Good afternoon, ladies and gentlemen, and welcome to the Second Quarter 2025 Cardlytics, Inc. Earnings Conference Call. [Operator Instructions] This call is being recorded on Wednesday, August 6 of 2025. I would now like to turn the conference over to Nick Lynton. Please go ahead.

Good evening, and welcome to the Cardlytics Second Quarter 2025 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 third quarter of 2025, our capital structure, increasing our supply, the growth of new partners, advertiser churn and operational and product initiatives. For a discussion of the specific risk factors that could cause our actual results to differ materially from today's discussion, please refer to the Risk Factors section of our 10-Q for the quarter ended June 30, 2025, 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, which you can find on 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 it up for your questions. With that, I'll hand the call over to Amit.

Good evening, and thank you for joining our second quarter 2025 earnings call. Q2 marked another quarter of steady progress against our strategy. As I look back over the past year since stepping into the CEO role, we significantly improved the product and tech challenges facing us over the past several quarters, diversified our ecosystem and set a foundation for growth. With the work we've accomplished, we are now deepening our efforts in key areas that will be most critical for the next stage of our business. I'd like to share details on the progress we've made last quarter to advance our 4 business pillars. First, increasing and diversifying our supply to meet consumers where they are. Our publisher base is what makes our network unique and growing and diversifying this foundation continues to be a top priority for us. We're focused on growing our partnerships with both financial institutions and merchants from other verticals. We are pleased with the early progress with our newest bank partners, and we have a robust pipeline of prospective FI and non-FI partners in both the U.S. and U.K. We are not only focused on adding more publishers with large user bases, but also working with our bank partners to maximize user engagement with our offers. When our partners are fully committed to our shared goal of maximizing value for consumers, we see a substantial difference in results. As an example, we've been working with a top 5 bank partner who has been investing in their program and increasing their marketing and merchandising activities around cashback offers. And through these efforts, this partner is seeing a significant lift across key metrics, including a 92% increase in activations and a 48% increase in redemptions year-over-year. We plan to continue these efforts with several bank partners…

Thank you, Amit. In the second quarter, we delivered results above the midpoint of our guidance for most metrics, and we surpassed the high end of our guidance for adjusted EBITDA. My comments will be year-over-year comparisons to the second quarter of 2024, unless stated otherwise. In Q2, our total billings were $104 million, a 5.7% decrease. We achieved our billings guidance by continuing to expand billings with many of our top accounts in the grocery and gas category, which grew 41%. We also had success in the retail category, growing our largest retail advertiser by $2.8 million in billings year-over-year. We continue to see weakness in the travel category, which declined across a few key accounts. On new business, we are encouraged by the high quality of brands and momentum with 45 total new logos signed in Q2 and a strong potential to scale. Consumer incentives of $40.8 million were flat to prior year and revenue decreased 9.2% to $63.2 million, driven by a decrease in billings. Our revenue to billings margin was 2.3 points lower than prior year due to pressures on advertiser performance. Looking at our segment revenue results. Our U.S. revenue, excluding Bridg, decreased 13% due to lower billings and pricing pressure, as previously discussed. In the U.K., we saw 29% revenue growth, driven by higher billings and increased supply. We grew billings with all of our top 5 clients in the quarter and launched a new advertiser whose billings were in the top 5. Bridg revenue decreased 8% due to the loss of a major account in previous quarters. Adjusted contribution was $36.1 million, down 0.6% from the prior year. However, we expanded our margin as a percentage of revenue to 57.1%, an increase of 5 points due to a more favorable partner mix. This…

Thank you, Alexis. We remain confident in our ability to navigate the headwinds and focus on our strategy to grow and diversify our platform. We have made meaningful progress on our turnaround over the past year, and we are committed to delivering continued success despite the challenging near-term dynamics. Before moving on to Q&A, I want to thank our teams for their effort and commitment, our partners and advertisers for the opportunity to serve them and our investors for their patience. I'll now turn it over to the operator to begin Q&A.

[Operator Instructions] Your first question comes from Jacob Stephan of Lake Street.

Maybe just first, starting on the kind of Q3 outlook, the billings decrease. Help me understand a little bit better on the content restrictions. Is this mostly brands that the -- your FI partner is already doing business with and Cardlytics platform may be competing with them? Or maybe just kind of help us think through this and their decision.

