What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-01 · 251 added, 182 removed, 476 unchanged (48% of the section changed)

4 unchanged sentences

“Risk Factors” and “Special Note Regarding Forward-Looking Statements” in this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Our company’s mission is to redefine marketing by using data for good.

Our company's mission is to make commerce smarter and rewarding for everyone.

We work to accomplish this mission by operating 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 ("POS") data, including product-level purchase data, to enable marketers, in a privacy-protective manner, to perform analytics and target 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 POS 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 also operate a customer data platform that utilizes point-of-sale ("POS") 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"), that provide us with access to their anonymized purchase data and digital banking customers.

The partners for the Bridg platform predominantly are merchants ("merchant data partners") that provide us with access to their POS data, including product-level purchase data.

By applying advanced analytics to the purchase data we receive, we make it actionable, helping marketers, reach potential 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.

6 unchanged sentences

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.

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

We run campaigns offering compelling Consumer Incentives to drive an expected rate of return on advertising spend for marketers.

27 unchanged sentences

Our historical losses have been driven by our substantial investments in our purchase intelligence platform and infrastructure, which we believe will enable us to expand the use of our platforms by FI partners, merchant data partners and marketers.

On March 5, 2021, we acquired Dosh Holdings, Inc.

("Dosh"), and on May 5, 2021, we acquired Bridg, Inc.

During 2021, we incurred $9.8 million and $14.6 million of costs in connection with these acquisitions, respectively.

On January 7, 2022, we purchased Entertainment, on May 5, 2021, we acquired Bridg, Inc.

("Bridg") and on March 2021 we acquired Dosh Holdings, Inc.

During 2022, we incurred a $3.6 million benefit and a $0.8 million cost in connection with the Bridg and Dosh acquisitions, respectively.

During 2020, 2021 and 2022, our net loss included stock-based compensation expense of $32.4 million, $50.3 million and $44.7 million, respectively.

During the 2022, we received a benefit due to a reduction of the estimated contingent consideration and brokerage fee related to our Bridg acquisition partially offset by an impairment of goodwill.

We also initiated a strategic reduction of our forces in our U.S., U.K., and India operations, including the closure of our Indian office, which resulted restructuring charges of $1.3 million, $0.8 million and $8.1 million during 2020, 2021 and 2022, respectively.

Our FI partners include Bank of America, National Association ("Bank of America"), JPMorgan Chase Bank, National Association (“Chase”) and Wells Fargo Bank, National Association (“Wells Fargo”), as well as many other national and regional financial institutions, including several of the largest bank processors and digital banking providers to reach customers of small and mid-sized FIs.

Bank, National Association began a phased launch of the Cardlytics platform in the first quarter of 2021 that was completed in the third quarter of 2021.

Partner Commitments

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.

Certain of these agreements provide for future reductions in Partner Share due to the FI partner.

During 2018, development payments to a certain FI 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.

We have a minimum Partner Share commitment to a certain FI partner totaling $10.0 million over a 12-month period beginning on April 1, 2022.

Impacts of COVID-19 Pandemic

The COVID-19 pandemic resulted in a global slowdown of economic activity that disrupted supply and demand for a broad variety of goods and services and consumer discretionary spending, including spending by consumers with our marketers.

Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment.

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

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.

We have a minimum Partner Share commitment to a certain FI partner totaling $10.0 million over a 12-month period which began on April 1, 2022.

To the extent that this commitment is expected to exceed the amount of Partner Share otherwise payable to such FI partner in the absence of such commitment, we accrue any expected shortfall over the commitment period.

We accrued for zero and $3.2 million of expected minimum Partner Share commitment shortfalls as of December 31, 2021 and 2022, respectively.

Restructuring and Reduction of Force

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

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

These charges are reflected on our consolidated statement of operations for the year ended December 31, 2020, as follows:

$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.

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

As a result, during the year ended December 31, 2021 we 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.

During 2022, we initiated a strategic reduction of our forces in our U.S., U.K., and India operations, including the closure of our Indian office.

We also began a strategic shift within our organization to migrate certain data and applications to a cloud computing environment.

As part of these initiatives, we recognized severance and medical benefit costs of $8.1 million.

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

$2.1 million in delivery costs, $1.6 million in sales and marketing expense, $1.9 million in research and development expense and $2.5 million in general and administrative expense.

Our Indian office was closed on December 31, 2022 .

As of December 31, 2022 , the remaining costs that have been incurred related to our restructuring and reduction of force but not yet paid are $2.4 million.

On January 7, 2022, we purchased Entertainment for $13.0 million in equity at an agreed-upon price of $66.52 per share, subject to $1.1 million of fair value adjustments based upon our close date, and $2.3 million in cash, subject to $0.4 million of adjustments, for an acquisition date fair value of $14.6 million.

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

4 unchanged sentences

Refer to Note 4—Business Combinations to our consolidated financial statements for further information.

Public Offering of Common Stock

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.

Macroeconomic Considerations

Unfavorable conditions in the economy both in the United States and abroad may negatively affect the growth of our business and our results of operations.

For example, macroeconomic events, including the COVID-19 pandemic, rising inflation, the U.S.

Federal Reserve raising interest rates and the Russia-Ukraine war, have led to economic uncertainty globally.

Historically, during periods of economic uncertainty and downturns, businesses may slow spending on advertising, which may impact our business and our customers’ businesses.

The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods.

If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed.

For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “Risk Factors.”

