10-Q: Cardlytics Q2 2025: Revenue Declines, Key Partner Exits

Cardlytics reports a decline in Q2 2025 revenue and billings, alongside a significant non-renewal notice from Bank of America, while extending its JPMorgan Chase partnership.

Summary

• Net Loss for the three months ended June 30, 2025, was $(9.283) million, compared to $(4.257) million for the same period in 2024.
• Net Loss for the six months ended June 30, 2025, was $(22.565) million, compared to $(28.532) million for the same period in 2024.
• Revenue for the three months ended June 30, 2025, decreased by 9% to $63.249 million from $69.636 million in the prior year period.
• Revenue for the six months ended June 30, 2025, decreased by 9% to $125.147 million from $137.244 million in the prior year period.
• Billings for the three months ended June 30, 2025, decreased by 6% to $104.048 million from $110.389 million in the prior year period.
• Billings for the six months ended June 30, 2025, decreased by 6% to $201.627 million from $215.606 million in the prior year period.
• Cardlytics Monthly Qualified Users (MQUs) increased by 19% (35.6 million) to 224.464 million for the three months ended June 30, 2025, compared to the same period in 2024.
• Cardlytics Adjusted Contribution per User (ACPU) decreased by 13% to $0.14 for the three months ended June 30, 2025, from $0.16 in the prior year period.
• Bank of America, one of the top three FI partners, issued a non-renewal notice for agreements expiring July 31, 2025, with operations continuing through January 27, 2026, unless mutually extended.
• The Master Agreement with JPMorgan Chase Bank, National Association, was extended until November 18, 2028, with a reduced Supplier Billings Share beginning January 1, 2026, though it remains higher than prior to the Third Amendment.
• Cost savings measures were implemented during the three months ended June 30, 2025, incurring $1.5 million in one-time costs.
• The Dosh app was decommissioned on February 28, 2025, resulting in a $5.2 million gain on disposal or divestiture for the six months ended June 30, 2025.
• Borrowed $50.0 million against the 2018 Line of Credit on August 5, 2025, leaving $10.0 million of unused available borrowings.

Sentiment

Score: 3

Explanation: The sentiment is negative due to declining revenue and billings, the non-renewal of a major FI partner (Bank of America), and restrictions imposed by the largest FI partner (JPMorgan Chase) on marketing offers. While Adjusted EBITDA improved and the JPMC contract was extended, these positive aspects are overshadowed by significant challenges to the core business model and explicit negative forward-looking statements regarding billings. The company continues to report net losses and negative free cash flow.

Positives

• Net Loss decreased for the six months ended June 30, 2025, to $(22.565) million, compared to $(28.532) million for the same period in 2024.
• Adjusted EBITDA improved to $2.703 million for the three months ended June 30, 2025, from $(2.285) million in the prior year period.
• Adjusted EBITDA improved to $(1.681) million for the six months ended June 30, 2025, from $(2.059) million in the prior year period.
• Cardlytics Monthly Qualified Users (MQUs) increased by 19% (35.6 million) for the three months ended June 30, 2025, driven by organic growth of existing FI partners in the U.K. and U.S. and new FI partners in the U.S.
• Reported a foreign currency gain of $5.449 million for the three months ended June 30, 2025, compared to a gain of $0.099 million in the prior year period.
• Reported a foreign currency gain of $8.076 million for the six months ended June 30, 2025, compared to a loss of $(0.531) million in the prior year period.
• The Master Agreement with JPMorgan Chase Bank, National Association, was extended until November 18, 2028.
• The Supplier Billings Share with JPMorgan Chase, while reduced from January 1, 2026, remains higher than it was prior to the Third Amendment.
• Realized a gain on debt extinguishment of $13.017 million for the six months ended June 30, 2024, due to the repurchase of 2020 Convertible Senior Notes below par.
• Recorded a gain on disposal or divestiture of $5.2 million for the six months ended June 30, 2025, related to the decommission of the Dosh app.
• The 2018 Loan Facility was amended in April 2025 to extend its maturity date to April 15, 2028.
• Stockholders approved the 2025 Equity Incentive Plan on May 20, 2025, reserving 15,722,908 shares for stock awards.

