Cardlytics, Inc. [CDLX] Filings

10-Q 1 cdlx-20230930.htm 10-Q cdlx-20230930

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, 2023


☐			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


CARDLYTICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware		26-3039436
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
675 Ponce de Leon Ave. NE, Suite 6000	Atlanta	Georgia	30308
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	CDLX	NASDAQ

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, 2023, there were 39,254,146 shares outstanding of the registrant’s common stock, par value $0.0001.

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CARDLYTICS, INC.

QUARTERLY REPORT ON FORM 10-Q

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		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Operations (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)	5
	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 6.	Exhibits	73
Signatures		74

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

•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.

•The total amount we have to pay in connection with the acquisition of Bridg may be materially larger than we expect.

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 (as defined below) 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 (as defined below).

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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, 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, 2022		September 30, 2023
Assets
Current assets:
Cash and cash equivalents	$	121,905	$	90,067
Restricted cash	80		73
Accounts receivable and contract assets, net	115,609		103,324

Other receivables	4,470		4,865
Prepaid expenses and other assets	7,978		7,260
Total current assets	250,042		205,589
Long-term assets:
Property and equipment, net	5,916		3,005
Right-of-use assets under operating leases, net	6,571		4,823
Intangible assets, net	53,475		43,116
Goodwill	352,721		352,721
Capitalized software development costs, net	19,925		23,721

Other long-term assets, net	2,586		1,941
Total assets	$	691,236	$	634,916
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	3,765	$	3,479

Accrued liabilities:
Accrued compensation	10,486		11,086
Accrued expenses	21,335		9,666
Short-term debt	—		30,000
Partner Share liability	48,593		43,495
Consumer Incentive liability	53,983		48,922
Deferred revenue	1,751		3,323

Current operating lease liabilities	4,910		2,244

Current contingent consideration	104,121		27,268

Total current liabilities	248,944		179,483
Long-term liabilities:
Convertible senior notes, net	226,047		227,139
Long-term operating lease liabilities	4,306		2,878

Deferred liabilities	334		81


Total liabilities	$	479,631	$	409,581

Liabilities and stockholders' equity
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, $0.0001 par value—100,000 shares authorized, and 33,477 and 38,528 shares issued and outstanding as of December 31, 2022 and September 30, 2023, respectively	$	9	$	9
Additional paid-in capital	1,182,568		1,230,458

Accumulated other comprehensive income	5,598		5,304
Accumulated deficit	(976,570)		(1,010,436)
Total stockholders’ equity	211,605		225,335
Total liabilities and stockholders’ equity	$	691,236	$	634,916

See notes to the condensed consolidated financial statements

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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,
	2022		2023		2022		2023
Revenue	$	72,706	$	79,005	$	216,039	$	220,037
Costs and expenses:
Partner Share and other third-party costs	37,563		36,144		112,996		108,698
Delivery costs	9,125		7,012		23,820		20,451
Sales and marketing expense	18,289		14,161		57,920		43,314
Research and development expense	13,762		12,430		39,634		38,841
General and administration expense	19,972		15,561		61,381		44,907
Acquisition and integration (benefit) cost	(1,867)		78		(4,269)		(8,146)
(Gain) loss in fair value of contingent consideration	(46,126)		8,281		(114,144)		(15,045)
Goodwill impairment	—		—		83,149		—
Depreciation and amortization expense	10,468		5,990		30,695		19,765

Total costs and expenses	61,186		99,657		291,182		252,785
Operating income (loss)	11,520		(20,652)		(75,143)		(32,748)
Other expense:
Interest expense, net	(580)		(915)		(2,406)		(1,497)



Foreign currency (loss) gain	(4,673)		(2,399)		(10,882)		379
Total other expense	(5,253)		(3,314)		(13,288)		(1,118)
Income (loss) before income taxes	6,267		(23,966)		(88,431)		(33,866)
Income tax benefit	—		—		1,446		—
Net income (loss)	6,267		(23,966)		(86,985)		(33,866)

Net income (loss) attributable to common stockholders	$	6,267	$	(23,966)	$	(86,985)	$	(33,866)
Net income (loss) per share attributable to common stockholders, basic	$	0.19	$	(0.63)	$	(2.60)	$	(0.95)
Net income (loss) per share attributable to common stockholders, diluted	$	0.19	$	(0.63)	$	(2.60)	$	(0.95)
Weighted-average common shares outstanding, basic	32,950		37,982		33,455		35,502
Weighted-average common shares outstanding, diluted	33,269		37,982		33,455		35,502

See notes to the condensed consolidated financial statements

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CARDLYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(Amounts in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2023		2022		2023
Net income (loss)	$	6,267	$	(23,966)	$	(86,985)	$	(33,866)
Other comprehensive income (loss):

Foreign currency translation adjustments	3,998		2,261		9,092		(294)
Total comprehensive income (loss)	$	10,265	$	(21,705)	$	(77,893)	$	(34,160)

See notes to the condensed consolidated financial statements

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CARDLYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(Amounts in thousands)

Nine Months Ended September 30, 2023:


				Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total
	Common Stock
	Shares	Amount
Balance – December 31, 2022	33,477	$	9	$	1,182,568	$	5,598	$	(976,570)	$	211,605
Exercise of common stock options	10	—		54		—		—		54
Stock-based compensation	—	—		31,561		—		—		31,561
Settlement of restricted stock	2,004	—		—		—		—		—
Issuance of common stock	2,755	—		15,171		—		—		15,171
Issuance of common stock pursuant to the ESPP	282	—		1,104		—		—		1,104
Other comprehensive loss	—	—		—		(294)		—		(294)
Net loss	—	—		—		—		(33,866)		(33,866)
Balance – September 30, 2023	38,528	$	9	$	1,230,458	$	5,304	$	(1,010,436)	$	225,335

Three Months Ended September 30, 2023:


				Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total
	Common Stock
	Shares	Amount
Balance – June 30, 2023	37,088	$	9	$	1,219,530	$	3,043	$	(986,470)	$	236,112
Exercise of common stock options	6	—		44		—		—		44

Stock-based compensation	—	—		10,884		—		—		10,884
Settlement of restricted stock	1,434	—		—		—		—		—


Other comprehensive loss	—	—		—		2,261		—		2,261
Net loss	—	—		—		—		(23,966)		(23,966)
Balance – September 30, 2023	38,528	$	9	$	1,230,458	$	5,304	$	(1,010,436)	$	225,335

See notes to the condensed consolidated financial statements

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Nine Months Ended September 30, 2022:


				Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total
	Common Stock
	Shares	Amount
Balance – December 31, 2021	33,534	$	9	$	1,212,823	$	486	$	(522,618)	$	690,700
Cumulative effect upon adoption of ASU	—	—		(51,417)		—		11,312		(40,105)
Exercise of common stock options	23	—		417		—		—		417
Stock-based compensation	—	—		33,950		—		—		33,950
Settlement of restricted stock	664	—		—		—		—		—
Common stock purchase consideration for the acquisition of Entertainment	173	—		11,937		—		—		11,937
Issuance of common stock pursuant to the ESPP	55	—		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, 2022	33,043	$	9	$	1,169,213	$	9,578	$	(598,291)	$	580,509

