Ladies and gentlemen, thank you for standing by, and welcome to the Cardlytics Inc. Q1 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Wednesday, May 7, 2025. Now, I would like to turn the call over to Nick Lynton, Chief Legal and Privacy Officer. Please go ahead.

Good evening, and welcome to the Cardlytics' first 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 second quarter of 2025, our capital structure, the rollout of new partners and operational and product initiatives. For a discussion on 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 ending March 31, 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 first quarter 2025 earnings call. I want to start our call with a few comments on the macro environment. As you are all acutely aware, we've seen a lot of headlines about volatility and declining consumer sentiment in the first quarter. Based on our purchase data, which represents approximately $5.8 trillion in spend annually, consumer spending is still strong. While there was some softness in February, we saw spending rebound in March and grow steadily in April. Our data showed strong growth across categories like auto, home improvement, e-commerce and apparel, suggesting that consumers are front-running their purchases before tariffs take effect. We are keeping a close pulse on these fluctuations and how consumers are responding to market changes. Leading brands continue to spend with us, but overall, advertisers have been more cautious with their budgets, given the macroeconomic uncertainty. While we expect this wait-and-see stance to continue, we are focused on leveraging the breadth and depth of our purchase intelligence to help our advertisers navigate this uncertainty. For example, we know that the airline industry has been facing headwinds. And we've helped a large U.S. carrier bridge this gap. Seeing strong performance and incremental return, this advertiser scaled up to annualize budgets to reengage their customers and deliver outsized value. Now, turning to our key business pillars. As I shared on our last call, we entered 2025 with continued focus on building momentum across our key pillars, to maximize consumer engagement, which remains our North Star. Our four pillars: increasing supply, strengthening demand, optimizing our network and growing Bridg continue to underpin our journey ahead to platformize Cardlytics. Let me explain what I mean by platformize. Building on our long-standing leadership in the financial media space, we continue to evolve our…

Thank you, Amit. For the first quarter, we performed above or at the top end of our guidance across all metrics. As a reminder, Q1 is a seasonally weak quarter for Cardlytics in terms of billings and free cash flow. And we also decommissioned the Dosh consumer app in late February. Turning to our specific first quarter results. My comments will be year-over-year comparisons to the first quarter of 2024, unless stated otherwise. In Q1, our total billings were $97.6 million, a 7.3% decrease. We beat our billings guidance, driven primarily by pipeline wins in the U.S. and incremental improvement on delivery. On a category basis, we saw strength in our core vertical, everyday spend and in specialty retail, which grew 52%. The travel category declined as we saw budget shrink from a few key accounts. We also continue to see high amounts of new business with 96% of new brands on engagement-based pricing. Consumer incentives decreased by 5.1% to $35.7 million and revenue decreased 8.4% to $61.9 million, driven by lower top line billings in a category mix of advertisers. Our revenue to billings margin remained flat to prior quarter, but down 0.8% versus prior year due to pressures on advertiser performance. Looking at our segment revenue results. Our U.S. revenue, excluding Bridg, decreased 10.9% due to lower billings as previously discussed. In the U.K., we saw 8.6% revenue growth, driven by higher billings and increased supply. We signed 15 new brands in the U.K. this quarter, primarily in direct-to-consumer and retail categories. Bridg revenue increased 1.6%, due to new client wins with two major retailers. Adjusted contribution was $32.4 million, down 12.5%. As a percentage of revenue, our adjusted contribution margin was 52.4%, down 2.4 points due to a less favorable partner mix. Adjusted EBITDA was negative $4.4…

Thank you, Alexis. Before we move to Q&A, I want to underscore the journey we're on to platformize our company. Our expanding ecosystem, depth and breadth of our data and ongoing tech investments put us in a unique position to become the preeminent Commerce Media platform.

[Operator Instructions] We now have our first question. And this comes from the line of Jacob Stephan from Lake Street. Your line is now open. Please go ahead.

I appreciate you taking the questions. Congrats on the quarter. I was hoping that maybe we could touch on ERP a bit more. Can you kind of help us think about what kind of opportunity does this represent on the non-FI side, maybe comparing it to the FI side of the business? Is this market larger? Or is it kind of a nice complementary market to the current business?

Jacob, thank you for the question. I think, it's a very good question to start the strong quarter we've had. Cardlytics Reward Platform or CRP, as we've mentioned is -- it's a major step forward. It really allows us to frankly, change the definition of a partner. And in this case, it will be a digital sports platform. That will be our first CRP partner. And it's congratulations to them that they are actually forward thinking and leaning with us in driving more value to their consumers. In terms of the magnitude, we definitely see this as a strong path forward. But we don't want to kind of get ahead of ourselves. We want to make sure that, we continue to partner with some leading merchants and take the wrinkles out of the tech stack, so to speak, and the platform and then scale. And as soon as we have a better sense of once the -- some of these wrinkles are taken out, we'll come back to you with the magnitude. But we're really excited about the potential, especially now our advertising partners can become a publisher partners. And we also get to attract new partners where consumers frequent.

