforms. So for example, we don't overly emphasize clip because we are a true return for investment dollar AD spend platform. Its a pay for performance platform. So quick.

Don't matter, but the agencies would like some of those standard metrics that they get in other platforms. So we're working on that as well as more customize the boat reporting for them to import and create their own report using some of their own data those are probably the two biggest point the feedback that we're getting from them, but nothing major nothing that.

It's not easily addressable and that we continue to work on so we're still very confident with our beginning of rollout in early twenties 21, too many other agencies and of course as we discussed it will take many quarters for them to get to scale, but we're confident that we're going to get started.

Okay. Thank you very much.

Hey, Chris.

And our next question comes from the line of Tim Willi with Wells Fargo. Your line is open.

Hi, Thanks, good afternoon everybody.

A couple of quick questions a couple of housekeeping and one other just on the housekeeping side.

Andrew how should we think about interest expense and the upcoming quarters with the convert raises is what we saw in Threeq you a decent run rate or should we think about adjusting that number a little bit as we build out the quarterly from this point.

Yes, that's right. So we would not have had much much time here, we close that kind of in the middle to towards the end wants to the 18th of September So we would not reflected.

A full quarter of interest expenses, so certainly that the $230 million convert 1% you're going to have an annualized $2.3 million out. There you also going to have some some.

Non noncash interest as well just get the the accounting and so without accrete up that discount will accrete up. So you will certainly see that here in the next quarter, but that's sort of build that in.

So sort of started it just take a few 0.3 and divide that by four that will be a good starting point be accretion alter that material.

Yes, that's right, so you're going to get that and that will be the cash interest that's right Yep yep perfect.

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The second question was just around the stock comp number and I know that can move around the share price. So that is such a moving target at times the way that formula.

Works, but I guess, we sort of got two quarters here sequentially, where you could averaged out to 10 million and I know you brought on a bunch of people and things like that that probably help push that number up but assuming no real.

Volatility around the share price is this again sort of a good nominal number to work with them at 10 million a quarter or is there something we need to again sort of think about from the perspective of add backs and adjustment for stock comp.

Yes, Theres actually you're right, there's quite a few moving parts on there as well as the underlying kind of accounting, which creates a little bit of noise sometimes.

So we did have a little bit of.

Unusual charges that we don't take every every quarter that are running through their book of a couple of million dollars. It also note over the last couple of quarters right. We've talked a little bit about that we we have diverted some of our cash compensation into equity and so it is a bit inflated with in Q2 and Q3 in the prepared remarks I think we.

We actually quoted the $2.6 million number.

So these numbers here for Q3, and Q4 are not truly represented there a bit a bit higher than they would be otherwise.

But but we do can.

Continue to think that over the coming quarters barring excluding the effects of the incentive comp, which will come back into cash at some point that.

We're probably going to have some additional quarters here in 21, where it will continue to be noisy Unfortunately, but that's that's.

Thats kind of Directionally, what what I have.

Okay Perfect and then the question I'm, just the last one and I'll hop back in the queue.

When I think you said you see a CPG was part of one of the test groups with the agencies around self service is that correct.

I'm sorry.

Yes that is right. We've had our first CPG brand testing activate platform via the agencies or the fight senior to self service platform, we haven't in Germany.

[laughter] and just out of curiosity I mean, obviously the model is generally been sort of driven around you know.

A purchase amount at a retailer or a market or time of day dollar amount frequency what have you I.

I know you've referenced before in the grocery channel a little bit harder because the grocery store to have their own type of approach and I, let the cpgs do a lot of promotional activity as opposed to the store.

And I guess thinking about skew level, you know awards et cetera, I think you've talked about just any thoughts there and I don't know if the CPG test is actually around a particular item and getting into sort of the skew type level redemption activity, but I guess any thoughts around that task and or just the broader concept of truly very.

The specific items, especially if you're talking about like the grocery channel, where I know you guys sold through and try to crack the code versus some of the other verticals where as a bit easier.

No. It's a great question him. So this particular test they want to be clear. It's a CTG brand. We are testing the brand influence and and brands kind of drive that we can have as a result of this platform. It is not redeemed at the brand level. However, they are still able to.

You know, we deem within a variety of stores and by a variety of number of products underneath the CPG brands.

So it's not a full skew level offering and redemption that is absolutely something that we've all discussed over and over again you know if you could combine skew level data with transaction level data that is a game changer in our opinion, we are constantly looking at companies that we can either partner with or acquire.

Where that half skew level information.

But this is call it a very very baby step up it is not the full level targeting and redemption.

