Chase and Wells Expected To Give a Big Boost to Cardlytics, But Revenue Growth Will Lag

Cardlytics Inc. continues to ramp up its rewards platform to accommodate an expected tens of millions of new users coming from new big-bank clients, but revenue growth will lag customer growth for some time, company executives signaled this week.

Atlanta-based Cardlytics’s main product, Cardlytics Direct, provides merchant-funded offers to consumers via banks’ mobile and online banking sites. As of 2018’s fourth quarter, Cardlytics said it had an average of 83.2 million monthly active users from financial institutions, up 42% from 58.7 million a year earlier. By December, the platform had 99 million users, chief executive Scott Grimes told analysts Tuesday on a conference call to review the fourth-quarter results.

Bank of America Corp. has been Cardlytics’s biggest customer so far. But JPMorgan Chase & Co., the nation’s biggest bank by assets and biggest credit card issuer, and Wells Fargo and Co. are now plugging into Cardlytics’s platform. With those two mega-banks and others in the pipeline, Cardlytics has enhanced its platform to support as many as 150 million users by year’s end, according to Grimes.

But new users don’t automatically translate into a proportional increase in revenues. While average revenue per user increased 3% in all of 2018 to $2.30, in the fourth quarter it declined 14% to 57 cents from 66 cents a year earlier. Grimes told analysts that it will be 2021 before average revenues per user return to levels achieved in 2018.

“It is important to understand that revenue per user lags [monthly active user] growth; consumers have to discover and learn to use our marketing,” he said on the call, according to a Motley Fool Transcribers transcript. “We have to secure larger budgets from current marketers and we have to bring new marketers in the channel.” But he added: “We know how to do this. New banks are launching with strong user experiences, and we are consistently delivering strong return on the investments from our marketing clients.”

Cardlytics, which went public in February 2018, reported fourth-quarter revenues grew 22% year-over-year to $47.8 million, with a net loss of $11.6 million versus a $4.42 million loss in 2017’s fourth quarter. The loss per share, however, fell by half to 53 cents. For the full year, revenues increased 16% to $150.7 million, with a loss of $53.2 million compared with 2017’s loss of $25.4 million. The loss per share fell to $2.79 versus $7.86 in 2017.