Q1 2021 Cardlytics Inc Earnings Call

May 4, 2021

[music].

Greetings and welcome to the cartilage Q1, 2021 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow from presentation.

And you should require operator assistance during the conference. Please press Star zero on your telephone keypad. Please note. This conference is being reported I would now like to turn the conference over to your host Christian.

Legal and privacy officer. Thank you Sir you may begin.

Good evening and welcome to cosmetics first quarter 2021 financial results call.

We begin and let me remind everyone that today's discussion will contain forward looking statements based on our credit assumptions expectations and beliefs, Inc.

<unk> expectations about future financial performance and results, including our financial guidance and cash position for the second quarter and full year of 2021 and our ability to achieve key long term priorities the launch and additional functionality by banks, including U S Bank growth and M. A use or monthly active users and returned to year over year.

The launch of our new user experience and new technology infrastructure, and the increase and our two or average revenue per user and the impact of COVID-19 on our business and the economy as a whole, including the stabilization of the economy and potential improvements and the economy.

And see if our capital structure continued momentum in 2021, and the closing and anticipated benefits of our acquisition of Dosh Holdings, Inc. Enbridge, Inc.

For a discussion of the specific factors that could cause our actual results to differ materially from today's discussion. Please refer to the risk factors section. Other companies 10-Q for the quarter ended March 31, 2021, and and subsequent periodic reports that we filed 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 SEC.

Today's call is available via webcast and a replay will be available for one week you can find all the information and I've. Just described on the Investor Relations section of <unk> website. Please note that a supplemental presentation to our first quarter results has also been posted to our Investor Relations website joining.

Joining us on the call today is <unk> leadership team, including CEO and co founder Lynne Laube and CFO Andy Christiansen.

Following their prepared remarks, we'll open the call to your questions with that let me turn the call over to Lynn Lynn.

Thanks, Kirk and thank you to everyone for joining us on our first quarter 2021 earnings call.

And its strong starts the year with Q1 billings and total revenue exceeding expectation, even before adding contributions from dash and March our results reflect the continued positive trajectory in our business and while we're still experiencing impacts from COVID-19. We are encouraged by the momentum we're seeing and the U S.

However, U S travel and our UK business continued to be significantly impacted by the pandemic and related lockdown.

Before moving to our results I would like to briefly address our recent acquisitions, we are integrating dos and making solid progress on combining the two organizations. We are pleased with the team and the capabilities and are already seeing our acquisition thesis come from like well.

Also pleased to say that we expect to close the bridge acquisition in May We believe the bridge acquisition has the potential to be transformational given its technology and unique position and a customer data platform or CDP market.

I want to reiterate a few strategic points on both acquisitions for our investors.

And we expect the bridge and <unk> acquisitions will first once integrated allow cargo next to utilize SKU data to provide product little level offers from cpg's grocers and wider retail.

Second accelerate the next generation consumer experience with consumer engagement features and finally provide a lightweight platform to attract new partners and the new bank and non Fi industry.

We're very pleased with the early progress and results from Josh already now.

Now, let's turn to some highlights from the first quarter.

Total billings were $76 3 million up 13% and year over year.

Total revenue, which is equal to billings net of consumer incentives was $53 $2 million and increase of 17% from Q1 2020 and.

And adjusted contribution was $24 $3 million up 19% and year over year.

Our Q1 results reflect growth in billings across many of our major industry verticals.

<unk> continues to be the largest vertical measured by billings and we're pleased to have delivered year over year growth and this sector. In addition, we saw strong billing growth and both our retail and specialty retail verticals.

And we're encouraged by the return of positive year over year growth and our restaurant critical.

I want to highlight a couple of success stories to drive home the importance of our platform to advertisers.

We secured our first annual contract with one of the largest E comm platforms and the world. Despite the fact that the same client cut advertising budget by almost 75% for 2021.

Additionally, a large specialty retail client exited our channel and the second half of 2020, and then the client and began experiencing lost share of wallet and we prove that targeting these switchers delivered a positive ROI. This resulted and the clients signing and meaningful annual 2021 agreement.

Travel remains muted given the ongoing impacts of COVID-19, but overall, we remain encouraged by momentum, we're seeing and our results and we believe we're on track to deliver strong results and 2021.

Our Mou base grew to over $168 million and the first quarter up approximately 20% year over year, mainly due to the launch of Wells Fargo. We expect that core CD, Alex Mou growth will eventually stabilize in the low to mid single digits in future quarters. We are evaluating the impact <unk> will have on M. I use.

And <unk> over time.

We're proud to announce that U S Bank has launched with our newly built AD server that enables a richer and more robust user experience.

AD server offers both API and SDK integrations to enable faster iterations of any user experience module.

Together with U S Bank, we're taking and iterative approach to their deployment continuously launching with new functionality over the course of the next few quarters.

One of our initial modules is focused on educating the consumer about the offers program and how it works in order to drive adoption and engagement.

Additionally, one of our other large banks is committed and will be deploying the new AD server and the second half of 2021.

And to the first half of 2022, we will be migrating a large portion of our network over to this new technology infrastructure to enable speed scale and engagement.

