What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-03-01 · 595 added, 516 removed, 746 unchanged (60% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Cardlytics, Inc.

To the shareholders and the Board of Directors of Cardlytics, Inc.

Opinion on the Financial Statements

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31,2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2022, expressed an adverse opinion on the Company’s internal control over financial reporting because of a material weakness.

Basis for Opinion

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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or in the accounts or disclosures to which it relates.

Revenue – Refer to Note 4 to the consolidated financial statements

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue – Refer to Note 2 and 6 to the consolidated financial statements

Critical Audit Matter Description

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• For a sample of revenue transactions, we performed detail transaction testing by agreeing the amounts recognized to source documents and testing the mathematical accuracy of the recorded revenue.

Business Combinations – Refer to Notes 2, 4, and 13 to the consolidated financial statements

Critical Audit Matter Description

As disclosed in Note 4 to the consolidated financial statements, the Company completed the acquisition of Bridg Inc.

("Bridg") during 2021 for a transaction price of $578.9 million.

This transaction was accounted for as a business combination.

Auditing the Company's accounting for the acquisition of Bridg was complex due to the estimation utilized in the Company's determination of the fair value of the contingent consideration initially valued at $230.9 million on the date of acquisition.

The significant estimation was primarily due to the complexity of the valuation model used by management to measure the fair value of the contingent consideration and the sensitivity of the fair value to the significant underlying assumptions.

In order to determine the fair value of the contingent consideration, the Company simulated forecasted annual recurring revenue ("ARR") using a revenue volatility assumption from comparable market data.

The Company then determined the appropriate discount rate for the assumed cash component and used a Monte Carlo simulation for the assumed stock component.

The assumptions used in preparing this model include estimates such as revenue volatility, revenue discount rate, weighted average cost of capital, and the Company’s common stock volatility.

The assumptions utilized in the model are forward looking and could be affected by future economic and market conditions.

As contingent consideration is recorded as a liability it is remeasured using a fair value methodology consistent with the one described above and it will continue to be remeasured until the dates of settlement (upon the First Anniversary Payment and Second Anniversary Payment dates.)

We identified contingent consideration as a critical audit matter because of the judgement surrounding projected ARR and the complexity of the valuation model used to value the contingent consideration as well as the material weakness identified.

This required a high degree of auditor judgment and an increased extent of effort, including the need for us to involve professionals with valuation expertise.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Bridg contingent consideration, specifically the projected ARR and valuation model, included the following, among others:

• We tested the projected revenues used in the model by comparing them to historical results, third party industry projections, and the Company’s internal contracted backlog.

• We evaluated management’s ability to accurately forecast revenues by comparing actual results to management’s historical forecasts of revenue.

• With the assistance of our valuation specialists, we evaluated the valuation methodology and independently recalculated the estimated fair value of the contingent consideration to compare to the Company's recorded amount.

/s/ DELOITTE & TOUCHE LLP

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Restricted cash 110 95

Accounts receivable, net 81,452 81,249

Accounts receivable and contract assets, net 81,249 111,085

Other receivables 5,306 6,097

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Intangible assets, net 447 125,550

Goodwill — 742,516

Capitalized software development costs, net 6,299 13,131

Deferred FI implementation costs, net 8,383 3,785

Deferred implementation costs, net 3,785 —

Other long-term assets, net 1,786 2,406

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Accrued expenses 5,515 19,620

FI Share liability 41,956 37,457

Partner Share liability 37,457 46,595

Consumer Incentive liability 24,290 52,602

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Current operating lease liabilities 4,718 6,028

Current finance lease liabilities 24 13

Current contingent consideration — 182,470

Total current liabilities 81,274 327,350

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Convertible senior notes, net 174,011 184,398

Deferred liabilities 2,632 —

Long-term deferred revenue — 173

Long-term operating lease liabilities 9,381 6,801

Long-term finance lease liabilities 13 —

Long-term contingent consideration — 49,825

Other long-term liabilities 679 4,550

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Additional paid-in capital 551,429 1,212,823

Accumulated other comprehensive income (loss) 1,312 ( 192 )

Accumulated other comprehensive (loss) income ( 192 ) 486

Accumulated deficit ( 394,053 ) ( 522,618 )

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Costs and expenses:

FI Share and other third-party costs 85,371 118,080 109,308

Partner Share and other third-party costs 118,080 109,308 141,273

Delivery costs 12,893 14,310 22,503

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General and administration expense 36,720 46,532 66,222

Acquisition and integration costs — — 24,372

Change in fair value of contingent consideration — — 1,374

Depreciation and amortization expense 4,535 7,826 29,871

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Operating loss ( 17,325 ) ( 53,923 ) ( 122,599 )

Non-operating (expense) income:

Other income (expense):

Interest expense, net ( 548 ) ( 3,048 ) ( 12,563 )

Change in fair value of warrant liabilities, net ( 6,760 ) — —

Other (expense) income, net ( 2,101 ) 729 1,549

Total non-operating (expense) income ( 12,125 ) 181 ( 1,499 )

Foreign currency gain (loss) 729 1,549 ( 1,267 )

Total other income (expense) 181 ( 1,499 ) ( 13,830 )

Loss before income taxes ( 17,144 ) ( 55,422 ) ( 136,429 )

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Net loss ( 17,144 ) ( 55,422 ) ( 128,565 )

Adjustments to the carrying value of redeemable convertible preferred stock ( 157 ) — —

Net loss attributable to common stockholders $ ( 17,144 ) $ ( 55,422 ) $ ( 128,565 )

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Net loss $ ( 17,144 ) $ ( 55,422 ) $ ( 128,565 )

Other comprehensive income (loss):

Other comprehensive loss:

Foreign currency translation adjustments ( 680 ) ( 1,504 ) 678

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Issuance of common stock 1,904 1 61,308 — — 61,309

Issuance of common stock warrants — — 17,774 — — 17,774

Issuance of ESPP 154 — 2,208 — — 2,208

Issuance of restricted stock 486 — — — — —

Conversion of preferred stock to common stock 10,643 6 196,588 — — 196,594

Conversion of preferred stock warrants to common stock warrants — — 1,735 — — 1,735

Accretion of redeemable stock — — ( 157 ) — — ( 157 )

Other comprehensive income — — — ( 680 ) — ( 680 )

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Issuance of restricted stock 779 — — — — —

Issuance of common stock 1,904 1 61,308 — — 61,309

Issuance of ESPP 59 — 2,837 — — 2,837

Issuance of convertible notes — — 51,416 — — 51,416

Purchases of capped calls — — ( 26,450 ) — — ( 26,450 )

Other comprehensive loss — — — ( 1,504 ) — ( 1,504 )

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Exercise of common stock options 141 — 2,155 — — 2,155

Exercise of common stock warrants 9 — — — — —

Stock-based compensation — — 50,224 — — 50,224

Issuance of restricted stock 724 — — — — —

Issuance of common stock 3,850 1 484,048 — — 484,049

Common stock purchase consideration for the acquisition of Dosh 916 — 117,349 — — 117,349

Fair value of assumed Dosh options attributable to pre-combination service — — 3,593 — — 3,593

Fair value of assumed Bridg options attributable to pre-combination service — — 841 — — 841

Issuance of ESPP 42 — 3,184 — — 3,184

Issuance of convertible notes — — 51,416 — — 51,416

Purchases of capped calls — — ( 26,450 ) — — ( 26,450 )

Other comprehensive loss — — — ( 1,504 ) — ( 1,504 )

Other comprehensive income — — — 678 — 678

Net loss — — — — ( 128,565 ) ( 128,565 )

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Stock-based compensation expense 15,851 32,396 50,264

Change in the fair value of warrant liabilities, net 6,760 — —

Other non-cash expense (income), net 4,641 ( 570 ) ( 1,003 )

Amortization and impairment of deferred FI implementation costs 1,618 2,869 4,598

Settlement of paid-in-kind interest ( 8,353 ) — —

Change in fair value of contingent consideration — — 1,374

Other non-cash (income) expense, net ( 570 ) ( 1,003 ) 1,343

Deferred implementation costs 2,869 4,598 3,785

Income tax benefit — — ( 7,864 )

Change in operating assets and liabilities:

Accounts receivable ( 9,426 ) ( 26,018 ) ( 2,396 )

Accounts receivable and contracts assets, net ( 26,018 ) ( 2,396 ) ( 27,936 )

Prepaid expenses and other assets ( 2,224 ) ( 65 ) ( 1,466 )

Deferred FI implementation costs ( 9,250 ) — —

Recovery of deferred FI implementation costs 5,380 4,625 —

Recovery of deferred implementation costs 4,625 — —

Accounts payable ( 601 ) 16 1,260

Other accrued expenses 6,152 ( 1,238 ) ( 905 )

FI Share liability 3,742 14,301 ( 4,499 )

Partner Share liability 14,301 ( 4,499 ) 9,139

Customer Incentive liability 8,385 4,429 13,211

Net cash (used in) provided by operating activities ( 18,995 ) 11,457 ( 7,598 )

Net cash received from (used in) operating activities 11,457 ( 7,598 ) ( 38,523 )

Investing activities

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Capitalized software development costs ( 2,712 ) ( 4,633 ) ( 9,323 )

Business acquisitions, net of cash acquired — — ( 494,131 )

Net cash used in investing activities ( 11,020 ) ( 10,117 ) ( 506,695 )

Financing activities

Proceeds from issuance of debt 47,435 — —

Principal payments of debt ( 46,698 ) ( 23 ) —

Proceeds from issuance of convertible senior notes — — 223,100

Proceeds from issuance of convertible senior notes, net of issuance costs paid of $6,900 — 223,100 —

Purchase of capped calls related to convertible senior notes — ( 26,450 ) —

Proceeds from issuance of common stock 91,216 10,185 486,388

Equity issuance costs ( 1,949 ) ( 196 ) —

Deferred equity issuance costs ( 196 ) — ( 190 )

Debt issuance costs ( 143 ) ( 382 ) ( 200 )

Net cash provided by financing activities 65,191 44,179 206,430

Net cash received from financing activities 44,179 206,430 485,998

Effect of exchange rates on cash, cash equivalents and restricted cash 101 47 ( 567 )

Net increase in cash, cash equivalents and restricted cash 38,608 44,717 188,762

Net increase (decrease) in cash, cash equivalents and restricted cash 44,717 188,762 ( 59,787 )

Cash, cash equivalents, and restricted cash — Beginning of period 59,870 104,587 293,349

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Cash paid for interest $ 1,266 $ 63 $ 2,328

Cash paid for income taxes $ — $ — $ —

Amounts accrued for property and equipment $ 456 $ 242 $ 267

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(“we,” “our,” “us,” the “Company,” or “Cardlytics”) is a Delaware corporation and was formed on June 26, 2008.

We operate an advertising platform within financial institutions’ (“FIs”) digital channels, which include online, mobile, email, and various real-time notifications.

Our partnerships with FIs provide us with access to their anonymized purchase data and digital banking customers.

By applying advanced analytics to this aggregation of purchase data, we make it actionable, helping marketers identify, reach and influence likely buyers at scale, and measure the true sales impact of their marketing spend.

We have strong relationships with leading marketers across a variety of industries, including retail, restaurant, travel and entertainment, telecommunications, subscription services, direct to consumer, and grocery.

Using our purchase intelligence presents customers with offers to save money at a time when they are thinking of their finances.

We also operate in the U.K.

through Cardlytics UK Limited ("Cardlytics UK"), a wholly-owned and operated subsidiary registered as a private limited company in England and Wales, and in India through Cardlytics Services India Private Limited, a wholly-owned and operated subsidiary registered as a private limited company in India.

Reverse Stock Split

On January 26, 2018, our board of directors approved an amended and restated certificate of incorporation to (1) effect a reverse split on outstanding shares of our common stock and redeemable convertible preferred stock on a one-for-four basis (the “Reverse Stock Split”), (2) modify the threshold for automatic conversion of our preferred stock into shares of our common stock in connection with an initial public offering to eliminate the requirement of gross proceeds to the Company of not less than $ 70.0 million and (3) authorize us to issue up to 100,000,000 shares of common stock, $ 0.0001 par value per share and 25,000,000 shares of redeemable convertible preferred stock, $ 0.0001 par value per share (collectively, the “Charter Amendment”).

The authorized shares and par values of our common stock and redeemable convertible preferred stock were not adjusted as a result of the Reverse Stock Split.

The Charter Amendment was approved by the Company’s stockholders on January 26, 2018 and became effective upon the filing of the Charter Amendment with the State of Delaware on January 26, 2018.

All issued and outstanding common stock and preferred stock and related share and per share amounts contained in these financial statements have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented.

We operate an advertising platform within our own and our partners' digital channels, which include online, mobile applications, email, and various real-time notifications (the "Cardlytics platform").

We also operate a customer data platform which utilizes point-of-sale data, including product-level purchase data, to enable marketers, in a privacy-protective manner, to perform analytics and targeted loyalty marketing and also enable marketers to measure the impact of their marketing (the "Bridg platform").

The partners for the Cardlytics platform are predominantly financial institutions ("FI partners") who provide us with access to their anonymized purchase data and digital banking customers.

The partners for the Bridg platform are merchants ("merchant data partners") who provide us with access to their point-of-sale data, including product-level purchase data.

By applying advanced analytics to the purchase data we receive, we make it actionable, helping marketers identify, reach and influence likely buyers at scale, and measure the true sales impact of their marketing spend.

We have strong relationships with leading marketers across a variety of industries, including retail, restaurant, travel and entertainment, direct-to-consumer, and grocery and gas.

Using our purchase intelligence, we present customers with offers to save money at a time when they are thinking of their finances.

We also operate through (1) Dosh Holdings, LLC, a wholly owned and operated subsidiary in the United States, (2) Cardlytics UK Limited, a wholly owned and operated subsidiary registered as a private limited company in England and Wales, and (3) Cardlytics Services India Private Limited, a wholly owned and operated subsidiary registered as a private limited company in India.

Proceeds from Issuance of Common Stock

On February 13, 2018, we closed our initial public offering (“IPO”), in which we issued and sold 5,400,000 shares of common stock at a public offering price of $ 13.00 per share, resulting in gross proceeds of $ 70.2 million.

On February 14, 2018, pursuant to the underwriters’ partial exercise of their over-allotment option to purchase up to an additional 810,000 shares from us, we issued and sold an additional 421,355 shares of our common stock, resulting in additional gross proceeds to us of $ 5.5 million.