Three Months Ended September 30, 2022:


				Additional Paid-In-Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total
	Common Stock
	Shares	Amount
Balance – June 30, 2022	32,883	$	9	$	1,163,126	$	5,580	$	(604,558)	$	564,157

Stock-based compensation	—	—		6,087		—		—		6,087
Settlement of restricted stock	160	—		—		—		—		—


Other comprehensive income	—	—		—		3,998		—		3,998
Net income	—	—		—		—		6,267		6,267
Balance – September 30, 2022	33,043	$	9	$	1,169,213	$	9,578	$	(598,291)	$	580,509

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,
	2022		2023
Operating activities
Net loss	$	(86,985)	$	(33,866)
Adjustments to reconcile net loss to net cash used in operating activities:
Credit loss expense	949		1,153
Depreciation and amortization	30,695		19,765
Amortization of financing costs charged to interest expense	1,192		1,234


Amortization of right-of-use assets	4,230		2,807
Stock-based compensation expense	32,194		29,956
Goodwill impairment	83,149		—
(Gain) loss in fair value of contingent consideration	(114,144)		(15,044)


Other non-cash expense (income), net	10,524		(613)

Income tax benefit	(1,446)		—
Change in operating assets and liabilities:
Accounts receivable	15,082		10,991
Prepaid expenses and other assets	(456)		1,114


Accounts payable	111		(265)
Other accrued expenses	(5,814)		(10,282)

Partner Share liability	(5,836)		(4,994)
Consumer Incentive liability	(4,248)		(5,075)
Net cash used in operating activities	(40,803)		(3,119)
Investing activities
Acquisition of property and equipment	(1,090)		(393)
Acquisition of patents	(73)		—
Capitalized software development costs	(9,170)		(8,302)
Business acquisitions, net of cash acquired	(2,274)		—
Net cash used in investing activities	(12,607)		(8,695)
Financing activities
Proceeds from issuance of debt	—		30,000
Settlement of contingent consideration	—		(50,050)
Principal payments of debt	(24)		(21)


Proceeds from issuance of common stock	397		55
Deferred debt costs	—		(58)
Repurchase of common stock	(40,000)		—
Deferred equity issuance costs	(181)		—
Net cash used in financing activities	(39,808)		(20,074)
Effect of exchange rates on cash, cash equivalents and restricted cash	(1,756)		43
Net decrease in cash, cash equivalents and restricted cash	(94,974)		(31,845)
Cash, cash equivalents, and restricted cash — Beginning of period	233,562		121,985
Cash, cash equivalents, and restricted cash — End of period	$	138,588	$	90,140

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,
	2022		2023
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet:
Cash and cash equivalents	$	138,514	$	90,067
Restricted cash	74		73
Total cash, cash equivalents and restricted cash — End of period	$	138,588	$	90,140

Supplemental schedule of non-cash investing and financing activities:
Cash paid for interest	$	2,358	$	2,958




Common stock purchase consideration for acquisition of Entertainment	$	11,937	$	—

See notes to the condensed consolidated financial statements

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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 predominantly 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, and (3) Cardlytics U.K. Limited, a wholly owned and operated subsidiary registered as a private limited company in England and Wales.

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") for the fiscal year ended December 31, 2022.

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. Refer to Note 3 - Business Combinations for further information.

Contingent consideration for the acquisition of Bridg

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. In June 2022, we calculated the First Anniversary ARR and the First Anniversary Payment Amount and provided the calculation to the Stockholder Representative. The Stockholder Representative objected to these calculations, and the dispute over these matters was then referred to an independent accountant, as contemplated by the relevant dispute resolution provision of the Merger Agreement.

On April 28, 2023, the independent accountant made its determination of the appropriate amount of the First Anniversary ARR, determining the First Anniversary ARR as determined by the independent accountant to be $23.2 million. Consequently, based on the First Anniversary ARR, we calculated the First Anniversary Payment to be $208.1 million.

Pursuant to the Merger Agreement, we were obligated to pay at least 30% of the First Anniversary Payment in cash, and could elect to pay the remainder of the First Anniversary Payment in cash or our common stock, based on a share price of $40.15 per share, or a combination thereof. In the event we chose to pay 30% of the First Anniversary Payment, as determined by the independent accountant, in cash and the remainder in common stock, we would have paid $65.3 million in cash and issued 3,556,717 shares of our common stock to complete the First Anniversary Payment, inclusive of brokerage fees and transaction bonuses and accounting for all true-ups and credits. The amount of cash and shares is different than previously reported in our Form 8-K dated May 1, 2023 and our Form 10-Q dated May 4, 2023 – in which we had calculated that $72.6 million in cash and 3,374,383 shares of common stock would be paid in the event we paid the First Anniversary Payment based on the independent accountant’s determination – due to subsequent discussions and agreements reached by the relevant parties related to the amount of the brokerage fees.

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However, we believe that the independent accountant exceeded its authority with respect to its determination related to one specific contract at issue. As a result, we filed a verified complaint in the Delaware Court of Chancery in May 2023 seeking a declaratory judgment that the portion of the independent accountant's determination related to that one contract be stricken as null and void. Since the lawsuit is pending, we have not made the portion of the First Anniversary Payment related to the one specific contract at issue. After adjusting the First Anniversary ARR to not include the contract for which we believe the independent accountant exceeded its authority, we have determined the First Anniversary ARR to be $20.8 million. Consequently, based on the adjusted First Anniversary ARR, we calculated the First Anniversary Payment to be $160.1 million. Based on this calculation, and due to our decision to pay 30% of the First Anniversary Payment in cash and the remainder in common stock, we calculated that $50.1 million of cash and 2,740,418 shares of our common stock would be needed to complete the First Anniversary Payment of $160.1 million, inclusive of brokerage fees and transaction bonuses and accounting for all true-ups and credits. As of September 30, 2023, we have paid $50.1 million in cash and delivered 2,740,418 shares of our common stock related to the First Anniversary Payment, inclusive of brokerage fees and transaction bonuses and accounting for all true-ups and credits. Solely in connection with the disputed contract at issue in the Delaware court proceeding and included in our current contingent consideration and accrued expenses on our consolidated balance sheet, we are withholding $15.2 million and 816,299 shares of our common stock, inclusive of brokerage fees and transaction bonuses and accounting for all true-ups and credits.

Additionally, we have calculated the Second Anniversary ARR to be less than the First Anniversary ARR, and we have therefore calculated the Second Anniversary Payment to be $0, inclusive of brokerage fees and transaction bonuses and accounting for all true-ups and credits. Per the terms of the Merger Agreement, we delivered the Second Earnout Statement within thirty days of the end of the Second Earnout Period. We subsequently agreed to extend the Stockholder Representative's review period. In October 2023, we received an Earnout Objection Notice from the Stockholder Representative that alleges a material understatement of the Second Anniversary Payment amount. We are continuing the dispute-resolution process specific to the Second Anniversary Payment outlined in the Merger Agreement. We have not changed our calculation of the contingent consideration related to our acquisition of Bridg as a result of the dispute over the Second Anniversary ARR. Refer to Note 3 - Business Combinations for further information about the Bridg acquisition and related contingent consideration.

