Good evening, and welcome to the Cardlytics Second 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, our financial guidance and cash position for the third quarter of 2021, our ability to achieve long-term initiatives to drive long-term growth, growth in MAUs or monthly active users, launches by new partners in the coming quarters, 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 uneven recovery and volatility of the economy. Q4 being a seasonal high period of ads spending and consumer spending. The increase in stock-based compensation next quarter, continued pressure on our U.K. results and the anticipated benefits and expections and goals related to the integration of our acquisition of Dosh Holdings, Inc. and Bridg Inc. For a discussion of this 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 year ended June 30, 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. Lynne?

Good evening, and thank you for joining our Q2 2021 earnings call. While we grew Cardlytics platform billings to 111% and adjusted contribution 123% from Q2 2020, we fell below our guidance. This was driven by us forecasting a faster recovery than was realized in travel, retail, and restaurant. Here are the numbers. Cardlytics platform billings were $83.2 million, up 111% year-over-year. Cardlytics platform revenue, which is equal to billings, net of consumer incentives was $56.8 million, an increase of 101% from Q2 2020. And Cardlytics platform adjusted contribution was $27.6 million, up a 123% year-over-year. To provide investors with more transparency into the quarter, we're providing advertiser spending concentration and growth rates for each of our key verticals. We're also reporting Bridg results as a separate segment to help investors better understand performance and our investments in this business. I want to reiterate that while we're disappointed in the myth our business is performing well. We believe advertisers spent less than we forecasted for three reasons; First, there were labor shortages. Second, retailers and restaurants had supply chain issues. And third, there was an increase in consumer demand reducing the need for advertising with several key clients. For example, several of our key client restaurants pause their marketing because they couldn't purchase enough critical ingredients. A men's clothing client halted all of their marketing spend when they realized their supply chain couldn't deliver the inventory they needed to maintain customer selection. As a result, some marketing budgets across our client pace were actually paused in Q2, something we rarely see in our business and/ or push to Q3. Additionally, as you can see from the new supplemental information, travel and entertainment, advertising spend are still down about 75% from Q2 2019, and the U.K. is still down about 23…

Thank you, Lynn. As Lynn mentioned, our financial results continue to be impacted by the pandemic. But I also share Lynn's excitement about the immense progress we've made on our longer term product and technology initiatives. So let me review our Q2 financial results. Total billings increased to 116% year over year to $85.3 million. Cardlytics platform billings was $83.2 million, an increase of 111%. Total revenue increased to 109% year-over-year to $58.9 million. Cardlytics' platform revenue was $56.8 million, an increase of 101%. Our Cardlytics U.S. revenue increased 95% year-over-year and our Cardlytics U.K. revenue increased 220%. In the U.S. we saw significant year-over-year growth in each of our industry verticals. When compared to 2019 however, it is clear that we are still being affected by an uneven recovery with lingering challenges across travel and in some cases retail and restaurant. Our U.K. business continues to be more severely impacted by the pandemic as lockdowns and restrictions are still unwinding. Consumer spending and ad budget have rebounded significantly from last year We anticipate some continued pressure on our U.K. results over the next few quarters. As Lynn mentioned, we have provided new information on ad spending on the Cardlytics platform by industry, both retail and restaurant spending were in excess of 110% year-over-year. But we expected both of these industries to rebound at an even faster pace when forecasting at the beginning of the year. Our stronger than expected results in March reinforced this expectation, specifically our Cardlytics platform revenue with $16 million in January, $15 million in February and $22 million in March. During Q2, our Cardlytics' platform revenue was $17 million in April, $20 million in May and $20 million in June. These monthly fluctuations reflect the volatility of consumer spending and ad budgets in our key…

Thanks Andy. There's still significant uncertainty in the market right now given COVID-19 trends. But we believe our business will continue trending towards a position of strength through this uneven recovery. We're looking forward to executing on our plan and acquisition integration for the second half of 2021. With that, I'll open up the call for your questions.

Thank you. [Operator Instructions] Our first question comes from Jason Kreyer of Craig-Hallum. Your line is open.

All right. Thank you for taking my questions. Just a couple of clarification items if you don't mind. So, in terms of the metrics you provided, it looks like MAUs were down about a million quarter over quarter. Just wondering if there was an explanation on that. And then, when we look at the Q3 guide, obviously, you're providing a wide range of outcomes. But it looks like the low end of the Q3 guide would actually show a lower sequential movement from the Q2 level. So I'm just trying to understand the logic and kind of the puts and takes that would drive a sequential reduction there?

