CARDLYTICS, INC. 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
Our company's mission is to redefine marketing by using data for good. We work to accomplish this mission by operating an advertising platform within our own and our partners' digital channels, which include online, mobile applications, email, and various real-time notifications (the "Cardlytics platform"). We also operate a customer data platform which utilizes point-of-sale ("POS") data, including product-level purchase data, to enable marketers, in a privacy-protective manner, to perform analytics and target loyalty marketing and also enable marketers to measure the impact of their marketing (the "Bridg platform"). The partners for theCardlytics platform are predominantly financial institutions ("FI partners") who provide us with access to their anonymized purchase data and digital banking customers. The partners for the Bridg platform are merchants ("merchant data partners") who provide us with access to their POS data, including product-level purchase data. By applying advanced analytics to the purchase data we receive, 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, direct-to-consumer, and grocery and gas. 44
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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 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 customers
from the marketers to which the Consumer Incentives relate.
We pay certain partners a negotiated and fixed percentage of our billings to
marketers less any Consumer Incentives that we pay to customers and certain
third-party data costs ("Partner Share"). We report our revenue gross of Partner
Share. Partner Share costs are included in Partner Share and other third-party
costs in our consolidated statements of operations, rather than as a reduction
of revenue, because we and not our partners act as the principal in our
arrangements with marketers. Prior to March 31, 2021 , we referred to Partner
Share as FI Share.
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 a partner to enhance the level of Consumer Incentives to their respective
customers, funded by their Partner Share. We believe that these investments by
our partners positively impact our platforms by making their customers more
highly engaged with our platforms. 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 Partner Share
and other third-party costs, was $186.9 million and $267.1 million for the years
ended December 31, 2020 and 2021, respectively, representing an increase of 43%.
Billings, a non-GAAP measure that represents the gross amount billed to
marketers and is reported gross of both Consumer Incentives and Partner Share,
was $263.4 million and $394.1 million for the years ended December 31, 2020 and
2021, respectively, representing an increase of 50%. Gross profit, which
represents revenue less Partner Share and other third-party costs and less
delivery costs, was $63.3 million and $103.3 million for the years ended
December 31, 2020 and 2021, respectively, representing an increase of 63%.
Adjusted contribution, a non-GAAP measure that represents our revenue less our
adjusted Partner Share and other third-party costs, was $82.2 million and $129.6
million for the years ended December 31, 2020 and 2021, respectively,
representing an increase of 58%.
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.
The following table summarizes our results (dollars in thousands):
Year Ended December 31, Change Year Ended December 31, Change
2019 2020 $ % 2020 2021 $ %
Billings(1) $ 316,053 $ 263,355 $ (52,698) (17) % $ 263,355 $ 394,075 $ 130,720 50 %
Consumer Incentives 105,623 76,463 (29,160) (28) 76,463 126,959 50,496 66
Revenue 210,430 186,892 (23,538) (11) 186,892 267,116 80,224 43
Adjusted Partner Share and other
third-party costs(1) 115,211 104,710 (10,501) (9) 104,710 137,488 32,778 31
Adjusted contribution(1) 95,219 82,182 (13,037) (14) 82,182 129,628 47,446 58
Delivery costs 12,893 14,310 1,417 11 14,310 22,503 8,193 57
Deferred implementation costs 2,869 4,598 1,729 60 4,598 3,785 (813) (18)
Gross profit $ 79,457 $ 63,274 $ (16,183) (20) % $ 63,274 $ 103,340 $ 40,066 63 %
Net loss $ (17,144) $ (55,422) $ (38,278) 223 % $ (55,422) $ (128,565) $ (73,143) 132 %
Adjusted EBITDA(1) $ 6,052 $ (7,780) $ (13,832) (229) % $ (7,780) $ (12,220) $ (4,440) 57 %
(1)Billings, adjusted Partner Share and other third-party costs, adjusted contribution and adjusted EBITDA are non-GAAP measures, as detailed below in our reconciliations of GAAP revenue to billings, GAAP gross profit to adjusted contribution and GAAP net loss to adjusted EBITDA.
