Q2 2024 Cardlytics Inc Earnings Call

Welcome to the card, let it second quarter 'twenty 'twenty four earnings conference call.

Speaker Change: At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question answer session SASSA.

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Operator: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nick Lynton, Chief Legal and Privacy Officer.

Speaker Change: Be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Nicholas Chen Chief legal and privacy Officer. Please go ahead.

Nick Lynton: Good evening, and welcome to Cardlytics' second quarter 2024 financial results. 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 regarding our future financial performance and results, including for the third quarter of 2024, our CEO transition plans, our capital structure, and various operational and product initiatives and improvements. For a discussion of the specific risk factors that could cause our actual results to differ materially from today's discussion, please refer to the risk factors section of the company's 10-Q for the quarter ended June 30, 2024, which was filed with the SEC.

Nicholas Chen: Good evening and welcome to the card with second quarter 2024 financial results call.

Speaker Change: Before we begin let me remind everyone that today's discussion will contain forward looking statements based on our current assumptions expectations and beliefs.

Expectations regarding our future financial performance and results, including for the third quarter of 2024, our CEO transition plans, our capital structure and various operational and product initiatives and improvements.

Unnamed Speaker: For a discussion on the specific risk factors that could cause our actual results to differ materially from today's discussion, please refer to the risk factors section of the company's 10-Q for the quarter ended June 30, 2024, which has been filed with the SEC. Also, during this call, we will discuss non-GAAP measures of our performance. Gap financial reconciliations and supplemental financial information are provided in the press release issued today and the 8K that has been filed with the SEC, which you can find in the investor relations section of the Cardlytics website. Today's call is available via webcast, and a replay will also be available on our website.

Speaker Change: For a discussion on 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 June 32024, which has been filed with the SEC.

Nick Lynton: Also, during this call, we will discuss non-GAAP measures of our performance. Gap financial reconciliations and supplemental financial information are provided in the press release issued today and the 8K that has been filed with the SEC, which you can find in the investor relations section of the Cardlytics website. Today's call is available via webcast, and a replay will also be available on our website. Joining us on the call today are Cardlytics Board Chair Jack Klinck, who will provide some brief comments about this afternoon's Executive Transition Announcement, as well as current COO and incoming CEO, Amit Gupta, and CFO, Alexis DeSieno. Following their prepared remarks, we'll open the call to your questions. With that, I'll hand the call over to Jack.

Speaker Change: Also during this call we will discuss non-GAAP measures of our performance gap.

Speaker Change: GAAP financial reconciliations and supplemental financial information are provided in the press release issued today and the 8-K that has been filed with SEC, which you can find in the Investor Relations section of the <unk> website.

Speaker Change: Today's call is available via webcast and a replay will also be available on our website.

Amit: Joining us on the call today, we have hardwood explored shared Jack Lynch, who will provide some brief comments about this afternoon's executive transition announcement as well as currency and incoming CEO Amit.

Speaker Change: CFO electric <unk>.

Speaker Change: Following their prepared remarks, we'll open the call to your questions with that I'll hand, the call over to Jack.

Jack Klinck: Thanks, Nick. As I'm sure you've all seen from our announcement earlier today, the board has appointed Cardlytics' current COO, Amit Gupta, to the role of CEO, effective August 16, 2024. Amit will also be joining our board of directors at the same time. Karim Temsamani will be stepping down as Cardlytics CEO and board member to pursue another professional opportunity.

Nick: Thanks, Nick.

Jack Lynch: I'm sure you've all seen from our announcement earlier today. The board has appointed card Bolitics current C O L. A make good debt to the role of CEO effective August 16 2024.

Speaker Change: <unk> will also be joining our board of directors at the same time.

Speaker Change: Karin tends to money will be stepping down as card lytic CEO and board member to pursue another professional opportunity.

Jack Klinck: On behalf of the board, I would like to thank Karim for his contributions to Cardlytics during an important period of transformation. We are grateful he will help ensure a smooth transition, and we wish him the best. We are also excited to welcome Amit into his new role with Cardlytics, following a strong tenure as COO. He brings with him deep strategic product and operational expertise, as well as industry experience. And he has played a key role in developing our strategy, scaling our platform, and growing our business.

Unnamed Speaker: On behalf of the board, I would like to thank Karim for his contributions to Cardlytics during an important period of transformation, bringing new banking partners and advertisers to the platform, including Monzo in the UK and a large financial institution in the U.S., and launching Ripple, our retail media network on our bridge platform, opening the potential for us to tap into new categories of marketing budgets, particularly across major CPG brands. I hope you'll all join me in extending a warm welcome to Amit. With that said, let me turn the call over to you, Amit.

Speaker Change: On behalf of the board I would like to thank coram for his contributions to <unk> during an important period of transformation.

Speaker Change: We are grateful coram will help ensure a smooth transition and we wish him the best.

Unmet: We are also excited to welcome unmet into his new role with <unk>. Following a strong tenure as COO.

Speaker Change: He brings with him deep strategic product and operational expertise as well as industry experience and he has played a key role in developing our strategy scaling our platform and evolving our business.

Jack Klinck: I am confident he will lead this business well as we continue to execute on our transformation. We have the right team in place to execute our strategy, and we are in the early innings of our transformation. Some of the important milestones achieved by our team under Karim and Amit's leadership include right-sizing our expense structure and improving our capital structure, which helped us deliver positive adjusted EBITDA in 2023 and improved our long-term financial stability; bringing new banking partners and advertisers to the platform, including Monzo in the UK and a large financial institution in the U.S.; and launching Ripple, our retail media network on our bridge platform, With that said, let me turn the call over to you, Amit.

Speaker Change: I am confident he will lead this business well as we continue to execute on our transformation.

Speaker Change: We have the right team in place to execute our strategy and we are in the early innings of our transformation.

Speaker Change: Some of the important milestones achieved by our team under Coram and amidst leadership include right sizing our expense structure and improving our capital structure, which helped us deliver positive adjusted EBITDA in 2023 and improved our long term financial stability.

Speaker Change: Bringing new banking partners and advertisers to the platform, including Mondo and the U K and a large financial institution in the U S.

Speaker Change: And launching ripple, our retail media network on our bridge platform opening the potential for us to tap into new categories of marketing budgets, particularly across major CPG brands.

Imet: I hope you'll all join me in extending a warm welcome to our met with that let me turn the call over to you I met.

Amit Gupta: Thanks, Jack. I'm honored and excited to take on this new role at Cardlytics and look forward to working more closely with you, the rest of the board, and our broader team to continue to deliver on our mission. When I joined Cardlytics in January 2023, I was impressed at the caliber of talent, the power of our existing solutions, and most importantly, the untapped potential of the company. I am confident in that potential today.

Imet: Thanks, Jack I'm honored and excited to take on this new role at <unk> and look forward to working more closely with you the rest of the board and our broader team to continue to deliver on our mission.

Speaker Change: When I joined <unk> in January 2023, I was impressed at the caliber of talent the power of our existing solutions and most importantly, the untapped potential of the company.

Imet: I am confident in that potential today.

Amit Gupta: At our core, we have strong embedded relationships with some of the largest financial institutions, giving us tremendous scale, and we have a clear path to be able to expand on that. With these relationships, we have unrivaled first-party purchase data.

Imet: At our core we have strong embedded relationships with some of the largest financial institutions, giving us tremendous scale and we have a clear path to be able to expand our network.

Imet: With these relationships we have unrivaled first party purchase data, we believe that cardholder spend data is the best predictor of future behavior, which makes it incredibly valuable for advertisers.

Amit Gupta: We believe that cardholder spend data is the best predictor of future behavior, which makes it incredibly valuable for advertisers. As a result, we benefit from the flywheel effect of buyers, brands, and banks, delighting cardholders with rewards, which leads to driving both loyalty and incremental spend for our advertisers and banks. We are still in the early stages of a significant transformation to evolve our business, but I am confident we're on the right path for three reasons.

Imet: As a result, we benefit from a flywheel effect of buyers brand and banks delighting cardholders with rewards, which leads to driving both loyalty and incremental spend for our advertisers and banks.

Amit Gupta: We are still in the early stages of a significant transformation to evolve our business, but I am confident we're on the right path for three reasons.

Imet: We are still in early stages of a significant transformation to evolve our business I am confident we're on the right path for three reasons.

Amit Gupta: First, we have strengthened our financial profile to better facilitate continued strategic investment in the business by reducing our operating costs and improving our capital structure. We need to better monetize the value we deliver to our buyers, brands, and banks. That starts with better forecasting, delivery, and pricing, and delivering a platform that fully meets our advertiser's needs. Alexis will discuss the most recent quarter in greater detail in a few minutes. We missed our Q2 guidance, primarily due to a miss on the top line related to delivery issues.

Amit Gupta: First, we have strengthened our financial profile to better facilitate continued strategic investment in the business through reducing our operating costs and improving our capital structure. Second, we have a clear path ahead to better align our offerings with the modern advertising market and increase billings and consumer incentives. Last, we are clear-eyed about the challenges before us.

Imet: First we have strengthened our financial profile to better facilitate continued strategic investment in the business through reducing our operating costs and improving our capital structure.

Imet: We have a clear path ahead to better align our offerings with the modern advertising market and increased billing and consumer incentives.

Imet: Last we are clear eyed about the challenges before us we are not satisfied with our results and we're taking proactive steps to address these challenges we.

Amit Gupta: We are not satisfied with our results, and we're taking proactive steps to address these challenges. We need to better monetize the value we deliver to our buyers, brands, and veterinarians. That starts with better forecasting, delivery, and pricing, and delivering a platform that fully meets our advertiser's needs. Alexis will discuss the most recent quarter in greater detail in a few minutes. We missed our Q2 guidance primarily due to a miss on the top line related to delivery issues.

Imet: We need to better monetize the value, we deliver to our buyers brand index.

Imet: That starts with better forecasting delivery and pricing and delivering a platform that fully meets our advertisers' needs.

Imet: Alexis will discuss the most recent quarter in greater detail in a few minutes, we missed our Q2 guidance, primarily due to a miss on topline related to delivery issues.

Amit Gupta: This myth was driven by fast-paced changes to our technology platform, which led to unpredictable delivery of the advertiser budget. We are actively addressing these issues in the second half. In the long run, these refinements to our platform coupled with engagement-based pricing will give us real-time data on camp and performance and enable us to optimize campaigns based on these signals to deliver better outcomes for buyers, brands, and banks. I'd like to call out some highlights for the quarter.

Alexis: This miss was driven by fast based changes to our technology platform, which lead to unpredictable delivery of the advertiser budgets.

Alexis: We are actively addressing these issues in the second half.

Alexis: In the long run these refinements to our platform coupled with engagement based pricing will give us real time data on campaign performance.

Alexis: And enable us to optimize campaigns based on these signals to deliver better outcomes for our buyers brands and banks.

Alexis: I'd like to call out some highlights for the quarter.

