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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File Number: 001-38386
cdlx-20220930_g1.jpg
CARDLYTICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware26-3039436
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
675 Ponce de Leon Ave. NE, Ste 6000AtlantaGeorgia30308
(Address of principal executive offices, including zip code)
(888)792-5802
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockCDLXNASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
As of October 31, 2022, there were 33,165,847 shares outstanding of the registrant’s common stock, par value $0.0001.

CARDLYTICS, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
  Page
PART I.FINANCIAL INFORMATION 
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
PART II.OTHER INFORMATION 
Item 1.
Item 1A.
Item 2.
Item 6.

RISK FACTORS SUMMARY
Our business is subject to a number of risks and uncertainties, including those risks discussed at-length in the section below titled “Risk Factors.” These risks include, among others, the following:
Risks Related to our Business and Industry
•The ongoing COVID-19 pandemic could materially and adversely affect our business, results of operations and financial condition.
•Unfavorable conditions in the global economy or the industries we serve could limit our ability to grow our business and negatively affect our operating results.
•Our quarterly operating results have fluctuated and may continue to vary from period to period, which could result in our failure to meet expectations with respect to operating results and cause the trading price of our stock to decline.
•We may not be able to sustain our revenue and billings growth rate in the future.
•We are dependent upon the Cardlytics platform.
•If we fail to identify and respond effectively to rapidly changing technology and industry needs, our solutions may become less competitive or obsolete.
•We are substantially dependent on Chase, Bank of America, Wells Fargo and a limited number of other FI partners.
•The market in which we participate is competitive, and we may not be able to compete successfully with our current or future competitors.
•If we are unable to successfully integrate Dosh’s, Bridg’s and Entertainment's businesses and employees, it could have an adverse effect on our future results and the market price of our common stock.
•The amount we will have to pay in connection with the acquisition of Bridg has not been conclusively determined, and it may be materially larger than we expect.

1
Risks Related to our Outstanding Convertible Senior Notes
•Servicing our debt may require a significant amount of cash. We may not have sufficient cash flow from our business to pay our indebtedness, and we may not have the ability to raise the funds necessary to settle for cash conversions of the Notes or to repurchase the Notes for cash upon a fundamental change, which could adversely affect our business and results of operations.
•We are subject to counterparty risk with respect to the Capped Calls.
Risks Related to Regulatory and Intellectual Property Matters
•Legislation and regulation of online businesses, including privacy and data protection regimes, are expansive, not clearly defined and rapidly evolving. Such regulation could create unexpected costs, subject us to enforcement actions for compliance failures, or restrict portions of our business or cause us to change our business model.
•Failure to protect our proprietary technology and intellectual property rights could substantially harm our business, financial condition and operating results.
Risks Related to Ownership of our Common Stock
•The market price of our common stock has been and is likely to continue to be volatile.
•Anti-takeover provisions in our charter documents and under Delaware law could make acquiring us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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CARDLYTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Amounts in thousands, except par value amounts)
December 31, 2021September 30, 2022
Assets
Current assets:
Cash and cash equivalents$233,467 $138,514 
Restricted cash95 74 
Accounts receivable and contract assets, net111,085 97,168 
Other receivables6,097 4,675 
Prepaid expenses and other assets7,981 8,697 
Total current assets358,725 249,128 
Long-term assets:
Property and equipment, net11,273 7,103 
Right-of-use assets under operating leases, net10,196 9,276 
Intangible assets, net125,550 113,878 
Goodwill742,516 665,813 
Capitalized software development costs, net13,131 18,377 
Other long-term assets, net2,406 2,737 
Total assets$1,263,797 $1,066,312 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$4,619 $4,768 
Accrued liabilities:
Accrued compensation12,136 12,940 
Accrued expenses19,620 20,556 
Partner Share liability46,595 41,051 
Consumer Incentive liability52,602 48,353 
Deferred revenue3,280 3,004 
Current operating lease liabilities6,028 6,088 
Current contingent consideration182,470 118,151 
Total current liabilities327,350 254,911 
Long-term liabilities:
Convertible senior notes, net184,398 225,678 
Long-term operating lease liabilities6,801 5,135 
Deferred liabilities173 58 
Long-term contingent consideration49,825 — 
Other long-term liabilities4,550 21 
Total liabilities$573,097 $485,803 
Stockholders’ equity:
Common stock, $0.0001 par value—100,000 shares authorized, and 33,534 and 33,043 shares issued and outstanding as of December 31, 2021 and September 30, 2022, respectively
$9 $9 
Additional paid-in capital1,212,823 1,169,213 
Accumulated other comprehensive income486 9,578 
Accumulated deficit(522,618)(598,291)
Total stockholders’ equity690,700 580,509 
Total liabilities and stockholders’ equity$1,263,797 $1,066,312 
See notes to the condensed consolidated financial statements