Restructuring

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 for the nine months ended September 30, 2022 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 closed our Indian office at the end of 2022.

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.

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 changes in inflation, the U.S. Federal Reserve raising interest rates, disruptions in access to bank deposits or lending commitments due to bank failures, the Russia-Ukraine war and the Israel conflict 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."

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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, 2022, 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 is 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.

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.

During the three and nine months ended September 30, 2022, we incurred a $1.9 million cost and a $4.3 million of benefit, respectively, primarily in connection with our acquisition of Bridg due to the changes in the estimated brokerage fees and transaction bonuses and accounting for all true-ups and credits related to the acquisition of Bridg. During the three and nine months ended September 30, 2023, we incurred a $0.1 million cost and a $8.1 million benefit, respectively, primarily in connection with our acquisition of Bridg due to the changes in the estimated brokerage fees and transaction bonuses and accounting for all true-ups and credits related to the acquisition of Bridg. These benefits and costs are included in acquisition and integration benefit on our condensed consolidated statements of operations.

Acquisition of Bridg

On May 5, 2021, we completed the acquisition of Bridg for purchase consideration of $578.9 million. The purchase consideration consisted of a $350.0 million cash purchase price, subject to $2.8 million of adjustments and escrows, and contingent consideration with an initial fair value of $230.9 million related to additional potential future payments. Under the Merger Agreement, the potential payment to be paid after the determination or agreement of the first payment amount (the "First Anniversary Payment") was to be equal to 20 times the difference between the U.S. annualized recurring revenue ("ARR"), based on revenue in April 2022, and $12.5 million. The potential payment to be paid after the determination or agreement of the second payment amount (the "Second Anniversary Payment") is equal to 15 times the difference between the ARR for customers as of the first anniversary, based on the April 2023 revenue, and the prior ARR at the first anniversary, based on the April 2022 revenue. At least 30% of each of the First Anniversary Payment and the Second Anniversary Payment is required to be paid in cash, with the remainder to be paid in cash or our common stock, at our option. For the portion of the First Anniversary Payment

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or Second Anniversary Payment in our common stock, the number of shares is determined by dividing the amount of the payment by the trailing 20-day volume-weighted average price ending on the first anniversary date or second anniversary date, as applicable. We also assumed unvested options to purchase Bridg’s common stock and attributed $0.8 million of their fair value to the pre-combination service period. "Management's Discussion and Analysis of Financial Condition and Results of Operations". Refer to Note 9—Fair Value Measurements and Note 1—Overview of Business and Basis of Presentation for further information.

On April 28, 2023, the independent accountant made its determination of the appropriate amount of the First Anniversary ARR, determining the First Anniversary ARR to be $23.2 million. Consequently, based on the First Anniversary ARR as determined by the independent accountant, we calculated the First Anniversary Payment to be $208.1 million.

Pursuant to the Merger Agreement, we were obligated to pay at least 30% of the First Anniversary Payment in cash, and can elect to pay the remainder of the First Anniversary Payment in cash or our common stock, based on a share price of $40.15 per share, or a combination thereof. In the event we chose to pay 30% of the First Anniversary Payment, as determined by the independent accountant, in cash and the remainder in common stock, we would have paid $65.3 million in cash and issued 3,556,717 shares of our common stock to complete the First Anniversary Payment, inclusive of brokerage fees and transaction bonuses and accounting for all true-ups and credits. The amount of cash and shares is different than previously reported in our Form 8-K dated May 1, 2023 and our Form 10-Q dated May 4, 2023 – in which we had calculated that $72.6 million in cash and 3,374,383 shares of common stock would be paid in the event we paid the First Anniversary Payment based on the independent accountant’s determination – due to subsequent discussions and agreements reached by the relevant parties related to the amount of the brokerage fees.

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 debt	2,053
Cash paid to settle pre-acquisition liabilities and acquiree deal-related costs	624
Cash paid to membership interest holders	24
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 assets	1,259
Intangible assets	9,800
Goodwill	5,002
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 Value		Useful life (in years)
Trade name	$	800	3.0
Developed technology	700		3.0
Merchant relationships	8,300		4.0

The results of Entertainment have been included in the consolidated financial statements since its date of acquisition. For each of the nine months ended September 30, 2022 and 2023, Entertainment's combined revenue included in the consolidated statement of operations was approximately 3% of consolidated revenue. Due to the continued integration of the combined businesses, it was impractical to determine the earnings.

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, 2022. 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 acquisition actually occurred on January 1, 2022 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, 2022
	(in thousands)
Revenue	$	216,060
Net loss	$	(85,902)

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4. GOODWILL AND ACQUIRED INTANGIBLES

There have been no changes to the carrying amounts of goodwill since December 31, 2022. The carrying amounts of goodwill as of September 30, 2023 are as follows (in thousands):


	Cardlytics Platform		Bridg Platform		Consolidated
Gross goodwill	$	210,692	$	538,271	$	748,963
Accumulated impairments	(46,262)		(349,980)		(396,242)
Net goodwill	$	164,430	$	188,291	$	352,721

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.

We have assessed the triggering events criteria along with related conditions and developments as of September 30, 2023. We have determined that none of the conditions collectively constitute a triggering event. As such, we have determined that it is not more likely than not that the carrying values of our reporting units exceed their respective fair values, and an impairment test was not required as of September 30, 2023. However, future changes in assumptions or market conditions could result in an impairment.

As of June 30, 2022, we determined that it was necessary to perform an interim impairment test for goodwill, in which we recognized goodwill impairment of $83.1 million related to the Bridg platform. Subsequently, we performed our annual impairment test as of October 1, 2022 and determined that the carrying value of both the Cardlytics platform in the U.S. and the Bridg platform exceeded their respective fair values, and we recognized an additional goodwill impairment of $313.1 million, resulting in a total impairment of $396.2 million as of December 31, 2022.

Acquired intangible assets subject to amortization as of September 30, 2023 were as follows:


	Gross Carrying Amount (1)		Accumulated Amortization		Net		Weighted Average Remaining Useful Life
	(in thousands)						(in years)
Trade name	$	2,315	$	(1,979)	$	336	0.3
Developed technology	64,070		(31,759)		32,311		0.7
Merchant relationships	25,915		(15,521)		10,394		1.1


Total other intangible assets	$	92,300	$	(49,259)	$	43,041

(1) We recorded an impairment of intangible assets in the amount of $56.4 million as of December 31, 2022.

Amortization expense of acquired intangibles during the three months ended September 30, 2022 and 2023 was $7.2 million and $3.4 million, respectively. Amortization expense of acquired intangibles during the nine months ended September 30, 2022 and 2023 was $21.6 million and $10.3 million, respectively.

