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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File Number: 001-38386
https://cdn.kscope.io/b319e564bc522492287f313b3e88f6b7-cdlx-20201231_g1.jpg
CARDLYTICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware26-3039436
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
675 Ponce de Leon Ave. NE, Ste 6000AtlantaGeorgia30308
(Address of principal executive offices, including zip code)
(888)792-5802
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockCDLXNASDAQ
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ☐    No  ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer   Accelerated Filer 
Non-accelerated filer   Smaller reporting company 
 Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting stock held by non-affiliates of the registrant was $1.8 billion based upon the closing sale price of our common stock on that date.
As of February 28, 2021, there were 27,903,828 shares outstanding of the registrant’s common stock, par value $0.0001 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, for its 2021 Annual Meeting of Stockholders are incorporated by reference in Part III of the Form 10–K.


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CARDLYTICS, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K ("Annual Report"), contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), that reflect our current expectations regarding future events, our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management. Forward-looking statements include any statement that does not directly relate to a current or historical fact. In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions contained in this Annual Report are based upon information available to us as of the date of this Annual Report and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements include statements about:
our ability to continue to add new financial institution ("FI") partners and marketers and maintain existing FI partners and marketers;
with respect to the Cardlytics platform, our ability to increase FI partner customer engagement from new and existing FI partners;
our ability to increase revenue from new and existing marketers in both new and existing industries;
the effects of increased competition as well as innovations by new and existing competitors in our market;
our ability to adapt to technological change and effectively enhance, innovate and scale our solutions;
our ability to effectively manage or sustain our growth and to sustain profitability;
potential acquisitions and integration of complementary business and technologies;
our ability to maintain, or strengthen awareness of, our brand;
perceived or actual integrity, reliability, quality or compatibility problems with our solutions, including related to unscheduled downtime or outages;
future revenue, hiring plans, expenses, capital expenditures, capital requirements and stock performance;
our ability to attract and retain qualified employees and key personnel and further expand our overall headcount;
our ability to grow our business;
our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
our ability to maintain, protect and enhance our intellectual property;
costs associated with defending intellectual property infringement and other claims;
the future trading prices of our common stock and the impact of securities analysts’ reports on these prices;
the closing of our acquisition of DOSH Holdings, Inc.;
the potential impact of the worldwide COVID-19 pandemic and related global economic uncertainty on our business, results of operations and financial condition; and
other risks detailed below in Item 1A. “Risk Factors.”
You should refer to Item 1A. “Risk Factors” section of this Annual Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Annual Report.
Except as otherwise indicated herein or as the context otherwise requires, references in this Annual Report to “Cardlytics,” the “company,” “we,” “us,” “our” and similar references refer to Cardlytics, Inc. and, unless the context otherwise requires, its consolidated subsidiaries.

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RISK FACTORS SUMMARY
Our business is subject to a number of risks and uncertainties, including those risks discussed at-length in the section below titled “Risk Factors.” These risks include, among others, the following:
Risks Related to our Business and Industry
The ongoing COVID-19 pandemic could materially and adversely affect our business, results of operations and financial condition.
Unfavorable conditions in the global economy or the industries we serve could limit our ability to grow our business and negatively affect our operating results.
Our quarterly operating results have fluctuated and may continue to vary from period to period, which could result in our failure to meet expectations with respect to operating results and cause the trading price of our stock to decline
We may not be able to return to or sustain our revenue and billings growth rate in the future.
We are dependent upon the Cardlytics platform.
We are substantially dependent on Chase, Bank of America and a limited number of other FI partners.
The market in which we participate is competitive and we may not be able to compete successfully with our current or future competitors.
Risks Related to our Outstanding Convertible Senior Notes
Servicing our debt may require a significant amount of cash. We may not have sufficient cash flow from our business to pay our indebtedness, and we may not have the ability to raise the funds necessary to settle for cash conversions of the Notes or to repurchase the Notes for cash upon a fundamental change, which could adversely affect our business and results of operations.
We are subject to counterparty risk with respect to the Capped Calls.
Risks Related to Regulatory and Intellectual Property Matters
Regulatory, legislative or self-regulatory developments regarding Internet privacy matters could adversely affect our ability to conduct our business.
Legislation and regulation of online businesses, including privacy and data protection regimes, is expansive, not clearly defined and rapidly evolving. Such regulation could create unexpected costs, subject us to enforcement actions for compliance failures, or restrict portions of our business or cause us to change our business model.
Failure to protect our proprietary technology and intellectual property rights could substantially harm our business, financial condition and operating results.
Risks Related to Ownership of our Common Stock
The market price of our common stock has been and is likely to continue to be volatile.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

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PART I.
ITEM 1. BUSINESS
Overview
Cardlytics operates an advertising platform within financial institutions’ (“FIs”) digital channels, which include online, mobile, email and various real-time notifications. Our partnerships with FIs provide us with access to their anonymized purchase data and digital banking customers. By applying advanced analytics to this aggregation of purchase data, we make it actionable, helping marketers identify, reach and influence likely buyers at scale, and measure the true sales impact of their marketing spend. We have strong relationships with leading marketers across a variety of industries, including retail, restaurant, travel and entertainment, telecommunications, subscription services, direct to consumer, and grocery.
Our purchase intelligence, coupled with our access to customers using FIs’ online, mobile, and email channels, enables us to help solve fundamental problems for marketers. Marketers increasingly have access to data on the purchase behavior of their customers in their own stores and websites. However, they lack insight into their customers’ purchase behavior outside of their stores and websites, as well as the purchase behavior of individuals who are not yet customers. The reality is, no matter how robust their own customer data, marketers only see a small portion of their customers’ overall spend. As a result, it is very difficult for businesses to focus their marketing investments on the most valuable customers. By consolidating the largely untapped, high growth mobile and online banking channels of FIs, we enable marketers to reach potential customers across our network of FI partners through their digital banking accounts and present them relevant offers to save money at a time when they are thinking of their finances. Marketers are also challenged to measure the performance of their marketing. This issue is particularly acute with respect to measuring the impact of marketing on in-store sales, where the vast majority of consumer spending occurs. We believe purchase intelligence is a disruptive opportunity in marketing and can comprehensively address these challenges by enabling marketers to precisely measure how marketing drives sales by “closing the loop”—both digital and in-store.
Our platform also helps solve fundamental problems for FIs. Leveraging our powerful predictive analytics, we are able to create compelling cash back offers that have the potential to drive deeper and sustained use of the FI channels, which we believe reduces customer attrition and increases use of the FIs’ credit and debit cards. Today, our FI partners include Bank of America, National Association ("Bank of America"), JPMorgan Chase Bank, National Association (“Chase”) and Wells Fargo Bank, National Association (“Wells Fargo”), as well as many other national and regional financial institutions, including several of the largest bank processors and digital banking providers to reach customers of small and mid-sized FIs. Wells Fargo began a phased launch of our platform in the fourth quarter of 2019 that was completed in the second quarter of 2020.
Revenue from the Cardlytics platform, which is net of Consumer Incentives, was $149.3 million, $210.4 million and $186.9 million for 2018, 2019 and 2020, respectively. During 2018, 2019 and 2020, our average monthly active users ("FI MAUs") were approximately 65.0 million, 122.6 million and 155.8 million, respectively, and our average revenue per user ("ARPU") was $2.30, $1.72 and $1.20, respectively. FI MAU and ARPU are performance metrics defined under the heading "Non-GAAP Measures and Other Performance Metrics" within Item 7 of this Annual Report.
During 2018, 2019 and 2020, our net loss was $53.0 million, $17.1 million and $55.4 million, respectively. Our historical losses have been driven by our substantial investments to expand the use of our platform by both FIs and marketers and include significant non-cash charges. During 2018, 2019 and 2020, our net loss includes stock-based compensation expense of $26.8 million, $15.9 million and $32.4 million, respectively. In 2018, our net loss also includes a $6.8 million non-cash expense related to the change in fair value of our warrant liabilities and a $2.5 million non-cash expense related to the vesting of warrants issued to an FI partner that accelerated upon our IPO.

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Purchase Intelligence
Data Asset
Purchase data from FIs provides a secure view into where and when consumers are spending their money. Our technology aggregates and analyzes purchase data without any personally identifiable information ("PII") leaving the FI or otherwise being made available to us. The data from the FI is anonymized so that it cannot be associated with any one individual. Our platform analyzes online and in-store transactions across the United States ("U.S"). and United Kingdom ("U.K."), including one in two debit and credit card transactions in the U.S. as of December 31, 2020. We believe that access to both debit and credit card purchase data at scale can only be obtained by partnering directly with FIs. This data allows us to serve relevant advertisements to our FIs’ customers through our native bank advertising channel. We also leverage the power of purchase intelligence to provide marketers utilizing the Cardlytics platform with valuable insights into the preferences of their actual or potential customers wherever they shop.
Advanced Analytics Capabilities
The advanced analytics we apply to our unique purchase dataset are what transforms it into valuable purchase intelligence. We use sophisticated quantitative methods to quickly access our massive volumes of data and make sense of what has happened—and, importantly, what is likely to happen. Our analytics makes our data actionable, enabling us to develop insights that marketers and FIs rely on to make more informed business decisions and more meaningful customer connections.
We analyze the impact marketing campaigns have on in-store and online sales. Since we are able to measure sales impact, marketers can use our purchase intelligence to optimize their advertising efforts, increase their investment in the Cardlytics platform and enhance future campaigns. Given our granular view into consumer spending across all categories, we can also help marketers identify share shift against their competition, and learn more about where else their customers spend their money.
For FIs, we use our analytics to optimize the offers we display to FI customers within our channel. By assigning relevancy scores to each offer based on what customers are most likely to buy, our platform can present the most relevant offers earlier in customers’ mobile and online banking sessions. This increases the likelihood that customers activate, redeem, and earn more cash back on the things they care about most. At the same time, marketers gain more opportunities to get valuable content in front of the right audience.
Distributed Architecture
A crucial aspect of our platform is our patented distributed architecture, which helps to facilitate both the effective delivery of our solutions and the protection of customer PII, which is not shared by FIs to Cardlytics. Our Offer Placement System ("OPS") and Offer Management System ("OMS") form the core of our advertising platform.
Each FIs' OPS is either hosted at the FI partner’s data center behind the FI partner’s firewall or hosted by us on behalf of the FI partner. The OPS tracks impressions, engagement, activation and redemptions and is responsible for targeting and presenting offers, which are developed and designed within the OMS. The OPS interfaces with FI systems to receive anonymized purchase data, assign a unique consumer ID to each FI customer, which we call a Cardlytics ID, and aggregate this purchase data. The Cardlytics ID is then used to assign offers, measure redemptions, and in limited cases, validate certain online purchases via anonymously linking to a consumer’s digital media presence.
The OMS is hosted in our data centers behind our firewall and is used to create, manage and publish marketing campaigns to each FI partner's OPS. OMS also provides a majority of the functionality for managing configuration settings within each OPS and the transfer of data between Cardlytics and our FI partners.

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Solutions
The Cardlytics Platform
Through our platform, marketers can deliver advertising content to FI customers in the form of an opportunity to earn rewards, which are funded with a portion of the fees we collect from marketers. Additionally, Cardlytics benefits FI customers by enhancing their experiences by showing them relevant advertisements tailored to their specific needs based on their specific purchase history. We maintain similar platforms in both the U.S. and the U.K.
Cardlytics helps marketers find potential new customers that are active in their category but not currently shopping with them, or to grow their business with existing customers. Our marketing is targeted and measured based on actual spending information at a customer level. However, all reporting is aggregated across consumers in our FI network. Unlike many other measurement solutions on which the marketing industry has historically relied, our measurements are not probabilistic or based on models, but are based on actual in-store and online purchases.
The breadth of our FI partners means that we are able to offer marketers the ability to optimize their marketing efforts to reach a large number of consumers through a single point of contact. The Cardlytics platform also provides FIs a scalable solution for driving customer loyalty and engagement whereby Cardlytics handles everything from contracting with marketers and creating, managing and reporting performance of their campaigns to attributing incentives to each FIs' customers. Prior to the year ended December 31, 2020, we referred to the Cardlytics platform as Cardlytics Direct.
Other Platform Solutions
Our Other Platform Solutions enabled marketers and marketing service providers to leverage the power of purchase intelligence outside the bank channel. During 2018, Other Platform Solutions revenue was $1.4 million, before shifting the majority of our efforts and resources to support the growth of the Cardlytics platform. We no longer generate revenue from Other Platform Solutions and do not expect to generate revenue from Other Platform Solutions for the foreseeable future.
Privacy and Security
We have architected privacy and security into our systems and practices. A critical part of our strategy involves a design focused on gathering data without collecting, maintaining or using sensitive information, such as social security numbers, credit card numbers, financial account information or medical records. Our platform is currently designed so that we do not receive or have access to any PII from our FI partners. We only target marketing against anonymized data. This approach to privacy is intended to protect consumers. Our privacy and security standards have also been designed and implemented to meet the requirements and safeguard the reputations of our FI partners and marketers, many of which are large, multinational corporations. These customers frequently audit our practices and engage in detailed assessments of our infrastructure.
Despite the fact that we do not receive or have access to any PII from FIs, privacy and security are among our highest priorities and we commit significant resources to protecting the data that we receive. We have implemented, assess on an ongoing basis, and, when necessary, upgrade our physical, procedural and technical controls. We also take steps to impose compliance with these controls on our service providers via contract and regular audits.
We have implemented a number of security controls. Our security controls have been audited and certified by third parties using standards which include SSAE 18, SQCS and SAS. Sensitive data is subject to encryption, anonymization, or de-identification depending on the use case and risk profile. We enhance network security through measures such as network segmentation, firewalls and network and host-based intrusion detection at critical network aggregation and ingress/egress points.
A cornerstone of our practices is transparency in data use and consumer choice. Our privacy policy outlines the types of data we collect and how we use it. Most of our FI partners maintain different types of "opt-out” features for any consumer wishing to opt out of the FI rewards program on the Cardlytics platform.
Outside of the U.S., our privacy and data handling practices are subject to regulation by data protection authorities and other regulators in the countries in which we do business, which may be more restrictive than the requirements that we are subject to in the U.S.

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Acquisition of Dosh
On March 1, 2020, we announced the entry into an Agreement and Plan of Reorganization (the “Merger Agreement”) to acquire DOSH Holdings, Inc. (“Dosh”), a personalized cash-back offers platform, for approximately $275.0 million, including $150.0 million in cash, subject to adjustments and escrows, and $125.0 million of our common stock at an agreed upon price of $136.33 per share. The acquisition will be accounted for under the acquisition method of accounting with the operations of the newly acquired entity included in our operating results from the date of acquisition.
Competitive Strengths
We have the ability to reach and influence real buyers at scale and measure the true impact of our campaigns on in-store and online sales. We believe that the following strengths provide us with competitive advantages:
Deeply Embedded with FIs. Our founders were bankers who understood the power of historical purchase data and the needs of marketers. Our platform was architected with our FI partners in mind and is designed to ensure that no PII ever leaves the FI or is otherwise made available to us. The data is anonymized so that it cannot be associated with any one individual. No FI partner with which we contract directly has unilaterally terminated its use of our platform. We are generally the exclusive provider of native bank channel advertising to our FI partners as mobile and online banking portals are typically not conducive to supporting marketing content from different vendors. Further, advertising within banks' digital channels requires deep technological integrations, which we believe increases the cost of switching vendors and therefore increases FI partner loyalty to us.
Valuable Consumer Touchpoints. With all of our FI partners, we enable marketers to reach consumers in a captive, largely untapped, and digitally engaging environment, when they are thinking about their finances. Given FI requirements, we reach real people in a secured, brand-safe environment. We have access to consumers through both online and mobile channels, and are increasingly reaching them through various other channels, including emails and real-time notifications.
Massive Reach Informed by Purchase Intelligence. During 2020, our platform analyzed approximately $3.4 trillion in purchases across stores, retail categories, and geographies, both online and in-store. We have access to purchase data on our platform in the form of credit, debit, ACH and bill pay transactions. We provide marketers with the opportunity to leverage this unique data set to precisely reach millions of consumers.
Significant Scale with Marketers and Compelling Return on Advertising Spend ("ROAS"). We work with marketers across a variety of industries, including retail, restaurant, travel and entertainment, telecommunications, subscription services, direct to consumer, and grocery. By serving these marketers at scale, we have developed deep insight into consumer behavior, which has allowed us to optimize how we reach and influence likely buyers.
Powerful, Self-Reinforcing Network Effects. We see significant network effects within our platform. By adding new marketers and increasing the potential incentives provided to our FIs’ customers, we are able to increase engagement within our FIs’ digital banking channels. This, in turn, attracts more FIs to our platform, adding to our scale, and making our platform more valuable to marketers.
Ability to Improve Marketing. Even in the global pandemic, consumers spend a vast majority of their purchase dollars in physical stores and online marketers have long sought efficient and effective ways to understand online-to-offline attribution. Likewise, although marketers may have access to data on the purchase behavior of their customers in their stores and on their websites, they lack visibility about these customers’ overall purchasing patterns and the purchasing behavior of other likely buyers. Through our proprietary purchase intelligence platform, we reach and influence real buyers at scale and measure the true, incremental impact marketers’ campaigns have on in-store and online sales. Our targeting capabilities allow us to tailor the campaigns on our platform to the growth strategies of marketers.

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Proprietary Technology Architecture and Advanced Analytics Capabilities. We have designed our platform to protect highly sensitive first-party data. Our proprietary, distributed architecture helps facilitate both the effective delivery of our solution and the protection of our FI customers’ PII. No PII is shared by the FIs with Cardlytics and the data is anonymized so that it cannot be associated with any one individual. Our technologies leverage proprietary algorithms, to process raw purchase data into normalized purchase history useful for marketing and analytics. Our platform also supports integration of data from third-party sources to enrich the intelligence that we are able to provide. Further, we apply advanced analytics to continuously increase our intelligence capabilities and identify actionable behavior patterns for our marketers. Our advanced analytics capabilities are what transforms our unique purchase dataset into valuable purchase intelligence. We use sophisticated quantitative methods to quickly access our massive volumes of data and make sense of what has happened—and, importantly, what is likely to happen. Our analytics makes our data actionable, enabling us to develop insights that marketers and FIs rely on to make more informed business decisions and more meaningful customer connections.
World-Class Management Team with Unique Combination of Backgrounds and Experiences. Our team’s extensive experience across banking, technology and marketing is invaluable in our ability to forge relationships with financial and marketing partners, and understand the technical complexities inherent in building a platform that is transforming and disrupting the marketing industry.
Growth Strategies
The principal components of our strategy include the following:
Grow our Business with Marketers. While we already work with many large marketers, our platform currently captures only a small portion of their overall marketing spend. We intend to continue to expand our sales and marketing efforts to grow our share of advertising budgets from existing marketers and attract new brands, retailers and service providers. We also intend to grow our business with new marketers in new industry verticals such as travel and entertainment, direct to consumer, and grocery. We plan to increase sales to marketers through advertising agencies by leveraging our platform’s new self-service capabilities.
Drive Growth through Existing FI Partners. We intend to drive revenue growth by continuing to increase customer adoption by improving the effectiveness of FIs’ digital channels. The amount of revenue that we generate from the incentive programs of each of our FI partners varies. This variance is typically a result of how long the program has been active, the user interface for the program and the FI’s efforts to promote the program. We continually work with FIs to improve their customers’ user experience, increase customer awareness and leverage additional customer outreach channels like email.
Expand the Network of FI Partners. We will continue to focus on growing our network of FI partners by integrating directly with large national and regional banks and by opportunistically reselling our solution through financial processors and payment networks. Each new FI partner increases the size of our data asset, increasing the value of our platform to both marketers and FIs that are already part of our FI network.
Continue to Innovate and Evolve our Platform. As we continue to grow our data asset and enhance our platform through the option of self-service, we are developing new solutions, greater automation and increasingly sophisticated analytical capabilities. Our platform’s new self-service capabilities will provide existing and new marketers with the ability to build their own campaigns directly on our platform and enhance their experience with our product. As we have in the past, we plan to continue to work in close collaboration with our FI partners to develop new purchase intelligence-based analytic solutions to enable marketers to make more informed business decisions.
Grow the Platform Through Integrations with Partners. We intend to continue to partner with other media platforms, marketing technology providers and agencies that can utilize our platform to serve a broad array of customers. To facilitate these partnerships, we intend to focus on continued technological integration of our platform with those of complementary market participants.
FI Partners
We define an FI partner as a separate contracting entity from which we access purchase data to empower our platform either directly or through a third-party intermediary, such as a bank processor, digital banking provider or payment network operator. We generally pay our FI partners an FI Share, which is a negotiated and fixed percentage of our billings to marketers less any Consumer Incentives that we pay to the FIs’ customers and certain third-party data costs.

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As of December 31, 2020, we had direct contractual relationships with 20 of our FI partners. From inception to date, no FI partner with which we contract directly has unilaterally terminated its use of our solution. FI partners that become part of our network through bank processors and digital banking providers may terminate their relationships with these bank processors and digital banking providers and thereby indirectly terminate their relationships with us.
Agreements with Bank of America
Since November 2010, our relationship with Bank of America has been governed by a General Services Agreement ("GSA") pursuant to which we provide Bank of America with access to the Cardlytics platform and certain other related services, and a related Software License, Customization and Maintenance Agreement, which grants Bank of America the right to use the software underlying the Cardlytics platform. The GSA terminates in December 2021 and may be extended by Bank of America for additional one-year periods.
Pursuant to the GSA with Bank of America, we provide the Cardlytics platform to Bank of America customers which includes forming relationships with participating marketers; obtaining and publishing marketer offers to customers after screening both the marketer and specific advertising content; and monitoring redemption rates with respect to Consumer Incentives offered in Cardlytics campaigns. Although we are primarily responsible for securing marketers to advertise on our platform, Bank of America may likewise secure marketers and has the right to approve all marketer offers to be presented to Bank of America customers on the Cardlytics platform.
Under the GSA, we share the revenue that we generate from the sale of advertising within the Bank of America channel with Bank of America, subject to certain exceptions. The amounts that we pay to Bank of America are reflected as FI Share. The specific FI Share percentage that we pay is based on whether we or Bank of America have secured the relevant marketer account and other marketer- and transaction-specific factors, provided that we are entitled to retain a minimum percentage of the monthly revenue subject to the GSA.
In connection with entering into certain supplements to the GSA and the related license agreement, in March 2011 we granted to an affiliate of Bank of America a 10-year warrant to purchase up to (i) 78,100 shares of our common stock at an exercise prices of $2.52 per share and (ii) 312,401 shares of our common stock at an exercise price of $6.52 per share. These warrants were net exercised in February 2018, resulting in the issuance of 263,518 shares of our common stock.
Agreements with Chase
In May 2018, we entered into a Master Agreement and Schedule #1 to the Master Agreement (collectively, the “Master Agreement”) with Chase, pursuant to which we provide Chase with access to the Cardlytics platform. Under the Master Agreement, we provide Chase with access to the Cardlytics platform through November 2025. Chase may terminate the Master Agreement at any time upon 90 days’ written notice.
Under the Master Agreement, we share billings that we generate from the sale of advertising within the Chase channel with Chase, subject to certain exceptions. The amounts that we pay to Chase in excess of Consumer Incentives are reflected as FI Share. The specific billing share percentage that we pay is based on whether we or Chase have secured the relevant marketer account and other marketer- and transaction-specific factors, provided that we are entitled to retain a minimum percentage of the monthly revenue subject to the Master Agreement.
Marketers
We enable marketers and their agencies to efficiently and effectively market to our FIs’ customers through the Cardlytics platform. We work with companies across a variety of industries, including retail, restaurant, travel and entertainment, telecommunications, subscription services, direct to consumer, and grocery. During 2018, 2019 and 2020, our top five marketers accounted for 23%, 27% and 35% of our revenue. No marketer represented a significant concentration of our accounts receivable as of December 31, 2018. As of December 31, 2019 and December 31, 2020 our top five marketers accounted for 26% and 31% of our accounts receivable, respectively, with one marketer representing over 10% as of December 31, 2019 and December 31, 2020, respectively.

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Sales and Marketing
Our sales teams are focused on growth with our marketer and agency customers and our marketing efforts are focused on increasing market awareness for Cardlytics through partnerships, public relations, industry events and publications. Our FI-focused account management team is focused on deepening relationships with existing FI partners and expanding our FI network. During 2018, 2019 and 2020, our total sales and marketing expenses were $41.9 million, $43.8 million and $45.3 million, respectively, representing approximately 28%, 21% and 24% of revenue, respectively.
Marketers
We have dedicated sales teams responsible for establishing relationships with marketers and their agencies. Our sales teams are organized by industry, which include retail, restaurant, travel and entertainment, telecommunications, subscription services, direct to consumer, and grocery. Each industry team is led by an experienced sales manager and staffed with sales, sales support and service specialists who have deep domain knowledge and industry operating experience. We also have account managers that manage our customer relationships within each industry.
Financial Institution Partners
Our efforts to expand our FI network are focused on both nurturing our existing banking relationships and cultivating new relationships. Our FI partner sales team is focused on driving FIs to enhance their user interface for our platform, otherwise drive increased consumer engagement and encourage adoption of our solution offerings.
Competition
The market for the utilization of purchase intelligence is nascent and we believe we are one of the only companies that can provide purchase intelligence with the scale and the level of granularity that is equivalent to ours. We believe that we are the only company that enables marketing through FI channels at scale. In the future, we may face greater competition from online retailers, credit card companies, digital publishers and mobile pay providers with access to a substantial amount of consumer purchase data. While we may successfully partner with a wide range of companies that are, to some extent, currently competitive to us, these companies may become more competitive to us in the future. As we introduce new solutions, as our existing solutions evolve and as other companies introduce new products and services, we are likely to face additional competition.
We believe the principal competitive factors in our industry include the following:
ability to leverage purchase data to inform marketing;
depth and breadth of relationships with FIs, marketers and their agencies;
depth and breadth of, and access to, purchase data;
effectiveness in increasing return on advertising spend ("ROAS") for marketers;
effectiveness in increasing marketing campaign performance for marketers and their agencies;
effectiveness in increasing FI customer engagement;
ability to maintain confidentiality and security of FI transaction data;
transparency into and measurement of marketing performance;
multi-channel capabilities;
pricing;
brand awareness and reputation;
ability to continue to innovate; and
ability to attract, retain and develop leading-edge analytical and technical talent.
We believe that we compete favorably with respect to these factors and that we are well positioned as a leading provider and innovator of purchase intelligence.
Intellectual Property
Our future success and competitive position depend in part on our ability to protect our intellectual property and proprietary technologies. To safeguard these rights, we rely on a combination of patent, trademark, copyright and trade secret laws and contractual protections in the U.S. and other jurisdictions.

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As of December 31, 2020, we had four issued patents and are pursuing ten additional patents relating to our software. Our issued patents relate to a distributed system for inserting offers into online banking and expire in October 2028. We cannot assure you that any patents will issue from any patent applications, that patents that issue from such applications will give us the protection that we seek or that any such patents will not be challenged, invalidated, or circumvented. Any patents that may issue in the future from our pending or future patent applications may not provide sufficiently broad protection and may not be enforceable in actions against alleged infringers.
We have registered the “Cardlytics” name and logo in the U.S. and certain other countries. We have registrations and/or pending applications for additional marks in the U.S. and other countries; however, we cannot assure you that any future trademark registrations will be issued for pending or future applications or that any registered trademarks will be enforceable or provide adequate protection of our proprietary rights.
We also license software from third parties for integration into our offerings, including open source software and other software available on commercially reasonable terms. We cannot assure you that such third parties will maintain such software or continue to make it available.
We are the registered holder of a variety of domestic and international domain names that include cardlytics.com and similar variations on that name.
In order to protect our unpatented proprietary technologies and processes, we rely on trade secret laws and confidentiality agreements with our employees, consultants, financial institution partners, marketers, vendors and others. Despite our efforts to protect our proprietary technology and trade secrets, unauthorized parties may attempt to misappropriate, reverse engineer or otherwise obtain and use them. In addition, others may independently discover our trade secrets, which would prevent us from being able to assert trade secret rights, or develop similar technologies and processes. Further, the contractual provisions that we enter into may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property rights and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary technology or intellectual property rights. If we become more successful, we believe that competitors will be more likely to try to develop solutions and services that are similar to ours and that may infringe our proprietary rights. It may also be more likely that competitors or other third parties will claim that our platform infringes their proprietary rights.
Patent and other intellectual property disputes are common in our industry and we have been involved in such disputes from time to time in the ordinary course of our business. Some companies, including some of our competitors, own large numbers of patents, copyrights and trademarks, which they may use to assert claims against us. Third parties may in the future assert claims of infringement, misappropriation or other violations of intellectual property rights against us. They may also assert such claims against our FI partners, which we typically indemnify against such claims. As the numbers of products and competitors in our market increase and overlaps occur, claims of infringement, misappropriation and other violations of intellectual property rights may increase. Any claim of infringement, misappropriation or other violation of intellectual property rights by a third-party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management from our business.
Seasonality
Our cash flows from operations vary from quarter to quarter, largely due to the seasonal nature of our marketers’ advertising spending. Many marketers tend to devote a significant portion of their marketing budgets to the fourth quarter of the calendar year to coincide with consumer holiday spending and to reduce spend in the first quarter of the calendar year.
Employees
As of December 31, 2020, we had 471 full-time employees, including 88 in delivery, 192 in sales and marketing, 140 in research and development and 51 in general and administrative. None of our employees are covered by collective bargaining agreements. We believe our employee relations are good and we have not experienced any work stoppages.

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Human Capital Resources and Management
We are focused on building a revolutionary company, and we know this starts with investing in each of our employees. Headquartered in Atlanta, GA with additional offices in New York, NY; San Francisco, CA; London, U.K. and Visakhapatnam, India, our employees are a big part of what drives our exceptional desire to win and help our advertisers and FI partners win.
Diversity, Equity, and Inclusion (“DEI”) is integrated in everything we do. This mindset starts at the top. Our CEO and other senior leaders have DEI objectives in their performance goals. This focus is embedded in each aspect of the talent lifecycle: attraction, recruitment, onboarding, development and retention efforts. We build external relationships to ensure our talent pipelines are filled with candidates of diverse backgrounds. At the foundation of our DEI focus is our employee-led Special Interest Groups (“SIGs”). These groups facilitate learning and development, holistic wellness, professional connections, philanthropy, and raising awareness internally and externally for meaningful causes. Each group is sponsored by senior leaders in the organization. Cardlytics Connect, our newest SIG, focuses on our black employees across the globe and has a focused curriculum led by senior leaders. As of December 31, 2020, approximately 39% of our global workforce is made up of women and 40% people of color.
A key component to our sustainability and success is learning and development. We are intentional in our efforts to provide all employees opportunities to grow. Cardlytics University is a resource for both new hires as well as longer tenured employees, and we have specialized curriculum for emerging leaders, managers and mentors.
Our use of equity compensation allows all employees to operate as owners and is a key component of our total rewards strategy to retain, motivate and attract the best talent. All employees are shareholders and are invested, figuratively and literally, in our success. Employee equity is the cornerstone in our compensation philosophy along with comprehensive medical benefits, a positive work/life ratio, unlimited paid time off, health and wellness programs, and learning and development opportunities. Each year, with the help of outside experts, we evaluate each aspect of compensation and benefits to ensure they are in alignment with the market and our peers.
Our values reflect what drives our success. Our people and culture are our most valuable assets and greatest differentiators. We GSD, take initiative, are hungry to win, value transparency, and make it a priority to create a place where people want to be.
Corporate Information
Cardlytics, Inc. was initially incorporated under the laws of the State of Delaware in June 2008. Our principal executive offices are located at 675 Ponce de Leon Avenue NE, Suite 6000, Atlanta, Georgia 30308. Our telephone number is (888) 798-5802. Our website address is www.cardlytics.com. Our common stock is listed on the Nasdaq Global Market under the symbol “CDLX.” “Cardlytics,” the Cardlytics logo and other trademarks or service marks of Cardlytics, Inc. appearing in this Annual Report on Form 10-K are the property of Cardlytics, Inc. This Annual Report on Form 10-K contains additional trade names, trademarks and service marks of others, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this Annual Report may appear without the ® or TM symbols.
Available Information
Our website address is www.cardlytics.com and our investor relations website is located at http://ir.cardlytics.com/. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act, are available free of charge on our investor relations website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission ("SEC"). Additionally, the SEC maintains an internet site that contains reports, proxy and information statements and other information. The SEC’s website address is www.sec.gov.
The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information contained in this report, and in our other public filings in evaluating our business. Our business, financial condition, operating results, cash flow, and prospects could be materially and adversely affected by any of these risks or uncertainties. In that event, the market price of our common stock could decline and you could lose part or all of your investment.

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Risks Related to our Business and Industry
The ongoing COVID-19 pandemic could materially and adversely affect our business, results of operations and financial condition.
In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to spread throughout the United States and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of our marketers, FI partners, suppliers and others with whom we work, for an indefinite period of time. To support the health and well-being of our employees, marketers, FI partners and communities, our employees began working remotely in March 2020 and are still working from home. In addition, many of our marketers and prospective marketers, as well as our FI partners, are working remotely. The disruptions to our operations caused by COVID-19 may result in inefficiencies, delays and additional costs that we cannot fully mitigate through remote or other alternative work arrangements. In addition, given the economic uncertainty created by COVID-19, we have and may continue to see delays in our sales cycle, failures of marketers to renew at all or to renew at a reduced scope their agreements with us, requests from marketers for payment term deferrals as well as pricing concessions, which, if significant, could materially and adversely affect our business, results of operations and financial condition. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, its impact on industry events, and its effect on consumer spending, our marketers, FI partners, suppliers and vendors and other parties with whom we do business, all of which are uncertain and cannot be predicted at this time. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel, employee work locations, and cancellation of marketing events. We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take actions that alter our business operations, including those that may be required by federal, foreign, state or local authorities, or that we determine are in the best interests of our employees, marketers, FI partners, suppliers, vendors and stockholders. At this point, the extent to which the COVID-19 pandemic may impact our business, results of operations and financial condition is uncertain.
More generally, the pandemic raises the possibility of an extended global economic downturn and has caused volatility in financial markets, which could materially and adversely affect demand for our solution and materially and adversely impact our results and financial condition even after the pandemic is contained and the shelter-in-place orders are lifted. For example, we may be unable to collect receivables from those marketers significantly impacted by COVID-19, which may be more pronounced in each industry more directly impacted by the COVID-19 pandemic. The pandemic may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including risks associated with our guidance, our marketers, our potential marketers, our market opportunity, renewals and sales cycle, among others. We will continue to evaluate the nature and extent of the impact of COVID-19 on our business.
The full extent of COVID-19’s impact on our operations and financial performance depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, a possible resurgence or mutations of the virus, the effectiveness and rollout of a vaccine or effective therapeutics for the virus, the virus’ impact on capital and financial markets, the timing of an economic recovery and any new information that may emerge concerning the severity of the virus, its spread to other regions as well as the actions taken to contain it, among others. Any of these impacts could have a material adverse impact on our business, results of operations and financial condition and ability to execute and capitalize on our strategies. Due to the current uncertainty regarding the severity and duration of the COVID-19 pandemic, we cannot predict whether our response to date or the actions we may take in the future will be effective in mitigating the effects of COVID-19 on our business, results of operations or financial condition.

