Cardlytics Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (1) our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10–Q and (2) the audited consolidated financial statements and the related notes and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2023 included in our Annual Report on Form 10-K, filed with the SEC on March 14, 2024.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (1) our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10–Q and (2) the audited consolidated financial statements and the related notes and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2023 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission ("SEC") on March 14, 2024.

Previous wording

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "project," "will," "would" or the negative or plural of these words or similar expressions or variations, and such forward-looking statements include, but are not limited to, statements with respect to our business strategy, plans and objectives for future operations, including our expectations regarding our expenses; continued enhancements of our platform and new product offerings; our future financial and business performance; anticipated payments under the Merger Agreement with Bridg; and anticipated Partner Share commitment shortfall payments. The events described in these forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled "Risk Factors," set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in our other SEC filings. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Current wording

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "project," "will," "would" or the negative or plural of these words or similar expressions or variations, and such forward-looking statements include, but are not limited to, statements with respect to our business strategy, plans and objectives for future operations, including our expectations regarding our expenses; continued enhancements of our platform and new product offerings; our future financial and business performance; and anticipated payments under the Merger Agreement with Bridg. The events described in these forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled "Risk Factors," set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in our other SEC filings. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Previous wording

During the three months ended March 31, 2024, Cardlytics MAUs increased by 10.4 million compared to the three months ended March 31, 2023 primarily driven by an increase in new MAUs.

Current wording

During the three months ended June 30, 2024, Cardlytics MAUs increased by 5.5 million compared to the three months ended June 30, 2023 primarily driven by organic growth of the existing FI partners in the U.K. and U.S. and a new FI Partner in the U.K.

Previous wording

During the three months ended March 31, 2024, Cardlytics ARPU decreased by $0.01 compared to the three months ended March 31, 2023 as a result of a$3.3 million increase in Revenue and a 10.4 million increase in Cardlytics MAUs.

Current wording

During the three months ended June 30, 2024, Cardlytics ARPU decreased by $0.06 compared to the three months ended June 30, 2023 as a result of an $8.0 million increase in Consumer Incentives due to higher engagement with our customers than expected.

Previous wording

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 partners. Adjusted Contribution demonstrates how incremental Revenue on our platforms 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 Partner Share and other third-party costs exclusive of deferred implementation costs, which is a non-cash cost. 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.

Current wording

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 partners. Adjusted Contribution demonstrates how incremental Revenue on our platforms 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 Partner Share and other third-party costs exclusive of deferred implementation costs, which is a non-cash cost. 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. Management views Adjusted Contribution as the most relevant metric to measure the financial performance as it reflects the dollars we keep after all of our partners are paid.

Previous wording

Adjusted EBITDA represents our Net (Loss) Income before interest expense, net; depreciation and amortization; stock-based compensation expense; foreign currency loss (gain); acquisition, integration and divestiture costs; and change in contingent consideration; and, in applicable periods, certain other income and expense items, such as impairment of goodwill and intangible assets; loss on divestiture; restructuring and reduction of force; income tax benefit; and deferred implementation costs. We do not consider these excluded items to be indicative of our core operating performance. Of these items depreciation and amortization expense, stock-based compensation expense, and foreign currency loss (gain) are non-cash impacting. Notably, any impacts related to minimum Partner Share commitments in connection with agreements with certain partners are not added back to net income in order to calculate Adjusted EBITDA.

Current wording

Adjusted EBITDA represents our Net Loss before interest expense, net; depreciation and amortization; stock-based compensation expense; foreign currency (gain) loss; gain on debt extinguishment; acquisition, integration and divestiture benefit; and change in contingent consideration; and, in applicable periods, certain other income and expense items, such as impairment of goodwill and intangible assets; loss on divestiture; restructuring and reduction of force; income tax benefit; and deferred implementation costs. We do not consider these excluded items to be indicative of our core operating performance. Of these items depreciation and amortization expense, stock-based compensation expense, and foreign currency loss (gain) are non-cash impacting. Notably, any impacts related to minimum Partner Share commitments in connection with agreements with certain partners are not added back to net loss in order to calculate Adjusted EBITDA.

Previous wording

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 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 income and other GAAP financial results.

Current wording

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 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.