3
CARDLYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands, except per share amounts)
 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2021202220212022
Revenue$64,984 $72,706 $177,067 $216,039 
Costs and expenses:
Partner Share and other third-party costs34,090 37,563 93,814 112,996 
Delivery costs6,390 9,125 16,076 23,820 
Sales and marketing expense16,733 18,289 46,998 57,920 
Research and development expense11,141 13,762 26,293 39,634 
General and administration expense20,073 19,972 49,136 61,381 
Acquisition and integration costs (benefit)1,714 (1,867)22,926 (4,269)
Change in fair value of contingent consideration6,261 (46,126)7,741 (114,144)
Goodwill impairment
— — — 83,149 
Depreciation and amortization expense8,375 10,468 20,273 30,695 
Total costs and expenses104,777 61,186 283,257 291,182 
Operating (loss) income(39,793)11,520 (106,190)(75,143)
Other expense:
Interest expense, net(3,193)(580)(9,316)(2,406)
Foreign currency loss(1,543)(4,673)(1,224)(10,882)
Total other expense(4,736)(5,253)(10,540)(13,288)
(Loss) income before income taxes(44,529)6,267 (116,730)(88,431)
Income tax benefit— — — 1,446 
Net (loss) income(44,529)6,267 (116,730)(86,985)
Net (loss) income attributable to common stockholders$(44,529)$6,267 $(116,730)$(86,985)
Net (loss) income per share attributable to common stockholders, basic$(1.35)$0.19 $(3.67)$(2.60)
Net (loss) income per share attributable to common stockholders, diluted$(1.35)$0.19 $(3.67)$(2.60)
Weighted-average common shares outstanding, basic33,101 32,950 31,802 33,455 
Weighted-average common shares outstanding, diluted33,101 33,269 31,802 33,455 
See notes to the condensed consolidated financial statements

4
CARDLYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
(Amounts in thousands)
 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2021202220212022
Net (loss) income$(44,529)$6,267 $(116,730)$(86,985)
Other comprehensive income:
Foreign currency translation adjustments1,267 3,998 807 9,092 
Total comprehensive (loss) income$(43,262)$10,265 $(115,923)$(77,893)
See notes to the condensed consolidated financial statements

5
CARDLYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(Amounts in thousands)

Nine Months Ended September 30, 2022:
  Additional
Paid-In
Capital		Accumulated
Other
Comprehensive Income		Accumulated
Deficit		Total
 Common Stock
 SharesAmount
Balance – December 31, 202133,534 $9 $1,212,823 $486 $(522,618)$690,700 
Cumulative effect upon adoption of ASU 2020-06— — (51,417)— 11,312 (40,105)
Exercise of common stock options23 — 417 — — 417 
Stock-based compensation— — 33,950 — — 33,950 
Settlement of restricted stock664 — — — — — 
Common stock purchase consideration for the acquisition of Entertainment173 — 11,937 — — 11,937 
Issuance of common stock pursuant to the ESPP55 — 1,503 — — 1,503 
Repurchase and cancellation of common stock(1,406)— (40,000)— — (40,000)
Other comprehensive income— — — 9,092 — 9,092 
Net loss— — — — (86,985)(86,985)
Balance – September 30, 202233,043 $9 $1,169,213 $9,578 $(598,291)$580,509 