Acquired intangible assets subject to amortization as of December 31, 2022 were as follows:


	Gross Carrying Amount		Accumulated Amortization		Impairments of Intangible Assets		Net		Weighted Average Remaining Useful Life
	(in thousands)								(in years)
Trade name	$	3,500	$	(1,744)	$	(1,185)	$	571	1.4
Developed technology	91,700		(24,882)		(27,630)		39,188		3.6
Merchant relationships	40,300		(12,301)		(14,385)		13,614		1.7
Partner relationships	2,000		(450)		(1,550)		—		n/a
Card-linked subscriber user base	17,000		(5,355)		(11,645)		—		n/a
Total other intangible assets	$	154,500	$	(44,732)	$	(56,395)	$	53,373

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As of September 30, 2023, we expect amortization expense in future periods to be as follows (in thousands):


	Amount
2023 (remaining three months)	3,423
2024	13,603
2025	13,192
2026	9,674
2027	3,149
Thereafter	—
Total expected future amortization expense	$	43,041

5. REVENUE

The Cardlytics platform

The Cardlytics platform is our proprietary native bank advertising channel that enables marketers to reach consumers through the FI partners' trusted and frequently visited digital banking channels. Working with the marketer, we design a campaign that targets customers based on their purchase history. The consumer is offered an incentive to make a purchase from the marketer within a specified period. We use a portion of the fees that we collect from marketers to provide these consumer incentives to our FI partners' customers after they make qualifying purchases ("Consumer Incentives"). Leveraging our powerful purchase intelligence platform, we are able to create compelling Consumer Incentives that have the potential to increase return on advertising spend for marketers and measure the effectiveness of the advertising. Consumer Incentives totaled $37.7 million and $37.6 million during the three months ended September 30, 2022 and 2023, respectively. Consumer Incentives totaled $100.3 million and $101.4 million during the nine months ended September 30, 2022 and 2023, respectively. We pay certain partners a negotiated and fixed percentage of our billings to marketers less any Consumer Incentives that we pay to partners’ customers and certain third-party data costs ("Partner Share"). Revenue on our consolidated statements of operation is presented net of Consumer Incentives and gross of Partner Share.

We price our advertising campaigns predominantly in two ways: (1) Cost per Served Sale ("CPS"), and (2) Cost per Redemption ("CPR").

•CPS. Our primary pricing model is CPS, which we created to meet the media-buying preferences of marketers. We generate revenue by charging a percentage of all purchases from the marketer by consumers who (1) are served marketing, and (2) subsequently make a purchase from the marketer during the campaign period, regardless of whether consumers select the marketing and thereby becomes eligible to earn the applicable Consumer Incentive. We set CPS rates for marketers based on our expectation of the marketer's return on advertising spend for the relevant campaign. Additionally, we set the amount of the Consumer Incentives payable for each campaign based on our estimation of our ability to drive incremental sales for the marketer and other factors.

•CPR. Under our CPR pricing model, marketers generally specify and fund the Consumer Incentive and pay us a separate negotiated, fixed marketing fee for each purchase that we generate. We generally generate revenue if the consumer (1) is served marketing, (2) selects the marketing and thereby becomes eligible to earn the applicable Consumer Incentive, and (3) makes a qualifying purchase from the marketer during the campaign period. We set the CPR fee for marketers based on our estimation of the marketers' return on spend for the relevant campaign and other factors.

The following table summarizes revenue from the Cardlytics platform by pricing model (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2023		2022		2023
Cost per Served Sale	$	43,436	$	49,957	$	128,568	$	138,664
Cost per Redemption	21,602		20,842		65,333		58,305
Other	2,247		2,265		6,637		5,851
Cardlytics platform revenue	$	67,285	$	73,064	$	200,538	$	202,820

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The Bridg platform

The Bridg platform generates revenue through the sale of subscriptions to our cloud-based customer-data platform and the delivery of professional services, such as implementation, onboarding, data analytics and technical support in connection with each subscription. We recognize subscription revenue on a ratable basis over the contract term beginning on the date that our service is made available to the customer. For non-recurring services or transactional based fees dependent on system usage, revenue is recognized as services are delivered.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2023		2022		2023
Subscription revenue	$	5,421	$	5,941	$	15,471	$	17,217
Other revenue	—		—		30		—
Bridg platform revenue	$	5,421	$	5,941	$	15,501	$	17,217

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


Contract Balance Type	Consolidated Balance Sheets Location	December 31, 2022		September 30, 2023
Contract assets, current	Accounts receivable and contract assets, net	$	28	$	147
Contract assets, long-term	Other long-term assets, net	—		—
Total contract assets		$	28	$	147

Contract liabilities, current	Deferred revenue	$	1,750	$	3,324
Contract liabilities, long-term	Long-term deferred revenue	334		81
Total contract liabilities		$	2,084	$	3,405

During the nine months ended September 30, 2023, we recognized $1.3 million of revenue related to amounts that were included in deferred revenue as of December 31, 2022.

The following information represents the total transaction price for the remaining performance obligations as of September 30, 2023 related to contracts expected to be recognized over future periods. This includes deferred revenue on our consolidated balance sheets and contracted amounts that will be invoiced and recognized as revenue in future periods. As of September 30, 2023, we had $23.7 million of remaining performance obligations, of which $12.8 million is expected to be recognized in the next twelve months, with the remaining amount recognized thereafter. The remaining performance obligations exclude future transaction revenue of variable consideration that are allocated to wholly unsatisfied distinct services that form part of a single performance obligation and meets certain variable allocation criteria.

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6. LEASES

We have various non-cancellable operating and finance leases for our office spaces, data centers and operational assets with lease periods expiring between 2023 and 2032.

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


Lease Type	Consolidated Balance Sheets Location	December 31, 2022		September 30, 2023
Operating lease assets	Right-of-use assets under operating leases, net	$	6,571	$	4,823
Finance lease assets	Property and equipment, net	48		20
Total lease assets		6,619		4,843

Operating lease liabilities, current	Current operating lease liabilities	4,910		2,244
Operating lease liabilities, long-term	Long-term operating lease liabilities	4,306		2,878
Finance lease liabilities, current	Accrued expenses	38		37
Finance lease liabilities, long-term	Other long-term liabilities	3		—
Total lease liabilities		$	9,257	$	5,159

Amended Lease Agreement

On April 3, 2023, we amended the lease terms of our office located in Atlanta, Georgia. The amended lease agreement provides for our relocation to a different unit in the same building, reducing the square footage of our office from approximately 77,000 to 17,000. As part of the amended lease agreement, we will receive a discount on our current space through the remainder of 2023, which will result in a reduction of minimum lease payments of $0.4 million and a reduction in expense of $0.2 million in 2023. The amended lease agreement contemplates that our use of the new space will commence on January 1, 2024, which is when the transfer of control and right of use for this lease asset will occur. Additional future reductions in minimum lease payments and lease expense in the new lease total $1.9 million and $0.7 million, respectively, through the term of our original lease agreement, which was set to terminate on April 2025. The amended lease agreement will terminate on January 1, 2032, and we have the option to renew for an additional five-year period.

7. DEBT AND FINANCING ARRANGEMENTS

Our debt consists of the following (in thousands):


	December 31, 2022		September 30, 2023
Line of Credit	$	—	$	30,000
Convertible senior notes, net	226,047		227,139
Total debt	$	226,047	$	257,139

Accrued interest is included within accrued expenses in our consolidated balance sheet. We had accrued interest on debt of $0.7 million and less than $0.1 million, respectively, as of December 31, 2022 and September 30, 2023.

