Greetings, and welcome to the Cardlytics Q1 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I would now like to turn the conference over to your host, Kirk Somers, Chief Legal and Privacy Officer. Thank you, sir. You may begin.

Good evening, and welcome to Cardlytics first quarter 2021 financial results call. Before we begin, let me remind everyone that today's discussion will contain forward-looking statements based on our current assumptions, expectations and beliefs, including expectations about future financial performance or results, including our financial guidance and cash position for the second quarter and full-year of 2021, our ability to achieve key long-term priorities, the launch of additional functionality by banks, including U.S. Bank, growth in MAUs or monthly active users, the return to year-over-year growth, the launch of our new user experience, the new technology infrastructure, the increase in ARPU or average revenue per user, the impact of COVID-19 on our business and the economy as a whole, including the stabilization of the economy and potential improvements in the economy, the sufficiency of our capital structure, continued momentum in 2021, and the closing and anticipated benefits of our acquisition of Dosh Holdings, Inc. and Bridg Inc. For a discussion of the specific factors that could cause our actual results to differ materially from today's discussion, please refer to the Risk Factors section of the company's 10-Q for the quarter ended March 31, 2020, and in the subsequent periodic reports that we file with the Securities and Exchange Commission. Also during this call, we will discuss non-GAAP measures of our performance. GAAP financial reconciliations and supplemental financial information are provided in the press release issued today and the 8-K that has been filed with the SEC. Today's call is available via webcast, and a replay will be available for one week. You can find all of the information I've just described on the Investor Relations section of Cardlytics website. Please note that a supplemental presentation to our first quarter results has also been posted to our Investor Relations website. Joining us on the call today is Cardlytics leadership team, including CEO and Co-Founder, Lynne Laube; and CFO, Andy Christiansen. Following their prepared remarks, we'll open the call to your questions. With that, let me turn the call over to Lynne.

Thanks, Kirk. And thank you to everyone for joining us on our first quarter 2021 earnings conference call. We had a strong start to the year with Q1 billings and total revenue exceeding expectations even before adding contributions from Dosh in March. Our results reflect the continued positive trajectory in our business. While we're still experiencing impacts from COVID, we are encouraged by the momentum we're seeing in the US. However, U.S. travel and our UK business continue to be significantly impacted by the pandemic and related lockdown. Before moving to our results, I'd like to briefly address our recent acquisitions. We are integrating Dosh and making solid progress on combining the two organizations. We are pleased with the team and the capabilities and are already seeing our acquisition thesis come to light. We're also pleased to say that we expect to close the Bridg acquisition in May. We believe the Bridg acquisition has the potential to be transformational given its technology and unique position in the customer data platform or CDT market. I want to reiterate a few strategic points on both acquisitions for our investors. We expect the Bridg and Dosh acquisitions will, once integrated, allow Cardlytics to utilize data to provide product-level offers from CPGs, grocers, and wider retail. Second, accelerate the next generation consumer experience with consumer engagement features. And finally, provide a lightweight platform to attract new partners in the neo-bank and non-FI industries. We're very pleased with the early progress and results from Dosh already. Now let's turn to some highlights from the first quarter. Total billings were $76.3 million, up 13% year-over-year. Total revenue, which is equal to billings net of consumer incentive, was $53.2 million, an increase of 17% from Q1 2020, and adjusted contribution was $24.3 million, up 19% year-over-year. Our Q1 results reflect growth in billings across many of our major industry verticals. B2C continues to be the largest vertical measured by billings, and we're pleased to have delivered year-over-year growth in this sector. In addition, we saw strong billing growth in both our retail and specialty retail verticals, and we're encouraged by the return of positive year-over-year growth in our restaurant vertical. I want to highlight a couple of success stories to drive home the importance of our platform to advertisers. We secured our first annual contract with one of the largest e-commerce platforms in the world, despite the fact that the same client cut advertising budgets by almost 75% for 2021. Additionally, a large specialty retail client exited our channel in the second half of 2020. Then the client began experiencing lost share of wallet, and we proved that targeting these switchers delivered a positive ROI. This resulted in the client signing a meaningful annual 2021 agreement. Travel remains muted given the ongoing impacts of COVID. But overall, we remain encouraged by momentum we're seeing in our results and we believe we're on track to deliver strong results in 2021. Our MAU base grew to over 168 million in the first quarter, up approximately 20% year-over-year, mainly due to the launch of Wells Fargo. We expect that core CDLX MAU growth will eventually stabilize in the low to mid single digits in future quarters. We are evaluating the impact Dosh will have on MAUs and ARPUs over time. We're proud to announce that U.S. Bank has launched with our newly built ad server, which enables a richer and more robust user experience. The ad server offers both API and SDK integrations to enable faster iterations of any user experience module. Together with U.S. Bank, we're taking an iterative approach to their deployment, continuously launching with new functionality over the course of the next few quarters. One of our initial modules is focused on educating the consumer about the offers program and how it works in order to drive adoption and engagement. Additionally, one of our other large banks has committed and will be deploying the new ad server in the second half of 2021. Into the first half of 2022, we will be migrating a large portion of our network over to this new technology infrastructure to enable speed, scale, and engagement. Before I turn it over to Andy, I also want to announce that we've launched our first UK-based FinTech rewards program with Curve. We're excited about the potential of this partnership.

