Executive Summary / Key Takeaways

• Strategic Pivot Amidst Headwinds: Cardlytics is actively transforming into a diversified commerce media platform, leveraging its unique financial data insights and proprietary technology to expand beyond traditional bank channels, despite significant near-term content restrictions from its largest financial institution (FI) partner.
• Technological Moat and Diversification: The company's core Cardlytics and Bridg platforms, enhanced by new offerings like the Cardlytics Rewards Platform (CRP) and successful CPG offer pilots, provide a differentiated data-driven advertising solution, enabling new revenue streams and faster partner onboarding.
• Financial Resilience and Efficiency: While Q3 2025 guidance reflects a substantial year-over-year billings decrease due to partner restrictions, Cardlytics anticipates achieving breakeven Adjusted EBITDA and its highest Adjusted Contribution margin to date, driven by improved partner economics and aggressive cost management.
• Liquidity and Debt Management: With $106.7 million in liquidity (including recent line of credit drawdown) and the final settlement of contingent consideration, the company is well-positioned to address its September 2025 convertible note maturity and fund strategic initiatives.
• Medium-Term Growth Trajectory: Despite current challenges, strategic shifts towards supply diversification, engagement-based pricing, and enhanced network performance are expected to position Cardlytics for sustained profitable growth in the evolving retail media market.

The Unseen Power of Purchase Data: Cardlytics' Core Vision

Cardlytics, Inc. (NASDAQ:CDLX) operates at the nexus of commerce and media, building a differentiated commerce media platform designed to make spending more rewarding for consumers and marketing more effective for brands. At its core lies the Cardlytics platform, a proprietary financial media network embedded within the digital banking channels of major financial institutions. Complementing this is the Bridg platform, an identity resolution solution that leverages granular point-of-sale (POS) data, including product-level purchase information. This dual-platform approach grants Cardlytics unparalleled access to approximately $6 trillion in annual consumer spend data, a "superpower" that forms the bedrock of its competitive advantage in the nascent, yet rapidly expanding, transaction-based marketing and analytics industry.

The company's vision is to create a "platformized" ecosystem characterized by multisided participation, flywheel network effects, seamless plug-and-play integrations, and powerful data capabilities. This strategic direction is particularly pertinent in a retail media market projected to double in the next three years. Cardlytics' ability to offer rich, sophisticated solutions to both publishers and advertisers, driven by its unique data scale, sets it apart from broader digital advertising players.

Technological Differentiation and Innovation

Cardlytics' technological edge is fundamental to its investment thesis. The Cardlytics platform's native integration into bank channels allows for highly targeted, personalized offers based on anonymized purchase history. This capability translates into tangible benefits for advertisers, with reported return on advertising spend (ROAS) growth exceeding 25% for some clients. Recent enhancements include advanced geo-targeting, enabling advertisers to reach consumers not just where they live, but also where they work and recreate, significantly expanding campaign reach and relevance.

The Bridg platform extends this data advantage by providing product-level insights, crucial for understanding consumer behavior and measuring marketing impact. A significant innovation is the recent pilot program for CPG offers, which for the first time integrates Bridg's SKU-level data with the core Cardlytics platform. Initial results from this pilot are highly encouraging, demonstrating a 30% increase in the rate of baskets containing the specific product among redeemers, a 2% increase in basket size for transactions with the product, and a 13% increase for all other transactions. This integration unlocks new CPG budgets and creates co-branded supply experiences between banks and merchants, representing a substantial growth avenue.

Further technological advancements are evident in the Cardlytics Rewards Platform (CRP), launched in Q2 2025. This new solution diversifies the publisher base beyond traditional FIs to include non-bank digital properties, such as a leading digital sports platform. The company's investment in its tech stack, including SDKs, hosted solutions, and robust APIs, has dramatically accelerated partner onboarding, exemplified by a new neobank partner integrated in eight weeks and the first CRP partner in just four weeks. This efficiency is critical for scaling the network and attracting new partners with minimal friction. While AI integration is underway for internal development and analytics, management notes that reprioritizations due to recent challenges may temper its immediate impact on new capabilities.

