Good day, and thank you for standing by. Welcome to the Cardlytics Third Quarter 2024 Financial Results Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Nick Lynton, Chief Legal and Privacy Officer. You're ready to go.

Good evening, and welcome to the Cardlytics third 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 for the fourth quarter of 2024, the rollout of new financial institution partners, and 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 our 10-Q for the quarter ending June 30, 2024, which has been filed with the SEC. 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, 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. On the call today, we have 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 Amit.

Thanks, Nick, and thank you all for joining us today. As you all know, I stepped into my new role shortly after we released Q2 earnings. Over the last three months as CEO, I have spent time going deeper with our teams and hearing feedback from our advertisers and bank partners, and a few things have become clear. Our data continues to be a superpower. Our ability to see approximately 50% of U.S. cardholder transactions, representing nearly $4.7 trillion in annual consumer spend, is unparalleled in the industry, and this number will continue to grow as we onboard new partners. It has also become evident that card-linked offers (CLO) have evolved and are becoming a more important differentiator than a year ago. There have been new entrants to the CLO market, increased competition between financial institutions, and diversification in the way bank reward programs are run. Some of this is a tailwind due to more focus on CLO programs than ever before, which is good for us and the broader ecosystem. However, as we have seen these market dynamics change, we have not reacted quickly enough. We rightfully have been focused on evolving our technology and platform from static to dynamic. But as we look to our North Star, driving consumer engagement and rewards, we need to be even more focused on the end consumer. We want to make it easier for our consumers to find and utilize our offers. This means continuing to work to improve our offer relevance in addition to diversifying the channels through which we are engaging with them. More importantly, we get consistent feedback that our platform is unique, not only because of our diverse set of advertisers, but also our innovative offer constructs that meet advertiser KPIs. We must continue to strengthen these key differentiators. We are staying true to our mission of making commerce more rewarding. We are in the business of helping consumers maximize their savings with the brands they love while also discovering new ones. If we continue to build a more performant network, end consumers will benefit, and our bank partners and advertisers will also clearly see the benefits of partnering with us. We have laid out our path to bring more value to consumers, which I will talk about shortly. We acknowledge we have been on this journey for several quarters. Now we have narrowed our focus to the fundamentals of driving network performance. Our approach includes a renewed focus on all stakeholders: our bank partners, our advertisers, and consumers as we continue to work towards our North Star. We acknowledge the backdrop of a more challenging macroeconomic environment for some of our largest advertisers, but we see bright spots in the feedback we've heard from them. They continue to see the value of CLO programs. As one CMO of a large advertiser said to us, they see Cardlytics as a strategic partner rather than a transactional relationship. That CMO noted that we successfully demonstrated the best incremental returns across their digital marketing channels. They are now looking to allocate more budget and integrate Cardlytics into their strategic plans for loyalty acquisition, audience identification, and category cross-sells into higher-margin products. Looking forward, I have centered the team around four key pillars of our business: supply, demand, network performance, and bridge. First, we will work to increase our supply so we can reach more consumers and help them maximize savings, as well as diversify our revenue. We are broadening relationships with existing and new financial institutions in the US and internationally. We are still on track to launch with a large financial institution in the US before year-end, which will help expand our network and enable us to reach a larger audience to serve relevant offers. As expected, the initial launch of our partnership will involve testing with a small card member base and grow from there. We are also focused on engaging with potential new financial institution partners and other commerce platforms in the US to continue to grow our supply and meet consumers where they are. In the UK, we continue to ramp up our partnership with Monzo and are in active conversations with new financial institution partners. We are focused on increasing our supply and expanding our UK footprint in 2025. Second, on the demand side, we are honing in on how we can drive more growth with our advertisers. We are focused on scaling our relationships with brands across core categories while exploring new advertiser verticals. The more diversified our advertiser base, the more rewards we will bring to consumers. More than a quarter of our advertisers are now on the Insights portal, a self-service portal powered by our unique purchase intelligence that offers market trends and competitive insights, empowering brands to make more informed business decisions. We expect to see increased interest and usage as more advertisers gain access to the portal. We see our insights on demand as a key