Non-GAAP Measures and Other Performance Metrics

10 unchanged sentences

Adjusted EBITDA $ (7,780) $ (12,220) $ (45,169)

Cardlytics Monthly Active Users

Cardlytics Monthly Active Users ("MAUs")

We define MAUs as targetable customers or accounts that have logged in and visited online or mobile applications containing offers from, opened an email containing offers from, or redeemed an offer from the Cardlytics platform during a monthly period.

1 unchanged sentence

We believe that MAUs is an indicator of the Cardlytics platform’s ability to drive engagement and is reflective of the marketing base that we offer to marketers.

Cardlytics Average Revenue per User

Cardlytics Average Revenue per User ("ARPU")

We define ARPU as the total revenue generated in the applicable period calculated in accordance with generally accepted accounting principles in the United States ("GAAP"), divided by the average number of MAUs in the applicable period.

We believe that ARPU is an indicator of the value of our relationships with our FI partners with respect to the Cardlytics platform.

Bridg Annualized Recurring Revenue

Bridg Annualized Recurring Revenue ("ARR")

Consistent with the Bridg merger agreement, we define ARR as the annualized GAAP revenue of the final month in the period presented for the Bridg platform.

1 unchanged sentence

We believe that ARR is an indicator of the Bridg platform’s ability to generate future revenue from existing clients.

Billings represents the gross amount billed to customers and marketers for advertising campaigns in order to generate revenue.

Billings represents the gross amount billed to customers and marketers for services in order to generate revenue.

Cardlytics platform billings is recognized gross of both Consumer Incentives and Partner Share.

24 unchanged sentences

Adjusted contribution measures the degree by which revenue generated from our marketers exceeds the cost to obtain the purchase data and the digital advertising space from our partners.

Adjusted contribution demonstrates how incremental marketing spend on our platforms generates incremental amounts to support our sales and marketing, research and development, general and administration and other investments.

Adjusted contribution demonstrates how incremental revenue on our platforms generates incremental amounts to support our sales and marketing, research and development, general and administration and other investments.

Adjusted contribution is calculated by taking our total revenue less our Partner Share and other third-party costs exclusive of deferred implementation costs, which is a non-cash cost.

57 unchanged sentences

Deferred implementation costs (2)

3,785 — 3,785

Adjusted contribution $ 122,981 $ 20,054 $ 143,035

12 unchanged sentences

foreign currency gain (loss);

impairment of goodwill and intangible assets;

deferred implementation costs;

restructuring costs, acquisition and integration costs and change in fair value of contingent consideration.

restructuring and reduction of force costs;

acquisition and integration costs (benefits);

and change in fair value of contingent consideration.

We do not consider these excluded items to be indicative of our core operating performance.

The items that are non-cash include foreign currency (gain) loss, deferred implementation costs, depreciation and amortization expense, stock-based compensation expense and change in fair value of contingent consideration.

The items that are non-cash include foreign currency (gain) loss, impairment of goodwill and intangible assets, deferred implementation costs, depreciation and amortization expense, stock-based compensation expense and change in fair value of contingent consideration.

Notably, any impacts related to minimum Partner Share commitments in connection with agreements with certain FI partners are not added back to net loss in order to calculate adjusted EBITDA.

11 unchanged sentences

Year Ended December 31,

Cardlytics Platform Bridg Platform Consolidated

2020 2021 2022

Net loss $ (55,422) $ (128,565) $ (465,264)

Interest expense, net 3,048 12,563 2,556

Depreciation and amortization expense 4,535 — 4,535

Depreciation and amortization 7,826 29,871 37,544

Stock-based compensation expense 32,396 50,264 44,686

Foreign currency loss (781) — (781)

Loss on extinguishment of debt 51 — 51

Costs associated with financing events 123 — 123

Acquisition and integration costs (benefits) — 24,372 (2,874)

Change in fair value of contingent consideration — 1,374 (128,174)

Foreign currency (gain) loss (1,549) 1,267 6,376

Impairment of goodwill and intangible assets — — 453,288

Restructuring and reduction of force 1,323 713 8,139

Income tax benefit — (7,864) (1,446)

Deferred implementation costs 4,598 3,785 —

Adjusted EBITDA $ (7,780) $ (12,220) $ (45,169)

The following table presents a reconciliation of adjusted EBITDA to adjusted contribution, the most directly comparable segment income measure, for each of the periods indicated (in thousands):

Year Ended December 31, 2020

Cardlytics Platform Bridg Platform Consolidated

Net loss $ (55,422) $ — $ (55,422)

Interest expense, net 3,048 — 3,048

Depreciation and amortization expense 7,826 — 7,826

Adjusted contribution $ 82,182 $ — $ 82,182

Delivery costs 14,310 — 14,310

Sales and marketing expense 45,307 — 45,307

Research and development expense 17,532 — 17,532

General and administration expense 46,532 — 46,532

Stock-based compensation expense (32,396) — (32,396)

Foreign currency gain (1,549) — (1,549)

Deferred implementation costs 4,598 — 4,598

Restructuring costs 1,323 — 1,323

Restructuring and reduction of force (1,323) — (1,323)

Adjusted EBITDA $ (7,780) $ — $ (7,780)

1 unchanged sentence

Cardlytics Platform Bridg Platform Consolidated

Net loss $ (121,455) $ (7,110) $ (128,565)

Income tax benefit (2,302) (5,562) (7,864)

Interest expense, net 12,563 — 12,563

Depreciation and amortization expense 22,485 7,386 29,871

Adjusted contribution $ 121,675 $ 7,953 $ 129,628

Delivery costs 18,170 4,333 22,503

Sales and marketing expense 62,771 3,225 65,996

Research and development expense 35,393 2,711 38,104

General and administration expense 63,379 2,843 66,222

Stock-based compensation expense (47,223) (3,041) (50,264)

