Thank you for standing by, and welcome to the Cardlytics Q3 2021 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] As reminder, today's conference call is being recorded. I would now like to turn the conference to your host, Mr. Kirk Somers, Chief Legal and Privacy Officer. Sir, you may begin.

Good evening, and welcome to Cardlytics third 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 fourth quarter of 2021, our ability to achieve key initiatives to drive long-term growth, growth in MAUs or Monthly Active Users, the migration of clients to our ads manager, launches of our new ad server by bank partners and the capabilities and timing thereof; the renewal of the Bank of America contract and contracts with other financial institutions and the timing thereof, 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, the impact of iOS privacy changes, the growth in agency sales, the impact of product level offers and the anticipated benefits, expectations and goals related to the integration of our acquisitions of Dosh and Bridg. 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-Q for the quarter ended September 30, 2021, and in subsequent periodic reports that we file with the Securities and Exchange Commission. Also during the 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 third 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 Q3 2021 earnings call. We had a solid quarter and delivered results above our guidance. During Q3, we saw increasing momentum from our investments in sales, and marketers are better managing the ongoing labor and supply disruptions that impacted our results in Q2. Here are the numbers; Cardlytics platform billings were $95.5 million, up 54% year-over-year. Cardlytics platform revenue, which is equal to billings net of consumer incentives, was $62.1 million, an increase of 35% from Q3 2020. And Cardlytics platform adjusted contribution was $28.9 million, up 46% year-over-year. Our Q3 results reflect sequential billing growth in all of our industry verticals. The core business continues to gain traction with our clients, and we achieved wins in all of our major verticals, including six new logos within travel and entertainment. We are encouraged for the pace of our billings growth compared to last quarter and expect the momentum in our sales organization will continue, but I want to caution that the now well-documented labor and supply chain disruptions that we noted last quarter continued to impact our clients. It's difficult to estimate the impact it may have on their appetite to drive consumer demand until these conditions improve. On a positive note, I want to remind investors that Apple's iOS privacy changes do not affect our platform, and we believe it will be an additional tailwind moving forward as advertisers look for new ways to engage their customers. Moving on from results; I want to provide an update on our key initiatives. As we've discussed over the past several quarters, we're transforming our entire platform to have features and functionality that are similar to other digital platforms, but still within the brand safe and responsive bank channels. This is a company-wide initiative…

Thank you, Lynne. We saw the core business strengthen throughout the quarter as we achieved sequential billings growth each month. And as Lynne discussed, we also made exciting progress on our strategic product and technology initiatives. So let me review our Q3 financial results. Total billings increased 59% year-over-year to $98.4 million. Cardlytics platform billings was $95.5 million, an increase of 54%. Total revenue increased 41% year-over-year to $65 million. Our risk platform revenue was $62.1 million, an increase of 35%. Adjusted contribution was $31.6 million, an increase of 60% year-over-year. Cardlytics platform adjusted contribution was $28.9 million, an increase of 46%. Adjusted contribution as a percentage of billings was 30.2% for the Cardlytics platform, which is slightly below historical levels, and is temporary as we migrate to ad manager. It is possible that we experienced similar margins in Q4, which will be our first full quarter with ads manager but that is not our expectation. Our Cardlytics U.S. revenue increased 32% year-over-year. Compared to Q3 of 2019, revenue was only up 12%; so it's clear that we've been impacted by the economic disruptions of the pandemic for well over a year. In the U.S., we saw year-over-year growth in each of our industry verticals with the exception of travel. Despite this continued improvement, I want to caution investors that advertisers are still facing macroeconomic headwinds related to labor and supply shortages. Our Cardlytics U.K. revenue increased 84% but is still down 11% compared to Q3 of 2019. Our U.K. business has been impacted by the effects of the pandemic even longer than the U.S. due to the lockdowns and restrictions that have been in place for much of 2021. We're paying close attention to the new delta-plus variant; we're hopeful that the U.K. business will continue to recover over…

Thanks, Andy. This quarter was a step in the right direction, and we believe our business will continue trending towards a position of strength despite the challenges in the global economy. I want to thank Cardlytics employees for their hard work this quarter as we continue through a series of important strategic changes. Execution remains our primary focus, and we have the team and resources to achieve our financial goals, be a strategic partner for our banks and continue our progress on product and technology initiatives. We're looking forward to executing on our plan and finishing out the year strong. With that, I'll open up the call for your questions.