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Unfavorable conditions in the global economy or the industries we serve could limit our ability to grow our business and negatively affect our operating results.
General worldwide economic conditions have experienced significant instability in recent years including the recent global economic uncertainty and financial market conditions caused by the COVID-19 pandemic. These conditions make it extremely difficult for marketers and us to accurately forecast and plan future business activities and could cause marketers to continue to reduce or delay their marketing spending. For example, there has been an impact from the COVID-19 pandemic on spending by our marketers. We have also seen disruption in consumer spending in our data and it is impossible to predict the duration of the disruption. At this time, the potential impact on marketer spend and consumer spending from the COVID-19 pandemic is difficult to predict and, therefore, it is not possible to fully determine the impact on our future results. Historically, economic downturns have resulted in overall reductions in marketing spending. If macroeconomic conditions deteriorate or are characterized by uncertainty or volatility, marketers may curtail or freeze spending on marketing in general and for services such as ours specifically, which could have a material and adverse impact on our business, financial condition and operating results.
In addition, our business may be materially and adversely affected by weak economic conditions in the industries that we serve. We have historically generated a substantial majority of our revenue from marketers in the restaurant, brick and mortar retail, telecommunications and cable industries, and have recently entered new industries such as travel and hospitality, grocery, e-commerce and luxury brands. All of these industries have been negatively impacted by the pandemic and certain precautions taken to control the pandemic. We cannot predict the timing, strength or duration of any economic slowdown or recovery. In addition, we cannot predict the timing, strength or duration of any economic slowdown or recovery. In addition, even if the overall economy is robust, we cannot assure you that the market for services such as ours will experience growth or that we will experience growth.
Our quarterly operating results have fluctuated and may continue to vary from period to period, which could result in our failure to meet expectations with respect to operating results and cause the trading price of our stock to decline.
Our operating results have historically fluctuated and our future operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are beyond our control. Period-to-period comparisons of our operating results should not be relied upon as an indication of our future performance. Given our relatively short operating history and the rapidly evolving purchase intelligence industry, our historical operating results may not be useful in predicting our future operating results.
Factors that may impact our quarterly operating results include the factors set forth in this “Risk Factors” section, as well as the following:
our ability to maintain and grow our business in light of the global COVID-19 pandemic and precautions taken to reduce the risk of this virus;
our ability to attract and retain marketers and FI partners;
the amount and timing of revenue, operating costs and capital expenditures related to the operations and expansion of our business, particularly with respect to our efforts to attract new marketers and FI partners to our network;
the revenue mix revenue generated from our operations in the U.S. and U.K.;
decisions made by our FI partners to increase Consumer Incentives or use their FI share to fund their Consumer Incentives;

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changes in the economic prospects of marketers, the industries that we primarily serve, or the economy generally, which could alter marketers’ spending priorities or budgets;
the termination or alteration of relationships with our FI partners in a manner that impacts ongoing or future marketing campaigns;
reputational harm;
the amount and timing of expenses required to grow our business, including the timing of our payments of FI Share and FI Share commitments as compared to the timing of our receipt of payments from our marketers;
changes in demand for our solutions or similar solutions;
seasonal trends in the marketing industry, including concentration of marketer spend in the fourth quarter of the calendar year and declines in marketer spend in the first quarter of the calendar year;
competitive market position, including changes in the pricing policies of our competitors;
exposure related to our international operations and foreign currency exchange rates;
quarantine, private travel limitation, or business disruption in regions affecting our operations, stemming from actual, imminent or perceived outbreak of contagious disease, including the COVID-19 pandemic;
expenses associated with items such as litigation, regulatory changes, cyberattacks or security breaches;
the introduction of new technologies, products or solution offerings by competitors; and
costs related to acquisitions of other businesses or technologies.
Fluctuations in our quarterly operating results, non-GAAP metrics and other metrics and the price of our common stock may be particularly pronounced in the current economic environment due to the uncertainty caused by and the unprecedented nature of the current COVID-19 pandemic. Each factor above or discussed elsewhere in this "Risk Factors" section or the cumulative effect of some of these factors may result in fluctuations in our operating results. This variability and unpredictability could result in our failure to meet expectations with respect to operating results, or those of securities analysts or investors, for a particular period. If we fail to meet or exceed expectations for our operating results for these or any other reasons, the market price of our stock could fall and we could face costly lawsuits, including securities class action suits.
We may not be able to return to or sustain our revenue and billings growth rate in the future.
Our revenue increased 40% from $150.7 million in 2018 to $210.4 million in 2019. Our revenue decreased 11% from $210.4 million in 2019 to $186.9 million in 2020. Our billings increased 44% from $219.0 million in 2018 to $316.1 million in 2019. Our billings decreased 17% from $316.1 million in 2019 to $263.4 million in 2020. We may not be able to resume year-over-year revenue and billings growth in the near term or at all. We expect revenue and billings growth rates will be negatively impacted by the COVID-19 pandemic, and you should not consider our revenue and billings growth in any specific historical periods as indicative of our future performance. Our revenue and billings may be negatively impacted in future periods due to a number of factors, including slowing demand for our solutions, increasing competition, decreasing growth of our overall market, our inability to engage and retain a sufficient number of marketers or FI partners, or our failure, for any reason, to capitalize on growth opportunities. If we are unable to maintain consistent revenue, revenue growth or billings growth, our stock price could be volatile, and it may be difficult for us to achieve and maintain profitability.
We are dependent upon the Cardlytics platform.
All of our revenue and billings during 2020 was derived from sales of advertising via the Cardlytics platform. We have historically derived substantially all of our revenue and billings from the Cardlytics platform and expect to continue to derive substantially all of our future revenue and billings from sales of the Cardlytics platform for the foreseeable future. Our operating results could suffer due to:
lack of continued participation by FI partners in our network or our failure to attract new FI partners;
any decline in demand for the Cardlytics platform by marketers or their agencies;
failure by our FI partners to increase engagement with our solutions within their customer bases, improve their customers’ user experience, increase customer awareness, leverage additional customer outreach channels like email or otherwise promote our incentive programs on their websites and mobile applications, including by making the programs difficult to access or otherwise diminishing their prominence;
our failure to offer compelling incentives to our FIs’ customers;
FI partners may elect to use their FI share to fund their Consumer Incentives;

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the introduction by competitors of products and technologies that serve as a replacement or substitute for, or represent an improvement over, the Cardlytics platform;
FIs developing their own technology to support purchase intelligence marketing or other incentive programs;
technological innovations or new standards that the Cardlytics platform does not address; and
sensitivity to current or future prices offered by us or competing solutions.
In addition, we are required to pay a majority of Consumer Incentives associated with the Cardlytics platform marketing campaigns regardless of whether the amount of such Consumer Incentives exceeds the amount of billings that we are paid by the applicable marketer. Further, we are often required to pay such Consumer Incentives before we receive payment from the applicable marketer. Accordingly, if the amount of Consumer Incentives that we are required to pay materially exceeds the billings that we receive or we encounter any significant failure to ultimately collect payment, our business, financial condition and operating results could be adversely affected.
If we are unable to grow our revenue and billings from sales of the Cardlytics platform, our business and operating results would be harmed.
We are substantially dependent on Chase, Bank of America and a limited number of other FI partners.
We require participation from our FI partners in the Cardlytics platform and access to their purchase data in order to offer our solutions to marketers and their agencies. We must have FI partners with a sufficient number of customers and levels of customer engagement to ensure that we have robust purchase data and marketing space to support a broad array of incentive programs for marketers.
In addition, we pay most of our FI partners an FI Share, which is a negotiated and fixed percentage of our billings less certain costs. During 2018, Bank of America, National Association (“Bank of America”) accounted for over 60% of the total FI Share we paid to all FIs. No other FI partner accounted for over 10% of FI Share during this period. For each year during 2019 and 2020, Bank of America and JPMorgan Chase Bank, National Association (“Chase”) combined to account for over 75% of the total FI Share we paid to all FIs, with each representing over 25%. No other FI partner accounted for over 10% of FI Share during these periods.
Our agreements with a substantial majority of our FI partners have three- to seven-year terms but are generally terminable by the FI partner on 90 days or less prior notice. If an FI partner terminates its agreement with us, we would lose that FI as a source of purchase data and online banking customers. Our FI partners may elect to withhold from us or limit the use of their purchase data for many reasons, including:
a change in the business strategy;
if there is a competitive reason to do so;
if new technical requirements arise;
consumer concern over use of purchase data;
if they choose to develop and use in-house solutions or use a competitive solution in lieu of our solutions; and
if legislation is passed restricting the dissemination, or our use, of the data that is currently provided to us or if judicial interpretations result in similar limitations.
To the extent that we breach or are alleged to have breached the terms of our agreement with any FI partner, or a disagreement arises with an FI partner regarding the interpretation of our contractual arrangements, which has occurred in the past and may occur again in the future, such an FI partner may be more likely to cease providing us data or to terminate its agreement with us. The loss of Bank of America, Chase or any other significant FI partner would significantly harm our business, results of operations and financial conditions.

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We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which would cause our stock price to decline.
We have provided and may continue to provide guidance about our business, future operating results and other business metrics. In developing this guidance, our management must make certain assumptions and judgments about our future performance. Some of those key assumptions relate to the impact of COVID-19 and the associated economic uncertainty on our business and the timing and scope of economic recovery globally, which are inherently difficult to predict. Furthermore, analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance. Our business results may vary significantly from such guidance or that consensus due to a number of factors, many of which are outside of our control, including due to the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic, which could adversely affect our operations and operating results. Furthermore, if we make downward revisions of any publicly announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors or other interested parties, the price of our common stock would decline.
If we fail to maintain our relationships with current FI partners or attract new FI partners, we may not be able to sufficiently grow our revenue, which could significantly harm our business, results of operations and financial condition.
Our ability to grow our revenue depends on our ability to maintain our relationships with current FI partners and attract new FI partners. A significant percentage of consumer credit and debit card spending is concentrated with the 10 largest FIs in the U.S., five of which are currently part of our network, while the balance of card spending is spread across thousands of smaller FIs. Accordingly, our ability to efficiently grow our revenue will specifically depend on our ability to maintain our relationships with the large FIs that are currently part of our network and establish relationships with the large FIs that are not currently part of our network. In addition, we must continue to maintain our relationships with our existing bank processor and digital banking provider partners and attract new such partners because these partners aggregate smaller FIs into our network. We have in the past and may in the future be unsuccessful in attempts to establish and maintain relationships with large FIs. If we are unable to maintain our relationships with current FI partners and attract new FI partners, maintain our relationships with our existing bank processor and digital banking provider partners or attract new bank processor and digital provider partners, our business, results of operations and financial condition would be significantly harmed and we may fail to capture a material portion of the native bank advertising market opportunity.
Our future success will depend, in part, on our ability to expand into new industries.
We have historically generated a substantial majority of our revenue from marketers in the restaurant, brick and mortar retail, telecommunications and cable industries, and have recently entered new industries such as travel and entertainment, direct to consumer, and grocery, and believe that our future success will depend, in part, on our ability to expand adoption of our solutions in new industries. As we market to a wider group of potential marketers and their agencies, we will need to adapt our marketing strategies to meet the concerns and expectations of customers in these new industries. Our success in expanding sales of our solutions to marketers in new industries will depend on a variety of factors, including our ability to:
tailor our solutions so that they that are attractive to businesses in such industries;
hire personnel with relevant industry experience to lead sales and services teams; and
develop sufficient expertise in such industries so that we can provide effective and meaningful marketing programs and analytics.
If we are unable to successfully market our solutions to appeal to marketers and their agencies in new industries, we may not be able to achieve our growth or business objectives.
We derive a material portion of our revenue from a limited number of marketers, and the loss of one or more of these marketers could adversely impact our business, results of operations and financial conditions.
Our marketer base is concentrated with our top five marketers representing 23%, 27% and 35% of revenue for 2018, 2019 and 2020, respectively. We do not have long-term commitments from most of these marketers. If we were to lose one or more of our significant marketers, our revenue may significantly decline. In addition, revenue from significant marketers may vary from period-to-period depending on the timing or volume of marketing spend. The loss of one or more of our significant marketers could adversely affect our business, results of operations and financial conditions.

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Further, our top five marketers represented 23%, 26% and 31% of accounts receivable as of December 31, 2018, 2019 and 2020, respectively. Accordingly, our credit risk is concentrated among a limited number of marketers and the failure of any significant marketer to satisfy its obligations to us, on a timely basis or at all, could materially and adversely affect our business, results of operations and financial conditions.
If we do not effectively grow and train our sales team, we may be unable to add new marketers or increase sales to our existing marketers and our business will be adversely affected.
We continue to be substantially dependent on our sales team to obtain new marketers and to drive sales with respect to our existing marketers. We believe that the characteristics and skills of the best salespeople for our solutions are still being defined, as our market is relatively new. Further, we believe that there is, and will continue to be, significant competition for sales personnel with the skills and technical knowledge that we require. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training, integrating and retaining sufficient numbers of sales personnel to support our growth. New hires require significant training and it may take significant time before they achieve full productivity. Our recent hires and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. In addition, as we continue to grow, a large percentage of our sales team will be new to our company and our solutions. If we are unable to hire and train sufficient numbers of effective sales personnel, or the sales personnel are not successful in obtaining new marketers or increasing sales to our existing marketers, our business will be adversely affected.
A breach of the security of our systems could result in a disruption of our operations, or a third-party’s entry into our FI partners’ systems, which would be detrimental to our business, financial condition and operating results.
We leverage our FI partners’ purchase data and infrastructures to deliver our solutions. We do not currently receive or have access to any personally identifiable information ("PII") from our FI partners, although we may obtain or have access to PII in the future as our business evolves. However, because of the interconnected nature of our infrastructure with that of our FI partners, there is a risk that third parties may attempt to gain access to our systems, or our FI partners’ systems through our systems, for the purpose of stealing sensitive or proprietary data, accessing sensitive information on our network, or disrupting our or their respective operations. In turn, we may be a more visible target for cyberattacks and/or physical breaches of our databases or data centers, and we may in the future suffer from such attacks or breaches.
Current or future criminal capabilities, discovery of existing or new vulnerabilities in our systems and attempts to exploit those vulnerabilities or other developments may compromise or breach the technology protecting our systems. Due to a variety of both internal and external factors, including defects or misconfigurations of our technology, our services could become vulnerable to security incidents (both from intentional attacks and accidental causes) that cause them to fail to secure networks and detect and block attacks. In the event that our protection efforts are unsuccessful, and our systems are compromised such that a third-party gains entry to our or any of our FI partners’ systems, we could suffer substantial harm. In addition, due to the COVID-19 pandemic, we have transitioned all of our employees to work remotely, which may make us more vulnerable to cyberattacks. A security breach could result in operational or administrative disruptions, or impair our ability to meet our marketers’ requirements, which could result in decreased revenue. Also, our reputation could suffer irreparable harm, causing our current and prospective marketers and FI partners to decline to use our solutions in the future. Further, we could be forced to expend significant financial and operational resources in response to a security breach, including repairing system damage, increasing cybersecurity protection costs by deploying additional personnel and protection technologies, dealing with regulatory scrutiny, and litigating and resolving legal claims, all of which could divert resources and the attention of our management and key personnel away from our business operations. In any event, a breach of the security of our systems or data could materially harm our business, financial condition and operating results.
We cannot assure you that any limitations of liability provisions in our contracts would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a security lapse or breach. While we maintain cybersecurity insurance, our insurance may be insufficient or may not cover all liabilities incurred by such attacks. We also cannot be certain that our insurance coverage will be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceeds available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results and reputation.

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If we fail to generate sufficient revenue to offset our contractual commitments to FIs, our business, results of operations and financial conditions could be harmed.
We have a minimum FI Share commitment with a certain FI partner totaling $10.0 million over a 12-month period following the completion of certain milestones by the FI partner, which were not met as of December 31, 2020. Any expected shortfall penalty will be accrued during the 12-month period following the completion of the milestones.
To the extent that we are unable to generate revenue from marketers sufficient to offset our FI Share commitments and other obligations, our business, results of operations and financial conditions could be harmed.
Bringing new FI partners into our network can require considerable time and expense and can be long and unpredictable.
Our FI partners and FI partner prospects engage in highly regulated businesses, are often slow to adopt technological innovation and have rigorous standards with respect to providing third parties, like us, with access to their data. Our operating results depend in part on expanding our FI network to maintain and enhance the scale of our solutions. The length of time that it takes to add an FI partner to our network, from initial evaluation to integration into our network, varies substantially from FI to FI and may take several years. Our sales and integration cycle with respect to our FI partners is long and unpredictable, requires considerable time and expense and may not ultimately be successful. It is difficult to predict exactly when, or even if, a new FI partner will join our network and we may not generate revenue from a new FI partner in the same period as we incurred the costs associated with acquiring such FI partner, or at all. Once an FI partner has agreed to work with us, it may take a lengthy period of time for the implementation of our solutions to be prioritized and integrated into the FI partner’s infrastructure. Because a substantial portion of our expenses are relatively fixed in the short-term, our operating results will suffer if revenue falls below our expectations in a particular quarter, which could cause the price of our stock to decline. Ultimately, if additions to our FI network are not realized in the time period expected or not realized at all, or if an FI partner terminates its agreement with us, our business, financial condition and operating results could be adversely affected.
We have a short operating history, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
We have a relatively short operating history, which limits our ability to forecast our future operating results and subjects us to a number of uncertainties, including with respect to our ability to plan for and model future growth. We have encountered and will continue to encounter risks and uncertainties frequently experienced by growing companies in developing industries. If our assumptions regarding these uncertainties, which we use to manage our business, are incorrect or change in response to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, our business could suffer and our stock price could decline. Any success that we may experience in the future will depend in large part on our ability to, among other things:
maintain and expand our network of FI partners.
build and maintain long-term relationships with marketers and their agencies;
develop and offer competitive solutions that meet the evolving needs of marketers;
expand our relationships with FI partners to enable us to use their purchase data for new solutions;
improve the performance and capabilities of our solutions;
successfully expand our business;
successfully compete with other companies that are currently in, or may in the future enter, the markets for our solutions;
increase market awareness of our solutions and enhance our brand;
manage increased operating expenses as we continue to invest in our infrastructure to scale our business and operate as a public company; and
attract, hire, train, integrate and retain qualified and motivated employees.

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Any failure of our FI partners to effectively deliver and promote the online incentive programs that comprise the Cardlytics platform could materially and adversely affect our business.
We have spent the last several years and significant resources building out technology integrations with our FI partners to facilitate the delivery of incentive programs to our FIs’ customers and measuring those customers subsequent in-store or digital spending. We are also reliant on our network of FI partners to promote their digital incentive programs, increase customer awareness and leverage additional customer outreach channels like email, all of which can increase customer engagement, as well as expand our network of FI partners. We believe that key factors in the success and effectiveness of our incentive program include the level of accessibility and prominence of the program on the FI partners’ website and mobile applications, as well as the user interface through which a customer is presented with marketing content. In certain cases, we have little control over the prominence of the incentive program and design of the user interface that our FI partners choose to use. To the extent that our FI partners deemphasize incentive programs, make incentive programs difficult to locate on their website and/or mobile applications and/or fail to provide a user interface that is appealing to FIs' customers, FIs' customers may be less likely to engage with the incentive programs, which could negatively impact the amount of fees that we are able to charge our marketer customers in connection with marketing campaigns, and, therefore, our revenue. In addition, a failure by FIs to properly deliver or sufficiently promote marketing campaigns would reduce the efficacy of our solutions and impair our ability to attract and retain marketers and their agencies. As a result, the revenue we generate from our Cardlytics platform solution may be adversely affected, which would materially and adversely affect our business, financial condition and results of operations.
Our business could be adversely affected if marketers or their agencies are not satisfied with our solutions or our systems and infrastructure fail to meet their needs.
We derive nearly all of our revenue from marketers and their agencies. Accordingly, our business depends on our ability to satisfy marketers and their agencies with respect to their marketing needs. With respect to the Cardlytics platform, we rely on our Offer Management System ("OMS") to facilitate the creation of marketing campaigns and evaluate the results of campaigns, and our Offer Placement System ("OPS"), to track impressions, engagement, activation and redemptions and to target consumers and present offers. Further, we are in the process of updating our platform with a self-service tool. Any failure of, or delays in the performance (or in the case of the self-service tool, the rollout) of, our systems, including without limitation our OMS, OPS, or self-service tool, could cause service interruptions or impaired system performance. Such failures in our systems could cause us to maximize our earning potential with respect to any given marketing campaign. Such failures in our systems could also cause us to over-run on campaigns, thus committing us to higher redemptions, which may negatively affect the profitability of the affected campaigns. If sustained or repeated, these performance issues could adversely affect our business, financial condition or operating results, and further reduce the attractiveness of our solutions to new and existing marketers and cause existing marketers to reduce or cease using our solutions, which could also adversely affect our business, financial condition or operating results. In addition, negative publicity resulting from issues related to our marketer relationships, regardless of accuracy, may damage our business by adversely affecting our ability to attract new marketers or marketing agencies and maintain and expand our relationships with existing marketers.
If the use of our solutions increases, or if marketers or FI partners demand more advanced features from our solutions, we will need to devote additional resources to improving our solutions, and we also may need to expand our technical infrastructure at a more rapid pace than we have in the past. This may involve purchasing or leasing data center capacity and equipment, upgrading our technology and infrastructure and introducing new or enhanced solutions. It may take a significant amount of time to plan, develop and test changes to our infrastructure, and we may not be able to accurately forecast demand or predict the results we will realize from such improvements. There are inherent risks associated with changing, upgrading, improving and expanding our technical infrastructure. Any failure of our solutions to operate effectively with future infrastructure and technologies could reduce the demand for our solutions, resulting in marketer or FI partner dissatisfaction and harm to our business. Also, any expansion of our infrastructure would likely require that we appropriately scale our internal business systems and services organization, including without limitation implementation and support services, to serve our growing marketer base. If we are unable to respond to these changes or fully and effectively implement them in a cost-effective and timely manner, our solutions may become ineffective, we may lose marketers and/or FI partners, and our business, financial condition and operating results may be negatively impacted.

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We generally do not have long-term commitments from marketers, and if we are unable to retain and increase sales of our solutions to marketers and their agencies or attract new marketers and their agencies, our business, financial condition and operating results would be adversely affected.
Most marketers do business with us by placing insertion orders for particular marketing campaigns, either directly or through marketing agencies that act on their behalf. We often do not have any commitment from a marketer beyond the campaign governed by a particular insertion order, and we frequently must compete to win further business from a marketer. In most circumstances, our insertion orders may be canceled by marketers or their marketing agencies prior to the completion of all the campaigns contemplated in the insertion orders; provided that marketers or their agencies are required to pay us for services performed prior to cancellation. As a result, our success is dependent upon our ability to outperform our competitors and win repeat business from existing marketers, while continually expanding the number of marketers for which we provide services. To maintain and increase our revenue, we must encourage existing marketers and their agencies to increase their use of our solutions and add new marketers. Many marketers and marketing agencies, however, have only just begun using our solutions for a limited number of marketing campaigns, and our future revenue growth will depend heavily on these marketers and marketing agencies expanding their use of our solutions across campaigns and otherwise increasing their spending with us. Even if we are successful in convincing marketers and their agencies to use our solutions, it may take several months or years for them to meaningfully increase the amount that they spend with us. Further, larger marketers with multiple brands typically have individual marketing budgets and marketing decision makers for each of their brands, and we may not be able to leverage our success in securing a portion of the marketing budget of one or more of a marketer’s brands into additional business with other brands. Moreover, marketers may place internal limits on the allocation of their marketing budgets to digital marketing, to particular campaigns, to a particular provider or for other reasons. In addition, we are reliant on our FI network to have sufficient marketing inventory within the Cardlytics platform to place the full volume of advertisements contracted for by our marketers and their agencies. Any failure to meet these demands may hamper the growth of our business and the attractiveness of our solutions.
Our ability to retain and increase sales of our solutions and attract new marketers and their agencies may be adversely affected by competitive offerings, marketing methods that are lower priced or perceived as more effective than our solutions, or a general continued reduction or decline in spending by marketers due to the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic. Larger marketers may themselves have a substantial amount of purchase data and they may also seek to augment their own purchase data with additional purchase, impression and/or demographic data acquired from third-party data providers, which may allow them to develop, individually or with partners, internal targeting and measurement capabilities.
Because many of our agreements are not long-term with our marketers or their agencies, we may not be able to accurately predict future revenue streams, and we cannot guarantee that our current marketers will continue to use our solutions, or that we will be able to replace departing marketers with new marketers that provide us with comparable revenue. If we are unable to retain and increase sales of our solutions to existing marketers and their agencies or attract new marketers and their agencies for any of the reasons above or for other reasons, our business, financial condition and operating results would be adversely affected.
We have a history of losses and may not achieve profitability in the future.
We have incurred net losses since inception and expect to incur net losses in the future. We incurred net losses of $53.0 million, $17.1 million and 55.4 million in 2018, 2019 and 2020, respectively. As of December 31, 2020, we had an accumulated deficit of $394.1 million. We have never achieved profitability on an annual basis, and we do not know if we will be able to achieve or sustain profitability. Although our revenue has increased substantially in recent periods, we also do not expect to maintain this rate of revenue growth. We plan to continue to invest in our research and development and sales and marketing efforts, and we anticipate that our operating expenses will continue to increase as we scale our business and expand our operations. We also expect our general and administrative expense to increase as a result of our growth and operating as a public company. Our ability to achieve and sustain profitability is based on numerous factors, many of which are beyond our control. We may never be able to generate sufficient revenue to achieve or sustain profitability.
We operate in an emerging industry and future demand and market acceptance for our solutions is uncertain.
We believe that our future success will depend in large part on the growth, if any, in the market for purchase intelligence. Utilization of consumer purchase data to inform marketing is an emerging industry and future demand and market acceptance for this type of marketing is uncertain. If the market for purchase intelligence does not continue to develop or develops more slowly than we expect, our business, financial condition and operating results could be harmed.

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The market in which we participate is competitive and we may not be able to compete successfully with our current or future competitors.
The market for purchase intelligence is nascent and we believe that there is no one company with which we compete directly across our range of solutions. With respect to the Cardlytics platform, we believe that we are the only company that enables marketing through FI channels at scale. In the future, we may face competition from online retailers, credit card companies, established enterprise software companies, advertising and marketing agencies, digital publishers and mobile pay providers with access to a substantial amount of consumer purchase data. While we may successfully partner with a wide range of companies that are to some extent currently competitive to us, these companies may become more competitive to us in the future. As we introduce new solutions, as our existing solutions evolve and as other companies introduce new products and solutions, we are likely to face additional competition.
Some of our actual and potential competitors may have advantages over us, such as longer operating histories, significantly greater financial, technical, marketing or other resources, stronger brand and recognition, larger intellectual property portfolios and broader global distribution and presence. In addition, our industry is evolving rapidly and is becoming increasingly competitive. Larger and more established companies may focus on purchase intelligence marketing and could directly compete with us. Smaller companies could also launch new products and services that we do not offer and that could gain market acceptance quickly.
Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. Larger competitors are also often in a better position to withstand any significant reduction in capital spending and will therefore not be as susceptible to economic downturns. In addition, current or potential competitors may be acquired by third parties with greater available resources. As a result of such relationships and acquisitions, our current or potential competitors might be able to adapt more quickly to new technologies and customer needs, devote greater resources to the promotion or sale of their products and services, initiate or withstand substantial price competition, take advantage of other opportunities more readily or develop and expand their product and service offerings more quickly than we do. For all of these reasons, we may not be able to compete successfully against our current or future competitors.
If we fail to identify and respond effectively to rapidly changing technology and industry needs, our solutions may become less competitive or obsolete.
Our future success depends on our ability to adapt and innovate. To attract, retain and increase new marketers and FI partners, we will need to expand and enhance our solutions to meet changing needs, add functionality and address technological advancements. If we are unable to adapt our solutions to evolving trends in the marketing industry, if we are unable to properly identify and prioritize appropriate solution development projects or if we fail to develop and effectively market new solutions or enhance existing solutions to address the needs of existing and new marketers and FI partners, we may not be able to achieve or maintain adequate market acceptance and penetration of our solutions, and our solutions may become less competitive or obsolete.
In addition, new, more effective or less costly technologies may emerge that use data sources that we do not have access to, that use entirely different analytical methodologies than we do or that use other indicators of purchases by consumers. If existing and new marketers and their agencies perceive greater value in alternative technologies or data sources, our ability to compete for marketers and their agencies could be materially and adversely affected.
A number of factors could impair our ability to collect the significant amounts of data that we use to deliver our solutions.
Our ability to collect and use data may be restricted or prevented by a number of other factors, including:
the failure of our network or software systems, or the network or software systems of our FI partners;
decisions by our FI partners to restrict our ability to collect data from them (which decision they may make at their discretion) or to refuse to implement the mechanisms that we request to ensure compliance with our legal obligations or technical requirements;
decisions by our FI partners to limit our ability to use their purchase data outside of the applicable banking channel;
decisions by our FIs’ customers to opt out of the incentive program or to use technology, such as browser settings, that reduces our ability to deliver relevant advertisements;
interruptions, failures or defects in our or our FI partners’ data collection, mining, analysis and storage systems;
changes in regulations impacting the collection and use of data;
changes in browser or device functionality and settings, and other new technologies, which impact our FI partners’ ability to collect and/or share data about their customers; and

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changes in international laws, rules, regulations and industry standards or increased enforcement of international laws, rules, regulations, and industry standards.
Any of the above-described limitations on our ability to successfully collect, utilize and leverage data could also materially impair the optimal performance of our solutions and severely limit our ability to target consumers or bill marketers for our services, which would harm our business, financial condition and operating results.
The efficacy of some of our solutions depends upon third-party data providers.
We rely on several third parties to assist us in matching our anonymized identifiers, which we call Cardlytics IDs, with third-party identifiers. This matching process enables us to use purchase intelligence to measure in-store and online campaign sales impact or provide marketers with valuable visibility into the behaviors of current or prospective customers both within and outside the context of their marketing efforts. If any of these key data providers were to withdraw or withhold their identifiers from us, our ability to provide our solutions could be adversely affected. Replacements for these third-party identifiers may not be available in a timely manner or under economically beneficial terms, or at all.
Defects, errors or delays in our solutions could harm our reputation, which would harm our operating results.
The technology underlying our solutions may contain material defects or errors that can adversely affect our ability to operate our business and cause significant harm to our reputation. This risk is compounded by the complexity of the technology underlying our solutions and the large amounts of data that we leverage and process. In addition, with regard to the Cardlytics platform, if we are unable to attribute Consumer Incentives to our FIs’ customers in a timely manner, our FI partners may limit or discontinue their use of our solutions. Any such error, failure, malfunction, disruption or delay could result in damage to our reputation and could harm our business, financial condition and operating results.
Significant system disruptions or loss of data center capacity could adversely affect our business, financial condition and operating results.
Our business is heavily dependent upon highly complex data processing capabilities. We contract with our primary third-party data center, located in Atlanta, Georgia, and our redundancy data center, located in Suwanee, Georgia, pursuant to agreements that expire in 2023, subject to earlier termination upon material breach and a failure to cure. If for any reason our arrangements with our third-party data centers are terminated, or if we are unable to renew our agreements on commercially reasonable terms, we may be required to transfer that portion of our operations to new data center facilities, and we may incur significant costs and possible service interruption in connection with doing so. Further, protection of our third-party data centers against damage or interruption from fire, flood, tornadoes, power loss, telecommunications or equipment failure or other disasters and events beyond our control is important to our continued success. Any damage to, or failure of, the systems of the data centers that we utilize, or of our own equipment located within such data centers, could result in interruptions to the availability or functionality of our solutions. In addition, the failure of the data centers that we utilize to meet our capacity requirements could result in interruptions in the availability or functionality of our solutions or impede our ability to scale our operations. Any damage to the data centers that we utilize, or to our own equipment located within such data centers, that causes loss of capacity or otherwise causes interruptions in our operations could materially adversely affect our ability to quickly and effectively respond to our marketers’ or FI partners’ requirements, which could result in loss of their confidence, adversely impact our ability to attract new marketers and/or FI partners and force us to expend significant resources. The occurrence of any such events could adversely affect our business, financial condition and operating results.
Seasonal fluctuations in marketing activity could adversely affect our cash flows.
We expect our revenue, operating results, cash flows from operations and other key performance metrics to vary from quarter to quarter in part due to the seasonal nature of our marketers’ spending on digital marketing campaigns. For example, many marketers tend to devote a significant portion of their budgets to the fourth quarter of the calendar year to coincide with consumer holiday spending and to reduce spend in the first quarter of the calendar year. Seasonality could have a material impact on our revenue, operating results, cash flow from operations and other key performance metrics from period to period.

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Our international sales and operations subject us to additional risks that can adversely affect our business, operating results and financial condition.
During each of 2018, 2019 and 2020, we derived 13%, 11% and 8% of our revenue outside the U.S., respectively. While substantially all of our operations are located in the U.S., we have an office in the U.K. and a research and development and support office in Visakhapatnam, India and may continue to expand our international operations as part of our growth strategy. Our ability to convince marketers to expand their use of our solutions or renew their agreements with us is directly correlated to our direct engagement with such marketers or their agencies. To the extent that we are unable to engage with non-U.S. marketers and agencies effectively with our limited sales force capacity, we may be unable to grow sales to existing marketers to the same degree we have experienced in the U.S.
Our international operations subject us to a variety of risks and challenges, including:
localization of our solutions, including adaptation for local practices;
increased management, travel, infrastructure and legal compliance costs associated with having international operations;
fluctuations in currency exchange rates and related effect on our operating results;
longer payment cycles and difficulties in collecting accounts receivable or satisfying revenue recognition criteria;
increased financial accounting and reporting burdens and complexities;
general economic conditions in each country or region;
the global economic uncertainty and financial market conditions caused by the COVID–19 pandemic;
reduction in billings, foreign currency exchange rates, and trade with the European Union;
contractual and legislative restrictions or changes;
economic uncertainty around the world;
compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations;
compliance with U.S. laws and regulations for foreign operations, including the Foreign Corrupt Practices Act, the U.K. Bribery Act, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our software in certain foreign markets, and the risks and costs of non-compliance;
heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of financial statements and irregularities in financial statements;
difficulties in repatriating or transferring funds from or converting currencies in certain countries;
cultural differences inhibiting foreign employees from adopting our corporate culture;
reduced protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; and
compliance with the laws of foreign taxing jurisdictions and overlapping of different tax regimes.
Any of these risks could adversely affect our international operations, reduce our international revenues or increase our operating costs, adversely affecting our business, financial condition and operating results.
If we do not manage our growth effectively, the quality of our solutions may suffer, and our business, financial condition and operating results may be negatively affected.
The recent growth in our business has placed, and is expected to continue to place, a significant strain on our managerial, administrative, operational and financial resources, as well as our infrastructure. We rely heavily on information technology ("IT") systems to manage critical functions such as data storage, data processing, matching and retrieval, revenue recognition, budgeting, forecasting and financial reporting. To manage our growth effectively, we must continue to improve and expand our infrastructure, including our IT, financial and administrative systems and controls. In particular, we may need to significantly expand our IT infrastructure as the amount of data we store and transmit increases over time, which will require that we both utilize existing IT products and adopt new technologies. If we are not able to scale our IT infrastructure in a cost-effective and secure manner, our ability to offer competitive solutions will be harmed and our business, financial condition and operating results may suffer.

