Cardlytics (CDLX 19.68, -0.56, -2.74%), which made its IPO debut in February 2018, is
trading lower today after initially gapping up. It reported better than
expected Q2 results last night. Cardlytics provides a platform that helps
marketers determine where and when consumers are spending money.
Cardlytics uses purchase intelligence to make marketing more relevant and measurable. The company partners with more than 2,000 financial institutions to run their banking rewards programs. In turn, CDLX has a secure view into where and when consumers are spending their money. CDLX uses these insights to help marketers identify, reach, and influence likely buyers.
In an effort to aggregate broad types and amounts of data, CDLX's founders partnered with FIs and architected a platform that leverages machine learning and a robust set of algorithms to analyze trillions of dollars of raw purchase data from tens of millions of accounts. This will also ideally allow for more focused marketing.
The company believes that purchase intelligence is the next disruptive opportunity in marketing. Some of CDLX's partners include JP Morgan Chase, Bank of America, Wells Fargo, PNC Bank, Lloyds and Santander UK. In terms of marketers being served, CDLX has strong relationships across a variety of industries, including 20 of the top 25 US restaurant chains, 23 of the top 50 US retailers as well as three of the four largest US wireless carriers.
Turning to the Q2 results, CDLX reported a loss as expected, but it was much narrower than the market was expecting. Non-GAAP loss came in at $(0.21) per share, a nice improvement from $(0.43) in the prior year period. Revenue rose 8.4% year/year to $35.6 mln, which was slightly better than expected and above prior guidance of $34-35 mln. That revenue growth is pretty lackluster, however, it appears to include some legacy business in the prior year period. If you focus just on its core Cardlytics Direct revenue, that rose 21% Year/year to $35.1 mln. Adjusted EBITDA improved to $(2.2) mln from $(2.8) mln last year. This was above prior guidance of $(4.2)-(4.0) mln. Looking ahead, CDLX guided to Q3 revenue of $36-38 mln, so they are expecting some sequential growth next quarter. Full year revenue guidance was reaffirmed at $153-156 mln.
In sum, this was a nice quarter for CDLX. The stock initially jumped higher but has settled back down. While there was a nice beat on the EPS line, perhaps the lackluster revenue growth is taking some of the wind out of the sails. Perhaps investors wanted to see more upside. Typically, with a recent IPO, the market likes to see big revenue growth and large beats and CDLX's growth seems a bit more muted.
In addition to earnings, CDLX also announced it has signed an agreement with Wells Fargo to launch Cardlytics Direct nationally and across all digital channels. That was good to see after they added JP Morgan Chase earlier in 2018. On a final note, we have to wonder if CDLX may get impacted in the future as consumers start to push back on data sharing. The Facebook data sharing incident caused some backlash at Facebook. Many people may not realize their banking transactions are being aggregated and sold to marketers. There may be some push back at some point.
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