Q3 2025 Cardlytics Inc Earnings Call

Speaker #3: Good afternoon , ladies and gentlemen , and welcome to the Q3 2025 Cardlytics, Inc. Earnings Conference Call . At this time , all lines are in listen only mode .

Speaker #3: Following the presentation , we will conduct a question and answer session . If at any time during this call , you require immediate assistance , please press star zero .

Speaker #3: For the operator . This call is being recorded on November 5th , 2025 , and I would like to turn the conference over to Nick Lynton .

Speaker #3: Thank you. Please go ahead.

Speaker #4: Good evening and welcome to the Cardlytics, Inc. third quarter 2025 Financial Results call for . 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 around our future financial performance and results , including for the fourth quarter of 2025 , the growth of CRP and the launches of new CRP partners .

Speaker #4: Our capital structure increasing our supply and operational and product initiatives . 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 our 10-q for the quarter ended September 30th , 2025 , which has been filed with the SEC .

Speaker #4: Also , during our call , we will discuss non-GAAP measures of our performance , GAAP , financial reconciliations , and supplemental financial information are provided in the press release issued today , which you can find on the Investor Relations section of the Cardlytics website .

Speaker #4: Today's call is available via webcast , and a replay will also be available on our website . On the call today , we have CEO , Amit Gupta and CFO Alexis DeSieno .

Speaker #4: Following their prepared remarks , we'll open it up for your questions . With that , I'll hand the call over to Amit .

Speaker #5: Good evening and thank you for joining us today . On our last call in August , we shared updates on the steady progress we made across our key priorities , as well as the headwinds we would be facing starting Q3 as a reminder , these headwinds are stemming from our largest FY partners decision to block our advertiser content from running on their channels .

Speaker #5: Overall , our Q3 billings results were in line with our expectations as we actively work to shift volume to other partners in our network and learn from our mitigation strategy .

Speaker #5: In parallel , we have taken a series of steps to ensure the long term sustainability and success of our company and maintained our relentless focus on our key business pillars .

Speaker #5: First , increasing and diversifying our supply to meet consumers where they are . Our relationships with financial institutions continue to expand in both scope and depth , reinforcing the strategic value of our network , especially in light of replacing the supply we have lost from our largest FYE partner .

Speaker #5: For example , with one bank partner . We expect to soon add their debit and SMB portfolios to our program , which represents a significant opportunity to deepen engagement with their customers and expand our reach .

Speaker #5: We believe that strengthening consumer engagement is just as effective as adding new users , and we remain focused on doing this through new and innovative capabilities .

Speaker #5: For example , we recently ran a double Days campaign where rewards were doubled on specific days to drive a sense of urgency . This campaign grew consumer engagement by approximately 15% .

Speaker #5: In addition , building on previous success with one of our larger bank partners . We are expanding category level offers in Q4 . These offers reward customers for spending in a specific category rather than with a specific advertiser , and have proven to be effective in driving engagement with our offers .

Speaker #5: In Q2 . We tested this with gas and grocery , and in Q3 we took our learnings to the entertainment category . Once again .

Speaker #5: These campaigns have demonstrated that category level offers are highly effective in creating a halo effect . 73% of consumers who redeemed a category level offer also redeemed another offer .

Speaker #5: Due to the decision of our largest FYE partner , approximately one third of our total billings were set to be blocked . But we were able to mitigate a significant portion of the drop because the rest of our network is more than 2.5 times larger than our largest FYE partner alone .

Speaker #5: We can increase content shift to other banks with MQ capacity , and also increase engagement with those bank's customers . By doing more of this , we would be on the path to make up the billings shortfall with better margins .

Speaker #5: Turning to Cardlytics rewards platform . Our network of Non-fee publishers , we are excited to share positive momentum from last quarter . We signed three new partners in the US , including OpenTable , a global leader in restaurant technology .

Speaker #5: Through this partnership , we plan to help boost engagement and loyalty with open tables , large user base . As part of their recently revamped loyalty program , we look forward to sharing updates on when we expect to launch with OpenTable for our other two partners .

Speaker #5: We expect to launch in Q4 after testing and integration , which is currently underway . We see CRP as a significant growth opportunity not only does CRP allow us to meet more consumers where they are , it can also help our traditional Fi partners by enabling us to bring new advertisers and verticals to our platform .