Foreign currency loss 1,267 — 1,267

Deferred implementation costs 3,785 — 3,785

Restructuring costs 713 — 713

Acquisition and integration costs 24,380 (8) 24,372

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

Restructuring and reduction of force (713) — (713)

Adjusted EBITDA $ (10,102) $ (2,118) $ (12,220)

Year Ended December 31, 2022

Cardlytics Platform Bridg Platform Consolidated

Adjusted contribution $ 122,981 $ 20,053 $ 143,034

Delivery costs 24,112 6,290 30,402

Sales and marketing expense 67,830 6,915 74,745

Research and development expense 47,579 6,856 54,435

General and administration expense 79,069 2,377 81,446

Stock-based compensation expense (43,490) (1,196) (44,686)

Restructuring and reduction of force (8,139) — (8,139)

Adjusted EBITDA $ (43,980) $ (1,189) $ (45,169)

Components of Results of Operations

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

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

We report our revenue net of Consumer Incentives and gross of Partner Share.

We report our revenue net of Consumer Incentives and gross of Partner Share and other third-party costs.

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.

Cost and Expense

8 unchanged sentences

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

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

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

We expect that our Partner Share and other third-party costs will increase in absolute dollars as a result of our revenue growth.

1 unchanged sentence

Delivery costs consist primarily of personnel costs of our campaign, data operations and production support teams, including salaries, benefits, bonuses, stock-based compensation and payroll taxes.

Delivery costs also include hosting facility costs, purchased or licensed software costs, outsourcing costs and professional services costs.

As we add data center capacity and support personnel in advance of anticipated growth, our delivery costs will increase in absolute dollars and if such anticipated revenue growth does not occur, our delivery costs as a percentage of revenue will be adversely affected.

Delivery costs also include hosting costs, purchased or licensed software costs, outsourcing costs and professional services costs.

As we migrate our technology to the cloud, our delivery costs will increase in absolute dollars and if such anticipated revenue growth does not occur, our delivery costs as a percentage of revenue will be adversely affected.

Over time, we expect delivery costs will decline as a percentage of revenue.

12 unchanged sentences

General and administrative expense also includes professional fees for external legal, accounting and consulting services, financing transaction costs, facilities costs such as rent and utilities, royalties, bad debt expense, travel expense, property taxes and franchise taxes.

We expect that general and administrative expenses will increase on an absolute dollar basis but decrease as a percentage of revenue as we focus on processes, systems and controls to enable the our internal support functions to scale with the growth of our business.

We expect that general and administrative expenses will increase on an absolute dollar basis but decrease as a percentage of revenue as we focus on processes, systems and controls to enable our internal support functions to scale with the growth of our business.

Acquisition and Integration Costs

7 unchanged sentences

If we make additional acquisitions, it is possible that we will incur gains or losses in the future due to the change in the fair value of contingent consideration.

Impairment of Goodwill and Intangible Assets

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

We evaluate the recoverability of our finite-lived intangible assets and other long-lived assets whenever events or substantive changes in circumstances indicate that the carrying amount may not be recoverable.

The impairment analysis involves determining whether the estimated fair value of each intangible asset exceeds its carrying amount.

Our estimation of the fair value of definite lived intangible assets include the use of discounted cash flow analyses which reflected estimates of future revenue, customer attrition rates, royalty rates, cash flows, and discount rates.

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.

Depreciation and Amortization Expense

22 unchanged sentences

General and administrative expense 46,532 66,222 81,446

Acquisition and integration costs — — 24,372

Acquisition and integration costs (benefits) — 24,372 (2,874)

Impairment of goodwill and intangible assets — — 453,288

Change in fair value of contingent consideration — 1,374 (128,174)

2 unchanged sentences

Operating loss (53,923) (122,599) (457,778)

Non-operating income (expense):

Other (expense) income:

Interest expense, net (3,048) (12,563) (2,556)

Foreign currency gain (loss) 1,549 (1,267) (6,376)

Total non-operating income (expense) 181 (1,499) (13,830)

Total other expense (1,499) (13,830) (8,932)

Loss before income taxes (55,422) (136,429) (466,710)

3 unchanged sentences

In this section, we discuss the results of our operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.

For a discussion of the year ended December 31, 2020 compared to the year ended December 31, 2019, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2020.

For a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2021.

Year Ended December 31, Change

6 unchanged sentences

The $31.4 million increase in revenue during 2022 compared to 2021 was comprised of a $48.4 million increase in billings, offset by a $17.0 million increase in Consumer Incentives.

The billings increase was comprised of a $65.0 million increase in sales to existing marketers and a $65.7 million increase in sales to new marketers.

Revenue during 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 2021, we saw a recovery of both consumer spending as well as the advertising budgets of our clients.

Consumer Incentives grew at a higher rate than billings during 2021 compared to 2020 primarily as a result of changes in advertiser mix and an increase in Consumer Incentives funded by partners through a reduction in Partner Share.

The billings increase was comprised of a $6.9 million net increase in sales to existing marketers and a $41.5 million increase in sales to new marketers in 2022.

Consumer Incentives grew at a higher rate than billings during 2022 compared to 2021 primarily as a result of changes in advertiser mix and Consumer Incentives funded by partners through a reduction in Partner Share.