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We must also continue to manage our employees, operations, finances, research and development and capital investments efficiently. Our productivity and the quality of our solutions may be adversely affected if we do not integrate and train our new employees quickly and effectively or if we fail to appropriately coordinate across our executive, research and development, technology, service development, analytics, finance, human resources, marketing, sales, operations and customer support teams. If we continue our rapid growth, we will incur additional expenses, and our growth may continue to place a strain on our resources, infrastructure and ability to maintain the quality of our solutions. If we do not adapt to meet these evolving challenges, or if the current and future members of our management team do not effectively manage our growth, the quality of our solutions may suffer and our corporate culture may be harmed. Failure to manage our future growth effectively could cause our business to suffer, which, in turn, could have an adverse impact on our business, financial condition and operating results.
Our corporate culture has contributed to our success, and if we cannot maintain it as we grow, or our corporate culture is negatively impacted by the COVID-19 pandemic, we could lose the innovation, creativity and teamwork fostered by our culture, and our business may be harmed.
As of December 31, 2020, we had 471 full-time employees. We intend to further expand our overall headcount and operations, with no assurance that we will be able to do so while effectively maintaining our corporate culture. Additionally, our corporate culture may be negatively impacted by the COVID-19 pandemic. We believe our corporate culture is one of our fundamental strengths as it enables us to attract and retain top talent and deliver superior results for our customers. As we grow and change, and as the COVID-19 pandemic continues, we may find it difficult to preserve our corporate culture, which could reduce our ability to innovate and operate effectively. In turn, the failure to preserve our culture could negatively affect our ability to attract, recruit, integrate and retain employees, continue to perform at current levels and effectively execute our business strategy.
We are dependent on the continued services and performance of our senior management and other key personnel, the loss of any of whom could adversely affect our business.
Our future success depends in large part on the continued contributions of our senior management and other key personnel, including our cofounder and chief executive officer, Lynne Laube. In particular, the leadership of key management personnel is critical to the successful management of our company, the development of our solutions and our strategic direction. We do not maintain “key person” insurance for any member of our senior management team or any of our other key employees. Our senior management and key personnel are all employed on an at-will basis, which means that they could terminate their employment with us at any time, for any reason and without notice. The loss of any of our key management personnel could significantly delay or prevent the achievement of our development and strategic objectives and adversely affect our business. Further, if members of our management and other key personnel in critical functions across our organization are unable to perform their duties or have limited availability due to COVID–19, we may not be able to execute on our business strategy and/or our operations may be negatively impacted.
If we are unable to attract, integrate and retain additional qualified personnel, including top technical talent, our business could be adversely affected.
Our future success depends in part on our ability to identify, attract, integrate and retain highly skilled technical, managerial, sales and other personnel, including top technical talent from the industry and top research institutions. We face intense competition for qualified individuals from numerous other companies, including other software and technology companies, many of whom have greater financial and other resources than we do. These companies also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than those we have to offer. In addition, new hires often require significant training and, in many cases, take significant time before they achieve full productivity. We may incur significant costs to attract and retain qualified personnel, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in recruiting and training them. Moreover, new employees may not be or become as productive as we expect, as we may face challenges in adequately or appropriately integrating them into our workforce and culture. In addition, as we move into new geographies, we will need to attract and recruit skilled personnel in those areas. We have little experience with recruiting in geographies outside of the U.S., and may face additional challenges in attracting, integrating and retaining international employees. If we are unable to attract, integrate and retain suitably qualified individuals who are capable of meeting our growing technical, operational and managerial requirements, on a timely basis or at all, our business will be adversely affected.

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If currency exchange rates fluctuate substantially in the future, the results of our operations could be adversely affected.
Due to our international operations, we may be exposed to the effects of fluctuations in currency exchange rates. We generate revenue and incur expenses for employee compensation and other operating expenses at our U.K. and Indian offices in the local currency. Fluctuations in the exchange rates between the U.S. dollar, British pound and Indian rupee could result in the dollar equivalent of such revenue and expenses being lower, which could have a negative net impact on our reported operating results. Although we may in the future decide to undertake foreign exchange hedging transactions to cover a portion of our foreign currency exchange exposure, we currently do not hedge our exposure to foreign currency exchange risks.
Our ability to use net operating losses and certain other tax attributes to offset future taxable income may be limited.
Our net operating loss ("NOL"), carryforwards could expire unused and be unavailable to offset future tax liabilities because of their limited duration or because of restrictions under U.S. tax law. As of December 31, 2020, we had U.S. federal and state NOLs of $371.2 million and $155.8 million, respectively. Our NOLs generated in tax years ending on or prior to December 31, 2017 are only permitted to be carried forward for 20 years under applicable U.S. tax law. Under the Tax Cuts and Jobs Act ("the Tax Act"), as modified by the CARES Act, our federal NOLs generated in tax years ending after December 31, 2017 may be carried forward indefinitely, but the deductibility of federal NOLs, particularly for tax years beginning after December 31, 2020, may be limited. It is uncertain if and to what extent various states will conform to the Tax Act and the CARES Act.
In addition, under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, ("the Code") and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. We have experienced “ownership changes” under IRC Section 382 in the past, and future changes in ownership of our stock, including by reason of future offerings, as well as other changes that may be outside of our control, could result in future ownership changes under IRC Section 382. If we are or become subject to limitations on our use of NOLs under IRC Section 382, our NOLs could expire unutilized or underutilized, even if we earn taxable income against which our NOLs could otherwise be offset. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
Future acquisitions could disrupt our business and adversely affect our business, financial condition and operating results.
We may choose to expand by making acquisitions that could be material to our business, financial condition or operating results. Our ability as an organization to successfully acquire and integrate technologies or businesses is unproven. Acquisitions involve many risks, including the following:
an acquisition may negatively affect our business, financial condition, operating results or cash flows because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition;
we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us;
an acquisition, whether or not consummated, may disrupt our ongoing business, divert resources, increase our expenses and distract our management;
an acquisition may result in a delay or reduction of purchases for both us and the company that we acquired due to uncertainty about continuity and effectiveness of solution from either company;
we may encounter difficulties in, or may be unable to, successfully sell any acquired products or solutions;
an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions;
challenges inherent in effectively managing an increased number of employees in diverse locations;
the potential strain on our financial and managerial controls and reporting systems and procedures;
potential known and unknown liabilities associated with an acquired company;
our use of cash to pay for acquisitions would limit other potential uses for our cash;

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if we incur debt to fund such acquisitions, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants;
the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions; and
to the extent that we issue a significant amount of equity or convertible debt securities in connection with future acquisitions, existing stockholders may be diluted and earnings (loss) per share may decrease (increase).
We may not succeed in addressing these or other risks or any other problems encountered in connection with the integration of any acquired business. The inability to integrate successfully the business, technologies, products, personnel or operations of any acquired business, or any significant delay in achieving integration, could have a material adverse effect on our business, financial condition and operating results.
If our proposed acquisition of Dosh is not completed, we will have incurred substantial costs that may adversely affect our financial results and operations and the market price of our common stock.
If our acquisition of Dosh is not completed, the price of our common stock may decline to the extent that the current market price of our common stock reflects a market assumption that the acquisition will be completed. In addition, we have incurred and will incur substantial costs in connection with the proposed acquisition. These costs are primarily associated with the fees of attorneys, accountants and our financial advisors. In addition, we diverted significant management resources in an effort to complete the acquisition and are subject to restrictions contained in the Merger Agreement on the conduct of our business during the pendency of the acquisition. If the acquisition is not completed, we will have received little or no benefit in respect of such costs incurred. Also, if the acquisition is not completed under certain circumstances that resulted in litigation, we may be exposed to monetary damages.
Further, if the acquisition is not completed, we may experience negative reactions from the financial markets and our FIs, marketers, and employees. Each of these factors may adversely affect the trading price of our common stock and our financial results and operations.
If we are unable to successfully integrate Dosh’s business and employees, it could have an adverse effect on our future results and the market price of our common stock.
The success of our acquisition of Dosh will depend, in part, on our ability to integrate Dosh’s operations and to realize the anticipated benefits, including annual net operating synergies and cost reductions from combining the businesses. This integration may be complex and time-consuming.
The failure to successfully integrate and manage the challenges presented by the integration process may result in our failure to achieve some or all of the anticipated benefits of the acquisition. Potential difficulties that may be encountered in the integration process include the following:
complexities associated with managing the larger combined company;
integrating personnel from the two companies;
current and prospective employees may experience uncertainty regarding their future roles with our company, which might adversely affect our ability to retrain, recruit and motivate key personnel;
potential lost sales and customer if Dosh's FI or advertising clients decide not to do business with the combined company;
potential lost sales and customers if our FI or advertising clients decide not to do business with the combined company;
potential unknown liabilities and unforeseen expenses associated with the acquisition; and
performance shortfalls as a result of the diversion of management's attention caused by integrating the companies' operations.
In addition, acquisitions are inherently risky, and our due diligence processes in connection with the acquisition may fail to identify significant problems, liabilities or other shortcomings or challenges of Dosh’s business.
If any of these events were to occur, our ability to maintain relationships with customers, suppliers and employees or our ability to achieve the anticipated benefits of the acquisition could be adversely affected or could reduce our future earnings or otherwise adversely affect our business and financial results and, as a result, adversely affect the market price of our common stock.

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We may in the future may become involved in securities class action litigation that could divert management's attention and harm our business and insurance coverage may not be sufficient to cover all costs and damages.
It is common for securities class-action litigation to follow an acquisition. Responding to any litigation could divert management's attention and harm our business. Moreover, insurance coverage may not be sufficient to cover all costs and damages we incur in connection with the litigation.
We may require additional capital to support growth, and such capital might not be available on terms acceptable to us, if at all, which may in turn hamper our growth and adversely affect our business.
We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new solutions or enhance our solutions, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity, equity-linked or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or equity-linked securities, including convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities that we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, including the ability to pay dividends or repurchase shares of our capital stock. This may make it more difficult for us to obtain additional capital, to pursue business opportunities, including potential acquisitions, or to return capital to our stockholders. We also may not be able to obtain additional financing on terms favorable to us, if at all. For example, while the potential impact and duration of the COVID-19 pandemic on the global economy and our business in particular may be difficult to assess or predict, the pandemic has resulted in, and may continue to result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth, service our indebtedness and respond to business challenges could be significantly impaired, and our business may be adversely affected. Regulatory, legislative or self-regulatory developments regarding Internet privacy matters could adversely affect our ability to conduct our business.
Bringing new FI partners into our network may impede our ability to accurately forecast the performance of our network.
Bringing new FI partners into our network may impede our ability to accurately predict how certain marketing campaigns will perform, and thus may impede our ability to accurately forecast the performance of our network. Such inaccurate predictions could result in marketing campaigns underperforming, which impact the total fees we can collect from marketers, or over performing, which may result is us paying certain Consumer Incentives to consumers without adequate compensation from the marketers. The amount of time it will take us to be able to understand the impact of a new FI partner on our network is uncertain and difficult to predict. Additionally, our understanding of the impact of any given FI is subject to change at any time, as such understanding can be impacted by factors such as changes to an FI’s business strategy, changes to an FI’s user interface, or changes in the behavior or makeup of an FI's consumer base.
If we are not able to maintain and enhance our brand, our business, financial condition and operating results may be adversely affected.
We believe that developing and maintaining awareness of the Cardlytics brand in a cost-effective manner is critical to achieving widespread acceptance of our existing solutions and future solutions and is an important element in attracting new marketers and FI partners. Furthermore, we believe that the importance of brand recognition will increase as competition in our market increases. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and on our ability to deliver valuable solutions for our marketers, their agencies and our FI partners. In the past, our efforts to build our brand have involved significant expense. Brand promotion activities may not yield increased revenue and billings, and even if they do, any increased revenue and billings may not offset the expenses that we incurred in building our brand. If we fail to successfully promote and maintain our brand or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new marketers or FI partners or retain our existing marketers or FI partners and our business could suffer.

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Risks Related to our Outstanding Convertible Senior Notes
Servicing our debt may require a significant amount of cash. We may not have sufficient cash flow from our business to pay our indebtedness, and we may not have the ability to raise the funds necessary to settle for cash conversions of the Notes or to repurchase the Notes for cash upon a fundamental change, which could adversely affect our business and results of operations.
In September 2020, we issued convertible senior notes with an aggregate principal amount of $230.0 million bearing an interest rate of 1.00% due in 2025 (the "Notes"). The interest rate is fixed at 1.00% per annum and is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2021. Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flows from operations in the future that are sufficient to service our debt. If we are unable to generate such cash flows, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive. Our ability to refinance any future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our debt.
Holders of the Notes have the right to require us to repurchase their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any. Upon conversion, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted. We may not have enough available cash or be able to obtain financing at the time we are required to make repurchases in connection with such conversion and our ability to pay may additionally be limited by law, by regulatory authority or by agreements governing our existing and future indebtedness. Our failure to repurchase the Notes at a time when the repurchase is required by the indenture governing the Notes or to pay any cash payable on future conversions as required by such indenture would constitute a default under such indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our existing and future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions thereof.
In addition, our indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences. For example, it could:
make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry, and
competitive conditions and adverse changes in government regulation;
limit our flexibility in planning for, or reacting to, changes in our business and our industry;
place us at a disadvantage compared to our competitors who have less debt;
limit our ability to borrow additional amounts for funding acquisitions, for working capital, and for other general corporate purposes; and
make an acquisition of our company less attractive or more difficult.
Any of these factors could harm our business, results of operations, and financial condition. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase.

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The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and results of operations.
In the event the conditional conversion feature of the Notes is triggered, holders of Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
Transactions relating to our Notes may affect the value of our common stock.
The conversion of some or all of the Notes would dilute the ownership interests of existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our common stock upon any conversion of such Notes. Our Notes may become in the future convertible at the option of their holders under certain circumstances. If holders of our Notes elect to convert their Notes, we may settle our conversion obligation by delivering to them a significant number of shares of our common stock, which would cause dilution to our existing stockholders.
In addition, in connection with the pricing of the Notes, we entered into capped call transactions (the "Capped Calls") with certain financial institutions (the "Option Counterparties"). The Capped Calls are expected generally to reduce the potential dilution to our common stock upon any conversion or settlement of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.
In connection with establishing their initial hedges of the Capped Calls, the Option Counterparties or their respective affiliates entered into various derivative transactions with respect to our common stock and/or purchased shares of our common stock concurrently with or shortly after the pricing of the Notes.
From time to time, the Option Counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivative transactions with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so following any conversion of the Notes, any repurchase of the Notes by us on any fundamental change repurchase date, any redemption date, or any other date on which the Notes are retired by us, in each case, if we exercise our option to terminate the relevant portion of the Capped Calls). This activity could cause a decrease and/or increased volatility in the market price of our common stock.
We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of the Notes or our common stock. In addition, we do not make any representation that the Option Counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

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We are subject to counterparty risk with respect to the Capped Calls.
The Option Counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the Capped Calls. Our exposure to the credit risk of the Option Counterparties will not be secured by any collateral. Past global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an Option Counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the Capped Calls with such Option Counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a default by an Option Counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the Option Counterparties.
The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on our reported financial results.
The accounting method for reflecting the notes on our balance sheet, accruing interest expense for the notes and reflecting the underlying shares of our common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition. We expect that, under applicable accounting principles, the initial liability carrying amount of the notes will be the fair value of a similar debt instrument that does not have a conversion feature, valued using our cost of capital for straight, unconvertible debt. We expect to reflect the difference between the net proceeds from this offering and the initial carrying amount as a debt discount for accounting purposes, which will be amortized into interest expense over the term of the notes. As a result of this amortization, the interest expense that we expect to recognize for the notes for accounting purposes will be greater than the cash interest payments we will pay on the notes, which will result in lower reported income or higher reported loss. The lower reported income or higher reported loss resulting from this accounting treatment could depress the trading price of our common stock and the notes. However, in August 2020, the Financial Accounting Standards Board published an Accounting Standards Update ("ASU") 2020-06, eliminating the separate accounting for the debt and equity components as described above. ASU 2020-06 will be effective for SEC-reporting entities for fiscal years beginning after December 15, 2021 (or, in the case of smaller reporting companies, December 15, 2023), including interim periods within those fiscal years. However, early adoption is permitted in certain circumstances for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. When effective, we expect the elimination of the separate accounting described above to reduce the interest expense that we expect to recognize for the notes for accounting purposes.
If accounting standards change in the future and we are not permitted to use the treasury stock method, then our diluted earnings per share may decline. For example, the Financial Accounting Standards Board’s ASU described above amends these accounting standards, effective as of the dates referred to above, to eliminate the treasury stock method for convertible instruments that can be settled in whole or in part with equity and instead require application of the “if-converted” method. Under that method, diluted earnings per share would generally be calculated assuming that all the notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive. The application of the if-converted method may reduce our reported diluted earnings per share.
Furthermore, if any of the conditions to the convertibility of the notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the notes as a current, rather than a long-term, liability. This reclassification could be required even if no noteholders convert their notes and could materially reduce our reported working capital.
Risks Related to Regulatory and Intellectual Property Matters
Regulatory, legislative or self-regulatory developments regarding Internet privacy matters could adversely affect our ability to conduct our business.
We, our FI partners and our marketers are subject to a number of domestic and international privacy and security laws, rules and regulations that apply to online services and the Internet generally. These laws, rules and regulations often include restrictions or technological requirements regarding the collection, use, storage, protection, retention or transfer of personal data.
In the U.S., the rules and regulations to which we, directly or contractually through our FI partners, or our marketers may be subject include those promulgated under the authority of the Federal Trade Commission, the Electronic Communications Privacy Act, Computer Fraud and Abuse Act, Health Insurance Portability and Accountability Act, the Gramm-Leach-Bliley Act and state cybersecurity and breach notification laws, as well as regulator enforcement positions and expectations reflected in federal and state regulatory actions, settlements, consent decrees and guidance documents. Internationally, virtually every jurisdiction in which we operate has established its own data security and privacy legal frameworks with which we, directly or contractually through our FI partners, or our marketers may be required to comply.

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For example, in the U.S., the California Consumer Privacy Act (“CCPA”), took effect on January 1, 2020. The CCPA creates privacy rights for individual California consumers and increases the privacy and security obligations on entities handling broadly defined personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.
Further, California voters approved a new privacy law, the California Privacy Rights Act (“CPRA”), in the November 3, 2020 election. Effective starting on January 1, 2023, the CPRA will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA. New legislation proposed or enacted in various other states will continue to shape the data privacy environment nationally. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to confidential, sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts
In the EU, the European Commission adopted the European General Data Protection Regulation ("GDPR"), which went into effect in May 2018. The GDPR imposes additional obligations and risk upon our business and increases substantially the penalties to which we could be subject in the event of any non–compliance. Administrative fines under the GDPR can amount up to 20 million Euros or four percent of the group’s annual global turnover, whichever is highest. These existing and proposed laws, regulations and industry standards can be costly to comply with and can delay or impede the development of new solutions, result in negative publicity and reputational harm, increase our operating costs, require significant management time and attention, increase our risk of non-compliance and subject us to claims or other remedies, including fines or demands that we modify or cease existing business practices.
Further, the Court of Justice of the European Union ruled in July 2020 that the Privacy Shield, used by thousands of companies to transfer data between the European Union and United States, was invalid and could no longer be used. In September 2020, Switzerland concluded that the Swiss-U.S. Privacy Shield Framework does not provide an adequate level of protection for data transfers from Switzerland to the United States. Alternative transfer mechanisms may be used, including the standard contractual clauses (“SCCs”), while the authorities interpret the decisions and scope of the invalidated Privacy Shield, but the SCCs have also been called into question in the same ruling that invalidated Privacy Shield. At present, there are few if any viable alternatives to the SCCs, so future developments may necessitate further expenditures on local infrastructure, changes to internal business processes, or may otherwise affect or restrict sales and operations.
Additionally, Brexit took effect in January 2020, which will lead to further legislative and regulatory changes. While the Data Protection Act of 2018, which “implements” and complements the GDPR achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, it is still unclear whether transfer of data from the EEA to the United Kingdom will remain lawful in the long term under the GDPR. With the expiry of the transition period on December 31, 2020, companies will have to comply with the GDPR and the GDPR as incorporated into United Kingdom national law, which has the ability to separately fine up to the greater of £17.5 million or 4% of global turnover. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, for example around how data can lawfully be transferred between each jurisdiction, which exposes us to further compliance risk. We may incur liabilities, expenses, costs, and other operational losses under the GDPR and under privacy laws of applicable EU Member States and the United Kingdom in connection with any measures we take to comply with them.
Complying with these numerous, complex and often changing laws and regulations is expensive and difficult, and failure to comply with any privacy laws or data security laws or any security incident or breach involving the misappropriation, loss or other unauthorized use or disclosure of sensitive or confidential patient or consumer information, whether by us, one of our business associates or another third-party, could adversely affect our business, financial condition and results of operations, including but not limited to: investigation costs, material fines and penalties; compensatory, special, punitive and statutory damages; litigation; consent orders regarding our privacy and security practices; requirements that we provide notices, credit monitoring services and/or credit restoration services or other relevant services to impacted individuals; adverse actions against our licenses to do business; and injunctive relief. Further, many federal, state and foreign government bodies and agencies have introduced, and are currently considering, additional laws and regulations. If passed, we will likely incur additional expenses and costs associated with complying with such laws. The costs of compliance with, and other burdens imposed by, the laws, rules, regulations and policies that are applicable to the businesses of our FI partners or marketers may limit the use and adoption of, and reduce the overall demand for, our solutions.

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Legislation and regulation of online businesses, including privacy and data protection regimes, is expansive, not clearly defined and rapidly evolving. Such regulation could create unexpected costs, subject us to enforcement actions for compliance failures, or restrict portions of our business or cause us to change our business model.
Government regulation and industry standards may increase the costs of doing business online. Federal, state, municipal and foreign governments and agencies have adopted and could in the future adopt, modify, apply or enforce laws, policies, regulations and standards covering user privacy, data security, technologies such as cookies that are used to collect, store and/or process data, online marketing, the use of data to inform marketing, the taxation of products and services, unfair and deceptive practices, and the collection (including the collection of information), use, processing, transfer, storage and/or disclosure of data associated with unique individual Internet users.
Although we do not believe we have collected or retained data that is traditionally considered PII under U.S. law, such as names, email addresses, addresses, phone numbers, social security numbers, credit card numbers, financial data or health data, we typically do collect and store Internet Protocol addresses and other device identifiers, which are or may be considered personal data in some jurisdictions or otherwise may be the subject of legislation or regulation. Furthermore, we may elect to use PII in the future for our current solutions or solutions we may introduce. In addition, certain U.S. laws impose requirements on the collection and use of information from or about users or their devices. Other existing laws may in the future be revised, or new laws may be passed, to impose more stringent requirements on the use of identifiers to collect user information, including information of the type that we collect. Changes in regulations could affect the type of data that we may collect; restrict our ability to use identifiers to collect information, and, thus, affect our ability to actually collect that information; the costs of doing business online, and, therefore, the demand for our solutions; the ability to expand or operate our business; and harm our business. For instance, California enacted the California Consumer Privacy Act ("CCPA") on June 28, 2018, which took effect on January 1, 2020. The CCPA gives California residents expanded rights to request access to and deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches includes statutorily defined damages of up to $750 per citizen and that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability, and many similar laws have been proposed at the federal level and in other states. In the event that we are subject to or affected by the CCPA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition. Additionally, our FI partners may choose to alter or discontinue our program in light of the CCPA, which could adversely affect our financial condition.
In particular, there has been increasing public and regulatory concern and public scrutiny about the use of PII. Because the interpretation and application of privacy and data protection laws are still uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or our solutions or that the definition of “PII” is expanded in the future. If this is the case, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our solutions, which could have a material adverse effect on our business, financial condition or operating results. Any inability to adequately address privacy concerns, even if unfounded, or comply with applicable privacy or data protection laws, regulations, policies or standards could result in additional cost and liability to us; damage our reputation; affect our ability to attract new marketers and FI partners and maintain relationships with our existing marketers and FI partners; and adversely affect our business, financial condition or operating results. Privacy and security concerns, whether valid or not, may inhibit market adoption of our solutions.
U.S. and non-U.S. regulators also may implement “Do-Not-Track” legislation, particularly if the industry does not implement a standard. Effective January 1, 2014, the California Governor signed into law an amendment to the California Online Privacy Protection Act of 2003. Such amendment requires operators of commercial websites and online service providers, under certain circumstances, to disclose in their privacy policies how such operators and providers respond to browser “do not track” signals.
Some of our activities may also be subject to the laws of foreign jurisdictions, whether or not we are established or based in such jurisdictions. In the U.K., for example, the Privacy and Electronic Communications Regulations 2011 ("PECR"), implement the requirements of Directive 2009/136/EC (which amended Directive 2002/58/EC), which is known as the ePrivacy Directive. The PECR regulates various types of electronic direct marketing that use cookies and similar technologies. The PECR also imposes sector-specific breach reporting requirements, but only as applicable to providers of particular public electronic communications services. Additional EU member state laws of this type may follow.

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We may be required to, or otherwise may determine that it is advisable to, develop or obtain additional tools and technologies for validation of certain of our limited sales related to online purchases to compensate for a potential lack of cookie data. Even if we are able to do so, such additional tools may be subject to further regulation, time consuming to develop or costly to obtain, and less effective than our current use of cookies. In addition, certain information, such as Internet Protocol addresses as collected and used by us may constitute “personal data” in certain non-U.S. jurisdictions, including in the U.K., and therefore certain of our activities could be subject to EU laws applicable to the processing and use of personal data.
More generally, the regulatory framework for online services and data privacy and security issues worldwide can vary substantially from jurisdiction to jurisdiction, is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many federal, state and foreign government bodies and agencies have adopted or are considering adopting laws, rules, regulations and standards regarding the collection, use, storage and disclosure of information, web browsing and geolocation data collection and data analytics. Interpretation of these laws, rules and regulations and their application to our solutions in the U.S. and foreign jurisdictions is ongoing and cannot be fully determined at this time.
In addition, the regulatory environment for the collection and use of consumer data by marketers is evolving in the U.S. and internationally and is currently a self-regulatory framework, which relies on market participants to ensure self-compliance. The voluntary nature of this self-regulatory framework may change.
The U.S. and foreign governments have enacted, considered or are considering legislation or regulations that could significantly restrict industry participants’ ability to collect, augment, analyze, use and share anonymous data, such as by regulating the level of consumer notice and consent required before a company can place cookies or other tracking technologies. A number of existing bills are pending in the U.S. Congress that contain provisions that would regulate how companies can use cookies and other tracking technologies to collect and utilize user information.
In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that either legally or contractually apply to us. We may also be subject to claims of liability or responsibility for the actions of third parties with whom we interact or upon whom we rely in relation to various solutions, including but not limited to our marketers and their agencies and our FI partners. If this were to occur, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our solutions, which could have an adverse effect on our business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy or data protection laws, regulations and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business.
In addition, if we were to gain knowledge that we inadvertently received PII from our FI partners, our failure to comply with applicable laws and regulations, or to protect personal data, could result in enforcement action against us, including fines, imprisonment of our officers and public censure, claims for damages by consumers and other affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse impact on our operations, financial performance and business. Even the perception of privacy or security concerns, whether or not valid, may harm our reputation and inhibit adoption of our solution by current and future marketers and marketing agencies.
If the use of matching technologies, such as cookies, pixels and device identifiers, is rejected by Internet users, restricted or otherwise subject to unfavorable terms, such as by non-governmental entities, our validation methodologies could be impacted and we may lose customers and revenue.
Our solution can be utilized by in-store and online marketers; however, a large majority of consumer purchases continue to be made in-store. For validation of certain of these limited online purchases, our solutions may use digital matching technologies, such as mobile advertising identifiers, pixels and cookies to match the Cardlytics IDs we have assigned to our FIs’ customers with their digital presence outside of the FI partners’ websites and mobile applications. In most cases, the matching technologies we use relate to mobile advertising identifiers that we use in limited cases to validate that we influenced an online purchase. If our access to matching technology data is reduced, our ability to validate certain online purchases in the current manner may be affected and thus undermine the effectiveness of our solutions.

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On occasion, “third-party cookies” may be placed through an Internet browser to validate online purchases. Internet users may easily block and/or delete cookies (e.g., through their browsers or “ad blocking” software). The most commonly used Internet browsers allow Internet users to modify their browser settings to prevent cookies from being accepted by their browsers, or are set to block third-party cookies by default. Further, Google recently announced its plans to eliminate third-party cookies from its browser in 2022. If more browser providers and Internet users adopt these settings or delete their cookies more frequently than they currently do, our practices related to the validation of limited online purchases could be impacted, which could result in us needing to implement other available methodologies. Some government regulators and privacy advocates have suggested creating a “Do Not Track” standard that would allow Internet users to express a preference, independent of cookie settings in their browser, not to have website browsing recorded. If Internet users adopt a “Do Not Track” browser setting and the standard either gets imposed by state or federal legislation or agreed upon by standard-setting groups, it may curtail or prohibit us from using non-personal data as we currently do. This could hinder growth of marketing on the Internet generally and cause us to change our business practices and adversely affect our business, financial condition and operating results. In addition, browser manufacturers could replace cookies with their own product and require us to negotiate and pay them for use of such product to record information about Internet users’ interactions with our marketers, which may not be available on commercially reasonable terms, or at all.
Failure to protect our proprietary technology and intellectual property rights could substantially harm our business, financial condition and operating results.
Our future success and competitive position depend in part on our ability to protect our intellectual property and proprietary technologies. To safeguard these rights, we rely on a combination of patent, trademark, copyright and trade secret laws and contractual protections in the U.S. and other jurisdictions, all of which provide only limited protection and may not now or in the future provide us with a competitive advantage.
As of December 31, 2020, we had four issued patents and are pursuing ten additional patents. We cannot assure you that any patents will issue from any patent applications, that patents that issue from such applications will give us the protection that we seek or that any such patents will not be challenged, invalidated, or circumvented. Any patents that may issue in the future from our pending or future patent applications may not provide sufficiently broad protection and may not be enforceable in actions against alleged infringers. We have registered the “Cardlytics” name and logo in the U.S. and certain other countries. We have registrations and/or pending applications for additional marks in the U.S. and other countries; however, we cannot assure you that any future trademark registrations will be issued for pending or future applications or that any registered trademarks will be enforceable or provide adequate protection of our proprietary rights. We also license software from third parties for integration into our products, including open source software and other software available on commercially reasonable terms. We cannot assure you that such third parties will maintain such software or continue to make it available.
In order to protect our unpatented proprietary technologies and processes, we rely on trade secret laws and confidentiality agreements with our employees, consultants, vendors and others. Despite our efforts to protect our proprietary technology and trade secrets, unauthorized parties may attempt to misappropriate, reverse engineer or otherwise obtain and use them. Bank of America also has a right to purchase some of the source code underlying the Cardlytics platform upon the occurrence of specified events, which could compromise the proprietary nature of our platform and/or allow Bank of America to discontinue the use of our solutions. Additionally, other FIs have a right to obtain the source code underlying Cardlytics OPS through the release of source code held in escrow upon the occurrence of specified events, which could compromise the proprietary nature of our platform and/or allow these FIs to discontinue the use of our solutions.
In addition, others may independently discover our trade secrets, in which case we would not be able to assert trade secret rights or develop similar technologies and processes. Further, the contractual provisions that we enter into may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property rights and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary technology or intellectual property rights. Moreover, policing unauthorized use of our technologies, trade secrets and intellectual property is difficult, expensive and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the U.S. and where mechanisms for enforcement of intellectual property rights may be weak. We may be unable to determine the extent of any unauthorized use or infringement of our solutions, technologies or intellectual property rights.
From time to time, legal action by us may be necessary to enforce our patents and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the intellectual property rights of others or to defend against claims of infringement or invalidity. Such legal action could result in substantial costs and diversion of resources and could negatively affect our business, financial condition and operating results.

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Assertions by third parties of infringement or other violations by us of their intellectual property rights, whether or not correct, could result in significant costs and harm our business, financial condition and operating results.
Patent and other intellectual property disputes are common in our industry. We have in the past and may in the future be subject to claims alleging that we have misappropriated, misused, or infringed other parties’ intellectual property rights. Some companies, including certain of our competitors, own larger numbers of patents, copyrights and trademarks than we do, which they may use to assert claims against us. Third parties may also assert claims of intellectual property rights infringement against our FI partners, whom we are typically required to indemnify. As the numbers of solutions and competitors in our market increases and overlap occurs, claims of infringement, misappropriation and other violations of intellectual property rights may increase. Any claim of infringement, misappropriation or other violation of intellectual property rights by a third-party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management from our business.
The patent portfolios of our most significant competitors are larger than ours. This disparity may increase the risk that they may sue us for patent infringement and may limit our ability to counterclaim for patent infringement or settle through patent cross-licenses. In addition, future assertions of patent rights by third parties, and any resulting litigation, may involve patent holding companies or other adverse patent owners who have no relevant product revenues and against whom our own patents may therefore provide little or no deterrence or protection. There can be no assurance that we will not be found to infringe or otherwise violate any third-party intellectual property rights or to have done so in the past.
An adverse outcome of a dispute may require us to:
pay substantial damages, including treble damages, if we are found to have willfully infringed a third-party’s patents or copyrights;
cease developing or selling solutions that rely on technology that is alleged to infringe or misappropriate the intellectual property of others;
expend additional development resources to attempt to redesign our solutions or otherwise develop non-infringing technology, which may not be successful;
enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies or intellectual property rights; and
indemnify our FI partners and other third parties.
In addition, royalty or licensing agreements, if required or desirable, may be unavailable on terms acceptable to us, or at all, and may require significant royalty payments and other expenditures. Some licenses may also be non-exclusive, and therefore our competitors may have access to the same technology licensed to us. Any of the foregoing events could seriously harm our business, financial condition and operating results.

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Our use of open source software could negatively affect our ability to sell our solutions and subject us to possible litigation.
We use open source software to deliver our solutions and expect to continue to use open source software in the future. Some of these open source licenses may require that source code subject to the license be made available to the public and that any modifications or derivative works to open source software continue to be licensed under open source licenses. This may require that we make certain proprietary code available under an open source license. We may face claims from others claiming ownership of, or seeking to enforce the license terms applicable to such open source software, including by demanding release of the open source software, derivative works or our proprietary source code that was developed using such software. Few of the licenses applicable to open source software have been interpreted by courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our products. These claims could also result in litigation, require us to purchase costly licenses or require us to devote additional research and development resources to change the software underlying our solutions, any of which would have a negative effect on our business, financial condition and operating results and may not be possible in a timely manner. We and our customers may also be subject to suits by parties claiming infringement due to the reliance by our solutions on certain open source software, and such litigation could be costly for us to defend or subject us to an injunction. In addition, if the license terms for the open source code change, we may be forced to re-engineer our software or incur additional costs. Finally, we cannot assure you that we have not incorporated open source software into the software underlying our solutions in a manner that may subject our proprietary software to an open source license that requires disclosure, to customers or the public, of the source code to such proprietary software. In the event that portions of our proprietary technology are determined to be subject to an open source license, we could be required to publicly release portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our solutions and technologies and materially and adversely affect our ability to sustain and grow our business. Many open source licenses also limit our ability to bring patent infringement lawsuits against open source software that we use without losing our right to use such open source software. Therefore, the use of open source software may limit our ability to bring patent infringement lawsuits, to the extent we ever have any patents that cover open source software that we use.
We are subject to government regulation, including import, export, economic sanctions and anti-corruption laws and regulations that may expose us to liability and increase our costs.
Various of our products are subject to U.S. export controls, including the U.S. Department of Commerce’s Export Administration Regulations and economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. These regulations may limit the export of our products and provision of our solutions outside of the U.S., or may require export authorizations, including by license, a license exception or other appropriate government authorizations, including annual or semi-annual reporting. Export control and economic sanctions laws may also include prohibitions on the sale or supply of certain of our products to embargoed or sanctioned countries, regions, governments, persons and entities. In addition, various countries regulate the importation of certain products, through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our products. The exportation, reexportation, and importation of our products and the provision of solutions, including by our partners, must comply with these laws or else we may be adversely affected, through reputational harm, government investigations, penalties and a denial or curtailment of our ability to export our products or provide solutions. Complying with export control and sanctions laws may be time consuming and may result in the delay or loss of sales opportunities. Although we take precautions to prevent our products from being provided in violation of such laws, our products may have previously been, and could in the future be, provided inadvertently in violation of such laws, despite the precautions we take. If we are found to be in violation of U.S. sanctions or export control laws, it could result in substantial fines and penalties for us and for the individuals working for us. Changes in export or import laws or corresponding sanctions, may delay the introduction and sale of our products in international markets, or, in some cases, prevent the export or import of our products to certain countries, regions, governments, persons or entities altogether, which could adversely affect our business, financial condition and results of operations.
We are also subject to various domestic and international anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, as well as other similar anti-bribery and anti-kickback laws and regulations. These laws and regulations generally prohibit companies and their employees and intermediaries from authorizing, offering or providing improper payments or benefits to officials and other recipients for improper purposes. We rely on certain third parties to support our sales and regulatory compliance efforts and can be held liable for their corrupt or other illegal activities, even if we do not explicitly authorize or have actual knowledge of such activities. Although we take precautions to prevent violations of these laws, our exposure for violating these laws increases as our international presence expands and as we increase sales and operations in foreign jurisdictions.

