Cardlytics, Inc. Common Stock 2026 Q2 Earnings Call

Chris, please go ahead. Good evening, and welcome to the Cardlytics second quarter 2026 financial results call.

Before we begin, let me remind everyone that today's discussion will contain forward-looking statements based on our current assumptions, expectations, and beliefs, including expectations around our future financial performance and results, including for the third quarter of 2026, our capital structure, and operational and product initiatives. For a discussion on the specific risk factors that could cause our actual results to differ materially from today's discussion, please refer to the Risk Factors section of our 10-Q for the quarter ending June 30th, 2026, which has been filed with the SEC. During our call, we will discuss non-GAAP measures of our performance. GAAP financial reconciliations and supplemental financial information are provided in the press release issued today, which you can find on the investor relations section of the Cardlytics website.

Today's call is available via webcast, and a replay will also be available on our website. On the call today, we have CEO Amit Gupta and CFO David Evans. Following their prepared remarks, we'll open it up for your questions. With that, I'll hand the call over to Amit.

Good evening, and thank you for joining us. The second quarter showed clear progress against our strategic priorities. The investments we made earlier this year in our people, advertiser business, and tech platform are starting to deliver. We remain focused on the same priorities we've talked about all year: deepening our bank partnerships and expanding our publisher network, driving incremental revenue for advertisers through our purchase intelligence, and continuing to invest in our tech platform that differentiates us. As we've stated in the past, 2026 has been and is a year of execution. The biggest takeaway from Q2 is that we are beginning to see the results of the reset. Our advertiser growth is accelerating, churn is improving materially, and supply has stabilized. Starting with our network and supply. Rewards programs across the industry are shifting toward merchant-funded, locally relevant models, and we are at the center of that shift.

We are partnering with industry leaders to define how this evolves industry-wide, particularly as AI adoption accelerates. The shift is happening across the industry. At their investor day this year, one of the country's largest card issuers said they're shifting more towards merchant-funded offers than expensive points-based rewards. The reason is simple. Consumers want offers that are more relevant and personalized. On CRP, market interest remains strong and our pilot partners already live on our platform are giving us positive feedback. The proposition is resonating. Our focus now is executing well for those early partners while we continue conversations to bring new ones onto the platform. We continue to grow with our existing bank partners, and we're in active discussions with new ones.

Several longstanding FI partners, along with some newer ones, have asked us to expand our card-linked offers program to additional portfolios, a direct result of the value we are driving for their cardholders and the top-of-wallet behavior it creates. One of our major bank partners recently agreed to temporarily reduce their FI share as a show of good partnership to accelerate co-development and innovation in their program. We've seen this play out in concrete outcomes this quarter. In one recent bank-funded program, we tested extra rewards for cardholders who made two redemptions in a month with an even higher reward for three. As a result of this program, we saw total redemptions go up 105%, first-time redeemers were up 113%, and merchant-funded redemption spend increased 78%. This shows the Cardlytics flywheel delivering for all three sides of our business: consumers, bank partners, and advertising merchants.

We are also continuing to grow our local third-party offers. They are now live across four major banks and drive nearly 5,000 redemptions a day. They get strong engagement because they are highly relevant to consumers locally, and billings are up 20% since the start of the year. In the U.K., Cardlytics expanded our role in providing offers for Monzo, one of the fastest-growing banks in the U.K. Starting July 2026, Cardlytics now powers more card-linked offers for Monzo's U.K. customers, delivering personalized, spend-based cashback rewards directly within the Monzo app. The partnership expands Cardlytics' U.K. reach by building on its extensive network of agencies and partners, giving brands direct access to Monzo's highly engaged, digitally native customer base.