Amit Gupta: We've made great progress in growing engagement. Consumer incentives grew 25% this quarter, meaning consumers are finding value in the offers we provide. As a reminder, our North Star is Redemptions, which materialize as rewards on a dollar basis in our financial system.

Alexis: We've made great progress and growing engagement consumer incentives grew 25% this quarter, meaning consumers are finding value in the offers that we provide.

Alexis: As a reminder, our north star is redemptions, which materialized as rewards on a dollar basis in our financials.

Amit Gupta: Redemptions are a key indicator that our technology is delivering the most relevant offer to each person and driving value for our banks and. Driving engagement will continue to bring more marketing budgets to the Cardlytics platform, adding to the flywheel effect I mentioned earlier. We have continued to make progress on the rollout of our new technology across three key areas, including first, the adoption and refinement of our Ads Decisioning Engine, or ADE.

Amit Gupta: Redemptions are a key indicator that our technology is delivering the most relevant offer to each person and driving value for our banks and. Driving engagement will continue to bring more marketing budgets to the Cardlytics platform, adding to the flywheel effect I mentioned earlier. We have continued to make progress on the rollout of our new technology across three key areas, including first, Second, we are excited that we launched our Insights Dashboard. Insights will increase our overall billing opportunity through spend thresholds required for access, as well as enable advertisers' ability to take action in real time. CPE is directly aligned to the real value we create for our buyers, brands, and banks. I'll now turn it over to Alexis to discuss the finish.

Alexis: Redemptions are a key indicator that our technology is delivering the most relevant offer to each person and driving value for our banks and advertisers.

Alexis: Driving engagement will continue to bring more marketing budgets to the <unk> platform, adding to the flywheel effect I mentioned earlier.

Amit Gupta: Second, the launch of our automated insights dashboard. And third, the launch of the dynamic marketplace, which includes the transition to our engagement-based pricing model. First, on ADE, 80% of our banks have already onboarded, and we continue to make progress getting the remaining banks on the platform. We have also made progress in enhancing the logic, models, and signals that determine the offer decision. Second, we are excited that we launched our Insights Dashboard.

Alexis: We have continued to make progress on the rollout of our new technology across three key areas, including first.

Alexis: The adoption and refinement of our AD decisioning engine or a D cell.

Alexis: The launch of our automated insights dashboard and third the launch the dynamic marketplace, which includes the transition to our engagement based pricing model.

Alexis: First on AE, 80% of our banks have already on boarded and we continue to make progress getting the remaining banks on the platform. We have also made progress in enhancing the logic model and signal that determine the off our decisioning.

Alexis: Second we are excited that we launched our insights dashboard advertisers can now access on demand insights such as share wallet shifts.

Amit Gupta: Advertisers can now access on-demand insights such as share wallet shifts. These insights will increase our overall billing opportunity through spend thresholds required for access, as well as enable advertisers' ability to take action in real time. We had 10% of advertisers using it by the end of last quarter and are on track to have the platform available for all advertisers by the end of the year. Third, we launched the dynamic marketplace with over 20 live campaigns running with cost-per-engagement pricing and variable TROAS goals. To remind you, pricing budgets and offers have historically been static, with advertisers priced on a static fee with a fixed budget that persists during the life of the campaign.

Alexis: Insight will increase our overall billing opportunity through spend thresholds required for axis as well as enabling advertisers ability to take action in real time.

Alexis: We have 10% of advertisers using it by the end of last quarter and are on track to have the platform available for all advertisers by the end of the year.

Alexis: Third we launched a dynamic marketplace with over 20 life campaigns running with cost per engagement pricing and variable T Rowe as goals.

Alexis: Remind you pricing budgets and offers have historically been static with advertisers priced unaesthetic fee with fixed budgets that persists during the life of the campaign.

Amit Gupta: That dynamic marketplace allows advertisers to see their campaign performance on a daily basis and make ongoing changes to their ROAS goals, fees, and budgets, which we believe ultimately will lead to a better performance of their campaigns and higher retention of those advertisers. As part of this, we are shifting to an engagement-based pricing model. This pricing aligns with industry standards and will allow us to significantly improve visibility to advertisers. This model should appeal to advertisers that are accustomed to buying from other digital media platforms on a cost-per-click basis, and it will provide them with improved pacing visibility. CPE is directly aligned to the real value we create for our buyers, brands, and banks.

Alexis: That dynamic marketplace allows advertisers to see their campaign performance on a daily basis and make ongoing changes to their rollout gold fees and budgets, which we believe ultimately will lead to a better performance of their campaigns and higher retention of those advertisers.

Alexis: As part of this we are shifting to an engagement based pricing model. This pricing aligned with industry standards and will allow us to significantly improve visibility to advertisers.

Alexis: This model should appeal to advertisers that are accustomed to buying from other digital media platforms on a cost per click basis.

Alexis: And it will provide them with improved pacing visibility and control.

Alexis: CPE is directly aligned to the real value, we create for our buyer brand and bags.

Amit Gupta: We expect to have the majority of our accounts on engagement-based pricing models by the end of 2025. We are also expanding our addressable market for Ripple, which we power with our bridge data to help us tap into the rapidly expanding retail media budget. We are continuing to build out our nationwide footprint of individual shoppers and expect to have over 100 million profiles and 50,000 locations by year-end. In June, we published over 2,800 purchase-based audience segments on leading DSPs such as the Trade Desk and LiveRamp, providing CPG advertisers with more transparency into product-specific purchasing behaviors of consumers.

Alexis: We expect to have majority of our accounts on engagement based pricing models by the end of 2025.

Alexis: We are also expanding our addressable market for ripple, which we power with our bridge data to help us tap into the rapidly expanding retail media budgets, we are continuing to build out our nationwide footprint of individual shoppers and expect to have over $100 million profile.

Alexis: And 50000 locations by year end.

Alexis: In June we published over 2800 purchased based audience segments on leading DSP, such as the trade desk and live ramp providing CPG advertisers with more transparency into product specific purchasing behaviors of consumers. While early days, we have already seen hundreds.

Amit Gupta: While it's early days, we have already seen hundreds of advertisers engaged since launch. Ripple allows us to diversify our advertiser base by adding CPG brands to the mix and allows us to tap into one of the largest portions of advertising budgets that our core Cardlytics business cannot effectively cap. Looking ahead, we are excited to launch a large bank partner in the U.S. in the near future. This will help increase marketer scale faster via a larger and more engaged audience to whom we can serve often.

Alexis: Advertisers engage since launch.

Speaker Change: <unk> allows us to diversify our advertiser base by adding CPG brands to the mix and allowing us to tap into one of the largest portion of advertising budgets that are or cosmetics business cannot effectively capture.

Speaker Change: Looking ahead, we are excited to launch a large bank partner in the U S. In the near future. This will help increase marketer scale faster, we are larger and more engaged audience to whom we can serve offers.

Amit Gupta: We are also committed to further growing our bank partnerships and are in active conversations with both new and existing. Before I hand it over to Alexis, I want to reiterate my excitement for Cardlytics' future. As card-linked offers become more important to banks, we are the clear leader in our industry, with a strong market position and a deep network of major financial institutions. No one else has the platform and deep relationships we have.

Alexis: We are also committed to further growing our bank partnerships and are in active conversations with both new and existing partners.

Speaker Change: Before I hand, it over to Alexis I want to reiterate my excitement for cosmetics future as card linked offers become more important to banks, we are the clear leader in our industry.

Alexis: With a strong market position and a deep network of major financial institutions.

Alexis: No one else as the platform and deep relationships we have.

Amit Gupta: We are well aware that progress along this path will not be linear, but we are confident we have the right strategy and are making the right moves to set Cardlytics on a much stronger course for the future. As excited as we are about this future, we know short-term results also matter, and you have our commitment that we won't take our eyes off the ball in the months ahead. I'll now turn it over to Alexis to discuss the finish.

Speaker Change: We are well aware that progress along this path will not be linear, but we are confident we have the right strategy and are making the right moves to set <unk> on a much stronger course for the future.

Alexis: As excited as we are about this future. We know short term results also matter and you have our commitment that we won't take our eyes off the ball in the months ahead.

Speaker Change: I'll now turn it over to <unk> to discuss the financials.

<unk>: Thank you Amit.

Alexis DeSieno: This quarter was more challenging than expected. Although we continued to execute on our North Star, Redemptions, our overall business experience had While our top line grew more slowly than expected, we continue to be focused on tightly managing expenses and maintaining a strong balance. Now, we turn to our specific second quarter results. My comments will be year-over-year comparisons to the second quarter of 2023, excluding entertainment, our former subsidiary that we sold in December 2023, unless stated otherwise. In Q2, billings reached $110.4 million, a 2% increase. The majority of the weakness was a result of our ongoing changes to our platform and technology, which led to unpredictable delivery rather than pipeline weakness.

Operator: Welcome to the Cardlytics 2nd quarter, 2024 earnings conference call. At this time, all participants are in a listening mode.

Speaker Change: This quarter was more challenging than expected, although we continued to execute on our Northstar redemptions, our overall business experienced headwinds.

Operator: After this biggest presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

Alexis DeSieno: While our top line grew more slowly than expected, we continue to be focused on tightly managing expenses and maintaining a strong balance. Now, we turn to our specific second quarter results. My comments will be year-over-year comparisons to the second quarter of 2023, excluding entertainment, our former subsidiary that we sold in December 2023, unless stated otherwise. The majority of the weakness was a result of our ongoing changes to our platform and technology, which led to unpredictable delivery, rather than pipeline.

<unk>: Our topline grew more slowly than expected we continue to be focused on tightly managing expenses and maintaining a strong balance sheet.

Speaker Change: Now turning to our specific second quarter results my comments will be year over year comparisons to the second quarter of 2023, excluding entertainment our former subsidiary that we sold in December 2023, unless stated otherwise.

Operator: Please be advised that today's conference is being recorded.

Nick Lynton: I would now like to hand the conference over to you speaker today, Nick Lynton, Chief Legal and Privacy Officer. Please go ahead.

Speaker Change: In Q2 billings reached $110 4, million% to 2% increase.

Nick Lynton: Good evening and welcome to the Cardlytics 2nd quarter, 2024 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 regarding our future financial performance and results, including for the 3rd quarter of 2024, our CEO transition plans, our capital structure, and various operational and product initiatives and improvements. For a discussion on the specific risk factors that could cause our actual results to differ materially from today's discussion, please refer to the risk factors section of the company's 10Q for the quarter ended June 30, 2024, which has been filed with SEC.

Alexis: Majority of the weakness was a result of our ongoing changes to our platform and technology, which lead to unpredictable delivery rather than pipeline weakness.

Alexis DeSieno: While some level of under-delivery and over-delivery is inherent in any ad network, we are taking decisive action to address our operational challenges around forecasting and delivery. We experience growth in our travel and entertainment and everyday spend verticals, with standout growth from key airlines and hotels, but partially offset by downward movement in DTC and retail. In parallel to scaling new logos, our churn rate, which is based on the number of advertisers that leave our channel, is at its lowest since before the pandemic.