Speaker #5: Additionally , we have seen an increase in our pipeline since last quarter . As a result of customer loyalty becoming a more central focus in the market .

Speaker #5: We believe Cardlytics, Inc. is perfectly positioned to be a commerce , media partner for leading companies looking to accelerate their advertising efforts while delivering value to their customers .

Speaker #5: Now , moving on to our second pillar strengthening and growing advertiser demand . Leading advertisers continue to recognize the unique value of our network and capabilities , while commerce , media is undergoing a fundamental shift , advertisers have not lowered their standards .

Speaker #5: They continue to seek measurable outcomes and sophisticated capabilities to leverage different ad formats and micro-target customers with our existing advertisers . We are building trust by continuing to build campaigns that deliver results .

Speaker #5: Of note , most advertisers have decided to stick with Cardlytics despite the supply changes . With our largest partner . In fact , for the partners that run card linked offers with Cardlytics as well as a competitor program , we consistently hear that our incremental Roas is superior on the new business front .

Speaker #5: We signed pilots with iconic brands such as a large athletic apparel brand and a global hotel brand , and 100% of our new business was on engagement based pricing .

Speaker #5: We have also been focused on winning back key accounts . Several notable brands , including a global coffee chain and a global discount grocer , have rejoined our network , which we believe underscores our ability to drive performance for our advertisers .

Speaker #5: One of the core value propositions of our platform is that we drive both online and in-store sales . We have enhanced our geotargeting capabilities over the last six months , and implemented different reward amounts between online and offline purchases , as well as newer features like shop at Targeting , which targets users where they buy not just where they live .

Speaker #5: Many auto , gas and restaurant chains have used our Multi-location reports to assess performance , identify top performing locations and inform franchise marketing efforts .

Speaker #5: Geotargeting also helps engagement with franchisees that often have independent marketing budgets . Our U.K. business continues to show strength , with 22% revenue growth year over year .

Speaker #5: This quarter , we were able to grow budgets with all our top advertisers and closed a large number of new logos across grocery , gas , restaurant and retail .

Speaker #5: We are now working with all of the top five U.K. grocers , up from four previously and ongoing recognition of the strength of our platform and finally , last quarter , we added another localized content partner to expand our always on third party content for our publishers .

Speaker #5: We can now deliver nearly 10,000 local and regional offers , which we are now providing to our smaller banks that did not have local offers previously .

Speaker #5: Additionally , with our new partnership with OpenTable , not only will they be joining our platform as a publisher , but also as a content provider , bringing the restaurant partners to our network for the benefit of all our publishers .

Speaker #5: We believe all these initiatives drive awareness and relevancy for the program and deepen engagement with consumers . Now , turning to network performance .

Speaker #5: Building on the work we've done to modernize our tech stack , we continue to strengthen our engineering foundation to benefit our clients and improve internal productivity .

Speaker #5: While our models continue to become stronger with higher predictability , we experienced some aberrations in July as supply changes began to take effect .

Speaker #5: These issues stabilized by the end of the quarter, and while they caused some choppiness in our margins, they are making our delivery models better at handling large-scale changes.

Speaker #5: We are also advancing the integration of our measurement models with widely adopted industry standards, which we believe make it easier for our advertisers to evaluate performance across channels.

Speaker #5: Building on our efforts to ensure cardlytics data is properly modeled in leading mbms , we are now integrating with more partners to automatically feed our data into their dashboards .

Speaker #5: These changes helped to retain our existing clients , and we believe , outperform other channels . The performance of our network remains strong , reinforced by the impact and efficiency of the campaigns delivered through our platform .

Speaker #5: With the investments we've made in our models , our platform continues to perform better for our advertisers and bank partners . With a 21% year on year improvement in Roas .

Speaker #5: Last but not least , our bridge business in Q3 , we saw continued interest in our identity resolution product , both from existing clients and new prospects , including a grocer that engaged bridge to gain access to previously unavailable insights around shopper behavior .

Speaker #5: This will allow them to significantly enhance their ability to understand , engage and target individuals driving increased frequency , spend and loyalty . I am also pleased to share that we recently signed a two year renewal with a large fast food chain on ripple .

Speaker #5: We continue to make progress on both supply and demand . On the supply side , we added two new retailers to the ripple network .

