Cardlytics Announces Successful Resolution of SRS Dispute and Preliminary Fourth Quarter 2023 Results
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Insights
The settlement agreement between Cardlytics and Shareholder Representative Services LLC, coupled with the preliminary financial results, indicates a significant reduction in legal and financial uncertainty for Cardlytics. The $25 million cash and 3.6 million shares of common stock issued to SRS represent a tangible cost, but the resolution of disputes allows for a clearer future financial outlook. The ability to extend the credit facility maturity date to April 2025 demonstrates improved financial stability and may enhance investor confidence. It is important to note that the settlement value being less than $46 million, as stated by the CEO, suggests a favorable outcome compared to the potential costs of prolonged litigation.
From a financial perspective, the preliminary Q4 results showing that Cardlytics expects to meet or exceed their previous guidance is a positive indicator of the company's performance. The anticipated positive adjusted EBITDA for full year 2023 is a critical metric for investors as it suggests operational profitability excluding certain expenses. The increase in adjusted EBITDA from the previously guided $4.0 - $8.0 million to $9.5 - $10.5 million reflects a stronger than expected financial performance, which could potentially lead to a positive reaction in the stock market.
The advertising platform sector where Cardlytics operates is highly competitive and sensitive to market trends such as digital channel engagement and consumer spending patterns. The preliminary revenue of $89.0 - $90.0 million, which includes a one-time benefit of approximately $2 million, suggests that the company is effectively capitalizing on market opportunities. However, investors should consider the sustainability of such one-time benefits and whether they indicate a recurring revenue stream or are merely episodic.
Furthermore, the commitment to cost discipline and efficiency mentioned by the CFO is critical in the current economic climate where many tech companies are scrutinizing their cost structures. Investors often look for companies that can control costs while driving revenue growth, as this can lead to improved margins and profitability in the long term. Cardlytics' focus on this area could be a differentiator in their market segment.
From a legal standpoint, the settlement with SRS and the avoidance of additional payments related to the first anniversary earnout payment is significant. It indicates that Cardlytics has managed to cap its legal liabilities in relation to the Bridg merger agreement disputes. This can be seen as a proactive measure to avoid the unpredictability of court proceedings and the potential for significant legal expenses. The absence of further obligations beyond the settlement terms provides a more predictable legal expense forecast for investors and analysts.
However, it is crucial for investors to understand that the preliminary financial results are unaudited and subject to change following the quarter-end review process and the annual audit. The forward-looking statements and non-GAAP financial measures such as adjusted EBITDA should be interpreted with caution, as they exclude items that could be material to the company’s financial condition and results of operations.
Expects Preliminary Results to Allow Extension of Credit Facility Maturity Date to April 2025
ATLANTA, Jan. 29, 2024 (GLOBE NEWSWIRE) -- Cardlytics, Inc. (NASDAQ: CDLX), an advertising platform in banks’ digital channels, today announced that it entered into a settlement agreement with Shareholder Representative Services LLC, or SRS, successfully resolving all disputes between the parties related to the Bridg merger agreement and the earnout payments, and further reported preliminary financial results for the fourth quarter ended December 31, 2023. With the preliminary financial results, Cardlytics expects to achieve positive adjusted EBITDA for full year 2023, which would allow it to extend the maturity date of its credit facility until April 2025 pursuant to the terms of its credit facility agreement.
SRS Settlement
On January 25, 2024, Cardlytics entered into a settlement agreement with SRS, the entity representing the former shareholders of Bridg. The settlement agreement resolved all disputes between the parties related to the Bridg merger agreement, including the disputes related to the first anniversary earnout payment and the second anniversary earnout payment.
In connection with the settlement agreement, Cardlytics agreed to pay SRS
"I am delighted to resolve this significant issue that has greatly impacted Cardlytics for the last year and a half,” said Cardlytics CEO Karim Temsamani. “All matters with SRS, including our withholding from the first anniversary earnout payment as well as the second anniversary earnout dispute, were settled for less than
Fourth Quarter 2023 Preliminary Results
Additionally, Cardlytics today announced preliminary and unaudited financial results for the fourth quarter ended December 31, 2023. Cardlytics anticipates billings, revenue, adjusted contribution and adjusted EBITDA to be in the following ranges (in millions):
| Q4 2023 Previously Reported Guidance | Q4 2023 Preliminary Results(1) | |
| Billings | ||
| Revenue | ||
| Adjusted contribution | ||
| Adjusted EBITDA |
(1) Q4 2023 preliminary results include approximately
“I am pleased that we expect to meet or exceed our previous guidance,” said Cardlytics CFO Alexis DeSieno. “Our focus on cost discipline and efficiency is paying off, and our fourth-quarter performance continues to prove that we can achieve sustained profitability. Our preliminary Q4 2023 results also imply positive adjusted EBITDA for 2023. Once finalized, this positive adjusted EBITDA result for 2023 will allow us to extend the maturity date of our credit facility to April 2025 pursuant to the terms of the credit facility agreement, giving us additional flexibility.”