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Risks Related to Ownership of Our Common Stock
The market price of our common stock has been and is likely to continue to be volatile.
The market price of our common stock may be highly volatile and may fluctuate substantially as a result of a variety of factors, some of which are related in complex ways. Since shares of our common stock were sold in our initial public offering in February 2018 at a price of $13.00 per share, our stock price has ranged from an intraday low of $9.80 to an intraday high of $161.47 through February 28, 2021. Factors that may affect the market price of our common stock include:
actual or anticipated fluctuations in our financial condition and operating results;
variance in our financial performance from expectations of securities analysts or investors;
changes in the prices of our solutions;
changes in laws or regulations applicable to our solutions;
announcements by us or our competitors of significant business developments, acquisitions or new offerings;
our involvement in litigation;
our sale of our common stock or other securities in the future;
changes in senior management or key personnel;
trading volume of our common stock;
changes in the anticipated future size and growth rate of our market; and
general economic, regulatory and market conditions.
Recently, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies due to, among other factors, the actions of market participants or other actions outside of our control, including general market volatility caused by the COVID–19 pandemic. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry fluctuations, as well as general economic, political, regulatory and market conditions, may negatively impact the market price of our common stock. In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial costs and divert our management’s attention.
We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change in control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:
authorize our board of directors to issue preferred stock without further stockholder action and with voting liquidation, dividend and other rights superior to our common stock;
require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent, and limit the ability of our stockholders to call special meetings;
establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for director nominees;
establish that our board of directors is divided into three classes, with directors in each class serving three-year staggered terms;

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require the approval of holders of two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our amended and restated bylaws or amend or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors and the ability of stockholders to take action by written consent or call a special meeting;
prohibit cumulative voting in the election of directors; and
provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your shares of our common stock in an acquisition.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Pursuant to our amended and restated certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law. (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws or (4) any action asserting a claim governed by the internal affairs doctrine. However, this exclusive forum provision would not apply to suits brought to enforce a duty or liability created by the Securities Act or the Exchange Act. The forum selection clause in our amended and restated certificate of incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
General Risk Factors
Natural or man-made disasters, pandemics and other similar events may significantly disrupt our business, and negatively impact our business, financial condition and operating results.
A significant public health crisis, epidemic or pandemic (including the ongoing COVID-19 pandemic), or a natural disaster, such as an earthquake, fire or a flood, or a significant power outage could have a material adverse impact on our business, operating results and financial condition. A significant portion of our employee base, operating facilities and infrastructure are centralized in Atlanta, Georgia. Any of our facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, tornadoes, hurricanes, wildfires, floods, nuclear disasters, acts of terrorism or other criminal activities, infectious disease outbreaks and power outages, which may render it difficult or impossible for us to operate our business for some period of time. Our facilities would likely be costly to repair or replace, and any such efforts would likely require substantial time. Any disruptions in our operations could negatively impact our business, financial condition and operating results, and harm our reputation. In addition, we may not carry business insurance or may not carry sufficient business insurance to compensate for losses that may occur. Any such losses or damages could have a material adverse effect on our business, financial condition and operating results. In addition, the facilities of significant marketers, FI partners or third-party data providers may be harmed or rendered inoperable by such natural or man-made disasters, which may cause disruptions, difficulties or material adverse effects on our business.
An active trading market for our common stock may not develop or be sustained.
Although our common stock is listed on the Nasdaq Global Market, we cannot assure you that an active trading market for our shares will be sustained. If an active market for our common stock is not sustained, it may be difficult for investors in our common stock to sell shares without depressing the market price for the shares or to sell the shares at all.

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Future sales of our common stock in the public market could cause our share price to decline.
Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales, particularly sales by our directors, executive officers, and significant stockholders, may have on the prevailing market price of our common stock. All of our outstanding shares of common stock are available for sale in the public market, subject only to the restrictions of Rule 144 under the Securities Act in the case of our affiliates. In addition, the shares of common stock subject to outstanding options under our equity incentive plans and the shares reserved for future issuance under our equity incentive plans, as well as shares issuable upon vesting of restricted stock unit awards, will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations. In addition, certain holders of our common stock have the right, subject to various conditions and limitations, to request we include their shares of our common stock in registration statements we may file relating to our securities.
We may issue common stock or other securities if we need to raise additional capital. The number of new shares of our common stock issued in connection with raising additional capital could constitute a material portion of our then-outstanding shares of our common stock.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our stock or change their opinion of our business or market value, our share price would likely decline. If one or more of these analysts cease providing coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the U.S.
Generally accepted accounting principles in the U.S. are subject to interpretation by the Financial Accounting Standards Board ("FASB"), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change.
We have incurred and will continue to incur increased costs as a result of being a public company.
As a public company, and particularly as we are no longer an “emerging growth company,” we have incurred and we will continue to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Stock Market and other applicable securities rules and regulations impose various requirements on public companies. We expect that compliance with these requirements will continue to increase certain of our expenses and make some activities more time-consuming than they have been in the past when we were a private company. Such additional costs going forward could negatively affect our financial results.
As a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.
We are required, pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting on an annual basis. Our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting in our annual report.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
Our principal executive offices are located in Atlanta, Georgia where we occupy a facility of approximately 77,000 square feet. Our lease expires in April 2025. We have additional offices in New York, NY; San Francisco, CA; London, U.K. and Visakhapatnam, India. We believe that our facilities are sufficient for our current needs and that, should it be needed, additional facilities will be available to accommodate the expansion of our business.
ITEM 3. LEGAL PROCEEDINGS
From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

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PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is listed on the Nasdaq Global Market under the symbol “CDLX.”
Holders of Record
As of February 28, 2021, there were approximately 45 stockholders of record of our common stock. Because many of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
None.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review Item 1A. “Risk Factors” and “Special Note Regarding Forward-Looking Statements” in this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
Cardlytics operates an advertising platform within financial institutions’ (“FIs”) digital channels, which include online, mobile, email, and various real-time notifications. Our partnerships with FIs provide us with access to their anonymized purchase data and digital banking customers. By applying advanced analytics to this aggregation of purchase data, we make it actionable, helping marketers identify, reach and influence likely buyers at scale, and measure the true sales impact of their marketing spend. We have strong relationships with leading marketers across a variety of industries, including retail, restaurant, travel and entertainment, telecommunications, subscription services, direct to consumer, and grocery. Using our purchase intelligence, we present customers with offers to save money at a time when they are thinking of their finances.
Working with a marketer, we design a campaign that targets consumers based on their purchase history. The consumer is offered an incentive to make a purchase from the marketer within a specified period. We use a portion of the fees that we collect from marketers to provide these consumer incentives to our FIs’ customers after they make qualifying purchases ("Consumer Incentives"). We report our revenue on our consolidated statements of operations net of Consumer Incentives since we do not provide the goods or services that are purchased by our FIs’ customers from the marketers to which the Consumer Incentives relate.
We generally pay our FI partners a negotiated and fixed percentage of our billings to marketers less any Consumer Incentives that we pay to the FIs’ customers and certain third-party data costs ("FI Share"). We report our revenue gross of FI Share. FI Share costs are included in FI Share and other third-party costs in our consolidated statements of operations, rather than as a reduction of revenue, because we and not our FI partners act as the principal in our arrangements with marketers.
We run campaigns offering compelling Consumer Incentives to drive an expected rate of return on advertising spend for marketers. At times, we may collaborate with an FI partner to enhance the level of Consumer Incentives to their respective FIs' customers funded by their FI Share. We believe that these investments by our FI partners positively impact our platform by making FIs' customers more highly engaged with our platform. However, these investments negatively impact our GAAP revenue, which is reported net of Consumer Incentives.
Revenue, which is reported net of Consumer Incentives and gross of FI Share and other third-party costs, was $210.4 million and $186.9 million for December 31, 2019 and 2020, respectively, representing a decline of 11%. Billings, a non-GAAP measure that represents the gross amount billed to marketers and is reported gross of both Consumer Incentives and FI Share, was $316.1 million and $263.4 million for December 31, 2019 and 2020, respectively, representing a decline of 17%. Gross profit, which represents revenue less FI Share and other third-party costs and less delivery costs, was $79.5 million and $63.3 million for December 31, 2019 and 2020, respectively, representing a decline of 20%. Adjusted contribution, a non-GAAP measure that represents our revenue less our adjusted FI Share and other third-party costs, was $95.2 million and $82.2 million for December 31, 2019 and 2020, respectively, representing a decline of 14%.
Billings and adjusted contribution are further defined under the heading "Non-GAAP Measures and Other Performance Metrics" below. We believe these non-GAAP measures, alongside our GAAP revenue and GAAP gross profit, provide useful information to investors for period-to-period comparisons of our core business and in understanding and evaluating our results of operations in the same manner as our management and board of directors.

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The following table summarizes our results (dollars in thousands):
 Year Ended December 31,ChangeYear Ended December 31,Change
 20182019$%20192020$%
Billings$218,980 $316,053 $97,073 44 %$316,053 $263,355 $(52,698)(17)%
Consumer Incentives68,296 105,623 37,327 55 105,623 76,463 (29,160)(28)
Revenue150,684 210,430 59,746 40 210,430 186,892 (23,538)(11)
Adjusted FI Share and other third-party costs(1)(2)
81,234 115,211 33,977 42 115,211 104,710 (10,501)(9)
Adjusted contribution(2)
69,450 95,219 25,769 37 95,219 82,182 (13,037)(14)
Delivery costs10,632 12,893 2,261 21 12,893 14,310 1,417 11 
Non-cash equity expense included in FI Share2,519 — (2,519)n/a— — — n/a
Deferred FI implementation costs(3)
1,618 2,869 1,251 77 2,869 4,598 1,729 60 
Gross profit$54,681 $79,457 $24,776 45 %$79,457 $63,274 $(16,183)(20)%
(1)Adjusted FI Share and other third-party costs excludes a non-cash equity expense included in FI Share and deferred FI implementation costs, as detailed below in our reconciliation of GAAP gross profit to adjusted contribution.
(2)Adjusted FI Share and other third-party costs and adjusted contribution include the impact of a $0.8 million gain during 2018 related to the renewal of our agreement with an FI partner, which contains certain amendments that are retroactively applied as of January 1, 2018.
(3)Deferred FI implementation costs for the year ended December 31, 2020 includes the impact of a $0.7 million write off related to certain platform features.
During 2018, 2019 and 2020, our net loss was $53.0 million, $17.1 million and $55.4 million, respectively. Our historical losses have been driven by our substantial investments in our purchase intelligence platform and infrastructure, which we believe will enable us to expand the use of our platform by both FIs and marketers. During 2018, 2019 and 2020, our net loss includes stock-based compensation expense of $26.8 million, $15.9 million and $32.4 million, respectively. In 2018, our net loss also includes a $6.8 million non-cash expense related to the change in fair value of our warrant liabilities and a $2.5 million non-cash expense related to the vesting of warrants issued to an FI partner that accelerated upon our IPO.
Acquisition of Dosh
On February 26, 2021, we entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with DOSH Holdings, Inc., a Delaware corporation (“Dosh”), BSPEARS MERGER SUB I, INC., a Delaware corporation and our wholly owned subsidiary (“Merger Sub 1”), BSPEARS MERGER SUB II, LLC, a Delaware limited liability company and our wholly owned subsidiary (“Merger Sub 2”), and certain other parties named therein. The Merger Agreement provides for Merger Sub 1 to merge with and into Dosh ( “Merger 1”), with Dosh surviving Merger 1 as our wholly owned subsidiary, immediately followed by the merger of Dosh with and into Merger Sub 2, with Merger Sub 2 surviving Merger 2 as our wholly owned subsidiary, subject to the terms and conditions set forth in the Merger Agreement.
Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, at the closing, we are required to pay the former equityholders of Dosh (other than former holders of unvested options to purchase Dosh’s common stock) (collectively, the “Dosh Equityholders”) consideration of $275.0 million, consisting of, and subject to adjustment with respect to, the following: (A) an amount in cash equal to $150.0 million, subject to adjustments and subject to escrows; and (B) $125.0 million million of shares of our common stock at an agreed-upon price of $136.33 per share. In addition, we will assume the unvested options held by the holders of unvested options to purchase Dosh’s common stock and issue up to $8.0 million in our performance stock units to certain key Dosh executives.
The Merger Agreement contains customary representations, warranties, covenants and indemnities of each of us and Dosh. During the period from the date of the Merger Agreement to the closing, we and Dosh have agreed to carry on their respective businesses in the ordinary course and consistent with past practices and have agreed to certain other operating covenants.
The closing of the Mergers is subject to the satisfaction or waiver of a number of customary closing conditions in the Merger Agreement, including, among others, the absence of certain governmental restraints and the absence of a material adverse effect on Dosh.

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The Merger Agreement may be terminated prior to the closing date by mutual written agreement of us and Dosh. In addition, the Merger Agreement may be terminated by either we or Dosh in certain circumstances, including if the Acquisition has not been closed on or before May 31, 2021, or if the other party has materially breached any representation, warranty, covenant, obligation or agreement such that certain of the conditions to closing cannot be satisfied.
FI Partners
Our FI partners include Bank of America, National Association ("Bank of America"), JPMorgan Chase Bank, National Association (“Chase”) and Wells Fargo Bank, National Association (“Wells Fargo”), as well as many other national and regional financial institutions, including several of the largest bank processors and digital banking providers to reach customers of small and mid-sized FIs. Wells Fargo began a phased launch of our platform in the fourth quarter of 2019 that was completed in the second quarter of 2020.
For December 31, 2019 and 2020, our average FI monthly active users ("FI MAUs") were 122.6 million and 155.8 million and our average Cardlytics platform revenue per user ("ARPU") was 1.72 and 1.20, respectively. FI MAU and ARPU are performance metrics defined under the heading "Non-GAAP Measures and Other Performance Metrics" below. The increase in FI MAUs is largely due to Wells Fargo completing their phased launch in the second quarter of 2020 and Chase launching our Cardlytics platform for its online banking channel in the second quarter of 2019. We expect U.S. Bank to begin a phased launch of the Cardlytics platform in the first half of 2021, which will also impact FI MAU growth. We expect a continued increase in FI MAUs year over year as a result of the launch of Wells Fargo and U.S. Bank. Over time, we expect year-over-year increases in ARPU as both consumer spending and the advertising budgets of our clients recover from the negative impacts of the COVID-19 pandemic.
FI Partner Commitments
Agreements with certain FI partners require us to fund the development of specific enhancements, pay for certain implementation fees, or make milestone payments upon the deployment of our solution. Certain of these agreements provide for future reductions in FI Share due to the FI partner. During 2018, development payments to a certain FI partner totaled $9.3 million which was partially offset by recoveries through FI Share payment reductions of $4.6 million in 2019.
During 2020, one of our FI partners notified us of plans to end the use of certain platform features prior to the end of our contractual arrangement with the FI partner. As a result, we wrote off deferred FI implementation costs totaling $0.7 million to FI Share and other third-party costs on our consolidated statements of operation.
We have an FI Share commitment to a certain FI partner totaling $10.0 million over a 12-month period following the completion of certain milestones by the FI partner, which were not met as of December 31, 2020. Any expected shortfall penalty will be accrued during the 12-month period following the completion of the milestones.
Impacts of COVID-19 Pandemic
We remain focused on supporting our marketers, FIs partners, employees and communities during the COVID-19 pandemic. The impact of COVID-19 on the global economy and on our business continues to be a fluid situation. We responded quickly to adopt a virtual corporate strategy to enable all of our employees to work productively from home, guard the health and safety of our team, support our marketers and FI partners, mitigate risk and maximize our financial performance. We are focused on ensuring continuity for our marketers and FI partners.
Revenue for the year ended December 31, 2020 was unfavorably affected by the COVID-19 pandemic and its impact on both consumer discretionary spending and marketers' ability to spend advertising budgets on our solution. Revenue during the second quarter of 2020 was significantly affected by the COVID-19 pandemic and its negative impact on both consumer spending and marketers' ability to spend advertising budgets on our solution. During the third and fourth quarters of 2020, we saw a recovery of both consumer spending as well as the advertising budgets of our clients. Due to continuing uncertainty regarding the severity and duration of the impacts of COVID-19 on the global economy, we will continue to monitor this situation and the potential impacts to our business.

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The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, its impact on industry events, and its effect on consumer spending, our marketers, FI partners, suppliers and vendors and other parties with whom we do business, all of which are uncertain and cannot be predicted at this time. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel, employee work locations, and cancellation of marketing events. We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take actions that alter our business operations, including those that may be required by federal, foreign, state or local authorities, or that we determine are in the best interests of our employees, marketers, FI partners, suppliers, vendors and stockholders. At this point, the extent to which the COVID-19 pandemic may impact our business, results of operations and financial condition is uncertain. See “Risk Factors” for further discussion of the adverse impacts of the COVID-19 pandemic on our business.

Non-GAAP Measures and Other Performance Metrics
We regularly monitor a number of financial and operating metrics in order to measure our current performance and estimate our future performance. Our metrics may be calculated in a manner different than similar metrics used by other companies.
 Year Ended December 31,
 201820192020
 (Amounts in thousands, except ARPU)
FI MAUs65,012 122,586 155,784 
ARPU$2.30 $1.72 $1.20 
Billings$218,980 $316,053 $263,355 
Adjusted contribution(1)
$69,450 $95,219 $82,182 
Adjusted EBITDA(1)
$(6,595)$6,052 $(7,780)
(1)Adjusted contribution and Adjusted EBITDA includes the impact of a $0.8 million gain during 2018 related to the renewal of our agreement with an FI partner, which contains certain amendments that are retroactively applied as of January 1, 2018.
Monthly Active Users
We define FI MAUs as targetable customers or accounts of our FI partners that logged in and visited the online or mobile banking applications of, or opened an email containing our offers from, our FI partners during a monthly period. We then calculate a monthly average of these FI MAUs for the periods presented. We believe that FI MAUs is an indicator of our and our FI partners’ ability to drive engagement with the Cardlytics platform and is reflective of the marketing base that we offer to marketers through the Cardlytics platform.
Average Revenue per User
We define ARPU as the total Cardlytics platform revenue generated in the applicable period calculated in accordance with generally accepted accounting principles in the United States ("GAAP"), divided by the average number of FI MAUs in the applicable period. We believe that ARPU is an indicator of the value of our relationships with our FI partners with respect to the Cardlytics platform.
Billings
Billings represents the gross amount billed to marketers for advertising campaigns in order to generate revenue. Billings is reported gross of both Consumer Incentives and FI Share. Our GAAP revenue is recognized net of Consumer Incentives and gross of FI Share.
We review billings for internal management purposes. We believe that billings provides useful information to investors for period-to-period comparisons of our core business and in understanding and evaluating our results of operations in the same manner as our management and board of directors. Nevertheless, our use of billings has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Other companies, including companies in our industry that have similar business arrangements, may address the impact of Consumer Incentives differently. You should consider billings alongside our other GAAP financial results.

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The following table presents a reconciliation of billings to revenue, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):
 Year Ended December 31,
 201820192020
Revenue$150,684 $210,430 $186,892 
Plus:
Consumer Incentives68,296 105,623 76,463 
Billings$218,980 $316,053 $263,355 
Adjusted Contribution
Adjusted contribution measures the degree by which revenue generated from our marketers exceeds the cost to obtain the purchase data and the digital advertising space from our FI partners. Adjusted contribution demonstrates how incremental marketing spend on our platform generates incremental amounts to support our sales and marketing, research and development, general and administration and other investments. Adjusted contribution is calculated by taking our total revenue less our FI Share and other third-party costs exclusive of a non-cash equity expense and deferred FI implementation costs, which are non-cash costs. Adjusted contribution does not take into account all costs associated with generating revenue from advertising campaigns, including sales and marketing expenses, research and development expenses, general and administrative expenses and other expenses, which we do not take into consideration when making decisions on how to manage our advertising campaigns.
We use adjusted contribution extensively to measure the efficiency of our advertising platform, make decisions to manage advertising campaigns and evaluate our operational performance. Adjusted contribution is also used to determine the vesting of performance-based equity awards and is used to determine the achievement of quarterly and annual bonuses across our entire global employee base, including executives. We view adjusted contribution as an important operating measure of our financial results. 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. Adjusted contribution should not be considered in isolation from, or as an alternative to, measures prepared in accordance with GAAP. Adjusted contribution should be considered together with other operating and financial performance measures presented in accordance with GAAP. Also, adjusted contribution may not necessarily be comparable to similarly titled measures presented by other companies. Refer to Note 16—Segments to our consolidated financial statements for further details on our adjusted contribution by segment.
The following table presents a reconciliation of adjusted contribution to gross profit, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):
 Year Ended December 31,
 201820192020
Revenue$150,684 $210,430 $186,892 
Minus:
FI Share and other third-party costs(1)
85,371 118,080 109,308 
Delivery costs(2)
10,632 12,893 14,310 
Gross profit(1)
54,681 79,457 63,274 
Plus:
Delivery costs(2)
10,632 12,893 14,310 
Non-cash equity expense included in FI Share(3)
2,519 — — 
Deferred FI implementation costs(3)
1,618 2,869 4,598 
Adjusted contribution(1)
$69,450 $95,219 $82,182 
(1)FI Share and other third-party costs, gross profit and adjusted contribution include the impact of a $0.8 million gain during 2018 related to the renewal of our agreement with an FI partner, which contains certain amendments that are retroactively applied as of January 1, 2018.
(2)Stock-based compensation expense recognized in delivery costs totaled $0.6 million, $0.7 million and $1.2 million during 2018, 2019 and 2020, respectively.

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(3)Non-cash equity expense included in FI Share and deferred FI implementation costs are excluded from adjusted FI Share and other third-party costs as follows (in thousands):
 Year Ended December 31,
 201820192020
FI Share and other third-party costs$85,371 $118,080 $109,308 
Minus:
Non-cash equity expense included in FI Share2,519 — — 
Deferred FI implementation costs(1)
1,618 2,869 4,598 
Adjusted FI Share and other third-party costs$81,234 $115,211 $104,710 
(1) Deferred FI implementation costs for the year ended December 31, 2020 includes the impact of a $0.7 million write off related to certain platform features.

Adjusted EBITDA
Adjusted EBITDA represents our net loss before income tax benefit; interest expense, net; depreciation and amortization expense; stock-based compensation expense; foreign currency gain; deferred FI implementation costs; costs associated with financing events; loss on extinguishment of debt; restructuring costs; change in fair value of warrant liabilities, net; and a non-cash equity expense recognized in FI Share. We do not consider these excluded items to be indicative of our core operating performance. The items that are non-cash include change in fair value of warrant liabilities, Other (expense) income, net, deferred FI implementation costs, depreciation and amortization expense, stock-based compensation expense and a non-cash equity expense included in FI Share. Notably, any impacts related to minimum FI Share commitments in connection with agreements with certain FI partners are not added back to net loss in order to calculate adjusted EBITDA. Adjusted EBITDA is a key measure used by management to understand and evaluate our core operating performance and trends and to generate future operating plans, make strategic decisions regarding the allocation of capital and invest in initiatives that are focused on cultivating new markets for our solution. In particular, the exclusion of certain expenses in calculating adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis. Adjusted EBITDA is not a measure calculated in accordance with GAAP.
We believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. Nevertheless, use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are: (1) adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (2) adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation and equity instruments issued to our FI partners; (3) adjusted EBITDA does not reflect tax payments or receipts that may represent a reduction or increase in cash available to us and (4) other companies, including companies in our industry, may calculate adjusted EBITDA or similarly titled measures differently, which reduces the usefulness of the metric as a comparative measure. Because of these and other limitations, you should consider adjusted EBITDA alongside our net loss and other GAAP financial results.

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The following table presents a reconciliation of adjusted EBITDA to net loss, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):
 Year Ended December 31,
 201820192020
Net loss(1)
$(53,042)$(17,144)$(55,422)
Plus:
Income tax benefit— — — 
Interest expense, net3,264 548 3,048 
Depreciation and amortization expense3,282 4,535 7,826 
Stock-based compensation expense26,790 15,851 32,396 
Foreign currency (loss) gain1,172 (781)(1,549)
Deferred FI implementation costs1,618 2,869 4,598 
Costs associated with financing events118 123 — 
Loss on extinguishment of debt924 51 — 
Restructuring costs— — 1,323 
Change in fair value of warrant liabilities6,760 — — 
Non-cash equity expense included in FI Share2,519 — — 
Adjusted EBITDA(1)
$(6,595)$6,052 $(7,780)
(1)Net loss and adjusted EBITDA include the impact of a $0.8 million gain during 2018 related to the renewal of our agreement with an FI partner, which contains certain amendments that are retroactively applied as of January 1, 2018.
Components of Results of Operations
Revenue
We sell our solutions by entering into agreements directly with marketers or their marketing agencies, generally through the execution of insertion orders. The agreements state the terms of the arrangement, the negotiated fee, payment terms and the fixed period of time of the campaign. We invoice marketers monthly based on the qualifying purchases of the FIs' customers as reported by our FI partners during the month. We report our revenue net of Consumer Incentives and gross of FI Share.
Cost and Expense
We classify our expenses into the following categories: FI Share and other third-party costs; delivery costs; sales and marketing expense; research and development expense; general and administrative expense; and depreciation and amortization expense.
FI Share and Other Third-Party Costs
FI Share and other third-party costs consist primarily of the FI Share that we pay our FI partners, media and data costs, deferred implementation costs incurred pursuant to our agreements with certain FI partners and a $2.5 million non-cash expense in 2018 related to the vesting of warrants issued to an FI partner that accelerated upon the consummation of our IPO. To the extent that we use a specific FI customer’s anonymized purchase data in the delivery of our solutions, we pay the applicable FI partner an FI Share calculated based on the relative contribution of the data provided by the FI partner to the overall delivery of the services. We expect that our FI Share and other third-party costs will increase in absolute dollars as a result of our revenue growth.
Delivery Costs
Delivery costs consist primarily of personnel costs of our campaign, data operations and production support teams, including salaries, benefits, bonuses, stock-based compensation and payroll taxes. Delivery costs also include hosting facility costs, purchased or licensed software costs, outsourcing costs and professional services costs. As we add data center capacity and support personnel in advance of anticipated growth, our delivery costs will increase in absolute dollars and if such anticipated revenue growth does not occur, our delivery costs as a percentage of revenue will be adversely affected. Over time, we expect delivery costs will decline as a percentage of revenue.

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Sales and Marketing Expense
Sales and marketing expense consists primarily of personnel costs of our sales, account management, marketing and analytics teams, including salaries, benefits, bonuses, commissions, stock-based compensation and payroll taxes. Sales and marketing expense also includes professional fees, marketing programs such as trade shows, marketing materials, public relations, sponsorships and other brand building expenses, as well as outsourcing costs, travel and entertainment expenses and company funded consumer testing expenses for certain marketers that are not current customers. We expect that our sales and marketing expense will increase in absolute dollars as a result of hiring new sales representatives and as we invest to enhance our brand. Over time, we expect sales and marketing expenses will decline as a percentage of revenue.
Research and Development Expense
Research and development expense consists primarily of personnel costs of our information technology ("IT") engineering, IT architecture and product development teams, including salaries, benefits, bonuses, stock-based compensation and payroll taxes. Research and development expense also includes outsourcing costs, software licensing costs, professional fees and travel expenses. We focus our research and development efforts on improving our solutions and developing new ones. We expect research and development expense to increase in absolute dollars as we continue to create new solutions and improve the functionality of our existing solutions.
General and Administrative Expense
General and administrative expense consists of personnel costs of our executive, finance, legal, compliance, IT support and human resources teams, including salaries, benefits, bonuses, stock-based compensation and payroll taxes. General and administrative expense also includes professional fees for external legal, accounting and consulting services, financing transaction costs, facilities costs such as rent and utilities, royalties, bad debt expense, travel expense, property taxes and franchise taxes. We expect that general and administrative expenses will increase on an absolute dollar basis but decrease as a percentage of revenue as we focus on processes, systems and controls to enable the our internal support functions to scale with the growth of our business.
Depreciation and Amortization Expense
Depreciation and amortization expense includes depreciation of property and equipment over the estimated useful life of the applicable asset as well as amortization of deferred patent costs and capitalized internal-use software development costs.
Interest Expense, Net
Interest expense, net consists of interest incurred on our debt facilities, as well as related discount amortization and financing costs, partially offset by interest income on our cash balances.
Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities represents adjustments to the fair value of certain warrants to purchase either preferred or common stock based upon changes in the fair value of the underlying stock.
Other (Expense) Income, Net
Other (expense) income, net consists primarily of gains and losses on foreign currency transactions and expenses recorded in connection with the extinguishment of debt.
Income Taxes
We have generated losses before income taxes in the U.S., U.K. and most U.S. state income tax jurisdictions. We have generated historical net losses and recorded a full valuation allowance against our deferred tax assets. We expect to maintain a full valuation allowance in the near term. Due to our history of losses and our expectation of maintaining a full valuation allowance, we have not recorded an income tax provision or benefit during the periods presented. Realization of any of our deferred tax assets depends upon future earnings, the timing and amount of which are uncertain.

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Results of Operations
The following table sets forth our consolidated statements of operations (in thousands):
 Year Ended December 31,
 201820192020
Revenue$150,684 $210,430 $186,892 
Costs and expenses:
FI Share and other third-party costs85,371 118,080 109,308 
Delivery costs10,632 12,893 14,310 
Sales and marketing expense41,878 43,828 45,307 
Research and development expense16,210 11,699 17,532 
General and administrative expense34,228 36,720 46,532 
Depreciation and amortization expense3,282 4,535 7,826 
Total costs and expenses191,601 227,755 240,815 
Operating loss(40,917)(17,325)(53,923)
Non-operating (expense) income:
Interest expense, net(3,264)(548)(3,048)
Change in fair value of warrant liabilities, net(6,760)— — 
Other (expense) income, net(2,101)729 1,549 
Total non-operating (expense) income(12,125)181 (1,499)
Loss before income taxes(53,042)(17,144)(55,422)
Income tax benefit— — — 
Net loss$(53,042)$(17,144)$(55,422)


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The following table sets forth our consolidated statements of operations expressed as a percentage of revenue (percentages may not sum due to rounding):
 Year Ended December 31,
 201820192020
Revenue100 %100 %100 %
Costs and expenses:
FI Share and other third-party costs57 56 58 
Delivery costs
Sales and marketing expense28 21 24 
Research and development expense11 
General and administration expense23 17 25 
Depreciation and amortization expense
Total costs and expenses127 108 129 
Operating loss(27)(8)(29)
Non-operating (expense) income:
Interest expense, net(2)— (2)
Change in fair value of warrant liabilities, net(4)— — 
Other (expense) income, net(1)— 
Total non-operating (expense) income(8)— (1)
Loss before income taxes(35)(8)(30)
Income tax benefit— — — 
Net loss(35)%(8)%(30)%
Comparison of Year Ended December 31, 2019 and 2020
In this section, we discuss the results of our operations for the year ended December 31, 2019 compared to the year ended December 31, 2020. For a discussion of the year ended December 31, 2018 compared to the year ended December 31, 2019, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2019.
Revenue
 Year Ended December 31,Change
 20192020$  %   
 (dollars in thousands)
Revenue$210,430 $186,892 $(23,538)(11)%
The $23.5 million decrease in revenue during 2020 compared to 2019 was comprised of a $42.5 million decrease in sales to existing marketers, partially offset by a $19.0 million increase in sales to new marketers. Revenue during the second quarter of 2020 was significantly affected by the COVID-19 pandemic and its negative impact on both consumer spending and marketers' ability to spend advertising budgets on our solution. During the third and fourth quarters of 2020, we saw a recovery of both consumer spending as well as the advertising budgets of our clients. Due to continuing uncertainty regarding the severity and duration of the impacts of COVID-19 on the global economy, we will continue to monitor this situation and the potential impacts to our business.

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Costs and Expenses
FI Share and Other Third-Party Costs
 Year Ended December 31,Change
 20192020$      %      
 (dollars in thousands)
FI Share and other third-party costs:
Adjusted FI Share and other third-party costs$115,211 $104,710 $(10,501)(9)%
Deferred FI implementation costs2,869 4,598 1,729 60 
Total FI Share and other third-party costs$118,080 $109,308 $(8,772)(7)%
% of revenue56 %58 %
FI Share and other third-party costs decreased by $8.8 million during 2020 compared to 2019 primarily due to decreased revenue from sales of the Cardlytics platform. Deferred FI implementation costs increased by $1.7 million during the 2020 compared to the 2019 primarily due to a write off of deferred FI implementation costs totaling $0.7 million relating to the discontinued use of certain platform features.
We believe the near-term fluctuations in revenue caused by the economic impact of COVID–19 would also result in similar percentage fluctuations in adjusted FI Share and other third-party costs in future periods.
Delivery Costs
 Year Ended December 31,Change
 20192020$      %      
 (dollars in thousands)
Delivery costs$12,893 $14,310 $1,417 11 %
% of revenue%%
Delivery costs increased by $1.4 million during 2020 compared to 2019 primarily due to a $0.7 million increase in hosting-related IT costs, a $0.5 million increase in stock-based compensation expense and a $0.2 million increase in personnel costs associated with additional headcount to host the Cardlytics platform for certain new FI partners.
Sales and Marketing Expense
 Year Ended December 31,Change
 20192020$      %      
 (dollars in thousands)
Sales and marketing expense$43,828 $45,307 $1,479 %
% of revenue21 %24 %
Sales and marketing expense increased by $1.5 million during 2020 compared to 2019 primarily due to a $5.6 million increase in stock-based compensation expense, partially offset by a decrease of $3.0 million in incentive compensation and a $1.1 million decrease in travel and entertainment expense.

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Research and Development Expense
 Year Ended December 31,Change
 20192020$      %      
 (dollars in thousands)
Research and development expense$11,699 $17,532 $5,833 50 %
% of revenue%%
Research and development expense increased by $5.8 million during 2020 compared to 2019 primarily due to a $3.1 million increase in stock-based compensation expense, a $3.0 million increase in personnel costs associated with additional headcount, a $0.9 million increase in professional fees, partially offset by a $1.0 million decrease in personnel costs due to higher capitalization and a $0.2 million decrease in travel and entertainment.
General and Administrative Expense
 Year Ended December 31,Change
 20192020$      %      
 (dollars in thousands)
General and administration expense$36,720 $46,532 $9,812 27 %
% of revenue17 %25 %
General and administrative expense increased by $9.8 million during 2020 compared to 2019 primarily due to a $7.4 million increase in stock-based compensation expense, a $1.7 million increase in software licensing costs, a $0.9 million increase in professional fees, a $0.5 million increase in facility costs, partially offset by a $0.7 million decrease in travel and entertainment.
Stock-based Compensation Expense
The following table summarizes the allocation of stock-based compensation in the consolidated statements of operations (dollars in thousands):
 Year Ended December 31,Change
 20192020$      %      
Delivery costs$711 $1,181 $470 66 %
Sales and marketing expense4,248 9,857 5,609 132 
Research and development expense1,619 4,713 3,094 191 
General and administrative expense9,273 16,645 7,372 79 
Total stock-based compensation expense$15,851 $32,396 $16,545 104 %
% of revenue%17 %
Stock-based compensation expense increased by $16.5 million during 2020 compared to 2019 primarily due to an increase in expense relating to RSUs. During 2020, we recognized $19.0 million of expense related to RSUs compared to $4.4 million of expense in 2019 due to a change in mix between RSUs and PSUs and increased hiring activity throughout the organization. We also recognized $4.1 million of expense related to RSUs that were granted in lieu of cash-based incentive compensation.