Before I turn it over to Andy I also wanted to announce that we have launched our first U K based Fintech rewards program with curve, we're excited about the potential and this partnership Andy.

Thank you Lynn we are extremely pleased with our results and Q1, which marked a return to year over year growth, our existing business before including the results of dosh exceeded our expectations before diving further into our results I wanted to discuss our cash and liquidity position at the end of Q1, which includes our equity offering and the dog.

Acquisition, and where we expect to be following the close and bridge we.

We ended Q1 with $614 million in cash and cash equivalents compared to $293 million at the end of 2020.

We expect to have over 215 million and cash on a pro forma basis. After the bridge acquisition, which we expect to close later this month.

In addition, our loan facility of $50 million remains undrawn at this time.

Our sheet and liquidity remain extremely strong and following the brakes deal flow.

We're always evaluating our capital structure, we see no immediate need to raise additional funds.

Now turning to our Q1 performance, where we saw the usual seasonal decline from Q4 to Q1 Q1 landed at the high end of our expectations before taking into account the partial month contribution from the <unk> acquisition.

These strong results came despite the ongoing challenging environment and the U K is a strict COVID-19, lockdowns and continued limitations and travel.

As Lynn mentioned earlier, we saw strength and several industry verticals. What's also encouraging is the growing number of clients and our channel since the onset of the pandemic.

While most of our new accounts are relatively small budgets the increase and advertisers reflects the pivot we made in Q2 and 2020 and bodes well for the long term health of the platform.

As mentioned before we believe the self service capabilities of our new platform will accelerate this trend over time and give us a more scalable solution to onboard advertisers with budgets of all sizes.

Billings increased 13% year over year to $76 3 million, excluding the additional $1 3 million and billings from Das and the last 25 days and the quarter, our billings totaled $75 million and took up the high end of our guidance.

Revenue totaled $53 2 million, a 17% increase over Q1 and 2020.

And as expected billings margins were in line with historical norms at 70%.

Moving the half a million dollars and additional revenue from gosh, our revenue totaled $52 7 million, which was near the high end of our guidance.

U S revenue increased 23% year over year, However, U K revenue was down 25 per cent.

U K business continues to be meaningfully impacted by the pandemic as lockdowns implemented to slow the spread of new COVID-19 variance just started to unwind and April.

We expect and U K to continue this unwind carefully and anticipate some continued pressure our U K results and the near term.

Adjusted contribution was $24 3 million and increase of 19% year over year.

Don't expect adjusted contribution to significantly outpace revenue growth going forward, but it's worth noting that dos contract in place today of a lower level of partner share and other third party costs.

Adjusted EBITDA was a loss of $3 9 million compared to a loss of 4 million and Q1 and 2020 <unk>.

Excluding stock compensation, and gosh contributed $1 3 million and operating expenses.

Sensors within R&D and sales increase on a year over year basis and reflects investments made in the back half of 2020 to bring and several new leaders across the organization and increase our product development and analytical capabilities.

We expect to generate a larger EBITDA loss in Q2.

Our investment and gosh as reflected for a full quarter.

It's also worth noting that we incurred $7 million and acquisition costs during the current quarter and those costs are excluded from adjusted EBITDA, We expect additional acquisition and integration costs and the future as we continue and a great Josh and closed the acquisition of bridge.

As Lynn mentioned earlier and they use grew 20% year over year to over $168 million. This was driven by the wells Fargo launch accelerated organic growth from logins to check on the stimulus checks and the <unk> acquisition.

Bank will add several million and they use once fully launched we also expect continued growth from Josh as new partners come online throughout 2021.

ARPA during the first quarter was 32.

With the prior year.

We expect <unk> to increase on a sequential and year over year basis throughout the rest of 2021.

And they stabilized and we continue to grow our revenue.

We had $31 8 million shares outstanding at the end of Q1 compared to $27 8 million at the end of last year, which reflects the sale of $3 9 million shares in March.

Weighted average shares outstanding during the quarter was $29 3 million compared to $26 seven loans during Q1 and 2020.

Now turning to guidance our guidance range remains a bit wider than usual due to what may be and uneven recovery and U K and continued uncertainty of when the expected rebound and travel and entertainment occur.

Also while our guidance includes dosh does not include the results and bridge, which is not yet closed.

We expect billings in Q2 of between 85 and $95 million revenue of between 58% and $65 million and adjusted contribution of between 26% and $30 million.

Full year, and we expect billings of between 380 and $420 million revenue of between 260 and $285 million and adjusted contribution of between $117 5 million.

$132 5 million.

Again. These ranges include contributions from gosh, and we will incorporate per inch next quarter.

Well, we have a lot of work ahead of US and 2021, we are very excited about the collective potential of car lytic Stache and bridge and order to realize that full potential we are making sure we have sufficient resources and investments to thoughtfully bring these companies together and.

And meaningful shareholder value.

Legacy business is strong and has a lot of momentum and these acquisitions will not only sustain that momentum for years to come. We will also open up new avenues for future growth and with that I'll turn it back over to Lynn.

Thanks, Andy Q1 was a great start to the year, we're looking forward to executing on our plan and acquisition integration for the rest of 2021 with that I will open up your call for questions.

At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Information So will indicate your line is and the question queue.

