Cardlytics(CDLX) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents Cardlytics' unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Condensed Consolidated Financial Statements Presents unaudited condensed consolidated financial statements, including balance sheets, operations, comprehensive loss, equity, cash flows, and notes Condensed Consolidated Balance Sheets (Unaudited) Presents unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (Amounts in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :------------------ | | Assets | | | | Cash and cash equivalents | $46,745 | $65,594 | | Accounts receivable and contract assets, net | $93,189 | $103,252 | | Total current assets | $150,400 | $177,983 | | Total assets | $361,134 | $392,711 | | Liabilities | | | | Partner Share liability | $27,196 | $32,479 | | Consumer Incentive liability | $35,996 | $45,513 | | Total current liabilities | $129,149 | $148,955 | | Convertible senior notes, net | $168,289 | $167,729 | | Total liabilities | $302,428 | $322,718 | | Stockholders' Equity | | | | Total stockholders' equity | $58,706 | $69,993 | Condensed Consolidated Statements of Operations (Unaudited) Presents unaudited condensed consolidated statements of operations for Q2 and H1 2025 and 2024 Condensed Consolidated Statements of Operations (Amounts in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $63,249 | $69,636 | $125,147 | $137,244 | | Total costs and expenses | $76,038 | $85,448 | $152,015 | $175,882 | | Operating Loss | $(12,789) | $(15,812) | $(26,868) | $(38,638) | | Total other income | $3,506 | $11,555 | $4,303 | $10,106 | | Net Loss | $(9,283) | $(4,257) | $(22,565) | $(28,532) | | Net Loss per share, basic and diluted | $(0.18) | $(0.09) | $(0.43) | $(0.62) | | Weighted-average common shares outstanding, basic and diluted | 52,750 | 49,056 | 52,309 | 46,168 | Condensed Consolidated Statements of Comprehensive Loss (Unaudited) Presents unaudited condensed consolidated statements of comprehensive loss for Q2 and H1 2025 and 2024 Condensed Consolidated Statements of Comprehensive Loss (Amounts in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(9,283) | $(4,257) | $(22,565) | $(28,532) | | Foreign currency translation adjustments | $(4,874) | $(94) | $(7,229) | $486 | | Total Comprehensive Loss | $(14,157) | $(4,351) | $(29,794) | $(28,046) | Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Presents unaudited condensed consolidated statements of stockholders' equity for H1 2025 and 2024 Changes in Stockholders' Equity (Six Months Ended June 30, 2025, Amounts in thousands) | Metric | Shares | Common Stock Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total | | :----------------------------------- | :----- | :------------------ | :------------------------- | :------------------------------------------ | :------------------ | :------ | | Balance – December 31, 2024 | 51,257 | $10 | $1,366,958 | $3,601 | $(1,300,576) | $69,993 | | Stock-based compensation | — | — | $18,060 | — | — | $18,060 | | Issuance of common stock (2018 ESPP) | 263 | — | $447 | — | — | $447 | | Other comprehensive loss | — | — | — | $(7,229) | — | $(7,229) | | Net Loss | — | — | — | — | $(22,565) | $(22,565) | | Balance – June 30, 2025 | 52,994 | $10 | $1,385,465 | $(3,628) | $(1,323,141) | $58,706 | Changes in Stockholders' Equity (Six Months Ended June 30, 2024, Amounts in thousands) | Metric | Shares | Common Stock Amount | Additional Paid-In Capital | Other Comprehensive Income | Accumulated Deficit | Total | | :----------------------------------- | :----- | :------------------ | :------------------------- | :------------------------- | :------------------ | :------ | | Balance – December 31, 2023 | 39,728 | $9 | $1,243,594 | $2,467 | $(1,111,272) | $134,798 | | Stock-based compensation | — | — | $26,099 | — | — | $26,099 | | Issuance of common stock (Settlement Agreement) | 3,592 | — | $27,451 | — | — | $27,451 | | Issuance of common stock (ATM Offering Program) | 3,908 | — | $48,151 | — | — | $48,151 | | Other comprehensive income | — | — | — | $486 | — | $486 | | Net Loss | — | — | — | — | $(28,532) | $(28,532) | | Balance – June 30, 2024 | 49,402 | $9 | $1,346,876 | $2,953 | $(1,139,804) | $210,034 | Condensed Consolidated Statements of Cash Flows (Unaudited) Presents unaudited condensed consolidated statements of cash flows for H1 2025 and 2024 Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, Amounts in thousands) | Activity | 2025 | 2024 | | :----------------------------------- | :----- | :----- | | Net cash used in operating activities | $(5,481) | $(13,188) | | Net cash used in investing activities | $(8,561) | $(9,403) | | Net cash (used in) provided by financing activities | $(5,093) | $2,034 | | Effect of exchange rates on cash and cash equivalents | $286 | $(25) | | Net decrease in cash and cash equivalents | $(18,849) | $(20,582) | | Cash and cash equivalents — End of period | $46,745 | $71,248 | Notes to Condensed Consolidated Financial Statements (Unaudited) Provides detailed notes to the unaudited condensed consolidated financial statements 1. OVERVIEW OF BUSINESS AND BASIS OF PRESENTATION Cardlytics operates a commerce media platform, with recent corporate events including a new equity plan and debt issuance - Cardlytics operates a commerce media platform comprising the Cardlytics platform (financial media network with FI partners) and the Bridg platform (identity resolution platform with merchant data partners)[25] - The 2025 Equity Incentive Plan was approved, allowing for the issuance of up to 15,722,908 shares of common stock[29] - A reduction in force during Q2 2025 incurred approximately $1.5 million in one-time costs[30] - The Dosh app was decommissioned on February 28, 2025, resulting in a $5.2 million gain on disposal or divestiture[34] - The company issued $172.5 million in 4.25% Convertible Senior Notes due 2029 on April 1, 2024[31] - Contingent consideration for the Bridg acquisition was settled, with the final cash payments made in January and June 2025[38][99] 2. SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS Accounting policies are consistent, with ASU 2023-07 adopted and future ASUs under assessment - No changes to significant accounting policies other than the adoption of ASU 2023-07, Segment Reporting, which required additional disclosure in the Segment Footnote[42][45] - Assessing the impact of ASU 2024-03 (Disaggregation of Income Statement Expenses) effective for fiscal years starting after December 15, 2026[43] - Assessing the impact of ASU 2023-09 (Improvement to Income Tax Disclosures) effective for annual periods beginning with fiscal year ending December 31, 2025[44] 3. GOODWILL AND ACQUIRED INTANGIBLES Goodwill unchanged with no impairment; acquired intangibles net carrying amount was $8.462 million - Goodwill carrying amounts remained unchanged at $159.429 million since December 31, 2024, with no impairment triggering events identified as of June 30, 2025[47] - The Cardlytics platform in the U.S. is susceptible to future impairment risk due to potential changes in assumptions or market conditions[47] Acquired Intangible Assets Subject to Amortization (Amounts in thousands) | Asset Type | Gross Carrying Amount | Accumulated Amortization | Net | Weighted-Average Remaining Useful Life (in years) | | :----------------------- | :-------------------- | :----------------------- | :---- | :---------------------------------------- | | Developed technology | $49,873 | $(43,249) | $6,624 | 2.0 | | Merchant relationships | $21,930 | $(20,092) | $1,838 | 0.9 | | Total | $71,803 | $(63,341) | $8,462 | | Expected Future Amortization Expense (Amounts in thousands) | Period | Amount | | :----------------------- | :----- | | 2025 (remaining six months) | $2,910 | | 2026 | $4,348 | | 2027 | $1,204 | | Total | $8,462 | 4. REVENUE Cardlytics and Bridg platform revenues decreased, with $25.1 million in remaining performance obligations Cardlytics Platform Revenue by Pricing Model (Amounts in thousands) | Pricing Model | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Served based pricing | $21,397 | $40,506 | $46,308 | $80,537 | | Engagement based pricing | $35,893 | $21,447 | $66,572 | $42,954 | | Other Revenue | $751 | $2,049 | $1,596 | $2,744 | | Total Cardlytics Platform Revenue | $58,041 | $64,002 | $114,476 | $126,235 | Bridg Platform Revenue (Amounts in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Bridg Platform Revenue | $5,208 | $5,634 | $10,671 | $11,009 | - As of June 30, 2025, the company had $25.1 million of remaining performance obligations, with $11.9 million expected to be recognized in the next twelve months[57] 5. LEASES The company holds operating and finance leases, with total lease liabilities of $6.114 million Lease Assets and Liabilities (Amounts in thousands) | Lease Type | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :------------------ | | Operating lease assets | $4,633 | $6,341 | | Operating lease liabilities, current | $1,199 | $2,025 | | Operating lease liabilities, long-term | $4,915 | $6,034 | | Total lease liabilities | $6,114 | $8,059 | 6. DEBT AND FINANCING ARRANGEMENTS Total debt was $214.298 million, primarily from 2024 Convertible Senior Notes, with the 2018 Line of Credit extended Total Debt (Amounts in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :------------------ | | 2024 Convertible Senior Notes, net | $168,289 | $167,729 | | 2020 Convertible Senior Notes, net | $46,009 | $45,863 | | Total debt | $214,298 | $213,592 | - The 2024 Convertible Senior Notes, with a principal amount of $172.5 million and a 4.25% interest rate, were issued on April 1, 2024, and mature on April 1, 2029[60][61] - Approximately $183.9 million of