Thank you, Lynne. We were extremely pleased with our results in Q1, which marked our return to year-over-year growth. Our existing business, including the results of Dosh, exceeded our expectations. Before diving further into our results, I wanted to discuss our cash and liquidity position at the end of Q1, which includes our equity offering in the Dosh acquisition and where we expect to be following the close of Bridg. We ended Q1 with $614 million in cash and cash equivalents, compared to $293 million at the end of 2020. We expect to have over $215 million in cash on a pro forma basis after the Bridg acquisition, which we expect to close later this month. In addition, our loan facility of $50 million remains undrawn at this time. Our balance sheet liquidity remains extremely strong following the Bridg deal. While we are always evaluating our capital structure, we see no immediate need to raise additional funds. Now turning to our Q1 performance, we saw the usual seasonal decline from Q4 to Q1. Q1 landed at the high end of expectations before taking into account the partial month contribution from the Dosh acquisition. These strong results came despite the ongoing challenging environment in the UK due to strict COVID-19 lockdowns and continued limitations in travel. As we mentioned earlier, we saw strength in several industry verticals. What's also encouraging is the growing number of clients in our channel since the onset of the pandemic. While most of our new accounts are relatively small budgets, the increase in advertisers reflects the pivot we made in Q2 of 2020 and will bode well for the long-term health of the platform. As mentioned before, we believe the self-service capabilities of our new platform will accelerate this trend over time and give us a more scalable solution to onboard advertisers with budgets of all sizes. Billings increased 13% year-over-year to $76.3 million. Excluding the additional $1.3 million in billings from Dosh in the last 25 days of the quarter, our billings totaled $75 million, which is at the high end of our guidance. Revenue totaled $53.2 million, a 17% increase over Q1 of 2020. As expected, billings margins were in line with historical norms at 70%. Excluding the $0.5 million of additional revenue from Dosh, our revenue totaled $32.7 million, which was near the high end of our guidance. U.S. revenue increased 23% year-over-year; however, UK revenue was down 25%. Our UK business continued to be meaningfully impacted by the pandemic as lockdowns implemented to slow the spread of new COVID-19 variants just started to unwind in April. We expect the UK to continue to unwind carefully, anticipating continued pressure on our UK results in the near term. Adjusted contribution was $24.3 million, an increase of 19% year-over-year. We don't expect adjusted contribution to significantly outpace revenue growth going forward. But it's worth noting that Dosh contracts in place today, for a lower level of partnership, and other third-party costs. Adjusted EBITDA was a loss of $3.9 million, compared to a loss of $4 million in Q1 of 2020, excluding stock compensation. Dosh contributed $1.3 million in operating expenses. Expenses within R&D and sales increased on a year-over-year basis and reflect investments made in the back half of 2020 to bring in several new leaders across the organization and increase our product development and analytical capabilities. We expect to generate a larger EBITDA loss in Q2 as our investment in Dosh is reflected for a full quarter. It's also worth noting that we incurred $70 of acquisition costs during the current quarter, and those costs are excluded from adjusted EBITDA. We expect additional acquisition and integration costs in the future as we continue to integrate Dosh and close the acquisition of Bridg. As Lynne mentioned earlier, MAUs were 20% year-over-year to over 168 million. This was driven by the Wells Fargo launch and accelerated organic growth from Dosh acquisition. U.S. Bank will add several million MAUs once fully launched. We also expect continued growth from Dosh as new partners come online throughout 2021. ARPU during the first quarter was $0.32, consistent with the prior year. We expect ARPU to increase on a sequential and year-over-year basis throughout the rest of 2021 as our MAUs stabilize and we continue to grow our revenue. We had 31.8 million shares outstanding at the end of Q1 compared to 27.8 million at the end of last year, which reflects the sale of 3.9 million new shares in March. Weighted average shares outstanding during the quarter was 29.3 million compared to 26.7 million during Q1 of 2020. Now turning to guidance, our guidance range remains a bit wider than usual due to what may be an uneven recovery in the UK and continued uncertainty of when the expected rebound in travel and entertainment will occur. Also, while our guidance includes Dosh, it does not include the results of Bridg, which has not yet closed. We expect billings in Q2 of between $85 million and $95 million, revenue of between $58 million and $65 million, and adjusted contribution of between $26 million and $30 million. For the full year, we expect billings to be between $380 million and $420 million, revenue of between $260 million and $285 million, and adjusted contribution of between $117.5 million and $132.5 million. Again, these ranges include contributions from Dosh and will incorporate Bridg's next quarter. While we have a lot of work ahead of us in 2021, we are very excited about the collective potential of Cardlytics, Dosh, and Bridg. In order to realize that full potential, we are making sure we have sufficient resources and investments to thoughtfully bring these companies together and create meaningful shareholder value. Our legacy business is strong and has a lot of momentum, and these acquisitions will not only sustain that momentum for years to come but will also open up new avenues for future growth. And with that, I'll turn it back over to Lynne.