Negatives

• Revenue decreased by 9% for both the three and six months ended June 30, 2025, compared to the same periods in 2024.
• Billings decreased by 6% for both the three and six months ended June 30, 2025, compared to the same periods in 2024.
• Cardlytics Adjusted Contribution per User (ACPU) decreased by 13% for the three months ended June 30, 2025, and 22% for the six months ended June 30, 2025.
• Bank of America, a top three FI partner, issued a non-renewal notice for agreements expiring July 31, 2025, with operations continuing only through January 27, 2026, unless mutually extended.
• The largest FI partner (JPMorgan Chase) recently restricted Cardlytics from publishing offers for certain marketers on its channels, which is expected to significantly decrease marketing budgets for these advertisers.
• Net cash used in operating activities was $(5.481) million for the six months ended June 30, 2025, indicating continued cash burn from operations.
• Free Cash Flow was $(14.242) million for the six months ended June 30, 2025, indicating negative cash flow after capital expenditures.
• Interest expense, net, increased by $0.4 million for the three months ended June 30, 2025, and $1.4 million for the six months ended June 30, 2025, primarily due to the 2024 Convertible Senior Notes and decreased interest income from lower cash balances.
• Incurred $1.5 million in one-time costs related to a reduction in force during the three and six months ended June 30, 2025.
• Accumulated net losses since inception totaled $1,323.1 million as of June 30, 2025.
• The remaining principal amount of $46.1 million on the 2020 Convertible Senior Notes is due on September 15, 2025.

Risks

• Unfavorable global economic conditions, including inflationary pressure, tariffs, and geopolitical conflicts, could limit business growth and negatively affect operating results.
• Quarterly operating results have fluctuated and may continue to vary, potentially leading to failure to meet expectations and causing stock price decline.
• Inability to grow or sustain revenue or billings in the future.
• Dependence on the Cardlytics platform; issues with it could harm operating results.
• Failure to identify and respond effectively to rapidly changing technology and industry needs could make solutions less competitive or obsolete.
• Substantial dependence on Chase, Bank of America, Wells Fargo, and a limited number of other FI partners; loss or reduced reliance of any significant FI partner could significantly harm the business.
• The market is competitive, and the company may not be able to compete successfully with current or future competitors.
• Servicing debt may require a significant amount of cash, and insufficient cash flow or inability to raise funds could adversely affect business and results of operations.
• Subject to stringent and evolving U.S. and foreign privacy and data security laws, rules, and contractual obligations; actual or perceived failure to comply could lead to regulatory investigations, litigation, disruptions, and financial penalties.
• Failure to protect proprietary technology and intellectual property rights could substantially harm business, financial condition, and operating results.
• The market price of common stock has been, and is likely to continue to be, volatile.
• Anti-takeover provisions in charter documents and under Delaware law could make an acquisition more difficult, limit attempts by stockholders to replace management, and limit the market price of common stock.
• Failure to maintain relationships with current FI partners or attract new FI partners or other supply partners could prevent sufficient revenue growth.
• Inability to effectively grow and train the sales team may hinder adding new marketers or increasing sales to existing ones.
• Lack of long-term commitments from most marketers means the company must continually compete for business and may not be able to retain or increase sales.
• History of losses and may not achieve net income in the future.
• Operating in an emerging industry with uncertain future demand and market acceptance for solutions.
• Factors such as network or software system failures, partner restrictions on data use, or changes in regulations could impair the ability to collect significant amounts of data.
• Efficacy of some solutions depends on third-party data providers, and their withdrawal could adversely affect the ability to provide solutions.
• Defects, errors, or delays in solutions could harm reputation and operating results.
• Significant system disruptions, loss of data center capacity, or changes to data hosting solutions could adversely affect business.
• Seasonal fluctuations in marketing activity could adversely affect cash flows.
• Challenges in maintaining corporate culture as the company grows could lead to loss of innovation, creativity, and teamwork.
• Inability to attract, integrate, and retain additional qualified personnel, including top technical talent, could adversely affect the business.
• Dependence on the continued services and performance of senior management and other key personnel; loss of any could adversely affect the business.
• International sales and operations subject the company to additional risks, including currency exchange rate fluctuations and compliance challenges.
• Failure to manage growth effectively could compromise the quality of solutions and negatively impact business.
• Ability to use net operating losses and certain other tax attributes to offset future taxable income may be limited.
• Changes in tax laws or regulations could materially adversely affect the company.
• Future acquisitions could disrupt business and adversely affect financial condition and operating results.
• Charges to earnings resulting from acquisitions may negatively impact financial results.
• May require additional capital to support growth, and such capital might not be available on acceptable terms, if at all.
• Bringing new FI partners into the network, or changes made by existing FI partners, may impede the ability to accurately forecast network performance.
• Inability to maintain and enhance the brand could adversely affect business.
• The conditional conversion feature of either series of Notes, if triggered, may adversely affect financial condition and results of operations.
• Transactions relating to the Notes may affect the value of common stock.
• Subject to government regulation, including import, export, economic sanctions, and anti-corruption laws, which may expose to liability and increase costs.
• Use of open-source software could negatively affect the ability to sell solutions and subject to possible litigation.
• Business and operations could be negatively affected if subject to any securities litigation or stockholder activism.
• An active trading market for common stock may not be sustained.
• Future sales of common stock in the public market could cause share price to decline.
• If securities or industry analysts do not publish research or reports about the business, or publish negative reports, stock price and trading volume could decline.
• Reported financial results may be adversely affected by changes in accounting principles generally accepted in the U.S.
• Natural or man-made disasters, pandemics, and other similar events may significantly disrupt business and negatively impact financial condition and operating results.