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Depreciation and Amortization Expense
 Year Ended December 31,Change
 20192020$      %      
 (dollars in thousands)
Depreciation and amortization expense$4,535 $7,826 $3,291 73 %
% of revenue%%
Depreciation and amortization expense increased by $3.3 million during 2020 compared to 2019 primarily due to additional hardware and software placed in service in 2020 and the suspension of certain development efforts that resulted in a $1.0 million write off of capitalized internal-use software development costs during the first quarter of 2020.
Interest Expense, Net
 Year Ended December 31,Change
 20192020$      %      
 (dollars in thousands)
Interest expense$(1,377)$(3,488)$(2,111)153 %
Interest income829 456 (373)(45)
Interest expense, net$(548)$(3,048)$(2,500)456 %
% of revenue— %(2)%
Interest expense, net increased by $2.5 million during 2020 compared to 2019 primarily driven by an increase in interest expense related to the Notes, partially offset by a decrease in the amount outstanding on our 2018 Line of Credit and 2018 Term Loan. Interest income decreased $0.4 million during 2020 compared to 2019 due to moving cash into fully FDIC-insured demand deposit accounts, which have lower interest rates.
Other (Expense) Income, Net
 Year Ended December 31,Change
 20192020$      %      
 (dollars in thousands)
Foreign currency gain$781 $1,549 $768 98 %
Loss on extinguishment of debt(51)— 51 (100)
Other expense(1)— (100)
Other (expense) income, net$729 $1,549 $820 112 %
% of revenue— %%
The change in foreign currency gain was primarily due to the decrease in the value of the British pound relative to the U.S. dollar. During 2019, we also recognized a less than $0.1 million loss on extinguishment of debt related to the unamortized discount and unamortized debt issuance costs associated with our prior line of credit and prior term loan.
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with GAAP. The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates. Our most critical accounting policies are summarized below. Refer to the notes to our consolidated financial statements for additional information.

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Revenue Recognition
Our revenue generated from our platform consist of transaction-based fees made up of a significant volume of low-dollar transactions, sourced from multiple databases. The processing and recording of revenue is highly automated and is based on contractual terms with marketers, FIs, and other parties. Because of the nature of our transaction-based fees, we use automated systems to process and record our revenue transactions
We determine revenue recognition through the following steps:
identification of a contract with a customer,
identification of the performance obligation(s) in the contract,
determination of the transaction price,
allocation of the transaction price to the performance obligation(s) in the contract, and
recognition of revenue when or as the performance obligation(s) are satisfied.
We sell our solutions by entering into agreements directly with marketers or their marketing agencies, generally through the execution of insertion orders. The agreements state the terms of the arrangement, the negotiated fee, payment terms and the fixed period of time of the campaign. We consider a contract to exist when a campaign, which typically lasts 45 days, is published to an FI partner under the terms of an insertion order.
With respect to our Cardlytics platform, our performance obligation is to offer incentives to FIs' customers to make purchases from the marketer within a specified period. This performance obligation is a series that represents a stand ready obligation to provide a targeted campaign for the marketer to FIs' customers. The Cardlytics platform fees represent variable consideration that is resolved when FIs' customers make qualifying purchases during the marketing campaign term.
Subsequent to a qualifying purchase, the associated fees are generally not subject to refund or adjustment unless the fees from the marketing campaign exceed a contractual maximum (marketer budget). We have not constrained our revenue because adjustments have historically been immaterial and given the short duration of our marketing campaigns, any adjustments are recognized during the period of the marketing campaign. We recognize revenue for the Cardlytics platform fees over time using the right to invoice practical expedient because the amount billed is equal to the value delivered to marketers through qualified purchases by FIs' customers during that period.
Consumer Incentives
We report our revenue on our consolidated statements of operations net of Consumer Incentives. We do not provide the goods or services that are purchased by our FIs’ customers from the marketers to which the Consumer Incentives relate. Accordingly, the marketer is deemed to be the principal in the relationship with the customer and, therefore, the Consumer Incentive is deemed to be a reduction in the purchase price paid by the customer for the marketer’s goods or services. While we are responsible for remitting Consumer Incentives to our FI partners for further payment to their customers, we function solely as an agent of marketers in these arrangements.
We invoice marketers monthly based on the qualifying purchases of FIs' customers as reported by our FI partners during the month. Invoice payment terms, negotiated on a marketer-by-marketer basis, are typically between 30 to 60 days. However, for certain marketing agencies with sequential liability terms, payments are not due to us until such marketing agency has received payment from its marketer client. Accounts receivable is recorded at the amount of gross billings to marketers, net of allowances, for the fees and Consumer Incentives that we are responsible to collect. Our accrued liabilities also include the amount of Consumer Incentives due to FI partners. As a result, accounts receivable and accrued liabilities may appear large in relation to revenue, which is reported on a net basis. During 2018, 2019 and 2020, Consumer Incentives totaled $68.3 million, $105.6 million and $76.5 million, respectively.
FI Share and Other Third-Party Costs
We report our revenue on our consolidated statements of operations gross of FI Share. FI Share costs are included in FI Share and other third-party costs in our consolidated statements of operations, rather than as a reduction of revenue, because we and not our FI partners act as the principal in our arrangements with marketers. We are responsible for the fulfillment and acceptability of the services purchased by marketers. We also have latitude in establishing the price of our services, have discretion in supplier selection and earn variable amounts. FI partners only supply consumer purchase data and digital marketing space and generally have no involvement in the marketing campaigns or contractual relationship with marketers.

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Income Taxes
Income taxes are accounted for using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and operating loss and tax credit carryforwards. Valuation allowances are provided when we determine that it is more likely than not that all of, or a portion of, deferred tax assets will not be utilized in the future.
Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
Estimates of future taxable income are based on assumptions that are consistent with our plans. Assumptions represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. If actual amounts differ from our estimates, the amount of our tax expense and liabilities could be materially impacted.
We have recorded a full valuation allowance related to our deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.
We recognize the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on its technical merits as of the reporting date, and then, only in an amount more likely than not to be sustained upon review by the tax authorities. Where applicable, we classify associated interest and penalties as income tax expense. The total amounts of interest and penalties were not material. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.
Recent Accounting Pronouncements
Refer to Note 3—Accounting Standards to our consolidated financial statements for additional information.
Liquidity and Capital Resources
The following table summarizes our cash and cash equivalents, restricted cash, accounts receivable, working capital, total debt and unused available borrowings (in thousands):
December 31,
20192020
Cash and cash equivalents$104,458 $293,239 
Restricted cash129 110 
Working capital(1)
117,329 304,317 
Accounts receivable, net81,452 81,249 
Total debt(2)
37 174,024 
Unused available borrowings40,000 50,000 
(1)We define working capital as current assets less current liabilities. See our consolidated financial statements for further details regarding our current assets and current liabilities.
(2)Total debt as of December 31, 2020 includes finance leases liabilities and convertible senior notes, which is presented net of unamortized issuance costs of $5.4 million and unamortized debt discount of $50.6 million.
Our cash and cash equivalents are available for working capital purposes. We do not enter into investments for trading purposes, and our investment policy is to invest any excess cash in short-term, highly liquid investments that limit the risk of principal loss. A majority of our cash and cash equivalents are held in fully FDIC–insured demand deposit accounts that distribute funds, and credit risk, over a vast number of financial institutions. Our remaining cash and cash equivalents are held in treasury obligation funds and money market accounts with three financial institutions, which we believe are of high credit quality. As of December 31, 2020, our demand deposit accounts earned up to a 0.50% annual rate of interest. As of December 31, 2020, we had $3.9 million in cash and cash equivalents in the U.K. While our investment in Cardlytics UK is not considered indefinitely invested, we do not plan to repatriate these funds.

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Through December 31, 2020, we have incurred accumulated net losses of $394.1 million since inception, including losses of $53.0 million, $17.1 million and $55.4 million during 2018, 2019 and 2020, respectively. We expect to incur additional operating losses as we continue our efforts to grow our business. We have historically financed our operations and capital expenditures through convertible note financings, private placements of our redeemable convertible preferred stock, public offerings of our common stock as well as lines of credit and term loans. Through December 31, 2020, we have received net proceeds of $222.7 million from the issuance of convertible senior notes, net proceeds of $196.2 million from the issuance of preferred stock and convertible promissory notes and net proceeds of $127.1 million from public equity offerings.
Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the continued expansion of sales and marketing activities, the enhancement of our platform, the introduction of new solutions, the continued market acceptance of our solutions and the extent of the impact of COVID-19 on our operational and financial performance. We expect to continue to incur operating losses for the foreseeable future and may require additional capital resources to continue to grow our business. We believe that current cash and cash equivalents will be sufficient to fund our operations and capital requirements for at least the next 12 months following the date our consolidated financial statements were issued. However, if our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be materially and adversely impacted. In the event that additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all.
Sources of Funds
2020 Convertible Senior Notes
In September 2020, we issued convertible senior notes with an aggregate principal amount of $230.0 million bearing an interest rate of 1.00% due in 2025 (the "Notes"). The net proceeds from this offering were $222.7 million, after deducting the initial purchasers' discounts and commissions and the estimated offering expenses payable by us. We used $26.5 million of the net proceeds to pay the cost of capped call transactions (the "Capped Calls") described under the Financing Activities section below.
Proceeds from Issuance of Common Stock
On February 13, 2018, we closed our initial public offering (“IPO”), in which we issued and sold 5,400,000 shares of common stock at a public offering price of $13.00 per share, resulting in gross proceeds of $70.2 million. On February 14, 2018, pursuant to the underwriters’ partial exercise of their over-allotment option to purchase up to an additional 810,000 shares from us, we issued and sold an additional 421,355 shares of our common stock, resulting in additional gross proceeds to us of $5.5 million. In total, we issued 5,821,355 shares of common stock and raised $75.7 million in gross proceeds, or $66.1 million in net proceeds after deducting underwriting discounts and commissions of $5.3 million and offering costs of $4.3 million.
On September 13, 2019, we closed a public equity offering in which we sold 1,904,154 shares of common stock, which included 404,154 shares sold pursuant to the exercise by the underwriters of an option to purchase additional shares, at a public offering price of $34.00 per share. We received total net proceeds of $61.3 million after deducting underwriting discounts and commissions of $3.2 million and offering costs of $0.2 million. Selling stockholders, including certain of our executive officers and entities affiliated with certain of our directors, sold 1,194,365 shares of common stock in the offering at a public offering price of $34.00. We did not receive any proceeds from the sale of common stock by the selling stockholders.
During 2018, 2019 and 2020, we also received $2.0 million, $29.7 million and $10.2 million in proceeds from the exercise of options and warrants to purchase shares of common stock, respectively.
2018 Loan Facility
On May 21, 2018, we entered into a Loan and Security Agreement with Pacific Western Bank (the “Lender”) consisting of a $30.0 million asset–based revolving line of credit ("2018 Line of Credit") and a $20.0 million term loan ("2018 Term Loan") (collectively, the “2018 Loan Facility”). We used the entire $20.0 million in proceeds from the 2018 Term Loan and an advance of $27.4 million under the 2018 Line of Credit to repay all outstanding obligations under our prior line of credit and term loan.
On May 14, 2019, we amended our 2018 Loan Facility to increase the capacity of our Line of Credit, from $30.0 million to $40.0 million, and decrease the capacity of our 2018 Term Loan from $20.0 million to $10.0 million. This amendment also extended the maturity date of the 2018 Loan Facility from May 21, 2020 to May 14, 2021. We repaid $10.0 million of the principal balance of the 2018 Term Loan upon the execution of the amendment in May 2019 and repaid the remaining $10.0 million principal balance in September 2019.

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On September 17, 2020, we amended our 2018 Loan Facility to allow for the issuance of the Notes. On December 30, 2020, we amended our 2018 Loan Facility to increase the capacity of our Line of Credit, from $40.0 million to $50.0 million. This amendment also extended the maturity date of the 2018 Loan Facility from May 14, 2021 to December 31, 2022. As of December 31, 2020, we had $50.0 million of unused borrowings available under our 2018 Line of Credit.
Prior to the December 2020 amendment, the 2018 Loan Facility contained moving trailing 12-month billing covenants, which ranged from $210.0 million to $255.0 million, during the term of the facility. The former terms of the 2018 Loan Facility also required us to maintain a total cash balance plus liquidity under the 2018 Line of Credit of not less than $5.0 million. Effective with the December 2020 amendment, the former billings and liquidity covenants were removed and were replaced with a requirement to maintain a cash to funded senior debt ratio under the 2018 Line of Credit of 1.25:1.00.
Under the 2018 Loan Facility relating to the 2018 Line of Credit, we are able to borrow up to the lesser of $50.0 million or 85% of the amount of our eligible accounts receivable. Interest on advances under the 2018 Line of Credit bears an interest rate equal to the prime rate minus 0.50%, or 2.75% as of December 31, 2020. In addition, we are required to pay an unused line fee of 0.15% per annum on the average daily unused amount of the $50.0 million revolving commitment. Interest accrued on the 2018 Term Loan at an annual rate of interest equal to the prime rate minus 2.75%, or 2.00% at the date of repayment in September 2019.
The 2018 Loan Facility includes customary representations, warranties and covenants (affirmative and negative), including restrictive covenants that prohibits mergers, acquisitions and dispositions of assets, incurrence of indebtedness and encumbrances on our assets and the payment or declaration of dividends; in each case subject to specified exceptions.
The 2018 Loan Facility also includes standard events of default, including in the event of a material adverse change. Upon the occurrence of an event of default, the lender may declare all outstanding obligations immediately due and payable and take such other actions as are set forth in the 2018 Loan Facility and increase the interest rate otherwise applicable to advances under the 2018 Line of Credit by an additional 3.00%. All of our obligations under the 2018 Loan Facility are secured by a first priority lien on substantially all of our assets. The 2018 Loan Facility does not include any prepayment penalties.
We believe we were in compliance with all financial covenants as of December 31, 2020.
Uses of Funds
Our collection cycles can vary from period to period based on the payment practices of our marketers and their agencies. We are generally obligated to pay Consumer Incentives between one and three months following redemption, regardless of whether we have collected payment from a marketer or its agency. We are generally obligated to pay our FI partners’ FI Share by the end of the month following our collection of payment from the applicable marketer or its agency. As a result, timing of cash receipts from our marketers can significantly impact our operating cash flows for any period. Further, the timing of payment of commitments and implementation fees to our FI partners may also result in variability of our operating cash flows for any period.
Our operating cash flows also vary from quarter to quarter due to the seasonal nature of our marketers’ advertising spending. Many marketers tend to devote a significant portion of their marketing budgets to the fourth quarter of the calendar year to coincide with consumer holiday spending and reduce marketing spend in the first quarter of the calendar year. Any lag between the timing of our payments to FI partners and our receipt of payment from marketers and their agencies can exacerbate our need for working capital during the first quarter of the calendar year.

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Historical Cash Flows
In this section, we discuss the activity of our cash flows for the year ended December 31, 2019 and the year ended December 31, 2020. For a discussion of the year ended December 31, 2018, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Liquidity and Capital Resources" in our Annual Report on Form 10-K for the year ended December 31, 2019.
The following table shows a summary of our cash flows for the periods presented (in thousands):
 Year Ended December 31,
 20192020
Cash, cash equivalents and restricted cash at beginning of period$59,870 $104,587 
Net cash provided by (used in) operating activities11,457 (7,598)
Net cash used in investing activities(11,020)(10,117)
Net cash provided by financing activities44,179 206,430 
Effect of exchange rates on cash, cash equivalents and restricted cash101 47 
Cash, cash equivalents and restricted cash at end of period$104,587 $293,349 
Operating Activities
Historically, we have experienced negative operating cash flows, which reflects our investments to grow our business. Over time, we expect our business to generate positive operating cash flows. Given the seasonal nature of our marketer's advertising spending and our continued investment in our business, we may experience periods of negative operating cash flows from operations.
Operating activities used $7.6 million of cash in 2020, which reflected our net loss of $55.4 million, $51.6 million of which were non-cash charges, and a $3.8 million change in our net operating assets and liabilities. The non-cash charges primarily related to stock-based compensation expense, depreciation and amortization expense, amortization of right–of–use assets, deferred FI implementation costs and bad debt expense. The change in our net operating assets and liabilities was primarily due to a $2.4 million increase in accounts receivable, a $1.2 million decrease in other accrued expenses and a $4.5 million decrease in FI Share liability, partially offset by a $4.4 million increase in our Consumer Incentive liability. These changes were primarily a result of significantly lower sales during 2020, primarily caused by the COVID–19 pandemic, compared to 2019.
Operating activities provided $11.5 million of cash in 2019, which reflected our net loss of $17.1 million offset by $24.0 million of non-cash charges and a $4.6 million change in our net operating assets and liabilities. The non-cash charges primarily related to stock-based compensation expense, depreciation and amortization expense and deferred FI implementation costs. Changes in our net operating assets and liabilities were significantly impacted by the growth of the business as reflected by increases in revenue, Consumer Incentives and FI Share. The net change in our accounts receivable, Consumer Incentive liability and FI Share liability, including the impact from recoveries of development payments to a certain FI partner through FI Share payment reductions, was a positive cash flow impact of $1.4 million. This reflects our efforts to negotiate longer payment terms with our FI partners. Other changes in our net operating assets and liabilities include a $2.2 million increase in prepaid expenses and other assets, offset by a $5.6 million increase in accounts payable and accrued expenses.
Investing Activities
Our cash flows from investing activities are primarily driven by our investments in, and purchases of, property and equipment and costs to develop internal-use software. We expect that we will continue to use cash for investing activities as we continue to invest in and grow our business.
Investing activities used cash totaling $11.0 million and $10.1 million, in 2019 and 2020, respectively. Our investing cash flows during these periods primarily consisted of purchases of technology hardware and the capitalization of costs to develop internal-use software.

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Financing Activities
Our cash flows from financing activities have primarily been composed of borrowings and repayments under our debt facilities, proceeds from the issuance of common and preferred stock and payments for costs related to debt issuances and equity offerings.
Financing activities provided $206.4 million in cash in 2020. Our financing activities during this period primarily consisted of $223.1 million of net proceeds from our issuance of the Notes, of which we used $26.5 million to purchase the Capped Calls and proceeds from the exercise of options to purchase shares of common stock. The Capped Calls are intended to reduce potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be.
Financing activities provided $44.2 million in cash in 2019. We raised net proceeds of $61.3 million from our public equity offering and received $29.7 million in proceeds from the exercise of options and warrants to purchase shares of common stock. We also reduced our outstanding borrowings under our 2018 Line of Credit by $26.7 million and 2018 Term Loan by $20.0 million.
Contractual Obligations and Commitments
The following table summarizes our commitments to settle contractual obligations as of December 31, 2020 (in thousands):
Less than 1 Year
(2021)
1 to 3 Years
(2022 - 2023)
3 to 5 Years
(2024 - 2026)
More than
5 Years
(thereafter)
Total
Convertible senior notes(1)
$2,159 $4,600 $234,696 $— $241,455 
Finance leases(2)
$13 $— $— $— $13 
Operating leases(3)
5,097 7,373 2,418 — 14,888 
Purchase obligations(4)
3,484 3,141 — — 6,625 
Total$10,753 $15,114 $237,114 $— $262,981 
(1)Convertible senior notes includes total interest due of $11.5 million.
(2)Finance leases represent principal and interest payments.
(3)Operating lease obligations represent future minimum lease payments under our non-cancelable operating leases with an initial term in excess of one year.
(4)Purchase obligations include all legally binding contracts such as hardware, software, licenses and legally binding service contracts. Purchase orders that are not binding agreements are excluded from the table above.
The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. The table above does not include obligations under agreements that we can cancel without a significant penalty.
We have a minimum FI Share commitment with a certain FI partner totaling $10.0 million over a 12-month period following the completion of certain milestones, which were not met as of December 31, 2020. The table above does not include these obligations.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign exchange rates.
Interest Rate Risk
The interest rates under the 2018 Line of Credit are variable. Interest on advances under the 2018 Line of Credit bears an interest rate of the prime rate minus 0.50%, or 2.75%. As of December 31, 2020 the prime rate was 3.25% and a 10% increase in the current prime rate would, for example, result in a $0.2 million annual increase in interest expense if the maximum borrowable amount under the 2018 Line of Credit were outstanding for an entire year.

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Foreign Currency Exchange Risk
Both revenue and operating expense of Cardlytics UK Limited are denominated in British pounds, and we bear foreign currency risks related to these amounts. For example, if the average value of the British pound had been 10% higher relative to the U.S. dollar during the 2018, 2019 and 2020, our operating expense would have increased by $1.2 million, $1.4 million and $0.8 million, respectively. Our foreign currency risks related to expenses denominated in Indian rupees are insignificant.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CARDLYTICS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Cardlytics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cardlytics, Inc. and subsidiaries (the "Company") as of December 31, 2019 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or in the accounts or disclosures to which it relates.
Revenue – Refer to Note 4 to the consolidated financial statements
Critical Audit Matter Description
The Company’s revenue generated from its Cardlytics platform consists of transaction-based fees made up of a significant volume of low-dollar transactions, sourced from multiple databases. The processing and recording of revenue is highly automated and is based on contractual terms with marketers, FIs, and other parties. Because of the nature of the Company’s transaction-based fees, the Company uses automated systems to process and record its revenue transactions.
We identified revenue as a critical audit matter because the Company’s systems to process and record revenue are highly automated. This required an increased extent of effort, including the need for us to involve professionals with expertise in information technology (IT), to identify, test, and evaluate the Company’s systems, software applications, and automated controls.

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How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s systems to process revenue transactions included the following, among others:
With the assistance of our IT specialists, we:
Identified the relevant systems used to process revenue transactions and tested the general IT controls over each of these systems, including testing of user access controls, change management controls, and IT operations controls.
Performed testing of initial system set-up and monitoring controls, system interface controls, automated controls, and data monitoring controls within the relevant revenue streams, as well as the controls designed to ensure the accuracy and completeness of revenue.
We tested internal controls within the relevant revenue business processes, including those in place to reconcile the information from various systems to the Company’s general ledger.
For a sample of revenue transactions, we performed detail transaction testing by agreeing the amounts recognized to source documents and testing the mathematical accuracy of the recorded revenue.

/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 1, 2021

We have served as the Company’s auditor since 2012.

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CARDLYTICS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value amounts)
December 31,
20192020
Assets
Current assets:
Cash and cash equivalents$104,458 $293,239 
Restricted cash129 110 
Accounts receivable, net81,452 81,249 
Other receivables3,908 5,306 
Prepaid expenses and other assets5,783 5,687 
Total current assets195,730 385,591 
Long-term assets:
Property and equipment, net14,290 13,865 
Right-of-use assets under operating leases, net 10,764 
Intangible assets, net389 447 
Capitalized software development costs, net3,815 6,299 
Deferred FI implementation costs, net8,383 3,785 
Other long-term assets, net1,706 1,786 
Total assets$224,313 $422,537 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$1,229 $1,363 
Accrued liabilities:
Accrued compensation8,186 7,582 
Accrued expenses6,018 5,502 
FI Share liability41,956 37,457 
Consumer Incentive liability19,861 24,290 
Deferred revenue1,127 349 
Current operating lease liabilities 4,718 
Current finance lease liabilities24 13 
Total current liabilities78,401 81,274 
Long-term liabilities:
Convertible senior notes, net 174,011 
Deferred liabilities2,632  
Long-term operating lease liabilities 9,381 
Long-term finance lease liabilities13  
Other long-term liabilities 679 
Total liabilities81,046 265,345 
Stockholders’ equity:
Common stock, $0.0001 par value—100,000 shares authorized and 26,547 and 27,861 shares issued and outstanding as of December 31, 2019 and December 31, 2020, respectively8 8 
Additional paid-in capital480,578 551,429 
Accumulated other comprehensive income (loss)1,312 (192)
Accumulated deficit(338,631)(394,053)
Total stockholders’ equity143,267 157,192 
Total liabilities and stockholders’ equity$224,313 $422,537 
See notes to the consolidated financial statements

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CARDLYTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
 Year Ended December 31,
 201820192020
Revenue$150,684 $210,430 $186,892 
Costs and expenses:
FI Share and other third-party costs85,371 118,080 109,308 
Delivery costs10,632 12,893 14,310 
Sales and marketing expense41,878 43,828 45,307 
Research and development expense16,210 11,699 17,532 
General and administration expense34,228 36,720 46,532 
Depreciation and amortization expense3,282 4,535 7,826 
Total costs and expenses191,601 227,755 240,815 
Operating loss(40,917)(17,325)(53,923)
Non-operating (expense) income:
Interest expense, net(3,264)(548)(3,048)
Change in fair value of warrant liabilities, net(6,760)  
Other (expense) income, net(2,101)729 1,549 
Total non-operating (expense) income(12,125)181 (1,499)
Loss before income taxes(53,042)(17,144)(55,422)
Income tax benefit   
Net loss(53,042)(17,144)(55,422)
Adjustments to the carrying value of redeemable convertible preferred stock(157)  
Net loss attributable to common stockholders$(53,199)$(17,144)$(55,422)
Net loss per share attributable to common stockholders, basic and diluted$(2.79)$(0.72)$(2.04)
Weighted-average common shares outstanding, basic and diluted19,060 23,746 27,213 
See notes to the consolidated financial statements

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CARDLYTICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands)
 Year Ended December 31,
 201820192020
Net loss$(53,042)$(17,144)$(55,422)
Other comprehensive income (loss):
  Foreign currency translation adjustments926 (680)(1,504)
Total comprehensive loss$(52,116)$(17,824)$(56,926)
See notes to the consolidated financial statements

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CARDLYTICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands)
  Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (loss)
Accumulated
Deficit
Total
 Common Stock
 SharesAmount
Balance – December 31, 20173,439 $ $58,693 $1,066 $(268,445)$(208,686)
Exercise of common stock options356 — 1,959 — — 1,959 
Exercise of common stock warrants1,142 — — — — — 
Stock-based compensation— — 26,813 — — 26,813 
Issuance of common stock5,821 1 66,100 — — 66,101 
Issuance of common stock warrants— — 17,774 — — 17,774 
Issuance of ESPP177 — 1,958 — — 1,958 
Issuance of restricted stock888 — — — — — 
Conversion of preferred stock to common stock10,643 196,588 — — 196,594 
Conversion of preferred stock warrants to common stock warrants— — 1,735 — — 1,735 
Accretion of redeemable stock— — (157)— — (157)
Other comprehensive income— — — 926 — 926 
Net loss— — — — (53,042)(53,042)
Balance – December 31, 201822,466 $7 $371,463 $1,992 $(321,487)$51,975 
Exercise of common stock options716 — 12,052 — — 12,052 
Exercise of common stock warrants821 — 17,659 — — 17,659 
Stock-based compensation— — 15,888 — — 15,888 
Issuance of restricted stock486   — —  
Issuance of common stock1,904 61,308 — — 61,309 
Issuance of ESPP154 — 2,208 — — 2,208 
Other comprehensive loss— — — (680)— (680)
Net loss— — — — (17,144)(17,144)
Balance – December 31, 201926,547 $8 $480,578 $1,312 $(338,631)$143,267 
Exercise of common stock options467 — 10,176 — — 10,176 
Exercise of common stock warrants9 —  — —  
Stock-based compensation— — 32,872 — — 32,872 
Issuance of restricted stock779 — — — — — 
Issuance of ESPP59 — 2,837 — — 2,837 
Issuance of convertible notes— — 51,416 — — 51,416 
Purchases of capped calls— — (26,450)— — (26,450)
Other comprehensive loss— — — (1,504)— (1,504)
Net loss— — — — (55,422)(55,422)
Balance – December 31, 202027,861 $8 $551,429 $(192)$(394,053)$157,192 
See notes to the consolidated financial statements

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CARDLYTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
 Year Ended December 31,
 201820192020
Operating activities
 Net loss$(53,042)$(17,144)$(55,422)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Credit loss expense130 1,201 1,196 
Depreciation and amortization3,282 4,535 7,826 
Amortization of financing costs charged to interest expense282 95 312 
Amortization of right-of-use asset  3,766 
Accretion of debt discount and non-cash interest expense2,326  2,486 
Stock-based compensation expense26,790 15,851 32,396 
Change in the fair value of warrant liabilities, net6,760   
Other non-cash expense (income), net4,641 (570)(1,003)
Amortization and impairment of deferred FI implementation costs1,618 2,869 4,598 
Settlement of paid-in-kind interest(8,353)  
Change in operating assets and liabilities:
Accounts receivable(9,426)(26,018)(2,396)
Prepaid expenses and other assets(2,275)(2,224)(65)
Deferred FI implementation costs(9,250)  
Recovery of deferred FI implementation costs5,380 4,625  
Accounts payable911 (601)16 
Other accrued expenses3,255 6,152 (1,238)
FI Share liability3,742 14,301 (4,499)
Customer Incentive liability4,234 8,385 4,429 
Net cash (used in) provided by operating activities(18,995)11,457 (7,598)
Investing activities
Acquisition of property and equipment(5,920)(8,277)(5,408)
Acquisition of patents(23)(31)(76)
Capitalized software development costs(1,399)(2,712)(4,633)
Net cash used in investing activities(7,342)(11,020)(10,117)
Financing activities
Proceeds from issuance of debt47,435   
Principal payments of debt(52,581)(46,698)(23)
Proceeds from issuance of convertible senior notes  223,100 
Purchase of capped calls related to convertible senior notes  (26,450)
Proceeds from issuance of common stock72,334 91,216 10,185 
Equity issuance costs(1,949)(196) 
Debt issuance costs(48)(143)(382)
Net cash provided by financing activities65,191 44,179 206,430 
Effect of exchange rates on cash, cash equivalents and restricted cash(246)101 47 
Net increase in cash, cash equivalents and restricted cash38,608 44,717 188,762 
Cash, cash equivalents, and restricted cash — Beginning of period21,262 59,870 104,587 
Cash, cash equivalents, and restricted cash — End of period$59,870 $104,587 $293,349 





See notes to the consolidated financial statements

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CARDLYTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended December 31,
 201820192020
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheet:
Cash and cash equivalents$39,623 $104,458 $293,239 
Restricted cash20,247 129 110 
Total cash, cash equivalents and restricted cash — End of period$59,870 $104,587 $293,349 
Supplemental schedule of non-cash investing and financing activities:
Cash paid for interest$9,733 $1,266 $63 
Amounts accrued for property and equipment$640 $456 $242 
Amounts accrued for capitalized software development costs$ $10 $68 

See notes to the consolidated financial statements

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CARDLYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.    NATURE OF OPERATIONS
Cardlytics, Inc. (“we,” “our,” “us,” the “Company,” or “Cardlytics”) is a Delaware corporation and was formed on June 26, 2008. We operate an advertising platform within financial institutions’ (“FIs”) digital channels, which include online, mobile, email, and various real-time notifications. Our partnerships with FIs provide us with access to their anonymized purchase data and digital banking customers. By applying advanced analytics to this aggregation of purchase data, we make it actionable, helping marketers identify, reach and influence likely buyers at scale, and measure the true sales impact of their marketing spend. We have strong relationships with leading marketers across a variety of industries, including retail, restaurant, travel and entertainment, telecommunications, subscription services, direct to consumer, and grocery. Using our purchase intelligence presents customers with offers to save money at a time when they are thinking of their finances.
We also operate in the U.K. through Cardlytics UK Limited ("Cardlytics UK"), a wholly-owned and operated subsidiary registered as a private limited company in England and Wales, and in India through Cardlytics Services India Private Limited, a wholly-owned and operated subsidiary registered as a private limited company in India.
Reverse Stock Split
On January 26, 2018, our board of directors approved an amended and restated certificate of incorporation to (1) effect a reverse split on outstanding shares of our common stock and redeemable convertible preferred stock on a one-for-four basis (the “Reverse Stock Split”), (2) modify the threshold for automatic conversion of our preferred stock into shares of our common stock in connection with an initial public offering to eliminate the requirement of gross proceeds to the Company of not less than $70.0 million and (3) authorize us to issue up to 100,000,000 shares of common stock, $0.0001 par value per share and 25,000,000 shares of redeemable convertible preferred stock, $0.0001 par value per share (collectively, the “Charter Amendment”). The authorized shares and par values of our common stock and redeemable convertible preferred stock were not adjusted as a result of the Reverse Stock Split. The Charter Amendment was approved by the Company’s stockholders on January 26, 2018 and became effective upon the filing of the Charter Amendment with the State of Delaware on January 26, 2018. All issued and outstanding common stock and preferred stock and related share and per share amounts contained in these financial statements have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented.
Proceeds from Issuance of Common Stock
On February 13, 2018, we closed our initial public offering (“IPO”), in which we issued and sold 5,400,000 shares of common stock at a public offering price of $13.00 per share, resulting in gross proceeds of $70.2 million. On February 14, 2018, pursuant to the underwriters’ partial exercise of their over-allotment option to purchase up to an additional 810,000 shares from us, we issued and sold an additional 421,355 shares of our common stock, resulting in additional gross proceeds to us of $5.5 million. In total, we issued 5,821,355 shares of common stock and raised $75.7 million in gross proceeds, or $66.1 million in net proceeds after deducting underwriting discounts and commissions of $5.3 million and offering costs of $4.3 million. Upon the closing of the IPO, all of the outstanding shares of redeemable convertible preferred stock automatically converted into shares of common stock and all warrants to purchase shares of redeemable convertible preferred stock were automatically converted into warrants to purchase shares of common stock. Subsequent to the closing of the IPO, there were no shares of preferred stock or warrants to purchase shares of redeemable convertible preferred stock outstanding.
Upon the completion of our IPO, our amended and restated certificate of incorporation authorized us to issue up to 100,000,000 shares of common stock, $0.0001 par value per share, and 10,000,000 shares of preferred stock, $0.0001 par value per share, all of which shares of preferred stock are undesignated. Our board of directors may establish the rights and preferences of the preferred stock from time to time.
On September 13, 2019, we closed a public equity offering in which we sold 1,904,154 shares of common stock, which included 404,154 shares sold pursuant to the exercise by the underwriters of an option to purchase additional shares, at a public offering price of $34.00 per share. We received total net proceeds of $61.3 million after deducting underwriting discounts and commissions of $3.2 million and offering costs of $0.2 million.
Selling stockholders, including certain of our executive officers and entities affiliated with certain of our directors, sold 1,194,365 shares of common stock in the offering at a public offering price of $34.00. We did not receive any proceeds from the sale of common stock by the selling stockholders.