Got it. Helpful. And just to clarify, maybe, is this like a sports betting platform where maybe you're incentivizing consumers to make a bet at a certain point during the game? Or am I off on that?

Yes. I think, we can't say the partner, but it's not a sports betting platform. And it is one of the larger or largest digital sports platforms. But as I mentioned in my remarks, at times, we're not able to -- we want to share the names, but at times, we're not able to share. But as soon as we can, contractually, we'll come back and share that with you.

Let me chime in for a minute. I'm going to chime in for a minute, its Alexis. Just two things, I think to hit on. This really opens up anywhere you're using your app or website and log in with a partner. It really unlocks any of that property. So it's not just necessarily this one example that we're talking about. But you can think about anything that, you're frequenting a lot in terms of an app or website. That's an opportunity to serve you and offer one of our cash-back offers. So it really does open up the opportunities in terms of outside of the bank channels. And then it also does open up opportunities for advertisers that we can't currently work with. For example, financial services would not be something that we're putting on to our FI partners, but we could be advertising that category on these nonbank partners.

Could you repeat that?

Sorry, if my audio is not good. It just offers additional diversification benefits on both the advertising side.

Okay. Got it. Just last one for me. You guys noted some positive consumer spending. I'm just kind of curious, is that up significantly from maybe last year this time, where it truly is consumers kind of front-running those tariffs? Or is it relatively stable with kind of last year's trends, just curious.

Yes. I think generally, we think about it on a sequential quarter-on-quarter basis. So we've seen the spending growth continue to hold strong, Jacob. As you know, we see about $5.8 trillion of spend. So it's a large swath of consumer spend in the country. And mostly in the everyday spend categories, the spend has held strong. I think, as I mentioned in my prepared remarks, in areas of travel, we've seen some softness creep in. But right now, some of the signs point to some of this might be front running. But we'll keep a close eye on this and on these fluctuations. And when the trends change, this is an area where we continue to partner with our advertising partners and other publisher partners to get them, to advise them, so that they can stay ahead of these potential changing consumer patterns.

Okay, thank you. Appreciate all the color.

Thank you. And the next question comes from Luke Horton from Northland Capital Markets. Your line is now open. Please go ahead.

Hi, guys. Congrats on the quarter. Just wanted to touch back again on the CRP, the Consumer Rewards Platform. Just kind of the economics for Cardlytics with these new partners, would this be comparable to what you're seeing on the other side of the business? Or is it early to tell? Or is it engagement-based pricing? Just any sort of details there?

Yes. I think most likely -- again, thank you for the question. Most likely, it will be -- we are moving the platform towards an engagement-based pricing model. So we'll see more and more engagement-based pricing offers and ads on these platforms on CRP as well. Generally, in terms of economics, I think, the great thing in this case is the nature of interaction is different. The consumer frequency and the consumer engagement, is different. So we see the economics being pretty positive both for us and our publisher partners. But in terms of nuances, I think we want to get a few rinse and repeats and a few data points in multiple partners. And then we'll have a better sense of economics. But so far, we see positive economics both for us and our publisher partners.

Got it. Make sense. And then just touching on the macro environment kind of between the U.S. and Europe. Just any puts or takes there that you're seeing between geographies? I don't know, if I had missed it on the call, but I don't think I heard about the U.K. during the quarter.

Yes. I think that's a fair question. I think in the U.S., as we said, the spend is largely holding strong. And in the U.K. as well, we don't see any major changes in the spend patterns enough to kind of cause us to advise our advertisers differently. So, so far, I think we're seeing the spend patterns being the same. As I mentioned in my prepared remarks, some advertisers are in the wait-and-see environment. But they're actually continue to spend with us and specifically hitting the areas where softness in their areas which are softer in their business patterns.

Okay, got it. Well, thank you guys for taking the questions and congrats again on the quarter.

Thank you. [Operator Instructions] And the next question comes from Robert Coolbrith from Evercore. Your line is now open. Please go ahead.

Hi, thanks for taking our questions. A few, please. Just given the macro uncertainty at the moment, just wondering how you're sort of internally assessing your billings base, your customer base at the moment, whether you're looking by vertical exposure, customer tenure and so forth? And anything you can maybe tell us about the level of visibility that you have right now into Q2 and the rest of the year? And then, secondly, on the Cardlytics Rewards Platform and the opportunity with the non-FI partners. Sorry, I'm not up to speed. But can you just maybe -- it might be helpful to give a recap or an overview on the mechanics of things like redemption, how the spending is tracked, how the reward is delivered and so forth in the non-FI channel? And then I have one quick follow-up.