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During 2019, 2020 and 2021, our net loss was$17.1 million ,$55.4 million and$128.6 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 platforms by FI partners, merchant data partners and marketers. OnMarch 5, 2021 , we acquiredDosh Holdings, Inc. ("Dosh"), and onMay 5, 2021 , we acquiredBridg, Inc. ("Bridg"). During 2021, we incurred$9.8 million and$14.6 million of costs in connection with these acquisitions, respectively. During 2019, 2020 and 2021, our net loss included stock-based compensation expense of$15.9 million ,$32.4 million and$50.3 million , respectively.
Our FI partners includeBank of America, National Association ("Bank of America "),JPMorgan Chase Bank, National Association ("Chase") andWells 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.U.S. Bank, National Association began a phased launch of theCardlytics platform in the first quarter of 2021 that was completed in the third quarter of 2021. 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 Partner 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 Partner Share payment reductions of$4.6 million in 2019. During 2020 and 2021, we recognized write offs of deferred implementation costs totaling$0.7 million and$1.0 million , respectively, in Partner Share and other third-party costs on our consolidated statements of operations, upon the notification from one of our partners about plans to end the use of certain platform features prior to the end of our contractual arrangement with the partner.
We have a minimum Partner Share commitment to a certain FI partner totaling
Impacts of COVID-19 Pandemic
The COVID-19 pandemic resulted in a global slowdown of economic activity that disrupted supply and demand for a broad variety of goods and services and consumer discretionary spending, including spending by consumers with our marketers. 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 for the year endedDecember 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 solutions. During the year endedDecember 31, 2021 , we saw continued recovery of both consumer spending as well as the advertising budgets of our clients; however, many merchants continued to be impacted by labor shortages and disruptions in their supply chains. 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.
Acquisitions
OnMay 5, 2021 , we completed the acquisition of Bridg for purchase consideration of$578.9 million . The purchase consideration consisted of a$350.0 million cash purchase price, subject to$2.8 million of adjustments and escrows, and contingent consideration with a fair value of$230.9 million related to additional potential future payments. At least 30% of the potential future payments will be in cash, with the remainder to be paid in cash or our common stock, at our option. OnMarch 5, 2021 , we completed the acquisition of Dosh for purchase consideration of$277.6 million in a combination of cash and common stock. The total purchase consideration consisted of a$150.0 million cash purchase price, subject to$6.6 million of adjustments and escrows, and$125.0 million of shares of our common stock at an agreed-upon price of$136.33 per share, subject to$7.6 million of fair value adjustments based upon our close date, for an acquisition date fair value of$117.4 million .
Refer to Note 4-Business Combinations to our consolidated financial statements for further information.
Public Offering of Common Stock
OnMarch 5, 2021 , we closed a public equity offering in which we sold 3,850,000 shares of common stock at a public offering price of$130.00 per share for total gross proceeds of$500.5 million . We received total net proceeds of$484.0 million after deducting underwriting discounts and commissions of$16.3 million and offering costs of$0.2 million . 46
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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,
2019 2020 2021
(Amounts in thousands, except ARPU)
Cardlytics MAUs 122,586 155,784 170,925
Cardlytics ARPU $ 1.72 $ 1.20 $ 1.51
Bridg ARR $ - $ - $ 15,282
Billings $ 316,053 $ 263,355 $ 394,075
Adjusted contribution $ 95,219 $ 82,182 $ 129,628
Adjusted EBITDA $ 6,052 $ (7,780) $ (12,220) Cardlytics Monthly Active Users
We define MAUs as targetable customers or accounts that have logged in and visited online or mobile applications containing offers from, opened an email containing offers from, or redeemed an offer from theCardlytics platform during a monthly period. We then calculate a monthly average of these MAUs for the periods presented. We believe that MAUs is an indicator of theCardlytics platform's ability to drive engagement and is reflective of the marketing base that we offer to marketers.
Cardlytics Average Revenue per User
We define ARPU as the total revenue generated in the applicable period calculated in accordance with generally accepted accounting principles inthe United States ("GAAP"), divided by the average number of 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 theCardlytics platform.
Bridg Annualized Recurring Revenue
Consistent with the Bridg merger agreement, we define ARR as the annualized GAAP revenue of the final month in the period presented for the Bridg platform. ARR should not be considered in isolation from, or as an alternative to, revenue prepared in accordance with GAAP. We believe that ARR is an indicator of the Bridg platform's ability to generate future revenue from existing clients.
