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Item 7. Management’s Discussion and Analysis

2024-03-14 compared with 2023-03-01 · 271 added, 304 removed, 423 unchanged (58% of the section changed)

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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 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").

We work to accomplish this mission by operating an advertising platform within our own and our partners' digital channels, which includes online, mobile applications, email and various real-time notifications (the "Cardlytics platform").

We also operate a customer data platform that utilizes point-of-sale ("POS") data, including product-level purchase data, to enable marketers to perform analytics and targeted loyalty marketing and also 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.

The partners for the Bridg platform are predominantly 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.

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However, these investments negatively impact our GAAP revenue, which is reported net of Consumer Incentives.

Revenue, which is reported net of Consumer Incentives and gross of Partner Share and other third-party costs, was $267.1 million and $298.5 million for the years ended December 31, 2021 and 2022, respectively, representing an increase of 12%.

Billings, a non-GAAP measure that represents the gross amount billed to marketers and is reported gross of both Consumer Incentives and Partner Share, was $394.1 million and $442.5 million for the years ended December 31, 2021 and 2022, respectively, representing an increase of 12%.

Gross profit, which represents revenue less Partner Share and other third-party costs and less delivery costs, was $103.3 million and $112.6 million for the years ended December 31, 2021 and 2022, respectively, representing an increase of 9%.

Adjusted contribution, a non-GAAP measure that represents our revenue less our adjusted Partner Share and other third-party costs, was $129.6 million and $143.0 million for the years ended December 31, 2021 and 2022, respectively, representing an increase of 10%.

Billings and adjusted contribution are further defined under the heading "Non-GAAP Measures and Other Performance Metrics" below.

We believe these non-GAAP measures, alongside our GAAP revenue and GAAP gross profit, provide useful information to investors for period-to-period comparisons of our core business and in understanding and evaluating our results of operations in the same manner as our management and board of directors.

The following table summarizes our results (dollars in thousands):

Year Ended December 31, Change Year Ended December 31, Change

2020 2021 $ % 2021 2022 $ %

$ 263,355 $ 394,075 $ 130,720 50 % $ 394,075 $ 442,477 $ 48,402 12 %

Consumer Incentives 76,463 126,959 50,496 66 126,959 143,935 16,976 13

Revenue 186,892 267,116 80,224 43 267,116 298,542 31,426 12

Adjusted Partner Share and other third-party costs (1)

104,710 137,488 32,778 31 137,488 155,507 18,019 13

Adjusted contribution (1)

82,182 129,628 47,446 58 129,628 143,035 13,407 10

Delivery costs 14,310 22,503 8,193 57 22,503 30,403 7,900 35

Deferred implementation costs 4,598 3,785 (813) (18) 3,785 — (3,785) (100)

Gross profit $ 63,274 $ 103,340 $ 40,066 63 % $ 103,340 $ 112,632 $ 9,292 9 %

Net loss $ (55,422) $ (128,565) $ (73,143) 132 % $ (128,565) $ (465,264) $ (336,699) 262 %

Adjusted EBITDA (1)

$ (7,780) $ (12,220) $ (4,440) 57 % $ (12,220) $ (45,169) $ (32,949) 270 %

(1) Billings, adjusted Partner Share and other third-party costs, adjusted contribution and adjusted EBITDA are non-GAAP measures, as detailed below in our reconciliations of GAAP revenue to billings, GAAP gross profit to adjusted contribution and GAAP net loss to adjusted EBITDA.

During 2020, 2021 and 2022, our net loss was $55.4 million, $128.6 million and $465.3 million, respectively.

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 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.

Partner Commitments

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 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.

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 a fair value of $230.9 million related to additional potential future payments.

At least 30% of the potential future payments will be in cash, with the remainder to be paid in cash or our common stock, at our option.

On March 5, 2021, we completed the acquisition of 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.

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

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

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Our metrics may be calculated in a manner different than similar metrics used by other companies.

Key Performance Metrics

Year Ended December 31,

2020 2021 2022

(Amounts in thousands, except ARPU)

in thousands except per user amounts 2023 2022 2021

Cardlytics MAUs 162,148 154,550 146,242

Cardlytics ARPU $ 1.91 $ 1.93 $ 1.83

Bridg ARR $ — $ 15,282 $ 23,129

Billings $ 263,355 $ 394,075 $ 442,477

Adjusted contribution $ 82,182 $ 129,628 $ 143,035

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

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.

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

We then calculate a monthly average of these MAUs for the periods presented.

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.

Beginnging as of September 30, 2023, we are reporting only the total number of unique targetable customers within each FI, which we have applied to our reporting for current and prior periods in this Annual Report.

Year Ended December 31, Change Year Ended December 31, Change

in thousands 2023 2022 # % 2022 2021 # %

Cardlytics MAUs 162,148 154,550 7,598 5 154,550 146,242 8,308 6

Cardlytics MAUs increased by 7.6 million during 2023 compared to 2022 primarily driven by an increase in new MAUs (41% of total growth) and lapsed customers returning (59% of total growth).

Cardlytics MAUs increased by 8.3 million during 2022 compared to 2021, primarily driven by an increase in new or lapsed customers logging in and visiting online or mobile applications containing offers, opening an email containing an offer or redeeming an offer from the Cardlytics platform.