Financial Disclosure Advisory
The foregoing expected results are preliminary, unaudited and subject to change based on the completion of Cardlytics’ quarter-end review process and the completion of the audit for the year ended December 31, 2023. These preliminary results include calculations or figures that have been prepared internally by management and have not been reviewed or audited by Cardlytics’ auditors.
A reconciliation of billings to GAAP revenue on a forward-looking basis is presented below under the heading "Reconciliation of Preliminary GAAP Revenue to Billings." A reconciliation of adjusted contribution to GAAP gross profit and a reconciliation of adjusted EBITDA to GAAP net loss on a forward-looking basis is not available without unreasonable efforts due to the high variability, complexity, and low visibility with respect to the items excluded from this non-GAAP measure.
Reconciliation of Preliminary GAAP Revenue to Billings
| Q4 2023 Preliminary Results (amounts in millions) | ||||
| Revenue | ||||
| Plus: | ||||
| Consumer Incentives | ||||
| Billings | ||||
About Cardlytics
Cardlytics (NASDAQ: CDLX) is a digital advertising platform. We partner with financial institutions to run their banking rewards programs that promote customer loyalty and deepen banking relationships. In turn, we have a secure view into where and when consumers are spending their money. We use these insights to help marketers identify, reach, and influence likely buyers at scale, as well as measure the true sales impact of marketing campaigns. Headquartered in Atlanta, Cardlytics has offices in Menlo Park, New York, Los Angeles, and London. Learn more at www.cardlytics.com.
Cautionary Language Concerning Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to forward-looking statements related to our payments in connection with the settlement agreement with SRS, our preliminary results for the quarter ended December 31, 2023, our expected adjusted EBITDA results for full year 2023, and the extension of the maturity date of our credit facility. These forward-looking statements are made as of the date they were first issued and were based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as "expect," "anticipate," "should," "believe," "hope," "target," "project," "goals," "estimate," "potential," "predict," "may," "will," "might," "could," "intend," or variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control.
Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to the risks detailed in the “Risk Factors” section of our Form 10-Q filed with the Securities and Exchange Commission on November 8, 2023 and in subsequent periodic reports that we file with the Securities and Exchange Commission. Past performance is not necessarily indicative of future results.
The forward-looking statements included in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments will cause our views to change. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.
Non-GAAP Measures
To supplement the financial measures presented in our press release and related conference call or webcast in accordance with generally accepted accounting principles in the United States (“GAAP”), we also present the following non-GAAP measures of financial performance in this press release: billings, adjusted contribution, and adjusted EBITDA.
A “non-GAAP financial measure” refers to a numerical measure of our historical or future financial performance or financial position that is included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in our financial statements. We provide certain non-GAAP measures as additional information relating to our operating results as a complement to results provided in accordance with GAAP. The non-GAAP financial information presented herein should be considered in conjunction with, and not as a substitute for or superior to, the financial information presented in accordance with GAAP and should not be considered a measure of liquidity. There are significant limitations associated with the use of non-GAAP financial measures. Further, these measures may differ from the non-GAAP information, even where similarly titled, used by other companies and therefore should not be used to compare our performance to that of other companies.
We have presented billings, adjusted contribution, and adjusted EBITDA as non-GAAP financial measures in this press release. Billings represents the gross amount billed to customers and marketers for advertising campaigns in order to generate revenue. Cardlytics platform billings is recognized gross of both Consumer Incentives and Partner Share. Cardlytics platform GAAP revenue is recognized net of Consumer Incentives and gross of Partner Share. Bridg platform billings is the same as Bridg platform GAAP revenue. We define adjusted contribution as a measure 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, delivery costs, general and administration, and other investments. Adjusted contribution is calculated by taking our total revenue less our Partner Share and other third-party costs. Adjusted contribution does not take into account all costs associated with generating revenue from advertising campaigns, including sales and marketing expenses, research and development expenses, delivery costs, general and administrative expenses and other expenses, which we do not take into consideration when making decisions on how to manage our advertising campaigns. We define adjusted EBITDA as our net loss before income taxes; interest expense, net; depreciation and amortization expense; stock-based compensation expense; foreign currency gain (loss); acquisition and integration cost (benefit); loss (gain) in fair value of contingent consideration; goodwill impairment and restructuring and reduction of force. Notably, any impacts related to minimum Partner Share commitments in connection with agreements with certain partners are not added back to net income in order to calculate adjusted EBITDA and adjusted contribution.
We believe the use of non-GAAP financial measures, as a supplement to GAAP measures, is useful to investors in that they eliminate items that are either not part of our core operations or do not require a cash outlay, such as stock-based compensation expense. Management uses these non-GAAP financial measures when evaluating operating performance and for internal planning and forecasting purposes. We believe that these non-GAAP financial measures help indicate underlying trends in the business, are important in comparing current results with prior period results, and are useful to investors and financial analysts in assessing operating performance.
Contacts:
Public Relations:
Robert Robinson
pr@cardlytics.com
Investor Relations:
Robert Robinson
ir@cardlytics.com
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