Previous wording

We define Adjusted Net Loss as our Net (Loss) Income before stock-based compensation expense; foreign currency loss (gain); acquisition, integration and divestiture costs; amortization of acquired intangibles; and change in contingent consideration; and, in applicable periods, certain other income and expense items, such as impairment of goodwill and intangible assets; loss on divestiture; restructuring and reduction of force; and income tax benefit. We define Adjusted Net Loss per share as Adjusted Net Loss divided by our weighted-average common shares outstanding, diluted.

Current wording

We define Adjusted Net Loss as our Net Loss before stock-based compensation expense; foreign currency (gain) loss; gain on debt extinguishment; acquisition, integration and divestiture benefit; amortization of acquired intangibles; and change in contingent consideration; and, in applicable periods, certain other income and expense items, such as impairment of goodwill and intangible assets; loss on divestiture; restructuring and reduction of force; and income tax benefit. We define Adjusted Net Loss per share as Adjusted Net Loss divided by our weighted-average common shares outstanding, diluted.

Previous wording

During the three months ended March 31, 2024, Billings increased by$9.6 million compared to the three months ended March 31, 2023 primarily driven by a $7.0 million increase in net sales to existing marketers, an increase of $4.4 million in sales to new marketers, partially offset by $1.8 million loss due to the sale of Entertainment.

Current wording

During the three months ended June 30, 2024, Billings increased by$1.0 million compared to the three months ended June 30, 2023 primarily driven by an increase of $2.6 million in sales to new marketers, partially offset by a $1.6 million decrease in net sales to existing marketers.

Previous wording

(1)Stock-based compensation expense recognized in consolidated delivery costs totaled $0.6 million for each ofthree months ended March 31, 2024 and 2023.

Current wording

(1)Stock-based compensation expense recognized in consolidated delivery costs totaled $0.7 million and $0.6 million for the three months ended June 30, 2024 and 2023, respectively. Stock based compensation expense recognized in consolidated delivery costs totaled $1.4 million and $1.1 million for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

The following table presents a reconciliation of adjusted EBITDA to Net (Loss) Income, the most directly comparable GAAP measure (in thousands):

Current wording

The following table presents a reconciliation of adjusted EBITDA to Net Loss, the most directly comparable GAAP measure (in thousands):

Previous wording

The following table presents a reconciliation of Adjusted Net Loss to Net (Loss) Income, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):

Current wording

The following table presents a reconciliation of Adjusted Net Loss to Net Loss, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):

Previous wording

The following is a reconciliation of free cash flow to the most comparable GAAP measure, net cash used in operating activities (in thousands):

Current wording

The following is a reconciliation of free cash flow to net cash provided by (used in) operating activities, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):

Previous wording

Comparison of Three Months Ended March 31, 2024 and 2023

Current wording

Comparison of Three and Six Months Ended June 30, 2024 and 2023

Previous wording

The $3.3 million increase in Revenue during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was comprised of a $9.6 million increase in Billings and a $6.3 million increase in Consumer Incentives. Consumer Incentives grew at a higher rate than Billings during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to optimization of our targeting capabilities.

Current wording

The $7.1 million decrease in Revenue during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was comprised of a $1.0 million increase in Billings and a $8.0 million increase in Consumer Incentives. Consumer Incentives grew at a higher rate than Billings during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily due to higher engagement than expected.

Previous wording

Partner Share and other third-party costs decreased by$2.8 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to a decrease of $1.3 million due to a Partner Share commitment shortfall accrual in 2023 that did not reoccur in 2024. Excluding this shortfall commitment, the balance in Partner Share and other third-party costs decreased by $1.5 million. The decrease is primarily driven by a renegotiation of terms with a certain FI Partner and changes in Partner Share mix.

Current wording

Partner Share and other third-party costs decreased by$8.8 million during the six months ended June 30, 2024 compared to the six months ended June 30, 2023, partially due to a decrease of $1.3 million from a Partner Share commitment shortfall accrual in 2023 that did not reoccur in 2024. Excluding this shortfall commitment, the balance in Partner Share and other third-party costs decreased by $7.5 million. The decrease is primarily driven by a renegotiation of terms with a certain FI Partner and changes in Partner Share mix.

Previous wording

Total delivery costs decreased by $0.3 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Delivery costs excluding stock-based compensation decreased by $0.3 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, driven by $0.6 million decrease in data storage costs, a $0.1 million decrease in professional fees and a $0.1 million decrease in staff expense, partially offset by a $0.4 million increase in incentive compensation.