Cardlytics Average Revenue per User ("ARPU")

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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 ("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.

ARR should not be considered in isolation from, or as an alternative to, revenue prepared in accordance with GAAP.

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

Year Ended December 31, Change Year Ended December 31, Change

2023 2022 $ % 2022 2021 $ %

Cardlytics ARPU $ 1.91 $ 1.93 (0.02) (1) $ 1.93 $ 1.83 0.10 5

Cardlytics ARPU decreased by $0.02 during 2023 compared to 2022 as a result of a $10.7 million increase in revenue and a 7.6 million increase in Cardlytics MAUs.

Cardlytics ARPU increased by $0.10 during 2022 compared to 2021 as a result of a $31.4 million increase in revenue and an 8.3 million increase in Cardlytics MAUs.

Non-GAAP Metrics

Year Ended December 31,

in thousands 2023 2022 2021

Revenue $ 309,204 $ 298,542 $ 267,116

Billings $ 453,426 $ 442,477 $ 394,075

Gross Profit $ 130,378 $ 112,632 $ 103,340

Adjusted Contribution $ 158,626 $ 143,035 $ 129,628

Net Loss $ (134,702) $ (465,264) $ (128,565)

Adjusted EBITDA $ 3,771 $ (45,169) $ (12,220)

Adjusted Net Loss $ (11,436) $ (60,250) $ (38,727)

Net cash used in operating activities $ (185) $ (53,904) $ (38,523)

Free Cash Flow $ (12,577) $ (67,390) $ (51,087)

Definitions of Non-GAAP Measures

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

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We review billings for internal management purposes.

We believe that billings provides useful information to investors for period-to-period comparisons of our core business and in understanding and evaluating our results of operations in the same manner as our management and board of directors.

We believe billings is an important indicator for the current health of the business because it directly represents our ability to bill customers for our services before any Consumer Incentives are paid.

Nevertheless, our use of billings has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP.

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You should consider Billings alongside our other GAAP financial results.

The following table presents a reconciliation of billings to revenue, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):

Year Ended December 31, 2020

Cardlytics Platform Bridg Platform Consolidated

Revenue $ 186,892 $ — $ 186,892

Consumer Incentives 76,463 — 76,463

Billings $ 263,355 $ — $ 263,355

Year Ended December 31, 2021

Cardlytics Platform Bridg Platform Consolidated

Revenue $ 258,754 $ 8,362 $ 267,116

Consumer Incentives 126,959 — 126,959

Billings $ 385,713 $ 8,362 $ 394,075

Year Ended December 31, 2022

Cardlytics Platform Bridg Platform Consolidated

Revenue $ 277,185 $ 21,357 $ 298,542

Consumer Incentives 143,935 — 143,935

Billings $ 421,120 $ 21,357 $ 442,477

Adjusted Contribution

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We use Adjusted Contribution extensively to measure the efficiency of our advertising platform, make decisions to manage advertising campaigns and evaluate our operational performance.

Adjusted contribution is also used to determine the vesting of performance-based equity awards and is used to determine the achievement of quarterly and annual bonuses across our entire global employee base, including executives.

We view Adjusted Contribution as an important operating measure of our financial results.

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Refer to Note 15—Segments to our consolidated financial statements for further details on our Adjusted Contribution by segment.

Adjusted EBITDA

Adjusted EBITDA represents our Net Loss before income tax benefit;

interest expense, net;

depreciation and amortization;

stock-based compensation expense;

acquisition, integration and divestiture (benefits) costs;

change in fair value of contingent consideration;

foreign currency (gain) loss;

impairment of goodwill and intangible assets;

loss on divestiture;

restructuring and reduction of force;

income tax benefit;

and deferred implementation costs.

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), impairment of goodwill and intangible assets, loss on divestiture, deferred implementation costs, depreciation and amortization, 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.

Adjusted EBITDA is a key measure used by management to understand and evaluate our core operating performance and trends and to generate future operating plans, make strategic decisions regarding the allocation of capital and invest in initiatives that are focused on cultivating new markets for our solution.

In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis.

Adjusted EBITDA is not a measure calculated in accordance with GAAP.

We believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Nevertheless, use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP.

Some of these limitations are as follows:

(1) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

(2) Adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation;

(3) Adjusted EBITDA does not reflect tax payments or receipts that may represent a reduction or increase in cash available to us and (4) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces the usefulness of the metric as a comparative measure.

Because of these and other limitations, you should consider Adjusted EBITDA alongside our net loss and other GAAP financial results.

Adjusted Net Loss

We define Adjusted Net Loss as our Net Loss before stock-based compensation expense;

foreign currency (gain) loss;

acquisition, integration and divestitures costs (benefits);

amortization of acquired intangibles;

change in fair value of contingent consideration;

impairment of goodwill and intangible assets;

loss on divestiture;

restructuring and reduction of force;

and income tax benefit.

We define Adjusted Net Loss per share as Adjusted Net Loss divided by our weighted-average common shares outstanding, diluted.

Free Cash Flow

We define Free Cash Flow as net cash provided by (used in) operating activities, plus acquisition of property and equipment, acquisition of patents and capitalized software development costs.