differentiator and value-add for brands and ultimately a driver of new and stickier relationships. Looking at our top line results, we had a solid quarter with budget growth; however, billings were down 2%, excluding entertainment, due to the ongoing challenges with delivery, which we will cover in more detail. In the US, we saw continued growth in categories like travel and everyday spend. We were able to close some large upsells intra-quarter, which led to beating our original billings guidance. In the UK, we continued strong double-digit growth and saw the highest amount of consumer rewards in the history of our UK business. We signed 26 new brands, which is an increase of 27%, and also strengthened our key partnerships with existing advertisers. To meet a diverse set of advertiser KPIs and reward consumers in new ways, we are continuing to develop new offer constructs. In addition to generalized brand-level offers, we can deliver offers with higher values for specific purchases based on product category, purchase channel, and store location. We can also report on what products were purchased, which helps advertisers better understand the profitability of a campaign and tap into category-level marketing budgets. This quarter, we saw success with an everyday spend advertiser that ran SKU-level insights integrating both their own transaction data and Cardlytics data. As an example, these insights could help inform future campaigns for premium versus regular fuel and show not only what fuel grade was purchased but also if customers were loyalty members and what other products were purchased in store. This helps advertisers drive regional growth and increase store-level sales. We continue to test these kinds of offers and are working to automate them next year. We are encouraged to see consumers engaging more with these new ad formats, which we believe help differentiate our offers and open additional advertiser budgets. Moving on to our third pillar, our continued focus on enhancing the performance of our network and stabilizing our core platform. We continue to actively address the delivery challenges that we discussed last quarter. We've taken several measures, including placing more stringent limits on campaigns, enhanced daily monitoring, and budget management improvements. We are also making improvements to our ad decisioning engine and seeing good initial results with our budget management tools. These are helping to adjust the pace at which serves are made based on campaign type, media fees, and targeting. We've made initial progress with improving delivery this quarter through these efforts. As we've said, some level of over and under delivery will always be inherent to any ad business, and we are working to get to a more stable place where these extremes are no longer a concern. We are working on automating our efforts to further narrow the bookends of delivery outcomes. We also want to continue optimizing for engagement as increasing rewards fuels our flywheel. As part of our network enhancements and to help with stabilizing delivery, we also continue to work with our advertisers to shift to engagement-based pricing, which includes CPE, CPR, and CPT pricing models. We've seen strong interest from our new advertisers, with 84% of new logos and 51% of all logos in the US in Q3 on engagement-based pricing. We expect the majority of our advertisers to transition to engagement-based pricing by the end of next year, which should help us optimize campaign performance through faster engagement-based feedback. We're also making progress on the dynamic marketplace, which allows advertisers to see their campaign performance on a daily basis and make ongoing changes to their ROAS goals, fees, and budgets. This will lead to better performance of campaigns and higher retention of advertisers. We had 58 campaigns running on our dynamic marketplace in Q3, up from 20 in the previous quarter. Regarding measurement, we are working with leading marketing measurement experts to integrate Cardlytics data into media mix models and help our advertisers understand the incremental impact of our CLO campaigns. This helps ensure that we can participate in industry-standard measurement, making it easier for advertisers to measure our impact. Our fourth and final pillar is continuing to invest in Bridge and Ripple as significant growth drivers for our business. In October, we welcomed Enrique Munoz Torres as our new General Manager of Bridge, who is focusing on maximizing connectivity and further scaling our platform to address a larger suite of advertisers and retailers. Enrique led the advertising and search business at Yahoo and also brings a range of experience from Sunshine and Google. With Ripple, we continue to make progress in Q3. We reached our goal of 100 million active unique shopper profiles ahead of schedule, making Ripple one of the largest networks of regional grocers and convenience stores in the US. These shoppers have historically been hard to reach, and Ripple presents a unique opportunity for CPG brands to engage with these shoppers at scale. We saw increased adoption of our syndicated and custom audiences of these shopper profiles from CPG brands and agency partners who find value in the ability to reach deterministic purchasers at the brand and product level. These four pillars continue to underpin what we believe is necessary to deliver maximum savings for our consumers, which we believe will help power our flywheel and drive growth in our business. We remain relentlessly focused on addressing our short-term challenges while also taking a deliberate approach on how we prioritize our initiatives moving forward. I'll now turn the call over to Alexis to discuss the financials.