Future Outlook

Management expects Billings to decrease in the near term due to restrictions from its largest FI partner on publishing offers for certain marketers, which will significantly impact marketing budgets. The company intends to shift these marketers to other channels. While the company believes it has sufficient liquidity for at least the next 12 months and long-term, it anticipates incurring additional operating losses in the near term as it continues to invest in business growth. Delivery costs are expected to increase in absolute dollars with cloud migration but decline as a percentage of Revenue over time, similar to sales and marketing, research and development, and general and administrative expenses.

Management Comments

• "We believe that Adjusted Contribution provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and Board of Directors."
• "Management views Adjusted Contribution as the most relevant metric to measure the financial performance as it reflects the dollars we keep after all of our partners are paid."
• "In the near term, we expect our Billings to decrease compared to applicable prior year periods, primarily related to our largest FI partner recently restricting us from publishing offers for certain marketers on its channels."
• "We expect that these restrictions will impact our ability to grow marketing budgets for these selected advertisers, and in many cases will cause the marketing budgets for these selected advertisers to decrease significantly."
• "We intend to work with our other FI partners to shift such marketers to other channels."
• "We expect to incur additional operating losses in the near term as we continue our efforts to grow our business and may require additional capital resources to continue to grow our business."
• "We believe that we have sufficient liquidity to fund our operations and capital requirements for at least the next 12 months and in the long-term following the date our consolidated financial statements were issued."

Industry Context

Cardlytics operates in the nascent and competitive commerce media platform industry, which leverages financial media networks and identity resolution platforms. The market for transaction-based marketing and analytics is evolving rapidly, with potential competition from various players including online retailers, credit card companies, and even financial institutions developing in-house solutions. Macroeconomic conditions, such as inflation and geopolitical conflicts, are noted as significant factors influencing advertising spending, directly impacting the company's performance. The increasing stringency of data privacy and security regulations (e.g., CCPA, EU GDPR) and changes in technology platforms (e.g., ad-blocking, browser functionality) are creating challenges for targeted advertising, a core component of Cardlytics' business model. The company's heavy reliance on a limited number of large financial institution partners highlights a concentration risk prevalent in platform-dependent business models.