Billings
Billings represents the gross amount billed to customers and marketers for advertising campaigns in order to generate revenue.Cardlytics platform billings is recognized gross of both Consumer Incentives and Partner Share.Cardlytics platform GAAP revenue is recognized net of Consumer Incentives and gross of Partner Share. Bridg platform billings is the same as Bridg platform GAAP revenue. 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. 47
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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, 2019
Cardlytics Platform Bridg Platform Consolidated
Revenue $ 210,430 $ - $ 210,430
Plus:
Consumer Incentives 105,623 - 105,623
Billings $ 316,053 $ - $ 316,053
Year Ended December 31, 2020
Cardlytics Platform Bridg Platform Consolidated
Revenue $ 186,892 $ - $ 186,892
Plus:
Consumer Incentives 76,463 - 76,463
Billings $ 263,355 $ - $ 263,355
Year Ended December 31, 2021
Cardlytics Platform Bridg Platform Consolidated
Revenue $ 258,754 $ 8,362 $ 267,116
Plus:
Consumer Incentives 126,959 - 126,959
Billings $ 385,713 $ 8,362 $ 394,075
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 partners. Adjusted contribution demonstrates how
incremental marketing spend 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.
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.
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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
Cardlytics
Platform Bridg Platform Consolidated
Revenue $ 210,430 $ - $ 210,430
Minus:
Partner Share and other third-party costs 118,080 - 118,080
Delivery costs(1) 12,893 - 12,893
Gross profit 79,457 - 79,457
Plus:
Delivery costs(1) 12,893 - 12,893
Deferred implementation costs(2) 2,869 - 2,869
Adjusted contribution $ 95,219 $ - $ 95,219 (1)Stock-based compensation expense recognized in consolidated delivery costs
totaled
(2)Deferred implementation costs is excluded from adjusted Partner Share and other third-party costs as follows (in thousands):
Year Ended December 31, 2019
Cardlytics
Platform Bridg Platform Consolidated
Partner Share and other third-party costs $ 118,080 $ - $ 118,080 Minus:
Deferred implementation costs 2,869 - 2,869 Adjusted Partner Share and other third-party costs$ 115,211 $ -$ 115,211 Year Ended December 31, 2020 Cardlytics Platform Bridg Platform Consolidated Revenue$ 186,892 $ -$ 186,892 Minus: Partner Share and other third-party costs 109,308 - 109,308 Delivery costs(1) 14,310 - 14,310 Gross profit 63,274 - 63,274 Plus: Delivery costs(1) 14,310 - 14,310 Deferred implementation costs(2) 4,598 - 4,598 Adjusted contribution$ 82,182 $ -$ 82,182
(1)Stock-based compensation expense recognized in consolidated delivery costs
totaled
(2)Deferred implementation costs is excluded from adjusted Partner Share and other third-party costs as follows (in thousands):
Year Ended December 31, 2020
Cardlytics
Platform Bridg Platform Consolidated
Partner Share and other third-party costs $ 109,308 $ - $ 109,308 Minus:
Deferred implementation costs 4,598 - 4,598 Adjusted Partner Share and other third-party costs$ 104,710 $ -$ 104,710 49
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Year Ended December 31, 2021
Cardlytics Platform Bridg Platform Consolidated
Revenue $ 258,754 $ 8,362 $ 267,116
Minus:
Partner Share and other third-party costs 140,864 409 141,273
Delivery costs(1) 18,111 4,392 22,503
Gross profit 99,779 3,561 103,340
Plus:
Delivery costs(1) 18,111 4,392 22,503
Deferred implementation costs(2) 3,785 - 3,785
Adjusted contribution $ 121,675 $ 7,953 $ 129,628 (1)Stock-based compensation expense recognized in consolidated delivery costs
totaled
(2)Deferred implementation costs is excluded from adjusted Partner Share and other third-party costs as follows (in thousands):
Year Ended
Cardlytics Platform Bridg Platform Consolidated
Partner Share and other third-party costs $ 140,864 $ 409 $ 141,273 Minus:
Deferred implementation costs 3,785 - 3,785 Adjusted Partner Share and other third-party costs$ 137,079 $ 409$ 137,488 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 (loss); deferred implementation costs; restructuring costs, acquisition and integration costs and change in fair value of contingent consideration. We do not consider these excluded items to be indicative of our core operating performance. The items that are non-cash include foreign currency (gain) loss, deferred implementation costs, depreciation and amortization expense, stock-based compensation expense and change in fair value of contingent consideration. Notably, any impacts related to minimum Partner 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. 50