Thank you. [Operator Instructions] Our first question comes from the line of Doug Anmuth with JPMorgan. Your line is open.

Hey, this is Timothy [ph] on for Doug. Thanks for taking the questions. I have two. So, I mean you guys just talked about supply chain and labor further issues affecting your marketers. You guys had mentioned this at 2Q earnings as well; so just curious, since you fast forwarded three months now, what states are your advertisers in with respect to supply and labor shortage challenges relative to what you saw in 2Q? I'm curious if there are - has outlook for holiday season has been dampened in many ways because of this? And are there any specific verticals that might affect them more by these challenges? And then, as a follow-up to your comments about contract renewals coming up with your FI partners; I'm curious to hear your latest thoughts on competition and what you have heard from your partners on this front?

Hey, this is Lynne. Thanks for the questions. On the supply chain and labor disruption issues, Q3 was certainly quite a bit better than Q2. We actually did not have - to the best of our knowledge, we had no advertisers that had impacts in those issues such that they pulled or reduce their campaign spend with us; so we did not see it in Q3 like we did in Q2. However, we know lots of other people are seeing it. We certainly know that in the holiday season coming up, I mean, just today I was reading articles about there is not going to be Turkey for Thanksgiving; so we are very cautious about it. So it certainly has dampened the Q4 guide that we gave you; it's why the range is wider and it's why it's certainly lower than we would have thought and hoped before these issues happen. So they're real, we haven't seen them in Q3 like we did in Q2; we are cautious for Q4. On the competition question, there is really no one out there still in the U.S. and in the U.K. to the best of my knowledge, that is competing with us in terms of getting access to bank's data and bank's digital channels to publish targeted advertising content and content that gives you the ability to fully close the loop. There are certainly people out there who are trying to publish other types of content to some of our bank partners; some of that content is complementary, some of it is kind of noise. But in terms of really creating true transaction-based targeted marketing and fully penetrating all of that spend and being able to use it for advertisers and for advertising purposes, there is no one out there.

Got it. Thanks for the clarity.

Thank you. Our next question comes from the line of Kyle Peterson with Needham.

Hey, good evening guys. Thanks for taking the questions. I just wanted to touch a little bit on the outlook. And specifically, if you guys have - what you guys have seen in October, whether it's qualitatively or quantitatively, if you guys mentioned that kind of the expectation is that things might get a little better or things might get a little worse before they get better. So, I just wanted to see if there was any kind of update on what you guys are seeing either in the numbers or in just conversations with advertisers kind of quarter-to-date so far?

Hey Kyle, this is Andy. So look, we tried to be fairly clear that we are being cautious about Q4. We haven't quite seen the level of disruption that we did a couple of quarters ago but I think it's really logical that as we get into kind of the peak demand season, shopping season, that some of the issues that are present are going to be stressed even further. I mean, I think while we haven't seen that yet, even October - October has been basically what we've expected but I think that risk really does remain. I think that there is going to be a pull forward of spend as I think everyone is thinking about how do I secure gifts and whatnot a little bit earlier this year. And I think we're going to be in a good position to handle some of those things but as it relates to advertisers thinking about whether they need to be driving additional demand, that's a huge uncertainty for us. So we are being cautious but I think it's a very real risk that we expect to see to some degree.

All right. That's super helpful. And then, just a quick follow-up on Bridg. Obviously, the commentary seems very positive and it's great to hear about some of these new deal wins. How should we think about kind of the ramp schedule of some of these recent deal wins and when we'll start seeing them show up in ARR and revenue?

Yes, it's a great question. So when Bridg signs a client, the first thing the client has to do, of course, is to get Bridg access to all of the data, and then Bridg has to further clean and organize that data. That can go as quickly as two weeks, but it's still on average for most clients, it's taking a couple of months, and that's just the clients sort of getting their data organized and in order. So we don't see Bridg's ability to deliver for those clients until probably two, maybe three months after the deals are signed. And then, you tend - it's a SaaS-based model; so you'll see sort of the ARR three months later. However, what most clients do is they start by giving Bridg a certain amount of data, maybe one million customers to see what Bridg can do with that data, and then they give them more and more overtime; that's pretty consistent. So it's usually somewhere in the neighborhood of some clients give all the data right away, so call it three months, but some clients really do test and learn for a couple of months before they gave all of the data. So anywhere from three months to as long as nine months, quite frankly, maybe even longer before you get to the full potential ARR SaaS-based amount that that client is going to pay. And then it continues from there, obviously. Does that help?