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

Our first question comes from Aaron Kessler with Raymond James. Please go ahead with your question.

Any updates on the self-serve platform? I think you started to roll that out at the best and begin to get some feedback there. And then on the new FY platform at U.S. Bank, one of the large platforms, how do you think that could impact conversion rates or monetization, and what you would expect there? Finally, quickly on the guidance change for a full year, maybe what's the change on organic versus including efforts for Dosh? Thank you.

Hey, Aaron. So, yes, I’ll take the U.S. Bank question first. So, they are fully rolled out with our new ad server. They are not fully rolled out with the new user stream that is going to be coming over multiple quarters. So, as we talked about in the call, they have modules that are API-based, and they deploy different modules based on where they are in the rollout process. They are still very focused on modules that are helping customers find the program and educate them on how to use them. Then over time, they are going to incorporate more of the modules that are a little bit more focused on different kinds of content, different kinds of experience that we try to train these customers from scratch on how to use our program across a wider variety of offer features over time. But that's what you're seeing now is sort of the first module; over multiple quarters, they will be rolling out more modules. So, that's on U.S. Bank. I apologize. I forgot your second question.

Just kind of based on the self-serve platform as well.

I mean, if you try to talk about everything every time, but self-serve continues to go incredibly well. It is being rolled out now with multiple agencies. We are so committed to giving you billing numbers from agencies starting in Q3 of 2021 this year, and you'll be able to see how it's growing by looking at actual results.