Three Months Ended September 30, 2022:
  Additional
Paid-In
Capital		Accumulated
Other
Comprehensive
Income		Accumulated
Deficit		Total
 Common Stock
 SharesAmount
Balance – June 30, 202232,883 $9 $1,163,126 $5,580 $(604,558)$564,157 
Stock-based compensation— — 6,087 — — 6,087 
Settlement of restricted stock160 — — — — — 
Other comprehensive income— — — 3,998 — 3,998 
Net income— — — — 6,267 6,267 
Balance – September 30, 202233,043 $9 $1,169,213 $9,578 $(598,291)$580,509 
See notes to the condensed consolidated financial statements

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Nine Months Ended September 30, 2021:
  Additional
Paid-In
Capital		Accumulated
Other
Comprehensive
(Loss) Income		Accumulated
Deficit		Total
 Common Stock
 SharesAmount
Balance – December 31, 202027,861 $8 $551,429 $(192)$(394,053)$157,192 
Exercise of common stock options113 — 1,930 — — 1,930 
Stock-based compensation— — 37,952 — — 37,952 
Settlement of restricted stock393 — — — — — 
Issuance of common stock3,850 — 484,049 — — 484,049 
Common stock purchase consideration for the acquisition of Dosh916 — 117,349 — — 117,349 
Fair value of assumed Dosh options attributable to pre-combination service— — 3,593 — — 3,593 
Fair value of assumed Bridg options attributable to pre-combination service— — 841 — — 841 
Issuance of common stock pursuant to the ESPP21 — 1,637 — — 1,637 
Other comprehensive income— — — 807 — 807 
Net loss— — — — (116,730)(116,730)
Balance – September 30, 202133,154 $8 $1,198,780 $615 $(510,783)$688,620 


Three Months Ended September 30, 2021:


  Additional Paid-In-CapitalAccumulated Other Comprehensive (Loss) IncomeAccumulated DeficitTotal
 Common Stock
 SharesAmount
Balance – June 30, 202133,023 $8 $1,181,290 $(652)$(466,254)$714,392 
Exercise of common stock options29 — 474 — — 474 
Stock-based compensation— — 17,016 — — 17,016 
Settlement of restricted stock90 — — — — — 
Common stock purchase consideration for the acquisition of Dosh12 — — — — — 
Other comprehensive income— — — 1,267 — 1,267 
Net loss— — — — (44,529)(44,529)
Balance – September 30, 202133,154 $8 $1,198,780 $615 $(510,783)$688,620 





See notes to the condensed consolidated financial statements

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CARDLYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
 Nine Months Ended
September 30,
 20212022
Operating activities
Net loss$(116,730)$(86,985)
Adjustments to reconcile net loss to net cash used in operating activities:
Credit loss expense1,440 949 
Depreciation and amortization20,273 30,695 
Amortization of financing costs charged to interest expense701 1,192 
Accretion of debt discount and non-cash interest expense7,078 — 
Amortization of right-of-use assets3,770 4,230 
Stock-based compensation expense37,415 32,194 
Goodwill impairment— 83,149 
Change in fair value of contingent consideration7,741 (114,144)
Other non-cash expense, net1,275 10,524 
Deferred implementation costs2,343 — 
Income tax benefit— (1,446)
Change in operating assets and liabilities:
Accounts receivable(757)15,082 
Prepaid expenses and other assets(1,296)(456)
Accounts payable42 111 
Other accrued expenses(2,626)(5,814)
Partner Share liability(2,171)(5,836)
Consumer Incentive liability3,534 (4,248)
Net cash used in operating activities(37,968)(40,803)
Investing activities
Acquisition of property and equipment(2,145)(1,090)
Acquisition of patents(68)(73)
Capitalized software development costs(6,937)(9,170)
Business acquisitions, net of cash acquired(494,131)(2,274)
Net cash used in investing activities(503,281)(12,607)
Financing activities
Principal payments of debt— (24)
Proceeds from issuance of common stock486,163 397 
Deferred equity issuance costs(190)— 
Repurchase of common stock— (40,000)
Debt issuance costs(200)(181)
Net cash received provided by (used in) financing activities485,773 (39,808)
Effect of exchange rates on cash, cash equivalents and restricted cash(393)(1,756)
Net decrease in cash, cash equivalents and restricted cash(55,869)(94,974)
Cash, cash equivalents, and restricted cash — Beginning of period293,349 233,562 
Cash, cash equivalents, and restricted cash — End of period$237,480 $138,588 