the 2020 Convertible Senior Notes were repurchased in April 2024, resulting in a $13.0 million gain on debt extinguishment; the remaining $46.1 million is due September 15, 2025[66][193] - The 2018 Loan Facility was amended in April 2025, extending its maturity date to April 15, 2028; as of June 30, 2025, $60.0 million of unused available borrowings remained, with $50.0 million drawn on August 5, 2025[77][78][201][202] 7. STOCK-BASED COMPENSATION Stock-based compensation decreased due to forfeitures; new equity plans approved and RSUs granted Total Stock-Based Compensation Expense (Amounts in thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total stock-based compensation expense | $7,501 | $12,644 | $16,195 | $23,629 | | Change YoY (3 months) | $(5,143) | | | | | Change YoY (6 months) | | | $(7,434) | | - The 2025 Equity Incentive Plan was approved, reserving 15,722,908 shares for issuance; as of June 30, 2025, 8,972,500 shares were reserved under the 2025 Plan[79][80] - The 2022 Inducement Plan was amended in November 2024 to reserve an additional 2,500,000 shares, with 2,545,749 shares available as of June 30, 2025[81] - During the six months ended June 30, 2025, 4,969,380 RSUs were granted; unamortized stock-based compensation expense related to RSUs totaled $26.740 million as of June 30, 2025[83] 8. FAIR VALUE MEASUREMENTS Fair value measurements are categorized, with Bridg acquisition contingent consideration fully settled - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[96] Cash Equivalents at Fair Value (Amounts in thousands) | Asset Type | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :------------------ | | Money market funds | $24,499 | $32,332 | | US Treasury Bills | $2,993 | $13,450 | | Total | $27,492 | $45,782 | Reconciliation of Contingent Consideration Fair Value (Amounts in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Beginning balance | $— | $43,560 | | Decrease due to earnout settlement | $— | $(45,114) | | Change in fair value of contingent consideration | $— | $5,817 | | Reclassification due to fixed payments | $— | $(4,263) | | Ending balance | $— | $— | - Contingent consideration for the Bridg acquisition was fully settled by June 30, 2025, with no further payments due[99] 9. COMMITMENTS AND CONTINGENCIES Commitments include leases, notes, and cloud hosting; no material adverse legal proceedings are expected - The company has non-cancelable operating lease agreements[100] - Commitments include the 2020 Convertible Senior Notes ($46.1 million due September 2025) and 2024 Convertible Senior Notes ($172.5 million due April 2029)[100] - A cloud hosting agreement renewed in January 2024 guarantees aggregate spend of $17.0 million each year over a three-year period[101] - No current legal proceedings are expected to have a material adverse effect on the business[103] 10. EARNINGS PER SHARE Diluted net loss per share equals basic due to anti-dilutive effects of potentially dilutive items - Diluted net loss per share equals basic net loss per share due to anti-dilutive effects of potentially dilutive items[104] Anti-Dilutive Securities (Amounts in thousands) | Security Type | June 30, 2025 | June 30, 2024 | | :----------------------------------- | :------------ | :------------ | | Common stock options | 49 | 58 | | 2020 Convertible Senior Notes | 541 | 541 | | 2024 Convertible Senior Notes | 9,573 | 9,573 | | Unvested restricted stock units | 7,265 | 5,997 | | Common stock issuable pursuant to the 2018 ESPP | 232 | 69 | 11. SEGMENTS Cardlytics operates two reportable segments, with Adjusted Contribution decreasing and concentration risks with FI partners - Cardlytics has three operating segments: Cardlytics platform in the U.S., Cardlytics platform in the U.K., and the Bridg platform, aggregated into two reportable segments[105] Adjusted Contribution by Segment (Amounts in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cardlytics platform | $31,320 | $31,137 | $58,651 | $62,958 | | Bridg platform | $4,826 | $5,241 | $9,943 | $10,485 | | Total Adjusted Contribution | $36,146 | $36,378 | $68,594 | $73,443 | Revenue by Geography (Amounts in thousands) | Geography | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $56,086 | $64,086 | $112,475 | $126,620 | | United Kingdom | $7,163 | $5,550 | $12,672 | $10,624 | | Total | $63,249 | $69,636 | $125,147 | $137,244 | - The top three FI partners accounted for over 80% of total Partner Share in H1 2025 and over 90% in H1 2024, with the top FI partner representing over 50%[114][231] - Bank of America issued a non-renewal notice for its agreements, effective July 31, 2025, with a request to continue operations through January 27, 2026[115][235] - The Master Agreement with JPMorgan Chase Bank was extended until November 18, 2028, with reduced Supplier Billings Share starting January 1, 