Cardlytics, Inc. — FY2022 Form 10-K Summary
Business context and reporting period
Annual report for the fiscal year ended December 31, 2022, filed March 1, 2023. This is a full-year filing; it does not provide a clear standalone Q4 financial summary. Cardlytics operates a financial-institution advertising platform and the Bridg customer-data platform, using purchase and point-of-sale data for targeted marketing and campaign measurement.
Key financial metrics
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Revenue | $298.5 million | $267.1 million | +12% |
| Billings (non-GAAP) | $442.5 million | $394.1 million | +12% |
| Gross profit | $112.6 million | $103.3 million | +9% |
| Gross margin | 37.7% | 38.7% | Down 1.0 percentage point |
| Net loss | $465.3 million | $128.6 million | Loss increased $336.7 million |
| Adjusted EBITDA (non-GAAP) | $(45.2) million | $(12.2) million | Loss increased $32.9 million |
| Operating cash flow | $(53.9) million | $(38.5) million | Cash use increased $15.4 million |
Revenue is reported net of consumer incentives and gross of partner share. Consumer incentives were $143.9 million, up 13%. Adjusted contribution, a non-GAAP measure, rose 10% to $143.0 million. Cardlytics platform revenue increased 7% to $277.2 million; Bridg revenue rose to $21.4 million from $8.4 million. Bridg ARR was $23.1 million at year-end, versus $15.3 million in 2021.
Cash and cash equivalents were $121.9 million at December 31, 2022, down from $233.5 million. Working capital was $1.1 million. The company reported $60.0 million of unused revolving borrowing capacity. Convertible notes had $230.0 million principal, a 1.00% coupon and a September 2025 maturity; their net carrying value was approximately $226.0 million. Total assets were $691.2 million and total liabilities $479.6 million.
Material changes versus FY2021
- Revenue growth was 12%, versus 43% in 2021; management attributed billings growth mainly to $41.5 million of additional sales to new marketers, partly offset by higher consumer incentives.
- Operating expenses rose, including research and development (up 43%) and general and administrative costs (up 23%). Delivery costs increased 35%.
- The company recorded $453.3 million of goodwill and intangible-asset impairment charges, following weaker economic conditions, lower consumer spending and a sustained decline in its share price. The charge included $396.2 million of goodwill impairment and $56.4 million of acquired intangible impairment.
- A $128.2 million non-cash gain from remeasurement of Bridg contingent consideration partly offset the impairment in reported results. Net loss also included $44.7 million of stock-based compensation.
- Cash used in investing activities fell to $15.8 million from $506.7 million, principally because FY2021 included the Dosh and Bridg acquisitions. FY2022 financing used $40.0 million for share repurchases.
Outlook, risks and unusual items
Management expects operating losses to continue but stated that available cash and cash equivalents were expected to fund operations and capital requirements for at least 12 months and in the long term following issuance of the financial statements. No specific revenue, profit or cash-flow guidance is provided in the supplied filing text. The company plans continued investment in its platforms, cloud migration and growth; it also reduced headcount in the U.S., U.K. and India and closed its Indian office.
A key contingency is the disputed Bridg First Anniversary Payment. Cardlytics estimated the payment at $126.4 million and the Second Anniversary Payment at $67.8 million, inclusive of certain fees and bonuses; the seller representative objected to the First Payment calculation, and the dispute process was ongoing. The company estimated minimum cash requirements of $43.3 million and $24.0 million for the two payments, respectively. Its disclosed future cash requirements also included $25.7 million of purchase obligations and $230.0 million of note principal due in 2025.
Principal risks include dependence on a small group of financial-institution partners, notably Bank of America, Chase and Wells Fargo; partner agreements are generally terminable on 90 days’ notice or less. Other risks include marketer spending volatility, inflation and weaker consumer demand, privacy and data-security regulation, cyber incidents, acquisition integration and the Bridg earnout dispute. The company accrued $3.2 million for an expected shortfall under a $10.0 million minimum partner-share commitment. The 10-K reports effective disclosure controls and internal control over financial reporting; the auditor gave unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Progress and final cash/stock settlement of the Bridg anniversary payments, including the seller dispute and any change in estimated amounts.
- Cash use, working-capital needs and borrowing availability after the year-end balance date, particularly around earnout payments and seasonal first-quarter cash flows.
- Whether Cardlytics can improve profitability and margins as revenue grows, given higher operating costs and negative adjusted EBITDA.
- Retention and economics of major FI partners, marketer demand, and growth and contribution from Bridg.
- Whether further goodwill or intangible impairments, privacy/compliance costs, or refinancing and conversion obligations on the 2025 notes could materially affect results or liquidity.