See notes to the condensed consolidated financial statements

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CARDLYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
Nine Months Ended
September 30,
 20212022
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet:
Cash and cash equivalents$237,372 $138,514 
Restricted cash108 74 
Total cash, cash equivalents and restricted cash — End of period$237,480 $138,588 
Supplemental schedule of non-cash investing and financing activities:
Cash paid for interest$2,308 $2,358 
Common stock purchase consideration for the acquisition of Dosh$117,354 $— 
Common stock purchase consideration for acquisition of Entertainment$— $11,937 
Amounts accrued for property and equipment and capitalized software development costs$1,016 $— 
Amounts accrued for purchase of Dosh$462 $— 

See notes to the condensed consolidated financial statements

9
CARDLYTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1.OVERVIEW OF BUSINESS AND BASIS OF PRESENTATION
Cardlytics, Inc. (“we,” “our,” “us,” the “Company,” or “Cardlytics”) is a Delaware corporation and was formed on June 26, 2008. We operate 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 data, including product-level purchase data, to enable marketers, in a privacy-protective manner, to perform analytics and targeted loyalty marketing and to measure the impact of their marketing (the "Bridg platform"). The partners for the Cardlytics platform are predominantly financial institutions ("FI partners") that provide us with access to their anonymized purchase data and digital banking customers. The partners for the Bridg platform are merchants that provide us with access to their point-of-sale data, including product-level purchase data. By applying advanced analytics to the purchase data we receive, we make it actionable, helping marketers reach potential buyers at scale, and measure the true sales impact of their marketing spend. We have strong relationships with leading marketers across a variety of industries, including retail, restaurant, travel and entertainment, direct-to-consumer, and grocery and gas. Using our purchase intelligence, we present customers with offers to save money at a time when they are thinking of their finances.
We also operate through (1) Dosh Holdings, LLC, a wholly owned and operated subsidiary in the United States, (2) HSP EPI Acquisition, LLC ("Entertainment"), a wholly owned and operated subsidiary in the United States, (3) Cardlytics UK Limited, a wholly owned and operated subsidiary registered as a private limited company in England and Wales, and (4) Cardlytics Services India Private Limited, a wholly owned and operated subsidiary registered as a private limited company in India.
Unaudited Interim Results
The accompanying unaudited interim condensed consolidated financial statements and information have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all normal and recurring adjustments considered necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. The results for interim periods presented are not necessarily indicative of the results to be expected for the full year due to the seasonality of our business, which has been historically impacted by higher consumer spending during the fourth quarter. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included on our Annual Report on Form 10-K ("Annual Report") and Form 10-K/A for the fiscal year ended December 31, 2021.
Stock Repurchases
On May 11, 2022, our Board of Directors authorized a stock repurchase program to repurchase up to $40.0 million of our common stock. From May 11, 2022 to June 30, 2022, we paid $40.0 million to repurchase 1,405,655 shares of our common stock at an average purchase price of $28.44 per share and immediately canceled the repurchased shares.
Restructuring and Reduction of Force
During the nine months ended September 30, 2022, we initiated a strategic reduction of our forces in our U.S., U.K., and India operations, including the planned 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 $8.5 million. These charges are reflected on our condensed consolidated statement of operations as follows: $2.0 million in delivery costs, $1.9 million in sales and marketing expense, $1.5 million in research and development expense and $3.1 million in general and administrative expense. We recognize these costs when the extent of our actions are determined and the costs can be estimated. We plan to close our Indian office by the end of 2022. As of September 30, 2022, the remaining cost that have been incurred related to our restructuring and reduction of force but not yet paid are $5.2 million.
During the nine months ended September 30, 2021, we recognized $0.8 million in severance and medical benefits related to our integration efforts following our acquisitions. These charges are reflected on our condensed consolidated statement of operations within acquisition and integration costs. Additionally, during the nine months ended September 30, 2021, we recognized $0.7 million of severance and medical benefits charges related to internal restructuring. These charges are reflected on our condensed consolidated statement of operations as follows: $0.1 million in delivery costs, $0.3 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 are determined and the costs can be estimated.