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During 2018, 2019 and 2020, we received $2.0 million, $29.7 million and $10.2 million in proceeds from the exercise of options and warrants to purchase shares of common stock.
2020 Convertible Senior Notes
In September 2020, we issued convertible senior notes with an aggregate principal amount of $230.0 million bearing an interest rate of 1.00% due in 2025 (the "Notes"). Refer to Note 7—Debt and Financing Arrangements for further details
2.     SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from these estimates. Significant items subject to such estimates and assumptions include revenue recognition, internal-use software development costs, income taxes, stock-based compensation, income tax valuation allowance, contingencies and changes in fair value of our preferred stock warrants and common stock warrants. We base our estimates on historical experience and also on assumptions that we believe are reasonable. Changes in facts or circumstances may cause us to change our assumptions and estimates in future periods and it is possible that actual results could differ from our current or revised future estimates.
Restructuring
During the first quarter of 2020, we began a strategic shift within our organization to increase productivity and optimize performance. This plan has resulted in severance and medical benefits totaling $1.3 million during the year ended December 31, 2020. We recognize these costs when the extent of our actions is determined and the costs can be estimated. These charges are reflected on our consolidated statement of operations for the year ended December 31, 2020, as follows: $1.1 million in sales and marketing expense, $0.1 million in general and administrative expense and $0.1 million in research and development expense. Severance and medical benefits of $0.9 million have been paid to former employees through December 31, 2020.
Foreign Currency
The functional currency of our foreign wholly-owned subsidiaries is the local currency. We translate the financial statements of these subsidiaries into U.S. dollars each reporting period for purposes of consolidation. Assets and liabilities are translated at the period-end currency exchange rates, certain equity accounts are translated at historical exchange rates and income and expense amounts are translated at average currency exchange rates in effect for the period. The effect of these translation adjustments is reported in a separate component of stockholders’ deficit titled accumulated other comprehensive income.
We are also subject to gains and losses from foreign currency denominated transactions and the remeasurement of foreign currency denominated balance sheet accounts, both of which are included in other (expense) income, net in the accompanying consolidated statements of operations. We recorded a foreign currency loss (gain) totaling $1.2 million, $(0.8) million and $(1.6) million in 2018, 2019 and 2020, respectively.
FI Share and Other Third-Party Costs
We generally pay our FI partners a negotiated and fixed percentage of our billings to marketers less any Consumer Incentives that we pay to the FIs’ customers and certain third-party data costs ("FI Share"). FI Share and other third-party costs consist primarily of the FI Share that we pay our FI partners, media and data costs, and deferred FI implementation costs incurred pursuant to our agreements with certain FI partners, any incremental costs due to FIs as part of FI Share commitments, as well as a non-cash expense related to the vesting of warrants issued to an FI partner that accelerated upon the consummation of our IPO. To the extent that we use a specific FI customer’s anonymized purchase data in the delivery of our solutions, we pay the applicable FI partner an FI Share calculated based on the relative contribution of the data provided by the FI partner to the overall delivery of the services.

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Delivery Costs
Delivery costs consist primarily of personnel-related costs of our campaign, data operations and production support teams, including salaries, benefits, bonuses and payroll taxes, as well as stock-based compensation expense. Delivery costs also include hosting facility costs, internally developed and purchased or licensed software costs, outsourcing costs and professional services costs.
Impacts of COVID-19 Pandemic
The COVID–19 pandemic resulted in a global slowdown of economic activity that decreased demand for a broad variety of goods and services and consumer discretionary spending, including spending by consumers with our marketers, and such decreased demand is likely to continue. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. Actual results could differ from those estimates and any such differences may be material to our financial statements.
Revenue during the second quarter of 2020 was significantly affected by the COVID-19 pandemic and its negative impact on both consumer spending and marketers' ability to spend advertising budgets on our solution. During the third and fourth quarters of 2020, we saw a recovery of both consumer spending as well as the advertising budgets of our clients. Due to continuing uncertainty regarding the severity and duration of the impacts of COVID-19 on the global economy, we will continue to monitor this situation and the potential impacts to our business.
Accounts Receivable
Accounts receivable are carried at the original invoiced amount less an allowance for credit losses (formerly allowance for doubtful accounts), determined based on the probability of future collection. When we become aware of circumstances that may decrease the likelihood of collection, we record a specific allowance against amounts due, which reduces the receivable to the amount that we believe will be collected. For all other accounts receivable, we determine the adequacy of the allowance for credit losses based on historical loss patterns, the number of days that billings are past due and an evaluation of the potential risk of loss associated with specific accounts.
The following table presents changes in the allowance for credit losses (in thousands):
Year Ended December 31,
201820192020
Beginning balance$105 $169 $255 
Credit loss expense130 1,201 1,196 
Write-offs, net of recoveries(66)(1,115)(864)
Ending balance$169 $255 $587 
Unbilled receivables were $0.4 million, $0.6 million and $0.5 million as of December 31, 2018, 2019 and 2020, respectively. An unbilled receivable represents revenue earned and recognized from customer activity that was not billed prior to the end of the reporting period. Unbilled receivables are included in accounts receivable, net on our consolidated balance sheets.
Property and Equipment
Property and equipment are stated at cost. Expenditures for maintenance and repairs are expensed as incurred, while betterments that materially extend the life of an asset are capitalized. The cost of assets sold, retired or otherwise disposed of, and the related accumulated depreciation, are eliminated from the accounts and any resulting gain or loss is recognized.
Depreciation of property and equipment is determined using the straight-line method over the estimated useful lives of the applicable assets, which are as follows:
Computer equipment:2–3 years
Furniture and fixtures:5 years
Leasehold improvements:Lesser of estimated useful life or life of the lease

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Intangible Assets
Intangible assets are recorded at cost and consist of costs incurred for software patent applications. As of December 31, 2020, we had four issued patents and are pursuing ten additional patents relating to our software. We received approval for three patents in 2013 and one patent in 2018 and began amortizing the costs of obtaining these patents over the estimated remaining lives of the patents. If a patent application is rejected or if we abandon efforts to obtain a new patent, all deferred patent costs are expensed immediately. Deferred patent costs related to patents for which we have not yet obtained approval totaled $0.3 million and $0.3 million as of December 31, 2019 and 2020, respectively. Based on deferred patent costs as of December 31, 2020, the related amortization expense will be less than $0.1 million in each of the next five years. Intangible assets are as follows (in thousands):
December 31,
20192020
Deferred patent costs, gross$448 $518 
Less accumulated amortization(59)(71)
Deferred patent costs, net$389 $447 
Internal-Use Software Development Costs
Capitalized software development costs consist of costs incurred in the development of internal-use software, primarily associated with the development and enhancement of our offer management system and offer placement system. We capitalize the costs of software developed or obtained for internal use in accordance with ASC Topic 350-40, Internal Use Software. We begin to capitalize our costs upon completion of the preliminary project stage. We consider the preliminary project stage to be complete and the application development stage to have begun when preliminary development efforts are successfully completed, management has authorized and committed project funding and it is probable that the project will be completed and the software will be used as intended. These costs are amortized on a straight-line basis over the estimated useful life of the related asset, generally estimated to be three years. Costs incurred in the preliminary project stage and post-implementation operation stages are expensed as incurred and recorded in research and development expense on our consolidated statements of operations.
During 2018, 2019 and 2020, we capitalized the implementation of a new billing system as well as development costs for enhancements to our offer management system totaling $1.6 million, $2.6 million and $4.3 million, respectively. During the first quarter of 2020, we redesigned certain elements of this project and wrote off development costs totaling $1.0 million recognized in depreciation and amortization expense on our consolidated statement of operations.
Capitalized software development costs are as follows (in thousands):
December 31,
20192020
Capitalized software development costs, gross$5,537 $9,230 
Less accumulated amortization(1,722)(2,931)
Capitalized software development costs, net$3,815 $6,299 
Debt Issuance Costs
Costs incurred to obtain loans, other than lines of credit, are recorded as a reduction of the carrying amount of the related liability and amortized over the applicable loans’ life using the effective interest method. Costs incurred to obtain lines of credit are capitalized and included in other long-term assets on our consolidated balance sheets and amortized ratably over the term of the arrangement.
As described in Note 7—Debt and Financing Arrangements, we entered into a 2018 Loan Facility in 2018 and deferred $0.1 million of debt issuance costs associated with obtaining the 2018 Loan Facility and deferred $0.1 million of unamortized debt issuance costs attributed to our 2016 Line of Credit and 2016 Term Loan. We recognized a $0.9 million loss on extinguishment of debt related to the unamortized discount and unamortized debt issuance costs associated with our 2016 Term Loan and 2016 Line of Credit. This expense is included within other (expense) income, net on our consolidated statements of operations and is presented in other non-cash expenses on our consolidated statements of cash flows.

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Further, as described in Note 7—Debt and Financing Arrangements, on September 22, 2020, we issued convertible senior notes with an aggregate principal amount of $230.0 million bearing an interest rate of 1.00% due in 2025 (the “Notes”), including the exercise in full of the initial purchasers’ option to purchase up to an additional $30.0 million principal amount of the Notes. The net proceeds from this offering were $222.7 million, after deducting the initial purchasers’ discounts and commissions and the offering expenses payable by us. In accounting for the $7.3 million issuance costs related to the Notes, the allocation of issuance costs incurred between the liability and equity components was based on their relative values.
Amortization of debt issuance costs included in interest expense, net totaled $0.3 million, $0.1 million and $0.3 million in 2018, 2019 and 2020, respectively.
Deferred debt issuance costs related to our lines of credit included in other long-term assets are as follows (in thousands):
December 31,
20192020
Debt issuance costs, gross$388 $412 
Less accumulated amortization(271)(377)
Debt issuance costs, net$117 $35 

Deferred debt issuance costs related to our Notes included in debt are as follows (in thousands):
December 31,
20192020
Debt issuance costs, gross$ $5,596 
Less accumulated amortization (217)
Debt issuance costs, net$ $5,379 
Future amortization of debt issuance costs is as follows (in thousands):
Years Ending December 31,Amortization
2021$909 
20221,006 
20231,151 
20241,312 
20251,036 
Total$5,414 

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Deferred Offering Costs
Deferred offering costs consist of incremental costs directly attributable to equity offerings. Deferred offering costs are included in other long-term assets on our consolidated balance sheets. Upon completion of an offering, these amounts are offset against the proceeds of the offering.
Deferred offering costs is as follows (in thousands):
 Year Ended December 31,
 201820192020
Beginning balance$3,144 $ $ 
Deferred costs1,135 196  
Recognized against offering proceeds(4,279)(196) 
Ending balance$ $ $ 
Advertising
We expense advertising costs as incurred. These costs are included in sales and marketing expense on our consolidated statements of operations. Advertising costs include direct marketing costs such as print advertisements, market research, direct mail, public relations and trade show expenses and totaled $0.9 million, $1.4 million and $1.0 million in 2018, 2019 and 2020, respectively.
Stock-Based Compensation
We measure and recognize compensation expense based on the estimated fair value of the award on the grant date. The fair value is recognized as expense over the requisite service period, which is generally the vesting period of the respective award, on a straight-line basis when the only condition to vesting is continued service. We recognize the fair value of awards that contain performance conditions based upon the probability of the performance conditions being met. Expense for awards with performance conditions are estimated and adjusted on a quarterly basis based upon our assessment of the probability that the performance condition will be met. We recognize the fair value of awards that contain market conditions over the derived service period. Forfeitures are accounted for when they occur. Refer to Note 8—Stock-based Compensation for additional information regarding our specific award plans and estimates and assumptions used to determine fair value.
Redeemable Convertible Preferred Stock Warrant Liability
Warrants to purchase shares of our redeemable convertible preferred stock are accounted for as derivative liabilities in accordance with ASC Topic 815, Derivatives and Hedging due to the terms of the warrants and related agreements. We have determined that these warrants do not meet the scope exception of a contract indexed to our stock because of fair value protections contained in agreements governing our redeemable convertible preferred stock as described in Note 10—Redeemable Convertible Preferred Stock. We record preferred stock warrant liabilities on our consolidated balance sheets at their fair value. We record the changes in fair value of such instruments as non-cash gains or losses on our statements of operations. Upon the consummation of our IPO, all of the outstanding warrants to purchase shares of redeemable convertible preferred stock were automatically converted into warrants to purchase shares of common stock. Refer to Note 12—Fair Value Measurements for additional information.
Common Stock Warrant Liability
In connection with the Series G Stock financing, we issued warrants to purchase shares of our common stock that are accounted for as liabilities in accordance with ASC Topic 480, Distinguishing Liabilities From Equity due to the terms of the warrants and related agreements. We record these common stock warrant liabilities on our consolidated balance sheets at their fair value. We record the changes in fair value of such instruments as non-cash gains or losses in our statements of operations. Refer to Note 12—Fair Value Measurements for additional information.

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Fair Value of Financial Instruments
When required by GAAP, assets and liabilities are reported at fair value on our consolidated financial statements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Valuation inputs are arranged in a hierarchy that consists of the following levels:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 inputs are inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 inputs are unobservable inputs for the asset or liability.
Our nonfinancial assets that we recognize or disclose at fair value on our consolidated financial statements on a nonrecurring basis include property and equipment, intangible assets, capitalized software development costs and deferred FI implementation costs. The fair values for these assets are evaluated when events or changes in circumstances indicate the carrying value may not be recoverable. Refer to Note 12—Fair Value Measurements for information regarding the fair value of our financial instruments.
Income Taxes
Income taxes are accounted for using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and operating loss and tax credit carryforwards. Valuation allowances are provided when we determine that it is more likely than not that all of, or a portion of, deferred tax assets will not be utilized in the future.
Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
Estimates of future taxable income are based on assumptions that are consistent with our plans. Assumptions represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. If actual amounts differ from our estimates, the amount of our tax expense and liabilities could be materially impacted.
We have recorded a full valuation allowance related to our net deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.
We recognize the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on its technical merits as of the reporting date, and then, only in an amount more likely than not to be sustained upon review by the tax authorities. Where applicable, we classify associated interest and penalties as income tax expense. The total amounts of interest and penalties were not material. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

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3.    ACCOUNTING STANDARDS
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) to increase the transparency and comparability among organizations as it relates to lease assets and lease liabilities, by requiring lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months, with exceptions. Effective January 1, 2020, we early adopted this guidance using a modified retrospective approach, which was required for all leases that exist at or commence after the date of the initial application with an option to use certain practical expedients. We have elected to use these practical expedients, which allow us to treat all components of our leases as a single component, not to reassess lease classification or whether an arrangement is or contains a lease and not to reassess its initial accounting for direct lease costs. During the first quarter of 2020, we recorded right-of-use assets of $10.3 million, lease liabilities of $13.5 million and eliminated deferred rent liabilities of $3.2 million. These amounts represent right-of-use assets of $7.4 million, lease liabilities of $10.6 million and deferred rent liabilities of $3.2 million as of the adoption date of ASU 2016-02 and right-of-use assets and lease liabilities of $2.9 million, respectively, for office space entered into during the quarter. The adoption of this guidance did not have a significant impact on our consolidated statements of operations or cash flows.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is intended to provide more decision-useful information about expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 revises the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses on financial instruments, including, but not limited to, available for sale debt securities and accounts receivable. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, and in April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. These ASUs provide supplemental guidance and clarification to ASU 2016-13 and must be adopted concurrently with the adoption of ASU 2016-13, cumulatively referred to as “Topic 326.” Effective January 1, 2020, we adopted this guidance. The adoption of this guidance did not have a material effect on our consolidated financial statements.
On January 1, 2020, we adopted ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The adoption of this guidance did not have a material effect on our consolidated financial statements.
On January 1, 2020, we adopted ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which addresses the accounting for implementation, setup and other upfront costs incurred in a hosting arrangement. The adoption of this guidance did not have a material effect on our consolidated financial statements.
On January 1, 2019, we early adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method, as permitted under ASU 2014-09. The adoption of ASU 2014-09 did not result in a material change in the timing or amount of revenue recognized, nor did it result in the capitalization of incremental contract costs. Accordingly, there was no cumulative effect adjustment recorded in the consolidated financial statements upon adoption.
On January 1, 2019, we adopted ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The adoption of this guidance had no impact on our consolidated financial statements.

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Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion Options (“Subtopic 470-20”) and Derivatives and Hedging—Contracts in Entity’s Own Equity (“Subtopic 815-40”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. ASU 2020-06 also improves and amends the related Earnings Per Share guidance for both Subtopics. The ASU is part of the FASB's simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. ASU 2020-06 will be effective for annual reporting periods beginning after December 15, 2021. Early adoption is permitted, but not before annual reporting periods beginning after December 15, 2020. We are currently evaluating the impact of the new guidance on our consolidated financial statements.
4.     REVENUE
We have generated revenue through the sale of two categories of solutions that leverage our intelligence platform: (1) our proprietary native banking channel, the Cardlytics platform, and (2) our Other Platform Solutions. We have generated substantially all of our revenue from sales of the Cardlytics platform since inception.
Our Other Platform Solutions enabled marketers and marketing service providers to leverage the power of purchase intelligence outside the bank channel. We have shifted the majority of our efforts and resources to support the growth of the Cardlytics platform. As a result, we have not and do not expect to generate substantial, if any, revenue from Other Platform Solutions for the foreseeable future.
The Cardlytics Platform
The Cardlytics platform is our proprietary native bank advertising channel that enables marketers to reach consumers through the FIs' trusted and frequently visited digital banking channels. Working with the marketer, we design a campaign that targets customers based on their purchase history. The consumer is offered an incentive to make a purchase from the marketer within a specified period. We use a portion of the fees that we collect from marketers to provide these consumer incentives to our FIs’ customers after they make qualifying purchases ("Consumer Incentives").
The Cardlytics platform is priced predominantly in two ways: (1) Cost per Served Sale (“CPS”), and (2) Cost per Redemption (“CPR”).
CPS. Our primary pricing model is CPS, which we created to meet the media buying preferences of marketers. We generate revenue by charging a percentage, which we refer to as the CPS Rate, of all purchases from the marketer by consumers (1) who are served marketing and (2) subsequently make a purchase from the marketer during the campaign period, regardless of whether consumers select the marketing and thereby becomes eligible to earn the applicable Consumer Incentive. We set CPS Rates for marketers based on our expectation of the marketer’s return on spend for the relevant campaign. Additionally, we set the amount of the Consumer Incentives payable for each campaign based on our estimation of our ability to drive incremental sales for the marketer. We seek to optimize the level of Consumer Incentives to retain a greater portion of billings. However, if the amount of Consumer Incentives exceeds the amount of billings that we are paid by the applicable marketer we are still responsible for paying the total Consumer Incentive. This has occurred infrequently and has been immaterial in amount for each of the periods presented. In some instances, we may also charge the marketer the Consumer Incentive, in which case the marketer determines the level of Consumer Incentive for the campaign.
CPR. Under our CPR pricing model, marketers specify and fund the Consumer Incentive and pay us a separate negotiated, fixed marketing fee, which we refer to as the CPR Fee, for each purchase that we generate. We generate revenue if the consumer (1) is served marketing, (2) selects the marketing and thereby becomes eligible to earn the applicable Consumer Incentive and (3) makes a qualifying purchase from the marketer during the campaign period. We set the CPR Fee for marketers based on our estimation of the marketers’ return on spend for the relevant campaign. The CPR Fee is either a percentage of qualifying purchases or a flat amount. In some instances, we may solely charge the marketer the CPR Fee, in which case we determine the level of Consumer Incentive for the campaign.

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The following table summarizes revenue by pricing model (in thousands):
 Year Ended December 31,
 201820192020
Cost per Served Sale$101,087 $143,754 $131,045 
Cost per Redemption43,389 63,295 53,838 
Other6,208 3,381 2,009 
Revenue$150,684 $210,430 $186,892 
Revenue Recognition
Our revenue generated from our platform consist of transaction-based fees made up of a significant volume of low-dollar transactions, sourced from multiple databases. The processing and recording of revenue is highly automated and is based on contractual terms with marketers, FIs, and other parties. Because of the nature of our transaction-based fees, we use automated systems to process and record our revenue transactions.
We determine revenue recognition through the following steps:
identification of a contract with a customer,
identification of the performance obligation(s) in the contract,
determination of the transaction price,
allocation of the transaction price to the performance obligation(s) in the contract, and
recognition of revenue when or as the performance obligation(s) are satisfied.
We sell our solutions by entering into agreements directly with marketers or their marketing agencies, generally through the execution of insertion orders. The agreements state the terms of the arrangement, the negotiated fee, payment terms and the fixed period of time of the campaign. We consider a contract to exist when a campaign, which typically lasts 45 days, is published to an FI partner under the terms of an insertion order.
With respect to our Cardlytics platform service, our performance obligation is to offer incentives to FIs' customers to make purchases from the marketer within a specified period. This performance obligation is a series that represents a stand ready obligation to provide a targeted campaign for the marketer to FIs' customers. The Cardlytics platform fees represent variable consideration that is resolved when FIs' customers make qualifying purchases during the marketing campaign term.
Subsequent to a qualifying purchase, the associated fees are generally not subject to refund or adjustment unless the fees from the marketing campaign exceed a contractual maximum (marketer budget). We have not constrained our revenue because adjustments have historically been immaterial and given the short duration of our marketing campaigns, any adjustments are recognized during the period of the marketing campaign. We recognize revenue for the Cardlytics platform fees over time using the right to invoice practical expedient because the amount billed is equal to the value delivered to marketers through qualified purchases by FIs' customers during that period.
Consumer Incentives
We report our revenue on our consolidated statements of operations net of Consumer Incentives. We do not provide the goods or services that are purchased by our FIs’ customers from the marketers to which the Consumer Incentives relate. Accordingly, the marketer is deemed to be the principal in the relationship with the customer and, therefore, the Consumer Incentive is deemed to be a reduction in the purchase price paid by the customer for the marketer’s goods or services. While we are responsible for remitting Consumer Incentives to our FI partners for further payment to their customers, we function solely as an agent of marketers in these arrangements.
We invoice marketers monthly based on the qualifying purchases of FIs' customers as reported by our FI partners during the month. Invoice payment terms, negotiated on a marketer-by-marketer basis, are typically between 30 to 60 days. However, for certain marketing agencies with sequential liability terms, payments are not due to us until such marketing agency has received payment from its marketer client. Accounts receivable is recorded at the amount of gross billings to marketers, net of allowances, for the fees and Consumer Incentives that we are responsible to collect. Our accrued liabilities also include the amount of Consumer Incentives due to FI partners. As a result, accounts receivable and accrued liabilities may appear large in relation to revenue, which is reported on a net basis. During 2018, 2019 and 2020, Consumer Incentives totaled $68.3 million, $105.6 million and $76.5 million, respectively.

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FI Share and Other Third-Party Costs
We report our revenue on our consolidated statements of operations gross of FI Share. FI Share costs are included in FI Share and other third-party costs in our consolidated statements of operations, rather than as a reduction of revenue, because we and not our FI partners act as the principal in our arrangements with marketers. We are responsible for the fulfillment and acceptability of the services purchased by marketers. We also have latitude in establishing the price of our services, have discretion in supplier selection and earn variable amounts. FI partners only supply consumer purchase data and digital marketing space and generally have no involvement in the marketing campaigns or contractual relationship with marketers.
Contract Costs
Given the short-term nature of our marketing campaigns, all contract costs are expensed as incurred since the expected period of benefit is less than one year. Costs to fulfill a contract include immaterial costs to set up a campaign that we expense as incurred due to the short-term nature of our marketing campaigns
5.     LEASES
Effective January 1, 2020, we early adopted ASU 2016-02, Leases (Topic 842). This standard requires us to recognize a right-of-use asset and a lease liability for all leases with an initial term in excess of twelve months. The asset reflects the present value of unpaid fixed lease payments coupled with initial direct costs, prepaid lease payments, and lease incentives. The amount of the lease liability is calculated as the present value of unpaid fixed lease payments. We evaluate each of our lease and service arrangements at inception to determine if the arrangement is, or contains, a lease and the appropriate classification of each identified lease. A lease exists if we obtain substantially all of the economic benefits of and have the right to control the use of an asset for a period of time. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease agreement. Lease costs are recognized as expense on a straight-line basis over the lease term. We consider a termination or renewal option in the determination of the lease term when it is reasonably certain that we will exercise that option. We adopted ASU 2016-02 using a modified retrospective approach and did not restate comparative periods. We elected to take the package of practical expedients allowing us to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. We have elected to account for all components in a contract as part of the single lease component to which they are related. Significant assumptions and judgments in calculating the right-of-use assets and lease liability include the determination of the applicable borrowing rate for each lease. Because our leases generally do not provide a readily determinable implicit interest rate, we use an incremental borrowing rate to measure the lease liability and associated right-of-use asset at the lease commencement date. The incremental borrowing rate used is a fully collateralized rate that considers our credit rating, market conditions and the term of the lease at the lease commencement date.
During the first quarter of 2020, we recorded right-of-use assets of $10.3 million, lease liabilities of $13.5 million and eliminated deferred rent liabilities of $3.2 million. These amounts represent right-of-use assets of $7.4 million, lease liabilities of $10.6 million and deferred rent liabilities of $3.2 million as of the adoption date of ASU 2016-02 and right-of-use assets and lease liabilities of $2.9 million, respectively, for office space entered into during the quarter. As of the adoption date, our office and data center leases have remaining lease terms ranging from one to six years.
During 2020, we recorded additional right-of-use assets and lease liabilities of $1.0 million for data center equipment leases entered into during the year. We also renewed certain data center lease agreements resulting in a lease modification and the recognition of additional right-of-use assets and lease liabilities of $2.2 million.
During 2020, we made cash payments of $4.0 million for operating leases which are included in cash flows (used in) provided by operating activities in our consolidated statement of cash flows.
The following table summarizes activity related to our leases (in thousands):
Year Ended
December 31, 2020
Operating lease expense$4,078 
Variable lease expense847 
Short-term lease expense232 

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The following table presents our weighted average borrowing rate and weighted average lease term:
 December 31, 2020
Weighted average borrowing rate3.4 %
Weighted average remaining lease term (years)3.25

The following table summarizes future maturities of lease liabilities as of December 31, 2020 (in thousands):
Amount
2021$5,097 
20224,681 
20232,692 
20241,807 
2025611 
Total lease payments14,888 
Imputed interest789 
Total operating lease liabilities$14,099 

The following table summarizes future payments for operating leases as of December 31, 2019, prior to our adoption of ASU 2016-02 (in thousands):
Minimum Lease
Payments
2020$3,040 
20212,759 
20222,808 
20231,847 
20241,807 
Thereafter611 
Total$12,872 
6.    PROPERTY AND EQUIPMENT
Significant components of property and equipment are as follows (in thousands):
December 31,
20192020
Computer equipment$21,269 $27,105 
Leasehold improvements6,960 6,770 
Furniture and fixtures1,557 1,112 
Construction in progress1,125 125 
Property and equipment, gross30,911 35,112 
Less accumulated depreciation(16,621)(21,247)
Property and equipment, net$14,290 $13,865 

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Assets acquired under finance leases, included within computer equipment, are as follows (in thousands):
December 31,
20192020
Finance lease assets, gross$1,096 $557 
Less accumulated depreciation(1,067)(548)
Finance lease assets, net$29 $9 
Depreciation expense was $3.0 million, $4.0 million and $5.6 million in 2018, 2019 and 2020, respectively.

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7.     DEBT AND FINANCING ARRANGEMENTS
Our debt consists of the following (in thousands):
December 31,
20192020
Convertible senior notes, net$ $174,011 
Finance leases37 13 
Total debt37 174,024 
Less current portion of long-term debt(24)(13)
Long-term debt, net of current portion$13 $174,011 
Accrued interest is included within accrued expenses in our consolidated balance sheet. We had no accrued interest on debt as of December 31, 2019 and $0.6 million of accrued interest as of December 31, 2020.
2020 Convertible Senior Notes
On September 22, 2020, we issued convertible senior notes with an aggregate principal amount of $230.0 million bearing an interest rate of 1.00% due in 2025 (the “Notes”), including the exercise in full of the initial purchasers’ option to purchase up to an additional $30.0 million principal amount of the Notes. The Notes were issued pursuant to an indenture, dated September 22, 2020 (the “Indenture”), between us and U.S. Bank National Association, as trustee.
The Notes are general senior, unsecured obligations and will mature on September 15, 2025, unless earlier converted, redeemed or repurchased. The Notes bear interest at a rate of 1.00% per year, payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2021. The Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding June 15, 2025, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2020 (and only during such calendar quarter), if the last reported sale price of our common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the Notes on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of common stock and the conversion rate for the Notes on each such trading day; (3) if we call such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events as set forth in the Indenture. On or after June 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes at any time, regardless of the foregoing circumstances. Upon conversion, we may satisfy our conversion obligation by paying and/or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election, in the manner and subject to the terms and conditions provided in the Indenture. We currently intend to settle the principal amount of the Notes with cash.
The conversion rate for the Notes will initially be 11.7457 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $85.14 per share of common stock. The conversion rate for the Notes is subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In addition, following certain corporate events that occur prior to the maturity date of the Notes or if we deliver a notice of redemption in respect of the Notes, we will, in certain circumstances, increase the conversion rate of the Notes for a holder who elects to convert its Notes in connection with such a corporate event or convert its notes called for redemption during the related redemption period (as defined in the Indenture), as the case may be.
We may not redeem the Notes prior to September 20, 2023. We may redeem for cash all or any portion of the Notes, at our option, on or after September 20, 2023 and prior to the 36th scheduled trading day immediately preceding the maturity date, if the last reported sale price of our common stock has been at least 130% of the conversion price for the Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes. If we elect to redeem less than all of the Notes, at least $75.0 million aggregate principal amount of Notes must be outstanding and not subject to redemption as of the relevant redemption notice date.

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If we undergo a Fundamental Change (as defined in the Indenture), then, except as set forth in the Indenture, holders may require, subject to certain exceptions, us to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving us after which the Notes become automatically due and payable. The following events are considered “events of default” under the Indenture:
default in any payment of interest on any Note when due and payable and the default continues for a period of 30 days;
default in the payment of principal of any Note when due and payable at its stated maturity, upon optional redemption, upon any required repurchase, upon declaration of acceleration or otherwise;
failure by us to comply with our obligation to convert the Notes in accordance with the Indenture upon exercise of a holder’s conversion right, and such failure continues for three business days;
failure by us to give a fundamental change notice, notice of a make-whole fundamental change or notice of a specified corporate event, in each case when due and such failure continues for one business day;
failure by us to comply with its obligations in respect of any consolidation, merger or sale of assets;    
failure by us to comply with any of our other agreements in the Notes or the Indenture for 60 days after written notice of such failure from the trustee or the holders of at least 25% in principal amount of the Notes then outstanding;
default by us or any of our significant subsidiaries (as defined in the Indenture) with respect to any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of $35,000,000 (or its foreign currency equivalent), in the aggregate of us and/or any such significant subsidiary, whether such indebtedness now exists or shall hereafter be created, (i) resulting in such indebtedness becoming or being declared due and payable prior to its stated maturity date or (ii) constituting a failure to pay the principal of any such indebtedness when due and payable (after the expiration of all applicable grace periods) at its stated maturity, upon required repurchase, upon declaration of acceleration or otherwise, and in the cases of clauses (i) and (ii), such acceleration shall not have been rescinded or annulled or such failure to pay or default shall not have been cured or waived, or such indebtedness is not paid or discharged, as the case may be, within 30 days after written notice to us by the trustee or to us and the trustee by holders of at least 25% in aggregate principal amount of the Notes then outstanding in accordance with the Indenture; and
certain events of bankruptcy, insolvency or reorganization of us or any of our significant subsidiaries.
If certain bankruptcy and insolvency-related events of default with respect to us occur, the principal of, and accrued and unpaid interest on, all of the then outstanding Notes shall automatically become due and payable. If an event of default with respect to the Notes, other than certain bankruptcy and insolvency-related events of default with respect to us, occurs and is continuing, the trustee by notice to us or the holders of at least 25% in principal amount of the outstanding Notes by notice to us and the trustee, may, and the trustee at the request of such holders shall, declare the principal of, and accrued and unpaid interest on, all of the then-outstanding Notes to be due and payable. Notwithstanding the foregoing, the Indenture provides that, to the extent we so elect, the sole remedy for an event of default relating to certain failures by us to comply with certain reporting covenants in the Indenture will, for the first 365 days after the occurrence of such event of default, consist exclusively of the right to receive additional interest on the Notes at a rate equal to 0.25% per annum of the principal amount of the Notes outstanding for each day during the first 180 days after the occurrence of such an event of default and 0.50% per annum of the principal amount of the Notes outstanding from the 181st day to, and including, the 365th day following the occurrence of such event of default, as long as such event of default is continuing (in addition to any additional interest that may accrue as a result of a registration default (as set forth in the Indenture).
The Indenture provides that we shall not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all of the consolidated properties and assets of our subsidiaries, taken as a whole, to, another person (other than any such sale, conveyance, transfer or lease to one or more of our direct or indirect wholly owned subsidiaries), unless: (i) the resulting, surviving or transferee person (if not us) is a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and such corporation (if not us) expressly assumes by supplemental indenture all of our obligations under the Notes and the Indenture; and (ii) immediately after giving effect to such transaction, no default or event of default has occurred and is continuing under the Indenture.
The net proceeds from this offering were $222.7 million, after deducting the initial purchasers’ discounts and commissions and the offering expenses payable by us. We used $26.5 million of the net proceeds to pay the cost of the capped call transactions described below.

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The Notes are accounted for in accordance with FASB ASC Subtopic 470-20, Debt with Conversion and Other Options. Pursuant to ASC Subtopic 470-20, issuers of certain convertible debt instruments, such as the Notes, that have a net settlement feature and may be settled wholly or partially in cash upon conversion are required to separately account for the liability (debt) and equity (conversion option) components of the instrument. The carrying amount of the liability component of the instrument was computed using a discount rate of 6.50%, which was determined by estimating the fair value of a similar liability without the conversion option using Level 3 inputs. The amount of the equity component is then calculated by deducting the fair value of the liability component from the principal amount of the instrument. The difference between the principal amount and the liability component represents a debt discount that is amortized to interest expense over the respective term of the Notes using the effective interest rate method. The equity component is recorded in Additional Paid-in Capital and is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the issuance costs related to the Notes, the allocation of issuance costs incurred between the liability and equity components was based on their relative values.
The net carrying amount of the liability component of the Notes is as follows (in thousands):

December 31, 2020
Principal$230,000 
Minus: Unamortized debt discount(50,610)
Minus: Unamortized issuance costs(5,379)
Net carrying amount of the liability component$174,011 

The net carrying amount of the equity component of the Notes is as follows (in thousands):

December 31, 2020
Proceeds allocated to the conversion options (debt discount)$53,096 
Minus: Issuance costs(1,680)
Net carrying amount of the equity component$51,416 

Interest expense recognized related to the Notes is as follows (in thousands):
Year Ended
December 31, 2020
Contractual interest expense (due in cash)$626 
Amortization of debt discount2,486 
Amortization of debt issuance costs217 
Total interest expense related to the Notes$3,329 
Capped Call Transactions
In connection with the issuance of the Notes, we entered into privately negotiated capped call transactions (the "Capped Calls") with an affiliate of one of the initial Note purchasers and certain other financial institutions. The Capped Calls are intended to reduce potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be. The Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives. The cost of $26.5 million incurred to purchase the Capped Calls was recorded as a reduction to additional paid-in capital in the accompanying consolidated balance sheet.
The Capped Calls each have an initial strike price of $85.14 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have an initial cap price of $128.51 per share, subject to certain adjustments.