Speaker Change: While some level of under delivery and over delivery is inherent in any AD network. We are taking decisive action to address our operational challenges around forecasting and delivery.

<unk>: We experienced growth in our travel and entertainment and everyday spend verticals with standout growth from key airlines and hotels, but partially offset by downward movement in DTC and retail.

<unk>: In parallel to scaling new logos, our churn rate, which is based on the number of advertisers that leave our channel is at its lowest since before the pandemic.

Alexis DeSieno: Consumer incentives, which we refer to as rewards, increased by 25% to $40.8 million due to enhancements in ADE and more performance ad service. Revenue, which is Billings' net of consumer incentives but before partner share, was $69.6 million, a decrease of 7%. Revenue decreased due to a combination of lower-than-anticipated billings, largely due to underdelivery of budgets we had secured, and higher-than-expected consumer

Consumer incentives, which we refer to as rewards increased by 25% to $48 million due to enhancements in AIE and more performance AD survey.

Nick Lynton: Also during this call, we will discuss non-GAP measures of our performance. GAP financial reconciliation and supplemental financial information are provided in the press release issue today and the 8K that has been filed with SEC, which you can find in the investor-relations section of the Cardlytics website. Today's call is available via webcast and a replay will also be available on our website.

<unk>: Revenue, which is billings net of consumer incentives, but before partner share was $69 6 million a decrease of 7%.

<unk>: Revenue decreased due to a combination of lower than anticipated billings largely due to under delivery of budgets, we had secured and higher than expected consumer incentive payments.

Nick Lynton: Joining us on the call today, we have Cardlytics board-shared Jack Clink, who will provide some brief comments about this afternoon's executive transition announcement, as well as current COO and incoming CEO, Amit Gupta, and CFO, Alexis DCNO. Following their prepared remarks, we'll open the call to your questions. With that, I'll hand the call over to Jack. Thanks, Nick.

Alexis DeSieno: We are getting more efficient at surfacing the right rewards to the right user. In the short term, we will continue to see outsized rewards as engagement accelerates beyond top line growth due to these targeting and ranking improvements. But we expect this to normalize as we further refine our technology and pricing to better align rewards with, and while in the near term this is pressuring results, in the long run, we expect the benefits to come given the flywheel effect on our business. Rewards delay cardholders, driving loyalty in brands, and with cardholders' banks, new banks strengthen our network, and advertisers benefit from consumer insights and measurable outcomes that drive growth.

Alexis DeSieno: We are getting more efficient at surfacing the right rewards to the right user. In the short term, we will continue to see outsized rewards as engagement accelerates beyond top line growth due to these targeting and ranking improvements. While in the near term this is pressuring results, in the long run, we expect the benefits to come given the flywheel effect on our business. We continue to be focused on adjusted contribution, which we believe is a better indicator for our business than gap revenue.

<unk>: We are getting more efficient at servicing the right rewards to the right user and the short term, we will continue to see outsized rewards as engagement accelerates beyond topline growth due to these targeting and ranking improvements, but we expect this to normalize as we further refine our technology and pricing to better align rewards with returns.

Jack Klinck: As I'm sure you've all seen from our announcement earlier today, the board has appointed Cardlytics current COO, Amit Gupta, to the role of CEO, effective August 16, 2024. Amit will also be joining our board of directors at the same time.

Alexis DeSieno: While in the near term. This is pressuring results in the long run we expect the benefits to come given the flywheel effect to our business.

Speaker Change: <unk> delay cardholders, driving loyalty and brands and with cardholders banks, new banks strengthen our network and advertisers benefit from consumer insights and measurable outcomes that drive growth.

Jack Klinck: Karim Tensamani will be stepping down as Cardlytics CEO and board member to pursue another professional opportunity. On behalf of the board, I would like to thank Karim for his contributions to Cardlytics during an important period of transformation. We are grateful Karim will help ensure a smooth transition, and we wish him the best.

Alexis DeSieno: We continue to be focused on adjusted contribution, which we believe is a better indicator for our business than gap revenue. Adjusted contribution was $36.4 million, up 1%. As a percentage of revenue, adjusted contribution margin was 52%, up 4% year-over-year, primarily due to bank mix and partially offset by higher consumer reward. Turning briefly to segment results.

Alexis DeSieno: We continue to be focused on adjusted contribution, which we believe is a better indicator for our business in GAAP revenue.

<unk>: Adjusted contribution was $36 $4 million up 1% as a percentage of revenue adjusted contribution margin was 52% up 4% year over year, primarily due to bank mix and partially offset by higher consumer rewards.

Jack Klinck: We are also excited to welcome Amit into his new role with Cardlytics, following a strong tenure as COO. He brings with him deep strategic product and operational expertise, as well as industry experience, and he has played a key role in developing our strategy, scaling our platform, and involving our business. I am confident he will lead this business well as we continue to execute on our transformation.

Alexis DeSieno: Turning briefly to segment results.

Alexis DeSieno: U.S. billings were flat due to the previously discussed challenges with delivery. The UK continued to show very strong double-digit billings growth at 33%, partially due to our auto-enrollment program with Lloyds and the launch of our newest banking partner, Monzo, as well as... We also signed a large grocer, so we now have four of the five biggest grocers in the UK on the channel, which will continue to drive engagement Bridge billings were up 5% over Q1, but down 6% compared to last year due to the loss of a single existing customer.

<unk>: Billings were flat due to the previously discussed challenges with delivery.

Speaker Change: The UK continued to show very strong double digit billings growth at 33%, partially due to our auto enrollment program with Lloyds and the launch of our newest banking partner Monzo as well as budget expansion.

Amit Gupta: We have the right team in place to execute our strategy, and we are in the early innings of our transformation, some of the important milestones achieved by our team under Karim and amidst leadership include right sizing our expense structure and improving our capital structure which helped us deliver positive adjusted EBITDA in 2023 and improved our long term financial stability bringing new banking partners and advertisers to the platform including Monzo in the UK in a large financial institution in the US and launching Ripple, our retail media network on our bridge platform opening the potential for us to tap into new categories of marketing budgets particularly across major CPG grants. I hope you all join me in extending a warm welcome to amidst with that let me turn the call over to you I'm it thanks Jack I am honored and excited to take on this new role at Cardlytics and look forward to working more closely with you the rest of the board and our broader team to continue to deliver on our mission.

Alexis DeSieno: We also signed a large grocers. So we now have four of the five biggest grocers in the U K on the channel, which will continue to drive engagement.

Alexis DeSieno: Bridge billings were up 5% over Q1, but down 6% compared to last year due to the loss of a single existing customer. Headwinds and retail performance will continue with budgets from top accounts flat year over year in that category. The UK is expected to contribute double-digit billings growth in the quarter as we continue to capitalize on the incremental MAUs that unlock larger advertiser budgets. Bridge is expected to contribute positive growth as we continue to build out Ripple and establish relationships with our new CPG advertiser.

Speaker Change: <unk> billings were up 5% over Q1, but down 6% compared to last year due to the loss of a single existing customer the redemption in partnership dynamics. We've discussed do not impact bridge. So revenue is the key metric we use to assess the performance of this business.

Alexis DeSieno: The redemption and partnership dynamics we've discussed do not impact bridge, so revenue is the key metric we use to assess the performance of this. MAUs were $165.5 million for the second quarter, an increase of 3%, driven primarily by organic growth in the U.S., an auto enrollment, and a new bank in the U.K. Our food was $0.42, down 13% as a result of the 25% increase in consumer incentives, as we continue to deliver more rewards to cardholders. Adjusted EBITDA improved year-over-year from negative $3.8 million to negative $2.3 million this quarter. The UK delivered positive adjusted EBITDA for the third consecutive quarter. Total operating expenses, excluding stock-based compensation, came in at $38.7 million.

Speaker Change: And they use were $165 5 million for the second quarter, an increase of 3% driven primarily by organic growth in the U S and auto enrollment and a new bank in the U K.

Speaker Change: <unk> was four <unk>.

Speaker Change: Down 13% as a result of the 25% increase in consumer incentives as we continue to deliver more rewards to cardholders.

Alexis DeSieno: Adjusted EBITDA improved year over year from negative $3 8 million to negative $2 $3 million this quarter.

Alexis DeSieno: UK delivered positive adjusted EBITDA for the third consecutive quarter.

Alexis DeSieno: Total operating expenses, excluding stock based compensation came in at $38 7 million.

Alexis DeSieno: While we continue to believe in the changes we are making to our technology, product, and sales organizations to support growth over the long term, we are mindful of managing our expense base given our results. We expect operating expenses to remain below $40 million per quarter for the remainder of the year. In Q2, operating cash flow was positive $4.4 million, and free cash flow was negative $0.4 million. On the balance sheet, we ended Q2 with $71.2 million in cash and cash equivalents, and we had $60 million of unused available borrowings under our line of credit.

Alexis DeSieno: While we continue to believe in the changes we are making to our technology product and sales organizations to support growth over the long term, we are mindful of managing our expense base given our results we.

Amit Gupta: When I joined Cardlytics in January 2023 I was impressed at the caliber of talent the power of our existing solutions and most importantly the untapped potential of the company. I am confident in that potential today at our core we have strong embedded relationships with some of the largest financial institutions giving us tremendous scale and we have a clear path to be able to expand on network. With these relationships we have unrivaled first party purchase data we believe that Cardroller spend data is the best predictor of future behavior which makes it incredibly valuable for advertisers.

Alexis DeSieno: We expect operating expenses to remain below $40 million per quarter for the remainder of the year.

Speaker Change: In Q2 operating cash flow was positive $4 4 million and free cash flow was negative <unk> $4 million.

Alexis DeSieno: On the balance sheet, we ended Q2 with $71 $2 million in cash and cash equivalents and we had $60 million of unused available borrowings under our line of credit.

Alexis DeSieno: As a reminder, we repaid the $30 million draw on our line of credit in April. I am also pleased to announce that we have extended our $60 million line of credit with the Bank of California through July of 2026 at a lower interest rate.

Speaker Change: As a reminder, we repaid the $30 million drawn our line of credit in April I'm also pleased to announce that we've extended our $60 million line of credit with the bank of California through July of 2020, with a lower interest rate.

Amit Gupta: As a result we benefit from a flywheel effect of buyers brands and banks delight in cardholders with rewards which leads to driving both loyalty and incremental spend for our advertisers and banks. We are still in early stages of a significant transformation to evolve our business. I am confident we're on the right path for three reasons. First we have strengthened our financial profile to better facilitate continued strategic investment in the business through reducing our operating costs and improving our capital structure.

Alexis DeSieno: Now turning to our Q3 outlook. For Q3, we expect billings between $100 and $106 million, revenue between $56 and $63 million, adjusted contribution between $32 and $35 million, and adjusted EBITDA between negative six and negative $3.5 million. Our billings guidance represents negative 7% to negative 13% growth, excluding our former subsidiary, Entertainment. I'd like to provide some additional color on what we are seeing in the top.