2026[116] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes Cardlytics' financial condition and results, covering revenue, costs, operating loss, non-GAAP measures, and liquidity Overview Cardlytics operates a commerce media platform, with revenue reported net of Consumer Incentives and gross of Partner Share - Cardlytics operates a commerce media platform with the Cardlytics platform (financial media network) and Bridg platform (identity resolution)[120] - Revenue is reported net of Consumer Incentives and gross of Partner Share, with Partner Share costs included in 'Partner Share and other third-party costs'[121][122] - Investments by partners to enhance Consumer Incentives positively impact platform engagement but negatively impact GAAP Revenue[123] Non-GAAP Measures and Other Performance Metrics Key metrics include MQUs and ACPU; Billings decreased, while Adjusted EBITDA improved in Q2 2025 Key Performance Metrics (in thousands except ACPU amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cardlytics MQUs | 224,464 | 188,816 | 219,677 | 190,011 | | Cardlytics ACPU | $0.14 | $0.16 | $0.27 | $0.33 | - Cardlytics MQUs increased by 35.6 million (19%) during the three months ended June 30, 2025, primarily due to organic growth and new FI partners[127] - Cardlytics ACPU decreased by $0.02 (13%) for the three months ended June 30, 2025, and $0.06 (22%) for the six months ended June 30, 2025[129] Key Financial Metrics (Including Non-GAAP Metrics, Amounts in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Billings | $104,048 | $110,389 | $201,627 | $215,606 | | Adjusted Contribution | $36,146 | $36,378 | $68,594 | $73,443 | | Adjusted EBITDA | $2,703 | $(2,285) | $(1,681) | $(2,059) | | Adjusted Net Loss | $(7,008) | $(7,590) | $(18,059) | $(11,644) | | Free Cash Flow | $(3,431) | $(428) | $(14,242) | $(22,793) | - Billings decreased by $6.3 million (6%) for the three months and $14.0 million (6%) for the six months ended June 30, 2025, primarily due to decreased net sales to existing marketers[140][141] - Billings are expected to decrease in the near term due to restrictions from the largest FI partner on publishing offers for certain marketers[142] Components of Results of Operations Details revenue and expense components, with expectations for various costs to decline as a percentage of revenue - Revenue from the Cardlytics platform is recognized net of Consumer Incentives and gross of Partner Share, while Bridg platform revenue is from subscriptions and professional services[148] - Partner Share and other third-party costs are expected to fluctuate with revenue[150] - Delivery, sales and marketing, research and development, and general and administrative expenses are expected to decline as a percentage of revenue over time[151][152][153][154] - Acquisition, integration, and divestiture costs include diligence, legal, advisory, and employee-related expenses[155] - Changes in contingent consideration reflect fair value adjustments for earnout payments related to the Bridg acquisition[156] - Loss (gain) on disposal or divestiture includes the gain from decommissioning the Dosh app[157] Results of Operations Revenue and Partner Share costs decreased; total costs declined due to workforce reduction; interest expense increased Revenue Performance (Amounts in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :----------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Billings | $104,048 | $110,389 | $(6,341) | (6)% | | Consumer Incentives | $40,799 | $40,753 | $46 | —% | | Revenue | $63,249 | $69,636 | $(6,387) | (9)% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :----------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Billings | $201,627 | $215,606 | $(13,979) | (6)% | | Consumer Incentives | $76,480 | $78,362 | $(1,882) | (2)% | | Revenue | $125,147 | $137,244 | $(12,097) | (9)% | Partner Share and Other Third-Party Costs (Amounts in thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Partner Share and other third-party costs | $27,103 | $33,258 | $(6,155) | (19)% | | Period | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :----------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Partner Share and other third-party costs | $56,553 | $63,801 | $(7,248) | (11)% | - Total stock-based compensation expense decreased by $5.1 million (41%) in Q2 2025 and $7.4 million (31%) in H1 2025, primarily due to higher forfeitures from a reduction in headcount[173][174] - Interest expense, net, increased by $0.4 million in Q2 2025 and $1.4 million in H1 2025, mainly due to decreased average cash balances and increased interest on 2024 Convertible Senior Notes[182] - Foreign currency gain was $5.4 million in Q2 2025 (vs. $0.1 million gain in Q2 2024) and $8.1 million in H1 2025 (vs. $0.5 million loss in H1 2024), driven by British pound fluctuations[183][184] Liquidity and Capital Resources