10
Acquisitions
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 on the acquisition 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 at the time of the acquisition 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 3 - Business Combinations for further information.                                            
Public Offering of Common Stock
On March 5, 2021, we closed a public equity offering in which we sold 3,850,000 shares of common stock at a public offering price of $130.00 per share for total gross proceeds of $500.5 million. We received total net proceeds of $484.0 million after deducting underwriting discounts and commissions of $16.3 million and offering costs of $0.2 million.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Significant items subject to such estimates and assumptions include revenue recognition, internal-use software development costs, stock-based compensation, allowance for doubtful accounts, valuation of acquired intangible assets, valuation of contingent consideration for Bridg, goodwill impairment, income tax including valuation allowance and contingencies. We base our estimates on historical experience and on assumptions that we believe are reasonable. Changes in facts or circumstances may cause us to change our assumptions and estimates in future periods and it is possible that actual results could differ from our current or revised future estimates.
Leases
We have various non-cancellable operating and finance leases for our office spaces, data centers and operational assets with lease periods expiring between 2022 and 2025.
Lease assets and liabilities, net, are as follows (in thousands):
Lease TypeConsolidated Balance Sheets LocationDecember 31, 2021September 30, 2022
Operating lease assetsRight-of-use assets under operating leases, net$10,196 $9,276 
Finance lease assetsProperty and equipment, net86 57 
Total lease assets10,282 9,333 
Operating lease liabilities, currentCurrent operating lease liabilities6,028 6,088 
Operating lease liabilities, long-termLong-term operating lease liabilities6,801 5,135 
Finance lease liabilities, currentAccrued expenses36 37 
Finance lease liabilities, long-termOther long-term liabilities50 21 
Total lease liabilities$12,915 $11,281 

11
Impacts of COVID-19 Pandemic
The COVID-19 pandemic resulted in a global slowdown of economic activity that disrupted supply and demand for a broad variety of goods and services and consumer discretionary spending, and increased inflationary pressure, including spending by consumers with our marketers. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. Actual results could differ from those estimates and any such differences may be material to our financial statements. Due to continuing uncertainty regarding the severity and duration of the impacts of COVID-19 on the global economy, we will continue to monitor this situation and the potential impacts to our business.
2.     SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS
Significant Accounting Policies
There have been no changes to our significant accounting policies, other than the standards adopted below. These unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare our audited annual consolidated financial statements for the year ended December 31, 2021, and include, in the opinion of management, all adjustments, consisting of normal recurring items, necessary for the fair statement of the condensed consolidated financial statements.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion Options (“Subtopic 470-20”) and Derivatives and Hedging—Contracts in Entity’s Own Equity (“Subtopic 815-40”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. ASU 2020-06 also improves and amends the related Earnings Per Share guidance for both Subtopics. The ASU is part of the FASB's simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP, as it removes the requirement to bifurcate our Convertible Senior Notes (the "Notes") into a separate liability and equity component. As a result, it more closely aligns the effective interest rate with the coupon rate of the Notes. ASU 2020-06 is effective for annual reporting periods beginning after December 15, 2021. On January 1, 2022, we adopted this standard using the modified retrospective method which allowed for a cumulative-effect adjustment to the opening balance sheet without restating prior periods. As we did not elect the fair value option in the process, the Notes, net of issuance costs, are accounted for as a single liability measured at amortized cost. Upon adoption, we recorded a decrease in accumulated deficit of $11.3 million, an increase to convertible senior notes, net of $40.1 million and a decrease to additional paid in capital of $51.4 million. Refer to Note 6, “Debt and Financing Arrangements” for further information about the Notes.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which require an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with Topic 606, at fair value on the acquisition date. ASU 2020-08 will be effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendments is permitted, including adoption in an interim period. On January 1, 2022 we early adopted this standard with no material impact to our financial statements.