Current wording

Total delivery costs increased by $0.6 million during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Delivery costs excluding stock-based compensation increased by $0.5 million during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, driven by $0.5 million increase in data storage costs.

Previous wording

Total sales and marketing expenses increased by $0.2 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Sales and marketing expense excluding the impact of stock-based compensation increased by $0.1 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to a $0.7 million increase in incentive compensation, partially offset by a $0.3 million decrease in staff expense, a $0.2 million decrease in marketing events and a $0.1 million decrease in professional fees.

Current wording

Total sales and marketing expenses decreased by $1.2 million during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Sales and marketing expense excluding the impact of stock-based compensation decreased by $0.3 million during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily due to a $0.9 million decrease in staff expensesand a $0.1 million decrease in travel expenses, partially offset by a $0.7 million increase marketing expense.

Previous wording

Total research and development expense increased by$1.5 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Research and development expense excluding stock-based compensation increased by $1.6 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2024, primarily due to a $1.7 million increase in incentive compensation and a $0.5 million increase in data storage and software licenses, primarily offset by a $0.5 million decrease in staff expense and a $0.1 million decrease in consulting fees.

Current wording

Total research and development expense increased by$0.1 million during thesix months ended June 30, 2024 compared to thesix months ended June 30, 2023. Research and development expense excluding stock-based compensation decreased by $0.1 million during thesix months ended June 30, 2024 compared to thesix months ended June 30, 2023, primarily due to a $0.7 million decrease in professional fees, a $0.1 million decrease in staff expenses and a$0.1 million decrease in administrative expenses, partially offset by a $0.8 million increasein data storage and software licenses.

Previous wording

Total general and administrative expense increased by$1.4 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. General and administrative expense excluding stock-based compensation decreased by $1.6 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to a$1.4 million decrease in professional fees, a$1.0 million decrease in software licenses, a$0.6 million decrease in staff expense, a$0.5 million decrease in facility expenses, a$0.4 million decrease in data storage expense, partially offset by a$1.7 million increase in bad debt, and a$0.6 million increase in incentive compensation.

Current wording

Total general and administrative expense decreased by$0.1 million during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. General and administrative expense excluding stock-based compensation decreased by $1.6 million during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to a$1.3 million decrease in software licenses, a$1.0 million decrease in professional fees, a$0.5 million decrease in facility expenses and a$0.2 million decrease in staff expenses, partially offset by a$1.2 million increase in bad debt and a$0.2 million increase in travel expenses.

Previous wording

Stock-based compensation expense increased by $3.0 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by higher forfeitures related to executive departures that occurred during the three months ended March 31, 2023.

Current wording

Stock-based compensation expense increased by $3.9 million during the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily driven by higher forfeitures related to executive departures that occurred during the three months ended June 30, 2023.

Previous wording

During the three months ended March 31, 2024 and 2023 we incurred zero and a $1.7 million cost, respectively, primarily in connection with our acquisition of Bridg due to the changes in the estimated brokerage fees and transaction bonuses and accounting for all true-ups and credits related to the acquisition of Bridg.

Current wording

During the three months ended June 30, 2024 and 2023 we realized an expense of $0.2 million and a gain of $9.9 million primarily due to the changes in the estimated brokerage fees and transaction bonuses and accounting for all true-ups and credits related to the acquisition of Bridg. Refer to Note 3 - Business Combinations to our consolidated financial statements for additional information.

Previous wording

During the three months ended March 31, 2024 and 2023, we recognized a loss of $5.8 million and a gain of $34.6 million, respectively, related to the change in value of contingent consideration to the former Bridg shareholders. Refer to Note 9—Fair Value Measurements to our consolidated financial statements for additional information regarding the contingent consideration.

Current wording

During the three months ended June 30, 2024 we realized a gain of $5.8 million primarily related to the Settlement Agreement. Refer to Note 1—Overview of Business and Basis of Presentation for additional information. During the three months ended June 30, 2023 we realized a cost of $11.3 million primarily due to the change in value of contingent consideration to the former Bridg shareholders. Refer to Note 9—Fair Value Measurements to our consolidated financial statements for additional information regarding the contingent consideration.

Previous wording

Depreciation and amortization expense decreased by $0.3 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to a decrease in the acquisition of property and equipment and fully amortized intangibles.