In total, we issued 5,821,355 shares of common stock and raised $ 75.7 million in gross proceeds, or $ 66.1 million in net proceeds after deducting underwriting discounts and commissions of $ 5.3 million and offering costs of $ 4.3 million.

Upon the closing of the IPO, all of the outstanding shares of redeemable convertible preferred stock automatically converted into shares of common stock and all warrants to purchase shares of redeemable convertible preferred stock were automatically converted into warrants to purchase shares of common stock.

Subsequent to the closing of the IPO, there were no shares of preferred stock or warrants to purchase shares of redeemable convertible preferred stock outstanding.

Upon the completion of our IPO, our amended and restated certificate of incorporation authorized us to issue up to 100,000,000 shares of common stock, $ 0.0001 par value per share, and 10,000,000 shares of preferred stock, $ 0.0001 par value per share, all of which shares of preferred stock are undesignated.

Our board of directors may establish the rights and preferences of the preferred stock from time to time.

On March 5, 2021, we closed a public equity offering in which we sold 3,850,000 shares of common stock at a public offering price of $130.00 per share for total gross proceeds of $ 500.5 million.

We received total net proceeds of $ 484.0 million after deducting underwriting discounts and commissions of $ 16.3 million and offering costs of $ 0.2 million.

On September 13, 2019, we closed a public equity offering in which we sold 1,904,154 shares of common stock, which included 404,154 shares sold pursuant to the exercise by the underwriters of an option to purchase additional shares, at a public offering price of $ 34.00 per share.

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We did not receive any proceeds from the sale of common stock by the selling stockholders.

During 2018, 2019 and 2020, we received $2.0 million, $29.7 million and $10.2 million in proceeds from the exercise of options and warrants to purchase shares of common stock.

During 2019, 2020 and 2021, we received $ 29.7 million, $ 10.2 million and $ 2.2 million, respectively, in proceeds from the exercise of options and warrants to purchase shares of common stock.

2020 Convertible Senior Notes

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Refer to Note 9—Debt and Financing Arrangements for further details.

On May 5, 2021, we completed the acquisition of Bridg for purchase consideration of $ 578.9 million.

The purchase consideration consisted of a $ 350.0 million cash purchase price, subject to $ 2.8 million of adjustments and escrows, and contingent consideration with an initial fair value of $ 230.9 million related to additional potential future payments.

The potential payment within 30 days of the first anniversary of the acquisition (the "First Anniversary Payment") will be equal to 20 times the difference between the U.S.

annualized recurring revenue ("ARR"), based on the month preceding the first anniversary and $ 12.5 million.

The potential payment within 30 days of the second anniversary of the acquisition (the “Second Anniversary Payment”) will be equal to 15 times the difference between the ARR for customers as of the first anniversary based on the month preceding the second anniversary, and the prior ARR at the first anniversary.

The Second Anniversary Payment is subject to a specified cap.

At least 30% of the First Anniversary Payment and the Second Anniversary Payment will be in cash, with the remainder to be paid in cash or our common stock, at our option.

If we choose to pay a portion of the First Anniversary Payment or Second Anniversary Payment in our common stock, the number of shares will be determined by dividing the amount of the payment by the trailing 20-day volume-weighted average price ending on the first anniversary date or second anniversary date, as applicable.

We also assumed unvested options to purchase Bridg’s common stock and attributed $ 0.8 million of their fair value to the pre-combination service period.

ARR is a performance metric defined within Item 2.

"Management's Discussion and Analysis of Financial Condition and Results of Operations".

Refer to Note 4—Business Combinations for further information.

On March 5, 2021, we completed the acquisition of Dosh Holdings, Inc.

("Dosh") for purchase consideration of $ 277.6 million in a combination of cash and common stock.

The total purchase consideration consisted of a $ 150.0 million cash purchase price, subject to $ 6.6 million of adjustments and escrows;

and $ 125.0 million of shares of our common stock at an agreed-upon price of 136.33 per share, subject to $ 7.6 million of fair value adjustments based upon our close date, for an acquisition date fair value of $ 117.4 million.

In addition, we assumed unvested options to purchase Dosh’s common stock and attributed $ 3.6 million of their fair value to the pre-combination service period.

Refer to Note 4—Business Combinations for further information.

SIGNIFICANT ACCOUNTING POLICIES

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Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements.

Actual results could differ from these estimates.

Significant items subject to such estimates and assumptions include revenue recognition, internal-use software development costs, income taxes, stock-based compensation, income tax valuation allowance, contingencies and changes in fair value of our preferred stock warrants and common stock warrants.

We base our estimates on historical experience and also on assumptions that we believe are reasonable.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the

consolidated financial statements.

Significant items subject to such estimates and assumptions include revenue

recognition, internal-use software development costs, stock-based compensation, allowance for doubtful accounts,

valuation of acquired intangible assets of Dosh and Bridg, valuation of contingent consideration for Bridg, income tax including

valuation allowance and contingencies.

We base our estimates on historical experience and on assumptions that we believe are

Changes in facts or circumstances may cause us to change our assumptions and estimates in future periods and it is possible that actual results could differ from our current or revised future estimates

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During the first quarter of 2020, we began a strategic shift within our organization to increase productivity and optimize performance.

This plan has resulted in severance and medical benefits totaling $1.3 million during the year ended December 31, 2020.

This plan resulted in severance and medical benefits totaling $1.3 million during the year ended December 31, 2020.

We recognize these costs when the extent of our actions is determined and the costs can be estimated.

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$1.1 million in sales and marketing expense, $0.1 million in general and administrative expense and $0.1 million in research and development expense.

Severance and medical benefits of $0.9 million have been paid to former employees through December 31, 2020.

Severance and medical benefits of $0.9 million had been paid to former employees through December 31, 2020.

As a part of our integration efforts with our acquired companies, we have continued to evaluate the optimal structure of the combined organization.

As a result, during the year ended December 31, 2021 we have recognized $1.2 million in severance and medical benefits related to our acquisitions.

These charges are reflected on our consolidated statement of operations within acquisition and integration costs.

Additionally, during the year ended December 31, 2021, we recognized $0.8 million of severance and medical benefits charges related to internal restructuring.

These charges are reflected on our consolidated statement of operations as follows:

$0.1 million in delivery costs, $0.4 million in sales and marketing expense, and $0.3 million in research and development expense.

We recognize these costs when the extent of our actions is determined and the costs can be estimated.

As of December 31, 2021, $0.6 million of severance and medical benefits related to integration efforts and 2021 restructuring owed to former employees remains unpaid.

Foreign Currency

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We are also subject to gains and losses from foreign currency denominated transactions and the remeasurement of foreign currency denominated balance sheet accounts, both of which are included in other (expense) income, net in the accompanying consolidated statements of operations.

We recorded a foreign currency loss (gain) totaling $1.2 million, $(0.8) million and $(1.6) million in 2018, 2019 and 2020, respectively.

FI Share and Other Third-Party Costs

We generally pay our FI partners a negotiated and fixed percentage of our billings to marketers less any Consumer Incentives that we pay to the FIs’ customers and certain third-party data costs ("FI Share").

FI Share and other third-party costs consist primarily of the FI Share that we pay our FI partners, media and data costs, and deferred FI implementation costs incurred pursuant to our agreements with certain FI partners, any incremental costs due to FIs as part of FI Share commitments, as well as a non-cash expense related to the vesting of warrants issued to an FI partner that accelerated upon the consummation of our IPO.

To the extent that we use a specific FI customer’s anonymized purchase data in the delivery of our solutions, we pay the applicable FI partner an FI Share calculated based on the relative contribution of the data provided by the FI partner to the overall delivery of the services.

We recorded a foreign currency (gain) loss totaling $(0.8) million, $(1.6) million and $1.3 million in 2019, 2020 and 2021, respectively.

Partner Share and Other Third-Party Costs

We generally pay our partners a negotiated and fixed percentage of our billings to marketers less any Consumer Incentives that we pay to our partners’ customers and certain third-party data costs ("Partner Share").

Partner Share and other third-party costs consist primarily of the Partner Share that we pay our partners, media and data costs, and deferred implementation costs incurred pursuant to our agreements with certain partners, any incremental costs due to partners as part of Partner Share commitments.

To the extent that we use a specific partner customer’s anonymized purchase data in the delivery of our solutions, we pay the applicable FI partner a Partner Share calculated based on the relative contribution of the data provided by the partner to the overall delivery of the services.

Prior to March 31, 2021, we referred to Partner Share as FI Share.

Delivery Costs

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Actual results could differ from those estimates and any such differences may be material to our financial statements.

Revenue during the second quarter of 2020 was significantly affected by the COVID-19 pandemic and its negative impact on both consumer spending and marketers' ability to spend advertising budgets on our solution.

During the third and fourth quarters of 2020, we saw a recovery of both consumer spending as well as the advertising budgets of our clients.

Revenue for the year ended December 31, 2020 was unfavorably affected by the COVID-19 pandemic and its impact on both consumer discretionary spending and marketers' ability to spend advertising budgets on our solutions.

During the year ended December 31, 2021, we saw continued recovery of both consumer spending as well as the advertising budgets of our clients;

however, many merchants continued to be impacted by labor shortages and disruptions in their supply chains.

Due to continuing uncertainty regarding the severity and duration of the impacts of COVID-19 on the global economy, we will continue to monitor this situation and the potential impacts to our business.

Business Combinations

We apply the acquisition method of accounting for business combinations.

Under this method of accounting, all assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition.

We allocate the purchase consideration to the net tangible and identifiable intangible assets.

Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions.

These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset.

These estimates are inherently uncertain and unpredictable.

We recognize costs directly associated with business combinations, including diligence efforts, legal and advisory costs, broker fees and insurance premiums, as acquisition and integration costs on our consolidated statements of operations.

Acquired Intangible Assets and Goodwill

Acquired intangible assets consist of identifiable intangible assets resulting from our business acquisition.

Intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated useful lives.

Goodwill represents the purchase consideration of an acquired business that exceeds the fair value of the net tangible and identifiable intangible assets.

Goodwill is evaluated for impairment by reporting unit annually in the fourth quarter, specifically October 1, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.

Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate or a significant d ecrease in expected cash flows.

No impairment charges were recorded during 2019, 2020 nor 2021 .

Revenue Recognition

We determine revenue recognition through the following steps:

• identification of a contract with a customer;

• identification of the performance obligation(s) in the contract;

• determination of the transaction price;

• allocation of the transaction price to the performance obligation(s) in the contract and

• recognition of revenue when or as the performance obligation(s) are satisfied.

Cardlytics Platform

Our revenue generated from our Cardlytics platform consist of transaction-based fees made up of a significant volume of low-dollar transactions, sourced from multiple databases.

The processing and recording of revenue are highly automated and are based on contractual terms with marketers, partners, and other parties.

Because of the nature of our transaction-based fees, we use automated systems to process and record our revenue transactions.

We sell our solutions by entering into agreements directly with marketers or their marketing agencies, generally through the execution of insertion orders.

The agreements state the terms of the arrangement, the negotiated fee, payment terms and the fixed period of time of the campaign.

We consider a contract to exist when a campaign, which typically lasts 45 days, is published to an FI partner under the terms of an insertion order.

With respect to our Cardlytics platform service, our performance obligation is to offer incentives to partners' customers to make purchases from the marketer within a specified period.

This performance obligation is a series that represents a stand ready obligation to provide a targeted campaign for the marketer to partners' customers.

The Cardlytics platform fees represent variable consideration that is resolved when partners' customers make qualifying purchases during the marketing campaign term.

Subsequent to a qualifying purchase, the associated fees are generally not subject to refund or adjustment unless the fees from the marketing campaign exceed a contractual maximum (marketer budget).

We have not constrained our revenue because adjustments have historically been immaterial and given the short duration of our marketing campaigns, any adjustments are recognized during the period of the marketing campaign.

We recognize revenue for the Cardlytics platform fees over time using the right to invoice practical expedient because the amount billed is equal to the value delivered to marketers through qualified purchases by FIs' customers during that period.

Consumer Incentives

We report our revenue on our consolidated statements of operations net of Consumer Incentives.

We do not provide the goods or services that are purchased by our partners’ customers from the marketers to which the Consumer Incentives relate.

Accordingly, the marketer is deemed to be the principal in the relationship with the customer and, therefore, the Consumer Incentive is deemed to be a reduction in the purchase price paid by the customer for the marketer’s goods or services.

While we are responsible for remitting Consumer Incentives to our FI partners for further payment to their customers, we function solely as an agent of marketers in these arrangements.

We invoice marketers monthly based on the qualifying purchases of partners' customers as reported by our partners during the month.

Invoice payment terms, negotiated on a marketer-by-marketer basis, are typically between 30 to 60 days.

However, for certain marketing agencies with sequential liability terms, payments are not due to us until such marketing agency has received payment from its marketer client.

Accounts receivable is recorded at the amount of gross billings to marketers, net of allowances, for the fees and Consumer Incentives that we are responsible to collect.

Our accrued liabilities also include the amount of Consumer Incentives due to FI partners.

As a result, accounts receivable and accrued liabilities may appear large in relation to revenue, which is reported on a net basis.

Partner Share and Other Third-Party Costs

We report our revenue on our consolidated statements of operations gross of Partner Share.

Partner Share costs are included in Partner Share and other third-party costs in our consolidated statements of operations, rather than as a reduction of revenue, because we and not our partners act as the principal in our arrangements with marketers.

We are responsible for the fulfillment and acceptability of the services purchased by marketers.

We also have latitude in establishing the price of our services, have discretion in supplier selection and earn variable amounts.

Partners only supply consumer purchase data and digital marketing space and generally have no involvement in our marketing campaigns or contractual relationship with marketers.

Contract Costs

Given the short-term nature of our marketing campaigns, all contract costs are expensed as incurred since the expected period of benefit is less than one year.

Costs to fulfill a contract include immaterial costs to set up a campaign that we expense as incurred due to the short-term nature of our marketing campaigns.

Bridg Platform

Contracts with customers are evaluated on a contract-by-contract basis as contracts may include multiple types of subscription-based services.

Revenue is generated from the sale of subscriptions to our cloud-based customer data-platform and the related delivery of professional services such as implementation, onboarding and technical support.

Our subscription contracts are generally 6 to 36 months in duration and are generally billed in advance on a monthly, quarterly or annual basis, with the option for renewal at the end of the contractual arrangement.

We recognize revenue over the period in which such services are performed.

Our model typically includes an up-front implementation fee with a proof-of-concept period that begins once implementation has completed.