Yes. Yes, that's extremely helpful. I'll head back in the queue. Thanks, guys.

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

This is Bailey on for Jason. Thank you for taking my call. Just wondering what kind of traction you guys are seeing with self-serve? What kind of indications you might be getting from users that's building on your long-term confidence and solution?

Yes. Thanks for asking the question. So I want to be clear with investors that we are working with agencies basically for the first time ever; we started building an agency sales team for the most part this year. While we've had the occasional agency clients in the past, it was only when the advertiser that we went directly to referred us to that agency; so we're now directly calling on agencies for the first time ever, and I think some of those stats that I gave sort of show and prove the momentum. That being said, not all of those agencies are using self-service; many of them are still testing and learning on the platform and letting us do the work for them. And self-service, of course, is available in its B1 version, which is still strong but rudimentary in terms of what we ultimately want to have available. So for us, the way we look about this is how much spend are we getting from agencies, and then how many agencies are overtime doing more and more of the work themselves. Right now, I would say most of the agencies are letting us do the work for them. There's a few exceptions but we're closely watching how overtime as the platform is proven to them, they then start putting the hands on keyboard. And that will continue to happen over the course of the rest of this year into 2022, and probably even into 2023, quite frankly.

Great. Thanks so much for the color on that. That's all for us.

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

Hey, thank you. A couple of questions. Just you mentioned kind of the IDFA headwinds not seeing that, and maybe how are you thinking about maybe potentially gaining some budget share with marketers now maybe looking to reallocate some of the budget? Have you had any conversations with respect to that? And I did notice just the consumer incentive payments increased to, I believe, 35% in the Q3. Just any details around that and how we should thinking about that going forward? Thank you.

Hey Aaron, I couldn't hear what you said, the very first part of your question, the tailwinds that we're seeing on what?

On the first part, it was the - I think the IDFA headwinds that the industry was saying. You said that you're not seeing obviously any of that, thoughts on maybe gaining some market share from some of those marketers that need to reallocate.

No. I mean, yes, please. We're obviously out there being very, very clear with our advertisers that we are not impacted by these changes that we can still reach the consumers if they want to reach in our highly secured channel. And it is definitely a tailwind for us, it's obviously a fairly recent tailwind. I think a lot of advertisers are still trying to figure out how it has impacted their advertising strategy but we do think it will continue to work in our favor going forward, just how much is hard to say, but it is absolutely a tailwind. And then...

Got it.

Do you want to take that one, Andy?

Yes. The trend on consumer incentives [ph]?

Yes, I think that was 35% in Q3, but my calculation is a little bit higher than normal. Just thoughts on that.

Yes, that's right. That's right. So, you know, look, I think really what we saw this quarter, the actual percentage of incentives does fluctuate from period to period for a number of reasons. We did see that during the pandemic that the mix of advertisers really, really shifted. We saw a lower incentive during that time; that has kind of shifted back to be closer to where it's been historically. On top of that, we've talked a little bit about certain banks who use some of their FI share in certain periods to fund richer rewards and increases the consumer incentive, but then we're actually made whole on that. Those are dynamics certainly that we see today that does cause a little bit of noise on the billing margin. Now, when you look down at our take, it's just a contribution as a percentage of the billing, that is very, very stable. We did have a little bit lower margin there than we've had over the last couple of years, not that significant, but I will chart that up a little bit to just be the temporary shift into our ads manager. And as we work to finalize some of the optimization tools, etcetera, we'll see that rebound here in the next quarter or two but that's really the dynamics this quarter.

Got it. That's helpful. Thank you.

Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Lynne for closing remarks.

Well, thank you, everyone for joining the call. As we've said, I think we continue to see positive momentum with both, our advertising base and the progress that we're making on diversifying our advertising base, and our advertising capabilities. So despite some of the short-term tailwinds, certainly, some of the ones we saw in Q2, and some of the ones that we're cautiously watching for Q4, we feel great about this business and we're optimistic as we've ever been. So, thank you for joining. And we'll be available for questions after for those who want to schedule calls. Good night, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.