2020 Convertible Senior Notes

On September 22, 2020, we issued convertible senior notes with an aggregate principal amount of $230.0 million bearing an interest rate of 1.00% due in September 2025 (the "Notes"), including the exercise in full of the initial purchasers' option to purchase up to an additional $30.0 million principal amount of the Notes. The Notes were issued pursuant to an indenture, dated September 22, 2020 (the "Indenture"), between us and U.S. Bank National Association, as trustee.

The net proceeds from this offering were $222.7 million, after deducting the initial purchasers' discounts and commissions and the offering expenses payable by us. We used $26.5 million of the net proceeds to pay the cost of the capped call transactions described below.

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The Notes are general senior, unsecured obligations and will mature on September 15, 2025, unless earlier converted, redeemed or repurchased. The Notes bear interest at a rate of 1.00% per year, payable semiannually in arrears on March 15 and September 15 of each year, which began on March 15, 2021. The Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding June 15, 2025, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2020 (and only during such calendar quarter), if the last reported sale price of our common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the Notes on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the "measurement period") in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of common stock and the conversion rate for the Notes on each such trading day; (3) if we call such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events as set forth in the Indenture. The closing trading price of our common stock was not in excess of 130% of the conversion price for more than 20 trading days during the preceding 30 consecutive trading days as of September 30, 2023, thus the Notes are not convertible at the option of the holders during the quarter ending December 31, 2023. The Notes may be convertible thereafter if one or more of the conversion conditions is satisfied during future measurement periods. On or after June 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes at any time, regardless of the foregoing circumstances. Upon conversion, we may satisfy our conversion obligation by paying and/or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election, in the manner and subject to the terms and conditions provided in the Indenture. We currently intend to settle the principal amount of the Notes with cash.

The conversion rate for the Notes will initially be 11.7457 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $85.14 per share of common stock. The conversion rate for the Notes is subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In addition, following certain corporate events that occur prior to the maturity date of the Notes or if we deliver a notice of redemption in respect of the Notes, we will, in certain circumstances, increase the conversion rate of the Notes for a holder who elects to convert its Notes in connection with such a corporate event or convert its notes called for redemption during the related redemption period (as defined in the Indenture), as the case may be.

We may redeem for cash all or any portion of the Notes, at our option, prior to the 36th scheduled trading day immediately preceding the maturity date, if the last reported sale price of our common stock has been at least 130% of the conversion price for the Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes. If we elect to redeem less than all of the Notes, at least $75.0 million aggregate principal amount of Notes must be outstanding and not subject to redemption as of the relevant redemption notice date.

If we undergo a Fundamental Change (as defined in the Indenture), then, except as set forth in the Indenture, holders may require, subject to certain exceptions, us to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving us after which the Notes become automatically due and payable. The following events are considered "events of default" under the Indenture:

•default in any payment of interest on any Note when due and payable and the default continues for a period of 30 days;

•default in the payment of principal of any Note when due and payable at its stated maturity, upon optional redemption, upon any required repurchase, upon declaration of acceleration or otherwise;

•failure by us to comply with our obligation to convert the Notes in accordance with the Indenture upon exercise of a holder’s conversion right, and such failure continues for three business days;

•failure by us to give a fundamental change notice, notice of a make-whole fundamental change or notice of a specified corporate event, in each case when due and such failure continues for one business day;

•failure by us to comply with our obligations in respect of any consolidation, merger or sale of assets;

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•failure by us to comply with any of our other agreements in the Notes or the Indenture for 60 days after written notice of such failure from the trustee or the holders of at least 25% in principal amount of the Notes then outstanding;

•default by us or any of our significant subsidiaries (as defined in the Indenture) with respect to any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of $35,000,000 (or its foreign currency equivalent), in the aggregate of us and/or any such significant subsidiary, whether such indebtedness now exists or shall hereafter be created, (i) resulting in such indebtedness becoming or being declared due and payable prior to its stated maturity date or (ii) constituting a failure to pay the principal of any such indebtedness when due and payable (after the expiration of all applicable grace periods) at its stated maturity, upon required repurchase, upon declaration of acceleration or otherwise, and in the cases of clauses (i) and (ii), such acceleration shall not have been rescinded or annulled or such failure to pay or default shall not have been cured or waived, or such indebtedness is not paid or discharged, as the case may be, within 30 days after written notice to us by the trustee or to us and the trustee by holders of at least 25% in aggregate principal amount of the Notes then outstanding in accordance with the Indenture; and

•certain events of bankruptcy, insolvency or reorganization of us or any of our significant subsidiaries.

If certain bankruptcy and insolvency-related events of default with respect to us occur, the principal of, and accrued and unpaid interest on, all of the then outstanding Notes shall automatically become due and payable. If an event of default with respect to the Notes, other than certain bankruptcy and insolvency-related events of default with respect to us, occurs and is continuing, the trustee by notice to us or the holders of at least 25% in principal amount of the outstanding Notes by notice to us and the trustee, may, and the trustee at the request of such holders shall, declare the principal of, and accrued and unpaid interest on, all of the then-outstanding Notes to be due and payable. Notwithstanding the foregoing, the Indenture provides that, to the extent we so elect, the sole remedy for an event of default relating to certain failures by us to comply with certain reporting covenants in the Indenture will, for the first 365 days after the occurrence of such event of default, consist exclusively of the right to receive additional interest on the Notes at a rate equal to 0.25% per annum of the principal amount of the Notes outstanding for each day during the first 180 days after the occurrence of such an event of default and 0.50% per annum of the principal amount of the Notes outstanding from the 181st day to, and including, the 365th day following the occurrence of such event of default, as long as such event of default is continuing (in addition to any additional interest that may accrue as a result of a registration default (as set forth in the Indenture).

The Indenture provides that we shall not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all of the consolidated properties and assets of our subsidiaries, taken as a whole, to, another person (other than any such sale, conveyance, transfer or lease to one or more of our direct or indirect wholly owned subsidiaries), unless: (i) the resulting, surviving or transferee person (if not us) is a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and such corporation (if not us) expressly assumes by supplemental indenture all of our obligations under the Notes and the Indenture; and (ii) immediately after giving effect to such transaction, no default or event of default has occurred and is continuing under the Indenture.

The Notes were historically accounted for in accordance with FASB ASC Subtopic 470-20, Debt with Conversion and Other Options. Pursuant to ASC Subtopic 470-20, issuers of certain convertible debt instruments, such as the Notes, that have a net settlement feature and may be settled wholly or partially in cash upon conversion are required to separately account for the liability (debt) and equity (conversion option) components of the instrument. The carrying amount of the liability component of the instrument was computed using a discount rate of 6.50%, which was determined by estimating the fair value of a similar liability without the conversion option. The amount of the equity component is then calculated by deducting the fair value of the liability component from the principal amount of the instrument. The difference between the principal amount and the liability component represents a debt discount that is amortized to interest expense over the respective term of the Notes using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the issuance costs related to the Notes, the allocation of issuance costs incurred between the liability and equity components was based on their relative values. Refer to Note 2 - Significant Account Policies and Recent Accounting Standards for further information.

