Cardlytics targets $26M in annualized savings while advancing CRP partnerships after FI content restrictions

Earnings Call Insights: Cardlytics (CDLX) Q3 2025

MANAGEMENT VIEW

* CEO Amit Gupta addressed the impact of headwinds from the company's largest financial institution (FI) partner, stating, "these headwinds are stemming from our largest FI partners' decision to block our advertiser content from running on their channels." Gupta highlighted mitigation strategies including shifting volume to other partners and expanding the network. He announced, "with one bank partner, we expect to soon add their debit and SMB portfolios to our program, which represents a significant opportunity to deepen engagement." Gupta also pointed to successful consumer engagement campaigns, such as the Double Days initiative, which "grew consumer engagement by approximately 15%." He revealed plans to expand category-level offers, noting, "these campaigns have demonstrated that category-level offers are highly effective in creating a halo effect. 73% of consumers who redeemed a category-level offer also redeemed another offer."
* Gupta shared new partnerships for the Cardlytics Rewards Platform (CRP), including three U.S. partners and OpenTable, stating, "we plan to help boost engagement and loyalty with OpenTable's large user base as part of their recently revamped loyalty program."
* The CEO discussed advertiser retention, saying, "most advertisers have decided to stick with Cardlytics despite the supply changes with our largest FI partner," and disclosed wins such as pilots with a large athletic apparel brand and a global hotel brand, plus the return of a global coffee chain and discount grocer.
* On cost controls, Gupta said, "Last month, we took a difficult but necessary step in reducing our workforce... a 30% decrease in our workforce as well as reductions to third-party spend, real estate and operations, and we expect these reductions to deliver annualized cash savings of $26 million."
* CFO Alexis DeSieno stated, "In the third quarter, we delivered billings as expected and surpassed the high end of our guidance for adjusted EBITDA, though we were at the low end of the range for revenue and adjusted contribution." DeSieno added, "total billings were $89.2 million, a 20.3% decrease... revenue decreased 22.4% to $52.0 million... adjusted EBITDA was positive $3.2 million, an increase of $5.0 million."

OUTLOOK

* DeSieno provided Q4 guidance: "For Q4, we expect billings between $86 million and $96 million, revenue between $51.1 million and $59.1 million, adjusted contribution between $29.0 million and $35.0 million and adjusted EBITDA between $0.9 million and $7.9 million."
* She explained, "The primary driver of our expected billings decrease is a result of further content restrictions imposed by our largest FI partner."
* DeSieno emphasized operational focus, saying, "For the fourth quarter, we expect operating expenses to be at or below $28 million, excluding stock-based compensation and severance. This represents a reduction of 19% from the prior year."
* The company does not expect material 2025 financial impact from CRP partnerships and is focused on 2026 for significant contributions from this segment.

FINANCIAL RESULTS

* DeSieno reported, "Consumer incentives of $37.2 million were down from the prior year by 17.2% and revenue decreased 22.4% to $52.0 million."
* She stated, "Adjusted contribution was $30.0 million, down 17.5% from prior year. However, we expanded our margin as a percentage of revenue to 57.7%, an increase of 3.5 points due to a more favorable partner mix."
* Adjusted EBITDA improved to $3.2 million, with total adjusted operating expenses, excluding stock-based compensation, at $26.8 million, reflecting an $11.4 million year-over-year reduction.
* Operating cash flow was positive $1.8 million and free cash flow improved to negative $2.7 million.
* The company ended Q3 with $44 million in cash and cash equivalents after a net draw of $46.1 million on the line of credit to repay 2020 notes.
* MQUs grew to 230.3 million, an increase of 21%.

Q&A

* Jacob Stephan, Lake Street Capital Markets: Asked about billing margins, specifically the Q3 decrease and trends into 2026. DeSieno responded, "That was primarily all in July, where we were impacted by the abrupt change to our supply from our largest FI partner... The run rate in October is higher than what we saw in Q3. And so we expect that to continue. I would probably continue to model it in the low 60s."
* Stephan: Inquired about the $7 million range in adjusted EBITDA guidance for Q4. DeSieno explained, "Adjusted OpEx is really not a big range. It's only about $1 million. So all of this is flowing down from the range of the contribution and revenue guide."

SENTIMENT ANALYSIS

* Analysts focused on margin trends and guidance, showing a neutral tone and seeking clarification on variability and operational levers.
* Management maintained a confident tone in prepared remarks, emphasizing mitigation strategies and cost discipline, but was factual and slightly defensive in addressing margin pressures during Q&A.
* Compared to the previous quarter, analyst sentiment shifted from concern about content restrictions to more technical questions on margin and cost outlook. Management's tone remained confident but more focused on operational discipline and expense management.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for Q4 2025 signals a further decrease in billings compared to Q3, with a narrowed focus on cost reductions and a continued expectation for positive adjusted EBITDA.
* Management's confidence in FI and CRP diversification strategies increased, with more explicit cost control measures versus last quarter's focus on supply and platform diversification.
* MQUs continued to grow, but revenue and billings decreased sequentially, reflecting the full impact of FI partner restrictions.
* Analysts shifted attention from macro challenges with the largest FI partner to operational execution and margin stability.
* Strategic priorities evolved from platform expansion to aggressive cost management and targeted partnership growth.

RISKS AND CONCERNS

* The primary risk remains content restrictions from the largest FI partner, which management expects will continue to impact billings and revenue.
* Management aims to mitigate these risks through expanding partnerships, shifting volume to other network partners, and increasing consumer engagement.
* The company undertook significant workforce reductions and cost controls to align expenses with the new revenue reality.
* No new material risks beyond the ongoing FI partner restrictions and the need to execute on CRP partnership growth.

FINAL TAKEAWAY

Cardlytics management emphasized decisive action to offset the significant impact of FI partner content restrictions, including deep cost restructuring, a 30% reduction in workforce, and a sharpened focus on CRP partnerships and supply diversification. Despite ongoing headwinds, the company projects positive adjusted EBITDA for Q4 and the full year, signaling confidence in its ability to stabilize and return to growth by leveraging operational efficiency and new partnership momentum.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/cdlx/earnings/transcripts]

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