Alexis DeSieno: Now turning to our Q3 outlook.

Alexis DeSieno: For Q3, we expect billings between 101 hundred $6 million.

Speaker Change: Revenue between 56% and $63 million adjusted contribution between 32 and $35 million.

Amit Gupta: Second we have a clear path ahead to better align our offerings with the modern advertising market and increase buildings and consumer incentives. Last we are clear eyed about the challenges before us we are not satisfied with our results and we're taking proactive steps to address these challenges. We need to better monetize the value we deliver to our buyers brands and banks. That starts with better forecasting delivery and pricing and delivering a platform that fully meets our advertisers needs.

Speaker Change: Adjusted EBITDA between negative six of negative $3 5 million.

Alexis DeSieno: Our billings guidance represents negative 7% to negative 13% growth, excluding our former <unk> subsidiary Entertainment.

Speaker Change: I'd like to provide some additional color on what we're seeing in the topline.

Alexis DeSieno: Our Q3 guidance does not reflect our ambition. We expect there to be continued disruption in Q3 as a result of the changes we are making to our ad platform, but we believe that driving consumer engagement and modernizing our technology are necessary to support our long-term goals. We are not assuming any material improvement to our delivery for the purposes of guidance, despite several initiatives underway.

Alexis DeSieno: Our Q3 guidance does not reflect our ambition we expect there to be continued disruption in Q3 as a result of the changes we are making to our AD platform, but we believe that driving consumer engagement and modernizing our technology are necessary to support our long term goals.

Alexis DeSieno: We are not assuming any material improvement to our delivery for purposes of guidance. Despite several initiatives underway.

Alexis DeSieno: From a pipeline standpoint, we are seeing continued strength in travel and everyday spend, and after rebuilding our restaurant team at the end of last year, we expect to see growth in Q3. However, headwinds and retail performance will continue with budgets from top accounts flat year over year in that category. The UK is expected to contribute double-digit billings growth in the quarter as we continue to capitalize on the incremental MAUs that unlock larger advertiser budgets.

Speaker Change: From a pipeline standpoint, we are seeing continued strength in travel and everyday spend and after rebuilding our restaurant team at the end of last year, we expect to see growth in Q3 <unk>.

Amit Gupta: Alexis will discuss the most recent quarter in greater detail in a few minutes. We missed our Q2 guidance primarily due to a miss on top line related to delivery issues. This miss was driven by fast based changes to our technology platform which led to unpredictable delivery of the advertiser budgets. We are actively addressing these issues in the second half. In the long run these refinements to our platform coupled with engagement based pricing will give us real-time data on camping performance, and enable us to optimize campaigns based on these signals to deliver better outcomes for buyers, brands, and banks.

Alexis DeSieno: Headwinds in retail performance will continue with budgets from top accounts flat year over year in that category.

Alexis DeSieno: The UK is expected to contribute double digit billings growth in the quarter as we continued to capitalize on the incremental may use that unlock larger advertiser budgets.

Alexis DeSieno: Bridge is expected to contribute positive growth as we continue to build out Ripple and establish relationships with our new CPG advertiser. We are expecting another quarter of elevated redemptions as our targeting continues to service the right rewards to the right users. We expect adjusted contributions to be lower due to the expected decline in billings and revenue with margins similar to previous quarters. Adjusted EBITDA reflects the impact of our billings guidance while continuing to make strategic hiring decisions where we believe the return will be realized.

Alexis DeSieno: Bridge is expected to contribute positive growth as we continue to build out ripple and established relationships with our new CPG Advertiser base.

Alexis DeSieno: We are expecting another quarter of elevated redemptions as our targeting continues to service the right rewards to the right users. Adjusted EBITDA reflects the impact of our billings guidance while continuing to make strategic hiring decisions where we believe the return will be realized. We believe all of these factors can support double-digit billings and positive free cash flow in 2025.

Alexis DeSieno: We are expecting another quarter of elevated redemptions as our targeting continues to service the right rewards to the right users.

Alexis DeSieno: We expect adjusted contribution to be lower due to the expected decline in billings and revenue with margins similar to previous quarters.

Amit Gupta: I'd like to call out some highlights for the quarter. We've made great progress in growing engagement. Consumer incentives grew 25% this quarter, meaning consumers are finding value in the offers we provide. As a reminder, our North Star is Redemptions, which materialize as rewards on our dollar basis in our financials. Redemptions are a key indicator that our technology is delivering the most relevant offer to each person and driving value for our banks and advertisers.

Alexis DeSieno: Adjusted EBITDA reflects the impact of our billings guidance, while continuing to make strategic hiring decisions, where we believe the return will be realized.

Alexis DeSieno: We no longer expect double-digit billings growth for the full year 2024 or to be operating cash flow positive on a full year basis. We remain focused on our North Star redemptions, and we expect to continue to drive consumer engagement. For 2025, we believe performance will accelerate as our operational execution improves and as we scale a major new FI partner, see continued strength in the UK, and start to more fully realize contributions from Ripple.

Speaker Change: We no longer expect double digit billings growth for the full year 2024 or to be operating cash flow positive on a full year basis.

Alexis DeSieno: We remain focused on our North star redemptions, and we expect to continue to drive consumer engagement.

Alexis DeSieno: For 2025, we believe performance will accelerate as our operational execution improves and as we scale a major new ESI partner see continued strength in the U K and start to more fully realize contributions from ripple.

Amit Gupta: Driving engagement will continue to bring more marketing budgets to the Cardlytics platform adding to the flywheel effect I mentioned earlier. We have continued to make progress on the rollout of our new technology across three key areas, including first the adoption and refinement of our ads decisioning engine or ADE. Second, the launch of our automated insights dashboard and third, the launch of the dynamic marketplace, which includes the transition to our engagement based pricing model.

Alexis DeSieno: We believe all of these factors can support double digit billings and positive free cash flow in 2025, we.

Alexis DeSieno: We believe all of these factors can support double-digit billings and positive free cash flow in 2025. We are confident that our improved balance sheet and cash flow can enable us to continue to invest in the business and repay the remainder of the 2020 convertible notes in September 2025.

Alexis DeSieno: We are confident that our improved balance sheet and cash flow can enable us to continue to invest in the business and to repay the remainder of the 2020 convertible notes in September 2025.

Speaker Change: Now I'll turn it back to the operator for questions.

Speaker Change: Thank you.

Operator: Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jacob Stephan with Lake Street Capital Markets. Your line is now open.

Speaker Change: As a reminder to ask a question. Please press star one one of your telephone and wait for your name to be announced.

Speaker Change: Your question. Please press star one again.

Speaker Change: Please stand by while we compile the Q&A roster.

Amit Gupta: First, on ADE, 80% of our banks have already onboarded and we continue to make progress getting the remaining banks on the platform. We have also made progress in enhancing the logic, model, and signals that determine the offer decisioning. Second, we are excited that we launched our insights dashboard. Advertisers can now access on demand insights such as share wallet shifts. Insights will increase our overall billing opportunity through spend thresholds required for access, as well as enabling advertisers ability to take action in real time.

Alexis DeSieno: Our first question comes from the line of Jacob Stephen with Lake Street Capital Markets. Your line is now open.

Jason Schmidt: Hey guys, Jason Schmidt on for Jacob. Thanks for taking my questions. I just want to touch on the continued increased customer incentives you saw in the quarter versus historically. Are you finding that consumers are redeeming offers less if they're below a certain discount threshold? Any caller here would be helpful.

Jason Schmidt: Hey, guys, Jason Schmidt on for Jacob Thanks for taking my questions. Just wanted to touch on the continued increased customer incentives you saw in the quarter versus historically are you finding that consumers are redeeming offers last if theyre below a certain discount thresholds any color here would be helpful.

Alexis DeSieno: Thanks, it's Alexis. No, look, we're focused on driving engagement more holistically. ADE is really all about targeting the right offers to the right users and therefore driving higher engagement and higher rewards, so it's really not a function of necessarily lower rewards, as you're implying. What we're really seeing is more and more people engaging with offers and reducing them. So it's actually the opposite. And so what you'll see in the guide is we're actually assuming continued acceleration of the rewards to happen, with slightly more reward payout as a percentage of billings next quarter. And we want to give the opportunity to test different dynamic rewards, which could be either higher or lower going forward.

Speaker Change: Thanks, It's all access.

Speaker Change: No look we're focused on driving engagement more holistically.

Speaker Change: <unk> is really all about targeting the right offers to the right users and therefore driving higher engagement and higher rewards. So it's really not a function of necessarily lower reward those are implying what we're really seeing is more and more people engaging with offers and redeeming them. So it's actually the opposite and so what youll see in the guide.

Amit Gupta: We have 10% of advertisers using it by the end of last quarter and are on track to have the platform available for all advertisers by the end of the year. Third, we launched the dynamic marketplace with over 20 live campaigns running with cost for engagement pricing and variable TRO as goals. To remind you, pricing, budgets, and offers have historically been static, with advertisers priced on a static fee with fixed budgets that persist during the life of the campaign.

Alexis DeSieno: We're actually assuming continued acceleration of the rewards.

Alexis DeSieno: Happen.

Alexis DeSieno: Slightly more reward payout as a percentage of billings next quarter, and we want to give the opportunity to test different dynamic rewards, which could be either higher or lower going forward.

Jason Schmidt: Gotcha. And then, just as a follow-up, I know you outlined some of the investments in the platform, but how should we think about the incremental cap backs going forward?

Jason Kreyer: Gotcha. And then, just as a follow-up, I know you outlined some of the investments in the platform, but how should we think about the incremental cap backs going forward?

Speaker Change: Got you and then just as a follow up I know you outlined some of the investments in the platform, but how should we think about the incremental capex going forward.

Amit Gupta: The dynamic marketplace allows advertisers to see their campaign performance on a daily basis and make ongoing changes to their ROAS goals, fees, and budgets, which we believe ultimately will lead to a better performance of their campaigns and higher retention of those advertisers. As part of this, we are shifting to an engagement based pricing model. This pricing aligns with industry standards and will allow us to significantly improve visibility to advertisers. This model should appeal to advertisers that are accustomed to buying from other digital media platforms on a cost per click basis, and it will provide them with improved pacing visibility and control.

Alexis DeSieno: CAPEX should be relatively the same going forward. It's primarily a function of capitalized software costs related to our people, and there's not much else in terms of infrastructure costs, so I wouldn't model any major increases.

Speaker Change: Capex should be relatively the same going forward, it's primarily a function of.

Speaker Change: Capitalized software costs related to our people.

Speaker Change: And there's not much else in terms of infrastructure costs. So.

Speaker Change: I wouldn't model any major increases.

Jason Schmidt: Perfect. Thanks a lot.

Speaker Change: Perfect. Thanks, a lot.

Speaker Change: Thank you.