We believe free cash flow is useful to measure the funds generated in a given period that are available to invest in the business.

We believe this supplemental information enhances stockholders' ability to evaluate our performance.

Results of Non-GAAP Measures

Year Ended December 31, Change Year Ended December 31, Change

in thousands 2023 2022 $ % 2022 2021 $ %

Billings $ 453,426 $ 442,477 10,949 2 $ 442,477 $ 394,075 48,402 12

Billings increased by $10.9 million during 2023 compared to 2022, primarily driven by an increase of $32.8 million in sales to new marketers, offset by a $21.9 million net decrease in sales to existing marketers.

Billings increased by $48.4 million during 2022 compared to 2021, primarily driven by a $6.9 million increase in sales to existing marketers and an increase of $41.5 million in sales to new marketers.

The following table presents a reconciliation of billings to revenue, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):

Year Ended December 31,

2023 2022 2021

Revenue $ 309,204 $ 298,542 $ 267,116

Consumer Incentives 144,222 143,935 126,959

Billings $ 453,426 $ 442,477 $ 394,075

Cardlytics platform

Revenue $ 285,425 $ 277,185 $ 258,754

Consumer Incentives 144,222 143,935 126,959

Billings $ 429,647 $ 421,120 $ 385,713

Bridg platform

Revenue $ 23,779 $ 21,357 $ 8,362

Consumer Incentives — — —

Billings $ 23,779 $ 21,357 $ 8,362

Adjusted Contribution

The following table presents a reconciliation of Adjusted Contribution to gross profit, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):

Year Ended December 31,

Cardlytics Platform Bridg Platform Consolidated

2023 2022 2021

Revenue $ 309,204 $ 298,542 $ 267,116

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Deferred implementation costs (2)

4,598 — 4,598

Adjusted Contribution $ 158,626 $ 143,035 $ 129,628

(1) Stock-based compensation expense recognized in consolidated delivery costs totaled $1.2 million during 2020.

(2) Deferred implementation costs is excluded from adjusted Partner Share and other third-party costs as follows (in thousands):

Year Ended December 31, 2020

Cardlytics Platform Bridg Platform Consolidated

Partner Share and other third-party costs $ 109,308 $ — $ 109,308

Deferred implementation costs 4,598 — 4,598

Adjusted Partner Share and other third-party costs $ 104,710 $ — $ 104,710

Year Ended December 31, 2021

Cardlytics Platform Bridg Platform Consolidated

Cardlytics platform

Revenue $ 285,425 $ 277,185 $ 258,754

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Deferred implementation costs (2)

3,785 — 3,785

Adjusted Contribution $ 135,518 $ 122,981 $ 121,675

(1) Stock-based compensation expense recognized in consolidated delivery costs totaled $1.9 million during 2021.

(2) Deferred implementation costs is excluded from adjusted Partner Share and other third-party costs as follows (in thousands):

Year Ended December 31, 2021

Cardlytics Platform Bridg Platform Consolidated

Partner Share and other third-party costs $ 140,864 $ 409 $ 141,273

Deferred implementation costs 3,785 — 3,785

Adjusted Partner Share and other third-party costs $ 137,079 $ 409 $ 137,488

Year Ended December 31, 2022

Cardlytics Platform Bridg Platform Consolidated

Bridg platform

Revenue $ 23,779 $ 21,357 $ 8,362

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6,801 6,291 4,392

Deferred implementation costs (2)

Adjusted Contribution $ 23,108 $ 20,054 $ 7,953

(1) Stock-based compensation expense recognized in consolidated delivery costs totaled $2.7 million during 2022.

(1) Stock-based compensation expense recognized in consolidated delivery costs totaled $2.4 million, $2.7 million and $1.9 million during 2023, 2022 and 2021, respectively.

(2) Deferred implementation costs is excluded from Adjusted Partner Share and other third-party costs as follows (in thousands):

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Adjusted EBITDA

Adjusted EBITDA represents our net loss before income tax benefit;

interest expense, net;

depreciation and amortization expense;

stock-based compensation expense;

foreign currency gain (loss);

impairment of goodwill and intangible assets;

deferred implementation costs;

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, 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.

In particular, the exclusion of certain expenses in calculating adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis.

Adjusted EBITDA is not a measure calculated in accordance with GAAP.

We believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Nevertheless, use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP.

Some of these limitations are:

(1) adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

(2) adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation and equity instruments issued to our FI partners;

(3) adjusted EBITDA does not reflect tax payments or receipts that may represent a reduction or increase in cash available to us and (4) other companies, including companies in our industry, may calculate adjusted EBITDA or similarly titled measures differently, which reduces the usefulness of the metric as a comparative measure.

Because of these and other limitations, you should consider adjusted EBITDA alongside our net loss and other GAAP financial results.