Hey, thanks. This is Andy. On your first point on MAUs, while we did add a few million MAUs with the launch of U.S. bank. We actually did have a few million MAUs also come down from a planned wind down of a processor. We've been working with them for a while trying to get them to do the things that were necessary to really have a successful program. We actually have had less than $50,000 of revenue from that partner this year. So they were actually unprofitable. And so -- as we've talked a lot about kind of where we're going as a platform, it just really didn't make any sense. So that's what that was. And then our point on the Q3 guide, you're right. I mean, we have -- certainly there's a lot of uncertainty. We decided to keep the guide fairly wide. Still there's just a lot of things that we're trying to work through with visibility. Certainly, we talked about travel and some of the continuing challenges that we have there that are in the market from a supply and demand perspective. We really just continue to see some struggles there and then in the U.K. But I think generally speaking, right, when you look at the guidance and look at kind of where we're speaking to a midpoint there, we do anticipate things that continue to progress. We've seen continued increase quarter over quarter. We expect that to continue. And that wide guys because the lack of visibility that we have right now.

Got it. I appreciate the color Andy. I want to squeeze in one more just on the more strategic side. But in terms of this enhanced platform that U.S. bank is rolling out. Just wondering, if you can kind of reset the expectations on where we go from these -- from the current point in time. Other financial institutions you expect to add there like -- and at what point in time you think you get critical mass where you've got several institutions utilizing that platform?

Yes. Thanks Jason, it's Lynne. What we've publicly said is there is one very large bank that will be going live on this new platform, a new experience in the back half of this year. So starting next year, we'll have significant MAUs on the platform. And then what we've also said is we expect most of the rest of the MAUs to adopt the platform over the course of 2022, so that by the time we get into 2023, we will have the majority, probably not all, but the majority of MAUs on a new version of the user experience. And just to add to that. We are already -- it's very early, U.S. bank is of course a good nice mid-sized bank and it's very early. But we're already seeing very encouraging results with significantly higher click rates on ads that have pictures. Not a surprise. As well as significantly higher click rates on ads that are with the categorization features that we've added. So early times, but very exciting.

Perfect. Thank you. Appreciate the time.

Thank you. Our next question comes from Aaron Kessler of Raymond James. Your line is open.

Great. Thanks guys. Just a couple of questions. One, maybe you can just discuss the advertiser pipeline a little bit. And maybe specifically D2C trends looks like that may have flattened out, but it looks like they made them because of the recovery and some of the other verticals as a percentage of revenue basis. And just may quickly on that kind of the ARPU calculation. Just to clarify you excluding Bridg from that. I was off by a penny there just to clarify that? Thank you.

Yes. I was going to clarity that. Yes. The Bridg is not included in our ARPU calculations. The MAU number is really just a Cardlytics only platform number and then the revenue for generate from the Cardlytics platform.

Got it.

Yes. And then on the D2C question, I think it's much more what you observed Aaron, which is other categories are starting to come back. So D2C is still growing. But as a percentage of the overall business as the other categories are coming back, it looks like D2C is flattening out. But they are -- it's absolutely still a very, very fast growing category for us.

Got it. And just how do you feel about the advertiser pipeline right now? Kind of with the salesforce, any further details there?

Yes. I mean, look, I know it's sounds flipped< because we did just have a miss. But we also grew adjusted contribution, 123% year-over-year, which is higher than I think any other digital platform out there. So, we feel great about the pipeline. We talked about the momentum we're seeing with agencies, which are bringing in a lot of new logos and new clients. Our current clients are still very excited about the platform. The pipeline is robust. So, I know it sounds flipped, but there nothing wrong with the core business. We just over forecasted recovery.

Got it. Great. Thank you guys.

Thank you. Our next question comes from Karl Peters from Needham. Your line is open.

Hey, good afternoon. Thanks for taking my questions guys. Just want to see some of the feedback you guys are been getting from some of your clients. Maybe how much of the shortfall this quarter is from some of these kind of labor and supply chain issues? And how much of it is maybe from some of this pent-up demand kind of creating little bit of narrow pocket. Just want to see from you guys, like, what you guys are hearing?

Yes. I mean, I'll jump in and then Andy certainly free feel to add color. We certainly would have -- it been in the range probably about midpoint. Had we not seen campaign pause in the middle of the quarter. And the campaigns that pause in the middle of the quarter were because of very -- like labor issues or lack of chicken or things like that. I do think, we would have been above the high end of the guide. Had we not seen some advertisers just decide to -- basically not advertisers, because they didn’t meet you because of the demand. So its obviously a bit of both. But clearly the pausing of campaigns that were already committed budgets is something we have rarely seen. I mean, honestly I don't every remember seeing it. I'm sure its happened in the past, but I don't remember, have recent memory of it. And it really was because of those issues. And like I said, we would have been comfortably inside our guidance probably above the midpoint had enough in for those.

Okay. That's helpful. And then, just a follow-up on Bridg, the ARR breakdown and the revenue breakout in the releases, super helpful. But just wondered if you give us any additional color either on the bookings momentum, that they're seeing or how we should think about -- how that ARR will kind of roll into revenue moving forward?

Yes. I mean, look, you will see a fairly standard I think relationship that is related to some of these other software platforms. We're going to continue to grow that ARR. And as those become realize, I will see that roll through revenue. But, I think we have quite a bit of good moment on that side of the business. We talk a lot about. Really trying to drive that scale. And going in to market and having conversations jointly has already begun.