Our increase in guidance, certainly a big portion of that is attributed to the three quarters of the year we're going to gain from the Dosh acquisition. But I do want to make sure that everyone understands we had quite a bit of strength in Q1, and it might certainly give us a lot more confidence that we're going to be on a nice trajectory, and the core business is doing quite well. So, I think there's a small amount of this that relates to the strength in the core business. There are some pieces though, that are giving us a little bit of pause, like I mentioned, where in the UK, they're still just now emerging from their lockdown. I think that there's a little bit of risk there as to how uneven that may be. But I still feel pretty comfortable that the core business will be robust lastly in the UK, and we're going to be on track for a full year. So, it is largely Dosh.

So, maybe just finally, the share count has to think about that for the remainder of the year?

Share counts, so, we obviously, the significant jump in share count here in Q1 was the 3.9 million share sale that we had. Without needing any additional funds for the foreseeable future, I definitely don't think there's going to be any need to raise funds through offerings. So, I think it's a fairly muted increase. Now, if you recall, we have performance-based awards we've been issuing over the last several years for executives, the timing in which those will hit does remain a little bit uncertain. It's really that much less shares that we're talking about with some of the equity offerings that are out there. So, we'll see some lumpiness later in the year perhaps.

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

Just in regards to the U.S. Bank ad server, from a consumer experience perspective, is a U.S. Bank consumer experiencing anything really different than a Wells Fargo or Chase consumer? Or is it just those modules at this point in, really the consumer experience changes with the new platform rollout?

The new platform, they are on the new platform, the new platform is API-driven. They have only chosen to take a few of the APIs for their initial deployment of the experience. And those APIs are almost exclusively focused on education. So from that perspective, it is very different. You won't see anything like that in the other banks in terms of these education modules. But in terms of the actual ultra content right now, and the different types of content that we hope to display over time, they're going to look very, very similar. I think we've discussed this before, but U.S. Bank, ultimately, is going to be somewhere in the neighborhood of 4 million to 6 million MAUs. It's not enough to truly get the scale of significantly different types of offer contracts and offer properties, if you will. So, we're really focused on educating the consumer. We're focused on adding richer imagery; from that perspective, it looks very different than the other banks. But the real meaningful change as they incorporate different types of offer constructs and offer experiences, that's going to be over multiple quarters. And as I discussed, we've got other large banks committing to the deployment of this new ad server in the back half of this year, which means, they'll be doing the same type of thing going into Q1 and Q2 of next year. That's when we'll start to have the scale to really be able to drive different kinds of experiences in advertising content into the channel. Does that help?

That does help. I appreciate you straightening that out for me. As a follow-up or maybe a couple of follow-ups here, but if you can give any color just on the cadence of what you've seen over the last 6 weeks to 8 weeks, you're lapping some volatility from the pandemic. So, just kind of wondering how things have trended there and then any specific vertical commentary as you've lapped that. I guess I had one on travel. We started to see some resurgence in advertising in travel. I don't know if you guys have seen that or not, or have any perspective on that.

I'll comment, and then I'll throw it over to Andy as well — much of our increase was because of a strong increase in consumer spending that we saw in March. We didn't see it in January or February, but we saw it in March, and that's why we came in at sort of the high end of our guidance was really in the last three weeks. So, we are seeing it pick back up fairly materially in a lot of categories. We still haven't seen it pick back up as much in travel as we would hope; that it is changing in April. But for Q1, travel was still very, very suppressed. But we saw a nice recovery in a lot of the other verticals in the last two weeks in March. Andy, anything you would add?

That's right. We are starting to see a slight uptick in terms of travel, but it's not nearly as meaningful. It's not the rebound we're looking for.

Either not the droids you're looking for. May the force be with you, Andy.

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

Andy, two quick housekeeping, and I have a couple about the business. Just to make sure, interest expense on a go-forward should it be around $500,000 a quarter, is that about right post-offering – post paydown and redemption of convertible and everything?

We're paying 1% on that. So, that's about right. $2.3 million on that per year.