Speaker Change: Thank you.

Operator: Our next question comes from the line of Kyle Peterson with Needham. Your line is now open.

Jason Kreyer: Our next question comes from the line of Carl Peterson with Needham. Your line is now open.

Kyle Peterson: Hey, good afternoon guys. Thanks for taking the questions. I wanted to start off with the commentary on the transition to engagement-based pricing, with majority accounts by the end of 2025. Could you give us a reminder as to what percentage of, you know, whether it's billings or logos that are priced on an engagement basis today? And, you know, what does that transition in terms of, like, what's the pace of that look like over the next several quarters?

Speaker Change: Hey, guys.

Speaker Change: Hi, guys. Thanks for taking the questions.

Speaker Change: Wanted to start off.

Speaker Change: With the commentary on the fish.

Amit Gupta: CPE is directly aligned to the real value we create for our buyers, brands, and banks. We expect to have majority of our accounts on engagement-based pricing models by the end of 2025. We are also expanding our addressable market for Ripple, which we power with our bridge data to help us tap into the rapidly expanding retail media budgets. We are continuing to build out our nationwide footprint of individual shoppers and expect to have over 100 million profiles and 50,000 locations by year end.

Speaker Change: Transition to engagement based pricing majority accounts by the end of 2005.

Speaker Change: I guess just could you give US a reminder, as to what percentage of whether it's billings or logos that are.

Speaker Change: Price kind of engagement basis.

Speaker Change: De and what does that transition in terms of like what's the pace of that looks like over the next several quarters.

Speaker Change: No problem.

Alexis DeSieno: No problem. So we have a very minimal number on our new dynamic pricing. We said around 20 accounts were on the dynamic marketplace this quarter. Last quarter, I think we said 5%.

Speaker Change: So we have a very minimal number on our new dynamic pricing.

Speaker Change: We said around 20 accounts are on the dynamic marketplace this quarter or last quarter. I think we said, 5%. So it still remains a very low portion of our spend I think what youre, referring to is that we also have CPT pricing today, which is engagement based on spend based.

Amit Gupta: In June, we published over 2800 purchase-based audience segments on leading DSPs such as the Trade Desk and LiveRamp providing CPG advertisers with more transparency into product-specific purchasing behaviors of consumers. While early days, we have already seen hundreds of advertisers engaged since launch. Ripple allows us to diversify our advertiser base by adding CPG brands to the mix and allowing us to tap into one of the largest portions of advertising budgets that our core cardlytics business cannot effectively capture.

Alexis DeSieno: So it still remains a very low proportion of our spend. I think what you're referring to is that we also have CPT pricing today, which is engagement-based and spend-based, but actually not what we're moving towards fully. We're moving towards any sort of engagement-based pricing, meaning an activation, or click, or a spend. So today, the answer is that the newest pricing models in the dynamic marketplace are a very small portion of our billing. And we want to make sure that the marketplace is performing before we roll out more advertisers onto the platform. But we expect to see that happen by the end of this year.

Speaker Change: Actually not what we're moving towards and if fully we are moving towards any sort of.

Speaker Change: Engagement based pricing, meaning and activation of our click or spend so.

Speaker Change: Today, the answer is the newest pricing models and the dynamic marketplace.

Speaker Change: Very small portion of our billings and.

Speaker Change: We want to make sure that the marketplaces performing before we roll out more advertisers onto the platform.

Unnamed Speaker: But we can't see it happen by the end.

Amit Gupta: Looking ahead, we are excited to launch a large bank partner in the US in the near future. This will help increase marketer scale faster via a larger and more engaged audience to whom we can serve offers. We are also committed to further growing our bank partnerships and are in active conversations with both new and existing partners.

Jason Kreyer: But.

Speaker Change: It happened by the end of 2025.

Kyle Peterson: Okay, that's helpful, and I guess I just wanted to switch over to the profitability side of things, at least. In the interim, while consumer incentives are kind of weighing on some of these other pieces while we're in transition here, are there any levers that you guys could pull on the expense front to perhaps get back to free cash flow in EBITDA, whether it's breakeven or positive, or I guess just how long are you guys willing to... I would say you've done burn rates similar to what you guys guided to in the third quarter.

Unnamed Speaker: Okay.

Speaker Change: That's helpful and I guess I just wanted to switch over.

Speaker Change: The profitability side of things at least.

Unnamed Speaker: Hi.

Speaker Change: In term.

Unnamed Speaker: Sure.

Speaker Change: Consumer incentives are kind of weighing on.

Speaker Change: Some of these other pieces, while we're in transition here are there any levers.

Amit Gupta: Before I hand it over to Alexis, I want to reiterate my excitement for Cardlytics future. As Cardlyt offers become more important to banks, we are the clear leader in our industry, with a strong market position and a deep network of major financial institutions. No one else has a platform and deep relationships we have. We are well aware that progress along this path will not be linear, but we are confident we have the right strategy and are making the right moves to set Cardlytics on a much stronger course for the future. As excited as we are about this future, we know short-term results also matter and you have our commitment that we won't take our eyes off the ball in the months ahead.

Speaker Change: You guys could pull on the expense front to perhaps get back to you.

Speaker Change: Free cash flow and EBITDA, whether it's breakeven or positive or I guess, just how long are you guys willing to.

Unnamed Speaker: I run it, you know, and I would say, you've done burn rates similar to what you guys guided to in the third quarter.

Ryan: Hi, Ryan.

Unnamed Speaker: Alright.

Speaker Change: I would say EBITDA and burn rates are.

Speaker Change: Similar to what you guys have guided to the third quarter.

Amit Gupta: Yeah, so there's no shift in our cost discipline. We've spent a lot of time making cost reductions over the last year and changes to our capital structure that would enable the investments that we're making in a disciplined way. So, what I will say is we're committed to the long-term strategy, which requires investment to improve technology, products, and sales and to strengthen our overall business. So we're balancing that with prudent expense management.

Alexis DeSieno: Yeah, so there's no shift in our cost discipline. We've spent a lot of time making cost reductions over the last year and changes to our capital structure that would enable the investments that we're making in a disciplined way. So what I will say is we're committed to the long-term strategy, which requires investment to improve technology, products, and sales and to strengthen our overall business. And we're balancing that with prudent expense management.

Speaker Change: Yeah, So there's no shift in our cost discipline.

Amit Gupta: We've spent a lot of time to make cost reductions over the last year and changes to our capital structure that would enable the investments that we're making in a disciplined way. So what I will say is we're committed to the long term strategy, which requires investment to improve technology product and sales and to strengthen our overall business. So we're balancing that with prudent expense management and as I said.

Alexis DeSieno: I'll now turn it over to Alexis to discuss the financials. Thank you, Emmett. This quarter was more challenging than expected. Although we continue to execute on our North Star Redemptions, our overall business experience headwinds. While our top lane grew more slowly than expected, we continue to be focused on tightly managing expenses and maintaining a strong balance sheet. Now turning to our specific second quarter results. My comments will be year over year comparisons to the second quarter of 2023, excluding entertainment, our former subsidiary that we sold in December 2023 and less stated otherwise.

Amit Gupta: And as I said, in the past, I've said operating expenses in the mid-40s. On this call, I said below $40 million for the quarter and the remainder of the year. So we are keeping an eye on it. But again, it's a balance of investing for the long term and prioritizing where we're spending. Certainly, it's our goal to accelerate the top line, modernize our platform, and eventually generate a sustainable adjusted EBITDA and free cash flow over time. I think Q4 tends to be a stronger quarter for us. I'm not guiding Q4 today. But given the holiday and historic performance, certainly something that could happen, and we're keeping track of that.

Amit Gupta: In the past I've said operating expenses in the mid <unk>.

Amit Gupta: This call I said below $40 million for the quarter for the remainder of the year. So we are keeping an eye on it but again, it's a balance of investing for the long term and prioritizing where we're spending.

Alexis DeSieno: And as I said, in the past, I've said operating expenses in the mid-40s. On this call, I said below $40 million for the quarter and the remainder of the year. So we are keeping an eye on it, but again, it's a balance of investing for the long term and prioritizing where we're spending. Certainly, it's our goal to accelerate the top line, modernize our platform, and eventually generate a sustainable adjusted EBITDA and free cash flow over time. I think Q4 tends to be a stronger quarter for us. I'm not guiding Q4 today, but given the holiday and historic performance, it was certainly something that could happen, and we're keeping track of it.

Amit Gupta: Certainly, it's our goal to accelerate topline modernize our platform and eventually generate.

Amit Gupta: Sustainable adjusted EBITDA and free cash flow over time.

Amit Gupta: I think Q4 tends to be a stronger quarter for us I'm not guiding Q4 today, but given holiday and historic performance.

Amit Gupta: Certainly something that could happen and we're keeping track of it.

Alexis DeSieno: In Q2, Billings reached $110.4 million, a 2% increase. The majority of the weakness was the result of our ongoing changes to our platform and technology which led to unpredictable delivery rather than pipeline weakness. While some level of under delivery and over delivery is inherent in any ad network, we are taking decisive action to address our operational challenges around forecasting and delivery. Brewery. We experience growth in our travel and entertainment in everyday spend verticals with standout growth from key airlines and hotels, but partially offset by downward movement in DTC and retail.

Kyle Peterson: Okay, that's helpful. Thank you.

Unnamed Speaker: Okay, that's helpful. Thank you.

Amit Gupta: Okay.

Speaker Change: That's helpful. Thank you.

Alexis DeSieno: Thank you.

Operator: Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Luke Horton with Northland Capital markets. Your line is now open.

Unnamed Speaker: Hey guys, thanks for taking the question. Just wanted to touch on delivery performance. When did you guys sort of start to notice these delays or disruptions and kind of what are you doing to fix this, and how long do you expect this to be disrupting the business for?

Lucas Horton: Yeah, hey guys. Thanks for taking the question. Just wanted to touch on delivery performance. When did you guys sort of start to notice these delays or disruptions and kind of what are you doing to fix this, and how long do you expect this to be disrupting the business for?

Speaker Change: Hey, guys. Thanks for taking the question.

Unnamed Speaker: Just wanted to touch on the delivery performance.

Unnamed Speaker: When did you guys sort of start to notice these delays or disruptions.

Unnamed Speaker: Kind of what are you doing to fix this and how long do you expect this to be.

Speaker Change: Disrupting the business for.

Alexis DeSieno: Yeah, thanks for the question. I think you started to see this in the results going back a quarter or two. We alluded to higher rewards last quarter. ADE has been a process.

Speaker Change: Yeah. Thanks for the question.

Alexis DeSieno: In parallel to scaling new logos, our churn rate, which is based on the number of advertisers that leave our channel, is at its lowest since before the pandemic. Consumer incentives, which we refer to as rewards, increase by 25% to 40.8 million dollars, due to enhancements in ADE and more performance ad serving. Revenue, which is Billings' net of consumer incentives, but before partner share, was $69.6 million, a decrease of 7%. Revenue decreased due to a combination of lower than anticipated Billings, largely due to under delivery of budgets we had secured, and higher than expected consumer incentive payments.