12
3.     BUSINESS COMBINATIONS
Our acquisitions were accounted for as business combinations and the total purchase consideration of each was allocated to the net tangible and intangible assets and liabilities acquired based on their fair values on the acquisition dates with the remaining amounts recorded as goodwill. The values assigned to the assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of this Quarterly Report on Form 10-Q may be adjusted during the measurement period for each acquisition of up to 12 months from the dates of acquisition as further information becomes available. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.
During the three and nine months ended September 30, 2021 we incurred $1.7 million and $22.9 million of costs in connection with our acquisitions, respectively. During the three and nine months ended September 30, 2022 we incurred $1.9 million and $4.3 million of benefit in connection with our acquisitions, respectively. The benefit was due to a reduction of the estimated brokerage fee related to our reduced estimate of contingent consideration related to our Bridg acquisition. These costs (benefits) are included in acquisition and integration costs (benefit) on our condensed consolidated statements of operations and primarily represent legal, accounting and broker fees. The results of Entertainment have been included in the consolidated financial statements since its date of acquisition. For the three and nine months ended September 30, 2022, Entertainment's combined revenue included in the consolidated statement of operations was approximately 3% of consolidated revenue, respectively. Due to the continued integration of the combined businesses, it was impractical to determine the earnings.
For the acquisitions of Dosh, Bridg and Entertainment, as applicable, the estimated fair values of merchant relationships, partner relationships, and the card-linked subscriber base were determined using the replacement cost method and lost profits, as applicable, which required us to estimate the costs to recreate an asset of equivalent utility at prices available at the time of the valuation analysis and the lost profits over the period of time to recreate the asset. Trade names were valued using the "relief-from-royalty" approach. This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method required us to estimate the future revenues for the related brands, the appropriate royalty rates and the weighted-average costs of capital. Developed technology for Entertainment was valued using the replacement cost method, which required us to estimate the costs to recreate an asset of equivalent utility at prices available at the time of the valuation analysis. Developed technology for Dosh and Bridg was valued using the excess earnings method, an income approach. Under the excess earnings method, the fair value of an intangible asset is equal to the present value of the asset’s projected incremental after-tax cash flows (excess earnings) remaining after deducting the market rates of return on the estimated value of contributory assets (contributory charge) over its remaining useful life.
Acquisition of Entertainment
On January 7, 2022, we completed the acquisition of Entertainment for purchase consideration of $14.6 million, as presented below (in thousands):
January 7, 2022
Fair value of common stock transferred$11,937 
Cash paid to extinguish acquiree debt2,053 
Cash paid to settle pre-acquisition liabilities and acquiree deal-related costs624 
Cash paid to membership interest holders24 
Cash receivable from membership interest holders pursuant to finalization of net working capital(61)
Total purchase consideration$14,577 









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The following table presents the preliminary purchase consideration allocation recorded on our condensed consolidated balance sheet as of the acquisition date (in thousands):
January 7, 2022
Cash and cash equivalents$376 
Accounts receivable and other assets1,259 
Intangible assets9,800 
Goodwill5,002 
Accounts payable and other liabilities(1,860)
Total purchase consideration$14,577 
The goodwill was primarily attributed to the value of future synergies created with our current and future offerings. Goodwill is not expected to be deductible for income tax purposes.
The following table presents the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):
Fair ValueUseful life (in years)
Trade name$800 3.0
Developed technology700 3.0
Merchant relationships8,300 4.0
Acquisition of Bridg
On May 5, 2021, we completed the acquisition of Bridg for purchase consideration of $578.9 million, as presented below (in thousands):
May 5, 2021
Cash paid to common and preferred stockholders, warrant holders and vested option holders$337,166 
Cash paid to extinguish acquiree debt1,949 
Cash paid to settle pre-acquisition liabilities and acquiree deal-related costs8,012 
Fair value of contingent consideration230,921 
Fair value of assumed options attributable to pre-combination service841 
Total purchase consideration$578,889 
The following table presents the purchase consideration allocation recorded on our condensed consolidated balance sheet as of the acquisition date (in thousands):
May 5, 2021
Cash and cash equivalents$1,630 
Accounts receivable and other assets1,989 
Intangible assets64,700 
Goodwill538,271 
Accounts payable and other liabilities(20,694)
Deferred tax liabilities(7,007)
Total purchase consideration$578,889 
The goodwill was primarily attributed to the value of future growth expected for the Bridg platform and of synergies created with our current and future offerings. Goodwill is not expected to be deductible for income tax purposes.