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


	December 31, 2022		September 30, 2023
Principal	$	230,000	$	230,000

Minus: Unamortized issuance costs	(3,953)		(2,860)
Net carrying amount	$	226,047	$	227,140

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2023			2022			2023
Contractual interest expense (due in cash)	$	575		$	575		$	1,725		$	1,725

Amortization of debt issuance costs	365			365			1,095			1,096
Total interest expense related to the Notes	$	940		$	940		$	2,820		$	2,821
Effective interest rate	1.64		%	1.64		%	1.64		%	1.64		%

Capped Call Transactions

In connection with the issuance of the Notes, we entered into privately negotiated capped call transactions (the "Capped Calls") with an affiliate of one of the initial Note purchasers and certain other financial institutions. The Capped Calls are intended to reduce potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be. The Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives. The cost of $26.5 million incurred to purchase the Capped Calls was recorded as a reduction to additional paid-in capital in the accompanying condensed consolidated balance sheet.

The Capped Calls each have an initial strike price of $85.14 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have an initial cap price of $128.51 per share, subject to certain adjustments.

2018 Loan Facility

In April 2022, we amended our loan facility with Pacific Western Bank (the "2018 Loan Facility") to increase the capacity of our asset-backed revolving line of credit (the "2018 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 billings and cash covenants were removed and replaced with a requirement to maintain a minimum level of adjusted contribution and 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. 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 and Second Anniversary Payment under the Merger Agreement.

During the nine months ended September 30, 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 September 30, 2023. During the nine months ended September 30, 2023, we incurred approximately $1.4 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 September 30, 2023, we had $4.3 million of unused available borrowings under our 2018 Line of Credit. We believe we are in compliance with all financial covenants as of September 30, 2023.

8. STOCK-BASED COMPENSATION

Our 2018 Equity Incentive Plan ("2018 Plan") became effective in February 2018. Prior to the 2018 Plan, we granted awards under our 2008 Stock Plan ("2008 Plan"). Any awards granted under the 2008 Plan remain subject to the terms of our 2008 Plan and applicable award agreements, and shares subject to awards granted under our 2008 Plan that are forfeited, canceled or expired prior to vesting become available for use under our 2018 Plan. As of December 31, 2022, there were 405,830 shares of our common stock reserved for issuance under our 2018 Plan. The number of shares of our common stock reserved for issuance under our 2018 Plan will automatically increase on January 1 of each year through 2028 by 5% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year or a lesser number of shares determined by our board of directors. Accordingly, the number of shares of our common stock reserved for issuance under our 2018 Plan increased by 1,673,858 shares on January 1, 2023.

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On July 18, 2022, our board of directors adopted the Cardlytics, Inc. 2022 Inducement Plan ("2022 Inducement Plan"). Our board of directors also adopted a form of stock option grant notice and agreement and a form of restricted stock unit grant notice and agreement for use with the 2022 Inducement Plan. We reserved a total of 1,500,000 shares of our Common Stock under the 2022 Inducement Plan. On January 18, 2023, our board of directors approved an amendment to the 2022 Inducement Plan to reserve an additional 350,000 shares of our common stock. On July 13, 2023, our board of directors approved an amendment to the 2022 Inducement Plan to reserve an additional 800,000 shares of our common stock. As of September 30, 2023, there were 515,522 shares available under the 2022 Inducement Plan.

The following table summarizes the allocation of stock-based compensation in the condensed consolidated statements of operations (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2023		2022		2023
Delivery costs	$	920	$	667	$	2,416	$	1,800
Sales and marketing expense	1,428		2,683		8,765		9,487
Research and development expense	1,968		3,661		9,419		12,248
General and administration expense	1,451		3,238		11,594		6,421
Total stock-based compensation expense	$	5,767	$	10,249	$	32,194	$	29,956

During the nine months ended September 30, 2022 and 2023, we capitalized $1.0 million and $1.6 million of stock-based compensation expense for software development, respectively.

Restricted Stock Units

We grant restricted stock units ("RSUs") to certain employees and our non-employee directors. The following table summarizes changes in RSUs, inclusive of performance-based RSUs:


	Shares (in thousands)	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Term (in years)	Unamortized Compensation Costs (in thousands)
Unvested — December 31, 2022	5,956	$	25.43
Granted	3,145	6.57
Vested	(2,021)	22.85
Forfeited	(920)	33.98
Unvested — September 30, 2023	6,160	$	32.41	2.19	$	77,547
Shares expected to vest - September 30, 2023	6,107

During the nine months ended September 30, 2023, we granted 3,145,035 RSUs to employees and non-employee directors, which have vesting periods ranging from vesting immediately to vesting in four years.

Subsequent to September 30, 2023, we granted 414,233 RSUs to employees and non-employee directors, which have vesting periods of one to two years. Unamortized stock-based compensation expense related to these RSUs totaled $4.9 million.

Performance-based RSUs

In April 2019, we granted 1,252,500 performance-based restricted stock units ("2019 PSUs"). The 2019 PSUs are composed of four equal tranches, each of which have an independent performance-based vesting condition. The vesting criteria for the four tranches are as follows:

•a minimum growth rate in adjusted contribution over a trailing 12-month period ("Adjusted Contribution target"),

•a minimum number of advertisers that are billed above a specified amount over a trailing 12-month period ("Number of Advertisers target"),

•a minimum cumulative adjusted EBITDA target over a trailing 12-month period ("Adjusted EBITDA target"), and

•a minimum trailing 30-day average closing price of our common stock ("Stock Price target").

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Adjusted EBITDA and adjusted contribution are performance metrics defined within Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations." The compensation committee of our board of directors certified the attainment of the Stock Price target, Adjusted EBITDA target, Number of Advertisers target and Adjusted Contribution target in August 2019, November 2019, October 2021 and December 2021, respectively, resulting in a vesting of 50% of each respective tranche upon the certifications. Twenty-five percent of each respective tranche vested upon the six-month anniversary of the achievement date, and 25% of each respective tranche vested upon the 12-month anniversary of the achievement date, subject to the continued service of the participant.

In April 2020, we granted 476,608 performance-based restricted stock units, of which 443,276 units have a performance-based vesting condition based on a minimum average revenue per user ("ARPU") target over a trailing 12-month period ("2020 PSUs") and 33,332 units have the same performance-based vesting conditions as the 2019 PSUs described above that were unmet at the time. ARPU is a performance metric defined within Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations." The ARPU vesting condition must be achieved within four years of the grant date. Upon the vesting event, 50% of the award vests immediately, 25% of the award vests six months after achievement date and 25% of the award vests 12 months after the achievement date. During the year ended December 31, 2022, we reassessed the likelihood of achieving the 2020 PSUs performance-based vesting condition and concluded the achievement is no longer probable. As a result of the change in estimate, we have reversed the previously recognized cumulative expense associated with the 2020 PSUs since the grant date as a benefit to stock-based compensation during the year ended December 31, 2022.