Costs and Expenses

9 unchanged sentences

Partner Share and other third-party costs increased by $14.2 million during 2022 compared to 2021 primarily due to increase in billings partially offset by an increase in Consumer Incentives funded by partner through a reduction of Partner Share.

Deferred implementation costs decreased by $0.8 million during 2021 compared to 2020 primarily due to a write off of deferred implementation costs totaling $0.7 million in 2020.

Deferred implementation costs decreased by $3.8 million during 2022 compared to 2021 primarily due to the end of the useful lives of certain platform enhancements.

Delivery Costs

2 unchanged sentences

(dollars in thousands)

Delivery costs $ 14,310 $ 22,503 $ 8,193 57 %

Delivery costs excluding stock-based compensation expense and restructuring and reduction of force $ 20,554 $ 25,860 $ 5,306 26 %

Stock-based compensation expense 1,865 2,682 817 44

Restructuring and reduction of force 84 1,861 1,777 n/a

Total delivery costs $ 22,503 $ 30,403 $ 7,900 35 %

% of revenue 8 % 10 %

Delivery costs increased by $8.2 million during 2021 compared to 2020 primarily due to increased costs from our acquired businesses of $5.5 million, inclusive of $0.3 million of stock-based compensation expense.

The remaining increase related to a $1.2 million increase in hosting-related IT costs, a $1.1 million increase in personnel costs associated with additional headcount to host the Cardlytics platform for certain FI partners and a $0.4 million increase in stock-based compensation expense.

Delivery costs increased by $7.9 million during 2022 compared to 2021.

Delivery costs excluding stock-based compensation and restructuring and reduction of force increased by $5.3 million primarily due to a $2.9 million increase in hosting-related IT costs, a $1.8 million increase due to costs from our acquired businesses , a $0.5 million increase in personnel costs associated with additional headcount and a $0.1 million increase due to facilities expense.

Sales and Marketing Expense

2 unchanged sentences

(dollars in thousands)

Sales and marketing expense $ 45,307 $ 65,996 $ 20,689 46 %

Sales and marketing expense excluding stock-based compensation expense and restructuring and reduction of force $ 51,849 $ 60,671 $ 8,822 17 %

Stock-based compensation expense 13,780 11,935 (1,845) (13)

Restructuring and reduction of force 367 2,139 1,772 n/a

Total sales and marketing expense $ 65,996 $ 74,745 $ 8,749 13 %

% of revenue 25 % 25 %

Sales and marketing expense increased by $20.7 million during 2021 compared to 2020 primarily due to increased costs from our acquired businesses of $10.5 million , inclusive of $2.8 million of stock-based compensation expense.

The remaining increase related to $6.8 million in personnel costs associated with additional headcount, a $1.7 million increase in marketing expenses, a $1.1 million increase in stock-based compensation expense and a $0.6 million increase in professional fees.

Sales and marketing expense increased by $8.7 million during 2022 compared to 2021.

Sales and marketing expense excluding stock-based compensation and restructuring and reduction of force increased by $8.8 million primarily due to a $6.2 million increase due to costs from our acquired businesses, a $1.0 million increase in travel expenses, a $0.8 million increase in personnel costs associated with additional headcount, a $0.8 million increase in software licensing costs and a $0.3 million increase due to facility expense, offset by a $0.3 million decrease in professional fees.

Research and Development Expense

2 unchanged sentences

(dollars in thousands)

Research and development expense $ 17,532 $ 38,104 $ 20,572 117 %

Research and development expense excluding stock-based compensation expense and restructuring and reduction of force $ 27,468 $ 39,573 $ 12,105 44 %

Stock-based compensation expense 10,328 13,262 2,934 28

Restructuring and reduction of force 308 1,600 1,292 n/a

Total research and development expense $ 38,104 $ 54,435 $ 16,331 43 %

% of revenue 14 % 18 %

Research and development expense increased by $20.6 million during 2021 compared to 2020 primarily due to increased costs from our acquired businesses of $9.2 million , inclusive of $1.9 million of stock-based compensation expense.

The remaining increase is due to $6.2 million in personnel costs associated with additional headcount, a $3.7 million increase in stock-based compensation expense and a $0.9 million increase in professional fees and a $0.6 million increase in software license costs.

Research and development expense increased by $16.3 million during 2022 compared to 2021.

Research and development expense excluding stock-based compensation and restructuring and reduction of force increased by $12.1 million primarily due to a $8.2 million increase in personnel costs associated with additional headcount, a $3.5 million increase due to costs from our acquired businesses, a $1.1 million increase in software licensing costs, a $0.2 million increase due to facility expense, a $0.2 million increase due to travel expenses and a $0.1 million increase due to incentive compensation, partially offset by a $1.2 million decrease in professional fees.

General and Administrative Expense

2 unchanged sentences

(dollars in thousands)

General and administration expense $ 46,532 $ 66,222 $ 19,690 42 %

General and administrative expense excluding stock-based compensation expense and restructuring and reduction of force $ 41,931 $ 62,168 $ 20,237 48 %

Stock-based compensation expense 24,291 16,807 (7,484) (31)

Restructuring and reduction of force — 2,471 2,471 n/a

Total general and administrative expense $ 66,222 $ 81,446 $ 15,224 23 %

% of revenue 25 % 27 %

General and administrative expense increased by $19.7 million during 2021 compared to 2020 primarily due to increased costs from our acquired businesses of $12.9 million , inclusive of $7.5 million of stock-based compensation expense.

The remaining increase is due to $2.5 million in personnel costs associated with additional headcount, a $2.3 million increase in professional fees, $1.8 million increase in software licensing costs, a $0.1 million increase in facility costs and a $0.1 million increase in stock-based compensation expense.