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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, 2019
Cardlytics
Platform Bridg Platform Consolidated
Net loss $ (17,144) $ - $ (17,144)
Plus:
Interest expense, net 548 - 548
Depreciation and amortization expense 4,535 - 4,535
Stock-based compensation expense 15,851 - 15,851
Foreign currency loss (781) - (781)
Loss on extinguishment of debt 51 - 51
Costs associated with financing events 123 - 123
Deferred implementation costs 2,869 - 2,869
Adjusted EBITDA $ 6,052 $ - $ 6,052
Year ended December 31, 2020
Cardlytics
Platform Bridg Platform Consolidated
Net loss $ (55,422) $ - $ (55,422)
Plus:
Interest expense, net 3,048 - 3,048
Depreciation and amortization expense 7,826 - 7,826
Stock-based compensation expense 32,396 - 32,396
Foreign currency gain (1,549) - (1,549)
Deferred implementation costs 4,598 - 4,598
Restructuring costs 1,323 - 1,323
Adjusted EBITDA $ (7,780) $ - $ (7,780)
Year ended December 31, 2021
Cardlytics
Platform Bridg Platform Consolidated
Net loss $ (121,455) $ (7,110) $ (128,565)
Plus:
Income tax benefit (2,302) (5,562) (7,864)
Interest expense, net 12,563 - 12,563
Depreciation and amortization expense 22,485 7,386 29,871
Stock-based compensation expense 47,222 3,042 50,264
Foreign currency loss 1,267 - 1,267
Deferred implementation costs 3,785 - 3,785
Restructuring costs 713 - 713
Acquisition and integration costs 24,380 (8) 24,372
Change in fair value of contingent consideration 1,374 - 1,374
Adjusted EBITDA $ (9,968) $ (2,252) $ (12,220)
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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 our partners' customers as reported by our partners during the month. We report our revenue net of Consumer Incentives and gross of Partner Share. Cost and Expense We classify our expenses into the following categories: Partner 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.
Partner Share and Other Third-Party Costs
Partner Share and other third-party costs consist primarily of the Partner Share that we pay our partners, media and data costs, deferred implementation costs incurred pursuant to our agreements with certain partners. To the extent that we use a specific partners' customer's anonymized purchase data in the delivery of our solutions, we pay the applicable partner a Partner Share calculated based on the relative contribution of the data provided by the partner to the overall delivery of the services. We expect that our Partner 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.
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.
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Acquisition and Integration Costs
Acquisition costs primarily represent diligence efforts, legal and advisory costs, broker fees and insurance premiums. Integration costs primarily represent integration-related employee compensation, advisory costs, and travel costs.
Change in Fair Value of Contingent Consideration
Our acquisition of Bridg includes a component of contingent consideration to be paid to the sellers if certain performance levels are achieved by Bridg over a specific period of time. Contingent consideration is initially recorded at fair value on the acquisition date based, in part, on a range of estimated probabilities for achievement of these performance levels. The fair value is periodically adjusted as actual performance levels become known and updates are made to the estimated probabilities for future performance. A gain or loss is recognized in the income statement for fair value adjustments. If we make additional acquisitions, it is possible that we will incur gains or losses in the future due to the change in the fair value of contingent consideration.
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 acquired intangible assets, 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.
Foreign Currency Gain (Loss)
Foreign currency gain (loss) consists primarily of gains and losses on foreign currency transactions.