You may push start to feel like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment. Please as we poll for questions.

Our first question comes from the line of Aaron Kessler with Raymond James. Please proceed with your question.

Alright, great. Thanks.

And any updates on the self serve platform and I think you've started to roll that out.

Significantly from feedback there and then.

And of the new <unk> platform at a U S Bank and he said one other large platform. If you just how you think that could impact kind of conversion rates or monetization.

What you would expect there maybe following me for Andy just on the guidance change from a full year net.

And what's the change and organic versus kind of including estimates for dosch. Thank you.

And are you made a force to be with you good yep.

Yep. Thank you.

Yes, So let me take I'll take the U S. The U S Bank question first.

And so they are they are fully rolled out with her and excuse me. They are rolled out with our new AD server and they are not fully rolled out with the new user experience that is going to be coming and over multiple quarters, So they and and we talked about on the call day.

You've got modules that are API based and they deploy different modules based on where they are in the rollout of <unk>.

And now and there are still very focused on modules that are helping customers find the program and educate them on how to use them and then over time, they're going to incorporate more of the modules that are a little bit more focused on different kinds of content different kinds of experiences.

Slowly sort of try to train these customers from scratch and how to use our program across a wider variety of offer features overtime, but that that what youre seeing now and for goods. The first module.

Over multiple quarters, they will be rolling out more modules.

And that U S Bank I apologize I forgot your second question.

As far as just kind of any updates on the self serve platform as well.

I mean, you try and talk about everything every time, but they'll start up continues to go incredibly well and and then rollout now with multiple agencies, we are still committed to giving you.

From a billings numbers from agencies, starting in Q3 of 2021 this year.

And you'll be able to see how it's growing by looking at actual results.

Got it great and he's assigned maybe estimates for kind of dos and without how should we think about that.

Yeah.

Our our increase in guidance certainly a big portion of that is attributed to the three quarters.

Of the year, we're going to gain from from the Dosh acquisition.

And I do want to.

Make sure the debt.

And to understand and so we had.

A bit of strength during Q1, and I think that.

Turning to give us a lot more confidence that.

We're going to be on a nice trajectory and the core business is doing quite well.

So I think there is some amount.

A small amount.

This does relate to the strength of the core business. There are some pieces that are all giving and it's still a little bit of pause like I mentioned.

We're in the UK right, they're still just now and we're getting from they're locked down and I think that there is a little bit of risk there as to how.

And that may that may be.

And we'll feel pretty comfortable with.

Our business with speed, and perhaps weakness and the U K and so we're going to be on track for our full year. So it is largely nosh.

Great. That's helpful. Maybe just a finalist and share count how should you think about that for them and are there.

Share count and so obviously, there's a significant jump and share count here in Q1 was debt $3 9 million share sale that we had.

Without needing any additional funds for the foreseeable future I definitely don't think theres going to be any need to raise.

Funding through new offerings.

So I think it can be.

Early new did increase.

Do you recall.

All of these base award, we've been issuing and glass several years for executives.

And with those will it does remain a little bit of uncertainty and that's really that much less shares and we're talking about.

Offerings, but those are out there we will see some lumpiness.

Later in the year, perhaps.

Got it that's helpful. Thank you Andrea Thank you Juan.

Yeah.

Our next question comes from the line of Jason and Crane with Craig Hallum. Please proceed with your question.

Alright, Thanks, and good afternoon, just in regards to the U S Bank AD server from a consumer experience perspective.

It is a U S bank consumer experiencing anything really different than like a wells Fargo or chase or bofa consumer or is it is it just those modules at this point and really the consumer experience changes with the new platform rollout.

And the new platform they are on the new platform.

And the new platform and API, driven and they have only chosen to take a few of the API or their initial deployment of the experience and those Apis are almost exclusively focused on education.

So from that perspective, it's very different you won't see anything like that and the other banks in terms of these education module, but in terms of the actual offer content right now and the different types of content that we hope to display over time, they're going to look very very similar I think we've discussed this before but U S bank ultimately is going to be.

And somewhere in the neighborhood of four to 6 million M of us it's not enough to truly get the scale up significantly different types and offer construct and offer.

Offer types. If you will so we're really focused on educating the consumer we're focused on there is some richer imagery and it so from that perspective, it will look very different and the other banks, but they see that real meaningful change as they start ship a range of different types of offer construct and offer experiences that's going to be you know multiple quarters and as I do.

Scott, we've got other large banks and committing to the appointment of a new AD server and the back half of this year, which means they'll be doing the same type of thing going into Q1 and Q2 of next year. That's when we'll start to have the scale to really be able to drive and different kinds of experiences and advertising cost.

And into that channel.

And that helped.

That that helps I appreciate you kind of straightening that out for me.

As a follow up or maybe a couple of follow ups here, but if you can give any color just on the cadence of what you've seen over the last six to eight weeks.

You are lapping some volatility from the pandemic. So just kind of wondering how things have trended there and then any specific vertical commentary as you've lapped that I guess I had one on travel and we started to see some resurgence and advertising and travel and I don't know if you guys have seen that or not or have any perspective on that.

Yeah, I'll comment and then I'll throw it over to Andy as well.