It is followed with a periodic commitment from the customer that commences upon completion of the implementation and/or proof-of-concept period through the remainder of the customer life.

The periodic commitment includes, but is not limited to, a fixed periodic fee and/or a transactional fee based on system usage that exceeds committed minimums.

If the up-front implementation fee is not distinct, revenue is deferred until the date the customer commences use of our services, at which point the up-front implementation fee is recognized ratably over the life of the customer arrangement.

For contracts that contain multiple performance obligations, which include combinations of subscriptions to our cloud-based services and related professional services, we account for individual services as a separate performance obligation if they are distinct.

The service is distinct if the service is separately identifiable from other items in the arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer.

If these criteria are not met, the promised services are accounted for as a combined performance obligation.

The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring products or services to the customer.

We include any fixed charges within our contracts as part of the total transaction price.

To the extent that variable consideration is not constrained, we include an estimate of the variable amount, as appropriate, within the total transaction price and update its assumptions over the duration of the contract.

As a practical expedient, we do not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of services is expected to be one year or less.

Many of our contracts with customers contain some component of variable consideration;

however, the constraint will generally not result in a reduction in the estimated transaction price for most forms of variable consideration.

We may constrain the estimated transaction price in the event of a high degree of uncertainty as to the final consideration amount owed because of an extended length of time over which the fees may be adjusted.

The transaction price, including any discounts, is allocated between separate services in a contract that contains multiple performance obligations based on their relative standalone selling prices.

The standalone selling prices are determined based on the market adjusted approach utilizing prices at which we separately sell or historically sold each service.

For items that are not sold separately, we estimate the standalone selling prices using available information such as market conditions and internally approved pricing guidelines.

In instances where there are no observable selling prices for professional services, we may apply the residual approach to estimate the standalone selling price of the subscription based services.

In certain situations we al locate the variable consideration to a series of distinct services within a contract.

We allocate variable payments to one or more, but not all, of the distinct services or to a series of distinct services in a contract when (i) the variable payment relates specifically to our effort to transfer the distinct service and (ii) the variable payment is for an amount that depicts the amount of consideration to which we expect to be entitled in exchange for transferring the promised services to the customer.

Contract Balances

Timing may differ between the satisfaction of contractual performance obligations to our customers and corresponding invoicing and cash inflows.

Contract assets primarily relate to amounts for contracts with customers for which the amount of revenue recognized exceeds the amount billed to the customer.

Contract assets are transformed to a receivable (billed or unbilled) once the right to payment is unconditional.

Contract liabilities, or deferred revenue, are recorded for amounts collected in advance of the satisfaction of contractual performance obligations.

Contract balances are reported in a net contract asset or liability position on a customer-by-customer basis at the end of each reporting period.

Contract Costs

Contract costs are recognized based on the transfer of services to which the asset relates.

The recognition period will consider expected customer lives and whether the asset relates to services transferred under a specific anticipated contract.

As of December 31, 2021, there are no contract costs subject to capitalization.

There were no impairment losses recognized during 2021.

Accounts Receivable

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An unbilled receivable represents revenue earned and recognized from customer activity that was not billed prior to the end of the reporting period.

Unbilled receivables are included in accounts receivable, net on our consolidated balance sheets.

Unbilled receivables are included in accounts receivable and contract assets, net on our consolidated balance sheets.

At the inception or modification of a contract, we determine whether a lease exists and classify it as an operating or finance lease at commencement.

Subsequent to commencement, lease classification is only reassessed upon a change to the expected lease term or contract modification.

Finance and operating lease assets represent our right to use an underlying asset as lessee for the lease term, and lease obligations represent our obligation to make lease payments arising from the lease.

Lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments, net of incentives such as tenant improvement allowances, over the lease term.

As our leases generally do not provide an implicit rate, we use our incremental borrowing rates as of the lease commencement date to determine the present value of lease payments.

The incremental borrowing rate used is a fully collateralized rate that considers our credit rating, market conditions and the term of the lease at the lease commencement date.

We consider a termination or renewal option in the determination of the lease term when it is reasonably certain that we will exercise that option.

Leases with an initial expected term of 12 months or less are not recorded in the Consolidated Balance Sheets and the related lease expense is recognized on a straight-line basis over the lease term.

We have elected to include non-lease components, such as common-area maintenance costs, with lease payments for the purpose of calculating lease right-of-use assets and liabilities, to the extent that they are fixed.

Non-lease components that are not fixed are expensed as incurred as variable lease payments.

We record operating lease expense using the straight-line method within General and administration expense and/or Research and development expense dependent upon the individual leased assets.

Finance lease expense is recognized as amortization expense within Depreciation and amortization expense, and interest expense within Interest expense, net.

For leases with step rent provisions whereby the rental payments increase over the life of the lease, and for leases with rent-free periods, we recognize expense on a straight-line basis over the expected lease term, based on the total minimum lease payments to be made or lease receipts expected to be received.

Operating and finance lease assets are reviewed for impairment based on an ongoing review of circumstances that indicate the assets may no longer be recoverable, such as closures of office spaces or data centers, and leased assets that are no longer being utilized in current operations, and other factors.

When necessary, we calculate operating and finance lease impairments using a discount rate to calculate the present value of estimated subtenant rentals that could be reasonably obtained for the property or asset, if allowed by the lease.

Lease impairment charges for properties or assets no longer used in operations are recorded as a component of Restructuring, acquisition and integration related expenses or General and administrative expenses in t he Consolidated Statements of Operations, dependent upon the qualitative factors surrounding the impairment.

The calculation of lease impairment charges may require significant judgments and estimates, including estimated subtenant rentals, discount rates and future cash flows based on our experience and knowledge of the market in which the property or asset is located, previous efforts to dispose of similar assets and the assessment of existing market conditions.

Impairments are recognized as a reduction of the carrying value of the right-of-use asset and finance lease assets.

Refer to Note 7—Leases for additional information.

Property and Equipment

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Lesser of estimated useful life or life of the lease

Intangible Assets

Intangible assets are recorded at cost and consist of costs incurred for software patent applications.

As of December 31, 2020, we had four issued patents and are pursuing ten additional patents relating to our software.

We received approval for three patents in 2013 and one patent in 2018 and began amortizing the costs of obtaining these patents over the estimated remaining lives of the patents.

Other Intangible Assets

Intangible assets, excluding those acquired from our business combinations, are recorded at cost and consist of costs incurred for software patent applications.

As of December 31, 2021, we had seven issued patents relating to our software.

We received approval for three patents in 2013, one patent in 2018 and three in 2021 and began amortizing the costs of obtaining these patents over the estimated remaining lives of the patents.

If a patent application is rejected or if we abandon efforts to obtain a new patent, all deferred patent costs are expensed immediately.

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Internal-Use Software Development Costs

Capitalized software development costs consist of costs incurred in the development of internal-use software, primarily associated with the development and enhancement of our offer management system and offer placement system.

We capitalize the costs of software developed or obtained for internal use in accordance with ASC Topic 350-40, Internal Use Software .

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Costs incurred in the preliminary project stage and post-implementation operation stages are expensed as incurred and recorded in research and development expense on our consolidated statements of operations.

During 2018, 2019 and 2020, we capitalized the implementation of a new billing system as well as development costs for enhancements to our offer management system totaling $1.6 million, $2.6 million and $4.3 million, respectively.

During 2019, 2020 and 2021, we capitalized development costs for improvements to our platforms, including our Ads Manager Ad Server, totaling $2.6 million, $4.3 million and $10.1 million, respectively.

During the first quarter of 2020, we redesigned certain elements of this project and wrote off development costs totaling $1.0 million recognized in depreciation and amortization expense on our consolidated statement of operations.

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Costs incurred to obtain lines of credit are capitalized and included in other long-term assets on our consolidated balance sheets and amortized ratably over the term of the arrangement.

As described in Note 7—Debt and Financing Arrangements, we entered into a 2018 Loan Facility in 2018 and deferred $ 0.1 million of debt issuance costs associated with obtaining the 2018 Loan Facility and deferred $ 0.1 million of unamortized debt issuance costs attributed to our 2016 Line of Credit and 2016 Term Loan.

We recognized a $ 0.9 million loss on extinguishment of debt related to the unamortized discount and unamortized debt issuance costs associated with our 2016 Term Loan and 2016 Line of Credit.

This expense is included within other (expense) income, net on our consolidated statements of operations and is presented in other non-cash expenses on our consolidated statements of cash flows.

Further, as described in Note 7—Debt and Financing Arrangements, on September 22, 2020, we issued convertible senior notes with an aggregate principal amount of $ 230.0 million bearing an interest rate of 1.00 % due in 2025 (the “Notes”), including the exercise in full of the initial purchasers’ option to purchase up to an additional $30.0 million principal amount of the Notes.

As described in Note 9—Debt and Financing Arrangements, on September 22, 2020, we issued the Notes with an aggregate principal amount of $ 230.0 million bearing an interest rate of 1.00 % due in 2025, including the exercise in full of the initial purchasers’ option to purchase up to an additional $30.0 million principal amount of the Notes.

The net proceeds from this offering were $ 222.7 million, after deducting the initial purchasers’ discounts and commissions and the offering expenses payable by us.

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Refer to Note 10—Stock-based Compensation for additional information regarding our specific award plans and estimates and assumptions used to determine fair value.

Redeemable Convertible Preferred Stock Warrant Liability

Warrants to purchase shares of our redeemable convertible preferred stock are accounted for as derivative liabilities in accordance with ASC Topic 815, Derivatives and Hedging due to the terms of the warrants and related agreements.

We have determined that these warrants do not meet the scope exception of a contract indexed to our stock because of fair value protections contained in agreements governing our redeemable convertible preferred stock as described in Note 10—Redeemable Convertible Preferred Stock.

We record preferred stock warrant liabilities on our consolidated balance sheets at their fair value.

We record the changes in fair value of such instruments as non-cash gains or losses on our statements of operations.

Upon the consummation of our IPO, all of the outstanding warrants to purchase shares of redeemable convertible preferred stock were automatically converted into warrants to purchase shares of common stock.

Refer to Note 12—Fair Value Measurements for additional information.

Common Stock Warrant Liability

In connection with the Series G Stock financing, we issued warrants to purchase shares of our common stock that are accounted for as liabilities in accordance with ASC Topic 480, Distinguishing Liabilities From Equity due to the terms of the warrants and related agreements.

We record these common stock warrant liabilities on our consolidated balance sheets at their fair value.

We record the changes in fair value of such instruments as non-cash gains or losses in our statements of operations .

Refer to Note 12—Fair Value Measurements for additional information.

Fair Value of Financial Instruments

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• Level 3 inputs are unobservable inputs for the asset or liability.

Our nonfinancial assets that we recognize or disclose at fair value on our consolidated financial statements on a nonrecurring basis include property and equipment, intangible assets, capitalized software development costs and deferred FI implementation costs.

The fair values for these assets are evaluated when events or changes in circumstances indicate the carrying value may not be recoverable.

Refer to Note 13—Fair Value Measurements for information regarding the fair value of our financial instruments.

Contingent Consideration

The consideration for the Company’s acquisitions may include future payments that are contingent upon the occurrence of a particular event.

The Company records a contingent consideration obligation for such contingent payments at fair value on the acquisition date.

The Company estimates the fair value of contingent consideration obligations through valuation models designed to estimate the probability of such contingent payments based on various assumptions and incorporating estimated success rates.

Estimated payments are discounted using present value techniques to arrive at an estimated fair value at the balance sheet date.

Changes in the fair value of the contingent consideration obligations are recognized within the Company’s Consolidated Statements of Operations and Comprehensive Loss.

Changes in the fair value of the contingent consideration obligations can result from changes to one or multiple inputs, including adjustments to the discount rates and assumptions used in preparing these models which include estimates such as revenue volatility, revenue discount rate, weighted average cost of capital, and our common stock volatility.

Substantial judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period.

Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period.

Refer to Note 13—Fair Value Measurements for information regarding the fair value of our financial instruments.

Income taxes are accounted for using the asset and liability method.

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Valuation allowances are provided when we determine that it is more likely than not that all of, or a portion of, deferred tax assets will not be utilized in the future.

Significant judgment is required in determining any valuation allowance recorded against deferred tax assets.

Significant judgment is required in determining any valuation allowance recorded against net deferred tax assets.

In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income and the feasibility of tax planning strategies.

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The adoption of this guidance did not have a significant impact on our consolidated statements of operations or cash flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which is intended to provide more decision-useful information about expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

ASU 2016-13 revises the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses on financial instruments, including, but not limited to, available for sale debt securities and accounts receivable.

In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses , and in April 2019, the FASB issued ASU No.

2019-04, C odification Improvements to Topic 326, Financial Instruments – Credit Losses , Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments .

These ASUs provide supplemental guidance and clarification to ASU 2016-13 and must be adopted concurrently with the adoption of ASU 2016-13, cumulatively referred to as “Topic 326.” Effective January 1, 2020, we adopted this guidance.

The adoption of this guidance did not have a material effect on our consolidated financial statements.

On January 1, 2020, we adopted ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

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The adoption of this guidance did not have a material effect on our consolidated financial statements.

On January 1, 2019, we early adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , using the modified retrospective method, as permitted under ASU 2014-09.

The adoption of ASU 2014-09 did not result in a material change in the timing or amount of revenue recognized, nor did it result in the capitalization of incremental contract costs.

Accordingly, there was no cumulative effect adjustment recorded in the consolidated financial statements upon adoption.

On January 1, 2019, we adopted ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities, which is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information.

The adoption of this guidance had no impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

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The ASU is part of the FASB's simplification initiative, which aims to reduce unnecessary complexity in U.S.

GAAP, as it removes the requirement to bifurcate our Convertible Senior Notes ("the Notes") into a separate liability and equity component.

ASU 2020-06 will be effective for annual reporting periods beginning after December 15, 2021.

Early adoption is permitted, but not before annual reporting periods beginning after December 15, 2020.

We are currently evaluating the impact of the new guidance on our consolidated financial statements.

We have generated revenue through the sale of two categories of solutions that leverage our intelligence platform:

(1) our proprietary native banking channel, the Cardlytics platform, and (2) our Other Platform Solutions.

We have generated substantially all of our revenue from sales of the Cardlytics platform since inception.

Our Other Platform Solutions enabled marketers and marketing service providers to leverage the power of purchase intelligence outside the bank channel.

We have shifted the majority of our efforts and resources to support the growth of the Cardlytics platform.

As a result, we have not and do not expect to generate substantial, if any, revenue from Other Platform Solutions for the foreseeable future.