General and administrative expense increased by $15.2 million during 2022 compared to 2021.

General and administrative expense excluding stock-based compensation and restructuring and reduction of force increased by $20.2 million primarily due to a $6.6 million increase due to costs from our acquired businesses, a $4.6 million increase in personnel costs associated with additional headcount, a $3.0 million increase in professional fees, $2.2 million increase in software licensing costs, a $1.0 million increase in bad debt related to our acquired businesses, a $0.7 million increase in our insurance premiums, a $0.5 million increase in marketing expenses, a $0.5 million increase in tax expense and a $1.1 million increase due to other expenses including travel, facility expense, professional development and professional fees.

Stock-based Compensation Expense

8 unchanged sentences

% of revenue 19 % 15 %

Stock-based compensation expense increased by $17.9 million during 2021 compared to 2020 primarily due to $12.5 million expense related to our assumption of unvested options and grants of restricted stock units to employees of our acquired businesses.

The remaining increase is due to grants of restricted stock units to current employees and new hires during 2021.

Acquisition and integration costs

Stock-based compensation expense decreased by $5.6 million during 2022 compared to 2021 primarily due to forfeitures of restricted stock units related to our reduction of force.

Refer to Note 10—Stock-based Compensation to our consolidated financial statements for additional information regarding the change in stock compensation expense.

Acquisition and integration costs (benefits)

Year Ended December 31, Change

1 unchanged sentence

(dollars in thousands)

Acquisition and integration costs $ — 24,372 $ 24,372 n/a

Acquisition and integration costs (benefits) $ 24,372 (2,874) $ (27,246) n/a

% of revenue 9 % (1) %

During 2021 we incurred $24.4 million of costs in connection with the acquisitions of Dosh and Bridg.

For the year ended December 31, 2021, these amounts include $9.4 million of broker and insurance fees, $8.0 million of legal and accounting fees, $6.3 million of severances and incentive compensation and $0.7 million of travel costs.

Refer to Note 4—Business Combinations to our consolidated financial statements for additional information regarding these

acquisitions.

Acquisition and integration costs (benefits) decreased by $27.2 million during 2022 compared to 2021.

During 2021 we recognized $24.4 million of expense primarily due to the acquisitions of Dosh and Bridg.

During 2022 we recognized a $2.9 million benefit primarily due to a reduction in our estimated broker fee related to the contingent consideration for the Bridg acquisition, partially offset by $0.1 million of costs incurred by the acquisition of Entertainment.

Refer to Note 4—Business Combinations to our consolidated financial statements for additional information regarding these acquisitions.

Change in fair value of contingent consideration

5 unchanged sentences

During 2021, we recognized $1.4 million of expense due to an increase in the fair value of contingent consideration related to our acquisition of Bridg.

During 2022 we recognized a $128.2 million gain, respectively, in the fair value of contingent consideration related to our acquisition of Bridg.

This gain was driven by the mark-to-market reduction in fair value of the 2,068,995 shares of our common stock that we expect to issue to satisfy 70% of the contingent consideration related to the First Anniversary Payment.

Refer to Note 12—Fair Value Measurements to our consolidated financial statements for additional information regarding the contingent consideration.

Impairment of goodwill and intangible assets

Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

Impairment of goodwill and intangible assets $ — $ 453,288 $ 453,288 n/a

% of revenue — % n/a

During 2022, we recognized $453.3 million of impairment of goodwill and intangible assets related to the Cardlytics and Bridg Platform.

The impairment of goodwill and intangible assets resulted from a continued slowdown in the global economy and decreased consumer spend, and a sustained decline in our stock price.

Refer to Note 5—Goodwill and Acquired Intangibles to our condensed consolidated financial statements for additional information regarding the goodwill impairment.

Depreciation and Amortization Expense

4 unchanged sentences

% of revenue 11 % 13 %

Depreciation and amortization expense increased by $22.0 million during 2021 compared to 2020 primarily driven by the increase of amortization of intangible assets related to the Dosh and Bridg acquisitions.

Depreciation and amortization expense increased by $7.7 million during 2022 compared to 2021 primarily driven by a full year of amortization of intangible assets related to the Dosh and Bridg acquisitions.

Interest Expense, Net

6 unchanged sentences

% of revenue (5) % (1) %

Interest expense, net increased by $9.5 million during 2021 compared to 2020 primarily driven by an increase in interest expense, including contractual interest expense, amortization of debt issuance costs and amortization of debt issuance costs, related to the Notes which were issued on September 22, 2020 and have an aggregate principal amount of $230.0 million bearing interest of 1.00%.

Foreign Currency Gain (Loss)

Interest expense, net decreased by $10.0 million during 2022 compared to 2021 primarily driven by reduced amortization of debt discount reflected as interest expense related to the Notes upon the adoption of ASU 2020-06 on January 1, 2022.

Foreign Currency Loss

Year Ended December 31, Change

1 unchanged sentence

(dollars in thousands)

Foreign currency gain (loss) $ 1,549 $ (1,267) $ (2,816) (182) %

Foreign currency loss $ (1,267) $ (6,376) $ (5,109) 403 %

% of revenue — % (2) %

Foreign currency gain (loss) decreased by $2.8 million during 2021 compared to 2020 primarily due to the decrease in the value of the British pound relative to the U.S.

Foreign currency loss increased by $5.1 million during 2022 compared to 2021 primarily due to the decrease in the value of the British pound relative to the U.S.