Cardlytics had $46.745 million in cash, significant accumulated losses, and sufficient liquidity for the next 12 months Liquidity Summary (Amounts in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :------------------ | | Cash and cash equivalents | $46,745 | $65,594 | | Working capital | $21,251 | $29,028 | | Accounts receivable and contract assets, net | $93,189 | $103,252 | | Unused available borrowings (2018 Line of Credit) | $60,000 | $60,000 | - Accumulated net losses since inception totaled $1.323 billion as of June 30, 2025[190] - The remaining $46.1 million principal of the 2020 Convertible Senior Notes is due on September 15, 2025[193] - A cloud hosting agreement guarantees $17.0 million annual spend over three years[194] - The 2024 Convertible Senior Notes offering generated $166.8 million net proceeds, used partly to repurchase 2020 Notes[197] - On August 5, 2025, $50.0 million was borrowed against the 2018 Line of Credit, leaving $10.0 million unused[189][202] Cash Flow Summary (Six Months Ended June 30, Amounts in thousands) | Activity | 2025 | 2024 | | :----------------------------------- | :----- | :----- | | Net cash used in operating activities | $(5,481) | $(13,188) | | Net cash used in investing activities | $(8,561) | $(9,403) | | Net cash (used in) provided by financing activities | $(5,093) | $2,034 | Critical Accounting Estimates Critical accounting estimates involve capitalized software, equity awards, goodwill impairment, and deferred tax assets, requiring significant judgment - Critical accounting estimates include capitalized software development costs, valuation of equity awards and stock-based compensation, goodwill and acquired intangible asset impairment, and valuation allowance for deferred tax assets[212] - No material changes to critical accounting policies and estimates from the 2024 Annual Report on Form 10-K, except for the adoption of ASU 2020-06[213] Item 3. Quantitative and Qualitative Disclosures About Market Risk Cardlytics is exposed to market risks from interest rate fluctuations on variable-rate debt and foreign exchange rate changes - Market risk exposure is primarily due to fluctuations in interest rates and foreign exchange rates[214] - The 2018 Line of Credit has a variable interest rate (prime rate plus 0.125%); a 10% increase in the prime rate could result in a $0.5 million annual increase in interest expense if the maximum amount was outstanding[215] - Foreign currency risk from U.K. operations: a 10% lower British pound value could decrease H1 2025 revenue by $1.1 million and operating expenses by $0.9 million[216] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[217] - No material changes in internal control over financial reporting occurred during the period[218] PART II. OTHER INFORMATION Provides additional information including legal proceedings, risk factors, equity sales, other information, and exhibits Item 1. Legal Proceedings No current legal proceedings are expected to materially affect Cardlytics' business, though litigation can incur costs and divert management resources - No current legal proceedings are expected to have a material adverse effect on the business, operating results, financial condition, or cash flows[103][220] - Litigation can adversely impact the company due to defense and settlement costs and diversion of management resources[103][220] Item 1A. Risk Factors Outlines significant risks to Cardlytics' business, including industry challenges, indebtedness, regulatory matters, and common stock ownership Risks Related to our Business and Industry Cardlytics faces risks from economic conditions, volatile operating results, dependence on key FI partners, cybersecurity threats, and a history of losses - Unfavorable global economic conditions, including inflation and tariffs, could limit business growth and negatively affect operating results by reducing marketing spending[222][223] - Quarterly operating results are subject to significant fluctuations due to factors like marketer and partner attraction/retention, revenue mix, FI partner decisions (e.g., increasing Consumer Incentives, restricting offers), and macroeconomic events[225][226] - Revenue decreased 9.2% and billings decreased 5.7% during the six months ended June 30, 2025, indicating potential difficulty in sustaining growth[227] - Substantial dependence on Chase, Bank of America, and Wells Fargo, with top three FI partners accounting for over 80% of Partner Share in H1 2025[230][231] - Bank of America issued a non-renewal notice for its services agreements, effective July 31, 2025, with a request for continued operations through January 27, 2026[235] - The largest FI partner has restricted the company from publishing offers for certain marketers, which is expected to significantly decrease marketing budgets for those advertisers[234] - An actual