Thank you, Amit. This quarter exceeded our expectations as we focused on stabilizing our core platform. We beat the high end of our guidance on all metrics, primarily due to higher-than-expected budgets. Turning to our specific third quarter results, my comments will be year-over-year comparisons to the third quarter of 2023, excluding entertainment, our former subsidiary that we sold in December 2023, unless stated otherwise. In Q3, our total billings were $112 million, a 2% decrease. As expected, our billings were impacted by continued challenges with delivery rather than pipeline weakness. As Amit mentioned, we took decisive action during Q3 and made initial progress in improving delivery, and we saw sequential improvements throughout the quarter. Stabilizing delivery remains an all-hands-on-deck priority for us, so that our billings can start to reflect our ability to capture bigger budgets, and we can drive both performance and predictability for our advertisers. As a reminder, our North Star is consumer rewards, which materialize as consumer incentives in our financials. We believe that consumer rewards are a key indicator that our technology is delivering the most relevant offers to each person and driving value for our advertisers and bank partners. This quarter, consumer incentives increased by 20% to $44.9 million. As we've seen in the last two quarters, revenue, which was $67.1 million in Q3, decreased 13% due to driving more user engagement with our offers. Overdelivery peaked in July and has sequentially improved as our efforts began to take effect, and we do not expect this level of revenue as a percentage of billings to persist at 60%. We continue to believe that adjusted contribution is a better metric for assessing the health and performance of our business as it reflects how much we keep of every dollar we make. In Q3, adjusted contribution was $36.4 million, down 11% from the prior year. As a percentage of revenue, adjusted contribution margin was 54%, up 1% year-over-year. Partner mix partially offset the margin decline we saw from elevated rewards, and we expect similar or improved margins as we onboard new bank partners. Looking at our segment results, US revenue decreased 17% due to delivery challenges, but we saw growth in total budgets, especially from new brands, which helps broaden and diversify our advertiser base. In the UK, we continue to see strong double-digit revenue growth at 33% as well as the fourth consecutive quarter of profitability. July was the highest-ever billings month in our 10-year partnership with Lloyd's. As Amit mentioned, we are pleased to see consumer rewards in the UK reach an all-time high, demonstrating strong engagement with our offers. Bridge revenue was flat compared to last year. But as Amit mentioned, we've made good progress with Ripple. We have early positive signals from ongoing and active engagement with advertisers and agencies. First-party data is valuable. And according to eMarketer, the retail media market is expected to double in the next three years. We believe we are well-positioned to capture market share in this sector. Adjusted EBITDA declined year-over-year from $3.6 million to negative $1.8 million. Total adjusted operating expenses, excluding stock-based compensation, came in at $38.2 million. While we continue to believe in the investments we are making to support longer-term growth, we are tightly managing our expenses and maintaining cost discipline. We expect operating expenses to remain below $40 million in Q4. In Q3, operating cash flow was positive $1.4 million. Free cash flow was negative $3.9 million, driven by increased internally developed software expense. On the balance sheet, we ended Q3 with $67.0 million in cash and cash equivalents, and we had $60 million of unused available borrowings under our line of credit, which was recently extended through July 2026. Our total MAUs were $166 million for the third quarter, an increase of 2%, driven primarily by organic growth in the US as well as auto-enrollment at Lloyd's and ramping up Monzo in the UK. ARPU was $0.40, down 18% as a result of the 20% increase in consumer incentives as we continue to deliver more rewards to cardholders. Turning to our Q4 outlook, for Q4, we expect billings between $102 million and $108 million, revenue between $62 million and $67 million, adjusted contribution between $33 million and $36 million, adjusted EBITDA between negative $5 million and negative $1 million. Our billings guidance represents negative 22% to negative 18% growth, excluding our former subsidiary Entertainment. This weakness is driven by continued but improving challenges with delivery as well as with pipeline. Let me start with delivery. We expect continued disruption in Q4 but continue to believe that modernizing our technology and evolving our pricing are necessary to our long-term success. As Amit mentioned, CLO is becoming more important to our banks. They are continuing to make changes to their channels and user experience, which includes improved placement of the widget and more communication with their customers, but makes forecasting more difficult. We are assuming improvement to over-delivery as illustrated by our improved revenue as a percentage of billings of 62%. That said, we believe some level of elevated rewards will continue as our targeting services the right offers to the right users. However, billings are suppressed due to continued under-delivery. We have more work to do to improve the efficiency of our ad network around under-delivering campaigns. We continue to assume that our new financial institution partner will have no material impact on Q4. On pipeline, we are seeing advertiser caution around budgets, especially in the restaurant and travel verticals. While we continue to grow the number of advertisers we work with in the restaurant, overall spending has declined as a result of industry performance. We also expect to see some headwinds this holiday season, including the shorter period between Black Friday and Christmas, but we are seeing areas of strength in everyday spend, and this continues to be a key differentiator for Cardlytics in the market. We also are lapping the reduction of a few key accounts in Q4 of last year. While the number of new logos is up 38%, they do not fully offset the decline in these large accounts that have churned for various reasons, including large-scale reorganizations, shifts in marketing strategy, or their own company performance. The UK continues to be a bright spot, and we expect continued double-digit billings growth as we continue to work well with our new bank partners that enable us to unlock larger advertising budgets. We expect adjusted contribution to be similar on a margin basis. Our adjusted EBITDA guidance reflects the impact of our billings guidance and the fact that we will continue to make strategic hiring decisions where we believe the return will be realized in the near-term. We will continue to evaluate our investments and ongoing costs as we monitor performance. For 2025, we believe performance will accelerate as we improve our operational execution, scale a major new financial institution partner, see continued strength in the UK, and start to more fully realize contributions from Ripple. We expect to invest only as top-line performance improves and remain focused on improving delivery and launching a new bank partner in the near term.