Much of our beat was because of strong increase consumer spend that we saw in March and.

And we didn't see in January and February, but we thought in March and that that's why we came in at the high end of our guidance. It was really the last three weeks and we are seeing and pick back up fairly materially and a lot of categories. We still haven't seen it pick back up as much as and you would hope and travel.

And that it.

It is changing and in April but for the Q1 travel was still very very depressed, but saw a nice recovery and a lot of the other verticals and not and the last release in March.

And any debt.

That's right.

So we're starting to see a slight uptick and travel, but it's not nearly as meaningful and start the <unk>.

Not the rebound and we're looking for.

Right. These are not the joined Youre looking for it made a force be with you Andy.

[laughter] thanks for the color I appreciate it.

Our next question comes from the line of Tim Willi with Wells Fargo. Please proceed with your question.

Thank you and and good afternoon everybody.

And two quick housekeeping and then I had a couple about the business just to make sure interest expense on a go forward should it be around 500000 a quarter.

Is that about right post offering close to debt pay down and.

Redemption of convertible and everything.

And 1% on that and so.

No.

Yeah.

That's about that's about right.

Okay.

3 million on that occur per year.

Okay, perfect and then the other one was I noticed and the add backs. This quarter I think it was 998000 and acquisition intangible.

Along with the merger charge I know the charge you sort of add that back hard to predict goes is that 998000 number sort of a way to think about one month of and more tied to Dodge or is that sort of some kind of onetime accounting treatment, that's not really going to be part of the income statement on a go forward basis.

And you're absolutely right. It's the former it'll be the amortization on those acquired intangibles going forward and so you're right. It's just a partial.

Month, or 25 days of amortization on those and tangibles.

And you don't treat that as an add back I'm assuming per adjusted EBITDA and net income I just want to make sure we got our adjustments right and the models.

So we added that as a discrete add back and our non-GAAP net loss.

And we discussed our press release, we already and add back depreciation and amortization and our adjusted EBITDA calculation. So it is reflected there as well we don't add at all.

GAAP net loss, so you would see a difference there.

Okay, and then just going back to the business I can appreciate the U K and everybody sort of I think and understand what's going on in Europe. I mean, when last year, you talked about I can't remember the exact verbiage up the strategy.

Your U S customers.

And I can retain rise and there were three words put together about how youre going to market to bring people back onto the platform and get them going again, and I guess I'm curious as you look at like the U K and maybe progress that had been made but then sort of you know maybe how to get shelf for a little bit what their lockdowns as does the U K do you feel like you sort of ultimate.

And we sort of comes back like the U S and there was something about culturally or their banking industry that we shouldn't think about how the U S has come back so quickly that that is how the UK should play out once restrictions continue to run their course, any new thoughts about how it'll play out versus what we've seen and North America.

Good question and I don't know that I have the exact answer here and what I would say the range retain return strategy with a multi quarter strategy for it and as you know and I would I would now describe the U S and slowly and be a.

Return part of that strategy right.

That's very clear.

And most of the vertical and we discuss travel still a little muted but.

And we're fully and the return element of that strategy.

But that's been almost a full year. So I am cautiously optimistic that the UK will go through rise retain return and a very quick curious when they open back up because they have the advantage of opening back up with.

Most people free vaccinated and so I think it will just be very accelerated but only time will tell there is nothing.

And I see that's fundamentally different about how this has impacted banking or retail or anything like that and the U K that wood.

Argue something.

Different and that sort of hypothesis.

Okay, Great. That's all I had thank you very much.

And once again as a reminder, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad once again and if you'd like to ask a question. Please press star one.

Telephone keypad.

Our next question comes from the line of Doug Anmuth with Jpmorgan. Please share with your question.

Hey, good afternoon. This is day one.

And for Doug and thanks for taking the question.

And for some.

As a follow up to the Rockford team.

And of our strategy.

Firstly from a consumer marketers within core within the ryzen and retain category and Mike.

And if there are behaviors have changed the world.

I'll start to reopen and how should we think about like the behavior of the consumers.

Marketers within that category going forward are you expecting any reversion back to pre pandemic levels or do you think from other opinions that you've had and plenty plenty and will be sustainable and then as a follow up.

And you talked about policy and integration going well, but just curious.

And if theres anything you learn new of all costs that are a part of your family.

Yes.

And so on the on the three our strategy is you'd like to call. It which is like C. P. Three O may the force you issue them.

I think that sorry, guys I, just got a little on what these big growth.

And.

Well I think the direct to consumer and the rise in the direct to consumer vertical I think it's here to stay.

It's just become a very very powerful vertical I think both in terms of consumer demand or those types of products and just us being a really good channel to drive that I think that is absolutely here to stay I think the other thing that I can clearly say with and reasonably confident that appear to stay is online grocery.

We've seen a massive shifts and demand there and we have not seen it start to shift back and I will say and every other vertical and we've seen it start to shift back to in store purchases and I don't know if its going to go back to the exact mix. It was pre pandemic, but they're all going backwards, two meaning that the prospect height of the online spend.

And that does verticals had has now gone and they're buying more in store with the exception of those two categories D, which obviously doesn't have and instore component and and online grocery and.

