Good day and thank you for standing by. Welcome to Cardlytics Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Nick Lynton, Chief, Legal and Privacy Officer. Please go ahead.

Good evening and welcome to the Cardlytics fourth quarter and full year 2023 financial results call. Before we begin, let me remind everyone that today's discussion will contain forward-looking statements based on our current assumptions, expectations, and beliefs, including expectations regarding our future financial performance and results, including for the first quarter of 2024 and various product initiatives and improvements. For a discussion of the specific risk factors that could cause our actual results to differ materially from today's discussion, please refer to the risk factors section of the company's 10-K for the year ended December 31, 2023, 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 in 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 the information I have just described in the Investor Relations section of the Cardlytics website. Please note that a supplemental presentation to our fourth quarter and full year results has also been posted on our Investor Relations website. Joining us on the call today is Cardlytics CEO, Karim Temsamani, and CFO, Alexis DeSieno. Following their prepared remarks, we'll open the call to your questions. With that said, let me turn the call over to Karim.

Thank you, Nick. Good evening, and thank you for joining our Q4 2023 earnings call. I would first like to reflect on 2023 as a whole. We started the year in a difficult position financially, with the SRS dispute presenting a significant challenge for the company. I'm glad we not only resolved the SRS dispute, but also finished the year with positive annual adjusted EBITDA of $3.8 million. This is the first time since 2019 that we ended the year with positive adjusted EBITDA. In 2023, we also made fundamental changes to our cost structure, including renegotiating partner contracts and rightsizing our expenses. And we made key hires for tech, product, sales, and leadership teams. All these efforts and results are a great foundation for us to continue to improve our business. With the SRS dispute resolved and our cost structure rebalanced, we can now fully focus on execution and growth, as well as addressing our capital needs. I am delighted to add that we have just signed a large new banking partner, as per the 8-K we filed within the last hour. Q1 is off to a good start, and we're expecting 12% to 16% billings growth, when we exclude entertainment, which we solved in Q4. Alexis will provide further details on our financial performance later in the call. Aside from our finances, we are making progress across our operational team. Our sales teams in the U.S. and U.K. are driving stronger growth and bringing advertisers back to the platform. As I mentioned, our bank partner team has just signed a large new bank partner in the U.S., and we continue to have promising discussions with additional banks in the U.S. and the U.K. Our product and engineering teams are continuing to launch new products that improve the experience…

Thank you, Karim. Before moving on to Q4, I want to echo Karim's sentiments about 2023 as a turnaround year for Cardlytics, with most of the acceleration occurring in the second half of the year. In 2023, we generated $453.4 million in billings, representing 2% growth, and we generated $309.2 million in revenue, representing 4% growth both versus the prior year. Adjusted contribution was $158.6 million at 11% growth versus the prior year, with the second half of the year at 20% growth alone. Adjusted EBITDA was positive for the first time since 2019 at $3.8 million, and nearly $50 million better than in 2022. As Karim mentioned, we've made fundamental changes to our cost structure that will enable us to drive positive adjusted EBITDA and invest strategically in the future. Let's move on to our Q4 results. We performed in line or better than expected, with billings, revenue, and adjusted contribution consistent with our Q4 guidance, and adjusted EBITDA exceeding expectations. We had our third consecutive quarter of positive operating cash flow and our second consecutive quarter of positive adjusted EBITDA. We continue to show momentum in driving top-line after right-sizing our business. My comments will be year-over-year comparisons for the fourth quarter, unless stated otherwise. In Q4, billings reached $131.9 million, a 5% increase, due to continued success in everyday spend as well as in travel. Our restaurant category turned slightly positive in Q4, as the efforts of rebuilding our sales team are beginning to pay off. Revenue was $89.2 million, up 8%, partially driven by a one-time revenue-related benefit of $2.2 million. Our top five customers accounted for 16% of revenue this quarter, compared to 12% last year, and we continue to land new customers and expand existing customers. Geographically, U.S. revenue increased 8%. The U.K. showed…

Thank you, Alexis. With each passing quarter, we have delivered additional progress in the business. The trajectory of our financials continues upward. We have signed a new large bank partner, and the transformation of our platform is well on the way. I'd like to thank our teams for their dedication to the business, and I'd like to thank our investors for their patience over the last several years. I am excited about 2024 and Cardlytics long-term prospects. Thank you for your support.

And ladies and gentlemen, it is now time for our Q&A session. [Operator Instructions] Now, first question coming from the line of, Kyle Peterson with Needham. Your line is open.

I wanted to start off with the news on the new FI partner. It was great to see. I just wanted to see if you guys could give us any color on the timing of the ramp, both in terms of billings and revenues, contribution, but also will that require any sizable upfront expenses or CapEx for us to keep in mind as we think about our models this year?

Happy to start, and Alexis can chime in as well, Kyle. We can't tell you anything more outside of what we have referenced in the 8-K with regards to timing. With regards to expenses, there's no major expenses upfront that you need to take into account. And obviously, as soon as we can talk more about the timing for the launch, we will talk to the market.

Yes, I'll just add to that. The full year comments I made does not include any material impact from the signing of this agreement. Like many of our other bank partners, implementation will take time, so we'll keep you posted on launch dates and other information.

Got it. That's really helpful. And then just a follow-up on liquidity and cash. Obviously, you guys have done a really good job, with expense structure, the credit facility is extended. But I guess, what are some of the other near-term priorities you guys are thinking about with regards to whether it's just liquidity or the longer-term cap structure for the business?