Income Tax Benefit We have generated losses before income taxes in theU.S. ,U.K. and mostU.S. state income tax jurisdictions. We have generated historical net losses and recorded a full valuation allowance against our net deferred tax assets, and 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. For the periods presented, income tax benefit represents the release of a portion of our valuation allowance in connection with deferred tax liabilities arising from our acquisitions of Dosh and Bridg. 53
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Results of Operations
The following table sets forth our consolidated statements of operations (in
thousands):
Year Ended December 31,
2019 2020 2021
Revenue $ 210,430 $ 186,892 $ 267,116
Costs and expenses:
Partner Share and other third-party costs 118,080 109,308 141,273
Delivery costs 12,893 14,310 22,503
Sales and marketing expense 43,828 45,307 65,996
Research and development expense 11,699 17,532 38,104
General and administrative expense 36,720 46,532
66,222
Acquisition and integration costs - -
24,372
Change in fair value of contingent consideration - -
1,374
Depreciation and amortization expense 4,535 7,826 29,871 Total costs and expenses 227,755 240,815 389,715 Operating loss (17,325) (53,923) (122,599) Non-operating income (expense): Interest expense, net (548) (3,048) (12,563) Foreign currency gain (loss) 729 1,549 (1,267) Total non-operating income (expense) 181 (1,499) (13,830) Loss before income taxes (17,144) (55,422) (136,429) Income tax benefit - - 7,864 Net loss$ (17,144) $ (55,422) $ (128,565) 54
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Comparison of Years Ended
In this section, we discuss the results of our operations for the year endedDecember 31, 2021 compared to the year endedDecember 31, 2020 . For a discussion of the year endedDecember 31, 2020 compared to the year endedDecember 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 endedDecember 31, 2020 . Revenue Year Ended December 31, Change 2020 2021 $ % (dollars in thousands) Billings$ 263,355 $ 394,075 $ 130,720 50 % Consumer Incentives 76,463 126,959 50,496 66 % Revenue$ 186,892 $ 267,116 $ 80,224 43 % % of billings 141 % 148 % The$80.2 million increase in revenue during 2021 compared to 2020 was comprised of a$130.7 million increase in billings, offset by a$50.5 million increase in Consumer Incentives. The billings increase was comprised of a$65.0 million increase in sales to existing marketers and a$65.7 million increase in sales to new marketers. Revenue during 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 2021, we saw a recovery of both consumer spending as well as the advertising budgets of our clients. Consumer Incentives grew at a higher rate than billings during 2021 compared to 2020 primarily as a result of changes in advertiser mix and an increase in Consumer Incentives funded by partners through a reduction in Partner Share.
Costs and Expenses
Partner Share and Other Third-Party Costs
Year Ended December 31, Change
2020 2021 $ %
(dollars in thousands)
Partner Share and other third-party costs:
Adjusted Partner Share and other third-party costs $ 104,710 $ 137,488 $ 32,778 31 %
Deferred implementation costs 4,598 3,785 (813) (18)
Total Partner Share and other third-party costs $ 109,308 $ 141,273 $ 31,965 29 %
% of revenue 58 % 53 %
Partner Share and other third-party costs increased by $32.0 million during 2021
compared to 2020 primarily due to increase in billings partially offset by an
increase in Consumer Incentives funded by partner through a reduction of Partner
Share. Deferred implementation costs decreased by $0.8 million during 2021
compared to 2020 primarily due to a write off of deferred implementation costs
totaling $0.7 million in 2020.
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Delivery Costs
Year Ended December 31, Change
2020 2021 $ %
(dollars in thousands)
Delivery costs $ 14,310 $ 22,503 $ 8,193 57 %
% of revenue 8 % 8 %
Delivery costs increased by $8.2 million during 2021 compared to 2020 primarily
due to increased costs from our acquired businesses of $5.5 million , inclusive
of $0.3 million of stock-based compensation expense. The remaining increase
related to a $1.2 million increase in hosting-related IT costs, a $1.1 million
increase in personnel costs associated with additional headcount to host the
Cardlytics platform for certain FI partners and a $0.4 million increase in
stock-based compensation expense.
Sales and Marketing Expense
Year Ended December 31, Change
2020 2021 $ %
(dollars in thousands)
Sales and marketing expense $ 45,307 $ 65,996 $ 20,689 46 %
% of revenue 24 % 25 %
Sales and marketing expense increased by $20.7 million during 2021 compared to
2020 primarily due to increased costs from our acquired businesses of $10.5
million , inclusive of $2.8 million of stock-based compensation expense. The
remaining increase related to $6.8 million in personnel costs associated with
additional headcount, a $1.7 million increase in marketing expenses, a $1.1
million increase in stock-based compensation expense and a $0.6 million increase
in professional fees.
