Cardlytics, Inc. — Q2 2021 Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2021. Amounts are in U.S. dollars; financial statement figures are in millions unless noted. Cardlytics operates an advertising platform using anonymized financial-institution purchase data and, following its May acquisition, Bridg’s customer data platform.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Change |
|---|---|---|---|
| Revenue | $58.9 million | $28.2 million | +109% |
| Gross profit | $23.2 million | $7.9 million | +193% |
| Gross margin | 39.3% | 28.0% | +11.3 percentage points |
| Operating loss | $42.7 million | $19.7 million | Loss increased |
| Net loss | $47.3 million | $19.8 million | Loss increased 139% |
| Adjusted EBITDA (non-GAAP) | $(5.7) million | $(7.7) million | Loss narrowed |
| Basic and diluted loss per share | $(1.43) | $(0.73) |
For the first half, revenue was $112.1 million, up 52%; net loss was $72.2 million versus $33.3 million; and adjusted EBITDA loss was $9.6 million versus $11.7 million. Q2 billings, a non-GAAP measure, rose 116% to $85.3 million. Cardlytics reported Q2 average monthly active users of 167.6 million and average revenue per user of $0.34, versus 157.2 million and $0.18, respectively.
At June 30, cash and cash equivalents were $250.6 million, down from $293.2 million at year-end 2020. Working capital was $75.5 million. The company had $230 million principal amount of 1.00% convertible notes due 2025, with a $179.1 million net carrying amount, and no borrowings outstanding on its $50 million revolving credit line. Bridg contingent consideration was recorded at $232.4 million. Total assets were $1.23 billion, including $718.5 million of goodwill.
For the six months, the cash flow statement reports $27.5 million used in operating activities, $500.4 million used in investing activities (primarily acquisitions), and $485.4 million provided by financing activities, including $484.0 million of net proceeds from a public stock offering. The filing’s MD&A cash-flow summary gives inconsistent comparative 2020 cash-flow figures and ending cash; see investor verification points below.
Material changes versus prior period
- Revenue growth reflected higher billings, chiefly from existing marketers, as well as continued recovery in consumer spending and client advertising budgets from COVID-19 disruption. Q2 billings rose $45.8 million year over year; the company attributed $42.5 million of the increase to existing marketers and $3.4 million to new marketers.
- Consumer incentives increased to $26.5 million from $11.3 million in Q2, growing faster than billings, which reduced reported revenue relative to billings. Management attributed this largely to advertiser mix and partner-funded incentives.
- Cardlytics acquired Dosh on March 5 for $277.1 million and Bridg on May 5 for $578.9 million. The acquired companies together contributed about 10% of Q2 revenue; their combined earnings were not practicable to determine during integration.
- Acquisition and integration costs were $14.2 million in Q2 and $21.2 million in the first half. Amortization and interest expense also increased materially, reflecting acquired intangible assets and the convertible notes.
- The company issued 3.85 million shares in March, generating $484.0 million in net proceeds. The acquisitions and offering materially expanded assets, liabilities, and share count.
Outlook, risks and unusual items
- No specific revenue or earnings guidance is provided in the supplied filing text. Management expects operating losses and operating cash use to continue, while stating that cash and cash equivalents are expected to fund operations and capital requirements for at least 12 months after the financial statements were issued.
- Bridg’s contingent payments depend on ARR at the first and second acquisition anniversaries. At least 30% must be paid in cash; the remainder may be paid in cash or stock at Cardlytics’ option. The fair value is based on significant unobservable assumptions.
- A $10 million minimum Partner Share commitment to an FI partner begins April 1, 2022. The company also notes seasonal advertising and cash-flow patterns, including typically higher marketer spending in Q4.
- Key risks include continued COVID-19 and macroeconomic effects, dependence on a limited number of FI partners—Chase and Bank of America accounted for over 75% of Partner Share in the first half—privacy and data regulation, acquisition integration, competition, and the company’s history of losses. The company notes that many FI agreements can be terminated on 90 days’ or less notice.
- Management reported disclosure controls were effective at the reasonable-assurance level and no material change in internal control over financial reporting during the quarter. Acquired-company controls are to be integrated into the company’s control program.
Important facts for investors to verify
- Reconcile cash-flow reporting: the primary cash flow statement reports first-half 2020 operating cash use of $7.6 million and ending cash, cash equivalents, and restricted cash of $98.5 million; an MD&A summary instead reports $3.4 million of operating cash use and $102.3 million ending cash. The filing text does not explain the discrepancy.
- Track Bridg ARR performance and the resulting first- and second-anniversary contingent payments, including the cash-versus-stock settlement choice.
- Assess acquisition integration, recurring revenue contribution, and whether growth and improved adjusted EBITDA translate into lower GAAP losses and sustainable cash generation.
- Monitor the timing and terms of convertible-note conversion or repurchase obligations, the $50 million revolver availability, and the 2022 FI minimum-share commitment.
- Evaluate revenue quality and concentration: reported revenue is net of consumer incentives, while billings is a non-GAAP measure; top five marketers generated 34% of first-half revenue, and one marketer exceeded 10%.