And so to be determined I don't think consumer spend is ever going to go quite back to the levels and in store that it wasn't before but I think for many of our more traditional verticals restaurant and retail and it's good it's not going to be you know and if it was at 90 per cent per boat before it might be at 80%, it's not gonna stay and 40% range right just to give.

You some directional numbers.

Does that make sense.

Yes, Scott and makes us.

Yeah.

And with that we've reached the end of our question and answer session and I would like to turn the floor back over to management for closing remarks.

Hello, everyone and thank you for your time.

And we were able to answer questions and we look forward to continued conversations with many investors over the next couple of debt free.

Got it.

This concludes today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

[music].

And.

[music].

Greetings and welcome to <unk> Q1, 2021 earnings call.

This time all participants are in a listen only mode. A question and answer session will follow from presentation and for new should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I would now like to turn the conference over to your hopes and put some.

Chief legal and privacy officer. Thank you Sir you may begin.

Good evening and welcome to <unk> first quarter 2021 financial results call.

And we begin and 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 and results, including our financial guidance and cash position for the second quarter and full year of 2021 and our ability to achieve key long term priorities.

Launch and additional functionality by banks, including U S Bank growth and M may use per monthly active users.

Turn to year over year growth the launch of our new user experience and new technology infrastructure, and the increase and art too or average revenue per user.

Impact from COVID-19 on our business and the economy as a whole, including the stabilization of the economy and potential improvements and the economy.

Sufficiency of our capital structure continued momentum in 2021, and the closing and anticipated benefits of our acquisition of Dash Holdings, Inc. And Bridge Inc.

For a discussion of the specific factors that could cause our actual results to differ materially from today's discussion. Please refer to the risk factors section. Other companies 10-Q for the quarter ended March 31, 2021 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 SEC.

Joining us on the call today is <unk> leadership team, including CEO and co founder Lynne Laube and CFO Andy Christiansen.

Following their prepared remarks, we'll open the call to your questions with that let me turn the call over to Lynn Lynn.

Thanks, Kirk and thank you to everyone for joining us on our first quarter 2020 one earnings call. We had a strong start to the year with Q1 billings and total revenue exceeding expectation, even before adding contributions from das and March our results reflect the continued positive trajectory and our business low.

And we're still experiencing impacts from COVID-19. We are encouraged by the momentum, we're seeing and the U S. However, U S travel and our U K business continue to be significantly impacted by the pandemic and related lockdown.

Before moving to our results I'd like to briefly address our recent acquisitions, we are integrating dos and making solid progress on combining the two organizations. We are pleased with the team and the capabilities and are already seeing our acquisition thesis come to light.

We're also pleased to say that we expect to close the bridge acquisition in May We believe the Breeze acquisition has the potential to be transformational given its technology and unique position and the customer data platform or CDP market.

I want to reiterate a few strategic points on both acquisitions for our investors. We expect the bridge and <unk> acquisitions will first once integrated and allow cargo and X to utilize SKU data to provide product little level offers from cpg's grocers and wider retail.

Second accelerate the next generation consumer experience with consumer engagement features and finally provide a lightweight platform to attract new partners and the new bank and non Fi industry.

We're very pleased with the early progress and results from Das already now.

Now, let's turn to some highlights from the first quarter.

Total billings were $76 3 million up 13% and year over year.

Total revenue, which is equal to billings net of consumer incentives was $53 $2 million and increase of 17% from Q1 2020 and.

And adjusted contribution was $24 $3 million up 19% and year over year.

Our Q1 results reflect growth in billings across many of our major industry verticals.

And we're encouraged by the return of positive year over year growth and our restaurant vertical.

I want to highlight a couple of success stories to drive home the importance of our platform to advertisers.

We secured our first annual contract with one of the largest E comm platforms and the world. Despite the fact that the same client cut advertising budgets by almost 75% for 2021.

Additionally, a large specialty retail client exited our channel and the second half of 2020.

And then the client and began experiencing lost share of wallet and we prove that targeting these switchers delivered a positive ROI. This resulted and the clients signing a meaningful annual 2021 agreement.

Our Mou base grew to over $168 million and the first quarter up approximately 20% year over year, mainly due to the launch of Wells Fargo.

We expect that core CD, Alex Mou growth will eventually stabilize in the low to mid single digits in future quarters. We are evaluating the impact <unk> will have an M a use and <unk> overtime.

We're proud to announce that U S Bank has launched with our newly built AD server that enables a richer and more robust user experience. The AD server offers both API and SDK integrations to enable faster iterations of any user experience module.

Together with U S Bank, we're taking and iterative approach to their deployment continuously launching with new functionality over the course of the next few quarters.

One of our initial modules is focused on educating the consumer about the offers program and how it works in order to drive adoption and engagement.

Additionally, one of our other large banks has committed and will be deploying the new AD server and the second half of 2021 into.

And to the first half of 2022, we will be migrating a large portion of our network over to this new technology infrastructure to enable speed scale and engagement.

Before I turn it over to Andy I also want to announce that we have launched our first U K based Fintech rewards program with curve, we're excited about the potential and this partnership Andy.

