Cardlytics(CDLX) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - The company generated $453.4 million in billings in 2023, representing 2% growth YoY, and$ 309.2 million in revenue, up 4% YoY [41] - Adjusted EBITDA was positive for the first time since 2019 at $3.8 million, nearly$ 50 million better than in 2022 [41] - Q4 billings reached $131.9 million, a 5% increase YoY, driven by success in everyday spend and travel categories [42] - Q4 revenue was$ 89.2 million, up 8% YoY, partially due to a one-time revenue-related benefit of $2.2 million [42] - Adjusted contribution in Q4 increased 18% to$ 47.3 million, with a margin of 53% compared to 48% a year ago [43] - Free cash flow for the year improved by nearly $55 million compared to 2022, though Q4 free cash flow was negative$ 0.8 million [45] - Adjusted EBITDA exceeded guidance at positive $10 million in Q4, the largest in the company's history [22] Business Line Performance - The U.S. revenue increased 8% YoY, while the U.K. showed growth for the first time in several quarters at 4% [21] - The restaurant category turned slightly positive in Q4, with efforts to rebuild the sales team beginning to pay off [42] - Bridge, the company's retail media and data network, was profitable for the third consecutive quarter [22] - Bridge revenue grew 12% in Q4 due to an existing customer expanding its contract and a new large restaurant joining the platform [66] - The company signed a new large bank partner in the U.S., with promising discussions ongoing with additional banks in the U.S. and U.K. [9] Market Performance - The company re-signed Lloyds to a three-year contract and implemented an auto-enrollment program, which has allowed the sales team to sell and deliver larger budgets [21] - The company's new technology, ADE (Ads Decision Engine), has seen 80% of the network traffic now on AWS, with 40% on the latest version [11] - Banks on ADE have seen a 23% increase in redemption rates compared to a 9% increase across the whole network [11] - The company's Ripple platform has attracted leading retailers like Wegmans and Giant Eagle, with a national footprint of around 70 million profiles [62] Strategic Direction and Industry Competition - The company has made fundamental changes to its cost structure, including renegotiating partner contracts and rightsizing expenses [8] - The company is focusing on four key pillars to drive engagement: content and insights, customizable tools for merchants, easier offer discovery, and differentiated offerings for each bank [33][36][37][16] - The company is leveraging its tech and network size to create differentiated offerings such as featured offers, increased curations, and proximity offers [16] - The company is working towards a broader and deeper dataset, more sophisticated audience targeting, better analytics, and a variety of ad formats to drive increased engagement [18] Management Commentary on Operating Environment and Future Outlook - The company resolved the SRS dispute and rebalanced its cost structure, allowing it to focus on execution and growth [7][30] - The company expects 12% to 16% billings growth in Q1 2024, excluding entertainment, which was resolved in Q4 [30] - The company is confident in its long-term growth prospects, with a focus on driving consumer engagement, top-line growth, and adjusted EBITDA [47] - The company expects double-digit billings growth for 2024 and to be operating cash flow positive on an annual basis [47] Other Important Information - The company added a new non-GAAP metric, free cash flow, to its 10-K, which it believes is useful for measuring funds available to invest in the business [23] - The company ended Q4 with$ 91.8 million in cash and cash equivalents and $16.7 million of unused available borrowings under its line of credit [67] - The company amended its line of credit in February, allowing it to borrow up to 75% of its eligible accounts receivable, up from 50% previously [67] Q&A Session Summary Question: Timing and expenses related to the new FI partner - The company cannot provide specific timing details beyond what was referenced in the 8-K, but there are no major upfront expenses expected [50][75] Question: Upside to billings growth and drivers - The company is confident in its initiatives to re-accelerate revenue, with a focus on increased customer spend and engagement [52] Question: Progress on ADE adoption and challenges - 80% of the network is on ADE, with 20% not yet migrated due to larger tech changes required for some partners [82] Question: Multi-tier offers program rollout - The company is testing multi-tier offers with several clients and will update the market on the broader rollout when more data is available [86] Question: Return of larger marketers to the platform - The company has reinvested in its sales teams and introduced new product initiatives, which have helped bring back larger marketers [87] Question: Discovery and consumer activation improvements - The company is working with bank partners to improve offer placements and has seen a 5x higher activation rate for offers placed on line-item transactions in bank statements [84][90]