In April 2021, we granted 110,236 performance-based restricted stock units ("2021 PSUs") consisting of two tranches. The first tranche consists of 55,118 units that have a performance-based vesting condition based on a minimum revenue target over a trailing 12-month period. The units in this first tranche fully vest upon achievement. The second tranche consists of 55,118 units with a performance-based vesting condition based on a different minimum revenue target over a trailing 12-month period. Half of the units in the second tranche vest upon achievement and the remaining units vest six months after the achievement date, subject to continued service. Each performance-based vesting condition within the two tranches must be achieved within four years of the grant date and are subject to certification by the compensation committee of our board of directors. Additionally, in April 2021, we granted 10,000 performance-based restricted stock units, which have the same unmet vesting condition as the 2020 PSUs based on a minimum ARPU target over a trailing 12-month period as described above. During the three months ended September 30, 2023, we reassessed the likelihood of achieving the 2021 PSUs performance-based vesting condition and concluded the achievement is no longer probable. As a result of the change in estimate, we have reversed the previously recognized cumulative expense associated with the 2021 PSUs since the grant date as a benefit to stock-based compensation during the three months ended September 30, 2023.

In July 2021, we granted 34,344 performance-based restricted stock units ("Bridg PSUs") that have performance-based vesting conditions based on the achievement of a minimum ARR target by the first anniversary of the Bridg acquisition. Vesting is tied to the percentage of an annual run rate target achieved during the specified period with 50% of the units vesting between 80% - 99.999% achievement and 100% of the units vesting upon 100% achievement. During the three months ended September 30, 2023, the compensation committee of our board of directors certified the vesting of shares associated with the 50% attainment of the units based on the achieved annual run rate during the specified period.

In September 2021, we granted 6,666 PSUs which have the same unmet vesting condition as the 2020 PSUs, 6,667 PSUs which have the same unmet revenue target vesting condition as the 2021 PSUs and 6,667 PSUs which have the same unmet revenue target vesting condition as the 2021 PSUs as described above. As discussed above, we concluded the achievement of the 2020 PSUs and 2021 PSUs is no longer probable and have reversed the previously recognized cumulative expense in the respective period in which the 2020 PSUs and 2021 PSUs were determined to no longer be achievable.

In March 2022 and August 2022, we granted 269,202 and 25,248 performance-based restricted stock units ("2022 PSUs"), respectively, consisting of three tranches. The first two tranches each represent 25% of the grant, and each vest upon the achievement of certain milestones related to the installation of our Ad Server at our FI partners. Half of the third tranche vests upon the achievement of a certain number of advertisers purchasing both the Cardlytics and Bridg platforms at a target incremental billings amount over 2021 billings, and the remaining 50% of the tranche vest six months after this target is achieved. During the year ended December 31, 2022, the compensation committee of our board of directors certified that the first tranche's milestone related to the installation of our Ad Server at our FI partners had been achieved, which resulted in the immediate vesting of the first tranche representing 25% of the grant.

In July 2022, we granted 100,990 PSUs which vest on the achievement of specific revenue-based performance metrics.

With the exception of the 2020 PSUs, the 2021 PSUs, and any other PSUs tied to these vesting conditions, we believe that the achievement of all of the above referenced performance-based vesting conditions are probable before the awards' respective expiration dates.

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Employee Stock Purchase Plan

Our 2018 Employee Stock Purchase Plan ("2018 ESPP") enables eligible employees to purchase shares of our common stock at a discount. Purchases are accomplished through participation in discrete offering periods. On each purchase date, participating employees purchase our common stock at a price per share equal to 85% of the lesser of the fair market value of our common stock on the first trading day of the offering period or the date of purchase.

As of December 31, 2022, 878,969 shares of common stock were reserved for issuance pursuant to our 2018 ESPP. Additionally, the number of shares of our common stock reserved for issuance under our 2018 ESPP will automatically increase on January 1 of each year, which began on January 1, 2019 and will continue through and including January 1, 2026, by the lesser of (i) 1% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, (ii) 500,000 shares of our common stock or (iii) such lesser number of shares of common stock as determined by our board of directors. Accordingly, the number of shares of our common stock reserved for issuance under our 2018 ESPP increased by 334,771 shares on January 1, 2023. Shares subject to purchase rights granted under our 2018 ESPP that terminate without having been issued in full will not reduce the number of shares available for issuance under our 2018 ESPP. During the nine months ended September 30, 2023 we issued 282,419 shares under the 2018 ESPP.

9. FAIR VALUE MEASUREMENTS

We record the fair value of assets and liabilities in accordance with ASC 820, Fair Value Measurement ("ASC 820"). ASC 820 defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.

In addition to defining fair value, ASC 820 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

During the year ended December 31, 2022 we recognized a goodwill impairment of $396.2 million. The fair value of our reporting units was classified in Level 3 of the fair value hierarchy due to the significance of unobservable inputs developed using company-specific information. Refer to Note 4 - Goodwill and Acquired Intangibles for further details.

These levels are:

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

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

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

Contingent consideration for the acquisition of Bridg

The contingent consideration for the acquisition of Bridg is composed of the First Anniversary Payment and the Second Anniversary Payment. The fair value of contingent consideration in connection with the Bridg acquisition is as follows (in thousands):


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Liabilities:
Current contingent consideration	$	—	$	—	$	104,121	$	104,121

Total liabilities	$	—	$	—	$	104,121	$	104,121

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	September 30, 2023
	Level 1		Level 2		Level 3		Total
Liabilities:
Current contingent consideration	$	—	$	—	$	27,268	$	27,268

Total liabilities	$	—	$	—	$	27,268	$	27,268

The following table shows a reconciliation of the beginning and ending fair value measurements of our contingent consideration, which we have valued using level 3 inputs:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2023		2022		2023
Beginning balance	$	164,277	$	18,987	$	232,295	$	104,121
Decrease due to earnout settlement	—		—		—		(61,808)
(Gain) loss in fair value of contingent consideration	(46,126)		8,281		(114,144)		$	(15,045)
Ending balance	$	118,151	$	27,268	$	118,151	$	27,268

Additionally, we have calculated the Second Anniversary ARR to be less than the First Anniversary ARR, and we have therefore calculated the Second Anniversary Payment to be $0, inclusive of brokerage fees and transaction bonuses and accounting for all true-ups and credits. Per the terms of the Merger Agreement, we delivered the Second Earnout Statement within thirty days of the end of the Second Earnout Period. We subsequently agreed to extend the Stockholder Representative's review period. In October 2023, we received a Earnout Objection Notice from the Stockholder Representative that alleges a material understatement of the Second Anniversary Payment amount. We are continuing the dispute-resolution process specific to the Second Anniversary Payment outlined in the Merger Agreement. We have not changed our calculation of the contingent consideration related to our acquisition of Bridg as a result of the dispute over the Second Anniversary ARR Refer to Note 3 - Business Combinations for further information about the Bridg acquisition and related contingent consideration.