Speaker #5: We also continued to grow our demand , which resulted in the second consecutive quarter of doubling our revenue . Before I turn it over to Alexis , I want to touch on the actions we took in Q3 to strengthen our financial foundation and sharpen operational focus .

Speaker #5: In September , we fully paid the $46 million remaining on our 2020 convertible notes . Last month , we took a difficult but necessary step in reducing our workforce to ensure we can continue to operate sustainably and preserve the long term financial health of our company .

Speaker #5: This latest reduction reflects a 30% decrease in our workforce , as well as reductions to third party spend . Real estate and operations , and we expect these reductions to deliver annualized cash savings of $26 million .

Speaker #5: This follows prior reductions this year of $16 million in May , and $8 million in January , for a total of $50 million .

Speaker #5: We are deeply appreciative of the contributions of the colleagues who departed as part of these changes . As a leaner organization , we are now moving forward with more focus and discipline .

Speaker #5: Looking ahead , we are simplifying our strategic priorities . In 2026 , we plan to further solidify our foundation and grow our commerce , media platform .

Speaker #5: We will focus on expanding our CRP partner cohort while strengthening our existing FY partnerships to unlock increased advertiser budgets . We will lean into value propositions that are in demand and where we believe we can deliver a differentiated product , such as omnichannel performance , by doubling down on where we are best in the industry .

Speaker #5: We believe we can get back on a path to growth . I'll now turn it over to Alexis to discuss the financials .

Speaker #6: Thank you . Amit . My comments will be year over year comparisons to the third quarter of 2024 . Unless stated otherwise . In the third quarter , we delivered billings as expected and surpassed the high end of our guidance for adjusted EBITDA that we were at the low end of the range for revenue and adjusted contribution in Q3 .

Speaker #6: Our total billings were $89.2 million , a 20.3% decrease . As expected , the content restrictions impacted the size of the budgets we could sell as a result of fewer consumers to whom we could serve , offers .

Speaker #6: Despite this, we were able to retain the vast majority of our advertisers, which we believe demonstrates the value and incrementality that we drive for our advertisers.

Speaker #6: Consumer incentives of 37.2 million were down from the prior year by 17.2% , and revenue decreased 22.4% to $52.0 million , driven by a decrease in billings .

Speaker #6: Our revenue to billings margin was 1.6 points lower than the prior year . This margin impact was partially due to strategic investments in certain advertisers to drive incremental Roas , as well as a temporary overcorrection .

Speaker #6: As a result of the supply changes to our network . We believe we have now normalized our ability to deliver on budgets , and we are seeing our October billings margin trending higher than the Q3 average .

Speaker #6: Looking at our segment revenue results , our US revenue , excluding bridge , decreased 28% due to lower billings stemming from the content restrictions and pricing investments .

Speaker #6: We previously discussed in the UK . We saw 22% revenue growth driven by higher billings and increased supply . We grew billings across our top clients and saw a significant increase in billings from new merchants , including a large athletic apparel brand , bridge revenue decreased 15% due to the loss of a major account in previous quarters .

Speaker #6: Adjusted contribution was $30.0 million , down 17.5% from prior year . However , we expanded our margin as a percentage of revenue to 57.7% , an increase of 3.5 points due to a more favorable partner mix .

Speaker #6: This margin is the highest we have experienced to date , driven primarily by growth of our newest FY partners . Adjusted EBITDA was positive $3.2 million , an increase of $5.0 million .

Speaker #6: Total adjusted operating expenses , excluding stock based compensation , came in at $26.8 million , a reduction of $11.4 million year over year due to the reduction in staff .

Speaker #6: In May and an optimization of our cloud infrastructure , operating expenses benefited from $5 million in one time benefits , including from the IRC tax credit we received in September .

Speaker #6: In Q3 , operating cash flow was positive $1.8 million . Free cash flow was negative $2.7 million , which was an improvement of $1.2 million from prior year , due primarily to our lower expense base free cash flow improved from the previous quarter by $0.7 million .

Speaker #6: On the balance sheet . We ended Q3 with $44 million in cash and cash equivalents during the quarter . We had a net draw of $46.1 million on our line of credit , which was used entirely to repay our remaining 2020 notes .

Speaker #6: In the third quarter , we had 230.3 million MCAS , an increase of 21% , driven by the full ramp of our newest FFI partners .