Research and Development Expense
Year Ended December 31, Change
2020 2021 $ %
(dollars in thousands)
Research and development expense $ 17,532 $ 38,104 $ 20,572 117 %
% of revenue 9 % 14 %
Research and development expense increased by $20.6 million during 2021 compared
to 2020 primarily due to increased costs from our acquired businesses of $9.2
million , inclusive of $1.9 million of stock-based compensation expense. The
remaining increase is due to $6.2 million in personnel costs associated with
additional headcount, a $3.7 million increase in stock-based compensation
expense and a $0.9 million increase in professional fees and a $0.6 million
increase in software license costs.
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General and Administrative Expense
Year Ended December 31, Change
2020 2021 $ %
(dollars in thousands)
General and administration expense $ 46,532 $ 66,222 $ 19,690 42 %
% of revenue 25 % 25 %
General and administrative expense increased by $19.7 million during 2021
compared to 2020 primarily due to increased costs from our acquired businesses
of $12.9 million , inclusive of $7.5 million of stock-based compensation expense.
The remaining increase is due to $2.5 million in personnel costs associated with
additional headcount, a $2.3 million increase in professional fees, $1.8 million
increase in software licensing costs, a $0.1 million increase in facility costs
and a $0.1 million increase in stock-based compensation expense.
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
2020 2021 $ %
Delivery costs $ 1,181 $ 1,865 $ 684 58 %
Sales and marketing expense 9,857 13,780 3,923 40
Research and development expense 4,713 10,328 5,615 119
General and administrative expense 16,645 24,291 7,646 46
Total stock-based compensation expense $ 32,396 $ 50,264 $ 17,868 55 %
% of revenue 17 % 19 %
Stock-based compensation expense increased by $17.9 million during 2021 compared
to 2020 primarily due to $12.5 million expense related to our assumption of
unvested options and grants of restricted stock units to employees of our
acquired businesses. The remaining increase is due to grants of restricted stock
units to current employees and new hires during 2021.
Acquisition and integration costs
Year Ended December 31, Change
2020 2021 $ %
(dollars in thousands)
Acquisition and integration costs $ - 24,372 $ 24,372 n/a
% of revenue - % 9 %
During 2021 we incurred $24.4 million of costs in connection with the
acquisitions of Dosh and Bridg. For the year ended December 31, 2021 , these
amounts include $9.4 million of broker and insurance fees, $8.0 million of legal
and accounting fees, $6.3 million of severances and incentive compensation and
$0.7 million of travel costs. Refer to Note 4-Business Combinations to our
consolidated financial statements for additional information regarding these
acquisitions.
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Change in fair value of contingent consideration
Year Ended December 31, Change
2020 2021 $ %
(dollars in thousands)
Change in fair value of contingent consideration $ - $ 1,374 $ 1,374 n/a
% of revenue - % 1 %
During 2021, we recognized
Depreciation and Amortization Expense
Year Ended December 31, Change
2020 2021 $ %
(dollars in thousands)
Depreciation and amortization expense $ 7,826 $ 29,871 $ 22,045 282 %
% of revenue 4 % 11 %
Depreciation and amortization expense increased by $22.0 million during 2021
compared to 2020 primarily driven by the increase of amortization of intangible
assets related to the Dosh and Bridg acquisitions.
Interest Expense, Net
Year Ended December 31, Change
2020 2021 $ %
(dollars in thousands)
Interest expense $ (3,488) $ (12,860) $ (9,372) 269 %
Interest income 456 297 (159) (35)
Interest expense, net $ (3,048) $ (12,563) $ (9,515) 312 %
% of revenue (2) % (5) %
Interest expense, net increased by $9.5 million during 2021 compared to 2020
primarily driven by an increase in interest expense, including contractual
interest expense, amortization of debt issuance costs and amortization of debt
issuance costs, related to the Notes which were issued on September 22, 2020 and
have an aggregate principal amount of $230.0 million bearing interest of 1.00%.
Foreign Currency Gain (Loss)
Year Ended December 31, Change
2020 2021 $ %
(dollars in thousands)
Foreign currency gain (loss) $ 1,549 $ (1,267) $ (2,816) (182) %
% of revenue 1 % - %
Foreign currency gain (loss) decreased by $2.8 million during 2021 compared to
2020 primarily due to the decrease in the value of the British pound relative to
the U.S. dollar.