Yes. Thank you, Jacob. Thank you for the question. So, this is -- goes broader than -- the restriction is broader than the brands that the FI partner is currently engaged with or the content you see. We were obviously not expecting this level of content restriction. It's gotten -- it is beyond that what our expectation was, and that's why it's reflected in the guide. But we are actively working with our bank partners and advertisers to make sure we minimize the impact of this.

Okay. And maybe you could just kind of talk a little bit more on the credit line. It sounds like you guys are -- drew $50 million of that in Q3 here. Has the debt paydown already occurred? Or is that going to be prior to Q3 end? Or will that be in Q4?

No. So, we drew the line of credit yesterday for $50 million. The intent is to pay that at maturity for the notes that are due in September, so certainly not waiting until Q4. That's consistent with what we said in the past, right? We've always intended to draw the line to repay our notes and also have maintained an operating cash balance between $40 million and $50 million. So, all of this is consistent with what I said in terms of using it to pay the debt and maintaining a comfortable cash balance, and then, giving us sufficient flexibility to navigate the near-term headwinds that we're experiencing.

Got it. And sorry, just maybe back to the outlook, if I could ask in a different way. The concern from advertisers versus what your kind of FI partner is restricting content. How much of the billings decrease sequentially is kind of from each bucket there? I think in the past, you had said billings should grow sequentially throughout the remainder of the year, but the shortfall there, what's kind of in each bucket?

Yes. I'll take that. So, we did not anticipate this when I made the comment about sequential billings growth. I would say, a large portion of this decrease is due to the supply change that we're seeing. This partner represents a large portion of our network in terms of billings, that's actually disproportionate to the number of MQUs that it has. So, we do believe we can shift some of this volume to other partners. We're only a few weeks into the change, and so still learning how much we actually can shift. So, I do think there is room to do better than what I guided, but being conservative and still learning on how we expect this volume to shift. So, I would say majority is related to this partner. We're still learning this over the next couple of weeks. Amit, do you want to add anything?

Yes. No, I think that's exactly right. This is an unexpected change. But at the same time, I think what Alexis said, I'll underscore, our bank partners' initial response and our advertising partners' initial response has been very much a lean-in response. And so that's what we're engaging with them on.

Your next question comes from Luke Horton of Northland Capital Markets.

This is Ben on for Luke. Last quarter, you announced for Cardlytics Rewards platform to diversify with nonbank partners. Just wondering how that initial digital sports partnership has been going and how the build-out of the platform is going or if there's any other updates on new partners?

Thank you, Luke. So, we completed the pilot that we mentioned in the previous quarter and are now collecting data and the initial market feedback so we can optimize customer experience. Even though it was a pilot, but we saw a very positive and promising rates of customers linking their cards and redeeming offers. So, based on the initial results, we believe that there is a large potential for us to grow this part of the platform. And obviously, now we're focused on iterating and scaling this area. We're also very encouraged by the interest we're seeing with a long pipeline of prospective partners, both across U.S. and U.K. that we're engaged with. So active conversations with the pipelines of several leading brands across verticals, including telecom, rideshare and fintech. And as soon as we have updates that we can share, we'll bring it back to you. But we're pretty positively -- it's very promising that the initial pilot has gone well.

That's great color. And then also, how is Cardlytics leveraging AI throughout the platform? And what areas of the business do you think can benefit the most from that adoption, either internally or externally with partners and customers?

Yes, it's a great question. I mean, it's something that we've been thinking and starting to bring on board recently. So, the 3 areas that we've been debating and starting down this path, first of all, is within our dev team, our engineering team to use the typical tools which can help in code dev, code generation snippets and so on and QA. So those are -- those elements are in progress already. The other area which, obviously, as you can imagine, is a big area of opportunity is in our analytics space. We have a treasure trove of data with close to $6 trillion of spend that we have insight into. We absolutely expect to think about models that can actually connect the dots, identify patterns that can bring new capabilities to our advertisers. But given this changes from this bank partner, we are now thinking about how to prioritize these initiatives. But these are things that we've been talking about, but they might slow down, given our reprioritizations that we might need to undertake.