Thank you, Alexis. Overall, we are encouraged by the progress we've made this quarter. Above all, our Q3 results indicate better predictability of our business and our relentless focus on addressing our short-term challenges. Our efforts will take time, but we are focusing on the right priorities to maximize consumer engagement and rewards. I'll now turn it over to the operator to begin Q&A.

Thank you. Our first question comes from Robert Culbreth with Evercore ISI. Your line is open.

Hi, good afternoon. This is Rob on the call for Mark. It sounds like you have a good understanding of over-delivery. Can you discuss some of the main factors contributing to under-delivery and the plan to tackle those issues? Also, with the growth in logos being encouraging, could you share insights on trends in billings per logo? As you enhance platform capabilities through AD and the dynamic marketplace, what are your thoughts on re-engaging customers who have experienced churn or budget cuts, and how do you plan to organically increase billings per logo over time? Thank you.

Thank you, Robert, and thanks, everyone, again for joining the call. I think, first of all, thank you for recognizing the progress we've made on the overall delivery challenge that we had. And that's something that, as Alexis mentioned in her prepared remarks, continues to be our all-hands-on-deck priority. Now we've made delivery improvements sequentially, especially on over-delivery, but there's more work to be done on under. So things like ranking under-delivering campaigns differently, better forecasting, using mid-flight changes, and testing different reward amounts are all different parts of the product that we're going to assess. Just like what we did with under-delivery, our typical approach, Robert, is to test a set of things initially and then over time, we'll automate it. In terms of billings per logo, we're pleased to see that overall, the advertiser count has steadily grown and continues to increase. As market conditions start to improve, we expect the budgets per logo or budgets per advertiser to continue to grow. To that end, we are actively working with advertisers to map out their 2025 budgets and strategies.

Got it. Thank you. If I can ask one quick follow-up just on the issue of under-delivery. As you address some of those issues, are you able to automate those capabilities or create a feedback loop with advertisers? Do they need to master sort of the way that they handle the platform to optimize delivery? Or is it fairly an automated or a process of continual optimization? Thank you.

Yes, Robert, that's a good question. I think our typical mantra in this case is that we should take away all friction from the advertiser; it is our internal product teams' and engineering teams' area to fix. So for an advertiser, it would not be something that they need to optimize. Our teams will work with the advertisers to inform and work with them on how to best structure the campaign on an ongoing basis.

Thank you. Our next question comes from Jason Kreyer with Craig-Hallum. Your line is open.

Thank you. I just wanted to see if you can give maybe some details on contrasting Q3 and Q4. It seems like you had a lot of success in Q3 with billings and things like that, but there's a growth step down as we get into Q4. So, if you can parse those two things out, that would be great.

Hey, Jason, thanks for the question. Yes, I think all I really want to point out there is delivery did sequentially improve in Q3. So, we are seeing that continuing into Q4. I think what's different this time is that going into Q4, we are lapping some large accounts that did not reoccur from Q4 2023. If we did not have that happen, the retail sector actually would be up in terms of dollars and brands for Q4. So underlying advertisers are still spending more with us, committing budgets, but we did have a difficult comp versus last year. That is a lot of the driver of some of the performance you're seeing in the pipeline. And then I just wanted to elaborate on something that Amit said in the prior answer: solving under-delivery is important because it enables us to not over-serve people and then opens up some of those under-delivering campaigns. It was really important that we did that first. As you can see from the margin guide, delivery has improved, especially on the over-delivery side, going from 60% of revenue as a percentage of billings to 62% at the high end of the range, but still more work to do to close the gap on the under-delivery side, and that is part of the reason why you're seeing the Q4 guide that we provided today.