Thank you Lynn we are extremely pleased with our results and Q1, which marked a return to year over year growth, our existing business before including the results of das exceeded our expectations before diving further into our results I wanted to discuss our cash and liquidity position at the end of Q1, which includes our equity offering and the dollar.

Acquisition, and where we expect to be following the close and bridge.

We ended Q1 with $614 million and cash and cash equivalents compared to $293 million at the end of 2020.

We expect to have over $250 million and cash on a pro forma basis. After the bridge acquisition, which we expect to close later this month and and.

Addition, our loan facility of $50 million remains undrawn at this time our.

Our balance sheet liquidity warm and extremely strong and following the brakes deal.

And we're always evaluating our capital structure, we see no immediate need to raise additional funds.

Now turning to our Q1 performance.

It's all the usual seasonal decline from Q4 to Q1 Q1 landed at the high end of our expectations before taking into account the partial month contribution from the <unk> acquisition.

These strong results came despite the ongoing challenging environment and the U K is a strict COVID-19, lockdowns and continued limitations and travel.

As Lynn mentioned earlier, we saw strength and several industry verticals. What's also encouraging is the growing number of clients and our channel since the onset of the pandemic.

While most of our new accounts are relatively small budgets the increase and advertisers reflects the pivot we made in Q2 of 2020 and bodes well for the long term health of the platform.

As mentioned before we believe the self service capabilities of our new platform will accelerate this trend over time and give us some more scalable solution to onboard advertisers with budgets of all sizes.

The only increased 13% year over year to $76 3 million, excluding the shell, one 3 million and billings from Das and the last 25 days from the quarter, our billings totaled $75 million because of the high end of our guidance.

Revenue totaled $53 2 million, a 17% increase over Q1 at 12 and 20.

And as expected billings margins were in line with historical norms at 70%.

Excluding the half a million dollars and additional revenue from gosh, our revenue totaled $32 7 million, which was near the high end of our guidance.

U S revenue increased 23 per cent year over year. However, our UK revenue was down 25 per cent.

Our U K business continues to be meaningfully impacted by the pandemic as lockdowns implemented to slow the spread of new COVID-19 variance just started to unwind and April.

We expect and U K to continue this unwind carefully and anticipate some continued pressure in our UK results and the near term.

Adjusted contribution was $24 3 million and increase of 19% year over year, we don't expect adjusted contribution to significantly outpace revenue growth going forward, but it's worth noting that dos contract in place today from a lower level of partner share and other third party costs.

Adjusted EBITDA was a loss of $3 9 million compared to a loss of 4 million and Q1 and 2020.

Excluding stock compensation and Das contributed $1 3 million and operating expenses.

Sensors and within R&D and sales increase on a year over year basis and reflect investments made in the back half of 2020 to bring and several new leaders across the organization and increase our product development and analytical capabilities.

We expect to generate a larger EBITDA loss in Q2.

Our investment and das and reflected for a full quarter.

It's also worth noting that we incurred 7 million and acquisition costs during the current quarter and those costs are excluded from adjusted EBITDA, We expect additional acquisition and integration costs and the future as we continue and have great Josh and closed the acquisition of bridge.

As Lynn mentioned earlier and they use grew 20% year over year over $168 million. This was driven by the wells Fargo launch accelerated organic growth from logins to check on stimulus checks and the Deutsche acquisition.

Bank will add several million dollars and they use once fully launched we also expect continued growth from gosh as new partners come online throughout 2021.

ARPA during the first quarter was 32 and such.

And with the prior year.

We expect <unk> to increase on a sequential and year over year basis throughout the rest of 2021.

And they stabilized and we continue to grow our revenue.

We had $31 8 million shares outstanding at the end of Q1 compared to $27 8 million at the end of last year, which reflects the sale of $3 9 million shares in March.

Weighted average shares outstanding during the quarter was $29 3 million compared to $26 7 million during Q1 and 2020.

Also while our guidance includes gosh does not include the results and bridge, which is not yet closed.

We expect billings in Q2 of between 85 and $95 million revenue of between 58% and $65 million and adjusted contribution of between 26% and 30 million from them.

Full year, and we expect billings of between 380 and $420 million revenue of between 260 and $285 million and adjusted contribution of between $117 five volume.

$132 5 million and.

Again. These ranges include contributions from gosh and will incorporate per inch next quarter.

While we have a lot of work ahead of US and 2021, we are very excited about the collective potential of car lytic Stache and bridge and order to realize that full potential we are making sure we have sufficient resources and investments to thoughtfully bring these companies together and create meaningful shareholder value.

<unk> business and strong and has a lot of momentum and new.

These acquisitions will not only sustain that momentum for years to come and will also open up new avenues for future growth and with that I'll turn it back over to Lynn.

Thanks, Andy Q1 was a great start to the year, we're looking forward to executing on our plan and acquisition integration for the rest of 2021 with that I will open up your call for questions.

At this time, we'll be conducting a question and answer session.

If you would like to ask a question. Please press star 100 and telephone keypad.

From mission so wouldn't indicate your line is and the question queue.

You May press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment. Please as we poll for questions.

Our first question comes from the line of Aaron Kessler with Raymond James. Please proceed with your question.

Great. Thanks.