Income Tax Benefit

4 unchanged sentences

% of revenue 3 % — %

Income tax benefit increased by $7.9 million during 2021 compared to 2020 due to the release of a portion of our valuation allowance in connection with deferred tax liabilities arising from our acquisitions of Dosh and Bridg.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP.

The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses.

We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances.

We evaluate our estimates and assumptions on an ongoing basis.

Our actual results may differ from these estimates.

Our most critical accounting policies are summarized below.

Refer to the notes to our consolidated financial statements for additional information.

Business Combinations

We estimate the fair value of assets acquired and liabilities assumed in a business combination.

Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement.

Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology, useful lives, and discount rates.

Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

During the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

On the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

Fair Value of Contingent Consideration

When required by GAAP, assets and liabilities are reported at fair value on our consolidated financial statements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The consideration for our acquisition of Bridg may include future payments that are contingent upon the results of Bridg's operations.

We recorded a contingent consideration obligation for such contingent payments at fair value on the acquisition date.

We estimate 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 our consolidated statements of operations.

Changes in the fair value of the contingent consideration obligations can result from changes to one or multiple inputs, including adjustments to forecasts, 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 in our records in any given period.

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

Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in a business combination.

We evaluate our goodwill for impairment annually during the fourth quarter and whenever events or changes in circumstances indicate the carrying value of a reporting unit may not be recoverable.

Our reporting units are one level below the operating segments at which level our segment management conducts regular reviews of the operating results.

Our impairment evaluation consists of a qualitative assessment.

If this assessment indicates that it is more likely than not the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not considered impaired.

Otherwise, a quantitative impairment test is performed by comparing the fair value of a reporting unit to its carrying value, including goodwill.

We can bypass the qualitative assessment for any period and proceed directly to the quantitative impairment test.

If the carrying value of the net assets associated with the reporting unit exceeds the fair value of the reporting unit, goodwill is considered impaired and will be determined as the amount by which the reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

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

Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and operating loss and tax credit carryforwards.

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 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.

In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

Estimates of future taxable income are based on assumptions that are consistent with our plans.

Assumptions represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

If actual amounts differ from our estimates, the amount of our tax expense and liabilities could be materially impacted.

We have recorded a full valuation allowance related to our net deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.

We recognize the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on its technical merits as of the reporting date, and then, only in an amount more likely than not to be sustained upon review by the tax authorities.

Where applicable, we classify associated interest and penalties as income tax expense.

The total amounts of interest and penalties were not material.

We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

Recent Accounting Pronouncements

Refer to Note 3—Accounting Standards to our consolidated financial statements for additional information.

Income tax benefit decreased by $6.4 million during 2022 compared to 2021 due to the release of a portion of our valuation allowance in connection with deferred tax liabilities arising from our acquisitions of Dosh and Bridg.

Liquidity and Capital Resources

3 unchanged sentences

Working capital (1)

304,317 31,375

Accounts receivable and contract assets, net 95 80

12 unchanged sentences

We have historically financed our operations and capital expenditures through convertible note financings, private placements of our redeemable convertible preferred stock, public offerings of our common stock as well as lines of credit and term loans.

Through December 31, 2021, we have received net proceeds of $222.7 million from the issuance of convertible senior notes, net proceeds of $196.2 million from the issuance of preferred stock and convertible promissory notes and net proceeds of $611.1 million from public equity offerings.

On May 5, 2021, we completed the acquisition of Bridg.

2 unchanged sentences

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

Our other future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, our merger and acquisition efforts, the continued expansion of sales and marketing activities, the enhancement of our platforms, the introduction of new solutions, the continued market acceptance of our solutions and the extent of the impact of COVID-19 on our operational and financial performance.

We have determined the First Anniversary Payment to be $126.4 million and have estimated the Second Anniversary Payment to be $67.8 million, inclusive of brokerage fees and transaction bonuses.

We expect our minimum cash requirements, inclusive of contractual cash broker fees and transaction bonuses, for the First Anniversary Payment and Second Anniversary Payment to be $43.3 million and $24.0 million, respectively.

We are currently in a dispute with the Bridg Stockholder Representative regarding the amount of the First Anniversary Payment.

Refer to Note 4—Business Combinations to our condensed consolidated financial statements for additional information regarding the dispute.

We expect to continue to incur operating losses for the foreseeable future and may require additional capital resources to continue to grow our business.

We believe that current cash and cash equivalents will be sufficient to fund our operations and capital requirements for at least the next 12 months following the date our consolidated financial statements were issued.

We believe that current cash and cash equivalents will be sufficient to fund our operations and capital requirements for at least the next 12 months and in the long-term following the date our consolidated financial statements were issued.

However, if our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be materially and adversely impacted.

11 unchanged sentences

67,290 — — — 67,290

Broker fee on contingent consideration 12,300 4,500 — — 16,800

Purchase obligations (5)

4 unchanged sentences

(3) Operating lease obligations represent future minimum lease payments under our non-cancelable operating leases with an initial term in excess of one year.

(4) Amount represents the estimated fair value of the 30% cash portion of the Bridg First and Second Anniversary Payments.

(4) Amount represents the estimated fair value of the 30% cash portion of the Bridg First and Second Anniversary Payments, inclusive of $13.8 million of broker fees and transaction bonuses.

(5) Purchase obligations include all legally binding contracts such as hardware, software, licenses and legally binding service contracts.

2 unchanged sentences

The table above does not include obligations under agreements that we can cancel without a significant penalty.