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As a part of this acquisition, we have agreed to make a First Anniversary Payment equal to 20 times the annualized recurring revenue, ("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. As of September 30, 2022, the expected brokerage fee of the First Anniversary Payment is $6.9 million and the fair value of the brokerage fee of the Second Anniversary Payment is $4.6 million, reflected in accrued expenses on our condensed consolidated balance sheet.
As of September 30, 2022, the First Anniversary Payment has not been made and an agreement regarding the amount of the First Anniversary Payment has not been reached. Per the terms of the Agreement and Plan of Merger, we delivered the First Earnout Statement within thirty days of the end of the First Earnout Period. We subsequently agreed to extend the Stockholder Representative's review period. During the third quarter, we received a Earnout Objection Notice from the Stockholder Representative that alleges a material understatement of the First Anniversary Payment amount. We are continuing the dispute-resolution process specific to the First Anniversary Payment outlined in the Agreement and Plan of Merger, which was filed with the Securities and Exchange Commission as Exhibit 10.3 to our Quarterly Report on Form 10-Q on August 3, 2021.
The following table presents the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):
Fair ValueUseful life (in years)
Trade name$200 2.0
Developed technology53,500 6.0
Merchant relationships11,000 5.0
Acquisition of Dosh
On March 5, 2021, we completed our acquisition of Dosh for purchase consideration of $277.6 million, as presented below (in thousands):
March 5, 2021
Cash paid to common and preferred stockholders, warrant holders and vested option holders$136,626 
Cash paid to extinguish acquiree debt16,574 
Cash paid to settle pre-acquisition liabilities and acquiree deal-related costs3,463 
Fair value of common stock transferred117,354 
Fair value of assumed options attributable to pre-combination service3,593 
Total purchase consideration$277,610 
The following table presents the purchase consideration allocation recorded on our condensed consolidated balance sheet as of the acquisition date (in thousands):
March 5, 2021
Cash and cash equivalents$7,323 
Accounts receivable and other assets6,146 
Intangible assets80,000 
Goodwill205,690 
Accounts payable and other liabilities(4,146)
Consumer Incentive liability(15,101)
Deferred tax liabilities(2,302)
Total purchase consideration$277,610 
The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings and of future growth expected from the labor force of Dosh. Goodwill is not expected to be deductible for income tax purposes.


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The following table presents the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):
Fair ValueUseful life (in years)
Trade name$2,500 3.0
Developed technology37,500 6.0
Merchant relationships21,000 5.0
Partner relationships2,000 7.0
Card-linked subscriber user base$17,000 5.0
Pro forma consolidated results of operations
The following unaudited pro forma financial information presents combined results of operations for the period presented as if the acquisition of Entertainment had been completed on January 1, 2021 and the acquisitions of Dosh and Bridg had been completed on January 1, 2020. The pro forma information includes adjustments to depreciation expense for property and equipment acquired, to amortize expense for the intangible assets acquired, and to eliminate the acquisition transaction expenses recognized in the period. The pro forma financial information is for informational purposes only and is not necessarily indicative of the consolidated results of operations of the combined business had the acquisitions actually occurred on January 1, 2021 and January 1, 2020, respectively, or the results of future operations of the combined business. For instance, planned or expected operational synergies following the acquisition are not reflected in the pro forma information. Consequently, actual results will differ from the unaudited pro forma information presented below.
Nine Months Ended September 30,
20212022
(in thousands)
Revenue$191,992 $216,060 
Net loss$(130,998)$(85,902)
                                            
4.     GOODWILL AND ACQUIRED INTANGIBLES
The changes in the carrying amount of goodwill for the nine months ended September 30, 2022 are as follows (in thousands):
Cardlytics PlatformBridg PlatformConsolidated
Balance as of December 31, 2021
$205,690 $536,826 $742,516 
Goodwill additions due to acquisition of Entertainment5,062 — 5,062 
Measurement period adjustments(61)1,445 1,384 
Goodwill impairments— (83,149)(83,149)
Balance as of September 30, 2022
$210,691 $455,122 $665,813 

Goodwill is tested annually for impairment, unless certain triggering events require an interim impairment analysis, including macroeconomic conditions, industry and market considerations, costs factors, overall financial performance, and other relevant entity-specific events and changes. These considerations are evaluated holistically to assess whether it is more likely than not that a reporting unit's carrying value exceeds its fair value. Our reporting units consist of the Cardlytics platform in the U.S., the Cardlytics platform in the U.K. and the Bridg platform. There is no goodwill recorded within the Cardlytics platform in the U.K., and it is not evaluated further as a result.