Speaker Change: I think you started to see this in the results.

Speaker Change: Going back a quarter or two.

Speaker Change: We alluded to the higher rewards last quarter <unk> has been a process, we're doing a better job targeting and that started with getting all the banks on to AWS and on the cloud. So that we could be getting real time data and pushing out updates to our product more real time without its coming some of this disruption but.

Alexis DeSieno: We're doing a better job targeting. And, you know, this started with getting all the banks onto AWS and on the cloud so that we could be getting real-time data and pushing out updates to our product more real-time. With that comes some of this disruption. But basically, we're creating a more performant network. Some brands are performing much, much better than expected. Some are not.

Speaker Change: Basically we are creating a more performance network.

Speaker Change: Some brands are performing much much better than expected some are not but.

Alexis DeSieno: But overall, it's a more performant network, and that's what's leading to higher rewards in the short term. And then I'll let Amit talk about some of the second half initiatives that we have. But what I will say is clearly from the guide, we're not assuming any of these are taking place in Q3. We may start to see some of the benefits in Q4, and I'll let him walk through what we're working through today. Yeah, Luke, thanks.

Speaker Change: Overall, it's a more performance network and that's what's leading to that higher.

Unnamed Speaker: Rewards in the short term and then I'll, let Amit talk about kind of the second half initiatives that we have but what I will say is clearly from the guide we're not we're not assuming any of these are taking place in Q3.

Alexis DeSieno: We are getting more efficient at servicing the right rewards to the right user. In the short term, we will continue to see outsized rewards as engagement accelerates beyond top-line growth, due to these targeting and ranking improvements. But we expect this to normalize as we further refine our technology and pricing to better align rewards with returns. While in the near term, this is pressuring results. In the long run, we expect the benefits to come given the fly will affect to our business.

Speaker Change: We may start to see some of the benefits in Q4 and I'll, let him walk through what what we're working through today.

Unnamed Speaker: Yeah, Luke, thanks again for joining us. I think, as Alexis mentioned, we absolutely are kind of eyes wide open about where we're heading, and specifically to fix some of the issues in our near term priorities, we're focused on threefold. First of all, we're fine-tuning our delivery. Secondly, we're improving our forecasting, because that's where the whole process starts. And thirdly, we're going to continue to diversify and deepen our advertiser base. And, you know, we've talked a lot about ADD, and there was a previous question.

Amit Gupta: Yeah, Luke, thanks again for joining us. I think, as Alexis mentioned, we absolutely are eyes wide open about where we're heading, and specifically to fix some of the issues in our near-term priorities, we're focused on threefold. First of all, we're fine-tuning our delivery. Secondly, we're improving our forecasting, because that's where the whole process starts. And thirdly, we're going to continue to diversify and deepen our advertiser base. And, you know, we've talked a lot about ADD, and there was a previous question, so I'll address that as well.

Unnamed Speaker: Yeah, Luke, thanks.

Speaker Change: Yes look thanks again for joining I think as <unk> mentioned were.

Unnamed Speaker: Absolutely.

Unnamed Speaker: Our eyes wide open and where we're heading and specifically to fix some of the issues and near term priorities. We're focused on three fold first of all we're fine tuning our delivery secondly, we're improving our forecasting because that's where the whole process starts and thirdly, we're going to continue to diversify and deepen our advertiser base.

Alexis DeSieno: Rewards to late cardholders, driving loyalty and brands, and with cardholders banks, new banks strengthen our network and advertisers benefit from consumer insights and measurable outcomes that drive growth. We continue to be focused on adjusted contribution, which we believe is a better indicator for our business than gap revenue. Adjusted contribution was $36.4 million, up 1%. As a percentage of revenue, adjusted contribution margin was 52%, up 4% year over year, primarily due to bank mix and partially offset by higher consumer rewards.

Unnamed Speaker: And we've talked a lot about ADT and there was a previous question. So I'll address that as well, we're continuing we're continuing to focus on onboarding clients to AAV.

Unnamed Speaker: So I'll address that as well. We're continuing to focus on onboarding clients to ADE, scaling our insights, dashboard, and dynamic marketplace, which includes transitioning our customers to an engagement-based pricing model, as Alexis mentioned earlier. And that also helps us continue to grow our advertiser base.

Amit Gupta: We're continuing to focus on onboarding clients to ADE, scaling our insights, dashboard, and dynamic marketplace, which includes transitioning our customers to an engagement-based pricing model, as Alexis mentioned earlier. And that also helps us continue to grow our advertiser base.

Unnamed Speaker: Scaling our insights dashboard and dynamic marketplace, which includes transitioning our customers to an engaging based pricing model.

Lucas Horton: Got it. Okay.

Unnamed Speaker: Earlier and that also helps us continue to grow our advertiser base.

Alexis DeSieno: Turning briefly to segment results. US feelings were flat due to the previously discussed challenges with delivery. The UK continued to show very strong double-digit feelings growth at 33%, partially due to our auto-enrollment program with Lloyds and the launch of our newest banking partner, Monzo, as well as budget expansion. We also signed a large grosser so we now have four of the five biggest grossers in the UK on the channel, which will continue to drive engagement.

Lucas Horton: And then I guess just touching on the sales team. I know you guys have been investing in adding headcount on the sales side and rebuilding the agency funnel. Just wondering if this quarter was a continuation of that, of adding headcount there and kind of the progress that's being made there.

Luke: Got it okay.

Speaker Change: And then I guess just touching on the sales team I know you guys have been investing in adding headcount in the sales.

Unnamed Speaker: Syed and rebuilding the agency funnel.

Speaker Change: Wondering if this quarter was a continuation of that.

Speaker Change: Adding head count there.

Luke: Kind of the progress that's being made there.

Alexis DeSieno: Yeah, last quarter, we said that we were investing in those two teams. It's still really early stages for them, but those people are in place.

Speaker Change: Yes last quarter, we said that we were investing in those two teams.

Lucas Horton: But I would say we haven't seen the impact of the agency yet. What we did see is that we invested in the restaurant team about a quarter or two ago, and that actually did lead to stronger performance in restaurants. So some of these changes we're making in sales are working, and we're continuing to shift so that account management can really focus on that, and sales can focus on sales rather than on account management. So I would say stay tuned for those changes. But in terms of if you're asking on a cost basis, a minimal increase to next quarter.

Alexis DeSieno: Bridge buildings were up 5% over Q1, but down 6% compared to last year, due to the loss of a single existing customer. The redemption and partnership dynamics we've discussed do not impact bridge, so revenue was the key metric we used to assess the performance of this business. MAUs were $165.5 million for the second quarter in increase of 3%, driven primarily by organic growth in the US in auto-enrollment and a new bank in the UK.

Speaker Change: Still really early stages for them that people are in place.

Speaker Change: I would say, we haven't seen the impact from agency yet.

Speaker Change: Well, we did see is we invested in the restaurant team about a quarter or two ago and that actually did lead to stronger performance in restaurants. So some of these changes we're making in sales are working and we're continuing to ship.

Speaker Change: Shifts so that account management can really focus on that and sales can focus on sales rather than on account management. So I would say stay tuned for those changes, but in terms of if you're asking on a cost basis minimal increase till next to next quarter.

Alexis DeSieno: Our food was 42 cents, down 13% as a result of the 25% increase in consumer incentives as we continue to deliver more rewards to card holders. Adjusted EBITDA improved year over year from negative $3.8 million to negative $2.3 million this quarter. The UK delivered positive adjusted EBITDA for the third consecutive quarter. Total operating expenses, excluding stock-based compensation, came in at $38.7 million. While we continue to believe in the changes we are making to our technology product and sales organizations to support growth over the long term, we are mindful of managing our expense base given our results.

Lucas Horton: Okay, got it. Well, thanks for taking the questions. I'll take the rest offline.

Luke: Okay got it.

Speaker Change: Thanks for taking the questions I'll take the rest offline.

Operator: Thank you. As a reminder, to ask a question at this time, please press star 11 on your touchtone telephone. Our next question comes from the line of Jason Kreyer with Craig Hallam. Your line is now open.

Unnamed Speaker: Thanks.

Speaker Change: Thank you as a reminder to ask a question at this time. Please press star one one Oreo touchstone telephone.

Speaker Change: Our next question comes from the line of Jason <unk> with Craig Hallum. Your line is now open.

Jason Kreyer: Thank you. Just as you've had early conversations with marketers on this engagement pricing model, I'm curious if you've heard any pushback on pivoting to a new model, and then the follow-up to that is, why now?

Speaker Change: Thank you just as you've had early conversations with marketers on this engagement pricing model curious if you've heard any pushback on pivoting to a new model and then the follow up to that is just why now on the pricing model I think the current pricing model has been in place for almost a decade. So just curious what's catalyzing the desire to have there.

Alexis DeSieno: We expect operating expenses to remain below $40 million per quarter for the remainder of the year. In Q2, operating cashflow was positive $4.4 million and free cashflow was negative $0.4 million. On the balance sheet, we ended Q2 with $71.2 million in cash and cash equivalence and we had $60 million of unused available borrowing under our line of credit. As a reminder, we repaid the $30 million drawn our line of credit in April. I am also pleased to announce that we have extended our $60 million line of credit with the Bank of California through July of 2026 with the lower interest rate.

Alexis DeSieno: Change right now.

Alexis DeSieno: Okay, firstly, I'll take your first question. The answer is no. There hasn't really been any pushback. Advertisers appreciate that we need to make this shift to our pricing structure. It better aligns our offerings with industry standards and allows us to significantly improve visibility for them and for us and improve performance, so it's something that they're used to seeing. It's industry standard, as I said. So this model should really appeal to them, and they're accustomed to buying on a cost-per-click basis from other platforms.

Unnamed Speaker: Okay.

Speaker Change: Firstly I'll take the first question.

Speaker Change: The answer is no there hasnt really been any pushback advertisers appreciate that we need to make this shift to a pricing structure better aligns our offerings with industry standards and allows us to significantly improve visibility to them and to us and improved performance. So that's something that they're used to seeing at industry standard as I said. So this models that really appeal to them.

Speaker Change: And they are accustomed to buying on a cost per click basis from other platforms. So really gives them more pacing visibility and control. The reason its taking longer is we really need to build the tech to support it at scale and so that's why you only see a small percentage on it today.

Alexis DeSieno: So it really gives them more pacing, visibility, and control. The reason it's taking longer is we really need to build the tech to support it at scale, and so that's why you only see a small percentage of it today. The second part of your question, I think, was more long-term. Why now?

Alexis DeSieno: Now turning to our Q3 outlook. For Q3, we expect feelings between $106 million revenue between $56 and $63 million, adjusted contribution between $32 and $35 million, adjusted EBITDA between negative $6 and negative $3.5 million. Our billing guidance represents negative 7% to negative 13% growth, excluding our former subsidiary entertainment. I'd like to provide some additional color on what we are seeing in the top line. Our Q3 guidance does not reflect our ambition.