The following table presents a reconciliation of Adjusted EBITDA to Net Loss, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):

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Stock-based compensation expense 40,980 44,686 50,264

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

Acquisition, integration and divestiture (benefits) costs (6,313) (2,874) 24,372

Change in fair value of contingent consideration 1,246 (128,174) 1,374

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Impairment of goodwill and intangible assets 70,518 453,288 —

Loss on divestiture 6,550 — —

Restructuring and reduction of force — 8,139 713

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Year Ended December 31,

Cardlytics Platform Bridg Platform Consolidated

2023 2022 2021

Adjusted Contribution $ 158,626 $ 143,034 $ 129,628

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Adjusted EBITDA $ 3,771 $ (45,169) $ (12,220)

Year Ended December 31, 2021

Cardlytics Platform Bridg Platform Consolidated

Cardlytics platform

Adjusted Contribution $ 135,518 $ 122,981 $ 121,675

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Adjusted EBITDA $ 894 $ (43,980) $ (10,102)

Year Ended December 31, 2022

Cardlytics Platform Bridg Platform Consolidated

Bridg platform

Adjusted Contribution $ 23,108 $ 20,053 $ 7,953

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Adjusted EBITDA $ 2,877 $ (1,189) $ (2,118)

Adjusted Net Loss

The following table presents a reconciliation of Adjusted Net Loss to Net Loss, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):

Year Ended December 31,

2023 2022 2021

Net Loss $ (134,702) $ (465,264) $ (128,565)

Stock-based compensation expense 40,980 44,686 50,264

Foreign currency (gain) loss (3,304) 6,376 1,267

Acquisition, integration and divestiture (benefits) costs (6,313) (2,874) 24,372

Amortization of acquired intangibles 13,589 25,019 19,712

Change in fair value of contingent consideration 1,246 (128,174) 1,374

Impairment of goodwill and intangible assets 70,518 453,288 —

Loss on divestiture 6,550 — —

Restructuring and reduction of force — 8,139 713

Income tax benefit — (1,446) (7,864)

Adjusted Net Loss $ (11,436) $ (60,250) $ (38,727)

Weighted-average number of shares of common stock used in computing Adjusted net loss per share:

Weighted-average common shares outstanding, diluted 36,488 33,419 32,202

Adjusted weighted-average common shares outstanding, diluted 36,488 33,419 32,202

Adjusted Net Loss per share attributable to common stockholders, diluted $ (0.31) $ (1.80) $ (1.20)

Free Cash Flow

The following is a reconciliation of free cash flow to the most comparable GAAP measure, net cash used in operating activities (in thousands):

Year Ended December 31,

2023 2022 2021

Net cash used in operating activities $ (185) $ (53,904) $ (38,523)

Acquisition of property and equipment (667) (1,171) (3,108)

Acquisition of patents — (175) (133)

Capitalized software development costs (11,725) (12,140) (9,323)

Free Cash Flow $ (12,577) $ (67,390) $ (51,087)

Components of Results of Operations

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.

The insertion orders 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.

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Partner Share and Other Third-Party Costs

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.

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.

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.

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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.

As we continue to 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.

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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

Acquisition, Integration and Divestiture Costs

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.

Divestiture costs primarily represent legal and other professional fees.

Change in Fair Value of Contingent Consideration

Our acquisition of Bridg includes a component of contingent consideration to be paid to the sellers if certain performance levels are achieved by Bridg over a specific period of time.

Our acquisition of Bridg included a component of contingent consideration to be paid to the sellers if certain performance levels were achieved by Bridg over a specific period of time.

Contingent consideration is initially recorded at fair value on the acquisition date based, in part, on a range of estimated probabilities for achievement of these performance levels.

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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.

Loss on Divestiture

Loss on divestiture of businesses consists of loss on the sale of a business during the year ended December 31, 2023.

Depreciation and Amortization Expense

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General and administrative expense 58,810 81,446 66,222

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

Impairment of goodwill and intangible assets — — 453,288

Acquisition, integration and divestiture (benefits) costs (6,313) (2,874) 24,372

Change in fair value of contingent consideration 1,246 (128,174) 1,374

Impairment of goodwill and intangible assets 70,518 453,288 —

Loss on divestiture 6,550 — —

Depreciation and amortization expense 26,460 37,544 29,871

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Operating loss (135,670) (457,778) (122,599)

Other (expense) income:

Other income (expense):

Interest expense, net (2,336) (2,556) (12,563)

Foreign currency gain (loss) 3,304 (6,376) (1,267)

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

Total other income (expense) 968 (8,932) (13,830)

Loss before income taxes (134,702) (466,710) (136,429)

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In this section, we discuss the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.

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.

For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, 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, 2022.

Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

in thousands 2023 2022 $ %

Billings $ 453,426 $ 442,477 $ 10,949 2 %

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The $10.7 million increase in revenue during 2023 compared to 2022 was comprised of a $10.9 million increase in billings, offset by a $0.3 million increase in Consumer Incentives.

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.

During 2023, our Consumer Incentives grew at a lower rate than billings, due changes in FI partner mix and pricing, as well as a one-time benefit of $2.2 million related to rewards in a prior period.

Costs and Expenses

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Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

Partner Share and other third-party costs:

Adjusted Partner Share and other third-party costs $ 137,488 $ 155,507 $ 18,019 13 %

Deferred implementation costs 3,785 — (3,785) (100)

in thousands 2023 2022 $ %

Total Partner Share and other third-party costs $ 150,578 $ 155,507 $ (4,929) (3) %

% of Revenue 49 % 52 %

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 $3.8 million during 2022 compared to 2021 primarily due to the end of the useful lives of certain platform enhancements.