We have a minimum Partner Share commitment to a certain FI partner totaling $10.0 million over a 12-month period beginning on April 1, 2022.

We have a minimum Partner Share commitment to a certain FI partner totaling $10.0 million over a 12-month period which began on April 1, 2022.

We accrued for zero and $3.2 million of expected minimum Partner Share commitment shortfalls as of December 31, 2021 and 2022, respectively.

Sources of Funds

2 unchanged sentences

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.

We received total net proceeds of $61.3 million after deducting underwriting discounts and commissions of $3.2 million and offering costs of $0.2 million.

Selling stockholders, including certain of our executive officers and entities affiliated with certain of our directors, sold 1,194,365 shares of common stock in the offering at a public offering price of $34.00.

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

During 2019, 2020 and 2021, we also received $29.7 million, $2.2 million and $2.4 million, respectively, in proceeds from the exercise of options and warrants to purchase shares of common stock, respectively.

During 2020 and 2021 we also received $2.2 million and $2.4 million respectively, in proceeds from the exercise of options and warrants to purchase shares of common stock, respectively.

2020 Convertible Senior Notes

1 unchanged sentence

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

We used $26.5 million of the net proceeds to pay the cost of capped call transactions (the "Capped Calls") described under the Financing Activities section below.

We used $26.5 million of the net proceeds to pay the cost of capped call transactions (the "Capped Calls") related to the Notes.

2018 Loan Facility

On May 14, 2019, we amended our 2018 Loan Facility to increase the capacity of our Line of Credit, from $30.0 million to $40.0 million, and decrease the capacity of our 2018 Term Loan from $20.0 million to $10.0 million.

This amendment also extended the maturity date of the 2018 Loan Facility from May 21, 2020 to May 14, 2021.

We repaid $10.0 million of the principal balance of the 2018 Term Loan upon the execution of the amendment in May 2019 and repaid the remaining $10.0 million principal balance in September 2019.

On September 17, 2020, we amended our 2018 Loan Facility to allow for the issuance of the Notes.

On December 30, 2020, we amended our 2018 Loan Facility to increase the capacity of our Line of Credit, from $40.0 million to $50.0 million.

This amendment also extended the maturity date of the 2018 Loan Facility from May 14, 2021 to December 31, 2022.

As of December 31, 2021, we had $50.0 million of unused borrowings available under our 2018 Line of Credit.

Prior to the December 2020 amendment, the 2018 Loan Facility contained moving trailing 12-month billing covenants, which ranged from $210.0 million to $255.0 million, during the term of the facility.

The former terms of the 2018 Loan Facility also required us to maintain a total cash balance plus liquidity under the 2018 Line of Credit of not less than $5.0 million.

Effective with the December 2020 amendment, the former billings and liquidity covenants were removed and were replaced with a requirement to maintain a cash to funded senior debt ratio under the 2018 Line of Credit of 1.25:1.00.

On April 2022, we amended our 2018 Loan Facility to increase the capacity of our Line of Credit from $50.0 million to $60.0 million with an option to increase to $75.0 million upon syndication.

This amendment also extended the maturity date of the 2018 Loan Facility from December 31, 2022 to April 29, 2024.

As part of this amendment, the former cash covenant, as described below, was removed and was replaced with a requirement to maintain a minimum level of adjusted contribution and a minimum adjusted cash of $25.0 million, which is reduced by eligible accounts receivable in excess of the loan capacity.

On November 29, 2022 we amended our 2018 Loan Facility to modify the eligible account receivable to exclude UK accounts, reduce the ability to borrow up to 85% of the amount of our eligible accounts receivable to 50% and adjusted the required minimum level of adjusted contribution.

On February 16, 2023 we amended our 2018 Loan Facility to remove and replace the former adjusted contribution covenant with a requirement to maintain a minimum level of adjusted EBITDA.

Under the 2018 Loan Facility relating to the 2018 Line of Credit, we are able to borrow up to the lesser of $50.0 million or 50% of the amount of our eligible accounts receivable.

Interest on advances under the 2018 Line of Credit bears an interest rate equal to the prime rate minus 0.50%, or 2.75% as of December 31, 2021.

Interest on advances under the 2018 Line of Credit bears an interest rate equal to the prime rate minus of 7.50% as of December 31, 2022.

In addition, we are required to pay an unused line fee of 0.15% per annum on the average daily unused amount of the $60.0 million revolving commitment.

7 unchanged sentences

We believe we were in compliance with all financial covenants as of December 31, 2022.

As of December 31, 2022, we had $60.0 million of unused borrowings available under our 2018 Line of Credit.

Uses of Funds

9 unchanged sentences

In this section, we discuss the activity of our cash flows for the year ended December 31, 2021 and the year ended December 31, 2022.

For a discussion of the year ended December 31, 2019, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Liquidity and Capital Resources" in our Annual Report on Form 10-K for the year ended December 31, 2020.

For a discussion of the year ended December 31, 2020, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Liquidity and Capital Resources" in our Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2021.

The following table shows a summary of our cash flows for the periods presented (in thousands):

11 unchanged sentences

Operating activities used $53.9 million of cash in 2022, which reflected our net loss of $465.3 million, $422.7 million of which were non-cash charges, and a $11.3 million change in our net operating assets and liabilities.

The non-cash charges primarily related to stock-based compensation expense, depreciation and amortization expense, including the amortization of acquired intangible assets, amortization of right–of–use assets, deferred implementation costs, changes in the fair value of our contingent consideration, credit loss expense and income tax benefit.