The partnership reflects growing demand among leading U.K. financial institutions for data-driven, frictionless reward solutions. Across our FI and CRP conversations, we're hearing the same themes consistently from market leaders. The strength of our tech platform, the scale of our merchant network, and the size of value we can deliver to their consumers sets us apart. Turning to our advertiser base. Q2 advertiser base demonstrated growth both quarter-over-quarter and year-over-year. Active advertisers grew 18% quarter-over-quarter, and billings grew 11% alongside it. New logo volume was the strongest signal, up 59% quarter-over-quarter. Total new business billings for this group grew 17% year-over-year, and our largest new logo this quarter was more than 100% higher than our largest new logo a year ago. Growing advertisers, those increasing their billings with us, grew 42%.

Churn improved across the board, down 50% by advertiser count and 88% by dollar impact. That growth comes down to two things, measurement and scaling. Proving results quickly with new advertisers and making it easy for them to scale immediately. One large national restaurant brand piloted with us in Q2 and has already resigned to the max potential. A home services brand piloted with a single location, and before the pilot even wrapped, expanded to seven others and is now also at our maximum tier across their full portfolio. In the U.K., billings are up 10% year-over-year, and we saw a great example this quarter of what our purchase intelligence can do for our advertisers. Some of our restaurant clients thought their sales were slowing because the whole category was shrinking. Our data showed that wasn't the case.

The category was flat, and their customers were still eating out, but increasingly ordering through third-party delivery services. We got ahead of the trend and proactively adjusted look-back periods to reflect shifting market dynamics, capturing customers during their normal dormancy windows before spend moved out of the category. This ensured we sustained advertiser investment even in a category under real budget and margin pressure. We are seeing the same pattern here in the U.S. Quick service spend grew 3.3% year-over-year, but almost all of that was menu inflation. Real demand was flat. It's not just this quarter. QSR's share of restaurant spend has been shrinking year-over-year since 2024. While delivery keeps picking up the difference, up more than 18% this quarter alone. People aren't ordering less quick service food. That spend is just shifting to delivery. One QSR brand saw this play out directly.

They knew their purchase frequency trailed key competitors and assumed they were losing customers out of the category. Our data showed those customers hadn't left. They'd migrated to other brands, mirroring that same category-wide shift. That insight moved their strategy from broad acquisition to retention and re-engagement, and purchase frequency among those re-engaged customers came in stronger than across their broader base. That's the value we deliver, not just what's happening, but the action that drives growth. Our everyday spend data shows resilience in gas and convenience, up 11.1% year-over-year, even as discretionary dining growth flattens. That same purchase intelligence extends beyond category level trends into the broader economy. Our data shows that the U.S. consumer spend growth rebounded to 3.6% year-over-year in June, up from 2.3% in May. Contrary to popular opinion, lower spend households are driving this recent growth.

We often see shifts like these before they show up in broader economic data, and sophisticated advertisers take advantage of these broader trends as they plan their marketing efforts with us. Now on to our technology platform. Last year, we invested in cleaning up our tech debt and building an AI-forward tech stack. Now that these investments are behind us, we are now operating more efficiently and moving faster. We are also continuing to put AI to work across the platform. We recently launched new AI capabilities that automatically pull industry- and brand-level spending insights from our purchase data. Leading advertisers are using these insights to benchmark their performance and understand broader consumer trends, utilizing them in marketing decisions and beyond. We launched an AI-driven campaign publishing engine that automates core setup and configuration workflows within our advertiser platform.

Operating with human-in-the-loop oversight, this capability significantly reduces time to market for advertiser campaigns while driving long-term operating efficiencies across our sales and ad operations teams. In the U.S., we're building ad campaigns in about half the time we were a year ago while still hitting our internal targets 99.4% of the time. We are also building new capabilities that let banks personalize rewards for their own customer segments. Banks can tell us through our APIs which customers they consider high-tier or at risk of churning, and our platform can make personalized decisions on reward values, offer ranking, and bank-funded offers tailored specifically to those groups. We expect to begin testing this with one of our bank partners soon. We're developing token-based solutions that make our market leading offers protocol embeddable across different partner experiences. This will allow us to extend our reach and meet more consumers wherever they are.