Cardlytics, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021. Amounts below are in millions of dollars unless stated otherwise. Cardlytics operates a bank-channel advertising platform and the Bridg customer-data platform. Acquisitions affect comparability: Bridg was acquired in May 2021, and Entertainment in January 2022.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2022 | Change / comment |
|---|---|---|---|
| Revenue | $53.2 | $67.9 | +28% |
| Billings (non-GAAP) | $76.3 | $98.2 | +29% |
| Gross profit | $19.5 | $26.2 | +34%; gross margin about 36.7% vs. 38.6% |
| Net income (loss) | $(24.9) | $33.0 | Improved by $57.9 |
| Adjusted EBITDA (non-GAAP) | $(3.9) | $(10.5) | Loss widened by $6.6 |
| Cash used in operating activities | $(12.5) | $(19.7) | Higher use of cash |
- Cardlytics platform revenue was $64.0 million; Bridg contributed $3.9 million. Cardlytics billings grew primarily from higher spending by existing marketers, with a smaller contribution from new marketers.
- Average monthly active users rose to 178.5 million from 168.6 million; Cardlytics ARPU increased to $0.36 from $0.32. Bridg ARR was $14.0 million.
- Cash and cash equivalents were $208.3 million at quarter-end, down from $233.5 million at year-end. Working capital was $72.7 million. The company reported $50.0 million of unused revolver availability and no revolver borrowings.
- Convertible notes had $230.0 million principal and a $224.9 million net carrying amount after adoption of new accounting rules; they bear 1% interest and mature in 2025. The company said holders could not elect to convert in Q2 2022 based on the applicable stock-price test.
Material changes and unusual items
- The $33.0 million GAAP net income included a $65.1 million noncash gain from remeasuring Bridg acquisition contingent consideration, plus a $4.6 million acquisition-and-integration benefit, primarily from a reduced estimated brokerage fee. These items materially elevated reported operating income of $35.7 million; adjusted EBITDA remained negative at $10.5 million.
- Operating expenses increased, including R&D to $12.3 million, G&A to $20.4 million, and stock-based compensation to $13.6 million from $7.2 million. Depreciation and amortization rose to $9.9 million, largely reflecting acquired intangible assets.
- Cash used in operations was $19.7 million despite reported net income. The filing attributes this principally to working-capital movements and notes that net income included the noncash contingent-consideration gain.
- On January 1, 2022, Cardlytics adopted ASU 2020-06 for convertible notes. The adoption increased the notes’ net carrying amount by $40.2 million and reduced additional paid-in capital by $51.5 million, with an opening accumulated-deficit adjustment.
Outlook, risks and contingencies
- No specific quarterly or full-year financial guidance is provided in the supplied filing text. Management expects continued operating losses as it invests for growth, but believes cash and cash equivalents will fund operations and capital requirements for at least 12 months after issuance of the financial statements.
- After quarter-end, the April 29, 2022 loan amendment extended the facility maturity to April 29, 2024, increased capacity from $50 million to $60 million subject to bank audit, and provided an option to reach $75 million upon syndication. It replaced the prior cash covenant with minimum adjusted-contribution and $25 million adjusted-cash requirements.
- Cardlytics has a $10 million minimum Partner Share commitment to an FI partner over the 12 months beginning April 1, 2022, and a cloud-hosting commitment of $7.2 million over the first 12 months. Bridg anniversary payments remain contingent and may require cash; at least 30% must be paid in cash.
- Key risks include dependence on a limited number of FI partners—Bank of America and Chase together represented over 75% of Partner Share in both periods—privacy and data-security regulation, marketer spending and economic conditions, acquisition integration, foreign-exchange exposure, and the ongoing effects of COVID-19. The company also disclosed a material weakness in acquisition-related internal controls; remediation remained in progress and disclosure controls were deemed ineffective at March 31, 2022.
- The company reported no legal proceeding expected to have a material adverse effect and no off-balance-sheet arrangements.
Investor verification points
- Separate recurring operating performance from the $65.1 million contingent-consideration gain and acquisition-related benefit; review adjusted EBITDA alongside GAAP results.
- Track operating cash use, seasonal working-capital requirements, and cash needs for Partner Share and Bridg contingent payments.
- Verify progress on the material-weakness remediation and integration of Bridg and Entertainment.
- Monitor FI-partner concentration and renewals, marketer spending, and whether Cardlytics can sustain growth while expenses and stock-based compensation rise.
- Confirm the amended revolver’s final availability, covenant compliance, and any cash impact from convertible-note conversion or contingent payments.