Products that we'd ultimately like to build but it is a very important baby step to have a major brand and this is a brand everyone on the phone wouldn't know well and have a major brand come in and say, let us try to test out the channel.

In a more of a nontraditional way as exciting and then just very quickly I do want to talk about the stock.

Stock based comp as a reminder, a lot of the variability is because we have an awful lot of our stock based comp is performance based not time based and so we've got a number of performance based brands out there that we may trigger in 2021, which is a big part of what makes it variable, but you know there their performance numbers that I think every.

Then on the phone call would be relatively good so just keep that in mind.

That's great that's helpful to have that as well so thanks, I'll just cut back in the queue. Thanks.

Our next question comes from the line of Doug <unk> with Jpmorgan. Your line is open.

Great. Thanks for taking the questions.

I was just hoping you could share some of your latest thoughts kind of going into holiday. This year, just on any patterns, you're seeing around consumer spending and anything that you think will influence marketers spend on the platform and then secondly.

Just on the new user experience can you give us an update there are you still expecting you EPS bank.

Maybe the first bank to see kind of the early version as and is that still on track for the first half of the year. Thanks.

Thanks, Doug Let me take your last question first the answer is yes give us bank is on track for first half of next year, a new user experience.

You know it'll be version one of the new years' experience, but it will be noticeably different.

In terms of trends that we're seeing obviously, we see the spend.

Watched it very closely we continue to see recovery in all spend categories, even including travel, although it's still down quite a bit.

What I think the difference is too I think to both as we go into Q4, one is well it's looking like we're going to have another wave of some form of potential partial shutdown even in the U.S. I think most of our advertisers are more prepared to think about that and to handle that shut down in a way that is very dip.

Prison, what they didn't Q2, which was panic first and shut everything off and then try to figure things out.

So I feel good about that I also feel good about the pivot if you will that we've had with the right return retained strategy I think we are more.

Insulated with our with some of our brands than we were in the past you know the D to C brands as an example, a much more cobot resistant than for example, a large dining out establishment. So we feel we feel good about Q4.

Even if there is another you know.

Just reduction I mean, if it's massive and completely unprecedented you know all things off the table, but we are generally expecting disruption in both the U.S. in the UK and still feel good about the numbers we gave.

Okay and just following up on.

And then on the U.S. Bank part.

Any any insight on what kind of the early version of the new user experience will include what that will look like.

It's laying the foundation for having different types of offer contract. So that's the way you need to think about it as you know today all ever offer constructs are the same as you see low now you can shop at that retailer whenever and however, you choose online offline and you get the you get the cash back this new user experience.

Completely trying to lay the foundation for there are different kinds of offers that require different kinds of consumer experiences for you to get the cash back and so you're going to see much more of a popular kind of feature where you can find certain kinds of offers where the offers actually look a little bit different.

Where you can sort of categorize said laying a foundation that you won't necessarily see lots of different kinds of our contract, but you'll see the foundation laid so that overtime, we can bring those in.

Got it okay very helpful. Thank you.

Our next question comes online of Jason Kreyer with Craig Hallum. Your line is open.

Hi, Good afternoon. Thank you just piggybacking here, but you talked about potentially another wave of cases or shutdowns that could be on the horizon. Just curious if you're seeing anything in your data on consumer behavior in any geography is there any uniqueness that may be showing up in the numbers that you guys see.

Nothing nothing like we were before.

So far in Q2 and into early Q3 that difference is you could see between the cities and ZIP code then categories was dramatic it's a lot more leveled out now so California is not much different than New York right now.

The categories are still down some categories are still up but you don't see massive geography differences right now I anticipate that's going to start to change again quite frankly, but right now what you see is everything is recovering some are almost fully recover if not fully recovered several are still.

But everything is recovering and its covering pretty consistently across all areas of the U.S. right now.

Got it thank you and then we've.

We've seen some some changes start to trickle out just in terms of like imagery or format of the offers from some of these bank partners. Just curious you know what goes into that on your on like how many how much of these changes are things that card, but it has driven working with the with your.

Financial partners and what comes directly from the bank in terms of just making platforms updates to you know like their mobile experiences.

Yeah, No I mean, all of the changes that you see to our offer constructs are driven by now the banks are friendly you know any.

Gauged partners in it but they are driven by us the changes you're seeing so far are small test and learn types of changes nothing too material, but you know you got to start somewhere but the banks do you have a decent view of where we'd like to get to ultimately and so they're all trying to put their foot.