Speaker #6: Excluding these partners , MCAS would have increased 3% . Acp-eu was $0.11 , down 31% year over year . As a result of content restrictions .

Speaker #6: And as we ramp our newest EFI partners . Now turning to our outlook for Q4 . For Q4 , we expect billings between 86 and $96 million .

Speaker #6: Revenue between 51.1 and $59.1 million . Adjusted contribution between 29.0 and $35.0 million , and adjusted EBITDA between 0.9 and $7.9 million . Our billings guidance represents a -26 to -17% decrease year over year .

Speaker #6: Despite this top line weakness , we expect adjusted EBITDA to be positive for both the quarter and the full year . The primary driver of our expected billings decrease is a result of further content restrictions imposed by our largest fee partner .

Speaker #6: To mitigate this , we are focusing on several initiatives with our advertisers . First , we are continuing to prove performance with top brands , which are already running at maximum capacity , which has helped to secure renewals in Q4 and 2026 .

Speaker #6: We are also working to scale certain categories or brands that are not at maximum capacity by leaning into alignment with our advertisers measurement models .

Speaker #6: And lastly , our new business team is focused on signing new accounts and winning back key accounts . We expect to see continued incremental spend from our advertisers as many brands are starting holiday promotions .

Speaker #6: Earlier and want to benefit from budget add ons based on consumer demand and performance . Our priority remains replacing lost supply through new partnerships , shifting volume to the rest of the network and increasing engagement with our existing partners to illustrate our progress in shifting volume to other partners , we continue to see positive trends with our newest large fee partner .

Speaker #6: We had almost three times as many advertisers on this partner's channels in Q3 than in Q1 , which represents approximately half of our brands .

Speaker #6: We expect this momentum to continue and are already seeing October billings at approximately 50% higher than in Q3 . With this fee , our activation rate is two times the network average , and we believe our partnership is strong .

Speaker #6: While we are excited about our newest CRP partnerships announced today , we are not assuming any material financial impact in 2025 from the Cardlytics, Inc. Awards platform .

Speaker #6: CRP remains a key piece of our strategy for 2026 , both to diversify supply and also to unlock demand as the industry moves towards loyalty programs and embedded rewards .

Speaker #6: In Q4 , we plan to continue to grow in the UK , driven by continued success with our largest accounts and in attracting new advertisers to the platform revenue .

Speaker #6: As a percentage of billings is expected to be in the low 60% range for Q4 . We are making strategic pricing decisions to drive incremental spend from our advertisers and to remain competitive in the market , which is funded by our higher margin bank mix .

Speaker #6: In fact , we expect adjusted contribution as a percentage of revenue to be in the mid to high 50% range . This continues to be among the highest we have seen due to the improved economics with our new and ramping bank partners , and allows us to invest back into advertiser and consumer incentives to unlock incremental budgets and drive higher Roas offers and more compelling rewards mean better engagement .

Speaker #6: And this leads to a higher likelihood of scale and retention with our advertisers. Despite top-line weakness and strategic pricing decisions, we are keeping more of every dollar we make, and we remain focused on driving profitability.

Speaker #6: Our adjusted EBITDA guidance is a reflection of our recent operational cost base . Following the large reduction in force that we completed on October 1st for the fourth quarter , we expect operating expenses to be at or below $28 million , excluding stock based compensation and severance .

Speaker #6: This represents a reduction of 19% from the prior year . After adjusting for the 5,000,001 time benefits in Q3 . This represents a 3 to $4 million sequential improvement quarter over quarter in operating expenses and an additional 2 million of savings in capital expenses .

Speaker #6: As a reminder , the 26 million in annualized savings that we are expecting in 2026 represents both operating and capitalized expenses , as well as timing of certain other changes , such as lease terminations .

Speaker #6: We remain committed to driving operational efficiency and will make further changes as needed . For now , we believe we have fully reset our cost base to reflect our new top line reality while balancing the need to invest in both consumer engagement and supply diversification .

Speaker #6: Our guiding principle is to focus only on priorities that have a clear line of sight to driving revenue , and that align with our goal of positive adjusted EBITDA in 2025 and 2026 .

Speaker #6: We are confident we can return to growth and achieve profitability once we get through the current headwinds . I'll now turn it back to Amit for closing remarks .