Current wording

Depreciation and amortization expense decreased by $0.7 million during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to a decrease in the acquisition of property and equipment and fully amortized intangibles.

Previous wording

Foreign currency (loss) gain was a loss of $0.6 million during the three months ended March 31, 2024 compared to foreign currency (loss) gain of $1.4 million during the three months ended March 31, 2023, primarily due to the decrease in the value of the British pound relative to the U.S. dollar.

Current wording

Foreign currency gain (loss) was a gain of $0.1 million during the three months ended June 30, 2024 compared to a gain of $1.4 million during the three months ended June 30, 2023, primarily due to the decrease in the value of the British pound relative to the U.S. dollar.

Previous wording

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. Currently, a significant portion of our cash and cash equivalents are held in fully FDIC-insured money market accounts, demand deposit accounts and U.S. Treasury Bills. As of March 31, 2024, our demand deposit accounts and our money market account earned approximately 5.0% annual rate of interest. As of March 31, 2024, our U.S. Treasury Bills earned approximately 5.3% annual rate of interest. As of March 31, 2024, $2.7 million of our cash and cash equivalents were in the United Kingdom. While our investment in Cardlytics U.K. Limited is not considered indefinitely invested, we do not have any current plans to repatriate these funds.

Current wording

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. Currently, a significant portion of our cash and cash equivalents are held in fully FDIC-insured money market accounts, demand deposit accounts and U.S. Treasury Bills. As of June 30, 2024, our demand deposit accounts and our money market account earned approximately 5.0% annual rate of interest. As of June 30, 2024, our U.S. Treasury Bills earned approximately 5.3% annual rate of interest. As of June 30, 2024, $3.1 million of our cash and cash equivalents were in the United Kingdom. While our investment in Cardlytics U.K. Limited is not considered indefinitely invested, we do not have any current plans to repatriate these funds.

Previous wording

Through March 31, 2024, we have incurred accumulated net losses of $1,135.5 million since inception, including net loss of $24.3 million for the three months ended March 31, 2024, respectively. 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.

Current wording

Through June 30, 2024, we have incurred accumulated net losses of $1,139.8 million since inception, including net loss of $4.3 million for the three months ended June 30, 2024. 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.

Previous wording

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 September 2025 (the "2020 Convertible Senior Notes"), including the exercise in full of the initial purchasers' option to purchase up to an additional $30.0 million principal amount of the 2020 Convertible Senior Notes. The 2020 Convertible Senior Notes were issued pursuant to an indenture, dated September 22, 2020 (the "2020 Indenture"), between us and U.S. Bank National Association, as trustee. 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. Refer to Note 7—Debt and Financing Arrangements to our consolidated financial statements for additional information regarding the contingent consideration.

Current wording

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 September 2025 (the "2020 Convertible Senior Notes"), including the exercise in full of the initial purchasers' option to purchase up to an additional $30.0 million principal amount of the 2020 Convertible Senior Notes. The 2020 Convertible Senior Notes were issued pursuant to an indenture, dated September 22, 2020, between us and U.S. Bank National Association, as trustee. 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. Refer to Note 7—Debt and Financing Arrangements to our consolidated financial statements for additional information regarding the contingent consideration.

Previous wording

Subsequent to March 31, 2024, we partially paid down the 2020 Convertible Senior Notes at prices below par and issued convertible senior notes with an aggregate principal amount of $172.5 million bearing an interest rate of 4.25% due on April 1, 2029 as described below.

Current wording

On April 1, 2024, we partially paid down the 2020 Convertible Senior Notes at prices below par and issued the 2024 Convertible Senior Notes (as defined below) with an aggregate principal amount of $172.5 million bearing an interest rate of 4.25% due on April 1, 2029 as described below. The remaining portion not paid down on the 2020 Convertible Senior Notes are due on April 1, 2025.

Previous wording

We had a minimum Partner Share commitment to a certain FI partner totaling $10.0 million over a 12-month period which ended on March 31, 2023. We have accrued $4.5 million for the Partner Share shortfall, included within Partner Share liability on our condensed consolidated balance sheet. We expect to pay this shortfall through June 30, 2024. As of March 31, 2024, we paid $2.4 million of our shortfall. During the three months ended March 31, 2023, we recognized $1.3 million of expected minimum Partner Share commitment shortfalls within Partner Share and other third-party costs on our condensed consolidated statement of operations.