A History of Evolution and Strategic Pivots

Cardlytics' journey, founded in 2008, has been marked by continuous evolution and strategic recalibrations. The 2021 acquisition of Bridg significantly deepened its data capabilities, allowing for more granular insights. Financial restructuring has also been a recurring theme, notably with the issuance of $172.5 million in 4.25% Convertible Senior Notes due 2029 in April 2024, which facilitated the repurchase of a substantial portion of the 2020 Convertible Senior Notes and resulted in a $13 million gain on debt extinguishment.

The appointment of Amit Gupta as CEO in August 2024 ushered in a comprehensive turnaround plan centered on four key pillars: increasing supply, strengthening demand, optimizing network performance, and accelerating growth in Bridg. This strategic refocusing led to the divestiture of non-core assets, including the Entertainment business in December 2023 (incurring a $6.6 million loss) and the Dosh app in February 2025 (yielding a $5.2 million gain). These actions underscore a disciplined approach to streamline operations and concentrate resources on core growth drivers. Furthermore, the company implemented a 15% workforce reduction in May 2025, incurring $1.5 million in one-time costs in Q2 2025, to enhance operational efficiency and ensure liquidity.

Recent Performance and Emerging Headwinds

Cardlytics' Q2 2025 financial results reflect a company in transition, demonstrating both operational improvements and significant new challenges. Revenue for Q2 2025 decreased by 9.2% year-over-year to $63.25 million, and billings saw a 5.7% decline to $104.05 million. This billings decrease was primarily driven by an $8.6 million reduction in net sales to existing marketers, partially offset by a $2.3 million increase from new marketers. Despite the top-line pressure, Adjusted Contribution for Q2 2025 was $36.15 million, a modest 0.6% decrease year-over-year, but notably, the Adjusted Contribution margin expanded to 57.1% of revenue—a 5-point increase and the highest to date, attributed to a more favorable partner mix from newer bank partners. Adjusted EBITDA turned positive at $2.70 million, a $5 million improvement year-over-year, supported by a $5.2 million reduction in adjusted operating expenses (excluding stock-based compensation) due to staff reductions and lower incentive compensation. Net Loss for the quarter was $9.28 million.

Operational metrics show mixed signals. Monthly Qualified Users (MQUs) increased by 19% to 224.5 million in Q2 2025, driven by the full ramp of new FI partners. However, Adjusted Contribution per User (ACPU) declined by 15% year-over-year to $0.14, as the MQU base of the newest large FI partner has not yet been fully monetized, though ACPU did expand 10% sequentially from Q1 2025.

A significant headwind emerged in July 2025, as Cardlytics' largest FI partner imposed unexpected and extensive content restrictions, limiting the content that can run on its channels. This decision, which management "did not anticipate... at this scale," is unique to this partner and is expected to significantly impact marketing budgets for selected advertisers. Separately, Bank of America (BAC), another top-three FI partner, issued a non-renewal notice in April 2025, with services continuing through January 2026 while discussions for a new arrangement are ongoing. Conversely, the Master Agreement with JPMorgan Chase Bank (JPM) was extended until November 2028, albeit with a reduced Supplier Billings Share starting January 2026.

Strategic Responses and Competitive Positioning

In response to these dynamics, Cardlytics is accelerating its strategic initiatives. The company's competitive positioning is rooted in its unique access to financial data and its ability to deliver card-linked offers at scale, a capability competitors have generally struggled to replicate for multi-unit chains or sophisticated CLO needs.