Unnamed Speaker: The second part of your question, I think, was more long term. Why now? I can let Amit take that, but I think high level.

Luke: The second part of your question I think what's more long term why now I can let him take that but I think high level.

Alexis DeSieno: I can let Amma take that, but I think high-level. We need to modernize our platform. Staying in a static marketplace is not, not the industry standard. We need to modernize and move to a more dynamic-based pricing model, which ultimately will help us go head-to-head against some of the largest platforms. So, there's really no choice.

Unnamed Speaker: We need to modernize our platform. Like, staying in a static marketplace is not good for Locatorship communications.

Amit Gupta: We need to modernize our platform like staying in a static market place is not sustainable and is not the industry standard we need to modernize and move to a more dynamic based pricing model, which ultimately will help us go head to head against some of the largest platform. So theres really no choice now is the time to kind of evolve our platform from something that hasnt changed in 10.

Unnamed Speaker: Next slide, please. Okay. So carbon dioxide comes out from climate change, and carbon dioxide is available from natural sources. The question is filled with so many questions about climate change. Basically, they're sort of putting some lists together, the same kind of questions to put some carpet blocks and everyone kind, and a tighter set of outcomes going forward because we'll be able to react in real time to the performance we're seeing rather than having to wait.

Alexis DeSieno: Now's the time to kind of evolve our platform from something that hasn't changed in 10 years. So, this is really going to enable us to have better forecasting, better delivery, and a tighter set of outcomes going forward because we'll be able to react real-time to the performance we're seeing, rather than having to wait, you know, several weeks to receive the data on spend, which influences how that campaign is ultimately performing. So more real-time performance. I don't know if you want to add anything to it. Yeah,

Unnamed Speaker: So this is really going to enable us to have better forecasting better delivery in a tighter set of outcomes going forward, because we'll be able to react real time.

Alexis DeSieno: We expect our to be continued disruption in Q3 as a result of the changes we are making to our ad platform, but we believe that driving consumer engagement and modernizing our technology are necessary to support our long term goals. We are not assuming any material improvement to our delivery for purposes of guidance despite several initiatives underway. From a pipeline standpoint, we are seeing continued strength in travel and everyday spend and after rebuilding our restaurant team at the end of last year, we expect to see growth in Q3.

Unnamed Speaker: <unk>, we're seeing rather than having to wait.

Unnamed Speaker: Several weeks to receive the data on spend which influences how that campaign is ultimately doing so more real time performance I don't know if you want to add anything on that yes, I think Alex as Alexa said Jason.

Alexis DeSieno: Yeah, I think as Alexis said, Jason, this is in some ways how advertisers are used to spending, right? So we're doing a bit of a catch up. And frankly, as we work with leading brands and leading advertisers across the country and beyond, you know, they are actually quite welcoming of this change because this allows us to line up our platform and incentives more closely to their way of functioning and their incentives, right?

Unnamed Speaker: Yeah, I think as Alexis said, Jason, this is in some ways how advertisers are used to spending, right? So we're doing a bit of a catch up. And frankly, as we work with leading brands and leading advertisers across the country and beyond, you know, they are actually quite welcoming of this change because this allows us to line up our platform and incentives more closely to their way of functioning and their incentives, right?

Unnamed Speaker: In some ways, how advertisers are used to spend it.

Unnamed Speaker: So we're doing a bit of a catch up and frankly, as we work with leading brands and leading advertisers across the country and beyond.

Alexis DeSieno: Headwinds and retail performance will continue with budgets from top accounts flat year over year in that category. The UK is expected to contribute double digit billing growth in the quarter as we continue to capitalize on the incremental MAUs that unlock larger advertiser budgets. Bridges expected to contribute positive growth as we continue to build out ripple and establish relationships with our new CPG advertiser base. We are expecting another quarter of elevated redemptions as our targeting continues to service the right rewards to the right users.

Unnamed Speaker: They are actually quite welcoming of this change because this allows us to lineup our platform and incentives more closely to their way of functioning under incentives right and that as electrostatic allows them to function to change their decisions to modify and see what's happening live.

Alexis DeSieno: And that, as Alexis said, it allows them to change their decisions, to modify and see what's happening live or in the near term, in real time, almost real time, and to modify their decisions on how campaigns might be running and so on. So we're moving in that direction, and that is the right direction for us to move as we scale the Cardlytics platform.

Unnamed Speaker: And that, as Alexis said, it allows them to change their decisions to modify and see what's happening live or in the near term, in real time, almost real time, and make changes to their decisions on how campaigns might be running and so on. So we're moving in that direction, and that is the right direction for us to move as we scale the Cardlytics platform.

Speaker Change: Or in near.

Unnamed Speaker: Real time, almost real time and modify their decisions on our cap rates might be running it and so on so we're moving in that direction and that is the right direction for us to move as we scaled our card with X platform.

Alexis DeSieno: We expect adjusted contributions to be lower due to the expected decline in buildings and revenue with margins similar to previous quarters. Adjusted EBITDA reflects the impact of our billing guidance while continuing to make strategic hiring decisions where we believe the return will be realized. We no longer expect double digit billing growth for the full year 2024 or to be operating cash on positive on a full year basis. We remain focused on our north star redemptions and we expect to continue to drive consumer engagement.

Unnamed Speaker: As you talked about kind of real-time, I wanted to ask about the Insight Dashboard. We've heard this from advertisers, it's just a little bit of a sticking point, right, like marketers want that transparency, want that real-time access, so clearly, you know, the evolution of that solution is great and I think a step in the right direction. I'm just curious how meaningful you think that can be towards helping fix kind of this billing cycle issue; what do you think the timeline is for that helping drive better matching of billings and engagement?

Jason Kreyer: As you talked about kind of real-time, I wanted to ask on the Insight Dashboard. We've heard this from advertisers. It's just a little bit of a sticking point, right?

Speaker Change: As you talked about kind of real time I wanted to ask on the insight dashboard.

Unnamed Speaker: We've heard this from advertisers is just a little bit of a sticking point right like marketers want that transparency want that real time access. So clearly the evolution of that solution is great and I think a step in the right direction I'm just I'm curious how meaningful you think that can be towards helping fix kind of this billing cycle issue.

Jason Kreyer: Like marketers want that transparency, want that real-time access. So clearly, you know, the evolution of that solution is great and I think a step in the right direction. I'm just curious how meaningful you think that can be towards helping fix kind of this billing cycle issue; what do you think the timeline is for that helping drive better matching of billings and engagement?

Alexis DeSieno: For 2025, we believe performance will accelerate as our operational execution improves and as we scale a major U.S, by partner, he continued strength in the UK and start to more fully realized contributions from ripple. We believe all of these factors can support double digit billings and positive recaselo in 2025. We are confident that our improved balance sheet and cash flow can enable us to continue to invest in the business and repay the remainder of the 2020 convertible notes in September 2025.

Unnamed Speaker: What do you think the timeline is for that helping drive better matching of billings and engagement performance.

Alexis DeSieno: Yeah, so there's only 10% on as of Q2, which was our goal. So, we're very happy with that result.

Speaker Change: Yes. So there is only 10% on as of Q2, which was our goal so very happy with that result.

Alexis DeSieno: I think the point of the Insights Dashboard is that it really will drive retention and stickiness with these brands. However, in order to get access to these insights, which really nobody else has, you have to have certain spend thresholds in terms of your advertising business. And so we see this as one of the main benefits, we know what the advertisers like, and it's a real benefit to why you spend with us and the data analytics that you receive from us.

Speaker Change: I think the point of insights dashboard is that it really will drive retention and stickiness with these brands in order to get access to these insights, which really nobody else has.

Operator: Now, I'll turn it back to the Operator for questions. Thank you. As a reminder, to ask a question, please press star-1-1 on your telephone and wait for your name to be announced. If you draw your question, please press star-1-1 again. Please stand by when we compile the Q&A roster.

Speaker Change: You have to have certain spend thresholds in terms of your advertising business and so we see this as one of the main we know advertisers like it and it's a real benefit to why why you spend with us in the data analytics that you receive from us so creating those fans thresholds really is driving ulf.

Alexis DeSieno: So creating those spend thresholds really is driving, ultimately, retention, less churn, and ideally higher budgets going forward as advertisers want to maintain access to the insights. I don't know if there's anything you want to add on, but if not, no problem.

Operator: Our first question comes from the line of Jacob Stephan with Blake Street Capital Markets. She'll let us know open.

Speaker Change: Ultimately retention less churn and ideally higher budgets going forward as as advertisers wanted to maintain access to the insights I don't know if theres anything you want to add on that if not no problem, Yeah I think.

Alexis DeSieno: Hey guys, Jason Schmidt on for Jacob. Thanks for taking my questions. I just want to touch on the continued increased customer incentives you saw in the quarter, Bruce's historically. Are you finding that consumers are redeeming offers less that they're below us or in discount threshold? Any color here would be helpful.

Alexis DeSieno: Yeah, I think I'll just kind of add on to what Alexis just said, Jason. Insights are not new to us, right? We have a very deep-rooted culture of insights and a very powerful insights and analytics team that drives a lot of value that our clients, our advertisers, really love to engage with. So this is not new to us. What we're trying to do, as we mentioned in our previous scripted comments, as we move the business from more static to dynamic and more automated, this allows us to reach a larger scale of advertisers with a kind of smaller, let's say, headcount footprint, if you will. And this is very much something that advertisers are asking of us because this is an important ingredient in their decision-making, in some cases, even beyond direct marketing and budgets

Operator: Thank you. And I'm currently showing no further questions at this time. I'd like to hand the call back.

Speaker Change: Just kind of add on to what <unk>, just said, Jason insights is not new to US right. We have a very deep rooted culture of insights.

Speaker Change: Very powerful insights analytics team that drives a lot of value that clients our clients, our advertisers really love to engage with so this is not new to us what we're trying to do as in our previous scripted comments as we mentioned.

Alexis DeSieno: Thanks, it's Alexis. No, look, we're focused on driving engagement more holistically. 80 is really all about targeting the right offers to the right users, and they're for driving higher engagement and higher rewards. So it's really not a function of necessarily lower rewards as you're implying. What we're really seeing is more and more people engaging with offers and redeeming them. So it's actually the opposite. And so what you'll see in the guide is we're actually assuming continued acceleration of the rewards to happen with a slightly more reward payout as a percentage of buildings next quarter. And we want to give the opportunity to test different dynamic rewards, which could be either higher or lower going forward.

Speaker: Gotcha.

Speaker Change: Moved our business from more static to dynamic and more automated this allows us to reach a larger scale of advertisers.

Speaker Change: With a smaller let's say head count footprint, if you will.

Speaker Change: And this is very much something that advertisers are asking of us because this is an important ingredient in their decision, making in some cases, even beyond direct marketing.

Unnamed Speaker: Yes.