The water to test little things here, and there where they can to get ready for more and more so you should see that as a very positive sign up.

Thank engagement willing to work with us to get some of these ideas out there as soon as possible.

Okay and last one quick for me just going.

Going through the slide deck ill.

Interesting you talk about like greater touch points with consumers and that's kind of implied in there. This is based on email communication curious how those conversations go with the F.I. I mean, it seems like one or two of the five had been more aggressive with email campaigns that then the rest of them out so just wondering how that.

That dialogue progresses.

Yeah, I mean, I think the math.

The majority of our larger institution are pretty aggressive.

Aggressive aggressive may not be the right word, but email is a routine part of how they market this program to their customers.

I think most of our emails are fairly.

They're just hard they're just an expectation that the bank has that we're gonna email our customer is quite routinely on this program. Some banks are more willing to do sort of test and learn with in the email constructs, but I believe all of our banks consider email a huge part of the marketing of this program and we'll continue to do so and the Conversely.

Patients are you know.

I mean, we've talked about this we have some of the highest open rates if not the highest open rates of email sent by these banks over any other product that they have so they are excited to continue to use emails to engage with customers and I do think you'll even see some of them trying to sell other products and services within the email, but still using the card ltchs content.

The the thing that encourages the initial engagement.

Great. Thank you.

Our next question comes from the line of hair, Aaron Kessler with Raymond James Your line is open.

Great. Thanks, a lot a couple questions maybe just first on the traditional retail category in restaurants verticals.

Where are we in terms of the recoveries are you seeing kind of similar recoveries across the merchant in these categories are isn't really that Penn from from one retailer restaurant to another.

Just to maybe also in any EPS, maybe trends and advertiser ROI and your sense of how that compares to other channels as well I think the quote kind of an incremental return on EPS. The number thank you.

Yes, and this doesn't have it.

Yeah, what we're actually seeing a very broad based recovery to be honest when we look at all of the spend that we see a macro level, we see very healthy gains across retail and restaurant.

You know even even travel is started to tick up a little bit it's still down significantly, but we're benefiting from from all of those tailwinds as well. We you look at our results on a vertical basis, we don't share.

Sales there, but now it's it aligned very closely with the overall economy and restaurant in particular for US has been very very strong.

So I think that's that's one of the very very encouraging thing for us, which gives us a lot of comfort when you go into to reintroduce and guidance for Q4, and you see it on a broad basis like that it really is it really is helpful.

I do want to get the Aro ROI question is yes, I mean, the ROI is it.

This is this is going to sound silly or that I mean, it's you, but it is easy to obtain it is a very simple math formula if we're running a little hot on ROI, we simply bring offer values and offer impressions down if we're running a little low on ROI, we bring impressions often sometimes offer a mt. Todd as well it is very easy for us to get whatever ROI we need.

It's just a simple math formula and the Big machine. So we continue to try and be at the top of the stack or most of our advertisers you know they don't.

Please where we rank in the stack, but our general sales approaches we want to be the best option you have out there at least the best option digitally and I think we we are you may not hear that broadly from every advertiser because they like to kind of keep up little bit Brett, but we continue to deliver incredibly strong ROI for our.

Advertisers across every vertical.

Got it thanks Caitlyn anemic.

Our next question comes from the line of Josh Beck with Keybanc. Your line is open.

Yes, thanks for taking the question team when I wanted to follow up on one of your comments with which I found interesting it sounds like the advertiser.

Attitude has changed a little bit obviously everyone's learned a lot in the last three to six months certainly it seems like maybe how they will re prioritize things. If there were another big slowdown has changed so I'm wondering if that's favor.

In these very clear ROI channels like yourselves or I'm, just kind of curious to hear a little bit more about that change.

No great question and.

The change I was referring to is more at the macro level I don't know that it's necessarily unique to us but at the macro level I think what you have is advertisers to know that there is likely another version of some wave coming they're thinking about what their strategies are for handling that they're thinking about you know how they can push on mine more ore.

Or in store delivery more things like that and they're not in an instant reaction of okay. I have to shut everything down and figure out what I'm going to do so that comment was much more macro I think all channels are going to see all advertising platforms are going to see something similar I do think where we are somewhat unique.

The advantage, but it is different by vertical is because we see the spend sooner than others. We can certainly, particularly on the recovery campaign, we can tell them. When it's time to start launching a recovery in a way that other platforms may be cant. So we continue to believe that we're advantaged on that sort of return strategy, but the comments were made.

It's more men at the macro level, you're just not going to see the same panicked reaction that you saw on Q2 in Q4.