And any updates on the self serve platform and I think you're starting to roll that out.

The day to kept me some feedback there and then I'll.

And of the new <unk> platform at a U S Bank and he said one other large platform I mean, just how do you think that could impact kind of conversion rates or monetization.

And what you would expect there maybe finally for Andy just on the guidance change from a full year.

And what is what's the change and organic versus kind of including estimates for das and thank you.

Are you may the force be with you good yep.

Yep. Thank you.

Yes, So let me take I'll take you and the U S Bank question first.

And you've got modules that are API based and they deploy different modules based on where they are in the rollout of <unk>.

And now they are still very focused on modules that are helping customers find the program and educate them on how to use that and then over time, they're going to incorporate more of the modules that are a little bit more focused on different kinds of content different kinds of experiences.

Slowly sort of try to train these customers from scratch and how to use our program across a wider variety of offer features overtime, but that that what youre seeing now and forget the first module.

Over multiple quarters, they will be rolling out more modules.

And so that U S Bank I apologize I forgot your second question.

As far as just kind of any updates on the self serve platform as well.

Yeah.

Talk about everything every time, but self serve continues to go incredibly well and then.

And roll out now with multiple agencies, we are still committed to giving you.

Our billings numbers from agencies, starting in Q3 of 2021, this year and you'll be able to see how it's growing by looking at actual results.

Got it great and then Andrew just signed maybe estimates are for kind of dos and without a how should we think about that.

Yeah.

And our increase in guidance certainly a big portion of that is attributed to the three quarters.

Of the year, we're going to gain from from the <unk> acquisition.

And I do want to and.

And make sure that debt.

And one understands and we had quite a bit of strength in Q1, and I think net.

Turning to gives us a lot more confidence that.

We're going to be on a nice trajectory and the core business is doing quite well.

So I think there is some amount.

A small amount.

Does it relate to the strength of the core business. There are some pieces those are all giving us total a little bit of pause like I mentioned.

And the UK right, they're still just now emerging from they're locked down and I think that there is a little bit of risk there as to how uneven that may that may be.

We'll feel pretty comfortable with the core business would be and perhaps weakness and the U K and so we're going to be on track for our full year. So it is largely nosh.

Great. That's helpful. Maybe just the finalists and share count how should we think about that for them and are there.

Share count and so obviously, there's a significant jump and share count here in Q1 was the $3 9 million share sale that we had.

Without meeting any additional funds for the foreseeable future I definitely don't think theres going to be any need to raise.

Funding through new offerings.

So I think.

He was fairly muted increase.

And do with whole loans.

One of these base award, we've been issuing and glass several years for executives and the timing of when those will hit that's.

And is remaining and EBIT uncertainty and it's really that much less shares and we're talking and outlets.

But those are out there we will see some lumpiness.

Later in the year, perhaps.

Got it that's helpful and thank you Lindy and do you want.

Our next question comes from the line of Jason and Crane with Craig Hallum. Please proceed with your question.

Alright, Thanks, and good afternoon, just in regards to the U S Bank AD server from a consumer experience perspective.

To be clear the new platform they are on the new platform.

The new platform and API, driven and they have only chosen to take a few of the API or their initial deployment of the experience and those Apis are almost exclusively focused on education.

So from that perspective, it's very different you won't see anything like that and the other banks in terms of these education module, but in terms of the actual offer.

Right now and the different types of content that we hope to display over time, they're going to look very very similar I think we've discussed this before but U S bank ultimately is going to be somewhere in the neighborhood of four to 6 million M. A yes, it's not enough to truly get to scale up significantly different types and offer construct and offer.

Offer types. If you will so we're really focused on educating the consumer we're focused on there is some richer imagery and and so from that perspective, and look very different and the other banks, but didn't see real meaningful change as they search and array of different types of offer construct and offer experiences.

Moving to be multiple quarters and as I discussed.

What other large banks committing to this appointment of a new AD server and the back half of this year, which means they'll be doing the same type of thing going into Q1 and Q2 of next year. That's when we'll start to have the scale to really be able to try and different kinds of experiences and.

Advertising content into the channel.

And that helped.

That helps I appreciate you and kind of straightening that out for me.

As a follow up or maybe a couple of follow ups here, but if you can give any color just on the cadence of what you've seen over the last six to eight weeks.

You are lapping some volatility from the pandemic. So just kind of wondering how things have trended there and then any specific vertical commentary as you've lapped that.

I guess I had one on travel we started to see some resurgence and advertising and travel and I don't know if you guys have seen that or not or have any perspective on that.

Yeah.

Comment and then I'll throw it over to Andy as well.

Much of our beat was because of a strong increase in consumer spend that we saw in March.

We didn't see in January and February, but we thought and Mark and that that's why we came in at sort of the high end of our guide was really in the last three weeks and we are seeing and pick back up fairly materially and a lot of categories. We still haven't seen it pick back up as much as and you would hope and travel.

And that you know.

It is changing it and in April but for the Q1 travel was still very very depressed, but saw a nice recovery and a lot of the other verticals and the like.

And March.

Andy any debt.

That's right.

What are you starting to see a slight uptick and travel, but it's not nearly as meaningful and it's not the it's not the rebound and we're looking for.