Speaker Change: Thank you.

Operator: Thank you, and I'm currently showing no further questions at this time. I'd like to hand the call back over to Amit Gupta for closing remarks.

Unnamed Speaker: Thank you and I'm currently showing no further questions at this time I would like to hand, the call back over to Amit Gupta for closing remarks.

Alexis DeSieno: And then just as a follow up, I know you outlined some of the investments in the platform, but how should we think about the incremental cat backs going forward? CapEx should be relatively the same going forward. It's primarily a function of capitalized software costs related to our people. And there's not much else in terms of infrastructure costs. So I wouldn't model any major increases.

Amit Gupta: Well I'd like to thank the operator, and again I am honored that the board has appointed me to lead <unk> through its next phase as we've discussed today I am confident in the fundamental strength of this business and the strategy, we're implementing to better position ourselves for the future.

Speaker: Perfect. Thanks a lot. Thank you.

Amit Gupta: To thank everyone for joining the call today and for your time and for your questions. Thank you.

Amit Gupta: This concludes today's conference call. Thank you for your participation you may now disconnect.

Operator: Okay.

Operator: Our next question comes from the line of Kyle Peterson with Needham.

Operator: [music].

Kyle Peterson: You're a lot of self and.

Kyle Peterson: Hey, definitely guys thanks for taking the questions. One of the start off, you know, with the commentary on the kind of transition to engagement based pricing majority accounts by the end of 25. I guess just could you give us a reminder is to what percentage of, you know, whether it's buildings or logos that are price on an engagement basis today. And you know, what does that transition in terms of like what's the pace of that that look like over the next several quarters?

Operator: Okay.

Operator: Yes.

Operator: [music].

Operator: Okay.

Operator: Okay.

Operator: [music].

Operator: Okay.

Operator: Okay.

Operator: Sure.

Alexis DeSieno: No problem. So we have a very minimal number on our new dynamic pricing. We said around 20 accounts were on the dynamic marketplace this quarter or last quarter. I think we said 5%. So it still remains a very low portion of our spend. I think you what you're referring to is that we also have CPT pricing today, which is engagement based and spend based. But actually not what we're moving towards and fully we're moving towards any sort of engagement based pricing meaning an activation or click or spend.

Operator: [music].

Alexis DeSieno: So today the answer is the newest pricing models and the dynamic marketplace are very small portion of our billing. And we want to make sure that the market place is performing before we roll out more advertisers onto the platform, at the end of 2025.

Alexis DeSieno: Okay, that's helpful. And I guess I just wanted to switch over on the profitability side of things at least, you know, in the in-term while, you know, consumer incentives are kind of weighing on, you know, some of these other pieces while we're in transition here. Are there any levers, you know, that you guys could pull on the expense front to perhaps get back to, you know, free cash flow, whether in EBITDA, whether it's, you don't break even or for positive or I guess just how long are you guys willing to, you know, run it.

Alexis DeSieno: You know, I would say, you know, EBITDA and burn rates, similar to what, you know, you guys have guided to the third quarter. Yeah, so there's no shift in our cost discipline. We've spent a lot of time to make cost reductions over the last year and changes to our capital structure that would enable the investments that we're making in a disciplined way. So what I will say is we're committed to the long-term strategy, which requires investment to improve technology, product and sales and to strengthen our overall business.

Alexis DeSieno: So we're balancing that with expense management. And as I said, in the past, I've said operating expenses in the mid-40s. This call I said, it's below 40 million for the quarter for the remainder of the year. So we are keeping an eye on it. But again, it's a balance of investing for the long-term and prioritizing where we're spending. Certainly it's our goal to accelerate top line, modernize our platform, and eventually generate, you know, a sustainable adjuster. I think Q4 tends to be a strong recorder for us. I'm not guiding Q4 today, but given holiday and historic performance, you know, it was certainly something that could happen, and we're keeping track of it.

Kyle Peterson: Okay, that's helpful. Thank you.

Operator: Our next question comes from the line of Luke Gordon with Northland Capital Markets. You want us to open? Yeah, you guys.

Luke Gordon: Thanks for taking a question. Just wanted to touch on the delivery performance. When did you guys sort of start to notice these delays or disruptions and kind of what are you doing to fix this and how long do you expect this to be disrupting the business for? Yeah, thanks for the question. I think you started to see this in the results. Going back a quarter or two, we alluded to the higher rewards last quarter.

Luke Gordon: 80 has been a process. We're doing a better job targeting, and you know, the started with getting all the banks onto AWS and on the cloud so that we could be getting real-time data and pushing out updates to our product more real-time with that as coming some of this disruption, but basically, we're creating a more performant network. Some brands are performing much, much better than expected. Some are not, but overall, it's a more performant network, and that's with leading to the higher rewards in the short term.

Luke Gordon: And then Aula, on the talk about kind of the second half initiatives that we have, but what I will say is clearly from the guide, we're not assuming any of these are taking place in Q3. We may start to see some of the benefits in Q4, and Aula had him walk through what we're working through today. Yeah, Luke, thanks again for joining. I think as Alexis mentioned, we absolutely are kind of eyes wide open in where we're heading and specifically to fix some of the issues in near-from-priorities we're focused on threefold.

Luke Gordon: First of all, we're fine tuning our delivery. Secondly, we're improving our forecasting because that's where the whole process starts. And thirdly, we're going to continue to diversify and deepen our advertiser base. And you know, we've talked a lot about ADD and those are previous questions, so I'll let Reff add as well. We're continuing to focus on onboarding clients to ADD, ADD, scaling our insights, dashboard and dynamic marketplace, which includes transitioning our customers to an engagement-based pricing model as Alexis mentioned earlier.

Luke Gordon: And that also helps us continue to grow our advertiser base. Got it. Okay. And then I guess just touching on the sales team, I know you guys have been investing in adding headcount in the sales side and rebuilding the agency funnel. Just one aren't it's this quarter was the continuation of that of adding headcount there and kind of the progress that's being made there. Yeah, last quarter we said that we were investing in those two teams.

Luke Gordon: It's still really early stages for them, the people are in place, but I would say we haven't seen the impact from agency yet. What we did see is we invested in the restaurant team about a quarter or two ago and that actually did lead to stronger performance and restaurants. So some of these changes we're making and sales are working and we're continuing to shift so that account management can really focus on that and sales can focus on sales and rather than on account management. So I would say stay tuned for those changes, but in terms of if you're asking on a cost basis minimal increase to next quarter. Okay. Got it.

Operator: Well thanks for taking the questions I'll take the rest of one. Thanks. Thank you. As a reminder to ask a question at this time, please press star 11 or you touched on telephone.

Jason Kreyer: Our next question comes from the line of Jason Crayer with Craig Hallum. Your line is now open. Thank you.

Alexis DeSieno: Just as you've had early conversations with marketers on this engagement pricing model, curious if you've heard any pushback on pivoting to a new model and then the follow up to that is just why now on the pricing model. You know, I think the current pricing model has been in place for almost a decade. So just curious what's catalyzing the desire to have that change right now. Okay. Firstly, I'll take the first question.

Alexis DeSieno: The answer is no. There hasn't really been any pushback. Advertisers appreciate that we need to make this shift to our pricing structure. If better aligns are offerings with industry standards and allows us to significantly improve visibility to them and to us and improve performance. So it's something that they're used to seeing. If industry standard, as I said, so this model should really appeal to them and they're accustomed to buying on a cost per click basis from other platforms.

Alexis DeSieno: So really gives them more pacing, visibility, and control. The reason is taking longer is we really need to build the tech to support it at scale. And so that's why you only see a small percentage on it today. The second part of your question, I think, with more long term why now. I can let on it take that. But I think high level, we need to modernize our platform like staying in a Sustainable and is not the industry standard we need to modernize and move to more dynamic base pricing model, which ultimately will help us go ahead to head against some of the largest platforms.

Alexis DeSieno: So there's really no choice. Now is the time to kind of develop a platform from something that hasn't changed in ten years. So this is really going to enable us to have better forecasting, better delivery, and a tighter set of outcomes going forward because we'll be able to react real time to performance we're seeing rather than having to wait, you know, several weeks to receive the data on spend, which influences how that campaign is ultimately doing.

Alexis DeSieno: So more real time performance. I don't know if you want to add anything in that. Yeah, I think Alexa said Jason, you know, this is in some ways how advertisers are used to spending. Right? So we're doing a bit of a catch-off. And frankly, as we work with leading brands and leading advertisers across the country and beyond, you know, they are actually quite welcoming of this change because this allows us to line up our platform and incentives more closely to their way of functioning and their incentives, right?

Alexis DeSieno: And that as Alexa said, it allows them to function to change their decisions, to modify and see what's happening live or in real time, almost real time, and modify their decisions on how campaigns might be running and so on. So we're moving in that direction and that is the right direction for us to move as we scale the cardistics platform.

Amit Gupta: As you talked about kind of real time, I wanted to ask on the insight dashboard, we've heard this from advertisers is just a little bit of a sticking point, right? Like marketers want that transparency, want that real time access. So clearly, you know, the evolution of that solution is great and I think a step in the right direction. I'm just, I'm curious. How meaningful you think that can be towards helping fix kind of this, this billing cycle issue or what do you think the timeline is for that helping drive better matching of, of, of buildings and engagement performance?

Amit Gupta: Yeah, so there's only 10% on as a Q2, which was our goal. So very happy with that results. I think the point of the insight dashboard is that it really will drive retention and stickiness with these brands in order to get access to these insights, which really nobody else has. You have to have certain spend thresholds in terms of your advertising business. And so we see this as one of the main, you know, we know what the average is like it and it's a real benefit to why you spend with us and the data and Alexa you receive from us.

Amit Gupta: So creating those spend thresholds really is driving, you know, ultimately retention, less turn and ideally higher budgets going forward as advertisers want to maintain access to the insights. I don't know if there's anything you want to add on that if not no problem. Yeah, I think I'll just gonna add on to what Alexis just said Jason, insights is not new to us, right? We have a very deep rooted culture of insights and a very powerful insights analytics team that drives a lot of value that clients are, clients are advertisers really love to engage with.

Amit Gupta: So this is not new to us. What we're trying to do as in our previous scripted comments, as we mentioned, as we move the business from more static to dynamic and more automated, this allows us to reach a larger scale of advertisers with a kind of smaller, let's say, headcount for print if you will. And this is very much something that advertisers are asking of us because this is an important ingredient in their decision-making, in some cases, even beyond direct marketing budgets. Thank you.

Amit Gupta: Thank you, and I'm currently showing no further questions at this time. I'd like to hand a call back over to Amit Gupta for closing remarks. Well, I'd like to thank the operator, and again, I'm honored that the board has appointed me to lead Cardlytics through its next phase. As we've discussed today, I'm confident in the fundamental strength of this business and the strategy we're implementing to better position ourselves for the future. I'd like to thank everyone for joining the call today, and for your time and for your questions. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you.