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2018 Loan Facility
On May 21, 2018, we entered into a Loan and Security Agreement with Pacific Western Bank (the “Lender”) consisting of a $30.0 million asset–based revolving line of credit ("2018 Line of Credit") and a $20.0 million term loan ("2018 Term Loan") (collectively, the “2018 Loan Facility”). We used the entire $20.0 million in proceeds from the 2018 Term Loan and an advance of $27.4 million under the 2018 Line of Credit to repay all outstanding obligations under our prior line of credit and term loan.
On May 14, 2019, we amended our 2018 Loan Facility to increase the capacity of our Line of Credit, from $30.0 million to $40.0 million, and decrease the capacity of our 2018 Term Loan from $20.0 million to $10.0 million. This amendment also extended the maturity date of the 2018 Loan Facility from May 21, 2020 to May 14, 2021. We repaid $10.0 million of the principal balance of the 2018 Term Loan upon the execution of the amendment in May 2019 and repaid the remaining $10.0 million principal balance in September 2019.
On September 17, 2020, we amended our 2018 Loan Facility to allow for the issuance of the Notes. On December 30, 2020, we amended our 2018 Loan Facility to increase the capacity of our Line of Credit, from $40.0 million to $50.0 million. This amendment also extended the maturity date of the 2018 Loan Facility from May 14, 2021 to December 31, 2022. As of December 31, 2020, we had $50.0 million of unused borrowings available under our 2018 Line of Credit.
Prior to the December 2020 amendment, the 2018 Loan Facility contained moving trailing 12-month billing covenants, which ranged from $210.0 million to $255.0 million, during the term of the facility. The former terms of the 2018 Loan Facility also required us to maintain a total cash balance plus liquidity under the 2018 Line of Credit of not less than $5.0 million. Effective with the December 2020 amendment, the former billings and liquidity covenants were removed and were replaced with a requirement to maintain a cash to funded senior debt ratio under the 2018 Line of Credit of 1.25:1.00.
Under the 2018 Loan Facility relating to the 2018 Line of Credit, we are able to borrow up to the lesser of $50.0 million or 85% of the amount of our eligible accounts receivable. Interest on advances under the 2018 Line of Credit bears an interest rate equal to the prime rate minus 0.50%, or 2.75% as of December 31, 2020. In addition, we are required to pay an unused line fee of 0.15% per annum on the average daily unused amount of the $50.0 million revolving commitment. Interest accrued on the 2018 Term Loan at an annual rate of interest equal to the prime rate minus 2.75%, or 2.00% at the date of repayment in September 2019.
The 2018 Loan Facility includes customary representations, warranties and covenants (affirmative and negative), including restrictive covenants that prohibits mergers, acquisitions and dispositions of assets, incurrence of indebtedness and encumbrances on our assets and the payment or declaration of dividends; in each case subject to specified exceptions.
The 2018 Loan Facility also includes standard events of default, including in the event of a material adverse change. Upon the occurrence of an event of default, the lender may declare all outstanding obligations immediately due and payable and take such other actions as are set forth in the 2018 Loan Facility and increase the interest rate otherwise applicable to advances under the 2018 Line of Credit by an additional 3.00%. All of our obligations under the 2018 Loan Facility are secured by a first priority lien on substantially all of our assets. The 2018 Loan Facility does not include any prepayment penalties.
We believe we were in compliance with all financial covenants as of December 31, 2020.
2016 Line of Credit
In September 2016, we entered into a $50.0 million loan and security agreement ("2016 Line of Credit") maturing on March 14, 2019. The 2016 Line of Credit facility was repaid and terminated in May 2018 in connection with obtaining our 2018 Loan Facility. We recognized a $0.1 million loss on extinguishment of debt related to the unamortized debt issuance costs. This expense is included within other income (expense), net in our consolidated statements of operations and is presented in other non-cash expenses on our consolidated statement of statement of cash flows.
2016 Term Loan
In July 2016, we entered into a $24.0 million credit agreement ("2016 Term Loan") maturing on July 21, 2019. The 2016 Term Loan was repaid and terminated in May 2018 in connection with obtaining our 2018 Loan Facility. We recognized a $0.8 million loss on extinguishment of debt related to the unamortized discount and unamortized debt issuance costs. This expense is included within other income (expense), net in our consolidated statements of operations and is presented in other non-cash expenses on our consolidated statement of statement of cash flows.

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Future Payments
Aggregate future payments of principal due upon maturity are as follows (in thousands):
Years Ending December 31,Finance leasesConvertible Senior Notes
2021$13 $— 
2022— — 
2023— — 
2024— — 
2025— 230,000 
Total debt$13 $230,000 

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8.     STOCK-BASED COMPENSATION
In January 2018, our board of directors and stockholders approved an increase in the total number of shares of common stock issuable under our 2008 Stock Plan ("2008 Plan") to 4,020,000 shares. Our board of directors has adopted and our stockholders have approved our 2018 Equity Incentive Plan ("2018 Plan"). Our 2018 Plan became effective on February 8, 2018, the date our registration statement in connection with our IPO was declared effective. We do not expect to grant any additional awards under the 2008 Plan. Any awards granted under the 2008 Plan will remain subject to the terms of our 2008 Plan and applicable award agreements.
Initially, the aggregate number of shares of our common stock that may be issued pursuant to stock awards under the 2018 Plan was the sum of (i) 1,875,000 shares plus (ii) 61,247 shares reserved, and remaining available for issuance, under our 2008 Plan at the time our 2018 Plan became effective and (iii) the number of shares subject to stock options or other stock awards granted under our 2008 Plan that would have otherwise returned to our 2008 Plan (such as upon the expiration or termination of a stock award prior to vesting). As of December 31, 2020, there were 1,222,316 shares of our common stock reserved for issuance under our 2018 Plan. The number of shares of our common stock reserved for issuance under our 2018 Plan will automatically increase on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, by 5% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our board of directors. Accordingly, the number of shares of our common stock reserved for issuance under our 2018 Plan increased by 1,393,040 shares on January 1, 2021.
The 2018 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards and other forms of equity compensation, which are collectively referred to as stock awards. Additionally, the 2018 Plan provides for the grant of performance cash awards.
The following table summarizes the allocation of stock-based compensation on the consolidated statements of operations (in thousands):
 Year Ended December 31,
 201820192020
Delivery costs$633 $711 $1,181 
Sales and marketing expense9,358 4,248 9,857 
Research and development expense4,087 1,619 4,713 
General and administration expense12,712 9,273 16,645 
Total stock-based compensation expense$26,790 $15,851 $32,396 
During 2018, 2019 and 2020, we capitalized less than $0.1 million, less than $0.1 million and $0.5 million, respectively, of stock-based compensation expense for software development.
Common Stock Options
The term of each option to purchase shares of our common stock pursuant to the Stock Plan is set by our board of directors or a committee thereof. Option awards are generally granted with an exercise price not less than the fair value per share of our common stock at the grant date. Option awards generally vest over four years and expire 10 years following the date of grant.

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A summary of common stock option activity is as follows (in thousands, except per share amounts):
SharesWeighted-Average
Exercise Price
Per Share
Weighted Average Contractual Life (in years)
Aggregate Intrinsic Value(1)
(in thousands)
Outstanding - December 31, 20172,514 $18.42 
Granted29 24.24 
Exercised(357)6.25 
Forfeited(197)24.10 
Cancelled(215)16.60 
Outstanding - December 31, 20181,774 $20.55 
Granted39 20.64 
Exercised(716)16.84 
Forfeited(31)23.95 
Cancelled(66)22.37 
Outstanding - December 31, 20191,000 $22.99 
Granted  
Exercised(467)21.78 $29,523 
Forfeited(19)27.83 
Cancelled(1)21.89 
Outstanding - December 31, 2020513 $23.91 5.67$61,009 
Exercisable - December 31, 2020480 $23.72 5.62$57,126 
(1)For options exercised during the year, the aggregate intrinsic value represents the total pre-tax intrinsic value received by option holders based on the closing price of our common stock as reported on the Nasdaq Global Market on the exercise date. For options outstanding and exercisable at December 31, 2020, the aggregate intrinsic value represents the total pre-tax intrinsic value based on the $142.77 closing price of our common stock as reported on the Nasdaq Global Market on December 31, 2020 that would have been received by option holders had all in-the-money options been exercised on that date.
The total fair value of options vested during 2018, 2019 and 2020 was approximately $6.0 million, $4.8 million and $2.3 million respectively. As of December 31, 2020, $0.3 million of unrecognized compensation expense related to unvested options will be recognized over a weighted-average period of 0.3 years. All stock option awards outstanding as of December 31, 2020 are expected to vest.

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Restricted Stock Units
We grant restricted stock units ("RSUs") to employees and our non-employee directors. The following table summarizes changes in RSUs, inclusive of performance-based RSUs:
Shares
(in thousands)
Weighted-Average
Grant Date Fair Value Per Share
Weighted-Average Remaining Contractual Term (in years)Unamortized Compensation Costs
(in thousands)
Unvested - December 31, 2017 $ 
Granted1,309 20.58 
Vested(850)21.93 
Forfeited/canceled(78)17.97 
Unvested - December 31, 2018381 $18.11 
Granted1,978 17.78 
Vested(486)14.97 
Forfeited/canceled(132)18.92 
Unvested - December 31, 20191,741 $18.55 
Granted1,758 43.07 
Vested(779)28.56 
Forfeited(286)23.34 
Unvested - December 31,20202,434 $32.49 2.80$61,630 
Service-based Restricted Stock Units
During 2018, we granted 434,377 RSUs to our employees and non-employee directors, which have annual vesting periods ranging from one to four years. As of December 31, 2018, there was approximately $4.5 million of unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of 2.4 years.
During 2019, we granted 725,832 RSUs to employees and our non-employee directors, which have annual vesting periods ranging from one to four years. As of December 31, 2019, there was approximately $20.4 million of unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of 3.1 years.
During 2020, we granted 1,233,617 RSUs to employees, executives, and our non-employee directors, which have annual vesting periods ranging from one to four years. During 2020, we granted 47,690 immediately vesting RSUs to employees in lieu of cash-based incentive compensation. As of December 31, 2020, there was approximately $61.6 million of unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of 2.8 years. The aggregate intrinsic value based on the $142.77 closing price of our common stock as reported on the Nasdaq Global Market on December 31, 2020 of unvested RSUs is $347.5 million as of December 31, 2020.
Subsequent to December 31, 2020, we granted 52,322 RSUs to employees, which have annual vesting periods ranging from one to four years. The unamortized stock-based compensation expense related to these RSUs is approximately $6.4 million.
Performance-based Restricted Stock Units
During 2018, we granted two separate tranches of performance-based RSUs ("2018 PSUs"), each to receive 437,500 shares of common stock, to executives. The vesting of the 875,000 2018 PSUs was contingent upon the completion of our IPO and includes other performance-based conditions. The performance condition in the first tranche was to be satisfied when we attained 70.0 million of FI monthly active users ("FI MAUs") within three years of the grant date. The performance condition in the second tranche was to be satisfied when we attained 85.0 million of average FI MAUs within five years of the grant date. FI MAUs is a performance metric defined within "Management's Discussion and Analysis of Financial Condition and Results of Operations." We recognize stock compensation for these 2018 PSUs based upon the expected timing of the achievement of these FI MAU targets. During 2018, 25,000 of the 2018 PSUs were forfeited prior to the FI MAU targets being reached. During 2018, both average FI MAU targets were reached, resulting in the vesting of both tranches of the 2018 PSUs and the issuance of 850,000 shares of our common stock to fully settle the 2018 PSUs. During 2018, we recognized $18.6 million of stock-based compensation expense related to these awards.

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During 2019, we granted 1,252,500 performance-based RSUs (“2019 PSUs”). The 2019 PSUs are composed of four equal tranches, each of which have an independent performance-based vesting condition. The vesting criteria for the four tranches are as follows:
a minimum growth rate in adjusted contribution over a trailing 12-month period,
a minimum number of advertisers that are billed above a specified amount over a trailing 12-month period,
a minimum cumulative adjusted EBITDA target over a trailing 12-month period, and
a minimum trailing 30-day average closing price of our common stock.
The vesting conditions of each of the four tranches must be achieved within four years of the grant date. Upon a vesting event, 50% of the related tranche vests immediately, 25% of the related tranche vests six months after the achievement date and 25% of the related tranche vests 12 months after the achievement date. Adjusted EBITDA and adjusted contribution are performance metrics defined within Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations." In August and November 2019, the compensation committee of our board of directors certified that the target minimum trailing 30-day average closing price of our common stock and target minimum cumulative adjusted EBITDA over a trailing 12-month period, respectively, were achieved resulting in the immediate vesting of 50% of the related PSU tranches. In February 2020, 25% of the 30-day average closing price of our common stock PSU tranche vested upon the six-month anniversary of the tranche's achievement date and the remaining 25% of the tranche vested in August 2020 upon the twelve-month anniversary of the tranche's achievement date. In May 2020, 25% of the adjusted EBITDA tranche vested upon the six-month anniversary of the tranche's achievement date, and the remaining 25% of the tranche vested in November 2020 upon the twelve-month anniversary of the tranche's achievement date.
In April 2020, we granted 476,608 performance-based restricted stock units ("2020 PSUs"), of which 443,276 units have a performance-based vesting condition based on a minimum average revenue per user ("ARPU") target over a trailing 12-month period and 33,332 units have the same performance-based vesting conditions as those that remain unmet under the 2019 PSUs described above. ARPU is a performance metric defined within Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations." The ARPU vesting condition must be achieved within four years of the grant date. Upon the vesting event, 50% of the award vests immediately, 25% of the award vests six months after achievement date and 25% of the award vests 12 months after the achievement date.
Restricted Securities Units
During 2016, we granted $1.0 million of restricted securities units to certain executives in lieu of cash bonuses. Upon issuance, the restricted securities units were indexed to the 2016 convertible promissory notes. As a result of the Series G Stock financing in 2017, the restricted securities units became indexed to our Series G’ Stock upon conversion of the 2016 convertible promissory notes. Upon the consummation of our IPO in February 2018, the restricted securities units became indexed to our common stock.
Vesting requirements included both a service-based condition and a performance-based condition. The service-based condition required each recipient to remain employed until the earlier of i) the date 6 months from the restricted securities unit grant date, ii) the date of a qualified liquidity event, or iii) date of termination without cause. The performance-based condition required a sale of the Company or IPO event within a fixed period of time not more than 5 years from the restricted securities units grant date. The restricted securities units were considered liability classified awards, but due to the performance condition relating to sale of the Company or IPO, no compensation cost was recognized until one of these events occurred. These units vested upon the consummation of our IPO in February 2018, resulting in a non-cash expense of $0.5 million, and were settled upon the delivery of 37,406 shares of our common stock in August 2018.
Employee Stock Purchase Plan
Our board of directors adopted and our stockholders have approved our 2018 Employee Stock Purchase Plan ("2018 ESPP"). Our 2018 ESPP became effective on February 8, 2018, the date our registration statement in connection with our IPO was declared effective and enables eligible employees to purchase shares of our common stock at a discount. Purchases will be accomplished through participation in discrete offering periods. On each purchase date, eligible employees will purchase our common stock at a price per share equal to 85% of the lesser of the fair market value of our common stock on the first trading day of the offering period or the date of purchase. During 2018, 2019 and 2020, a total of 177,238, 154,601 and 59,173 shares of common stock were purchased by employees under the 2018 ESPP, respectively.

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As of December 31, 2020, 474,120 shares of common stock were reserved for issuance pursuant to our 2018 ESPP. Additionally, the number of shares of our common stock reserved for issuance under our 2018 ESPP will automatically increase on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2026, by the lesser of (i) 1% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, (ii) 500,000 shares of our common stock or (iii) such lesser number of shares of common stock as determined by our board of directors. Accordingly, the number of shares of our common stock reserved for issuance under our 2018 ESPP increased by 278,608 shares on January 1, 2021. Shares subject to purchase rights granted under our 2018 ESPP that terminate without having been issued in full will not reduce the number of shares available for issuance under our 2018 ESPP.
9.    INCOME TAXES
Domestic and foreign components of loss before income taxes are as follows (in thousands):
Year Ended December 31,
201820192020
Domestic$(48,897)$(13,464)$(42,613)
Foreign(4,145)(3,680)(12,809)
Loss before income taxes$(53,042)$(17,144)$(55,422)
The significant components of income tax (expense) benefit are as follows (in thousands):
Year Ended December 31,
201820192020
Current:
Federal$ $ $ 
State   
Foreign (1)
   
Total current   
Deferred:
Federal6,896 1,326 23,062 
State1,264 622 3,744 
Foreign916 222 1,713 
Change in uncertain tax positions(105)598 (117)
Change in valuation allowance(8,971)(2,768)(28,402)
Total deferred   
Income tax benefit$ $ $ 
(1)The current income tax (expense) during 2019 and 2020 excludes Indian income tax expense of less than $0.1 million and $0.3 million, respectively.

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The following table summarizes the significant differences between the U.S. federal statutory tax rate and our effective tax rate:
Year Ended December 31,
201820192020
Tax benefit at federal statutory rate21.00 %21.00 %21.00 %
State income taxes, net of federal benefit1.91 % % %
Change in federal and state statutory rate0.03 %0.34 %0.35 %
Foreign rate differential(0.06)%(0.20)%(0.62)%
Other adjustments(5.97)%(5.18)%7.36 %
Valuation allowance(16.91)%(16.18)%(28.57)%
Income tax benefit %(0.22)%(0.48)%
The significant components of deferred income taxes are as follows (in thousands):
December 31,
20192020
Net operating loss carry-forwards$64,348 $92,387 
Allowance for credit losses
28 94 
Depreciation and amortization(1,321)(13,601)
Stock-based compensation2,727 3,769 
Deferred costs2,275 1,462 
IRC Section 163(j) interest expense limitation436 89 
Other tax credit carry-forward1,419 1,771 
Other temporary differences319 20 
Valuation allowance(70,231)(85,991)
Net long-term deferred tax asset$ $ 
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. Key provisions of the CARES Act include one-time payments to individuals, strengthened unemployment insurance, additional health-care funding, loans and grants to certain businesses, and temporary amendments to the Internal Revenue Code. The corporate income tax provisions of the CARES Act include allowing the carryback of NOLs generated in recent tax years, temporary removal of the 80% NOL usage limitation put in place under the Tax Cuts and Jobs Act ("TCJA"), temporary favorable adjustments to the business interest expense limitation calculated under Sec. 163(j), and the acceleration of refundable AMT credits.
We believe that the corporate income tax provisions of the CARES Act will not have a materially beneficial impact on the Company. Due to the Company’s history of losses, there is no potential for the carryback of NOLs. The temporary removal of the 80% income limitation on NOL usage has no impact as the Company generated a taxable loss for 2020 and has substantial NOLs generated in years prior to the enactment of the TCJA not subject to this 80% limitation. The changes to Sec. 163(j) are not expected to have a beneficial impact as the Company’s interest expense is limited under Sec. 163(j) due to taxable losses rather than the 30% ATI limit enacted under the TCJA. The Company did take advantage of payroll tax deferrals under the CARES Act and as a result has established a $0.8 million deferred tax asset for nondeductible payroll tax accruals that are being deferred to the December 31, 2021 and December 31, 2022 payment dates.
We have generated historical net losses and recorded a full valuation allowance against our net deferred tax assets. We expect to maintain a full valuation allowance in the near term. Realization of any of our net deferred tax assets depends upon future earnings, the timing and amount of which are uncertain.

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The following table presents changes in our valuation allowance (in thousands):
Year Ended December 31,
201820192020
Beginning balance$(58,649)$(67,463)$(70,231)
Allowance for domestic and foreign net operating loss carry-forwards(9,863)(3,598)(26,277)
Rate change on domestic net operating loss carry-forwards(17)(32)(82)
Change in foreign currency157   
Convertible debt additional paid-in capital tax adjustment - valuation allowance impact  12,642 
Other changes909 862 (2,043)
Ending balance$(67,463)$(70,231)$(85,991)
As of December 31, 2019 and 2020 we have $266.8 million and $371.2 million, respectively, of gross U.S. federal net operating loss carry forwards that will begin to expire in the 2028 tax year. Additionally, we have $98.4 million and $155.8 million of gross state net operating loss carry-forwards as of December 31, 2019 and 2020, respectively that will expire between the 2021 and 2040 tax years for states that do not have indefinite carry-forward periods for net operating losses generated in recent years.
Ownership changes, as defined by IRC Section 382, may limit the amount of net operating losses that a company may utilize to offset future taxable income and taxes payable. Pursuant to IRC Section 382, an ownership change occurs when the stock ownership of 5% stockholders increases by more than 50% over a testing period of three years. We have experienced ownership changes in the past, and it is possible that we have undergone ownership changes subsequent to December 5, 2018, the date of our most recent evaluation, or that we may undergo such a change in the future. Any such ownership change may limit our ability to utilize net operating losses.
Our results during 2018, 2019 and 2020 reflect state tax credits related to hiring and research activities that are utilized through the reduction of state payroll tax withholdings totaling $0.7 million, $1.3 million and $1.4 million, respectively.
As of December 31, 2019 and 2020, Cardlytics UK had gross net operating losses of $12.1 million and $25.7 million, respectively. Foreign net operating loss carry-forwards expire according to the rules of each country. In the U.K., there is an indefinite carry-forward period. As of December 31, 2020, Cardlytics UK held cash and cash equivalents of $3.9 million. While our investment in Cardlytics UK is not considered to be permanently invested, we do not plan to repatriate these funds. Further, although the tax basis of our investment in Cardlytics UK exceeds its book basis, we have not recorded a deferred tax asset since we do not believe that a reversal of this temporary difference will occur in the foreseeable future.
The following table summarizes the activity related to our gross unrecognized tax benefits that would affect our effective tax rate, if recognized (in thousands):
Year Ended December 31,
201820192020
Beginning balance$678 $783 $185 
Increase related to current year tax position105 (598)117 
Ending balance$783 $185 $302 
All such positions, if recognized, would impact our effective tax rate. We do not currently anticipate any of our positions to change significantly in the next 12 months. Our tax filings from inception remain subject to income tax examinations.

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10. REDEEMABLE CONVERTIBLE PREFERRED STOCK
Upon the consummation of our IPO in 2018, all of the outstanding shares of redeemable convertible preferred stock were automatically converted into shares of common stock. Refer to Note 1—Nature of Operations for additional information regarding our IPO.
A summary of the change in carrying amount of the outstanding redeemable convertible preferred stock is as follows (in thousands):
 Series G’ StockSeries G Stock
 Shares  Amount  Shares  Amount  
Balance — December 31, 20171,296 $44,672 346 $5,110 
Accretion of redeemable convertible preferred stock— 108 
Conversion of preferred stock to common stock(1,296)(44,672)(346)(5,218)
Balance — December 31, 2018 $  $ 
 Series F-R StockSeries E-R StockSeries D-R Stock
 Shares  Amount  Shares  Amount  Shares  Amount  
Balance — December 31, 20171,199 58,449 795 $29,972 1,396 $32,728 
Accretion of redeemable convertible preferred stock— 38 — 1 — 7 
Conversion of preferred stock to common stock(1,199)(58,487)(795)(29,973)(1,396)(32,735)
Balance — December 31, 2018 $  $  $ 
 Series C-R StockSeries B-R StockSeries A-R Stock
 Shares  Amount  Shares  Amount  Shares  Amount  
Balance — December 31, 20171,508 $18,366 2,247 $5,288 1,857 $1,852 
Accretion of redeemable convertible preferred stock— 3 —  —  
Conversion of preferred stock to common stock(1,508)(18,369)(2,247)(5,288)(1,857)(1,852)
Balance — December 31, 2018 $  $  $ 

Common Stock Warrants Issued in Connection with the Series G Stock Financing
In connection with the Series G Stock financing in May 2017, we issued warrants to purchase an aggregate number of shares of common stock equal to the product obtained by multiplying 346,334 by a fraction, the numerator of which is the difference between $68.9516 and the volume weighted average closing price of our common stock over the 30 trading days (or such lesser number of days as our common stock has been traded on the Nasdaq Global Market) prior to the date on which such warrants vest and become exercisable and the denominator of which is such volume weighted average closing price, which warrants vested and became exercisable on August 8, 2018, which was 180 days following the date of our IPO, at an exercise price of $0.0004 per share. In August 2018, we issued warrants to purchase 792,434 shares of common stock at an exercise price of $0.0004 per share to the cash investors of our Series G financing, pursuant to our Series G stock purchase agreement. The warrants had a valuation of $15.3 million upon issuance and were immediately exercised. Refer to Note 12—Fair Value Measurements for additional information regarding the valuation of the warrants issued in connection with the Series G Stock financing.
Redemption
At any time on or after May 4, 2022, upon written request of the holders of not less than 66 2/3% of the shares of redeemable convertible preferred stock then-outstanding, voting together as a single class on an as-converted to common stock basis, we were required to redeem all outstanding shares of redeemable convertible preferred stock in eight quarterly installments. The Series A-R Stock, Series B-R Stock, Series C-R Stock, Series D-R Stock, Series E-R Stock, Series F-R Stock, Series G Stock and Series G’ Stock were redeemable at prices equal to $1.00, $2.3567, $12.2686, $23.64, $37.7344, $58.40, $34.4758 and $34.4758 per share, plus any declared or accumulated but unpaid dividends, respectively.

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To the extent that we had insufficient funds to redeem all outstanding shares of redeemable convertible preferred stock, we were required to first redeem shares of Series G Stock and Series G’ Stock, then shares of Series F-R Stock, then shares of Series E-R Stock, then shares of Series D-R Stock, then shares of Series C-R Stock and then shares of Series B-R Stock and Series A-R Stock pari passu, in each case on a pro rata basis among the holders thereof.
The redeemable convertible preferred stock carrying amount was increased by periodic accretions, using the interest method, so that the carrying amount would equal the redemption amount at May 4, 2022. Accretion was recorded through a charge against additional paid-in capital.
Liquidation
Upon us (i) selling or otherwise disposing of all or substantially all of our property or business or merging with or into or consolidation with any other corporation, limited liability company or other entity, (ii) a majority of the voting power of our outstanding capital stock being transferred or disposed of as a result of a transaction or series of related transactions that are not issuances of capital stock by us primarily for the purposes of raising equity capital or (iii) any dissolution or winding-up of our business, the holders of Series A-R Stock, Series B-R Stock, Series C-R Stock, Series D-R Stock, Series E-R Stock, Series F-R Stock, Series G Stock and Series G’ Stock were entitled to receive payments in amounts per share equaling $1.00, $2.3567, $21.4701, $23.64, $37.7344, $58.40, $68.9516, and $34.4758, plus any declared but unpaid dividends, respectively. Holders of Series G Stock and Series G’ Stock are pari passu and were to be paid prior, and in preference to, any distribution of assets to the holders of all other classes of capital stock. Holders of Series F-R Stock were to be paid prior, and in preference to, any distribution of assets to the holders of Series E-R Stock, Series D-R Stock, Series C-R Stock, Series B-R Stock and Series A-R Stock. Holders of Series E-R Stock were to be paid prior, and in preference to, any distribution of assets to the holders of Series D-R Stock, Series C-R Stock, Series B-R Stock and Series A-R Stock. Holders of Series D-R Stock were to be paid prior, and in preference to, any distribution of assets to the holders of Series C-R Stock, Series B-R Stock and Series A-R Stock. Holders of Series C-R Stock were to be paid prior, and in preference to, any distribution of assets to the holders of Series B-R Stock and Series A-R Stock. Holders of Series A-R Stock and Series B-R Stock are pari passu and were to be paid prior, and in preference to, any distribution of assets to the holders of common stock.
Upon completion of the distributions detailed above, any remaining assets were to be distributed to the holders of common stock, Series A-R Stock, Series B-R Stock, Series C-R Stock, Series D-R Stock, Series E-R Stock, Series F-R Stock, Series G Stock and Series G’ Stock; such participation in the distribution of remaining assets would cease, however, when the amount that the holders of Series A-R Stock, Series B-R Stock, Series C-R Stock, Series D-R Stock, Series E-R Stock, Series F-R Stock, Series G Stock and Series G’ Stock were entitled to receive upon liquidation equals $2.00 per share, $4.7134 per share, $36.8058 per share, $70.92 per share, $113.2032 per share, $175.20 per share, $103.4274 per share and $103.4274 per share, respectively, plus any declared but unpaid dividends thereon.
If, however, as a result of a conversion from redeemable convertible preferred stock to common stock, a holder would receive, in the aggregate, an amount greater than the amount that would be distributed to such holder if such holder did not convert such series of redeemable convertible preferred stock into shares of common stock, such holder would have been deemed to have converted such holder’s shares of redeemable convertible preferred stock into shares of common stock for the purposes of determining the amount that such holder is entitled to receive upon liquidation and would not have been entitled to any distribution that would have otherwise been made to the holders of redeemable convertible preferred stock detailed above.
Dividends
No dividends have been declared or paid as of December 31, 2020.
Conversion
The holders of our redeemable convertible preferred stock also had the right, at any time, to convert any or all of their shares into such number of shares of common stock as is determined by dividing $1.00 in the case of Series A-R Stock, $2.3567 in the case of the Series B-R Stock, $12.2686 in the case of Series C-R Stock, $23.64 in the case of Series D-R Stock, $37.7344 in the case of Series E-R Stock, $50.0568 in the case of Series F-R Stock, and $34.4758 in the case of Series G Stock and Series G’ Stock by the applicable conversion price. The initial conversion price was $1.00 in the case of Series A-R Stock, $2.3567 in the case of the Series B-R Stock, $2.3567 in the case of Series C-R Stock, $23.64 in the case of Series D-R Stock, $37.7344 in the case of Series E-R Stock, $50.0568 in the case of Series F-R Stock and $34.4758 in the case of Series G Stock and Series G’ Stock. If, at any time following the initial issuance of shares of Series G Stock, we had issued any additional shares of capital stock without consideration or for a consideration per share less than the then-effective conversion price for our redeemable convertible preferred stock, the conversion price for all series of outstanding redeemable convertible preferred stock would have been subject to adjustment.

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11.    COMMON STOCK WARRANTS
We have granted warrants to purchase shares of our common stock to certain FI partners that include both time-based and performance-based vesting conditions. These warrants are accounted for under ASC Topic 505-50, Equity-Based Payments to Non-Employees. Since the performance conditions contained in these warrants are directly related to revenue-producing activities, we incur non-cash expense in FI Share and other third-party costs on our consolidated statements of operations based on the vesting-date fair value of our common stock underlying these warrants.
A summary of common stock warrant activity, exclusive of the common stock warrants issued in connection with our Series G financing is as follows (in thousands, except per share amounts):
SharesWeighted-average
exercise price
per share
Warrants Outstanding - December 31, 2017600 $8.11 
Granted644 23.64 
Exercised(349)4.69 
Redeemable convertible preferred stock warrants converted to common stock warrants110 12.16 
Forfeited/canceled(138)5.85 
Warrants Outstanding - December 31, 2018867 21.89 
Exercised(821)21.89 
Forfeited/canceled(34)21.29 
Warrants Outstanding - December 31, 201912 23.64 
Exercised(9)23.64 
Forfeited/canceled(3)23.64 
Warrants Outstanding - December 31, 2020 $ 
The performance-based warrants to purchase 644,365 shares of our common stock vested upon the consummation of our IPO in February 2018 as discussed in Note 13—Related Parties. The conversion date fair value of the Series A Stock warrants and Series B Stock warrants, which were converted to common stock warrants upon our IPO, was reclassified from redeemable convertible preferred stock warrant liability to additional paid-in capital. See Note 12—Fair Value Measurements for more information.
12.     FAIR VALUE MEASUREMENTS
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table summarizes our liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
 December 31, 2017
 Level 1Level 2Level 3Total
Liabilities:
Preferred stock warrant liabilities(1)
$ $ $2,285 $2,285 
Common stock warrant liabilities(1)
  7,945 7,945 
Total liabilities$ $ $10,230 $10,230 
(1)Warrant liabilities were zero as of December 31, 2018, 2019 and 2020.

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Instruments Recorded at Fair Value Using Level 3 Inputs
Our redeemable convertible preferred stock warrants and common stock warrants issued in connection with the Series G Stock financing are measured and recorded at fair value on a recurring basis using Level 3 inputs. The carrying amount of the liability component of the Convertible Senior Notes was determined by estimating the fair value of a similar liability without the conversion option using Level 3 inputs. See Note 7—Debt and Financing Arrangements for additional information about the Convertible Senior Notes. The table below provides a roll forward of the changes in fair value of our preferred stock warrant and common stock warrant financial instruments (in thousands):
Preferred
Stock
Warrant Liabilities
Common
Stock
Warrant Liabilities
Balance at December 31, 2017$2,285 $7,945 
Conversion of redeemable convertible preferred stock warrants to common stock warrants(1,736)
Issuance of common stock warrants(549)7,309 
Changes in fair value— (15,254)
Balance at December 31, 2018$ $ 
Prior to our IPO, in valuing our instruments recorded at fair value using Level 3 inputs, our board of directors determined the equity value of our business generally using a combination of the income approach and the market approach valuation methods.
The income approach estimates value based on the expectation of future cash flows that a company will generate, such as cash earnings, cost savings, tax deductions and the proceeds from disposition. These future cash flows are discounted to their present values using a discount rate derived based on an analysis of the cost of capital of comparable publicly traded companies in similar lines of business, as of each valuation date, and is adjusted to reflect the risks inherent in our cash flows.
The market approach estimates the fair value of a company by applying market multiples of comparable publicly traded companies in a similar line of business. The market multiples are based on relevant metrics implied by the price that investors have paid for the equity of publicly traded companies. Given our significant focus on investing in and growing our business, we primarily utilized the forward-looking revenue multiple when performing valuation assessments under the market approach and considered both trading and transaction multiples. When considering which companies to include as our comparable industry peer companies, we focused on U.S.-based publicly traded companies that were broadly comparable to us based on consideration of industry, market and line of business. From the comparable companies, a representative market value multiple was determined and applied to our operating results to estimate the value of our company. The market value multiple was determined based on consideration of multiples of revenue to each of the comparable companies’ historical and forecasted revenue. In addition, the market approach considers IPO and merger and acquisition transactions involving companies similar to the company’s business being valued. Multiples of revenue are calculated for these transactions and then applied to the business being valued, after reduction by an appropriate discount.
Once an equity value was determined, we utilized probability-weighted expected return method (“PWERM”) to allocate the overall value of equity to the various share classes. The PWERM relies on a forward-looking analysis to predict the possible future value of a company. Under this method, discrete future outcomes, including an IPO and non-IPO scenarios, are weighted based on the estimated the probability of each scenario. The PWERM is used when discrete future outcomes can be predicted with reasonable certainty based on a probability distribution. We relied on the PWERM to allocate the value of equity under a liquidity scenario. The projected equity value relied upon in the PWERM scenario was based on (i) guideline IPO transactions involving companies that were considered broadly comparable to us and (ii) our expectation of the pre-money valuation that we needed to achieve to consider an IPO as a viable exit strategy.