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Income Tax Benefit
Year Ended December 31, Change
2020 2021 $ %
(dollars in thousands)
Income tax benefit $ - $ 7,864 $ 7,864 n/a
% of revenue - % 3 %
Income tax benefit increased by $7.9 million during 2021 compared to 2020 due to
the release of a portion of our valuation allowance in connection with deferred
tax liabilities arising from our acquisitions of Dosh and Bridg.
Critical Accounting Estimates
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.
Business Combinations
We estimate the fair value of assets acquired and liabilities assumed in a business combination.Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology, useful lives, and discount rates. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. During the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. On the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.
Fair Value of Contingent Consideration
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.
The consideration for our acquisition of Bridg may include future payments that
are contingent upon the results of Bridg's operations. We recorded a contingent
consideration obligation for such contingent payments at fair value on the
acquisition date. We estimate the fair value of contingent consideration
obligations through valuation models designed to estimate the probability of
such contingent payments based on various assumptions and incorporating
estimated success rates. Estimated payments are discounted using present value
techniques to arrive at an estimated fair value at the balance sheet date.
Changes in the fair value of the contingent consideration obligations are
recognized within our consolidated statements of operations. Changes in the fair
value of the contingent consideration obligations can result from changes to one
or multiple inputs, including adjustments to forecasts, the discount rates and
assumptions used in preparing these models which include estimates such as
revenue volatility, revenue discount rate, weighted average cost of capital, and
our common stock volatility. Substantial judgment is employed in determining the
appropriateness of these assumptions as of the acquisition date and for each
subsequent period. Accordingly, changes in assumptions could have a material
impact on the amount of contingent consideration expense in our records in any
given period. Refer to Note 13-Fair Value Measurements for information regarding
the fair value of our financial instruments.
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Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in a business combination. We evaluate our goodwill for impairment annually during the fourth quarter and whenever events or changes in circumstances indicate the carrying value of a reporting unit may not be recoverable. Our reporting units are one level below the operating segments at which level our segment management conducts regular reviews of the operating results. Our impairment evaluation consists of a qualitative assessment. If this assessment indicates that it is more likely than not the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not considered impaired. Otherwise, a quantitative impairment test is performed by comparing the fair value of a reporting unit to its carrying value, including goodwill. We can bypass the qualitative assessment for any period and proceed directly to the quantitative impairment test. If the carrying value of the net assets associated with the reporting unit exceeds the fair value of the reporting unit, goodwill is considered impaired and will be determined as the amount by which the reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
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 net 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.
Recent Accounting Pronouncements
Refer to Note 3-Accounting Standards to our consolidated financial statements for additional information.
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Liquidity and Capital Resources
The following table summarizes our cash and cash equivalents, restricted cash, working capital, accounts receivable and contract assets, net and unused available borrowings (in thousands):
December 31,
2020 2021
Cash and cash equivalents $ 293,239 $ 233,467
Restricted cash 110 95
Working capital(1) 304,317 31,375Accounts receivable and contract assets, net 81,249 111,085 Unused available borrowings
50,000 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.
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 fullyFDIC -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 six financial institutions, which we believe are of high credit quality. As ofDecember 31, 2021 , our demand deposit accounts earned up to a 0.50% annual rate of interest. As ofDecember 31, 2021 , we had$3.9 million in cash and cash equivalents in the U.K. While our investment in CardlyticsUK is not considered indefinitely invested, we do not plan to repatriate these funds. ThroughDecember 31, 2021 , we have incurred accumulated net losses of$522.6 million since inception, including losses of$17.1 million ,$55.4 million and$128.6 million during 2019, 2020 and 2021, 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. ThroughDecember 31, 2021 , 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$611.1 million from public equity offerings. OnMay 5, 2021 , we completed the acquisition of Bridg. As a part of this acquisition, we have agreed to make a First Anniversary Payment equal to 20 times the ARR based on the month preceding the anniversary, less$12.5 million , and a Second Anniversary Payment equal to 15 times the ARR for customers as of the first anniversary based on the month preceding the second anniversary, less the prior ARR at the first anniversary. The Second Anniversary Payment is subject to a specified cap. We have agreed to pay at least 30% of the First Anniversary Payment and the Second Anniversary Payment in cash, with the remainder to be paid in cash or our common stock, at our option. Our other future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, our merger and acquisition efforts, the continued expansion of sales and marketing activities, the enhancement of our platforms, 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. 61
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Sources of Material Cash Requirements
The following table summarizes our material cash requirements for future periods (in thousands):
Material Cash
Requirements Due by the Year Ended
2022 2023 - 2024 2025 - 2026 Thereafter Total
Convertible senior notes(1) $ 2,300 $ 4,600 $ 232,396 $ - $ 239,296
Finance leases(2) 39 50 - - 89
Operating leases(3) 6,334 6,392 611 - 13,337
Cash portion of contingent
consideration(4) 53,617 13,879 - - 67,496
Broker fee on contingent
consideration 12,300 4,500 - - 16,800
Purchase obligations(5) 4,616 2,807 - - 7,423
Total $ 79,206 $ 32,228 $ 233,007 $ - $ 344,441
(1)Convertible senior notes were issued on September 22, 2020 and have an
aggregate principal amount of $230.0 million bearing interest of 1.00%.