Karl, just to give you some tangible numbers there. When we acquired Bridg they had one full-time sales person. They are now up to three. And we're investing heavily. So we are going to really blow out the pipeline. That's the goal. That's always been the objective. But obviously going from one sales person to three, and people take time to train et cetera. So its going to be a multi quarter journey to really some material scale. But we're focused on that right now. And then the client we're calling. We've identified 25 very high potential clients. These are clients both that could really benefit from Bridg, but also could benefit from Bridg and Cardlytics combined. And we're going after them pretty aggressively.

All right. That's great color. Thanks guys.

Thank you. Our next question comes from Doug Anmuth of JPMorgan. Your line is open.

Hey. This is David on for Dough Anmuth. Thanks for taking the questions. First one, on the challenges that your -- quarter-over-quarter seeing. And like, when you just talk to them, what do you think they are in softening those challenging. Do you think they are at least turning the corner? Or do you think things look a little bit more challenging before it improves? And then, adjusted contribution as a percent of revenue, it suppressed 50% for the first time this quarter. And even if you exclude the Bridg contribution, that's close to 49%. And it seems like you guys are guiding to that being in the high 48% [ph]. But also just curious what drove the increase? And how we should think about that going forward?

Yes. I'll take the first part and Andy, you can take the second part. I think, I mean, its hard to predict the future. But I think the supply chain shortages that impacted a couple of clients, those seem to going away. But I will say, the labor shortages are not. As an example, I try to redeem a Burger King offer. I was really getting Onion Rings the last couple days. And I send my daughter to go get the Onion Rings. Two days in a row I just went to Burger King and they were closed. They didn't have enough employees. So I'm still worried about labor shortages. Supply chain, its hard to predict, but right now those seem to have gone away or at least dramatically declined.

And on your second point. We do have a bit more enhanced incentive this quarter than we've had in recent periods. We've talked about that right in that dynamic is where neo-banks are helping to fund and enhance offers, right, through the FI share. So what that does? That will suppress our GAAP revenue, right? But its neutral to adjusted contribution. So if you're looking at adjusted contribution as a percentage of revenue, that can be distorts a little bit in those periods. But even when you look at adjusted contribution as a percentage of billings. which is probably a better way to come look at that, you will see it is bit higher than normal. We don't expect to have that be probably high on the [Indiscernible] going forward. We talk historically about that being about 30% to 32%. And that's where we actually see it going longer term, those little bit under ratio in the quarter, but 30% to 32% is where we see that guidance.

Got it. Thank you. Helpful.

Thank you. [Operator Instructions] I'm sure though, I have a question from Charles Norman of Wells Fargo. Your line is open.

Good afternoon, and thank you for taking my questions. Few of the companies we follow in the payment space had reported an acceleration in trends in U.K. during July. And given your exposure, I was wondering if you could comment, if you're seeing anything similar given some of the reopenings in that region?

Yes. I think we've seen actually some nice improvements, significant improvements specially on the year-over-year basis. As they kind of started to unwind the lockdown, the restrictions, but they're still on process of winding this down. I think a very similar dynamic in the U.K. that we have in travel here in the U.S. something we would speak to that. There are couple of different times, where you have just not near enough of a need for demand generation. But as far as the spending, we do see that spending starting to come back. And I think really now its more about making sure we did the ad budget and the consumer spending which we need both of those.

Okay. And as a follow-up. I appreciate the color on slide 11 with the 13 rather with the offer activation rates by industry. And we just curious looking across those industries where you see the most potential upside in activation rates?

Yes. It’s a good question. Sorry, Andy, did you want to take that?

Go ahead.

I would just say, it's a great question. I mean, what we know is first of all, let's start with some basic stuff. Everybody eats. So we think restaurants are always going to be our highest click rates by far. I did mention the fact that we're seeing some really nice engagement with U.S., bank with the new UI. Restaurants are some of the key places where we're showing some pictures. So I think those have -- there's some real potential there. You take something like subscription. I don't think you're ever going to see it go much higher. Subscription is kind of a low engagement, but high in value. Offer is the way we think about it. So the more fast, fun and frequent a category is, the higher the click rates are going to go over time. And the more infrequent the category is, the lower the click rates are going to be, but the higher the revenue generation, is the way to think about it. But restaurant, retail, the kinds of things people do frequently and every day, I think those click rates could go dramatically higher.

Yes. I think especially one thing though too. I would say, grocery is probably one where as we start talking about skew level offers and those types of things, right? There's probably a significant move that could happen over time in grocery as we walk into that opportunity.

Great. Thank you for the color.

Thank you. I'm showing no further questions. At this time, I'd like to turn the call back over to management for any closing remark.

Thanks. So look, we had a miss. There's no, if answer bugs [ph] about it. We're horribly disappointed. But at the same time, it was over forecasting in a very uncertain time. There is nothing wrong with the core business. We still grew adjusted contribution 123%. So we apologize for the miss. But we are heads down fully focused. If you invested in this business for the long term, all the long-term stuff is still here and even more robust than it was a quarter ago. Thanks everyone. We appreciate your time.

Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. Now you all disconnect. Have a great day.