Tuesday , January 19, 2021

Cardlytics Goes in Reverse as Payments Stocks Join a Broader Market Rebound

In the wake of a weaker-than-expected outlook and a sudden CEO change, share prices for card-linked marketing-services provider Cardlytics Inc. plunged Wednesday even as other payments companies surged with the broader markets that had tanked Tuesday on fears of the coronavirus.

As of late morning, Atlanta-based Cardlytics’ stock was going for $57.30 per share on the Nasdaq Global Select market, down 34% from Tuesday’s $86.20 close while the major market indexes were up close to 2%. Many payments stocks tracked by Digital Transactions News joined that rebound. Cardlytics’ decline came even though the company reported strong fourth-quarter results, including a 60% increase in monthly active users of its marketing programs.

In addition to its earnings report, Cardlytics announced after the markets closed Tuesday that chief executive and co-founder Scott Grimes would take the new position of executive chairman of the board, effective May 15. Succeeding Grimes as CEO will be Cardlytics’ other co-founder, Lynn Laube, currently chief operating officer. The company also announced several other high-level executive and board changes.

Cardlytics obtains spending information from financial institutions to help merchants—which it dubs “marketers”—generate tailored offers to customers of those institutions. The company’s idea is to give marketers a broader idea of where consumers are spending their money beyond the merchants’ own stores and online sites. Financial-institution clients include such large banks as Bank of America Corp., JPMorgan Chase & Co., and most recently Wells Fargo & Co.

Cardlytics said it had an average of 133.4 million monthly active users of its offers in the fourth quarter, up 60.3% from 83.2 million a year earlier. The company reported total revenues of $69.3 million, a 44.9% increase from $47.8 million in 2018’s fourth quarter. Net income swung to $3.4 million from an $11.6 million loss a year earlier. For the full year, Cardlytics reported a net loss of $17.1 million versus a loss of $53.2 million in 2018 on revenues of $210.4 million, up 39.6% from $150.7 million.

Not all the numbers were rosy, however. Average revenue per user (ARPU) in the fourth quarter fell 8.8% to 52 cents compared with 57 cents in late 2018. For all 2019, ARPU dipped 25.1% to $1.72 versus $2.30 in 2018. 

The stock swoon began in after-hours trading. The earnings report included a forecast of first-quarter billings of $64 million to $69 million and $43.5 million to $46.5 million in revenues, below what analysts had been expecting. Those predictions, not the changes at the top, were the likely cause of the decline, according to analyst Chris Shutler of Chicago-based William Blair & Co.

“First-quarter guidance was weaker than expected and the primary reason the stock was down significantly after-hours,” Shutler wrote in a report. He later added: “While the optics of the leadership announcement in conjunction with underwhelming guidance is not ideal, the leadership appointments all make sense and provide a lot of continuity, and Cardlytics has brought on some impressive senior executive talent in recent quarters to bolster the team.”

Top brass reviewed the financial results with analysts after issuing the earnings report. “Management admitted it took its eye off the ball with a few marketers, which took longer to get up and running in the quarter … management also said it has seen some weakness in transaction volumes in its travel vertical, beginning in the western U.S. early in the quarter and moving east as the quarter has progressed, which we believe is related to Covid-19.” Shutler’s report says.

Covid-19 is commonly known as the coronavirus, which is spreading around the world and causing consumers to rein in spending. That has prompted payments companies such as Visa, Mastercard, and PayPal as well as others to predict reduced transaction activity in the first quarter.

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