Partner Share and other third-party costs decreased by $4.9 million during 2023 compared to 2022.

In 2023, we recognized $1.3 million of our expected minimum Partner Share commitment shortfall compared to $3.2 million in 2022.

The balance in Partner Share and other third-party costs decreased by $3.0 million during 2023 compared to 2022 due to negotiated terms with FI share partners.

Delivery Costs

Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

in thousands 2023 2022 $ %

Delivery costs excluding stock-based compensation expense and restructuring and reduction of force $ 25,821 $ 25,860 $ (39) — %

Stock-based compensation expense 2,427 2,682 (255) (10)

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

Restructuring and reduction of force — 1,861 (1,861) (100)

Total delivery costs $ 28,248 $ 30,403 $ (2,155) (7) %

% of Revenue 9 % 10 %

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.

Delivery costs decreased by $2.2 million during 2023 compared to the 2022 .

Delivery costs expense excluding stock-based compensation and restructuring and reduction of force decreased by less than $0.1 million during 2023 compared to 2022 , due to a $3.9 million decrease in headcount, offset by a $3.9 million increase in hosting costs related to migrating certain data and applications to a cloud computing environment .

Sales and Marketing Expense

Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

in thousands 2023 2022 $ %

Sales and marketing expense excluding stock-based compensation expense and restructuring and reduction of force $ 44,803 $ 60,671 $ (15,868) (26) %

Stock-based compensation expense 12,624 11,935 689 6

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

Restructuring and reduction of force (2) 2,139 (2,141) (100)

Total sales and marketing expense $ 57,425 $ 74,745 $ (17,320) (23) %

% of Revenue 25 % 25 %

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.

Sales and marketing expense decreased by $17.3 million during 2023 compared to 2022.

Sales and marketing expense excluding stock-based compensation and restructuring and reduction of force decreased by $15.9 million primarily due to a $10.7 million decrease in headcount , a $2.4 million decrease in marketing events, a $1.8 million decrease in professional fees, a $0.5 million decrease in facility expense, a $0.3 million decrease in software licensing costs and a $0.2 million decrease in travel expenses.

Research and Development Expense

Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

in thousands 2023 2022 $ %

Research and development expense excluding stock-based compensation expense and restructuring and reduction of force $ 34,960 $ 39,573 $ (4,613) (12) %

Stock-based compensation expense 16,392 13,262 3,130 24

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

Restructuring and reduction of force — 1,600 (1,600) (100)

Total research and development expense $ 51,352 $ 54,435 $ (3,083) (6) %

% of Revenue 17 % 18 %

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.

Research and development expense decreased by $3.1 million during 2023 compared to 2022.

Research and development expense excluding stock-based compensation and restructuring and reduction of force decreased by $4.6 million primarily due to a $5.9 million decrease in headcount, a $1.5 million increase in capital development and a $0.5 million tax benefit, partially offset by a $2.4 million increase in non staff software licensing and data storage costs related to operations and a $0.9 million increase in professional fees.

General and Administrative Expense

Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

in thousands 2023 2022 $ %

General and administrative expense excluding stock-based compensation expense and restructuring and reduction of force $ 49,273 $ 62,168 $ (12,895) (21) %

Stock-based compensation expense 9,537 16,807 (7,270) (43)

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

Restructuring and reduction of force — 2,471 (2,471) (100)

Total general and administrative expense $ 58,810 $ 81,446 $ (22,636) (28) %

% of Revenue 19 % 27 %

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.

General and administrative expense decreased by $22.6 million during 2023 compared to 2022.

General and administrative expense excluding stock-based compensation and restructuring and reduction of force decreased by $12.9 million primarily due to a $4.0 million decrease in software licensing costs, a $4.0 million decrease in headcount, a $1.0 million reduction in professional fees, a $0.8 million tax benefit, a $0.7 million reduction in bad debt, a $0.7 million reduction in other administrative expense, a $0.5 million reduction in training expenses and a $0.5 million reduction in marketing events, partially offset by a $0.7 million increase in our insurance premiums.

Stock-based Compensation Expense

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% of Revenue 13 % 15 %

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.

Stock-based compensation expense decreased by $3.7 million during 2023 compared to 2022 primarily driven by the reversal of the 2021 PSUs and higher forfeitures related to executive departures that occurred in 2023.

In 2022, we recorded a benefit related to the reversal of the 2020 PSUs.

We believe that both the 2020 PSUs and 2021 PSUs are no longer likely to vest.

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)

Acquisition, integration and divestiture benefits

Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

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

in thousands 2023 2022 $ %

Acquisition, integration and divestiture (benefits) $ (6,313) (2,874) $ (3,439) 120 %

% of Revenue (2) % (1) %

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.

Acquisition and integration benefits increased by $3.4 million during 2023 compared to 2022.

During 2023, we incurred a $6.8 million benefit due to a reduction of brokerage fee related to the reduction of our estimate of contingent consideration related to the First Anniversary Payment Amount to Bridg, partially offset by a $0.5 million expense due to the divestiture of Entertainment.

During 2022 we recognized a $2.9 million benefit primarily due to a reduction of brokerage fee related to the reduction of our estimate of contingent consideration related to the First Anniversary Payment Amount to Bridg, partially offset by $0.1 million of expense incurred by the acquisition of Entertainment.