On January 1, 2022 we will adopt this standard using the modified retrospective method which allows for a cumulative-effect adjustment to the opening balance sheet without restating prior periods.

Upon adoption, we expect to initially record a decrease in accumulated deficit of $11.2 million, an increase to long-term debt of $40.2 million and a decrease to additional paid in capital of $51.4 million.

Refer to Note 9, “Debt and Financing Arrangements” for further information about the Notes.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which require that an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with Topic 606, at fair value on the acquisition date.

ASU 2020-08 will be effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption of the amendments is permitted, including adoption in an interim period.

On January 1, 2022 we will adopt this standard and apply to prospective business combinations.

BUSINESS COMBINATIONS

Our acquisitions were accounted for as business combinations and the total purchase consideration of each was allocated to the net tangible and intangible assets and liabilities acquired based on their fair values on the acquisition dates with the remaining amounts recorded as goodwill.

The values assigned to the assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of this Annual Report on Form 10-K may be adjusted during the measurement period for each acquisition of up to 12 months from the dates of acquisition as further information becomes available.

Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.

During the year ended December 31, 2021 we incurred $ 24.4 million of costs in connection with the acquisitions of Dosh and Bridg.

These costs are included in acquisition and integration costs on our consolidated statements of operations.

Acquisition costs primarily represent diligence efforts, legal and advisory costs, broker fees and insurance premiums.

Integration costs primarily represent integration-related employee compensation, advisory costs, and travel costs.

The results of Dosh and Bridg have been included in the consolidated financial statements since their respective dates of acquisition.

For the year ended December 31, 2021, Dosh and Bridg's combined revenue included in the consolidated statement of operations were approximately 8% of consolidated revenue.

Due to the continued integration of the combined businesses, it was impractical to determine the earnings.

For both the acquisitions of Dosh and Bridg, as applicable, the estimated fair values of merchant relationships, partner relationships, and the card-linked subscriber user base were determined using the replacement cost method and lost profits, as applicable, which required us to estimate the costs to recreate an asset of equivalent utility at prices available at the time of the valuation analysis and the lost profits over the period of time to recreate the asset.

Trade names were valued using the "relief-from-royalty" approach.

This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them.

This method required us to estimate the future revenues for the related brands, the appropriate royalty rates and the weighted-average costs of capital.

Developed technology was valued using the excess earnings method, an income approach.

Under the excess earnings method, the fair value of an intangible asset is equal to the present value of the asset’s projected incremental after-tax cash flows (excess earnings) remaining after deducting the market rates of return on the estimated value of contributory assets (contributory charge) over its remaining useful life.

Acquisition of Bridg

On May 5, 2021, we completed the acquisition of Bridg for purchase consideration of $ 578.9 million, as presented below (in thousands):

Cash paid to common and preferred stockholders, warrant holders and vested option holders $ 337,166

Cash paid to extinguish acquiree debt 1,949

Cash paid to settle pre-acquisition liabilities and acquiree deal-related costs 8,012

Fair value of contingent consideration 230,921

Fair value of assumed options attributable to pre-combination service 841

Total purchase consideration $ 578,889

The following table presents the preliminary purchase consideration allocation recorded on our consolidated balance sheet as of the acquisition date (in thousands):

Cash and cash equivalents $ 1,630

Accounts receivable and other assets 1,989

Intangible assets 64,700

Goodwill 536,826

Accounts payable and other liabilities ( 20,694 )

Deferred tax liabilities ( 5,562 )

Total purchase consideration $ 578,889

The goodwill was primarily attributed to the value of future growth expected for the Bridg platform and of synergies created with our current and future offerings.

Goodwill is not expected to be deductible for income tax purposes.

During the fourth quarter of 2021, we recorded a measurement period adjustment to our income tax provision resulting in $5.6 million of additional goodwill.

See Note 11—Income Taxes for further details.

We will owe a brokerage fee derived from the amount of the First Anniversary Payment and the Second Anniversary Payment, if any.

As of December 31, 2021, the brokerage fee of the First Anniversary Payment is expected to be $12.3 million, reflected in accrued expenses on our consolidated balance sheet, and the brokerage fee of the Second Anniversary Payment is expected to be $4.5 million, reflected in other long-term liabilities on our consolidated balance sheet.

The following table presents the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):

Fair Value Useful life (in years)

Trade name $ 200 2.0

Developed technology 53,500 6.0

Merchant relationships 11,000 5.0

Acquisition of Dosh

On March 5, 2021, we completed our acquisition of Dosh for purchase consideration of $ 277.6 million, as presented below (in thousands):

March 5, 2021

Cash paid to common and preferred stockholders, warrant holders and vested option holders $ 136,626

Cash paid to extinguish acquiree debt 16,574

Cash paid to settle pre-acquisition liabilities and acquiree deal-related costs 3,463

Fair value of common stock transferred 117,354

Fair value of assumed options attributable to pre-combination service 3,593

Total purchase consideration $ 277,610

The following table presents the preliminary purchase consideration allocation recorded on our consolidated balance sheet as of the acquisition date (in thousands):

March 5, 2021

Cash and cash equivalents $ 7,323

Accounts receivable and other assets 6,146

Intangible assets 80,000

Goodwill 205,690

Accounts payable and other liabilities ( 4,146 )

Consumer Incentive liability ( 15,101 )

Deferred tax liabilities ( 2,302 )

Total purchase consideration $ 277,610

The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings and of future growth expected from the labor force of Dosh.

Goodwill is not expected to be deductible for income tax purposes.

the fourth quarter of 2021, we recorded a measurement period adjustment of $1.5 million of additional fair value of developed technology.

During the fourth quarter of 2021, we recorded a measurement period adjustment to our income tax provision resulting in $2.3 million of additional goodwill.

See Note 11—Income Taxes for further details.

The following table presents the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):

Fair Value Useful life (in years)

Trade name $ 2,500 3.0

Developed technology 37,500 6.0

Merchant relationships 21,000 5.0

Partner relationships 2,000 7.0

Card-linked subscriber user base $ 17,000 5.0

Pro forma consolidated results of operations

The following unaudited pro forma financial information presents combined results of operations for each of the periods presented as if the acquisitions of Bridg and Dosh had been completed on January 1, 2020.

The pro forma information includes adjustments to depreciation expense for property and equipment acquired, to amortize expense for the intangible assets acquired, and to eliminate the acquisition transaction expenses recognized in the period.

The pro forma financial information is for informational purposes only and is not necessarily indicative of the consolidated results of operations of the combined business had the acquisitions of Bridg and Dosh actually occurred on January 1, 2020, or the results of future operations of the combined business.

For instance, planned or expected operational synergies following the acquisitions are not reflected in the pro forma information.

Consequently, actual results will differ from the unaudited pro forma information presented below.

Revenue $ 223,259 $ 274,486

Net loss ( 92,883 ) ( 138,422 )

GOODWILL AND ACQUIRED INTANGIBLES

The changes in the carrying amount of goodwill for the year ended December 31, 2021 are as follows (in thousands):

Balance as of December 31, 2020 $ —

Goodwill additions 742,516

Balance as of December 31, 2021 $ 742,516

Acquired intangible assets subject to amortization as of December 31, 2021 were as follows:

Cost Accumulated Amortization Net Weighted Average Remaining Useful Life

(in thousands) (in years)

Trade name $ 2,700 $ ( 753 ) $ 1,947 2.1

Developed technology 91,000 ( 11,026 ) 79,974 5.3

Merchant relationships 32,000 ( 4,900 ) 27,100 4.2

Partner relationships 2,000 ( 235 ) 1,765 6.2

Card-linked subscriber user base 17,000 ( 2,798 ) 14,202 4.2

Total other intangible assets $ 144,700 $ ( 19,712 ) $ 124,988

Amortization expense of acquired intangibles for the twelve months ended December 31, 2021 was $ 19.7 million.

As of December 31, 2021, we expect amortization expense in future periods to be as follows (in thousands):

Thereafter 4,472

Total expected future amortization expense $ 124,988

The Cardlytics Platform

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We use a portion of the fees that we collect from marketers to provide these consumer incentives to our FIs’ customers after they make qualifying purchases ("Consumer Incentives").

Leveraging our powerful purchase intelligence platform, we are able to create compelling Consumer Incentives that have the potential to increase return on advertising spend for marketers and measure the effectiveness of the advertising.

During 2019, 2020 and 2021, Consumer Incentives totaled $ 105.6 million, $ 76.5 million and $ 127.0 million, respectively.

We pay certain partners a negotiated and fixed percentage of our billings to marketers less any Consumer Incentives that we pay to partners’ customers and certain third-party data costs ("Partner Share").

Revenue on our consolidated statements of operation is presented net of Consumer Incentives and gross of Partner Share.

Prior to March 31, 2021, we referred to Partner Share as FI Share.

The Cardlytics platform is priced predominantly in two ways:

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In some instances, we may also charge the marketer the Consumer Incentive, in which case the marketer determines the level of Consumer Incentive for the campaign.

Under our CPR pricing model, marketers specify and fund the Consumer Incentive and pay us a separate negotiated, fixed marketing fee, which we refer to as the CPR Fee, for each purchase that we generate.

We generate revenue if the consumer (1) is served marketing, (2) selects the marketing and thereby becomes eligible to earn the applicable Consumer Incentive and (3) makes a qualifying purchase from the marketer during the campaign period.

Under our CPR pricing model, marketers generally specify and fund the Consumer Incentive and pay us a separate negotiated, fixed marketing fee for each purchase that we generate.

We generally generate revenue if the consumer (1) is served marketing, (2) selects the marketing and thereby becomes eligible to earn the applicable Consumer Incentive, and (3) makes a qualifying purchase from the marketer during the campaign period.

We set the CPR fee for marketers based on our estimation of the marketers’ return on spend for the relevant campaign.

The CPR Fee is either a percentage of qualifying purchases or a flat amount.

In some instances, we may solely charge the marketer the CPR Fee, in which case we determine the level of Consumer Incentive for the campaign.

The following table summarizes revenue by pricing model (in thousands):

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Other 3,381 2,009 1,409

Revenue $ 150,684 $ 210,430 $ 186,892

Revenue Recognition

Our revenue generated from our platform consist of transaction-based fees made up of a significant volume of low-dollar transactions, sourced from multiple databases.

The processing and recording of revenue is highly automated and is based on contractual terms with marketers, FIs, and other parties.

Because of the nature of our transaction-based fees, we use automated systems to process and record our revenue transactions.

We determine revenue recognition through the following steps:

• identification of a contract with a customer,

• identification of the performance obligation(s) in the contract,

• determination of the transaction price,

• allocation of the transaction price to the performance obligation(s) in the contract, and

• recognition of revenue when or as the performance obligation(s) are satisfied.

We sell our solutions by entering into agreements directly with marketers or their marketing agencies, generally through the execution of insertion orders.

The agreements state the terms of the arrangement, the negotiated fee, payment terms and the fixed period of time of the campaign.

We consider a contract to exist when a campaign, which typically lasts 45 days, is published to an FI partner under the terms of an insertion order.

With respect to our Cardlytics platform service, our performance obligation is to offer incentives to FIs' customers to make purchases from the marketer within a specified period.

This performance obligation is a series that represents a stand ready obligation to provide a targeted campaign for the marketer to FIs' customers.

The Cardlytics platform fees represent variable consideration that is resolved when FIs' customers make qualifying purchases during the marketing campaign term.

Subsequent to a qualifying purchase, the associated fees are generally not subject to refund or adjustment unless the fees from the marketing campaign exceed a contractual maximum (marketer budget).

Consumer Incentives

We report our revenue on our consolidated statements of operations net of Consumer Incentives.

We do not provide the goods or services that are purchased by our FIs’ customers from the marketers to which the Consumer Incentives relate.

While we are responsible for remitting Consumer Incentives to our FI partners for further payment to their customers, we function solely as an agent of marketers in these arrangements.

We invoice marketers monthly based on the qualifying purchases of FIs' customers as reported by our FI partners during the month.

Invoice payment terms, negotiated on a marketer-by-marketer basis, are typically between 30 to 60 days.

However, for certain marketing agencies with sequential liability terms, payments are not due to us until such marketing agency has received payment from its marketer client.

Accounts receivable is recorded at the amount of gross billings to marketers, net of allowances, for the fees and Consumer Incentives that we are responsible to collect.

Our accrued liabilities also include the amount of Consumer Incentives due to FI partners.

As a result, accounts receivable and accrued liabilities may appear large in relation to revenue, which is reported on a net basis.

During 2018, 2019 and 2020, Consumer Incentives totaled $ 68.3 million, $ 105.6 million and $ 76.5 million, respectively.

FI Share and Other Third-Party Costs

We report our revenue on our consolidated statements of operations gross of FI Share.

FI Share costs are included in FI Share and other third-party costs in our consolidated statements of operations, rather than as a reduction of revenue, because we and not our FI partners act as the principal in our arrangements with marketers.

We are responsible for the fulfillment and acceptability of the services purchased by marketers.

We also have latitude in establishing the price of our services, have discretion in supplier selection and earn variable amounts.

FI partners only supply consumer purchase data and digital marketing space and generally have no involvement in the marketing campaigns or contractual relationship with marketers.

Contract Costs

Given the short-term nature of our marketing campaigns, all contract costs are expensed as incurred since the expected period of benefit is less than one year.

Costs to fulfill a contract include immaterial costs to set up a campaign that we expense as incurred due to the short-term nature of our marketing campaigns

Effective January 1, 2020, we early adopted ASU 2016-02, Leases (Topic 842) .

This standard requires us to recognize a right-of-use asset and a lease liability for all leases with an initial term in excess of twelve months.

The asset reflects the present value of unpaid fixed lease payments coupled with initial direct costs, prepaid lease payments, and lease incentives.

The amount of the lease liability is calculated as the present value of unpaid fixed lease payments.

We evaluate each of our lease and service arrangements at inception to determine if the arrangement is, or contains, a lease and the appropriate classification of each identified lease.

A lease exists if we obtain substantially all of the economic benefits of and have the right to control the use of an asset for a period of time.

Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease agreement.

Lease costs are recognized as expense on a straight-line basis over the lease term.

We consider a termination or renewal option in the determination of the lease term when it is reasonably certain that we will exercise that option.

We adopted ASU 2016-02 using a modified retrospective approach and did not restate comparative periods.

We elected to take the package of practical expedients allowing us to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases.

We have elected to account for all components in a contract as part of the single lease component to which they are related.