• Diversification of Supply: Cardlytics is actively expanding its network beyond its core, highly concentrated FI partners. New large U.S. FI partners are ramping up, showing strong engagement and higher average order values (AOVs) for premium advertisers. A new neobank partner was onboarded rapidly, expanding reach to different demographics. The Cardlytics Rewards Platform (CRP) is a pivotal step, allowing non-FI merchants (like the digital sports platform) to become publishers, opening new verticals and advertiser opportunities (e.g., financial services ads not suitable for FI channels).
• Strengthening Demand: The company is focusing on winning back advertisers impacted by churn and attracting new top-tier brands across various industries, including rideshare, retail, and national restaurant chains. The U.K. business remains a bright spot, with 29% revenue growth in Q2 2025 and the highest billings quarter in its history, driven by new logos and strong performance in everyday spend and subscription services. The Insights portal, offering self-service market and customer intelligence, is proving valuable, with a 77% sequential increase in Q1 usage and positive client feedback.
• Optimizing Network Performance: Delivery issues, a past challenge, are now "largely resolved" as of Q1 2025, with improvements in budget management, projections, and ad ranking. The shift to engagement-based pricing (EBP) is accelerating, with 79% of advertisers now on EBP and 96% of new business in Q2 2025 adopting this model. EBP is seen as crucial for compressing sales cycles, aligning with internal brand measurement, and enhancing churn resistance.
• Accelerating Bridg Growth: Bridg continues to garner strong client interest for its identity resolution capabilities, securing a long-term renewal with a high-end beauty brand and a new partnership with a restaurant chain. Rippl, a division of Bridg, is expanding rapidly, now boasting over 140 million unique shopper profiles (up from 110 million in Q4 2024) with the addition of Hy-Vee's RedMedia. Rippl audiences are seeing significant adoption, with 10% week-over-week growth on The Trade Desk (TTD), positioning Cardlytics to capture market share in the growing retail media sector.

Cardlytics' competitive advantages lie in its proprietary technology for bank-native advertising, which offers superior data targeting and customer loyalty, and its network effects from financial partnerships, which provide a unique distribution channel. While competitors like The Trade Desk offer broader programmatic scale and LiveRamp (RAMP) excels in identity resolution and data privacy, Cardlytics' niche focus on financial data provides deeper insights and potentially stronger pricing power in its specialized segments. However, its smaller scale and dependency on FI partners present vulnerabilities, potentially leading to higher customer acquisition costs and slower innovation compared to more agile rivals like Criteo (CRTO) or larger platforms like PubMatic (PUBM).

Financial Outlook and Liquidity

Cardlytics' outlook for Q3 2025 reflects the significant impact of the largest FI partner's content restrictions. The company expects billings between $87 million and $95 million, representing a substantial negative 15% to 22% decrease year-over-year. Revenue is projected to be between $52.2 million and $58.2 million. Despite this top-line weakness, Adjusted Contribution is guided between $30.3 million and $34.3 million, with Adjusted EBITDA expected to be between negative $2.3 million and positive $2.7 million, implying a breakeven scenario. Management is "modeling conservatively" given the early stages of optimizing around these restrictions.

The company anticipates its Adjusted Contribution as a percentage of revenue to reach the mid-to-high 50% range, its highest to date, reflecting improved economics with new and ramping bank partners.

Revenue as a percentage of billings is expected to remain in the low 60% range for Q3 and the full year. Operating expenses (excluding stock-based compensation) are projected to be sustained at or below $33 million per quarter for the remainder of 2025, following the workforce reduction and prudent investment pacing. The U.K. business is expected to continue its strong positive growth in Q3.

From a liquidity standpoint, Cardlytics ended Q2 2025 with $46.7 million in cash and cash equivalents. On August 5, 2025, it drew $50 million from its 2018 Line of Credit, leaving $10 million in unused available borrowings. This provides $106.7 million in total liquidity, or $81.7 million after accounting for a $25 million minimum cash covenant. These funds are intended to cover the $46.1 million maturity of the 2020 Convertible Senior Notes in September 2025 and provide operational flexibility. Management expresses confidence in having "sufficient liquidity to fund our operations and capital requirements for at least the next 12 months and in the long-term."

Conclusion

Cardlytics is undergoing a profound strategic realignment, transforming its core business model to diversify its supply, enhance its technological differentiators, and drive sustainable growth. While the unexpected content restrictions from its largest FI partner present a significant near-term headwind, impacting Q3 2025 guidance, the company's proactive responses—including the rapid expansion of the Cardlytics Rewards Platform, the successful integration of Bridg data for CPG offers, and a disciplined approach to cost management—underscore its resilience.

The commitment to achieving breakeven Adjusted EBITDA in Q3 despite revenue pressures, coupled with expanding Adjusted Contribution margins, highlights a renewed focus on profitability and operational efficiency. Cardlytics' unique data asset and proprietary technology continue to provide a formidable competitive moat, enabling it to deliver highly effective, measurable advertising solutions. As the company navigates these challenges and executes its strategic shifts, its ability to unlock new, diversified revenue streams and deepen advertiser engagement will be critical to realizing its medium-term vision for profitable growth in the dynamic commerce media landscape.