Good day and thank you for standing by. Welcome to the Q1 2023 Cardlytics, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chief Legal and Privacy Officer, Nick Lynton. Please, go ahead.

Good evening, and welcome to the Cardlytics first quarter 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 about our future financial performance and results, including for the second quarter of 2023, the bridge earn-out payments, including the second anniversary earn-out payment, the financial impacts of our various cost savings initiatives, our plans for adding new partners to the network and expanding our monthly active user base in the U.S. and the UK, the time line for our existing partners to transition to our new ad server, user experience and ad decisioning engine and the financial impact of these initiatives. The rollout of our new offer constructs, the growth of the Bridge Retail Media Network, our plans and time line for achieving positive free cash flow, our liquidity and cash position and the growth and expansion of our advertiser base. 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 March 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 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 the information I have just described in the Investor Relations section of the Cardlytics website. Please note that a supplemental presentation to our first quarter results has also been posted on our Investor Relations website. Joining us on the call today is Cardlytics CEO, Karim Temsamani; and CFO, Andy Christiansen. Following their prepared remarks, we'll open the call to your questions. With that said, let me turn the call over to Karim. Karim?

Good evening and thank you for joining our Q1 2023 earnings call. Today, I will share highlights of our product journey and explain how these foundational changes set a stronger road map and direction for the company. But first, given its importance to our business, I'd like to discuss the determination of the bridge first anniversary payout, the important changes to the second anniversary earn-out and our Q1 results. As you read in the 8-K earlier this week, an independent accountant made a determination on the first anniversary payout, finding the payout to be $208.1 million, inclusive of fees. Importantly, based on this determination, we anticipate that the second anniversary payment will be $0 given it is based on the growth of its first anniversary clients. The outcome for the total earn-out and the total cash portion of the earn-out is in line with our expectations, and we believe the monetary shift to the first anniversary is highly beneficial to our stockholders. Here are the key considerations. The total cash for both earn-outs, inclusive of fees, is expected to be $72.6 million. 3.4 million shares are expected to be delivered for the equity portion of the earn-out. Notably, we expect to be able to rely on the favorable $40.15 VWAP to deliver the full equity portion for the earn-outs regardless of the current trading price of the stock. Under this determination, we now expect shareholder dilution to be reduced by nearly half of our original expectation based on our current shares outstanding, and we expect the risk of any additional cash outflow due to the ownership cap provision in the merger agreement to be eliminated. We are thrilled to move past this road block, which will allow us to continue to focus our energy and attention on becoming a product-led…

Thank you, Karim. Our results this quarter exceeded expectations. We are still in a very uncertain economy. As Karim said, there are positive signs within our business, but elevated inflation and high interest rates are still pressuring the consumer. There's still an elevated chance of a recession in the near term, so advertisers are being cautious with their budgets, especially with smaller advertising platforms. Here are the numbers for Q1. Billings decreased 2.6% year-over-year to $95.6 million. Revenue decreased 5.3% year-over-year to $64.3 million. Adjusted contribution decreased 5.6% year-over-year to $30.9 million. Bridge revenue grew 34% year-over-year, while strong growth rates quarter-over-quarter decreased due to longer conversion cycles for proof of concepts. Our opportunities within the CDP and stand-alone RMN markets are substantial. But as we continue to grow our RMM business, we expect some fluctuation in our growth rates quarter-to-quarter. Geographically, U.S. revenue decreased 0.9% year-over-year. UK revenue, which comprises approximately 5% of total revenue, decreased 48.2% in U.S. dollars. The decrease in UK revenue is primarily due to the loss of a bank partner in the channel. We've continued to make progress reducing our customer concentration. Our top five customers accounted for 15.1% of revenue this quarter compared to 25% in Q1 of 2022. This will remain a key focus as we continue to grow and expand our advertiser base. Adjusted EBITDA was a loss of $6.1 million this quarter compared to a loss of $10.5 million in Q1 of 2022. Despite the seasonal decline in adjusted contribution from Q4 of 2022 to Q1 of 2023, our adjusted EBITDA loss was $6.1 million in both quarters, which highlights our cost discipline and the actions we've taken to right size our cost base. As Karim mentioned, while we may not reach our goal of being free cash flow positive…

Thank you to everyone listening. First, I want to thank Andy for his service to Cardlytics. We all sincerely appreciate his contributions to the company and wish him the best moving forward. We are excited to move past one of our largest short-term issues and to continue focusing on product as the central driver of our strategy. While the economy is still uncertain, we are confident that our unique scale platform drives values for our partners and deliver high ROI for marketers. We're excited about the tremendous opportunity that lies ahead of us. By prioritizing our goals and positioning the company for long-term success, we are setting ourselves up for a bright future. Now I will open the call to questions.

Thank you. At this time, we will conduct the question-and-answer session. [Operator Instructions] Our first question comes from the line of Kyle Peterson of Needham. Your line is now open.

Great, thanks. Good afternoon, guys. Appreciate taking the question. Just wanted to see if you guys could give a little more color on some of the spending with some of our clients on a same-store sales basis, I know there's a lot of moving pieces between some of the migration of the large restaurant client and then you're also onboarding some new logos. But maybe if you could just dive into a little bit in terms of whether it's an average or kind of a cross-sectional view of kind of on a same-store sales basis, how is spending with some of your key clients right now on the platform?

Hi. This is Andy. Yes, great question. We really felt in Q1, a lot of the headwind there from the loss of the large restaurant client, that was quite a drag. I mean, certainly, when you remove the impact of that, we actually had a pretty nice quarter there. I mean the U.S. business grew over 20%. So we're seeing some really nice results in Q1. It's just still a very choppy market. And the longer that we see some of the headwinds for the consumer around interest rates persist and inflation persists. And we just see an environment where it's going to get increasingly difficult. And I think marketers are generally feeling that as well. And so we're certainly guiding towards a bit of a choppy market here. But certainly, in Q1, we're moving outside the impacts of the large restaurant customer, we do a nice quarter across the board.

Got it. That’s really helpful. And then just kind of a follow-up as a housekeeping item here, I saw you guys drew down, it looks like about $30 million on the line of credit this quarter. Could you just confirm where that's being held? I know there's not a lot of concern given some of the headlines about PacWest, but I just want to see like where you guys are kind of holding that cash and how you feel about the security of that draw down at this time?

That’s a good question. So I think we mentioned this here recently in a press release in March. We keep the vast majority of our cash at PacWest, but we use a product that they have where we're utilizing kind of a multi-bank deposit program. And so that really applies to all of our accounts. The $30 million that we drew is actually part of that program as well. And so we think that we've really taken a conservative, appropriate view as to how we're kind of managing that risk. And so all that cash is really sitting in that program.

All right, that’s helpful. Thanks guys.

Thank you. [Operator Instructions] This now concludes our question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.