Significant assumptions and judgments in calculating the right-of-use assets and lease liability include the determination of the applicable borrowing rate for each lease.

Because our leases generally do not provide a readily determinable implicit interest rate, we use an incremental borrowing rate to measure the lease liability and associated right-of-use asset at the lease commencement date.

The incremental borrowing rate used is a fully collateralized rate that considers our credit rating, market conditions and the term of the lease at the lease commencement date.

During the first quarter of 2020, we recorded right-of-use assets of $ 10.3 million, lease liabilities of $ 13.5 million and eliminated deferred rent liabilities of $ 3.2 million.

These amounts represent right-of-use assets of $7.4 million, lease liabilities of $10.6 million and deferred rent liabilities of $3.2 million as of the adoption date of ASU 2016-02 and right-of-use assets and lease liabilities of $2.9 million, respectively, for office space entered into during the quarter.

As of the adoption date, our office and data center leases have remaining lease terms ranging from one to six years.

During 2020, we recorded additional right-of-use assets and lease liabilities of $1.0 million for data center equipment leases entered into during the year.

We also renewed certain data center lease agreements resulting in a lease modification and the recognition of additional right-of-use assets and lease liabilities of $ 2.2 million.

During 2020, we made cash payments of $4.0 million for operating leases which are included in cash flows (used in) provided by operating activities in our consolidated statement of cash flows.

Cardlytics platform revenue $ 210,430 $ 186,892 $ 258,754

The Bridg platform

The Bridg platform generates revenue through the sale of subscriptions to our cloud-based customer-data platform and the delivery of professional services, such as implementation, onboarding and technical support in connection with each subscription.

We recognize subscription revenue on a ratable basis over the contract term beginning on the date that our service is made available to the customer.

For non-recurring services or transactional based fees dependent on system usage, revenue is recognized as services are delivered.

Our subscription contracts are generally 6 to 36 months in duration and are generally billed in advance on a monthly, quarterly or annual basis.

The following table summarizes revenue from the Bridg platform (in thousands):

Period Ended December 31,

Subscription revenue $ 8,207

Other revenue 155

Bridg platform revenue $ 8,362

The following table summarizes contract balances from the Bridg platform (in thousands):

Contract Balance Type Consolidated Balance Sheets Location December 31, 2021

Contract assets, current Accounts receivable and contract assets, net $ 52

Contract assets, long-term Other long-term assets, net 26

Total contract assets $ 78

Contract liabilities, current Deferred revenue $ 1,627

Contract liabilities, long-term Long-term deferred revenue 173

Total contract liabilities $ 1,800

The following information represents the total transaction price for the remaining performance obligations as of December 31, 2021 related to contracts expected to be recognized over future periods.

This includes deferred revenue on our consolidated balance sheets and contracted amounts that will be invoiced and recognized as revenue in future periods.

As of December 31, 2021, we had $ 17.9 million of remaining performance obligations, of which $7.0 million is expected to be recognized in the next twelve months, with the remaining amount recognized thereafter.

The remaining performance obligations exclude future transaction revenue of variable consideration that are allocated to wholly unsatisfied distinct services that form part of a single performance obligation and meets certain variable allocation criteria.

We have various non-cancellable operating and finance leases for our office spaces, data centers and operational assets with lease periods expiring between 2022 and 2025.

During the year ended December 31, 2021, we recognized additional right-of-use assets and lease liabilities related to our operating leases of $ 5.1 million and $ 5.5 million , respectively.

This includes $ 1.8 million of new lease agreements related to data center expansion, $0.6 million related to the renewal or modification of pre-existing data center lease agreements, $ 0.4 million of new lease agreements related to office space expansion and $ 0.9 million related to the renewal or modification of pre-existing office space lease agreements.

Additionally, right-of-use assets and lease liabilities of $ 1.4 million and $ 1.8 million , respectively, were recorded related to the acquisitions of Dosh and Bridg and assumption of their existing lease agreements.

Refer to Note 4—Business Combinations for further information.

During 2021, we incurred an impairment of $ 0.6 million to the right-of-use assets under operating leases, related to the discontinued use of office space lease obtained during the Dosh acquisition.

The impairment is reflected in a cquisition and integration costs i n the Consolidated Statements of Operations and was attributable to the Cardlytics platform operating segment.

Refer to Note 16—Segments for more information on our operating segments.

During 2020 and 2021, respectively, we made cash payments of $ 4.0 million and $ 7.3 million for operating leases which are included in cash flows received from (used in) operating activities in our consolidated statement of cash flows.

Lease assets and liabilities, net, are as follows (in thousands):

Lease Type Consolidated Balance Sheets Location 2020 2021

Operating lease assets Right-of-use assets under operating leases, net $ 10,764 $ 10,196

Finance lease assets Property and equipment, net 9 86

Total lease assets 10,773 10,282

Operating lease liabilities, current Current operating lease liabilities 4,718 6,028

Operating lease liabilities, long-term Long-term operating lease liabilities 9,381 6,801

Finance lease liabilities, current Accrued expenses 13 36

Finance lease liabilities, long-term Other long-term liabilities — 50

Total lease liabilities $ 14,112 $ 12,915

The following table summarizes activity related to our leases (in thousands):

December 31, 2020

Operating lease expense $ 4,078 $ 5,632

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Short-term lease expense 232 119

The following table presents our weighted average borrowing rate and weighted average lease term:

December 31, 2020

Total net operating lease cost $ 5,157 $ 6,687

The following table presents our weighted average borrowing rates and weighted average lease terms:

Operating leases:

Weighted average borrowing rate 3.4 % 3.4 %

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The following table summarizes future maturities of lease liabilities as of December 31, 2021 (in thousands):

Fiscal Year Operating Leases

Total lease payments 13,337

Imputed interest 508

Total operating lease liabilities $ 14,099

The following table summarizes future payments for operating leases as of December 31, 2019, prior to our adoption of ASU 2016-02 (in thousands):

Minimum Lease

Thereafter 611

Total $ 12,872

Total lease liabilities $ 12,829

PROPERTY AND EQUIPMENT

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Property and equipment, gross 35,112 37,798

Less accumulated depreciation ( 16,621 ) ( 21,247 )

Less accumulated depreciation and amortization ( 21,247 ) ( 26,525 )

Property and equipment, net $ 13,865 $ 11,273

Assets acquired under finance leases, included within computer equipment, are as follows (in thousands):

Finance lease assets, gross $ 1,096 $ 557

Less accumulated depreciation ( 1,067 ) ( 548 )

Finance lease assets, net $ 29 $ 9

Depreciation expense was $ 4.0 million, $ 5.6 million and $ 6.7 million in 2019, 2020 and 2021, respectively.

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Convertible senior notes, net $ 174,011 $ 184,398

Finance leases 37 13

Total debt 37 174,024

Less current portion of long-term debt ( 24 ) ( 13 )

Long-term debt, net of current portion $ 13 $ 174,011

Accrued interest is included within accrued expenses in our consolidated balance sheet.

We had no accrued interest on debt as of December 31, 2019 and $0.6 million of accrued interest as of December 31, 2020.

We had accrued interest on debt of $0.6 million and $0.7 million as of December 31, 2020 and 2021, respectively.

2020 Convertible Senior Notes

On September 22, 2020, we issued convertible senior notes with an aggregate principal amount of $ 230.0 million bearing an interest rate of 1.00 % due in 2025 (the “Notes”), including the exercise in full of the initial purchasers’ option to purchase up to an additional $30.0 million principal amount of the Notes.

On September 22, 2020, we issued Notes with an aggregate principal amount of $ 230.0 million bearing an interest rate of 1.00 % due in 2025, including the exercise in full of the initial purchasers’ option to purchase up to an additional $30.0 million principal amount of the Notes.

The Notes were issued pursuant to an indenture, dated September 22, 2020 (the “Indenture”), between us and U.S.

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The Notes are general senior, unsecured obligations and will mature on September 15, 2025, unless earlier converted, redeemed or repurchased.

The Notes bear interest at a rate of 1.00 % per year, payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2021.

The Notes bear interest at a rate of 1.00 % per year, payable semiannually in arrears on March 15 and September 15 of each year, which began on March 15, 2021.

The Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding June 15, 2025, only under the following circumstances:

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The net carrying amount of the liability component of the Notes is as follows (in thousands):

December 31, 2020

Principal $ 230,000 $ 230,000

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The net carrying amount of the equity component of the Notes is as follows (in thousands):

December 31, 2020

Proceeds allocated to the conversion options (debt discount) $ 53,096 $ 53,096

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Interest expense recognized related to the Notes is as follows (in thousands):

December 31, 2020

Contractual interest expense (due in cash) $ 626 $ 2,300

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Total interest expense related to the Notes $ 3,329 $ 12,687

Effective interest rate 5.32 % 5.52 %

Capped Call Transactions

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Interest accrued on the 2018 Term Loan at an annual rate of interest equal to the prime rate minus 2.75 %, or 2.00 % at the date of repayment in September 2019.

The 2018 Loan Facility includes customary representations, warranties and covenants (affirmative and negative), including restrictive covenants that prohibits mergers, acquisitions and dispositions of assets, incurrence of indebtedness and encumbrances on our assets and the payment or declaration of dividends;

The 2018 Loan Facility includes customary representations, warranties and covenants (affirmative and negative), including restrictive covenants that prohibit mergers, acquisitions and dispositions of assets, incurrence of indebtedness and encumbrances on our assets and the payment or declaration of dividends;

in each case subject to specified exceptions.

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We believe we were in compliance with all financial covenants as of December 31, 2021.

2016 Line of Credit

In September 2016, we entered into a $ 50.0 million loan and security agreement ("2016 Line of Credit") maturing on March 14, 2019.

The 2016 Line of Credit facility was repaid and terminated in May 2018 in connection with obtaining our 2018 Loan Facility.

We recognized a $ 0.1 million loss on extinguishment of debt related to the unamortized debt issuance costs.

This expense is included within other income (expense), net in our consolidated statements of operations and is presented in other non-cash expenses on our consolidated statement of statement of cash flows.

2016 Term Loan

In July 2016, we entered into a $ 24.0 million credit agreement ("2016 Term Loan") maturing on July 21, 2019.

The 2016 Term Loan was repaid and terminated in May 2018 in connection with obtaining our 2018 Loan Facility.

We recognized a $ 0.8 million loss on extinguishment of debt related to the unamortized discount and unamortized debt issuance costs.

Future Payments

Aggregate future payments of principal due upon maturity are as follows (in thousands):

Years Ending December 31, Finance leases Convertible Senior Notes

2021 $ 13 $ —

2025 — 230,000

Years Ending December 31, Convertible Senior Notes

Total debt $ 230,000

STOCK-BASED COMPENSATION

In January 2018, our board of directors and stockholders approved an increase in the total number of shares of common stock issuable under our 2008 Stock Plan ("2008 Plan") to 4,020,000 shares.

Our board of directors has adopted and our stockholders have approved our 2018 Equity Incentive Plan ("2018 Plan").

Our 2018 Plan became effective on February 8, 2018, the date our registration statement in connection with our IPO was declared effective.

We do not expect to grant any additional awards under the 2008 Plan.

Any awards granted under the 2008 Plan will remain subject to the terms of our 2008 Plan and applicable award agreements.

Initially, the aggregate number of shares of our common stock that may be issued pursuant to stock awards under the 2018 Plan was the sum of (i) 1,875,000 shares plus (ii) 61,247 shares reserved, and remaining available for issuance, under our 2008 Plan at the time our 2018 Plan became effective and (iii) the number of shares subject to stock options or other stock awards granted under our 2008 Plan that would have otherwise returned to our 2008 Plan (such as upon the expiration or termination of a stock award prior to vesting).

Our 2018 Equity Incentive Plan ("2018 Plan") became effective in February 2018.

Prior to the 2018 Plan, we granted awards under our 2008 Stock Plan ("2008 Plan").

Any awards granted under the 2008 Plan remain subject to the terms of our 2008 Plan and applicable award agreements, and shares subject to awards granted under our 2008 Plan that are forfeited, canceled or expired prior to vesting become available for use under our 2018 Plan.

As of December 31, 2021, there were 2,033,227 shares of our common stock reserved for issuance under our 2018 Plan.

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Total stock-based compensation expense $ 15,851 $ 32,396 $ 50,264

During 2018, 2019 and 2020, we capitalized less than $ 0.1 million, less than $ 0.1 million and $0.5 million, respectively, of stock-based compensation expense for software development.

During 2019, 2020 and 2021, we capitalized less than $ 0.5 million, $ 0.5 million and $0.7 million, respectively, of stock-based compensation expense for software development.

Additionally, during 2021, we recognized $12.5 million expense related to our assumption of unvested options and RSU and PSU grants to employees of our acquired businesses.

As of December 31, 2021, we have accrued $0.8 million of stock-based compensation for bonus in lieu of cash compensation which has not been settled.

This amount is presented within accrued compensation on our condensed consolidated balance sheet.

Common Stock Options

The term of each option to purchase shares of our common stock pursuant to the Stock Plan is set by our board of directors or a committee thereof.

The term of each option to purchase shares of our common stock pursuant to the 2018 Plan is set by our board of directors or a committee thereof.

Option awards are generally granted with an exercise price not less than the fair value per share of our common stock at the grant date.

Option awards generally vest over four years and expire 10 years following the date of grant.

A summary of common stock option activity is as follows (in thousands, except per share amounts):

A summary of common stock option activity under our 2018 Plan is as follows (in thousands, except per share amounts):

Shares Weighted-Average

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Outstanding - December 31, 2019 1,000 $ 22.99

Granted 39 20.64

Exercised ( 467 ) 21.78 $ 29,523

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Exercised ( 106 ) 19.11 $ 9,710

Forfeited ( 19 ) 27.83

Cancelled ( 1 ) 22.16

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The total fair value of options vested during 2019, 2020 and 2021 was approximately $4.8 million, $2.3 million and $0.5 million respectively.

As of December 31, 2020, $0.3 million of unrecognized compensation expense related to unvested options will be recognized over a weighted-average period of 0.3 years.

All stock option awards outstanding as of December 31, 2020 are expected to vest.

All stock option awards outstanding under our 2018 Plan have vested as of December 31, 2021.

Common Stock Options from Bridg Acquisition

In connection with the acquisition of Bridg, each unvested option to purchase shares of Bridg common stock outstanding as of the acquisition date was converted to unvested options to purchase shares of our common stock.

These awards were granted under the Ecinity, Inc.