These are not the joined Youre looking for May the force be with you Andy.

Thanks for the color I appreciate it.

Our next question comes from the line of Tim Willi with Wells Fargo. Please proceed with your question.

Thank you and and good afternoon everybody.

And two quick housekeeping and then I had a couple about the business just to make sure interest expense on a go forward should it be around 500000.

Is that about right post offering and close debt pay down and.

The redemption of convertible and everything.

Good day, and 1% on that and so.

No.

Yes.

And that's about right.

Okay.

$2 3 billion on that occur per year.

Okay, perfect and then the other one was I noticed and the add backs. This quarter I think it was 998000 and acquisition intangible.

Along with the merger charge and I know the charge.

Add that back hard to predict goes we've got 998000 number is sort of a way to think about one month of and more tied to Dodge or is that sort of some kind of onetime accounting treatment, that's not really going to be part of the income statement on a go forward basis.

And you're absolutely right, it's the former it'll be and the amortization all of those acquired intangibles going forward and so you're right. It's just a partial.

Actual month or 25 days of amortization of other intangibles.

You will treat that as an add back I'm assuming per adjusted EBITDA and net income I just want to make sure we got our adjustments right and the models.

And so we added that as a discrete add back and our non-GAAP net loss.

And we discuss our press release, we already and add back depreciation and amortization and our adjusted EBITDA calculation. So it is reflected there as well we don't add at all.

GAAP net loss.

So you and you see a difference there.

Okay, and then just going back to the business I can appreciate the U K and everybody sort of I think understand what's going on in Europe, I mean, Lynn last year, you talked about I can't remember the exact verbiage up the strategy.

What's your U S customers and I think it was like.

Retain rise and from three words put together about how youre going to market to bring people back onto the platform and get them going again and I.

I guess I'm curious as you look at like the U K and maybe progress that had been made but then sort of maybe how to get shelf for a little bit with their lockdowns as does the U K do you feel like you sort of ultimately sort of comes back like the U S and there was something about culturally or their banking industry that we shouldn't think about how the U S.

Come back so quickly that that is how the UK should play out once restrictions continue to run their course any new.

And that's about how it'll play out versus what we've seen and North America.

A question and I don't know that I have the exact answer here and what I will say the rise retain return strategy with a multi quarter strategy for us as you know and I would I would now described and the U S and fully and me.

Return part of that strategy right.

We are definitely hungry.

Every day.

And most of the vertical and we discuss travel still a little muted, but we're fully and the return element of that strategy.

Those people free that is needed and so I think it will just be very accelerated but only time will tell there is nothing that I see that's fundamentally different about how this has impacted banking or retail or anything like that and the U K.

That would argue something different and that sort of hypothesis.

Okay.

That's all I had thank you very much.

And once again as a reminder, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad and once again, if you'd like to ask a question. Please press star one on your telephone keypad.

Our next question comes from the line of doesn't and moves with J P. Morgan Please share with your question.

Hey, Good afternoon. This is Harry on for Doug Thanks for taking the question.

My first one.

As a follow up to the Rockford pain.

Our strategy.

Sure.

From a consumer of our marketers within core within Verizon and retain category and like us.

And third behaviors have changed the world.

Alright, and I could talk to us.

Hard to reopen and how should we think about like the behavior of the consumers.

Marketers within that category going forward are you expecting any reversion back to pre pandemic levels or do you think some other things that you have and plenty plenty and will be sustainable and then as a follow up.

Talked about policy and integration.

Going well, but just curious.

And if theres anything you learn new of all costs.

Part of your family.

Yes.

And so on the on the the three our strategy is you'd like to call. It which is like <unk> made a force you issue.

And I think that sorry, guys I, just got a little on what.

And these mega airless.

The direct to consumer and the rise and the direct to consumer vertical I think it's year to day.

It's just become a very very powerful vertical I think both in terms of consumer demand for those types of products and just us being a really good channel to drive that I think that is absolutely here to day.

The other thing that I can clearly say with a.

Reasonably confident that appear to stay is online grocery.

We've seen a massive shift in demand there and we have not seen it start to shift.

I will say and every other vertical we have seen it and start to shift back to in store purchases and.

Don't know if it's going to go back to the exact mix. It was pre pandemic, but they're all going backwards two meaning that the height of the online spend in those verticals had has now gone and they're buying more in store with the exception of those two categories, DSD, which obviously doesn't have and instore component and and on.

And grocery and.

To be determined I don't think consumer spend is ever going to go quite back to the levels and in store than it was before but I think from many of our more traditional verticals restaurant and retail and it's good it's not going to be you know and it was at 90 per cent for bolt before it might be at 80%, it's not gonna stay and 40% range right just to give you.

And some directional numbers.

Does that makes sense.

Yes and makes sense.

And with debt we reached the other part question and answer session and I would like to turn the floor back over to management for closing remarks.

Hello, everyone and thank you for your time.

Hopefully we were able to answer questions and we look forward to continued conversations with many investors over the next couple of day.

Appreciate it.

This concludes today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

Q1 2021 Cardlytics Inc Earnings Call

Request a DemoDemo

CDLX

Cardlytics

Earnings