Do you have any updates from the last quarter regarding your discussions with customers about the CPE pricing solution? I'm curious about any changes in customer numbers or their overall receptivity and feedback.

So I think on pricing, we've discussed that we want to move towards engagement-based pricing, and that progress has continued to go well. Our advertisers who are engaging with it like it quite a bit, and a large number, as I mentioned in my prepared remarks, of the new advertisers are opting for those. So we continue to see success on that side. In terms of our billings, I think over time, as I've mentioned in my prepared remarks, we continue to expect we'll have a higher proportion of our advertisers move towards engagement-based pricing.

Our next question comes from Jacob Stephan with Lake Street Capital Markets. Your line is open.

Hey, appreciate you taking my question. Hopping between calls, so sorry if there's double coverage here. On the engagement-based price model, I'm just curious; it sounded like 5% or so of your customer base was using the engagement-based pricing as of last quarter. But could you just kind of help us understand, is this going to be a 5-, 6-quarter sort of transition? Or is this fully elective by the actual customer?

Yes. Let me just clarify a little bit here. So dynamic pricing was 5%, which is more specifically around CPC or cost per click. Engagement-based pricing encompasses CPT, which is cost per transaction, cost per redemption, and as well as cost per click. More broadly, we're at 38% of total billings in Q3. That's up sequentially and that continues to grow. We do expect to be a majority on CPE by the end of next year. In terms of the dynamic pricing specifically and CPC specifically, that went from 20 brands in Q2 to 58 this quarter. So hopefully, that's a little more clear about the trend. We're not seeing pushback on pricing from brands. This aligns with industry standards. And again, it improves visibility to us and improves campaign performance. It's also what the brands are used to buying. This is where we expect to be by the end of next year.

Okay. Got it. Very helpful. And then Amit, you've been in the CEO seat for three months now. It'd be kind of great to get a sense of what are your top three priorities, maybe near term and kind of medium-term?

Yes, absolutely. Thanks for that question. I want to say at the top level, my belief in the company and our place in the ecosystem continues to be very strong. That is reflected by our team's excitement about what we do and how we're showing up in the market with our new partners and so on. In terms of priorities, I'll go back to the four key pillars I mentioned. We are thinking about supply and our partners very differently. We're engaging with partners in a fundamentally different way. Similarly, we're going after our advertisers' engagement in a much more strategic and broad-based way. We want to ensure that network performance continues to improve. To that end, we're looking at our network from start to finish. This includes forecasting and projections, delivery, and measurement. Then we're bringing Bridge closer to connect with our core business. The transformation of our business takes some time, but we strongly believe this is the right path for us to grow the company.

Thank you. Just one final question comes from Luke Horton with Northland Capital Markets. Your line is open.

Hi, everyone. Thanks for the question. I understand you're currently addressing delivery issues. Looking ahead, once you manage to transition advertisers to the CPE and resolve some of these delivery challenges, what are your expectations for revenue as a percentage of billings normalizing with the rollout of the major US financial institution?

Unfortunately, I'm not providing guidance for 2025 at this point. However, we continue to believe that our primary focus is on rewards, and we aim to drive redemptions and improve that ratio. Our ability to achieve this depends on enhancing our margins over time. It's too early to determine where this will settle. Nevertheless, driving redemptions remains a crucial aspect of our strategy. We expect to enhance both our over and under delivery metrics as time progresses. Once those are stable, we can explore different reward formats for varying reward amounts. Currently, we are not prepared to give longer-term margin guidance.

Okay. Fair enough. And then just with the rollout of the major bank partner in the US, I think you had mentioned there's no material impact in Q4. Just wondering how that plays out over 2025, if we see an initial impact or kind of a tiered approach with the rollout there?

I wish I could give you more clarity here. Yes, we're doing an initial launch right now, very small, and it will continue to scale over time. We're not ready to provide additional guidance for 2025, but we are very optimistic and partnering well with this large partner. So we are excited to see how this plays out over time.

Thank you for taking the question.

Thank you all for joining us today. We look forward to discussing our fourth quarter and full year results on the next earnings call. Thank you again for all your questions.

This does conclude today's program. You may now disconnect.