(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)Amount represents the estimated fair value of the 30% cash portion of the
Bridg First and Second Anniversary Payments.
(5)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 Partner Share commitment to a certain FI partner totaling
Sources of Funds
Proceeds from Issuance of Common Stock
On
OnSeptember 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 2019, 2020 and 2021, we also received
2020 Convertible Senior Notes
InSeptember 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. 62
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2018 Loan Facility
OnMay 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 fromMay 21, 2020 toMay 14, 2021 . We repaid$10.0 million of the principal balance of the 2018 Term Loan upon the execution of the amendment inMay 2019 and repaid the remaining$10.0 million principal balance inSeptember 2019 . OnSeptember 17, 2020 , we amended our 2018 Loan Facility to allow for the issuance of the Notes. OnDecember 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 fromMay 14, 2021 toDecember 31, 2022 . As ofDecember 31, 2021 , we had$50.0 million of unused borrowings available under our 2018 Line of Credit. Prior to theDecember 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 theDecember 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 ofDecember 31, 2021 . 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 inSeptember 2019 .
The 2018 Loan Facility includes customary representations, warranties and covenants (affirmative and negative), including restrictive covenants that prohibit 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
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' Partner 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 endedDecember 31, 2020 and the year endedDecember 31, 2021 . For a discussion of the year endedDecember 31, 2019 , 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 endedDecember 31, 2020 . The following table shows a summary of our cash flows for the periods presented (in thousands): Year EndedDecember 31, 2020 2021
Cash, cash equivalents and restricted cash at beginning of period $
104,587$ 293,349 Net cash used in operating activities (7,598) (38,523) Net cash used in investing activities (10,117) (506,695) Net cash received from financing activities 206,430 485,998
Effect of exchange rates on cash, cash equivalents and restricted cash
47 (567)
Cash, cash equivalents and restricted cash at end of period $ 293,349 $ 233,562 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$38.5 million of cash in 2021, which reflected our net loss of$128.6 million ,$96.7 million of which were non-cash charges, and a$6.7 million change in our net operating assets and liabilities. The non-cash charges primarily related to stock-based compensation expense, depreciation and amortization expense, including the amortization of acquired intangible assets, amortization of right-of-use assets, deferred implementation costs, changes in the fair value of our contingent consideration, credit loss expense and income tax benefit. The change in our net operating assets and liabilities was primarily due to a$27.9 million increase in accounts receivable and contract assets, a$0.9 million decrease in other accrued expenses and a$9.1 million decrease in Partner Share liability, partially offset by a$13.2 million increase in our Consumer Incentive liability. 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 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 and contract assets, a$1.2 million decrease in other accrued expenses and a$4.5 million decrease in Partner 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 sales in 2019.
Investing Activities
Our cash flows used for investing activities are primarily driven by our acquisitions of Dosh and Bridg, 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
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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 stock and payments for costs related to debt issuances and equity offerings.
Financing activities provided$486.0 million in cash in 2021. During 2021, we raised total gross proceeds of$500.5 million , or net proceeds of$484.0 million after deducting underwriting discounts and commissions of$16.3 million and offering costs of$0.2 million from our public equity offering in which we sold 3,850,000 shares of common stock at a public offering price of$130.00 per share. 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.
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