Sure. Robert, let's -- I think let's get to both of your questions. On the advertiser side, I think as we briefly alluded, advertisers have been cautious in some cases, with their wait-and-see approach. But the good thing in this area, we can say, even in the case of downturn or a slower economic environment, there are certain categories that are countercyclical. So restaurant and retail advertisers typically tend to perform better because consumers are more prone to looking for deals and offers in their everyday spend more frequently. So typically, we've seen those advertisers not only perform better, but the consumer engagement and redemptions start to correspondingly increase. Generally, I think as I mentioned before, in some cases where advertisers are seeing potential macro uncertainty. They are leaning in. And they're actually working with us. So we gave example of one of our large U.S. carrier, airline carrier where they wanted to make sure that they secure like an annual level of capacity from our Cardlytics platform to make sure that they can continue to reach their customers and drive value to them. So there is some wait and see. But generally, we are working with advertisers closely and taking more creative opportunities to them to make sure that they can continue to spend with us. So that's more on the advertiser and the macro impact side. On the CRP, I think I'll probably do the summary version and happy to discuss specific details as a follow-up. It really allows us to redefine our partner ecosystem. So it allows us to expand our publishing supply from banks to nonbank merchants where consumers frequent on their digital properties. So as an example, we shared, we're launching our CRP with a large digital sports marketing platform. And that's an example where their consumers will get the benefit of our offers. And it gets them to drive deeper relationships and more value to their consumers. And for us, this is a credit to their engineering team and our team. We were able to onboard them within four weeks. And we built the platform very quickly. And we talked about it over the last earnings call. And we're happy that we were launching. We're launching this platform with them this quarter.

And the quick follow-up is just on the partner mix and the impact on adjusted contribution in the quarter. Just wanted to ask for a little more detail. And it looks like that's going to reverse in Q2, but just wanted to check on that.

Yes. Thank you for the question. You're right. So yes, Q2 returning to 54% at the midpoint of our guide for adjusted contribution to revenue margin and expecting this for kind of the rest of the year. I think in Q1, this is really a matter of legacy bank mix and engagement shifts that happened for a variety of reasons, including content and engagement. And so we just had a little bit of a headwind there in terms of the content in Q1, but returning back to kind of the mid-50s for the rest of the year and especially sequentially improving as we continue to ramp our newest supply partners, both the FI and non-FI ones.

Great. Thank you

Thank you. And the next question comes from Jason Kreyer from Craig-Hallum. Your line is now open. Please go ahead.

Great. Thank you. This is Cal on for Jason. And apologies, if you guys have touched on any of this already. But just kind of given you guys are a little unique in over-indexing towards daily spend advertisers. Just kind of curious how having those daily spend offers can play into both from an advertiser perspective as far as kind of what you guys are hearing from those advertisers? And how you would expect that to kind of play into a consumer -- the current consumer environment?

Yes. I think this is -- thank you for the question, Cal. I think this is our strong suit, right? Everyday spend and the everyday spend advertisers are -- definitely trust our platform a lot. And I think given the macro environment, there are some of these leading retailers are frankly leaning in. And they are leveraging our platform and the superior capabilities to drive very, targeted benefits and targeted behavior. So in some cases, we see some of these advertisers actually drive -- leverage our platform to drive more omnichannel behaviors to specifically get deeper relationship with their customers. I'll also mention one of the CEOs of major retailers actually said, not only are we looking to Cardlytics to actually weather through this uncertainty. But the real estate acquisition is a big part of their growth journey. And they actually rely on our insights to help them understand what the right real estate decisions might be even in these -- the potential macro uncertain environment that they have in front of us. So every day spend is something that we feel very good about. And that's something that several of our bank partners and now some of the nonbank partners really benefit from.

Great. And then maybe just kind of building off of that answer there. You guys have kind of done a lot of work around the data and providing a more holistic offering for some of your advertisers like you kind of alluded to there with the real estate. So in the event that we see some more macro pressure, I mean, do you think that that could lead to maybe some more, discovery of these different offerings that you have and kind of leaning in on these products that you've been bringing to market?

Actually, that's a great question. And when I mentioned about the strength of the quarter, this is an area that we're investing. We're actually investing a lot in our models to make sure that our redemptions are stronger. Our targeting is better. We're making sure that as we're presenting, our presentment has a significantly higher degree of relevancy. I think we shared an example where we're now able to do a specifically higher level of geo targeting where typically, a typical notional spend pattern would be we're targeting where consumers live. But in large parts of the country, we find consumer spend patterns almost mirror, if not, are greater in geos where they actually work and recreate and spend. And so we now can actually geo-target consumers, not only where they live, but also where they work and where they actually travel. So that's a great example in helping our advertisers to expand their reach. There are other areas where our models are also helping specific advertiser issues. So I think you're exactly right, we expect to continue to bring these new capabilities to the market. So advertisers can reach their customers more actively and in a stronger format.

Great. Thank you very much.

Thank you. And we don't have any further questions at this time. This concludes our conference call for today. Thank you all for participating. You may now disconnect your lines.