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Preferred Stock Warrants
Upon the consummation of our IPO, all of the outstanding warrants to purchase shares of redeemable convertible preferred stock were automatically converted into warrants to purchase shares of common stock. Refer to Note 10—Redeemable Convertible Preferred Stock for additional information regarding our IPO.
A summary of our preferred stock warrants is as follows (in thousands, except per share amounts):
Preferred SeriesGrant
date
Expiration
date
Exercise
price
December 31, 2017
Series B-R2/26/20102/25/2020$2.36 59 
Series D-R9/21/20129/20/2022$23.64 38 
Series D-R9/21/20129/20/2022$23.64 13 
Total preferred stock warrants110 
The fair value of the warrants to purchase Series B-R Stock and Series D-R Stock decreased from $26.80 per share and $13.63 per share on December 31, 2017 to $20.18 per share and $10.57 per share on February 8, 2018, respectively, the date at which they converted to warrants to purchase shares of our common stock and were reclassified to additional paid-in capital on our consolidated balance sheet. The decrease in the fair value of the warrants to purchase Series B-R Stock and Series D-R Stock primarily resulted from the timing of future potential liquidity events, changes to our forecasted financial results and changes in the valuation of comparable companies. Warrant liabilities related to redeemable convertible preferred stock were zero as of December 31, 2018, 2019 and 2020.
Common Stock Warrants
Common Stock Warrants Issued in Connection with the Series G Stock Financing
In connection with the Series G Stock financing in 2017, we issued warrants to purchase an aggregate number of shares of common stock equal to the product obtained by multiplying 346,334 by a fraction, the numerator of which is the difference between $68.9516 and the volume weighted average closing price of our common stock over the 30 trading days (or such lesser number of days as our common stock has been traded on the Nasdaq Global Market) prior to the date on which such warrants vest and become exercisable and the denominator of which is such volume weighted average closing price, which warrants vested and became exercisable on August 8, 2018, which was 180 days following the date of our IPO, at an exercise price of $0.0004 per share.
To determine the fair value of our common stock warrant liability issued in connection with our Series G Stock financing, we utilized a Monte Carlo simulation, which allows for the modeling of complex securities and evaluates many possible outcomes to forecast the stock price of the company post-IPO. As part of the valuation, we considered various scenarios related to the pricing, timing and probability of an IPO. We applied an annual equity volatility of 59% and a discount for lack of marketability of 11% to arrive at a valuation of $7.5 million on the issuance date.
Subsequent to our IPO, the fair value of the common stock warrant liability was estimated based on the fair market value of our common stock at each reporting period, discounted from the date of settlement. In August 2018, we issued warrants to purchase 792,434 shares of common stock at an exercise price of $0.0004 per share to the cash investors of our Series G financing, pursuant to our Series G stock purchase agreement. The warrants had a valuation of $15.3 million upon issuance and were subsequently exercised, resulting in the issuance of 792,434 shares of our common stock. As a result of change in fair value of the common stock warrant liability, we recognized a non-cash loss of $7.3 million in 2018.
Performance-based Warrants Issued to FIS
In May 2013, we granted 10-year performance-based warrants to purchase up to 644,365 shares of Series E Stock at an exercise price of $23.64 per share. Since FIS did not participate in the convertible promissory note financing in 2016, their warrants to purchase preferred stock were converted to warrants to purchase common stock. The warrants vested upon the completion of our IPO in February 2018 resulting in a non-cash expense of $2.5 million. We determined the fair value of these common warrants on the date of IPO using the Black-Scholes option pricing model, which is affected by the fair value of our common stock as well as the following significant inputs:

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February 8, 2018
Weighted-average grant date fair value$3.91
Significant inputs:
Value of common stock$13.00
Expected term5.3 years
Volatility50%
Risk-free interest rate2.0%
Dividend yield%
13.     RELATED PARTIES
Common Stock Warrants Issued in Connection with the Series G Stock Financing
In connection with the Series G Stock financing in 2017, we issued warrants to purchase an aggregate number of shares of common stock equal to the product obtained by multiplying 346,334 by a fraction, the numerator of which is the difference between $68.9516 and the volume weighted average closing price of our common stock over the 30 trading days (or such lesser number of days as our common stock has been traded on the Nasdaq Global Market) prior to the date on which such warrants vest and become exercisable and the denominator of which is such volume weighted average closing price, which warrants vested and became exercisable on August 8, 2018, which was 180 days following the date of our IPO, at an exercise price of $0.0004 per share. In August 2018, we issued warrants to purchase 792,434 shares of common stock at an exercise price of $0.0004 per share to the cash investors of our Series G financing, pursuant to our Series G stock purchase agreement. The warrants had a valuation of $15.3 million upon issuance and were subsequently exercised, resulting in the issuance of 792,434 shares of our common stock. The following table summarizes the participation in the common stock warrants issued in connection with the Series G Stock financing by our directors, executive officers and holders of more than 5% of any class of our capital stock as of the date of such transactions (in thousands):
Related PartyWarrants to
Purchase
Common
Stock
Entities affiliated with Polaris Venture Partners(1)
66 
Canaan VIII L.P.(2)
123 
Entities affiliated with Mark A. Johnson(3)
80 
John Klinck13 
David Adams7 
(1)Consists of 64,038 warrants to purchase common stock issued to Polaris Venture Partners V, L.P. ("PVP V"), 1,247 warrants to purchase common stock issued to Polaris Venture Partners Entrepreneurs’ Fund V, L.P. (“PVP EF V”), 438 warrants to purchase common stock issued to Polaris Venture Partners Founders’ Fund V, L.P. (“PVP FF V”), and 641 warrants to purchase common stock issued to Polaris Venture Partners Special Founders’ Fund V, L.P. (“PVP SFF V”). Polaris Venture Management Co. V, L.L.C. is a general partner of each of PVP V, PVP EF V, PVP FF V and PVP SFF V and may be deemed to have the sole voting and dispositive power over the shares held by PVP V, PVP EF V, PVP FF V and PVP SFF V. Bryce Youngren, an active member of our board of directors at the time of transaction, is a Managing Partner of Polaris Partners and may be deemed to share voting and dispositive power over the shares held by PVP V, PVP EF V, PVP FF V and PVP SFF V.
(2)John V. Balen, a member of our board of directors, is a managing member of Canaan Partners VIII LLC, the general partner of Canaan VIII L.P. Mr. Balen does not have voting or investment power over any shares held directly by Canaan VIII L.P.
(3)Consists of 66,365 warrants to purchase common stock issued to TTV Ivy Holdings, LLC, and 13,273 warrants to purchase common stock issued to Mr. Johnson. TTV Capital is a provider of management services to TTP GP II, LLC, which is a general partner of TTP Fund II, L.P. TTV Capital is the manager of TTV Ivy Holdings Manager, LLC, which is the general partner of TTV Ivy Holdings, LLC. Mark A. Johnson, a member of our board of directors, is a member of each of TTP GP II, LLC and TTV Ivy Holdings Managers, LLC and holds the title of partner of TTV Capital, and may be deemed to share voting and dispositive power over the shares held by TTP Fund II L.P. and TTV Ivy Holdings, LLC.

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Agreements with Fidelity Information Services, LLC
We are party to a reseller agreement with Fidelity Information Services LLC (“FIS”). Pursuant to the reseller agreement, FIS markets and sells our services to financial institutions that are current or potential customers of FIS in exchange for a revenue share percentage. We are also obligated to make milestone payments to FIS related to the integration and deployment of our solutions. Prior to our IPO, FIS was entitled to elect a member of our board of directors, who was Robert Legters until his resignation immediately prior to our IPO in February 2018.
In May 2013, FIS purchased 397,515 shares of our Series E Stock. We also granted 10-year performance-based warrants to purchase up to 644,365 shares of Series E Stock at an exercise price of $23.64 per share. The warrants were exercisable subject to the attainment of certain milestones related to the number of active accounts for which our solutions have been enabled with accelerated vesting upon an IPO. Since FIS did not participate in the convertible promissory note financing in 2016, their warrants to purchase preferred stock were converted to warrants to purchase common stock. The warrants vested upon the completion of our IPO in February 2018, resulting in a non-cash expense of $2.5 million based on the vesting-date fair value of our common stock underlying these warrants. Since the performance conditions were directly related to revenue-producing activities, we recognized this expense in FI Share and other third-party costs on our consolidated statement of operations. This expense is presented in other non-cash expenses on our consolidated statement of cash flows. Refer to Note 12—Fair Value Measurements for additional information regarding the valuation of the performance-based warrants issued to FIS.
In September 2019, FIS exercised all of their warrants to purchase common stock, resulting in cash proceeds of $15.2 million and the issuance of 644,365 shares of our common stock.

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14.     COMMITMENTS AND CONTINGENCIES
FI Implementation Costs
Agreements with certain FI partners require us to fund the development of specific enhancements, pay for certain implementation fees, or make milestone payments upon the deployment of our solution. Amounts paid to FI partners are included in deferred FI implementation costs on our consolidated balance sheets the earlier of when paid or earned and are amortized over the remaining term of the related contractual arrangements. Amortization and impairment is included in FI Share and other third-party costs on our consolidated statements of operations and is presented in amortization and impairment of deferred FI implementation costs on our consolidated statement of cash flows. Certain of these agreements provide for future reductions in FI Share due to the FI partner. These reductions in FI Share are recorded as a reduction to deferred implementation costs and also result in a cumulative adjustment to accumulated amortization. During 2018, development payments to a certain FI partner totaled $9.3 million which was partially offset by recoveries through FI Share payment reductions of $4.6 million in 2019.
During 2020, one of our FI partners notified us of plans to end the use of certain platform features prior to the end of our contractual arrangement with the FI partner. As a result, we recognized a write off of deferred FI implementation costs totaling $0.7 million in FI Share and other third-party costs on our consolidated statements of operations.
The following table presents changes in deferred FI implementation costs (in thousands):
 December 31,
 201820192020
Beginning balance$13,625 $15,877 $8,383 
Deferred costs9,250   
Recoveries through FI Share(5,380)(4,625) 
Amortization(1,618)(2,869)(3,915)
Impairment  (683)
Ending balance$15,877 $8,383 $3,785 
Payments to FI partners for enhancements not yet placed in service totaled $1.0 million as of December 31, 2020. Future amortization, based on the amounts earned as of December 31, 2020, is $2.8 million in 2021.
We have a minimum FI Share commitment with a certain FI partner totaling $10.0 million over a 12-month period following the completion of certain milestones, which were not met as of December 31, 2020. Any expected shortfall penalty will be accrued during the 12-month period following the completion of the milestones.
Other Commitments
We lease property and equipment under non-cancelable operating lease agreements. Refer to Note 5—Leases for further details. In September 2020, we issued convertible senior notes with an aggregate principal amount of $230.0 million bearing an interest rate of 1.00% due in 2025. Refer to Note 7—Debt and Financing Arrangements for further details.

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Litigation
From time to time, we may become involved in legal actions arising in the ordinary course of business including, but not limited to, intellectual property infringement and collection matters. We make assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. We record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, we accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, we disclose the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, we disclose the nature and estimate of the possible loss of the litigation. We do not disclose information with respect to litigation where an unfavorable outcome is considered to be remote or where the estimated loss would not be material. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on our liquidity, results of operations, business or financial condition.

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15.     EARNINGS PER SHARE
Diluted net loss per share is the same as basic net loss per share for 2018, 2019 and 2020 because the effects of potentially dilutive items were anti-dilutive, given our net loss during these periods. The following securities have been excluded from the calculation of diluted weighted-average common shares outstanding because the effect is anti-dilutive (in thousands):
 December 31,
 201820192020
Common stock options1,774 1,000 513 
Common stock warrants867 12  
Convertible Senior Notes  2,701 
Restricted stock units381 1,741 2,434 
Common stock issuable pursuant to the ESPP36 7 4 
16.     SEGMENTS
As of December 31, 2020, we have three operating segments: the Cardlytics platform in the U.S. and U.K. and Other Platform Solutions, as determined by the information that our Chief Executive Officer, who we consider our chief operating decision-maker, uses to make strategic goals and operating decisions. Our Cardlytics platform operating segments in the U.S. and U.K. represent our proprietary native bank advertising channels and are aggregated into one reportable segment given their similar economic characteristics, nature of service, types of customers and method of distribution. Prior to the year ended December 31, 2020, we referred to the Cardlytics platform as Cardlytics Direct.
Our Other Platform Solutions enabled marketers and marketing service providers to leverage the power of purchase intelligence outside the bank channel. We have shifted the substantial majority of our efforts and resources to support the growth of Cardlytics platform. As a result, we no longer generate revenue from Other Platform Solutions and do not expect to generate revenue from Other Platform Solutions for the foreseeable future.
Revenue can be directly attributable to each segment. With the exception of a non-cash equity expense and deferred FI implementation costs, FI Share is also directly attributable to each segment. Our chief operating decision maker allocates resources to, and evaluate the performance of, our operating segments based on revenue and adjusted contribution. The accounting policies of each of our reportable segments are the same as those described in the summary of significant accounting policies.

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The following table provides information regarding our reportable segments (in thousands):
 Year Ended December 31,
 201820192020
Cardlytics platform:
Adjusted contribution(2)
$69,364 $95,219 $82,182 
Plus: FI Share and other third-party costs (1)(2)
79,959 115,211 104,710 
Revenue$149,323 $210,430 $186,892 
Other Platform Solutions:
Adjusted contribution(2)
$86 $ $ 
Plus: FI Share and other third-party costs (1)(2)
1,275   
Revenue$1,361 $ $ 
Total:
Adjusted contribution(2)
$69,450 $95,219 $82,182 
Plus: FI Share and other third-party costs (1)(2)
81,234 115,211 104,710 
Revenue$150,684 $210,430 $186,892 
(1)Adjusted FI Share and other third-party costs presented above represents GAAP FI Share and other third-party data costs less a non-cash equity expense included in FI Share and deferred FI implementation costs, which are detailed below in our reconciliation of GAAP loss before income taxes to adjusted contribution.
(2)Adjusted contribution and FI Share and other third-party costs include the impact of a $0.8 million gain during 2018 related to the renewal of our agreement with an FI partner, which contains certain amendments that are retroactively applied as of January 1, 2018.
Adjusted Contribution
Adjusted contribution measures the degree by which revenue generated from our marketers exceeds the cost to obtain the purchase data and the digital advertising space from our FI partners. Adjusted contribution demonstrates how incremental marketing spend on our platform generates incremental amounts to support our sales and marketing, research and development, general and administration and other investments. Adjusted contribution is calculated by taking our total revenue less our FI Share and other third-party costs exclusive of a non-cash equity expense and deferred FI implementation costs, which are non-cash costs. Adjusted contribution does not take into account all costs associated with generating revenue from advertising campaigns, including sales and marketing expenses, research and development expenses, general and administrative expenses and other expenses, which we do not take into consideration when making decisions on how to manage our advertising campaigns.

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The following table presents a reconciliation of loss before income taxes presented in accordance with GAAP to adjusted contribution (in thousands):
 Year Ended December 31,
 201820192020
Adjusted contribution(1)(2)(3)
$69,450 $95,219 $82,182 
Minus:
Non-cash equity expense included in FI Share(1)
2,519   
Deferred FI implementation costs(3)
1,618 2,869 4,598 
Delivery costs10,632 12,893 14,310 
Sales and marketing expense41,878 43,828 45,307 
Research and development expense16,210 11,699 17,532 
General and administration expense34,228 36,720 46,532 
Depreciation and amortization expense3,282 4,535 7,826 
Total non-operating expense (income)12,125 (181)1,499 
Loss before income taxes$(53,042)$(17,144)$(55,422)
(1)Non-cash equity expense included in FI Share and deferred FI implementation costs are excluded from FI Share and other third-party costs, which is shown above in our reconciliation of GAAP revenue to non-GAAP adjusted contribution.
(2)Adjusted contribution includes the impact of a $0.8 million gain during 2018 related to the renewal of our agreement with an FI partner, which contains certain amendments that are retroactively applied as of January 1, 2018.
(3)Deferred FI implementation costs for 2020 includes the impact of a $0.7 million write off related to certain platform features.
The following tables provide geographical information (in thousands):
 Year Ended December 31,
 201820192020
Revenue:
United States$131,563 $186,864 $172,808 
United Kingdom19,121 23,566 14,084 
Total$150,684 $210,430 $186,892 
December 31,
20192020
Property and equipment:
United States$12,052 $9,549 
United Kingdom2,010 4,162 
India228 154 
Total$14,290 $13,865 
Capital expenditures within the United Kingdom were $0.1 million, $2.0 million and $2.8 million during 2018, 2019 and 2020, respectively.

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Concentrations of Risk
Cash and Cash Equivalents
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. A majority of our cash and cash equivalents are held in fully FDIC–insured demand deposit accounts that distribute funds, and credit risk, over a vast number of financial institutions. Our remaining cash and cash equivalents are held in treasury obligation funds and money market accounts with three financial institutions, which we believe are of high credit quality.
Marketers
Our accounts receivable are diversified among a large number of marketers segregated by both geography and industry. During 2018, 2019 and 2020, our top five marketers accounted for 23%, 27% and 35% of our revenue. No marketer represented a significant concentration of our accounts receivable as of December 31, 2018. As of December 31, 2019 and December 31, 2020 our top five marketers accounted for 26% and 31% of our accounts receivable, respectively, with one marketer representing over 10% as of December 31, 2019 and December 31, 2020, respectively.
FI Partners
Our business is substantially dependent on a limited number of FI partners. We require participation from our FI partners in the Cardlytics platform and access to their purchase data in order to offer our solutions to marketers and their agencies. We must have FI partners with a sufficient number of customers and levels of customer engagement to ensure that we have robust purchase data and marketing space to support a broad array of incentive programs for marketers. Our agreements with a substantial majority of our FI partners have terms of three to seven years but are generally terminable by the FI partner on 90 days or less prior notice. If an FI partner terminates its agreement with us, we would lose that FI as a source of purchase data and online banking customers.
During 2018, Bank of America, National Association (“Bank of America”) accounted for over 60% of the total FI Share we paid to all FIs. No other FI partner accounted for over 10% of FI Share during this period. For each year during 2019 and 2020, Bank of America and JPMorgan Chase Bank, National Association (“Chase”) combined to account for over 75% of the total FI Share we paid to all FIs, with each representing over 25%. No other FI partner accounted for over 10% of FI Share during these periods.
17.     SUBSEQUENT EVENTS
Acquisition of Dosh
On February 26, 2021, the Company entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with DOSH Holdings, Inc., a Delaware corporation (“Dosh”), BSPEARS MERGER SUB I, INC., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub 1”), BSPEARS MERGER SUB II, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Merger Sub 2”), and certain other parties named therein. The Merger Agreement provides for Merger Sub 1 to merge with and into Dosh ( “Merger 1”), with Dosh surviving Merger 1 as a wholly owned subsidiary of the Company, immediately followed by the merger of Dosh with and into Merger Sub 2, with Merger Sub 2 surviving Merger 2 as a wholly owned subsidiary of the Company, subject to the terms and conditions set forth in the Merger Agreement.
Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, at the closing, the Company is required to pay the former equityholders of Dosh (other than former holders of unvested options to purchase Dosh’s common stock) (collectively, the “Dosh Equityholders”) consideration of $275.0 million, consisting of, and subject to adjustment with respect to, the following: (A) an amount in cash equal to $150.0 million, subject to adjustments and subject to escrows; and (B) $125.0 million million of shares of the Company’s common stock at an agreed-upon price of $136.33 per share. In addition, the Company will assume the unvested options held by the holders of unvested options to purchase Dosh’s common stock and issue up to $8.0 million in the Company’s performance stock units to certain key Dosh executives.
The Merger Agreement contains customary representations, warranties, covenants and indemnities of each of the Company and Dosh. During the period from the date of the Merger Agreement to the closing, the Company and Dosh have agreed to carry on their respective businesses in the ordinary course and consistent with past practices and have agreed to certain other operating covenants.
The closing of the Mergers is subject to the satisfaction or waiver of a number of customary closing conditions in the Merger Agreement, including, among others, the absence of certain governmental restraints and the absence of a material adverse effect on Dosh.

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The Merger Agreement may be terminated prior to the closing date by mutual written agreement of the Company and Dosh. In addition, the Merger Agreement may be terminated by either the Company or Dosh in certain circumstances, including if the Acquisition has not been closed on or before May 31, 2021, or if the other party has materially breached any representation, warranty, covenant, obligation or agreement such that certain of the conditions to closing cannot be satisfied.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020. Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Report on Internal Controls Over Financial Reporting
Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in the Exchange Act Rule 13a-15(f). Management conducted an assessment of our internal control over financial reporting based on the framework established in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on the assessment, management concluded that, as of December 31, 2020, our internal control over financial reporting was effective.
Our independent registered public accounting firm has issued at attestation report on the effectiveness of our internal control over financial reporting, which appears in this Annual Report.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Cardlytics, Inc.
Opinion on the Financial Statements
We have audited the internal control over financial reporting of Cardlytics, Inc. and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in Internal Control —Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our
report dated March 1, 2021, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of
Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 1, 2021
ITEM 9B. OTHER INFORMATION.
None.

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PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission ("SEC") within 120 days of the fiscal year ended December 31, 2020.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2020.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2020.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2020.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2020.
PART IV.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)The following documents are filed as part of this Annual Report:
(i)Consolidated Financial Statements and Reports of Independent Registered Public Accounting Firm are shown in the Index to Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
(ii)All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(iii)Exhibits are incorporated herein by reference or are filed with this Annual Report as indicated below.
(b)Exhibits:
  Incorporated by Reference
ExhibitExhibit DescriptionSchedule
/Form
File
Number
ExhibitFiling Date
3.1    S-1  333-222531  3.2  1/12/2018
3.2    S-1  333-222531  3.4  1/12/2018
4.1S-1/A333-2225314.11/29/2018
4.2S-1333-2225314.21/12/2018
4.310-K001-383864.33/3/2020
4.4

8-K    001-383864.19/22/2020
4.58-K
001-38386
4.29/22/2020
10.1S-1333-22253110.121/12/2018
10.2†S-1/A333-22253110.11/29/2018
10.3†S-1/A333-22253110.21/29/2018
10.4†S-1/A333-22253110.31/29/2018
10.5†S-1333-22253110.61/12/2018
10.6†S-1/A333-22253110.71/29/2018
10.7†S-1333-22253110.81/12/2018
10.8†S-1333-22253110.91/12/2018
10.9†S-1333-22253110.11/12/2018
10.10†S-1/A333-22253110.111/29/2018

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10.12#S-1333-22253110.151/12/2018
10.13#S-1333-22253110.161/12/2018
10.14#10-Q001-3838610.18/14/2018
10.1510-Q001-3838610.28/14/2018
10.1610-Q001-3838610.15/9/2019
10.1710-Q001-3838610.25/9/2019
10.1810-Q001-3838610.18/8/2019
10.1910-Q001-3838610.28/8/2019
10.2010-Q001-3838610.111/12/2019
10.2110-K001-3838610.213/3/2020
10.2210-K001-3838610.223/3/2020
10.2310-Q001-3838610.15/11/2020
10.2410-Q001-3838610.18/4/2020
10.2510-Q001-3838610.111/2/2020
10.2610-Q001-3838610.211/2/2020
10.27*^
10.28*
10.298-K001-3838610.19/22/2020

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21.110-Q001-3838621.18/14/2018
23.1*
31.1*          
31.2*          
32.1**  
101.insXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.schXBRL Taxonomy Schema Linkbase Document
101.calXBRL Taxonomy Calculation Linkbase Document
101.defXBRL Taxonomy Definition Linkbase Document
101.labXBRL Taxonomy Label Linkbase Document
101.preXBRL Taxonomy Presentation Linkbase Document
104.0Cover page formatted as Inline XBRL and contained in Exhibit 101
* Filed herewith
** Furnished herewith
^ Certain portions of this exhibit, indicated by asterisks, have been omitted pursuant to Item 601(b)(10) of Regulation S–K because they are not material and would likely cause competitive harm to the registrant if publicly disclosed.
† Indicated management contract or compensatory plan
# Confidential treatment has been granted from the Securities and Exchange Commission as to certain portions of this document

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ITEM 16. FORM 10-K SUMMARY
None.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Cardlytics, Inc.
Date: March 1, 2021By:/s/ Lynne M. Laube
Lynne M. Laube
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SignatureTitleDate
/s/ Lynne M. LaubeChief Executive Officer and DirectorMarch 1, 2021
Lynne M. Laube
(Principal Executive Officer)
/s/ Andrew ChristiansenChief Financial OfficerMarch 1, 2021
Andrew Christiansen(Principal Financial and Accounting Officer)
/s/ Scott D. GrimesExecutive ChairmanMarch 1, 2021
Scott D. Grimes
/s/ David L. AdamsDirectorMarch 1, 2021
David L. Adams
/s/ John V. Balen
Lead Independent Director
March 1, 2021
John V. Balen
/s/ Jessica JensenDirectorMarch 1, 2021
Jessica Jensen
/s/ Mark A. JohnsonDirectorMarch 1, 2021
Mark A. Johnson
/s/ John KlinckDirectorMarch 1, 2021
John Klinck
/s/ Aimée LapicDirectorMarch 1, 2021
Aimée Lapic
/s/ Tony WeismanDirectorMarch 1, 2021
Tony Weisman


117
Document
Exhibit 10.27


https://cdn.kscope.io/b319e564bc522492287f313b3e88f6b7-bankofamerica1.jpg


2020 Amendment to General
Services Agreement




Supplier Name: Cardlytics, Inc.                     Master Agreement Number: CW251208
Supplier Address:
675 Ponce de Leon NE
Suite 6000
Atlanta, GA 30308                            Amendment Number: CW1569602
Supplier
Telephone: 888.798.5802                         Effective Date: Upon Execution



































Certain information has been excluded from this agreement (indicated by “[***]”) because such information (i) is not material and (ii) would be competitively harmful if publicly disclosed.


Exhibit 10.27

This 2020 Amendment serves to amend the General Services Agreement executed by and between Bank of
America, N.A. (“Bank of America”) and Cardlytics, Inc. (“Supplier”) dated November 5, 2010, as previously amended
by CW967765 on August 16, 2017 and other amendments (the “Agreement”). No terms of the Agreement shall be
altered or negated as a result of this Amendment except as stated herein. Capitalized terms not specifically defined
herein shall have the meaning set forth in the Agreement.

WHEREAS, Bank of America and Supplier entered into the Agreement in order to set forth the terms and conditions
pursuant to which Supplier provides certain Services to Bank of America; and

WHEREAS, the Parties desire to amend the Agreement;

NOW THEREFORE, in consideration of the promises and accords made herein, and the exchange of such good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Bank of America and Supplier agree as follows:

1.The expiration date of the Agreement is hereby extended to December 31, 2021.

2.Bank of America shall [***] and [***] no later than [***] (“Milestone 1”). Additionally, Bank of America shall [***] no later than [***] (“Milestone 2”).

3.Notwithstanding anything to the contrary in the Agreement, including without limitation Schedule B of the Agreement, in [***], the Bank of America Revenue Share Percentage and the Supplier Revenue Share Percentage for Supplier Secured Merchants as of the National Launch Date shall [***].

4.Notwithstanding anything to the contrary in the Agreement, including without limitation Schedule B of the Agreement, and subject to Section 7 below, on or before [***], Supplier shall [***].
5.Notwithstanding anything to the contrary in the Agreement, including without limitation Schedule B of the Agreement, upon the conclusion of [***], Supplier and Bank of America shall [***]. In the event the [***], Supplier shall [***].
By way of example, in the event that Bank of America [***], Supplier shall [***]. By way of another example, in the event that Bank of America [***], Supplier shall [***].
In the event [***], Bank of America or Cardlytics, as applicable, shall [***].
By way of example, in the event that Bank of America [***], Supplier shall [***]. By way of another example, in the event that Bank of America [***], Bank of America shall [***].
6.[***] are premised on the assumption that [***]. In the event that the [***], Supplier and Bank of America shall [***].
7.In the event that Bank of America is not able to meet Milestone 1 by [***], Cardlytics shall [***]. Additionally, in the event that Bank of America is not able to meet Milestone 2 by [***], Cardlytics shall [***].

CARDLYTICS, INC.BANK OF AMERICA N.A.
("Supplier")("Bank of America")
/s/ Andrew Christiansen
Date: December 2, 2020
/s/ James E. Englehart
Date: December 2, 2020
Andrew ChristiansenJames E. Englehart
Chief Financial Officer and Head of Corporate DevelopmentVP, Sr. Procurement Specialist
Certain information has been excluded from this agreement (indicated by “[***]”) because such information (i) is not material and (ii) would be competitively harmful if publicly disclosed.

Document
Exhibit 10.28

Sixth Amendment to Loan and Security Agreement

Borrower: Cardlytics, Inc.    
Date: September 15, 2020
This SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into between PACIFIC WESTERN BANK, a California state-chartered bank (“PWB”), as Agent and Lender, the other lenders from time to time party to the Loan Agreement, and the borrower named above (“Borrower”). PWB and lenders that may hereafter join as lenders under the Loan Agreement (as defined below) are herein sometimes collectively referred to as “Lenders” and individually as a “Lender”. PWB, in its capacity as administrative and collateral Agent for the Lenders, is referred to herein as the “Agent” (which term shall include any successor Agent in accordance with terms hereof).
Agent, Lenders and Borrower agree to amend the Loan and Security Agreement between them, dated May 21, 2018 (as amended, the “Loan Agreement”), as follows, effective as of the date hereof except as otherwise provided below. (Capitalized terms used but not defined in this Amendment shall have the meanings set forth in the Loan Agreement.)
1.Amendments to Loan Agreement.
1.1 The following definition is added to Section 8 of the Loan Agreement, in the appropriate alphabetical order, to read as follows:
“ ‘Sixth Amendment Effective Date’ means December [__], 2020.”
1.2 Clause (a)(1)(a) of Section 1 of the Schedule to the Loan Agreement is amended and restated to read as follows:
“(a) an amount equal to $50,000,000 (the “Maximum Revolving Loan Amount”).”
1.3 The portion of Section 1 of the Schedule to the Loan Agreement which reads as follows:
“Ancillary Services Limit: $1,350,800.
“Overall Credit Limit: Notwithstanding any provisions herein to the contrary, in no event shall the total Obligations (including without limitation the Term Loan, the Revolving Loans, and Obligations relating to Ancillary Services) at any time outstanding exceed $51,350,800 (the ‘Overall Credit Limit’).”
is amended and restated to read as follows:
“Ancillary Services Limit: $850,000.
“Overall Credit Limit: Notwithstanding any provisions herein to the contrary, in no event shall the total Obligations (including without limitation the Term Loan, the Revolving Loans, and Obligations relating to Ancillary Services) at any time outstanding exceed $50,850,000 (the ‘Overall Credit Limit’).”
1.4 The $75,000 Success Fee and $50,000 Success Fee provided for in the Loan Agreement as in effect prior to the Sixth Amendment Effective Date have been paid. The following is hereby added to Section 3 of the Schedule to the Loan Agreement:
“6th Amendment Success Fee:
In the event Borrower realizes Billings of $316,000,000 or more during any twelve-month period ending at the end of any month after the Sixth Amendment Effective Date, Borrower shall pay Agent for the benefit of the Lenders a one-time success fee (the “Success Fee”) in the amount of $100,000 within 30 days after the end of such month. Borrower’s obligation to pay the Success Fee shall continue as long as this Agreement remains in effect or any Loans or other Obligations remain outstanding, provided that if this Agreement is terminated and the Loans and other Obligations are paid in full prior to the date that is the one year anniversary of the Sixth Amendment Effective Date (such anniversary, the “Cut Off Date”), then Borrower’s obligation to pay the Success Fee shall survive until the Cut Off Date. If (a) for any applicable twelve-month period, Borrower’s Billings exceed $316,000,000, and (b) (i) this Agreement is still in effect or any Loans or Obligations remain outstanding; or (ii) the Cut Off Date has not yet occurred, then Borrower shall promptly notify Lender of the same and make payment of the Success Fee when due.
As used herein, ‘Billings’ means with respect to any fiscal period, on a consolidated basis, the amounts billed by Borrower to its customers in such period in accordance with its agreements with its customers.”
1.5 Section 4 of the Schedule to the Loan Agreement is amended and restated to read as follows:
“Maturity Date (Section 6.1): December 31, 2022.”


Exhibit 10.28

1.6 Section 5 of the Schedule to the Loan Agreement is amended and restated to read as follows:

“Minimum Cash to Funded Senior Debt Ratio:
Borrower shall at all times maintain a Cash to Funded Senior Debt Ratio of not less than 1.25:1.00.
As used herein, “Cash to Funded Senior Debt Ratio” means, on any day, the ratio of (i) Borrower’sunrestricted cash maintained in demand deposit accounts with Agent on such day to (ii) Revolving Loans outstanding on such day.”
1.7 Commencing with respect to Borrower’s monthly reporting for the month ending December 31, 2020, and thereafter Exhibit D to the Loan Agreement (the Form of Compliance Certificate) is replaced in its entirety with Exhibit D attached hereto.
2.    Representations True. Borrower represents and warrants to Agent and Lenders that all representations and warranties set forth in the Loan Agreement, as amended hereby, are true and correct in all material respects, except as to representations and warranties that relate to a different date, in which case said representations and warranties continue to be true in all material respects as of said date and those representations and warranties that are conditioned by materiality, which shall be true and correct in all respects.
3. Facility Fee. In consideration for Agent and Lenders entering into this Amendment, Borrower shall concurrently pay to Agent for the benefit of Lenders a fee in the amount of $25,000, which shall be non-refundable and in addition to all interest and other fees payable to Agent for benefit of Lenders under the Loan Documents. Agent is authorized to charge said fee to Borrower’s loan account or any of Borrower’s deposit accounts with Agent.
4. General Release. In consideration for Agent and Lenders entering into this Amendment, Borrower hereby irrevocably releases and forever discharges Agent, Lenders, and their successors, assigns, agents, shareholders, directors, officers, employees, agents, attorneys, parent corporations, subsidiary corporations, affiliated corporations, affiliates, participants, and each of them (collectively, the “Releasees”), from any and all claims, debts, liabilities, demands, obligations, costs, expenses, actions and causes of action, of every nature and description, known and unknown, which Borrower now has or at any time may hold, by reason of any matter, cause or thing occurred, done, omitted or suffered to be done prior to the date of this Amendment arising under or in any way related to the Loan Agreement, this Amendment or any other Loan Document or any of the transactions contemplated herein or therein (collectively, the “Released Claims”). Borrower hereby irrevocably waives the benefits of any and all statutes and rules of law to the extent the same provide in substance that a general release does not extend to claims which the creditor does not know or suspect to exist in its favor at the time of executing the release. Borrower represents and warrants that it has not assigned to any other Person any Released Claim, and agrees to indemnify Agent and Lenders against any and all actions, demands, obligations, causes of action, decrees, awards, claims, liabilities, losses and costs, including but not limited to reasonable attorneys' fees of counsel of Lenders’ choice and costs, which Lenders may sustain or incur as a result of a breach or purported breach of the foregoing representation and warranty.
5. No Waiver. Nothing herein constitutes a waiver of any default or Event of Default under the Loan Agreement or any other Loan Documents, whether or not known to Agent.
6. General Provisions. Borrower hereby ratifies and confirms the continuing validity, enforceability and effectiveness of the Loan Agreement and all other Loan Documents. This Amendment, the Loan Agreement, any prior written amendments to the Loan Agreement signed by Agent, Lenders and Borrower, and the other written documents and agreements between Agent, Lenders and Borrower set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, representations, agreements and understandings between the parties with respect to the subject hereof. Except as herein expressly amended, all of the terms and provisions of the Loan Agreement, and all other documents and agreements between Agent and Lenders on the one hand and Borrower on the other hand shall continue in full force and effect and the same are hereby ratified and confirmed. This Amendment may be executed in multiple counterparts, by different parties signing separate counterparts, and all of the same taken together shall constitute one and the same agreement.
7. Mutual Waiver of Jury Trial. AGENT AND LENDERS AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT IT MAY BE WAIVED. EACH OF THE PARTIES, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AMENDMENT, THE LOAN AGREEMENT, OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), ACTION OR INACTION OF ANY OF THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY ANY PARTY HERETO, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM. IF FOR ANY REASON THE PROVISIONS OF THIS SECTION ARE VOID, INVALID OR


Exhibit 10.28

UNENFORCEABLE, THE SAME SHALL NOT AFFECT ANY OTHER TERM OR PROVISION OF THIS AGREEMENT, AND ALL OTHER TERMS AND PROVISIONS OF THIS AGREEMENT SHALL BE UNAFFECTED BY THE SAME AND CONTINUE IN FULL FORCE AND EFFECT.

Borrower:Agent and Lender:
CARDLYTICS, INC. PACIFIC WESTERN BANK
 
/s/ Andrew Christiansen/s/ Mykas Degesys
Andrew ChristiansenMykas Degesys
Chief Financial Officer
(Principal Financial and Accounting Officer)
SVP

Document
Exhibit 23.1


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-222965, 333-231640 and 333-236869 on Form S-8, and Registration Statement No. 333-232861 on Form S-3 of our reports dated March 1, 2021, relating to the consolidated financial statements of Cardlytics, Inc. and subsidiaries, and the effectiveness of Cardlytics, Inc. and subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K of Cardlytics, Inc. for the year ended December 31, 2020.


/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 1, 2021  


Document
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lynne M. Laube, certify that:
1.I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2020 of Cardlytics, Inc. (the “registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:March 1, 2021By:/s/ Lynne M. Laube
  Lynne M. Laube
  
Chief Executive Officer
(Principal Executive Officer)


Document
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew Christiansen, certify that:
1.I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2020 of Cardlytics, Inc. (the “registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:March 1, 2021By:/s/ Andrew Christiansen
  Andrew Christiansen
  
Chief Financial Officer
(Principal Financial and Accounting Officer)


Document
Exhibit 32.1
CERTIFICATIONS OF
PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Scott D. Grimes, Chief Executive Officer of Cardlytics, Inc. (the “Company”), and David T. Evans, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:
1.The Company’s Annual Report on Form 10-K for the period ended December 31, 2020 (the "Report"), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date:March 1, 2021By:/s/ Lynne M. Laube
  Lynne M. Laube
  
Chief Executive Officer
(Principal Executive Officer)
   
Date:March 1, 2021By:/s/ Andrew Christiansen
  Andrew Christiansen
  
Chief Financial Officer
(Principal Financial and Accounting Officer)
This certification accompanies the Report to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.