Okay, perfect. And then the other one was, I noticed in the add-backs this quarter. I think it was $998,000 for acquisition intangible, along with the merger charge. I know the charge you sort of add that back, hard to predict those. Is that $998,000 number sort of a way to think about one month of amortized to Dosh or is that sort of some kind of one-time accounting treatment that's not really going to be part of the income statement on a go-forward basis, right?

You're absolutely right; it's the former. It'll be the amortization under the quarter intangibles going forward. So, you're right, it's just a partial month or 25 days of amortization on those intangibles.

And you will feel free to add back that, I'm assuming, for adjusted EBITDA in net income, just want to make sure the adjustments of the models?

We added that as discrete add-backs in our non-GAAP net loss, as we discussed in our press release. We already add back depreciation and amortization in our adjusted EBITDA calculation. So, it is reflected there as well. We don't add that back, so you'd see a difference there.

Okay. And then just going back to the business, I can appreciate the UK and everybody sort of, I think, understand what's going on in Europe. I mean, then last year you talked about, I remember the exact verbiage of the strategy which your U.S. customers and retain rise. There are three words put together about how you're going to market to bring people back onto the platform and get them going again. And I guess I'm curious as we looked at like the UK, and maybe progress that had been made, but then sort of maybe how to get shelved for a little bit with their lockdowns. Does the UK feel like sort of ultimately comes back to the U.S? Is there something about culturally or their banking industry that we shouldn't think about how the U.S. has come back so quickly, that that's how the UK should play out once restrictions continue to run their course? Any thoughts about how it will play out versus what we've seen in North America?

It's a good question, and I don't know that I have the exact answer. Here's what I would say: the rise, retain, return strategy was a multi-quarter strategy for us. I would now describe U.S. as fully in the return part of that strategy, right? We're recovering across most of the verticals; we just have travel still a little muted, but we're fully in the return element of that strategy. But that's been almost a full year. So, I am cautiously optimistic that the UK will go through rise, retain, return in a very quick period when they open back up because they have the advantage of opening back up with hopefully most people vaccinated. I think it will just be very accelerated, but only time will tell. There is nothing that I see that's fundamentally different about how this impacts thinking or retail or anything like that in the UK that would argue something different than that sort of hypothesis.

Our next question comes from Doug Anmuth with J.P. Morgan. Please proceed with your question.

The first one, I had as a follow-up to the rise and retain the RR strategy. To speak easily, like consumer marketers within core, within the rise and retain category, and like any other behaviors have changed out the world or advertised U.S. post are to be open? And how should we think about like the behavior of the customers and marketers within that category going forward? Are you expecting any reversion back to pre-pandemic levels? Or do you think that some of the things that you had in 2020 will be sustainable? And then as a follow-up, you talk about auction immigration going well, but just curious if there's anything you learned, you have now that you're part of your family?

So, on the three R strategy, as you’d like to call it, which is like CP three, may the force be with you. I think that sorry, guys, I just got no apologies. I think the direct-to-consumer rise in the direct-to-consumer vertical, I think it’s fair to say it’s just become a very, very powerful vertical, I think both in terms of consumer demand for those types of products and just being a really good channel to drive that. I think that is absolutely here to stay. I think the other thing that I can clearly say with remarkable confidence that is here to stay is online grocery. We have just seen a massive shift in demand there, and we have not seen it start to shift back. I will say, in every other vertical, we’ve seen it start to shift back to in-store purchases. I don’t know if it’s going to go back to the exact mix it was pre-pandemic, but they’re all going backwards to mean that the height of the online spend for those verticals has now gone less, and they’re buying more in-store with the exception of those two categories: beauty, which doesn’t obviously have an in-store component, and online grocery. So, to be determined, I don’t think consumer spend is ever going to go quite back to the level that it was before. But I think for many of our more traditional verticals, restaurant and retail, it’s not going to be, if it was at 90% before, 90% or 80%, it’s not going to stay at 40%, just to give you some directional numbers. Does that make sense?

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

Well, everyone, thank you for your time. Hopefully, we were able to answer questions, and we look forward to continued conversations with many investors over the next couple of days. Appreciate it.

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