Current wording

We had a minimum Partner Share commitment to a certain FI partner totaling $10.0 million over a 12-month period which ended on March 31, 2023. We had accrued $4.5 million for the Partner Share shortfall, included within Partner Share liability on our condensed consolidated balance sheet. As of June 30, 2024, we paid $3.4 million of our shortfall. During the six months ended June 30, 2024 and 2023, we recognized zero and $1.3 million of expected minimum Partner Share commitment shortfalls within Partner Share and other third-party costs on our condensed consolidated statement of operations. Subsequent to June 30, 2024, we paid $1.1 million of the remaining portion of our shortfall commitment.

Previous wording

As of March 31, 2024, the contingent consideration is valued at$4.3 million, exclusive of$0.3 million in broker fees and other costs, which is included in accrued expenses on our consolidated balance sheets. We determined the present value of the contingent consideration by discounting the future payments to be paid by January 31, 2025 and June 30, 2025. As the remaining payments are fixed as per the Settlement Agreement, the contingent consideration is no longer subject to ASC 820, Fair Value Measurement.

Current wording

As of June 30, 2024, the contingent consideration is valued at$4.4 million, exclusive of$0.3 million in broker fees and other costs, which is included in accrued expenses on our consolidated balance sheets. We determined the present value of the contingent consideration by discounting the future payments to be paid by January 31, 2025 and June 30, 2025. As the remaining payments are fixed as per the Settlement Agreement, the contingent consideration is no longer subject to ASC 820, Fair Value Measurement.

Previous wording

On April 1, 2024, we issued of $172.5 million principal amount of its 4.25% Convertible Senior Notes due in 2029 (the "2024 Convertible Senior Notes") in a private offering (the "Offering"), including the exercise in full of the initial purchasers' option to purchase up to an additional $22.5 million principal amount of 2024 Convertible Senior Notes. The net proceeds from this offering were an estimated $166.8 million, after deducting the initial purchasers' discounts, commissions and the offering expenses payable by us. The 2024 Convertible Senior Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of April 1, 2024, between us and U.S. Bank Trust Company, National Association, as trustee. We used approximately $169.3 million, consisting of the net proceeds from the Offering, together with cash on hand, to repurchase for cash approximately $183.9 million in aggregate principal amount of the 2020 Convertible Senior Notes, together with accrued and unpaid interest, in privately negotiated transactions below par and entered into concurrently with the pricing of the Offering through one of the initial purchasers or one of its affiliates, as our agents.

Current wording

On April 1, 2024, we issued of $172.5 million principal amount of its 4.25% Convertible Senior Notes due in 2029 (the "2024 Convertible Senior Notes" and together with the 2020 Convertible Senior Notes, the "Notes") in a private offering, including the exercise in full of the initial purchasers' option to purchase up to an additional $22.5 million principal amount of 2024 Convertible Senior Notes. The net proceeds from the offering were an $166.8 million, after deducting the initial purchasers' discounts, commissions and the offering expenses payable by us. The 2024 Convertible Senior Notes were issued pursuant to, and are governed by, an indenture, dated as of April 1, 2024, between us and U.S. Bank Trust Company, National Association, as trustee. We used approximately $169.3 million, consisting of the net proceeds from the offering, together with cash on hand, to repurchase for cash approximately $183.9 million in aggregate principal amount of the 2020 Convertible Senior Notes, together with accrued and unpaid interest, in privately negotiated transactions below par and entered into concurrently with the pricing of the offering through one of the initial purchasers or one of its affiliates, as our agents.

Previous wording

In April 2022, we amended our 2018 Loan Facility to increase the capacity of our Line of Credit from $50.0 million to $60.0 million with an option to increase to $75.0 million upon syndication. This amendment also extended the maturity date of the 2018 Loan Facility from December 31, 2022 to April 29, 2024, and further stated that if we had positive Adjusted EBITDA by December 31, 2023, we could extend the maturity date of the loan to April 29, 2025. Additionally with this amendment, the former cash covenant, as described below, was removed and was replaced with a requirement to maintain a minimum level of Adjusted Contribution and a minimum adjusted cash of $25.0 million, which is reduced by eligible accounts receivable in excess of the loan capacity. In November 2022, we amended our 2018 Loan Facility to modify the eligible account receivable to exclude UK accounts, reduce the ability to borrow up to 85% of the amount of our eligible accounts receivable to 50% and adjusted the required minimum level of Adjusted Contribution. In February 2023, we amended our 2018 Loan Facility to remove and replace the former Adjusted Contribution covenant with a requirement to maintain a minimum level of Adjusted EBITDA. In May 2023, we amended our 2018 Loan Facility to modify the covenants related to the maximum amount of cash we are allowed to pay for the First Anniversary Payment Amount and Second Anniversary Payment Amount under the Merger Agreement. In February 2024, we amended our 2018 Loan Facility to increase the ability to borrow up to 75% of the amount of our eligible accounts receivable, adjusted the required minimum level of Adjusted EBITDA and increased the interest rate to the prime rate plus 0.25%.