Sorry. Yes, thanks. Obviously, we're focused on right-sizing our capital structure. It's a priority for us, and we needed to address it in stages. First, we needed to improve the business. So, we've re-accelerated revenue, and we've right-sized our cost structure. And then next, we needed to resolve SRS. Nothing would happen in a way that protected shareholders without these being addressed, so this is done. And both of these have allowed us to extend the revolver and increase the amount that we can borrow, giving us further flexibility. So, in terms of next steps, we're working hard on this, and we have a clear strategy in place. And although I can't talk about specifics yet, I'm confident in our path forward, and again, we'll keep you updated as we can. Does that answer your question?

Yes. That's a very good color. Thanks, guys. Nice quarter.

Thank you. And our next question coming from the line of Jacob Stephan with Lake Street Capital Markets. Your line is open.

Congrats on the quarter, the guidance, and the new partner win there. Just touching on the guidance here, I'd like to get your thoughts on how you're thinking about the upside to billings growth. Your guidance to kind of mid-teens growth from, is that being driven by increased customer spend? Or how much of that coming from the increased engagement as well?

Sure, and I'll let Karim chime in at the end. We're confident in the steps we're taking to re-accelerate revenue. At the midpoint and top of the range, I want to reiterate that we're going to be breakeven or positive adjusted EBITDA for the first time in Q1, which is really exciting. So our initiatives are really paying off, and we're executing against our plan. And so, we're focused on increasing inventory with new banks, improving our tech and product, investing in our teams to get great content and reduce churn. And our international business is growing double digits. So some of these initiatives are taking time, but very confident in the guide and excited for the quarter.

Yes, okay. Maybe just kind of touching on the multi-tier offers programs. Maybe, it sounds like you've had good success with your airline partner. But maybe you could talk about where you are in the process of rolling this out to kind of the broader client base.

Yes, I'm happy to take that, Jacob. So obviously, these are sort of still tests that we're doing with a number of clients, and we continue to ramp that up with any client that's interested and has a relevant use case. We will update the market when we have a view of the sizing of this across the whole of the network. But importantly, those new product initiatives are not only positive benefits for the bank's customers, the advertisers and the clients, but they also allow our sales teams to have normal discussions about the range of offerings that we have across the network. So even if some clients are not adopting them, it allows us to have a discussion about bringing more budgets to the platform. So there are several benefits to these initiatives there.

Got it. I'll hop back in the queue here. Congrats, guys.

Thank you. And our next question coming from the line of Jason Kreyer with Craig-Hallum. Your line is open.

We've seen a pretty nice uptick recently just in terms of, new logos in the offer, kind of bigger names coming into offers. And I'm just curious, can you talk about, like, some of those include vendors that are coming back to the platform that have left in the past. And so just curious what you think is different right now, what's driving them, or what's changed where you're getting audience with what appears to be larger marketers?

Yes. I mean, I want to stress that larger marketers have always been our focus. So we are continuing to make strides with some of these clients. And going back to what happened in the last couple of years, some of those customers that we had lost were not because of the performance of the platform, but because mostly of strategy at these customers. And some of the customers we also lost because we did not have the right activity at the sales teams level. And, we fixed that now. I talked about it in the last call that we're reinvesting in our sales teams, and we have made a couple of changes. And we've seen those changes essentially allow us to have stronger relationship with many of our customers. There's plenty more that we want to do. And obviously, having new product initiatives that we can talk to customers about, including the risk level offers that we mentioned before, also enable us to open doors and showcase great benefits to customers. So I'm very confident that our strategy is really starting to pay off. And I'm very keen to continue to see this growth moving forward and accelerating.

And then on ADE, it seems like, I mean, you've been talking the last couple of quarters about getting all the right validation points, that this is certainly working and providing better offers. What do you think is causing, you know, some FI partners not to migrate to that in a quicker way?

So, again, the vast majority of our network is now on ADE. So we're very pleased with that. And then, subsequent improvements that we made to ADE just require a little bit of work at each of the partners, but it's very minimal. What we have is 20% of our network that's not yet on ADE, mostly because there's larger tech changes that are required for these partners to move from on-premise, which was essentially our old stack, to a non-cloud solution. And we're having very promising discussions with these partners, but it just takes time for the larger lift to occur. So, again, positive discussions. We will hopefully update the market as soon as we can with regards to the timing for those banks to move.

Okay. And then just one last one from me, please, on discovery. I think we've talked in the past about how some FIs have moved offers around in different areas of their applications. And it seems like there, at least historically, hasn't been as much volatility in consumer uptake or consumer activation. So, I'm just curious if you can maybe talk about what things you can influence in terms of discovery or accessibility inside of an application that you think can change consumer behavior and increase those activation rates.

Yes, that's a great question. I mean, what we really haven't had in the past is a proper playbook and the right discussions with our bank partners to really discuss different placements for the widgets and different types of offers and different places where we can surface the offers. Not only are we having these discussions now, we're creating those playbooks, but we also have an ability to provide some level of data on how these are working for the bank customers that are using them. And again, as I mentioned earlier in the call, we're basically seeing, for instance with regards to line item transactions in a customer bank statement, we're seeing a 5x higher activation than the normal activation that you see in the network. So, we can go back to more bank partners and tell them this is what we see and then work with them with regards to implementing it also on their platform. So, we feel much more confident that we have the right structure now, that we're really basing those discussions on data rather than on sort of our view of what banks should be doing. And that's allowing us to have much, much better discussions.

Thank you. And I'm showing no further questions in the Q&A queue at this time. I will now turn the call back over to Mr. Karim Temsamani for any closing remarks.

Thank you very much. This concludes our call. As I mentioned, we remain committed to positioning the business for future success. Thank you for your continued support and I look forward to our next discussion.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.