Your next question comes from Jason Kreyer of Craig-Hallum Capital Group.

This is Cal on for Jason. So maybe first, we've been noticing an increase of local offers on some of your partner platforms. So, just wondering if you can speak to any added traction that you've seen with scaling local offers.

Yes. Thank you, Cal. I think we mentioned this in our last earnings call as we have continued to invest in creating a high-performance network, one of the areas that we've invested and honed our capability is very much focused on geo-targeted offers so we can now differentiate where an individual lives and where do they shop. So, this has allowed us to actually bring in more geo-targeted content, more local offers. We continue to plan to increase those. You can imagine leading across multiunit chains in QSRs, they're excited about it. Multiunit or multiline retail stores are excited about it. So, we are definitely seeing benefits in everyday spend in QSRs, in general restaurant category, and we plan to continue to bring these local offers where it makes sense across our network.

Great. And then second, good to hear all the traction that you're seeing with Rippl. Just on the Hy-Vee partnership, can you just speak to the drivers for the win? And as you continue to build more referenceable wins like Hy-Vee, are you starting to see that accelerate interest and adoption of Rippl?

Yes, it's a great question. I think you heard in our prepared remarks that the traction in Rippl has definitely increased substantially, especially over the recent weeks. And the quick answer to that is yes. As we bring on high-quality partners that we had before like the Wegmans and the Giant Eagle and the new ones that we add like Hy-Vee and others, advertisers are getting more excited about the kind of scale that they see and also the quality of data that they see. So, we're seeing at the typical DSPs like Trade Desk, there's a large volume increase. A lot of advertisers are actually coming and approaching us for custom work as well. So, we're excited about the prospect that Rippl has and the continued progress as more and more retailers are choosing to come and join the Rippl network.

[Operator Instructions] Your next question comes from Robert Coolbrith of Evercore.

Anything you can tell us about the MQU impact? I know you said that it sounds like the billings impact is bigger than the MQU impact, but just anything more you can tell on that? And any way of sort of more precisely characterizing the extent of the restriction that's in place and whether that could ramp up? Sort of further related to that, what is the nature of the basis of the restriction? Are there opportunities to substitute in something else that may not violate the restriction of whatever type? And then the comment about the concern -- the global concern from brands, I just wanted to clarify that. I mean, so is the concern about running on that FI partner without the benefit of the Cardlytics platform and technology. It's not about a broader concern about the Cardlytics platform. I just wanted to make sure that I understood that correctly.

Thank you for the multi-set question, Robert. I want to make sure we address all the parts of it. The first one was around MQUs. So, just to give you a sense, our broader set of bank partners represent more than 50% of our MQUs, right? So -- and they represent a lower percentage in billings, but the broader set of the -- our bank partners in the U.S. represent more than 50% of our MQUs. So, hopefully, this gives you a sense of -- it is a large scale, but the network -- overall network continues to be scaled and resilient. And I think as we mentioned, I think your second question was around ability to replace and the concern about the brands. Frankly, the concern that brands has, it's mostly driven by the frustration that, now that because of these restrictions, it limits their ability to come to one platform for all their CLO needs. And -- so, some of them have actually expressed their dissatisfaction to us and the bank partner. But that said, our view is that our value proposition continues to resonate. We continue to make sure that brands have access to the largest financial media network, regardless of this bank's decision. And the areas that are resonating a lot with the brands as we've interacted with them and engage with them, first of all, they appreciate our progress on all the measurement efforts, our blending in TVC reporting, incrementality results and MMM readings so they can really get a clear view of ROAS. So, even from Q1 till now, advertisers have seen more than 25% growth in ROAS on the Cardlytics platform. So, their trust and belief in Cardlytics platform remain consistent and increases from what we see. The move to engagement-based pricing has been welcomed by our advertisers. They are now able to look at TLO spend on Cardlytics as a true performance media buy. And we recently also reorganized our sales team under our new Chief Business Officer. So vertical focused efforts increased the velocity. We brought U.S. and U.K. under this leader so that we can actually have marketing strategies across the 2 geographies run contiguously. And lastly, just to state the obvious, we very much plan to compete aggressively in the market and make sure we bring the best of our capabilities to our advertisers and to the network.

As there are no further questions at this time, this concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.