or perceived breach of security could lead to operational disruptions, reputational harm, loss of revenue, regulatory actions, and litigation[241][251] - The company has a history of losses and may not achieve net income in the future, with an accumulated deficit of $1.3 billion as of June 30, 2025[264] Risks Related to our Indebtedness Risks include insufficient cash flow to service debt, potential repurchase requirements, debt reclassification, and restrictive covenants from future debt - Servicing debt (2020 and 2024 Convertible Senior Notes, 2018 Line of Credit) requires significant cash flow, which the business may not generate[300][301] - Noteholders can require repurchase upon a fundamental change or conversion, potentially necessitating cash payments that could adversely affect liquidity[302] - The conditional conversion feature of the Notes, if triggered, could reclassify outstanding principal as a current liability, materially reducing net working capital[304] - Indebtedness could make the company more vulnerable to economic changes, limit borrowing capacity, and make acquisitions less attractive[303] Risks Related to Regulatory and Intellectual Property Matters Subject to evolving data privacy laws, challenges in targeted advertising, and IP protection and infringement risks - Subject to stringent and evolving U.S. and foreign privacy and data security laws (e.g., CCPA, CPRA, EU GDPR, U.K. GDPR), leading to potential regulatory investigations, litigation, fines, and business disruptions[308][309][312][314] - The regulatory framework for online services and data privacy is rapidly evolving and uncertain, with conflicting obligations across jurisdictions[311] - Delivering targeted advertising is becoming increasingly difficult due to changes in third-party platforms, new laws, and consumer resistance to data collection[319] - Failure to protect proprietary technology and intellectual property rights (patents, trademarks, trade secrets) could substantially harm the business[322][324][325] - Assertions of infringement by third parties, whether correct or not, could result in significant costs, damages, or the need for costly licensing agreements[327][329] - Use of open-source software could require public disclosure of proprietary code or lead to litigation[331] Risks Related to Ownership of Our Common Stock Stock price volatility, no dividends, anti-takeover provisions, and future stock sales pose risks to investors - The market price of common stock has been highly volatile, ranging from $1.22 to $161.47 since IPO, and is likely to continue fluctuating[334] - The company does not intend to pay dividends, so investor returns depend on stock price appreciation[336] - Anti-takeover provisions in charter documents and Delaware law could make an acquisition more difficult and limit stockholder influence on management[337][339][340] - Future sales of common stock in the public market could depress the share price[345] - If securities or industry analysts cease coverage or publish negative reports, stock price and trading volume could decline[347] General Risk Factors Business disruptions from disasters, market liquidity, accounting changes, and litigation or activism are general risks - Natural or man-made disasters, pandemics, or other similar events could significantly disrupt business operations, especially with centralized facilities in Atlanta, GA; Menlo Park, CA; and New York, NY[342] - An active trading market for common stock may not be sustained, making it difficult for investors to sell shares[343] - Changes in accounting principles generally accepted in the U.S. could adversely affect reported financial results[348] - Securities litigation or stockholder activism could negatively affect business, incur significant expenses, and divert management attention[349][350] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No purchases of equity securities by the issuer or issuances of unregistered securities occurred - No purchases of equity securities by the issuer during the period[351] - No recent issuances of unregistered securities during the period[352] Item 5. Other Information Cardlytics borrowed $50.0 million against its 2018 Line of Credit on August 5, 2025 - On August 5, 2025, Cardlytics borrowed $50.0 million against the 2018 Line of Credit, leaving $10.0 million of unused available borrowings[353] Item 6. Exhibits Lists all exhibits filed or incorporated by reference into the Quarterly Report on Form 10-Q - Exhibits include the 2025 Equity Incentive Plan, amendments to the Loan and Security Agreement, amended offer and separation pay agreements, and certifications of principal executive and financial officers[355] Signatures The report is signed by the CEO and CFO on August 6, 2025 - The report is signed by Amit Gupta, CEO, and Alexis DeSieno, CFO, on August 6, 2025[360]