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

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Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

Change in fair value of contingent consideration $ 1,374 $ (128,174) $ (129,548) n/a

in thousands 2023 2022 $ %

Change in fair value of contingent consideration $ 1,246 $ (128,174) $ 129,420 (101) %

% of Revenue — % (43) %

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.

During 2023 and 2022, we recognized a $1.2 million loss and $128.2 million gain, respectively, in the fair value of contingent consideration due to the change in value owed to the former Bridg shareholders.

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

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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.

in thousands 2023 2022 $ %

Impairment of goodwill and intangible assets $ 70,518 $ 453,288 $ (382,770) (84) %

% of Revenue 23 % 152 %

During 2023, we recognized $70.5 million of impairment of goodwill and intangible assets related to the Bridg platform.

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

The impairment of goodwill and intangible assets resulted from a continued slowdown in the economy, 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.

Loss on divestiture

Year Ended December 31, Change

in thousands 2023 2022 $ %

Loss on divestiture $ 6,550 $ — $ 6,550 n/a

% of Revenue 2 % n/a

On December 7, 2023 we sold and transferred substantially all of the assets of Entertainment for $6.0 million in cash, subject to a combined $1.1 million held in escrow for indemnities and sales and use taxes, as well as customary post-closing adjustment.

The resulting loss on sale of $6.6 million is recorded within "Loss on divestiture" within the statement of operations.

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

Depreciation and Amortization Expense

Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

in thousands 2023 2022 $ %

Depreciation and amortization expense $ 26,460 $ 37,544 $ (11,084) (30) %

% of Revenue 9 % 13 %

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.

Depreciation and amortization expense decreased by $11.1 million during 2023 compared to 2022, primarily due to our impairment of intangible assets in the fourth quarter of 2023.

Interest Expense, Net

Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

in thousands 2023 2022 $ %

Interest expense $ (6,183) $ (3,994) $ (2,189) 55 %

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% of Revenue (1) % (1) %

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

Interest expense, net decreased by $0.2 million during 2023 compared to 2022 primarily as a result of an increase in interest income, which is driven by higher interest rates on our money market and direct deposits account, and partially offset by additional interest expense resulting from the borrowing of $30.0 million against our 2018 Line of Credit during the year ended December 31, 2023.

Foreign Currency Gain (Loss)

Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

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

in thousands 2023 2022 $ %

Foreign currency gain (loss) $ 3,304 $ (6,376) $ 9,680 (152) %

% of Revenue 1 % (2) %

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.

Foreign currency gain (loss) was $3.3 million during 2023 compared to foreign currency loss of $6.4 million during 2022, primarily due to the decrease in the value of the British pound relative to the U.S.

Income Tax Benefit

Year Ended December 31, Change

2021 2022 $ %

(dollars in thousands)

Income tax benefit $ 7,864 $ 1,446 $ (6,418) n/a

in thousands 2023 2022 $ %

Income tax benefit $ — $ 1,446 $ (1,446) (100) %

% of Revenue — % — %

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.

Income tax benefit was $1.4 million during 2022 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.

There was no income tax benefit in 2023.

Liquidity and Capital Resources

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We do not enter into investments for trading purposes, and our investment policy is to invest any excess cash in short-term, highly liquid investments that limit the risk of principal loss.

A majority of our cash and cash equivalents are held in fully FDIC–insured demand deposit accounts that distribute funds, and credit risk, over a vast number of financial institutions.

Our remaining cash and cash equivalents are held in treasury obligation funds and money market accounts with six financial institutions, which we believe are of high credit quality.

As of December 31, 2022, our demand deposit accounts earned up to a 0.50% annual rate of interest.

A significant majority of our cash and cash equivalents are held in fully FDIC-insured demand deposit accounts that distribute funds, and credit risk, over a vast number of financial institutions.

Although the Company deposits cash with high credit-quality financial institutions, its deposits, at times, may exceed federally insured limits.

The Company believes no significant concentration risk exists with respect to its cash or cash equivalents.

As of December 31, 2023, our demand deposit accounts earned an approximately 5.0% annual rate of interest.

As of December 31, 2023, we had $3.4 million in cash and cash equivalents in the U.K.

While our investment in Cardlytics UK is not considered indefinitely invested, we do not plan to repatriate these funds.

Through December 31, 2022, we have incurred accumulated net losses of $976.6 million since inception, including losses of $55.4 million, $128.6 million and $465.3 million during 2020, 2021 and 2022, respectively.

cash balances are denominated in British pounds and as a result, may fluctuate based on changes in the exchange rate.

Refer to Item 7A.

Qualitative and Quantitative Disclosures About Market Risk for additional information about our foreign currency exchange risk.

While our investment in our operations in the U.K.

is not considered indefinitely invested, we do not plan to repatriate these funds.

Through December 31, 2023, we have incurred accumulated net losses of $1,111.3 million since inception, including net losses of $134.7 million, $465.3 million and $128.6 million during 2023, 2022 and 2021, respectively.

We expect to incur additional operating losses as we continue our efforts to grow our business.

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.