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As a result of the sustained decline in our stock price, we determined that it was necessary to perform an interim impairment test for goodwill as of June 30, 2022. The Cardlytics platform in the U.S., which is a combination of legacy and acquired businesses has $210.7 million of goodwill and as of June 30, 2022, had a fair value that exceeded its carrying value by approximately 40%. As a result of our impairment test, we determined that the carrying value of the Bridg platform, which is comprised entirely of an acquired business, exceeded its fair value, and consequently, we recognized a goodwill impairment of $83.1 million, with $455.1 million of goodwill remaining. As a result, the Bridg platform reporting unit had a fair value that is equal to carrying value as of the June 30, 2022 valuation date.
We performed an evaluation as of September 30, 2022 to determine whether it was more likely than not that the fair values of our reporting units are less than their carrying values. As of September 30, 2022, we determined that it was not more likely than not that the fair values of our reporting units are less than their carrying values. However, due to the low amount of cushion at the most recent impairment test date of June 30, 2022, future changes in assumptions or market conditions could result in an impairment.
The most significant assumptions utilized in the determination of the estimated fair of the Bridg platform and the Cardlytics platform in the U.S. are the net revenues and earnings growth rates (including residual growth rates) and discount rate.
The residual growth rate represents the expected rate at which the reporting unit is expected to grow beyond the shorter-term business planning period. The residual growth rate utilized in our fair value estimates is consistent with the reporting unit operating plans, and approximates expected long term growth rates. The residual growth rate is dependent on overall market growth rates, the competitive environment, inflation, and business activities that impact customer conversion. As a result, the residual growth rate could be adversely impacted by a sustained deceleration in customer activity, an increased competitive environment or other macro-economic factors that impact the business decisions of the customers of the Bridg platform and the Cardlytics platform in the U.S.
The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. Our discount rate may be impacted by adverse changes in the macroeconomic environment and volatility in the equity and debt markets.
We performed certain restructuring and reduction in force actions as discussed in Note 1—Overview of Business and Basis of Presentation. Further, management is currently undergoing its annual strategic budgeting process for future years, the ultimate cashflows of which will impact our goodwill annual test as of our testing date of October 1, 2022. While management can and has implemented strategies to address these events, changes in operating plans or adverse changes in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that would trigger future impairment charges of the reporting units' goodwill.
Acquired intangible assets subject to amortization as of September 30, 2022 were as follows:
CostAccumulated AmortizationNetWeighted Average Remaining Useful Life
(in thousands)(in years)
Trade name$3,500 $(1,651)$1,849 1.7
Developed technology91,700 (22,589)69,111 4.5
Merchant relationships40,300 (11,227)29,073 3.4
Partner relationships2,000 (450)1,550 5.4
Card-linked subscriber user base17,000 (5,355)11,645 3.4
Total other intangible assets$154,500 $(41,272)$113,228 
Amortization expense of acquired intangibles during the three and nine months ended September 30, 2022 was $7.2 million and $21.6 million, respectively.

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Acquired intangible assets subject to amortization as of December 31, 2021 were as follows:
CostAccumulated AmortizationNetWeighted Average Remaining Useful Life
(in thousands)(in years)
Trade name$2,700 $(753)$1,947 2.1
Developed technology91,000 (11,026)79,974 5.3
Merchant relationships32,000 (4,900)27,100 4.2
Partner relationships2,000 (235)1,765 6.2
Card-linked subscriber user base17,000 (2,798)14,202 4.2
Total other intangible assets$144,700 $(19,712)$124,988 
As of September 30, 2022, we expect amortization expense in future periods to be as follows (in thousands):
Amount
2022 (remainder of year)$7,172 
202328,695 
202427,976 
202527,336 
202617,596 
Thereafter