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The following table summarizes key assumptions used for estimating the fair value of the contingent consideration:


	December 31, 2022
Revenue volatility	20.0	%
Revenue discount rate	8.7	%
Weighted average cost of capital	17.0	%
Common stock volatility	156.0	%
Portion to be paid in cash	30.0	%

10. COMMITMENTS AND CONTINGENCIES

Commitments

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. We have accrued $4.5 million for the Partner Share shortfall, included within Partner Share liability on our condensed consolidated balance sheet. We expect to pay this shortfall on a quarterly basis from October 1, 2023 through June 30, 2024. During the nine months ended September 30, 2022 and 2023, we recognized $2.2 million and $1.3 million, respectively, of expected minimum Partner Share commitment shortfalls within Partner Share and other third-party costs on our condensed consolidated statement of operations. Subsequent to September 30, 2023, we paid our first shortfall payment of $1.2 million.

Other Commitments

We lease property and equipment under non-cancelable operating lease agreements. Refer to Note 6—Leases for further details. 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 September 2025. Refer to Note 7—Debt and Financing Arrangements for further details.

In connection with our acquisition of Bridg, we owed broker fees and transaction bonuses derived from the amount of the First Anniversary Payment and do not expect to owe broker fees or transaction bonuses derived from the amount of the Second Anniversary Payment. Refer to Note 3 - Business Combinations for further details.

In March 2022, we entered into a cloud hosting arrangement guaranteeing an aggregate spend of $7.2 million over the first twelve months of the arrangement. In January 2023, we renewed our agreement guaranteeing an aggregated spend of $13.5 million over a twelve-month period.

Litigation

From time to time, we may become involved in legal actions arising in the ordinary course of business including, but not limited to, intellectual property infringement and collection matters. We make assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. We record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, we accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, we disclose the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, we disclose the nature and estimate of the possible loss of the litigation. We do not disclose information with respect to litigation where an unfavorable outcome is considered to be remote or where the estimated loss would not be material.

As part of the acquisition of Bridg, and pursuant to the terms of the Merger Agreement, we agreed to make two earnout payments: a First Anniversary Payment and a Second Anniversary Payment – based on the First Anniversary ARR and the Second Anniversary ARR of Bridg, respectively. In June 2022, we calculated the First Anniversary ARR and the First Anniversary Payment Amount and provided the calculation to the Stockholder Representative. The Stockholder Representative objected to these calculations, and the dispute over these matters was then referred to an independent accountant, as contemplated by the relevant dispute resolution provision of the Merger Agreement. On April 28, 2023, the independent accountant made its determination of the appropriate amount of the First Anniversary ARR, determining the First Anniversary ARR to be $23.2 million. After review of the determination by the independent accountant, we filed a verified complaint in the Delaware Court of Chancery in May 2023 seeking declaratory judgment that a certain portion of the independent accountant's determination related to the First Anniversary ARR be stricken as null and void. Since our complaint has not yet been resolved, we have not made a portion of the First Anniversary Payment, based on the independent accountant's determination of the First Anniversary ARR, as of September 30, 2023. It is possible that the court will not rule in our favor and we will be obligated to pay the full First Anniversary Payment determined by the independent accountant, which could adversely affect our business, results of operations and financial conditions. As of September 30, 2023, the disputed and unpaid portion of the First Anniversary Payment remains accrued for in current contingent consideration and accrued expenses on our consolidated balance sheet. Additionally, we are

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currently in a dispute with the Bridg Stockholder Representative regarding the amount of the Second Anniversary Payment.

We are not presently a party to any other legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Refer to Note 3 - Business Combinations for further information about the Bridg acquisition and related contingent consideration.

11. EARNINGS PER SHARE

The computations of the numerators and denominators of diluted net income (loss) per share attributable to common stockholders are as follows (in thousands, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2023		2022		2023
Numerator:


Net income (loss) attributable to common stockholders, diluted	$	6,267	$	(23,966)	$	(86,985)	$	(33,866)

Denominator:
Weighted-average common shares outstanding, basic	32,950		37,982		33,455		35,502

Plus: dilutive effect of assumed conversion of restricted stock units	263		—		—		—
Plus: dilutive effect of assumed conversion of common stock options	6		—		—		—
Plus: dilutive effect of assumed issuance of common stock pursuant to the ESPP	50		—		—		—
Weighted-average common shares outstanding, diluted	33,269		37,982		33,455		35,502

Net (loss) income per share attributable to common stockholders, diluted	$	0.19	$	(0.63)	$	(2.60)	$	(0.95)

The following securities as of September 30, 2023 have been excluded from the calculation of diluted weighted-average common shares outstanding because the effect is anti-dilutive (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2023	2022	2023

Common stock options	396	86	402	86
Convertible Senior Notes	2,701	2,701	2,701	2,701
Unvested restricted stock units	4,824	6,166	5,087	6,166
Common stock issuable pursuant to the ESPP	104	82	154	82

12. SEGMENTS

As of September 30, 2023, we have three operating segments: the Cardlytics platform in the U.S., the Cardlytics platform in the U.K. and the Bridg platform, as determined by the information that our Chief Executive Officer, who we consider our chief operating decision maker ("CODM"), uses to make strategic goals and operating decisions. Our Cardlytics platform operating segments in the U.S. and U.K. represent our proprietary advertising channels and are aggregated into one reportable segment given their similar economic characteristics, nature of service, types of customers and method of distribution. Subsequent to the acquisition of Bridg, our CODM began reviewing Bridg's revenue and operating expenses. Therefore, we consider the Bridg platform to be a separate operating segment. Our CODM allocates resources to, and evaluates the performance of, our operating segments based on revenue and adjusted contribution. Our CODM does not review assets by operating segment for the purposes of evaluating performance or allocating resources.

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The following tables provide information regarding the Cardlytics platform and the Bridg platform reportable segments (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2023		2022		2023
Cardlytics platform
Adjusted contribution	$	29,886	$	37,053	$	88,709	$	94,548
Plus: Partner Share and other third-party costs	37,399		36,011		111,829		108,272
Revenue	$	67,285	$	73,064	$	200,538	$	202,820
Bridg platform
Adjusted contribution	$	5,257	$	5,808	$	14,334	$	16,791
Plus: Partner Share and other third-party costs	164		133		1,167		426
Revenue	$	5,421	$	5,941	$	15,501	$	17,217
Total
Adjusted contribution	$	35,143	$	42,861	$	103,043	$	111,339
Plus: Partner Share and other third-party costs	37,563		36,144		112,996		108,698
Revenue	$	72,706	$	79,005

Cardlytics, Inc. [CDLX] Filings
10-Q	[2023-11-08]
10-Q	[2023-08-01]
10-Q	[2023-05-04]
10-K	[2023-03-01]
10-Q	[2022-11-01]
10-Q	[2022-08-02]
10-Q	[2022-05-02]
10-K	[2022-03-01]
10-Q	[2021-11-02]
10-Q	[2021-08-03]
10-Q	[2021-05-04]
10-K	[2021-03-01]
10-Q	[2020-11-02]
10-Q	[2020-08-04]
10-Q	[2020-05-11]
10-K	[2020-03-03]
10-Q	[2019-11-12]
10-Q	[2019-08-08]
10-Q	[2019-05-09]
10-K	[2019-03-05]
10-Q	[2018-11-13]
10-Q	[2018-08-14]
10-Q	[2018-05-10]
10-K	[2018-03-19]
S-1	[2018-01-12]