Current wording

In April 2022, we amended our loan facility with Pacific Western Bank (the "2018 Loan Facility") to increase the capacity of our asset-backed revolving line of credit (the "2018 Line of Credit") from $50.0 million to $60.0 million with an option to increase to $75.0 million upon syndication. This amendment also extended the maturity date of the 2018 Loan Facility from December 31, 2022 to April 29, 2024, and further stated that if we had positive Adjusted EBITDA by December 31, 2023, we could extend the maturity date of the loan to April 29, 2025. Additionally with this amendment, the former cash covenant, as described below, was removed and was replaced with a requirement to maintain a minimum level of Adjusted Contribution and a minimum adjusted cash of $25.0 million, which is reduced by eligible accounts receivable in excess of the loan capacity. In November 2022, we amended our 2018 Loan Facility to modify the eligible account receivable to exclude UK accounts, reduce the ability to borrow up to 85% of the amount of our eligible accounts receivable to 50% and adjusted the required minimum level of Adjusted Contribution. In February 2023, we amended our 2018 Loan Facility to remove and replace the former Adjusted Contribution covenant with a requirement to maintain a minimum level of Adjusted EBITDA. In May 2023, we amended our 2018 Loan Facility to modify the covenants related to the maximum amount of cash we are allowed to pay for the First Anniversary Payment Amount and Second Anniversary Payment Amount under the Merger Agreement. In February 2024, we amended our 2018 Loan Facility to increase the ability to borrow up to 75% of the amount of our eligible accounts receivable, adjusted the required minimum level of Adjusted EBITDA and increased the interest rate to the prime rate plus 0.25%. We also confirmed the extension of the maturity date of the loan to April 29, 2025.

Previous wording

As of March 31, 2024, we had borrowed $30.0 million, which we paid down subsequent to March 31, 2024. Interest on advances under the 2018 Line of Credit bore an interest rate equal to the prime rate plus 0.25%. During the three months ended March 31, 2024, we incurred approximately $0.7 million of interest expense associated with the 2018 Loan Facility. In addition, we are required to pay an unused line fee of 0.15% per annum on the average daily unused amount of the revolving commitment. As of March 31, 2024, we had $29.5 million of unused available borrowings under our 2018 Line of Credit. We believe we are in compliance with all financial covenants as of March 31, 2024.

Current wording

In April 2024, we repaid in full $30.0 million of the principal balance of the 2018 Line of Credit. Interest on advances under the 2018 Line of Credit bore an interest rate equal to the prime rate plus 0.25%. During the six months ended June 30, 2024, we incurred approximately $0.7 million of interest expense associated with the 2018 Loan Facility. In addition, we are required to pay an unused line fee of 0.15% per annum on the average daily unused amount of the revolving commitment. As of June 30, 2024, we had $60.0 million of unused available borrowings under our 2018 Line of Credit. We believe we are in compliance with all financial covenants as of June 30, 2024.

Previous wording

Operating activities used $10.1 million of cash during the three months ended March 31, 2023, which reflected our net income of $13.6 million, which included $15.0 million of non-cash charges offset by a $34.6 million change in estimated contingent consideration, and a $4.1 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 amortization of financing costs charged to interest expense and credit losses expense. The change in our net operating assets and liabilities was primarily due to a $10.6 million decrease in our Consumer Incentive liability, a $9.7 million decrease in Partner Share liability, a $3.1 million decrease in other accrued expense, a $1.7 million decrease in accounts payable and a $0.4 million increase in prepaid expenses and other assets, partially offset by a $21.4 million decrease in accounts receivable. These fluctuations are primarily driven by the quarterly seasonality of our business.