2012 Equity Incentive Plan ("Bridg Plan") and were separately registered with the Securities and Exchange Commission on Form S-8 on August 3, 2021.

The maximum aggregate number of shares of our common stock that may be issued upon exercise of these awards is 21,797 shares, and we do not expect to grant any additional awards under the Bridg Plan.

The converted awards retain the same terms and conditions as the awards granted by Bridg prior to the acquisition.

The awards have remaining vesting periods ranging from less than one year to four years.

The following table summarizes changes in common stock options from the Bridg acquisition:

(in thousands) Weighted-Average Exercise Price Weighted Average Contractual Life (in years) Aggregate Intrinsic Value

(in thousands) (1)

Options outstanding — December 31, 2020 — $ —

Assumed 22 8.46

Exercised ( 4 ) 8.53 $ 318

Options outstanding — December 31, 2021 18 8.45 9.35 $ 1,023

Exercisable — December 31, 2021 4 $ 8.35 9.35 $ 225

(1) For options exercised during the period, the aggregate intrinsic value represents the total pre-tax intrinsic value received by option holders based on the closing price of our common stock as reported on the Nasdaq Global Market on the exercise date.

For options outstanding and exercisable at December 31, 2021, the aggregate intrinsic value represents the total pre-tax intrinsic value based on the $ 66.09 per share closing price of our common stock as reported on the Nasdaq Global Market on December 31, 2021, that would have been received by option holders had all in-the-money options been exercised on that date.

The total fair value of options vested during the twelve months ended December 31, 2021 was $ 0.4 million.

As of December 31, 2021, unamortized stock-based compensation expense related to unvested common stock options was $ 0.9 million, and the weighted-average period over which such stock-based compensation expense will be recognized was 1.7 years.

The acquisition date fair value of the converted options was determined using the Black-Scholes options pricing model.

The fair value identified was then allocated between pre-combination service, attributed to purchase consideration net of a 20% anticipated forfeiture rate, and post-combination service, to be recognized as stock-based compensation expense over the remaining vesting term.

The Black-Scholes options pricing model is affected by the estimated fair value of our common stock as well as the following significant inputs:

Value of Common Stock $ 106.34

Expected Term 7.0

Volatility 56.6 %

Risk-free interest rate 1.1 %

Exercise Price $6.54 - 9.81

Dividend Rate — %

Common Stock Options from Dosh Acquisition

In connection with the acquisition of Dosh, each unvested option to purchase shares of Dosh common stock outstanding as of the acquisition date was converted to unvested options to purchase shares of our common stock.

These awards were granted under the Dosh Holdings, Inc.

2017 Stock Incentive Plan ("Dosh Plan") and were separately registered with the Securities and Exchange Commission on Form S-8 on April 9, 2021.

The maximum aggregate number of shares of our common stock that may be issued upon exercise of these awards is 104,098 shares, and we do not expect to grant any additional awards under the Dosh Plan.

The converted awards retain the same terms and conditions as the awards granted by Dosh prior to the acquisition.

The awards have remaining vesting periods ranging from less than one year to four years.

The following table summarizes changes in common stock options from the Dosh acquisition:

(in thousands) Weighted-Average Exercise Price Weighted Average Contractual Life (in years) Aggregate Intrinsic Value

(in thousands) (1)

Options outstanding — December 31, 2020 — $ —

Assumed 104 3.06

Exercised ( 30 ) 3.06 $ 2,492

Forfeited ( 44 ) 3.06

Options outstanding — December 31, 2021 30 3.06 9.15 $ 1,847

Exercisable — December 31, 2021 5 $ 3.06 9.03 $ 308

The total fair value of options vested during the twelve months ended December 31, 2021 was $ 3.5 million.

As of December 31, 2021, unamortized stock-based compensation expense related to unvested common stock options was $ 2.4 million, and the weighted-average period over which such stock-based compensation expense will be recognized was 2.20 years.

The acquisition date fair value of the converted options was determined using the Black-Scholes options pricing model.

The Black-Scholes options pricing model is affected by the estimated fair value of our common stock as well as the following significant inputs:

March 5, 2021

Value of Common Stock $ 128.06

Expected Term 7.0

Volatility 54.6 %

Risk-free interest rate 1.1 %

Exercise Price $ 3.06

Dividend Rate — %

Restricted Stock Units

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Vested ( 779 ) 28.56

Forfeited/canceled ( 132 ) 18.92

Forfeited ( 286 ) 23.34

Unvested - December 31, 2020 2,434 $ 32.49

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Service-based Restricted Stock Units

During 2018, we granted 434,377 RSUs to our employees and non-employee directors, which have annual vesting periods ranging from one to four years.

As of December 31, 2018, there was approximately $4.5 million of unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of 2.4 years.

During 2019, we granted 725,832 RSUs to employees and our non-employee directors, which have annual vesting periods ranging from one to four years.

As of December 31, 2019, there was approximately $ 20.4 million of unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of 3.1 years.

During 2021, we granted 769,653 RSUs to employees, executives, and our non-employee directors, which have annual vesting periods ranging from one to four years.

During 2020, we granted 47,690 immediately vesting RSUs to employees in lieu of cash-based incentive compensation.

During 2021, we additionally granted 30,624 immediately vesting RSUs resulting from the modification of awards through separation agreements.

The immediately vesting awards replaced previously granted RSUs which were cancelled as a result of the modification.

As of December 31, 2021, there was approximately $ 106.5 million of unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of 2.8 years.

The aggregate intrinsic value based on the $ 66.09 closing price of our common stock as reported on the Nasdaq Global Market on December 31, 2021 of unvested RSUs is $ 151.6 million as of December 31, 2021.

Subsequent to December 31, 2020, we granted 52,322 RSUs to employees, which have annual vesting periods ranging from one to four years.

The unamortized stock-based compensation expense related to these RSUs is approximately $ 6.4 million.

Subsequent to December 31, 2021, we granted 283,634 RSUs to employees, which have annual vesting periods ranging from two to four years.

We additionally granted 6,093 RSUs which vest in less than a year and replace previously granted RSUs which were cancelled as a result of the modification of awards due to separation.

The unamortized stock-based compensation expense related to all RSUs granted subsequent to December 31, 2021 is $ 16.1 million.

Performance-based Restricted Stock Units

During 2018, we granted two separate tranches of performance-based RSUs ("2018 PSUs"), each to receive 437,500 shares of common stock, to executives.

The vesting of the 875,000 2018 PSUs was contingent upon the completion of our IPO and includes other performance-based conditions.

The performance condition in the first tranche was to be satisfied when we attained 70.0 million of FI monthly active users ("FI MAUs") within three years of the grant date.

The performance condition in the second tranche was to be satisfied when we attained 85.0 million of average FI MAUs within five years of the grant date.

FI MAUs is a performance metric defined within "Management's Discussion and Analysis of Financial Condition and Results of Operations." We recognize stock compensation for these 2018 PSUs based upon the expected timing of the achievement of these FI MAU targets.

During 2018, 25,000 of the 2018 PSUs were forfeited prior to the FI MAU targets being reached.

During 2018, both average FI MAU targets were reached, resulting in the vesting of both tranches of the 2018 PSUs and the issuance of 850,000 shares of our common stock to fully settle the 2018 PSUs.

During 2018, we recognized $ 18.6 million of stock-based compensation expense related to these awards.

During 2019, we granted 1,252,500 performance-based RSUs (“2019 PSUs”).

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In May 2020, 25% of the adjusted EBITDA tranche vested upon the six-month anniversary of the tranche's achievement date, and the remaining 25% of the tranche vested in November 2020 upon the twelve-month anniversary of the tranche's achievement date.

In April 2020, we granted 476,608 performance-based restricted stock units ("2020 PSUs"), of which 443,276 units have a performance-based vesting condition based on a minimum average revenue per user ("ARPU") target over a trailing 12-month period and 33,332 units have the same performance-based vesting conditions as those that remain unmet under the 2019 PSUs described above.

In October 2021, the compensation committee of our board of directors certified that the target

number of advertisers that were billed over a specified amount during a trailing 12-month period had been achieved resulting in

the immediate vesting of 50% of the related PSU tranche.

In December 2021, the compensation committee of our board of directors certified that the target growth rate for adjusted contribution during a trailing 12-month period had been achieved resulting in the immediate vesting of 50% of the related PSU tranche.

ARPU is a performance metric defined within Item 2.

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Upon the vesting event, 50% of the award vests immediately, 25% of the award vests six months after achievement date and 25% of the award vests 12 months after the achievement date.

Restricted Securities Units

During 2016, we granted $ 1.0 million of restricted securities units to certain executives in lieu of cash bonuses.

Upon issuance, the restricted securities units were indexed to the 2016 convertible promissory notes.

As a result of the Series G Stock financing in 2017, the restricted securities units became indexed to our Series G’ Stock upon conversion of the 2016 convertible promissory notes.

Upon the consummation of our IPO in February 2018, the restricted securities units became indexed to our common stock.

Vesting requirements included both a service-based condition and a performance-based condition.

The service-based condition required each recipient to remain employed until the earlier of i) the date 6 months from the restricted securities unit grant date, ii) the date of a qualified liquidity event, or iii) date of termination without cause.

The performance-based condition required a sale of the Company or IPO event within a fixed period of time not more than 5 years from the restricted securities units grant date.

The restricted securities units were considered liability classified awards, but due to the performance condition relating to sale of the Company or IPO, no compensation cost was recognized until one of these events occurred.

These units vested upon the consummation of our IPO in February 2018, resulting in a non-cash expense of $ 0.5 million, and were settled upon the delivery of 37,406 shares of our common stock in August 2018.

In April 2021, we granted 110,236 performance-based restricted stock units ("2021 PSUs") consisting of two tranches.

The first tranche consists of 55,118 units that have a performance-based vesting condition based on a minimum revenue target over a trailing 12-month period.

The units in this first tranche fully vest upon achievement.

The second tranche consists of 55,118 units with a performance-based vesting condition based on a different minimum revenue target over a trailing 12-month period.

Half of the units in the second tranche vest upon achievement and the remaining units vest six months after the achievement date, subject to continued service.

Each performance-based vesting condition within the two tranches must be achieved within four years of the grant date and are subject to certification by the compensation committee of our board of directors.

Additionally, in April 2021, we granted 10,000 performance-based restricted stock units which have the same unmet vesting condition as the 2020 PSUs based on a minimum ARPU target over a trailing 12-month period as described above.

In July 2021, we granted 34,344 performance-based restricted stock units ("Bridg PSUs") which have performance-based vesting conditions based on the achievement of a minimum ARR target by the first anniversary of the Bridg acquisition.

Vesting is tied to the percentage of the ARR target achieved during the specified period with 50% of the units vesting between 80% - 99.999% achievement and 100% of the units vesting upon 100% achievement.

If these percentages are not met, no Bridg PSUs will vest.

In September 2021, we granted 6,666 PSUs which have the same unmet vesting conditions of the 2020 PSUs, 6,667 PSUs which have the same unmet revenue target vesting condition of the 2021 PSUs and 6,667 PSUs which have the same unmet different revenue target vesting condition of the 2021 PSUs as described above.

We believe that the achievement of all of the above referenced performance-based vesting conditions are probable before the awards' respective expiration dates.

Employee Stock Purchase Plan

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Income tax benefit $ — $ — $ 7,864

(1) The current income tax (expense) during 2019 and 2020 excludes Indian income tax expense of less than $0.1 million and $0.3 million, respectively.

(1) The current income tax (expense) during 2019, 2020 and 2021 excludes Indian income tax expense of less than $0.1 million, $0.3 million and $0.2 million, respectively.

The following table summarizes the significant differences between the U.S.

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Net long-term deferred tax asset $ — $ —

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law.

Key provisions of the CARES Act include one-time payments to individuals, strengthened unemployment insurance, additional health-care funding, loans and grants to certain businesses, and temporary amendments to the Internal Revenue Code.

The corporate income tax provisions of the CARES Act include allowing the carryback of NOLs generated in recent tax years, temporary removal of the 80% NOL usage limitation put in place under the Tax Cuts and Jobs Act ("TCJA"), temporary favorable adjustments to the business interest expense limitation calculated under Sec.

163(j), and the acceleration of refundable AMT credits.

We believe that the corporate income tax provisions of the CARES Act will not have a materially beneficial impact on the Company.

Due to the Company’s history of losses, there is no potential for the carryback of NOLs.

The temporary removal of the 80% income limitation on NOL usage has no impact as the Company generated a taxable loss for 2020 and has substantial NOLs generated in years prior to the enactment of the TCJA not subject to this 80% limitation.

The changes to Sec.

163(j) are not expected to have a beneficial impact as the Company’s interest expense is limited under Sec.

163(j) due to taxable losses rather than the 30% ATI limit enacted under the TCJA.

The Company did take advantage of payroll tax deferrals under the CARES Act and as a result has established a $0.8 million deferred tax asset for nondeductible payroll tax accruals that are being deferred to the December 31, 2021 and December 31, 2022 payment dates.

We have generated historical net losses and recorded a full valuation allowance against our net deferred tax assets.

We expect to maintain a full valuation allowance in the near term.

We have generated historical net losses and recorded a full valuation allowance against our net deferred tax assets, and we expect to maintain a full valuation allowance in the near term.

Realization of any of our net deferred tax assets depends upon future earnings, the timing and amount of which are uncertain.

During 2021, we released $5.6 million and $2.3 million of our valuation allowance, related to net deferred tax liabilities arising from the acquisitions of Bridg and Dosh, respectively, resulting in a combined income tax benefit of $7.9 million reflected on our consolidated statement of operations.

Deferred tax liabilities for Bridg and Dosh primarily related to acquired intangible assets.

The following table presents changes in our valuation allowance (in thousands):

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Rate change on domestic net operating loss carry-forwards ( 32 ) ( 82 ) 419

Change in foreign currency 157 — —

Convertible debt additional paid-in capital tax adjustment - valuation allowance impact — 12,642 —

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Pursuant to IRC Section 382, an ownership change occurs when the stock ownership of 5% stockholders increases by more than 50% over a testing period of three years.

We have experienced ownership changes in the past, and it is possible that we have undergone ownership changes subsequent to December 5, 2018, the date of our most recent evaluation, or that we may undergo such a change in the future.

We have experienced ownership changes in the past, and it is possible that we have undergone ownership changes subsequent to April 2, 2020, the date of our most recent evaluation, or that we may undergo such a change in the future.

Any such ownership change may limit our ability to utilize net operating losses.

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Our tax filings from inception remain subject to income tax examinations.