The non-cash charges primarily related to stock-based compensation expense, depreciation and amortization expense, including the amortization of acquired intangible assets, impairment of goodwill and intangible assets, amortization of right–of–use assets, deferred implementation costs, changes in the fair value of our contingent consideration, credit loss expense and income tax benefit.

The change in our net operating assets and liabilities was primarily due to a $4.5 million increase in accounts receivable and contract assets, a $9.5 million decrease in other accrued expenses and a $1.7 million decrease in Partner Share liability, partially offset by a $1.4 million increase in our Consumer Incentive liability.

Operating activities used $38.5 million of cash in 2021, which reflected our net loss of $128.6 million, $96.7 million of which were non-cash charges, and a $6.7 million change in our net operating assets and liabilities.

The non-cash charges primarily related to stock-based compensation expense, depreciation and amortization expense, amortization of right–of–use assets, deferred implementation costs and bad debt expense.

The change in our net operating assets and liabilities was primarily due to a $27.9 million increase in accounts receivable and contract assets, a $0.9 million decrease in other accrued expenses and a $9.1 million decrease in Partner Share liability, partially offset by a $13.2 million increase in our Consumer Incentive liability.

These changes were primarily a result of significantly lower sales during 2020, primarily caused by the COVID–19 pandemic, compared to sales in 2019.

Investing Activities

5 unchanged sentences

Our cash flows from financing activities have primarily been composed of borrowings and repayments under our debt facilities, proceeds from the issuance of common stock and payments for costs related to debt issuances and equity offerings.

Financing activities used $40.0 million in cash in 2022, consisting of $40.0 million used to repurchase shares of our common stock, partially offset by proceeds received in connection with the exercise of stock options.

Financing activities provided $486.0 million in cash in 2021.

During 2021, we raised total gross proceeds of $500.5 million, or net proceeds of $484.0 million after deducting underwriting discounts and commissions of $16.3 million and offering costs of $0.2 million from our public equity offering in which we sold 3,850,000 shares of common stock at a public offering price of $130.00 per share.

Financing activities provided $206.4 million in cash in 2020.

Our financing activities during this period primarily consisted of $223.1 million of net proceeds from our issuance of the Notes, of which we used $26.5 million to purchase the Capped Calls and proceeds from the exercise of options to purchase shares of common stock.

The Capped Calls are intended to reduce potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP.

The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses.

We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances.

We evaluate our estimates and assumptions on an ongoing basis.

Our actual results may differ from these estimates.

Our most critical accounting policies are summarized below.

Refer to the notes to our consolidated financial statements for additional information.

Business Combinations

We estimate the fair value of assets acquired and liabilities assumed in a business combination.

Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement.

Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology, useful lives, and discount rates.

During the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Fair Value of Contingent Consideration

When required by GAAP, assets and liabilities are reported at fair value on our consolidated financial statements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The consideration for our acquisition of Bridg includes future payments that are contingent upon the results of Bridg's operations.

We recorded a contingent consideration obligation for such contingent payments at fair value on the acquisition date.

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 our consolidated statements of operations.

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

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

Refer to Note 12—Fair Value Measurementsto our consolidated financial statements for additional information regarding the fair value of our financial instruments.

Valuation and Impairment of goodwill and intangible assets

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

The intangible assets are evaluated whenever events or changes in circumstances indicated that we should estimate the fair value of our individual long-lived assets to determine if any impairment charges were present.

Given the significant level of uncertainty that currently exists, management applied several alternative scenarios for market and Company performance over the next several years to determine an estimated fair value.

Other key assumptions were updated as appropriate, including the discount rate, which increased as a result of an increase in the equity risk premium, which was partially offset by a decrease in the risk free rate.

Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in a business combination.

We evaluate our goodwill for impairment annually during the fourth quarter and whenever events or changes in circumstances indicate that the fair value of a reporting unit is more likely than not less than the carrying amount.

Our reporting units are one level below the operating segments at which level our segment management conducts regular reviews of the operating results.

Our impairment evaluation consists of a qualitative assessment.

If this assessment indicates that the fair value of the reporting unit is not more likely than not less than the carrying amount, goodwill is not considered impaired.

Otherwise, a quantitative impairment test is performed by comparing the fair value of a reporting unit to its carrying value, including goodwill.

We can bypass the qualitative assessment for any period and proceed directly to the quantitative impairment test.

If the carrying value of the net assets associated with the reporting unit exceeds the fair value of the reporting unit, goodwill is considered impaired and the impairment will be determined as the amount by which the reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

We performed a quantitative assessment for goodwill in our Cardlytics platform in the U.S.

reporting unit and our Bridg platform reporting unit at June 30, 2022, which resulted in a goodwill impairment of $83.1 million recorded to our Bridg platform reporting unit.

We performed our annual impairment test as of October 1, 2022, which resulted in goodwill impairment of $313.1 million recorded between our Cardlytics platform in the U.S.

and our Bridg platform reporting units.

We utilized a discounted cash flow method under the income approach, and to a lesser extent the market approach to value our reporting units.

The significant judgments in the discounted cash flow analysis for both our Cardlytics platform in the U.S.

and our Bridg platform included the selected discount rate and forecasts of future revenues and cash flows.

See Note 5—Goodwill and Acquired Intangibles in our consolidated financial statements for additional information.

We continue to closely monitor developments related to global events and macroeconomic conditions.

Changes in market conditions, laws and regulations, and key assumptions made in future quantitative assessments, including forecasted revenues and expected cash flows, competitive factors and discount rates, could negatively impact the results of future impairment testing and could result in the recognition of an additional impairment charge.