Current wording

Operating activities used $13.2 million of cash during the six months ended June 30, 2024, which reflected our Net Loss of $28.5 million, including $29.7 million of non-cash charges, offset by a $14.4 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, amortization of financing costs charged to interest expense and credit losses expense. The change in our net operating assets and liabilities was primarily due to a $7.2 million decrease in our Consumer Incentive liability, a $15.1 million decrease in Partner Share liability, a $7.3 million decrease in other accrued expense and a $0.4 million increase in prepaid expenses and other assets, partially offset by a $14.8 million decrease in accounts receivable and a $0.8 million increase in accounts payable. These fluctuations are primarily driven by the quarterly seasonality of our business.

Previous wording

Operating activities used $17.6 million of cash during the three months ended March 31, 2024, which reflected our Net Loss of $24.3 million, including $20.5 million of non-cash charges and a $5.8 million change in estimated contingent consideration, offset by a $19.6 million change in our net operating assets and liabilities. The non-cash charges primarily related to stock-based compensation expense, depreciation and amortization expense, amortization of right-of-use assets, amortization of financing costs charged to interest expense and credit losses expense. The change in our net operating assets and liabilities was primarily due to a $8.7 million decrease in our Consumer Incentive liability, a $13.3 million decrease in Partner Share liability, a $7.6 million decrease in other accrued expense and a $3.5 million increase in prepaid expenses and other assets, partially offset by a $13.3 million decrease in accounts receivable and a $0.1 million increase in accounts payable. These fluctuations are primarily driven by the quarterly seasonality of our business.

Current wording

Operating activities used $4.3 million of cash during the six months ended June 30, 2023, which reflected our net loss of $9.9 million, including $34.1 million of non-cash charges offset by a $23.3 million change in estimated contingent consideration, and a $5.2 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, amortization of financing costs charged to interest expense and credit losses expense. The change in our net operating assets and liabilities was primarily due to a $11.0 million decrease in our Consumer Incentive liability, a $0.3 million decrease in Partner Share liability and a $11.0 million decrease in other accrued expense, a $2.0 million decrease in accounts payable and a $0.4 million decrease in prepaid expenses and other assets, partially offset by a $18.1 million decrease in accounts receivable. These fluctuations are primarily driven by the quarterly seasonality of our business.

Previous wording

Investing activities used $4.7 million and $2.8 million and in cash during the three months ended March 31, 2024 and 2023, respectively. Our investing cash flows during the three months ended March 31, 2024 primarily consisted of funds used for the purchases of technology hardware and costs to develop internal-use software.

Current wording

Investing activities used $9.4 million and $5.5 million and in cash during the six months ended June 30, 2024 and 2023, respectively. Our investing cash flows during the six months ended June 30, 2024 and 2023 primarily consisted of funds used for the purchases of technology hardware and capitalization of costs to develop internal-use software.

Previous wording

Financing activities provided $28.3 million in cash during the three months ended March 31, 2024, consisted of anaggregate net proceeds of$48.6 million, pursuant to the Equity Distribution Agreement and completed the ATM Offering Program, offset by$20.1 million paid in cash related to the settlement agreement with the Stockholder Representative to resolve all outstanding disputes related to the Merger Agreement, inclusive of brokerage fees and transaction bonuses and accounting for all true-ups and credits.

Current wording

Financing activities provided $2.0 million in cash during the six months ended June 30, 2024, which consisted of aggregated net proceeds of $166.8 million proceeds from issuance of our 2024 Convertible Senior Notes offering ($172.5 million from the issuance of the 2024 Convertible Senior Notes offset by $5.6 million in debt issuance costs) and anaggregate net proceeds of$48.6 million, pursuant to the Equity Distribution Agreement, partially offset by a$169.3 million of principal payment of debt towards our 2020 Convertible Senior Notes, $30.0 million payment to the 2018 Line of Credit and $14.2 million paid in cash related to the settlement agreement with the Stockholder Representative to resolve all outstanding disputes related to the Merger Agreement, inclusive of brokerage fees and transaction bonuses and accounting for all true-ups and credit.

Previous wording

Financing activities provided $30.0 million in cash during the three months ended March 31, 2023, consisting of $30.0 million borrowed under our 2018 Line of Credit.

Current wording

Financing activities used $20.1 million in cash during the six months ended June 30, 2023, consisting of $50.1 million paid for the First Anniversary Payment and $30.0 million borrowed under our 2018 Line of Credit.