REDEEMABLE CONVERTIBLE PREFERRED STOCK

Upon the consummation of our IPO in 2018, all of the outstanding shares of redeemable convertible preferred stock were automatically converted into shares of common stock.

Refer to Note 1—Nature of Operations for additional information regarding our IPO.

A summary of the change in carrying amount of the outstanding redeemable convertible preferred stock is as follows (in thousands):

Series G’ Stock Series G Stock

Shares Amount Shares Amount

Balance — December 31, 2017 1,296 $ 44,672 346 $ 5,110

Accretion of redeemable convertible preferred stock — — — 108

Conversion of preferred stock to common stock (1,296) (44,672) (346) (5,218)

Balance — December 31, 2018 — $ — — $ —

Series F-R Stock Series E-R Stock Series D-R Stock

Shares Amount Shares Amount Shares Amount

Balance — December 31, 2017 1,199 58,449 795 $ 29,972 1,396 $ 32,728

Accretion of redeemable convertible preferred stock — 38 — 1 — 7

Conversion of preferred stock to common stock (1,199) (58,487) (795) (29,973) (1,396) (32,735)

Balance — December 31, 2018 — $ — — $ — — $ —

Series C-R Stock Series B-R Stock Series A-R Stock

Shares Amount Shares Amount Shares Amount

Balance — December 31, 2017 1,508 $ 18,366 2,247 $ 5,288 1,857 $ 1,852

Accretion of redeemable convertible preferred stock — 3 — — — —

Conversion of preferred stock to common stock (1,508) (18,369) (2,247) (5,288) (1,857) (1,852)

Balance — December 31, 2018 — $ — — $ — — $ —

Common Stock Warrants Issued in Connection with the Series G Stock Financing

In connection with the Series G Stock financing in May 2017, we issued warrants to purchase an aggregate number of shares of common stock equal to the product obtained by multiplying 346,334 by a fraction, the numerator of which is the difference between $ 68.9516 and the volume weighted average closing price of our common stock over the 30 trading days (or such lesser number of days as our common stock has been traded on the Nasdaq Global Market) prior to the date on which such warrants vest and become exercisable and the denominator of which is such volume weighted average closing price, which warrants vested and became exercisable on August 8, 2018, which was 180 days following the date of our IPO, at an exercise price of $ 0.0004 per share.

In August 2018, we issued warrants to purchase 792,434 shares of common stock at an exercise price of $ 0.0004 per share to the cash investors of our Series G financing, pursuant to our Series G stock purchase agreement.

The warrants had a valuation of $ 15.3 million upon issuance and were immediately exercised.

Refer to Note 12—Fair Value Measurements for additional information regarding the valuation of the warrants issued in connection with the Series G Stock financing.

At any time on or after May 4, 2022, upon written request of the holders of not less than 66 2/3% of the shares of redeemable convertible preferred stock then-outstanding, voting together as a single class on an as-converted to common stock basis, we were required to redeem all outstanding shares of redeemable convertible preferred stock in eight quarterly installments.

The Series A-R Stock, Series B-R Stock, Series C-R Stock, Series D-R Stock, Series E-R Stock, Series F-R Stock, Series G Stock and Series G’ Stock were redeemable at prices equal to $ 1.00 , $ 2.3567 , $ 12.2686 , $ 23.64 , $ 37.7344 , $ 58.40 , $ 34.4758 and $ 34.4758 per share, plus any declared or accumulated but unpaid dividends, respectively.

To the extent that we had insufficient funds to redeem all outstanding shares of redeemable convertible preferred stock, we were required to first redeem shares of Series G Stock and Series G’ Stock, then shares of Series F-R Stock, then shares of Series E-R Stock, then shares of Series D-R Stock, then shares of Series C-R Stock and then shares of Series B-R Stock and Series A-R Stock pari passu , in each case on a pro rata basis among the holders thereof.

The redeemable convertible preferred stock carrying amount was increased by periodic accretions, using the interest method, so that the carrying amount would equal the redemption amount at May 4, 2022.

Accretion was recorded through a charge against additional paid-in capital.

Upon us (i) selling or otherwise disposing of all or substantially all of our property or business or merging with or into or consolidation with any other corporation, limited liability company or other entity, (ii) a majority of the voting power of our outstanding capital stock being transferred or disposed of as a result of a transaction or series of related transactions that are not issuances of capital stock by us primarily for the purposes of raising equity capital or (iii) any dissolution or winding-up of our business, the holders of Series A-R Stock, Series B-R Stock, Series C-R Stock, Series D-R Stock, Series E-R Stock, Series F-R Stock, Series G Stock and Series G’ Stock were entitled to receive payments in amounts per share equaling $ 1.00 , $ 2.3567 , $ 21.4701 , $ 23.64 , $ 37.7344 , $ 58.40 , $ 68.9516 , and $ 34.4758 , plus any declared but unpaid dividends, respectively.

Holders of Series G Stock and Series G’ Stock are pari passu and were to be paid prior, and in preference to, any distribution of assets to the holders of all other classes of capital stock.

Holders of Series F-R Stock were to be paid prior, and in preference to, any distribution of assets to the holders of Series E-R Stock, Series D-R Stock, Series C-R Stock, Series B-R Stock and Series A-R Stock.

Holders of Series E-R Stock were to be paid prior, and in preference to, any distribution of assets to the holders of Series D-R Stock, Series C-R Stock, Series B-R Stock and Series A-R Stock.

Holders of Series D-R Stock were to be paid prior, and in preference to, any distribution of assets to the holders of Series C-R Stock, Series B-R Stock and Series A-R Stock.

Holders of Series C-R Stock were to be paid prior, and in preference to, any distribution of assets to the holders of Series B-R Stock and Series A-R Stock.

Holders of Series A-R Stock and Series B-R Stock are pari passu and were to be paid prior, and in preference to, any distribution of assets to the holders of common stock.

Upon completion of the distributions detailed above, any remaining assets were to be distributed to the holders of common stock, Series A-R Stock, Series B-R Stock, Series C-R Stock, Series D-R Stock, Series E-R Stock, Series F-R Stock, Series G Stock and Series G’ Stock;

such participation in the distribution of remaining assets would cease, however, when the amount that the holders of Series A-R Stock, Series B-R Stock, Series C-R Stock, Series D-R Stock, Series E-R Stock, Series F-R Stock, Series G Stock and Series G’ Stock were entitled to receive upon liquidation equals $ 2.00 per share, $ 4.7134 per share, $ 36.8058 per share, $ 70.92 per share, $ 113.2032 per share, $ 175.20 per share, $ 103.4274 per share and $ 103.4274 per share, respectively, plus any declared but unpaid dividends thereon.

If, however, as a result of a conversion from redeemable convertible preferred stock to common stock, a holder would receive, in the aggregate, an amount greater than the amount that would be distributed to such holder if such holder did not convert such series of redeemable convertible preferred stock into shares of common stock, such holder would have been deemed to have converted such holder’s shares of redeemable convertible preferred stock into shares of common stock for the purposes of determining the amount that such holder is entitled to receive upon liquidation and would not have been entitled to any distribution that would have otherwise been made to the holders of redeemable convertible preferred stock detailed above.

No dividends have been declared or paid as of December 31, 2020.

The holders of our redeemable convertible preferred stock also had the right, at any time, to convert any or all of their shares into such number of shares of common stock as is determined by dividing $ 1.00 in the case of Series A-R Stock, $ 2.3567 in the case of the Series B-R Stock, $ 12.2686 in the case of Series C-R Stock, $ 23.64 in the case of Series D-R Stock, $ 37.7344 in the case of Series E-R Stock, $ 50.0568 in the case of Series F-R Stock, and $ 34.4758 in the case of Series G Stock and Series G’ Stock by the applicable conversion price.

The initial conversion price was $ 1.00 in the case of Series A-R Stock, $ 2.3567 in the case of the Series B-R Stock, $ 2.3567 in the case of Series C-R Stock, $ 23.64 in the case of Series D-R Stock, $ 37.7344 in the case of Series E-R Stock, $ 50.0568 in the case of Series F-R Stock and $ 34.4758 in the case of Series G Stock and Series G’ Stock.

If, at any time following the initial issuance of shares of Series G Stock, we had issued any additional shares of capital stock without consideration or for a consideration per share less than the then-effective conversion price for our redeemable convertible preferred stock, the conversion price for all series of outstanding redeemable convertible preferred stock would have been subject to adjustment.

COMMON STOCK WARRANTS

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These warrants are accounted for under ASC Topic 505-50, Equity-Based Payments to Non-Employees .

Since the performance conditions contained in these warrants are directly related to revenue-producing activities, we incur non-cash expense in FI Share and other third-party costs on our consolidated statements of operations based on the vesting-date fair value of our common stock underlying these warrants.

Since the performance conditions contained in these warrants are directly related to revenue-producing activities, we incur non-cash expense in Partner Share and other third-party costs on our consolidated statements of operations based on the vesting-date fair value of our common stock underlying these warrants.

A summary of common stock warrant activity, exclusive of the common stock warrants issued in connection with our Series G financing is as follows (in thousands, except per share amounts):

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Warrants Outstanding - December 31, 2018 867 21.89

Granted 644 23.64

Exercised ( 821 ) 21.89

Redeemable convertible preferred stock warrants converted to common stock warrants 110 12.16

Forfeited/canceled ( 34 ) 21.29

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Warrants Outstanding - December 31, 2020 — $ —

Exercised ( 9 ) 23.64

Forfeited/canceled ( 3 ) 23.64

Warrants Outstanding - December 31, 2020 — $ —

The performance-based warrants to purchase 644,365 shares of our common stock vested upon the consummation of our IPO in February 2018 as discussed in Note 13—Related Parties.

The conversion date fair value of the Series A Stock warrants and Series B Stock warrants, which were converted to common stock warrants upon our IPO, was reclassified from redeemable convertible preferred stock warrant liability to additional paid-in capital.

See Note 12—Fair Value Measurements for more information.

We were formerly party to a reseller agreement with Fidelity Information Services LLC (“FIS”).

In September 2019, FIS exercised all of their warrants to purchase common stock, resulting in cash proceeds of $15.2 million and the issuance of 644,365 shares of our common stock.

No common stock warrants have been issued or exercised during 2021.

FAIR VALUE MEASUREMENTS

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The following table summarizes our liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

We record the fair value of assets and liabilities in accordance with ASC 820, Fair Value Measurement (“ASC 820”).

ASC 820 defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.

The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.

In addition to defining fair value, ASC 820 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs.

The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

These levels are:

• Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

• Level 3 - unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability at fair value.

Contingent consideration for the acquisition of Bridg

The contingent consideration for the acquisition of Bridg is composed of the First Anniversary Payment and the Second Anniversary Payment.

The fair value of contingent consideration in connection with the Bridg acquisition is as follows (in thousands):

December 31, 2021

Level 1 Level 2 Level 3 Total

Preferred stock warrant liabilities (1)

$ — $ — $ 2,285 $ 2,285

Common stock warrant liabilities (1)

— — 7,945 7,945

Current contingent consideration $ — $ — $ 182,470 $ 182,470

Long-term contingent consideration — — 49,825 49,825

Total liabilities $ — $ — $ 232,295 $ 232,295

(1) Warrant liabilities were zero as of December 31, 2018, 2019 and 2020.

Instruments Recorded at Fair Value Using Level 3 Inputs

Our redeemable convertible preferred stock warrants and common stock warrants issued in connection with the Series G Stock financing are measured and recorded at fair value on a recurring basis using Level 3 inputs.

The carrying amount of the liability component of the Convertible Senior Notes was determined by estimating the fair value of a similar liability without the conversion option using Level 3 inputs.

See Note 7—Debt and Financing Arrangements for additional information about the Convertible Senior Notes.

The table below provides a roll forward of the changes in fair value of our preferred stock warrant and common stock warrant financial instruments (in thousands):

Warrant Liabilities Common

Warrant Liabilities

Balance at December 31, 2017 $ 2,285 $ 7,945

Conversion of redeemable convertible preferred stock warrants to common stock warrants ( 1,736 ) —

Issuance of common stock warrants ( 549 ) 7,309

Changes in fair value — ( 15,254 )

Balance at December 31, 2018 $ — $ —

Prior to our IPO, in valuing our instruments recorded at fair value using Level 3 inputs, our board of directors determined the equity value of our business generally using a combination of the income approach and the market approach valuation methods.

The income approach estimates value based on the expectation of future cash flows that a company will generate, such as cash earnings, cost savings, tax deductions and the proceeds from disposition.

These future cash flows are discounted to their present values using a discount rate derived based on an analysis of the cost of capital of comparable publicly traded companies in similar lines of business, as of each valuation date, and is adjusted to reflect the risks inherent in our cash flows.

The market approach estimates the fair value of a company by applying market multiples of comparable publicly traded companies in a similar line of business.

The market multiples are based on relevant metrics implied by the price that investors have paid for the equity of publicly traded companies.

Given our significant focus on investing in and growing our business, we primarily utilized the forward-looking revenue multiple when performing valuation assessments under the market approach and considered both trading and transaction multiples.

When considering which companies to include as our comparable industry peer companies, we focused on U.S.-based publicly traded companies that were broadly comparable to us based on consideration of industry, market and line of business.

From the comparable companies, a representative market value multiple was determined and applied to our operating results to estimate the value of our company.

The market value multiple was determined based on consideration of multiples of revenue to each of the comparable companies’ historical and forecasted revenue.

In addition, the market approach considers IPO and merger and acquisition transactions involving companies similar to the company’s business being valued.

Multiples of revenue are calculated for these transactions and then applied to the business being valued, after reduction by an appropriate discount.

Once an equity value was determined, we utilized probability-weighted expected return method (“PWERM”) to allocate the overall value of equity to the various share classes.

The PWERM relies on a forward-looking analysis to predict the possible future value of a company.

Under this method, discrete future outcomes, including an IPO and non-IPO scenarios, are weighted based on the estimated the probability of each scenario.

The PWERM is used when discrete future outcomes can be predicted with reasonable certainty based on a probability distribution.

We relied on the PWERM to allocate the value of equity under a liquidity scenario.

The projected equity value relied upon in the PWERM scenario was based on (i) guideline IPO transactions involving companies that were considered broadly comparable to us and (ii) our expectation of the pre-money valuation that we needed to achieve to consider an IPO as a viable exit strategy.

Preferred Stock Warrants

Refer to Note 10—Redeemable Convertible Preferred Stock for additional information regarding our IPO.