Complete disaster strikes I mean, certainly if there's rioting the street in the cities are burning after election day that you know [laughter], but I think every every major advertiser, we talk to know that theres going to be some bumps in Q4, and they are sort of trying to figure out how they still do business, despite bumps and regional shut downs and things.

Like that we've adapted and pivoted our business and our clients are doing the exact same thing is while their business as well much more prepared to deal with that.

Okay, that's very helpful.

Context, and I certainly appreciate the engagement metrics.

Yeah, I think it's probably a little tough to look at them sequentially, but it does seem like there was a little bit of an improvement in the after offer activation rates per restaurant at retail. So I'm. Just wondering is there anything to read into that or those verticals.

Starting to recover in your view just anything that really stood out to you as you looked at some of these engagement metrics.

Yeah, I don't think there's anything really noteworthy in the activation rates one thing that that was kind of interesting I think was the uptick in the travel.

Some people have I've certainly noticed that travels a very very depressed level right now so.

One thing that it's interesting there is that we're referring to capture a little bit of budget, there, but it's off a real small base, but.

But the activation activation rates themselves I don't think there's anything to really read into it this quarter.

Okay. That's helpful and then when I know this push came up earlier about the delta between billings and revenue growth. It certainly looks like in Q4.

A much smaller delta the that's coming out in your.

Preliminary guidance, so anything that we should be mindful of there in terms of maybe what's what's behind that.

Yeah, I think we foresee that over the next couple of quarters that are going to margins will begin to revert back to historical levels that kind of upper 60 kind of low 70 level is kind of where where we've been historically, what we feel comfortable I think it does remain to be seen how quickly that that does is it but we are taking.

Some strategic action to to to get that down.

Down a little bit so those remain to be seen how far that may may come down, but but you're right. We did certainly guide for that to come down slightly but.

But but it remains to be seen exactly where that is going to is going to land.

Okay, and then if I could just sneak one other quick one in on and they use it yet it certainly seems like.

You around the you know.

You know call it $4.4 million level of net adds in Q3 is that maybe what was behind that is that is that a bit of a steady state.

For a while just anything you can share with us on that you Trust.

I think we for the most part D Chase and wells launches are behind us at this point.

So what you're going to be see in future quarters is just natural growth rate of and they use as it relates to customers engaging an online banking and mobile banking. So just macro trends that we benefit from versus you know one last push from any of our banks on you know a lot of them and they use that we don't already have obviously U.S. bank, you'll see some.

Check with them, but again on the base that we have 161 million plus even U.S. bank. It we're still going to be in that sort of you know.

Low to mid single digit growth rate for many quarters to come on and they use even with the out of the U.S. Bank, which would probably go across you know two quarters, maybe even three which is why we're confident you shouldn't take that back down to low single digit growth.

Really helpful. Thank you.

Thank you and our last question is a follow up from Chris Shutler with William Blair. Your line is open.

Hey, Thanks for taking the follow up.

Once you S Bank is live with the new user experience it it's.

It's going to be the only bank, where marketers can do more than.

Put a logo on the the bank's mobile app or or online banking platform. So what would you allow marketers I think the answer is yes, we do allow them to essentially specify that they want to work with the U.S. bank, because they're they're going to be the only ones that.

Blogs allow.

The showing of imagery and then any update on other large financial institutions expressing interest and then do you Alex.

Great.

So the answer to your first question no. Initially what we're going to do is allow marketers to test and learn with us on having some capabilities available in some banks and knocking those banks.

We probably won't raise prices.

So they'll probably get the benefit of some three testing and learning with no new capabilities like they've just the misery et cetera.

Is that as a.

Harris to get the bank to go faster on rolling out the new user experience.

So I think that answers that question on in terms of where the banks are you.

They are all very engaged in wanting this new user experience, they're all in various stages of figuring out how to do the business case.

And or how to get it into their eyes pipeline for prioritization. So it is going to be many many quarters I wouldn't tell you to conservatively not expect anything any large banks to roll out the new user experience fully in 2021, I believe we have a good chance that getting a couple of them to start but you know.

This is an initiative that goes clearly, it's 2022 and maybe even into early twenties me great.

Okay excellent.

Yes.

Thank you and I'm not showing any further questions. So I'll now turn the call back over to lend Lowe for closing remarks.

Okay, well. Thank you everyone for joining the call. We appreciate it and get out and vote. If you haven't already.

Hi, everyone.

Ladies and gentlemen, this does conclude the program. Thank you for participating and everyone have a wonderful day.