Cardlytics ($CDLX): Change in Billings Share with Chase (Update #180)
Discussions on what this could mean both in the near term (including the upcoming Q2 earnings) and the long term.
Market Cap as of 7.7.2023: ~$6.13 / Share x 33.9M Shares ~ $208M Market Cap.
(#180) 7.7.2023: Change in Billings Share with Chase
On July 5th, 2023, CDLX announced within an 8-K that CDLX’s Billing Share with Chase, which is their portion of advertiser billings retained by CDLX, increased on June 1st, 2023.
In other words, CDLX's revenue share (rev share) to Chase decreased June 1st. This is very big.
I didn't think there was anyway this would occur before the November 2025 renewal date with Chase.
Even small changes in this billings share / revenue share % will have a very large impact on CDLX's bottom line, since this is purely incremental with no corresponding increases in OpEx.
Given CDLX is near cash flow breakeven, this can lead to significant cash flow for CDLX, both in the near term and long term.
This also speaks a lot to the CDLX / Chase partnership, and provides other signals (which I’ll discuss below).
Related Past Research Note
On 3.29.2023, in CDLX Research Notes Update #155, I discussed some aspects related to how CDLX could obtain lower revenue share via increasing the customer value proposition and increasing their leverage for negotiations.
This post was called, “How Bridg Can Lower FI Revenue Share (leading to single digit P/E and P/FCF, including P/FCF<1, assuming no revenue growth)”
Where near the beginning I state, “lower FI revenue share is one of the larger opportunities for CDLX, that is both more significant (in terms of CF) and much more likely than most realize” (with the emphasis also in that original note).
While I don't yet know the details with Chase, the general impact and numbers discussed in that post show how impactful this could be, given it will increase gross profit for CDLX with no associated increase in OpEx.
It is also has an impact instantly, and technically even retroactively, since the 8-K states this began June 1st.
Additionally, I could see the reason Chase agreed to the new rev share % being a function of increasing the customer value proposition (as discussed in that original note, but I will discuss in this note more below, given I have new updated thoughts).
Below I also discuss what they could mean both in the near term and long term.
What this Means in the Near Term (including Q2 2023)
I’m surprised by the lack of any change in the stock price following this news. I don’t think many investors appreciate how big a deal this is.
Below are some of the near-term impacts (I discuss long-term impacts after).