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

As a part of this acquisition, we have agreed to make a First Anniversary Payment equal to 20 times the ARR based on the month preceding the anniversary, less $12.5 million, and a Second Anniversary Payment equal to 15 times the ARR for customers as of the first anniversary based on the month preceding the second anniversary, less the prior ARR at the first anniversary.

The Second Anniversary Payment is subject to a specified cap.

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.

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.

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 the global economy.

As part of our acquisition of Bridg, Inc.

("Bridg") and pursuant to the terms of the Agreement and Plan of Merger dated as of April 12, 2021, as amended (the "Merger Agreement"), we agreed to make two earnout payments – the First Anniversary Payment Amount and the Second Anniversary Payment Amount – based on the First Anniversary ARR and the Second Anniversary ARR of Bridg, respectively.

As of December 31, 2023, we had paid the First Anniversary Payment Amount consisting of $50.1 million of cash and 2,740,418 shares of our common stock to the Stockholder Representative, inclusive of brokerage fees and transaction bonuses and accounting for all true-ups and credits.

On January 25, 2024, we entered into the Settlement Agreement with the Stockholder Representative to resolve all outstanding disputes related to the Merger Agreement, pursuant to which we agreed to pay $25.0 million in cash and issue 3,600,000 shares of our common stock to the Stockholder Representative, inclusive of broker fees and transaction bonuses.

Pursuant to the Settlement Agreement, we paid the Stockholder Representative $20 million in cash on January 26, 2024 and we issued 3,600,000 shares of our common stock on February 1, 2024.

The remaining cash payments related to the Settlement Agreement will be paid in two tranches, with $3.0 million to be paid by January 31, 2025 and $2.0 million to be paid by June 30, 2025.

Refer to Note 13—Commitments and Contingencies for further information about the Bridg acquisition and related contingent consideration.

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 and the continued market acceptance of our solutions.

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 and in the long-term 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 following the date our consolidated financial statements were issued and in the long-term.

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

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5,000 — — — 5,000

Partner share commitments (5)

3,300 — — — 3,300

Purchase obligations (6)

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(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, 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.

(4) On January 25, 2024, we entered into the Settlement Agreement with the Stockholder Representative to resolve all outstanding disputes related to the Merger Agreement, pursuant to which we agreed to pay $25.0 million in cash and issue 3,600,000 shares of our common stock to the Stockholder Representative, inclusive of broker fees and transaction bonuses.

This amount represents the remaining portion to be paid out according to the terms of the Settlement Agreement, inclusive of broker fees and transaction bonuses.

(5) We had a minimum Partner Share commitment to a certain FI partner totaling $10.0 million over a 12-month period which ended on March 31, 2023 and resulted in an accrual of $4.5 million for the Partner Share shortfall as of that date.

The Partner Share shortfall is included within Partner Share liability on our condensed consolidated balance sheet.

As of December 31, 2023, we paid our shortfall of $1.2 million and will pay the remaining installments on a quarterly basis over the next three quarters.

During the years ended December 31, 2023 and 2022, we recognized $1.3 million and $3.2 million, respectively, of expected minimum Partner Share commitment shortfalls within Partner Share and other third-party costs on our condensed consolidated statements of operations.

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

Purchase orders that are not binding agreements are excluded from the table above.

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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 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

Proceeds from Issuance 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.

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.

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

In September 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").

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") related to the Notes.

2018 Loan Facility

On April 29, 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.

This amendment also extended the maturity date of the 2018 Loan Facility from December 31, 2022 to April 29, 2024, and further stated that if we had positive Adjusted EBITDA by December 31, 2023, we could extend the maturity date of the loan to April 29, 2025.

Additionally with 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 U.K.

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 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.

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 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.

On May 3, 2023, we amended our 2018 Loan Facility to modify the covenants related to the maximum amount of cash we are allowed to pay for the First Anniversary Payment Amount and Second Anniversary Payment Amount under the Merger Agreement.

On February 9, 2024, we amended our 2018 Loan Facility to increase the ability to borrow up to 75% of the amount of our eligible accounts receivable, adjusted the required minimum level of Adjusted EBITDA and increased the interest rate to the prime rate plus 0.25%.

We also confirmed the extension of the maturity date of the loan to April 29, 2025 based on our positive Adjusted EBITDA result.

As of December 31, 2023, interest on advances under the 2018 Line of Credit bore an interest rate equal to the prime rate of 8.50%.

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, which remains unchanged in the most recent amendment.

The 2018 Loan Facility includes customary representations, warranties and covenants (affirmative and negative), including restrictive covenants that prohibit mergers, acquisitions, dispositions of assets, inccurrence of indebtedness, encumbrances on our assets and the payment or declaration of dividends, in each case subject to specified exceptions.

The 2018 Loan Facility also includes standard events of default, including in the event of a material adverse change.

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The 2018 Loan Facility does not include any prepayment penalties.

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.

During the year ended December 31, 2023, we borrowed $30.0 million against our 2018 Line of Credit.

Interest on advances bears an interest rate equal to the prime rate of 8.50% as of December 31, 2023.

During the year ended December 31, 2023, we incurred approximately $2.1 million of interest expense associated with the 2018 Loan Facility.

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

As of December 31, 2023, we had $16.7 million of unused available borrowings under our 2018 Line of Credit.

We believe we are in compliance with all financial covenants as of December 31, 2023.