A summary of our preferred stock warrants is as follows (in thousands, except per share amounts):

Preferred Series Grant

date Expiration

date Exercise

price December 31, 2017

Series B-R 2/26/2010 2/25/2020 $ 2.36 59

Series D-R 9/21/2012 9/20/2022 $ 23.64 38

Series D-R 9/21/2012 9/20/2022 $ 23.64 13

Total preferred stock warrants 110

The fair value of the warrants to purchase Series B-R Stock and Series D-R Stock decreased from $ 26.80 per share and $ 13.63 per share on December 31, 2017 to $ 20.18 per share and $ 10.57 per share on February 8, 2018, respectively, the date at which they converted to warrants to purchase shares of our common stock and were reclassified to additional paid-in capital on our consolidated balance sheet.

The decrease in the fair value of the warrants to purchase Series B-R Stock and Series D-R Stock primarily resulted from the timing of future potential liquidity events, changes to our forecasted financial results and changes in the valuation of comparable companies.

Warrant liabilities related to redeemable convertible preferred stock were zero as of December 31, 2018, 2019 and 2020.

Common Stock Warrants

Common Stock Warrants Issued in Connection with the Series G Stock Financing

In connection with the Series G Stock financing in 2017, we issued warrants to purchase an aggregate number of shares of common stock equal to the product obtained by multiplying 346,334 by a fraction, the numerator of which is the difference between $ 68.9516 and the volume weighted average closing price of our common stock over the 30 trading days (or such lesser number of days as our common stock has been traded on the Nasdaq Global Market) prior to the date on which such warrants vest and become exercisable and the denominator of which is such volume weighted average closing price, which warrants vested and became exercisable on August 8, 2018, which was 180 days following the date of our IPO, at an exercise price of $ 0.0004 per share.

To determine the fair value of our common stock warrant liability issued in connection with our Series G Stock financing, we utilized a Monte Carlo simulation, which allows for the modeling of complex securities and evaluates many possible outcomes to forecast the stock price of the company post-IPO.

As part of the valuation, we considered various scenarios related to the pricing, timing and probability of an IPO.

We applied an annual equity volatility of 59 % and a discount for lack of marketability of 11 % to arrive at a valuation of $ 7.5 million on the issuance date.

Subsequent to our IPO, the fair value of the common stock warrant liability was estimated based on the fair market value of our common stock at each reporting period, discounted from the date of settlement.

The warrants had a valuation of $ 15.3 million upon issuance and were subsequently exercised, resulting in the issuance of 792,434 shares of our common stock.

As a result of change in fair value of the common stock warrant liability, we recognized a non-cash loss of $ 7.3 million in 2018.

Performance-based Warrants Issued to FIS

In May 2013, we granted 10 -year performance-based warrants to purchase up to 644,365 shares of Series E Stock at an exercise price of $ 23.64 per share.

Since FIS did not participate in the convertible promissory note financing in 2016, their warrants to purchase preferred stock were converted to warrants to purchase common stock.

The warrants vested upon the completion of our IPO in February 2018 resulting in a non-cash expense of $ 2.5 million.

We determined the fair value of these common warrants on the date of IPO using the Black-Scholes option pricing model, which is affected by the fair value of our common stock as well as the following significant inputs:

February 8, 2018

Weighted-average grant date fair value $ 3.91

Significant inputs:

Value of common stock $ 13.00

Expected term 5.3 years

Volatility 50 %

Risk-free interest rate 2.0 %

Dividend yield — %

RELATED PARTIES

Common Stock Warrants Issued in Connection with the Series G Stock Financing

The warrants had a valuation of $ 15.3 million upon issuance and were subsequently exercised, resulting in the issuance of 792,434 shares of our common stock.

The following table summarizes the participation in the common stock warrants issued in connection with the Series G Stock financing by our directors, executive officers and holders of more than 5 % of any class of our capital stock as of the date of such transactions (in thousands):

Related Party Warrants to

Entities affiliated with Polaris Venture Partners (1)

Canaan VIII L.P.

Entities affiliated with Mark A.

John Klinck 13

David Adams 7

(1) Consists of 64,038 warrants to purchase common stock issued to Polaris Venture Partners V, L.P.

("PVP V"), 1,247 warrants to purchase common stock issued to Polaris Venture Partners Entrepreneurs’ Fund V, L.P.

(“PVP EF V”), 438 warrants to purchase common stock issued to Polaris Venture Partners Founders’ Fund V, L.P.

(“PVP FF V”), and 641 warrants to purchase common stock issued to Polaris Venture Partners Special Founders’ Fund V, L.P.

(“PVP SFF V”).

Polaris Venture Management Co.

is a general partner of each of PVP V, PVP EF V, PVP FF V and PVP SFF V and may be deemed to have the sole voting and dispositive power over the shares held by PVP V, PVP EF V, PVP FF V and PVP SFF V.

Bryce Youngren, an active member of our board of directors at the time of transaction, is a Managing Partner of Polaris Partners and may be deemed to share voting and dispositive power over the shares held by PVP V, PVP EF V, PVP FF V and PVP SFF V.

Balen, a member of our board of directors, is a managing member of Canaan Partners VIII LLC, the general partner of Canaan VIII L.P.

Balen does not have voting or investment power over any shares held directly by Canaan VIII L.P.

(3) Consists of 66,365 warrants to purchase common stock issued to TTV Ivy Holdings, LLC, and 13,273 warrants to purchase common stock issued to Mr.

TTV Capital is a provider of management services to TTP GP II, LLC, which is a general partner of TTP Fund II, L.P.

TTV Capital is the manager of TTV Ivy Holdings Manager, LLC, which is the general partner of TTV Ivy Holdings, LLC.

Johnson, a member of our board of directors, is a member of each of TTP GP II, LLC and TTV Ivy Holdings Managers, LLC and holds the title of partner of TTV Capital, and may be deemed to share voting and dispositive power over the shares held by TTP Fund II L.P.

and TTV Ivy Holdings, LLC.

Agreements with Fidelity Information Services, LLC

We are party to a reseller agreement with Fidelity Information Services LLC (“FIS”).

Pursuant to the reseller agreement, FIS markets and sells our services to financial institutions that are current or potential customers of FIS in exchange for a revenue share percentage.

We are also obligated to make milestone payments to FIS related to the integration and deployment of our solutions.

Prior to our IPO, FIS was entitled to elect a member of our board of directors, who was Robert Legters until his resignation immediately prior to our IPO in February 2018.

In May 2013, FIS purchased 397,515 shares of our Series E Stock.

We also granted 10 -year performance-based warrants to purchase up to 644,365 shares of Series E Stock at an exercise price of $ 23.64 per share.

The warrants were exercisable subject to the attainment of certain milestones related to the number of active accounts for which our solutions have been enabled with accelerated vesting upon an IPO.

Since FIS did not participate in the convertible promissory note financing in 2016, their warrants to purchase preferred stock were converted to warrants to purchase common stock.

The warrants vested upon the completion of our IPO in February 2018, resulting in a non-cash expense of $ 2.5 million based on the vesting-date fair value of our common stock underlying these warrants.

Since the performance conditions were directly related to revenue-producing activities, we recognized this expense in FI Share and other third-party costs on our consolidated statement of operations.

This expense is presented in other non-cash expenses on our consolidated statement of cash flows.

Refer to Note 12—Fair Value Measurements for additional information regarding the valuation of the performance-based warrants issued to FIS.

In September 2019, FIS exercised all of their warrants to purchase common stock, resulting in cash proceeds of $ 15.2 million and the issuance of 644,365 shares of our common stock.

The following table shows a reconciliation of the beginning and ending fair value measurements of our contingent consideration, which we have valued using level 3 inputs:

December 31, 2021

Beginning balance $ —

Increase due to acquisition 230,921

Unrealized loss due to change in fair value $ 1,374

Ending balance $ 232,295

In order to determine the fair value of the First and Second Anniversary Payments, we simulated forecasted revenue using a revenue volatility assumption from comparable market data.

We then determined the appropriate discount rate for the assumed cash component and used a Monte Carlo simulation for the assumed stock component.

The assumptions used in preparing these models include estimates such as revenue volatility, revenue discount rate, weighted average cost of capital, and our common stock volatility.

These valuation models use unobservable market inputs, and therefore the liabilities are classified as Level 3.

The following table summarizes key assumptions used for estimating the fair value of the contingent consideration:

December 31, 2021

Revenue volatility 20.0 %

Revenue discount rate 4.7 %

Weighted average cost of capital 12.5 %

Common stock volatility 69.0 %

Portion to be paid in cash 30.0 %

COMMITMENTS AND CONTINGENCIES

FI Implementation Costs

Agreements with certain FI partners require us to fund the development of specific enhancements, pay for certain implementation fees, or make milestone payments upon the deployment of our solution.

Amounts paid to FI partners are included in deferred FI implementation costs on our consolidated balance sheets the earlier of when paid or earned and are amortized over the remaining term of the related contractual arrangements.

Amortization and impairment is included in FI Share and other third-party costs on our consolidated statements of operations and is presented in amortization and impairment of deferred FI implementation costs on our consolidated statement of cash flows.

Certain of these agreements provide for future reductions in FI Share due to the FI partner.

These reductions in FI Share are recorded as a reduction to deferred implementation costs and also result in a cumulative adjustment to accumulated amortization.

During 2018, development payments to a certain FI partner totaled $9.3 million which was partially offset by recoveries through FI Share payment reductions of $4.6 million in 2019.

During 2020, one of our FI partners notified us of plans to end the use of certain platform features prior to the end of our contractual arrangement with the FI partner.

As a result, we recognized a write off of deferred FI implementation costs totaling $0.7 million in FI Share and other third-party costs on our consolidated statements of operations.

The following table presents changes in deferred FI implementation costs (in thousands):

Implementation Costs

Agreements with certain partners require us to fund the development of specific enhancements, pay for certain implementation fees, or make milestone payments upon the deployment of our solution.

Amounts paid to partners are included in deferred implementation costs on our consolidated balance sheets the earlier of when paid or earned and are amortized over the remaining term of the related contractual arrangements.

Amortization and impairment is included in Partner Share and other third-party costs on our consolidated statements of operations and is presented in amortization and impairment of deferred implementation costs on our consolidated statement of cash flows.

Certain of these agreements provide for future reductions in Partner Share due to the partner.

These reductions in Partner Share are recorded as a reduction to deferred implementation costs and also result in a cumulative adjustment to accumulated amortization.

During 2018, development payments to a certain partner totaled $9.3 million which was partially offset by recoveries through Partner Share payment reductions of $4.6 million in 2019.

During 2020 and 2021, we recognized write offs of deferred implementation costs totaling $0.7 million and $1.0 million, respectively, in Partner Share and other third-party costs on our consolidated statements of operations, upon the notification from one of our partners about plans to end the use of certain platform features prior to the end of our contractual arrangement with the partner.

The following table presents changes in deferred implementation costs (in thousands):

2019 2020 2021

Beginning balance $ 15,877 $ 8,383 $ 3,785

Deferred costs 9,250 — —

Recoveries through FI Share ( 5,380 ) ( 4,625 ) —

Recoveries through Partner Share ( 4,625 ) — —

Amortization ( 2,869 ) ( 3,915 ) ( 2,826 )

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Ending balance $ 8,383 $ 3,785 $ —

Payments to FI partners for enhancements not yet placed in service totaled $ 1.0 million as of December 31, 2020.

Future amortization, based on the amounts earned as of December 31, 2020, is $ 2.8 million in 2021.

We have a minimum FI Share commitment with a certain FI partner totaling $ 10.0 million over a 12-month period following the completion of certain milestones, which were not met as of December 31, 2020.

Any expected shortfall penalty will be accrued during the 12-month period following the completion of the milestones.

We have a minimum Partner Share commitment with a certain FI partner totaling $ 10.0 million over a 12-month period beginning on April 1, 2022.

Other Commitments

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Refer to Note 9—Debt and Financing Arrangements for further details.

In connection with our acquisition of Bridg, we will owe a brokerage fee derived from the amount of the First Anniversary Payment and the Second Anniversary Payment, if any.

See Note 4—Business Combinations for further details.

From time to time, we may become involved in legal actions arising in the ordinary course of business including, but not limited to, intellectual property infringement and collection matters.

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the Cardlytics platform in the U.S.

and Other Platform Solutions, as determined by the information that our Chief Executive Officer, who we consider our chief operating decision-maker, uses to make strategic goals and operating decisions.

and the Bridg platform, as determined by the information that our Chief Executive Officer, who we consider our chief operating decision-maker ("CODM"), uses to make strategic goals and operating decisions.

Our Cardlytics platform operating segments in the U.S.

represent our proprietary native bank advertising channels and are aggregated into one reportable segment given their similar economic characteristics, nature of service, types of customers and method of distribution.

Prior to the year ended December 31, 2020, we referred to the Cardlytics platform as Cardlytics Direct.

Our Other Platform Solutions enabled marketers and marketing service providers to leverage the power of purchase intelligence outside the bank channel.

We have shifted the substantial majority of our efforts and resources to support the growth of Cardlytics platform.

As a result, we no longer generate revenue from Other Platform Solutions and do not expect to generate revenue from Other Platform Solutions for the foreseeable future.

represent our proprietary advertising channels and are aggregated into one reportable segment given their similar economic characteristics, nature of service, types of customers and method of distribution.

Subsequent to the acquisition of Bridg, our CODM began reviewing Bridg's revenue and operating expenses.

Therefore, we consider the Bridg platform to be a separate operating segment.

Our CODM allocates resources to, and evaluates the performance of, our operating segments based on revenue and adjusted contribution.

Our CODM does not review assets by operating segment for the purposes of evaluating performance or allocating resources.

Revenue can be directly attributable to each segment.

With the exception of a non-cash equity expense and deferred FI implementation costs, FI Share is also directly attributable to each segment.

Our chief operating decision maker allocates resources to, and evaluate the performance of, our operating segments based on revenue and adjusted contribution.

With the exception of deferred implementation costs, Partner Share and other third-party costs is also directly attributable to each segment.

The accounting policies of each of our reportable segments are the same as those described in the summary of significant accounting policies.

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Adjusted contribution $ 95,219 $ 82,182 $ 121,675

$ 69,364 $ 95,219 $ 82,182

FI Share and other third-party costs (1)(2)

Adjusted Partner Share and other third-party costs (1)

115,211 104,710 137,079

Revenue $ 210,430 $ 186,892 $ 258,754

What changed 10-K

Item 8. Financial Statements and Supplementary Data