Speaker #5: As we continue to navigate a challenging environment , we've taken decisive steps to reset our business , reduce our concentration risk and set ourselves up for a financially healthy future .

Speaker #5: We remain confident in the fundamental strength of our commerce , media platform , our partnerships , and our teams by prioritizing the areas where we know we can win , we expect to deliver greater value to our advertisers , partners , shareholders and consumers .

Speaker #5: I'll now turn it over to the operator to begin the Q&A.

Speaker #3: Thank you , ladies and gentlemen . We will now begin the question and answer session . Should you have a question , please press star followed by the one on your telephone keypad .

Speaker #3: You will hear a prompt that Joanne has been raised and should you wish to cancel your request , please press star followed by the two .

Speaker #3: If you are using a speaker phone , please lift your handset before pressing any keys . One moment please . For your first question .

Speaker #3: Thank you . And your first question comes from the line of Jacob Stephan from Lake Street Capital Markets . Please go ahead .

Speaker #7: Hey , I appreciate you guys taking the questions . I guess first I just kind of wanted to touch on the billing margins commentary a bit , maybe kind of help me piece this together .

Speaker #7: When you think through kind of , you know , we saw decrease in Q3 , but it sounds like you're seeing better margins with your remaining FY partners .

Speaker #7: It sounds like it improved in October, which kind of helped me think through, you know, what the impact was in Q3.

Speaker #7: And , you know , overall how you see these trending as we kind of enter 26 . .

Speaker #6: No problem . Thanks for the question . So yeah , there's two different types of margin . The billings to revenue margin , which you saw a little bit of a decrease in Q3 .

Speaker #6: That was primarily all in July , where we were impacted by the abrupt change to our supply from our largest fee partner . It took a little bit of time to normalize that .

Speaker #6: And by the end of the quarter , we were , you know , back to normal in terms of our ability to deliver and had learned how to properly target from that point on .

Speaker #6: There's also a little bit of margin pressure in there from performance incentives or higher Roas that we've been seeing . We make strategic decisions to remain competitive .

Speaker #6: And this is normal practice in the market . So it's a little bit of both . The run rate in October is higher than what we saw in Q3 .

Speaker #6: And so we expect that to continue . I would probably continue to model it in the low 60s . So that really was a blip from the July changes .

Speaker #6: And then just to touch on the bank mix piece, which is more what I look at when I talk about revenue to adjusted contribution—or sorry, adjusted contribution to revenue margin.

Speaker #6: That was the highest that we've seen so far . Even despite the lower billings margin . So we saw around 58% in Q3 .

Speaker #6: That's among the highest we've seen . And that's as a result of our newer partners who are better economics , taking share from our legacy partners , which are worse economics from a revenue share perspective .

Speaker #6: So it really highlights that it's unlocking our ability to invest more of that margin back in to engagement . And performance for our advertisers and our customers .

Speaker #6: And we're still able to keep more of every dollar we make from a contribution standpoint . Hopefully that helps . And we should expect to see adjusted contribution margin continuing to to improve or be stable around the high 50s .

Speaker #7: Okay . Yeah . Very helpful . And then second question , more so on kind of the guidance . You know , there's a roughly a $7 million range between the low end and high end of adjusted EBITDA .

Speaker #7: That's that's bigger than the the range of adjusted contribution . What I guess , what are the puts and takes that kind of gets you to the higher end versus the lower end of that .

Speaker #7: And maybe talk a little bit about the overall cost base . Now .

Speaker #6: Yeah , very helpful . You're right . That is confusing at first . Look , adjusted opex is really not a big range .

Speaker #6: It's only about 1 million . So all of this is flowing down from the range of the , you know , contribution and revenue guide .

Speaker #6: OpEx basically is 27 to 28 million is what we're guiding on opex . And so the rest of it comes from really that top line , top line .

Speaker #6: And margin flowing down . Does that make sense ?

Speaker #7: Understood . Yeah . Yep . Totally . I appreciate it .

Speaker #3: Thank you. Once again, should you have a question, please press star, then the number one on your telephone keypad.

Speaker #8: And the call .

Speaker #3: Once again that is star and one to ask a question . And if you're using a speaker phone , please lift the handset before pressing any keys .

Speaker #3: That ends question and answer session . Ladies and gentlemen , this concludes today's call . Thank you for participating . You may all disconnect .