Comparison to Industry Standards

• The filing does not provide specific industry benchmarks or comparable company performance data for direct assessment against global standards.
• Management notes that other companies in the industry with similar business arrangements may account for Consumer Incentives and calculate Adjusted EBITDA differently, which limits direct comparability of these specific metrics.

Management Changes

Corporate Governance

Legal Proceedings

• Not presently a party to any legal proceedings that, if determined adversely, would individually or collectively have a material adverse effect on business, operating results, financial condition, or cash flows.
• Historically involved in legal actions arising in the ordinary course of business, including intellectual property infringement and collection matters.
• Has been the subject of a putative securities class action lawsuit and stockholder activism in the past.

Stakeholder Impact

• Shareholders: Face potential dilution from future equity raises, continued stock price volatility, and the significant negative impact of the Bank of America non-renewal and JPMorgan Chase offer restrictions on future revenue and billings. No dividends are expected, so returns depend on stock price appreciation.
• Employees: Subject to a recent reduction in force, incurring one-time costs. Stock-based compensation remains a key component of remuneration, but the ability to attract and retain top talent may be challenged by stock price performance and competition.
• Customers (Marketers): Will be impacted by the largest FI partner's restrictions on publishing offers, potentially requiring shifts to other channels. The company continues efforts to provide compelling incentives.
• FI Partners: Bank of America's non-renewal signifies the loss of a major partner, while the extended JPMorgan Chase Master Agreement, despite adjusted terms, maintains a critical relationship. The company remains highly dependent on a limited number of FI partners.
• Suppliers/Creditors: The company has renewed a cloud hosting agreement guaranteeing $17.0 million annually for three years. Debt obligations, including Convertible Senior Notes and the Line of Credit, require ongoing servicing.

Next Steps

• Work with other FI partners to shift marketers from channels where offers are restricted by the largest FI partner.
• Evaluate the provisions and potential impact of the 'One Big Beautiful Bill Act'.
• Assess the impact of newly issued accounting standards (ASU 2024-03 and ASU 2023-09) on financial statements.
• Discuss potentially entering into a separate arrangement or agreement with Bank of America following its non-renewal notice.
• Continue to invest in research and development and sales and marketing efforts.
• Optimize development efforts to reduce research and development expenses in absolute dollars.
• Focus on improving processes, systems, and controls for general and administrative functions to scale with business growth.
• Potentially undertake foreign exchange hedging transactions in the future to manage currency risk.
• Continue efforts to grow the business, potentially requiring additional capital resources.
• Continue to improve and expand IT, financial, and administrative infrastructure.
• Attract, integrate, and retain highly skilled technical, managerial, sales, and other personnel.
• Potentially expand international operations as part of growth strategy.

Key Dates

Recommendation

The filing reveals significant headwinds for Cardlytics, including a 9% decline in revenue and 6% decline in billings for the first half of 2025. Critically, Bank of America, a top-three financial institution partner, has issued a non-renewal notice, indicating a loss of a major revenue source by early 2026. Furthermore, the largest FI partner (JPMorgan Chase) has imposed restrictions on publishing offers for certain marketers, which management explicitly states will negatively impact future billings. While Adjusted EBITDA showed some improvement and the JPMC agreement was extended, the core business challenges related to partner relationships and declining top-line metrics, coupled with the explicit negative outlook for near-term billings, suggest a deteriorating fundamental position. The company continues to incur net losses and negative free cash flow, indicating ongoing cash burn. These factors collectively point to significant operational and financial risks, making the stock a 'sell' for a seasoned investor.

Keywords

Cardlytics, CDLX, Financial Technology, FinTech, Commerce Media, Digital Advertising, Loyalty Marketing, Financial Institutions, FI Partners, Bank of America, JPMorgan Chase, Bridg, Dosh, SEC Filing, 10-Q, Quarterly Report, Earnings, Revenue, Billings, Net Loss, Adjusted EBITDA, Convertible Notes, Stock-based Compensation, Risk Factors, Corporate Governance, Shareholder Value