Uses of Funds

Our collection cycles can vary from period to period based on the payment practices of our marketers and their agencies.

We are generally obligated to pay Consumer Incentives between one and three months following redemption, regardless of whether we have collected payment from a marketer or its agency.

We are generally obligated to pay Consumer Incentives between one and four months following redemption, regardless of whether we have collected payment from a marketer or its agency.

We are generally obligated to pay our FI partners' Partner Share by the end of the month following our collection of payment from the applicable marketer or its agency.

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In this section, we discuss the activity of our cash flows for the year ended December 31, 2023 and the year ended December 31, 2022.

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.

For a discussion of the year ended December 31, 2022, 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, 2021.

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

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Net cash used in investing activities (10,062) (15,760)

Net cash received from financing activities 485,998 (39,987)

Net cash used in financing activities (20,026) (39,987)

Effect of exchange rates on cash, cash equivalents and restricted cash 118 (1,926)

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Operating activities used $0.2 million of cash in 2023, which reflected our net loss of $134.7 million, $148.0 million of which were non-cash charges, and a $13.5 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, 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.

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, changes in the fair value of our contingent consideration, and credit loss expense.

The change in our net operating assets and liabilities was primarily due to a $7.7 million increase in accounts receivable and contract assets, a $7.5 million decrease in other accrued expenses, and a $1.4 million decrease in our Consumer Incentive liability, partially offset by a $2.5 million decrease in prepaid expense and other assets and a $0.4 million increase in Partner Share liability.

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.

Investing Activities

Our cash flows used for investing activities are primarily driven by our acquisitions of Dosh and Bridg, our investments in, and purchases of, property and equipment and costs to develop internal-use software.

Our cash flows used in investing activities are primarily driven by our investments in, and purchases of, property and equipment and costs to develop internal-use software.

We expect that we will continue to use cash for investing activities as we continue to invest in and grow our business.

Investing activities used cash totaling $10.1 million and $15.8 million, in 2023 and 2022, respectively.

Our investing cash flows during these periods primarily consisted of funds used for the acquisitions of Dosh and Bridg, purchases of technology hardware and costs to develop internal-use software.

Our investing cash outflows during these periods primarily consisted of funds used for the purchases of technology hardware and costs to develop internal-use software.

Additionally, in 2023, we had cash inflows of $2.3 million related to proceeds from divestitures, net of cash divested and in 2022, we had cash outflows of $2.3 million related to business acquisitions, net of cash acquired.

Refer to Note 4—Business Combinations to our consolidated financial statements for additional disclosures related to our acquisitions and divestitures.

Financing Activities

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.

Our cash flows used in financing activities have primarily been composed of contingent consideration payments to Bridg, repurchasing shares of our common stock, offset by 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 $20.0 million in cash in 2023, consisting of $50.1 million paid for the First Anniversary Payment, partially offset by $30.0 million borrowed under our 2018 Line of Credit.

Financing activities used $40.0 million in cash in 2022, consisting of $40.0 million used to repurchase shares of our common stock.

Critical Accounting Estimates

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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.

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 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

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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 our annual impairment test as of October 1, 2023 and determined that the carrying value of the Bridg platform exceeded its fair value, and accordingly, we recognized goodwill impairment of $70.5 million.

The significant judgments in the discounted cash flow analysis for our Bridg platform included the selected discount rate and forecasts of future revenues and cash flows

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

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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.

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The interest rate on the Notes is fixed at 1.00%.

Refer to Note 9—Debt and Financing Arrangements to our consolidated financial statements for additional disclosures related to our debt.

Foreign Currency Exchange Risk

Both revenue and operating expense of Cardlytics UK Limited are denominated in British pounds, and we bear foreign currency risks related to these amounts.

For example, if the average value of the British pound had been 10% higher relative to the U.S.

dollar during the 2020, 2021 and 2022, our operating expense would have increased by $0.8 million, $1.0 million and $1.1 million, respectively.

Our foreign currency risks related to expenses denominated in Indian rupees are insignificant.

Inflation Risk

Historically, we do not believe that inflation has had a material effect on our business, financial condition or results of operations.

However, over the last year there has been increased inflationary pressure, and we believe that inflationary pressure has the potential to negatively impact overall consumer spending and advertising budgets as a result of the impact on consumer spend.

This could potentially impact our current business products and strategy.

We will continue to monitor the impact of inflation in order to reduce its effects through pricing strategies, productivity improvements, and cost reductions.

If advertising budgets were to become subject to significant inflationary pressures, we may not be able to fully offset the effects of lower demand through price increases.

Our inability or failure to do so could harm our business, financial condition and results of operations.

Both revenue and operating expense of Cardlytics UK Limited are denominated in British pounds.

We bear foreign currency risks related to the extent that any unfavorable fluctuation in the exchange rate between U.S.

dollars and the British pound could result in an adverse impact to either revenue or expense.

For example, if the average value of the British pound had been 10% lower relative to the U.S.

dollar during 2023, 2022 and 2021, our revenue would have decreased by $1.8 million, 2.3 million and 2.1 million, respectively.

The overall impact to net loss would be partially mitigated by decreases in operating expense of $0.5 million, $1.1 million and $1.0 million in 2023, 2022 and 2021, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis