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Swanson Investment Research
Cardlytics $CDLX: How Bridg Can Lower FI Revenue Share, My Latest Large Purchases of CDLX with Leverage (Research Notes #154 - #155)

Cardlytics $CDLX: How Bridg Can Lower FI Revenue Share, My Latest Large Purchases of CDLX with Leverage (Research Notes #154 - #155)

New notes on how Bridg can lower revenue share with the banks (leading to single digit P/E and P/FCF, including P/FCF <1, with no revenue growth), and my latest large purchases of CDLX with leverage.

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Austin Swanson
Mar 30, 2023
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Swanson Investment Research
Swanson Investment Research
Cardlytics $CDLX: How Bridg Can Lower FI Revenue Share, My Latest Large Purchases of CDLX with Leverage (Research Notes #154 - #155)
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Market Cap as of 3.30.2023: ~$2.82 / Share x 33.6M Shares ~ $95M Market Cap.

I continue to believe, the downside that many focus on has a very low probability of occurring, given everything that has been discussed in the Research Notes this month (included in the last 4 update emails for updates #133-139, #140-144, #145-149, #150-153).

At a high-level, given the relatively low amount of additional liquidity that could be needed in an adverse situation (which also has a low probability of occurring), there are simply way too many ways for CDLX to get through the Bridg earnouts and the dispute (such as current liquidity, paying Bridg over time with interest, divestures, revenue share deferrals, equity raises, rights offering, new debt, convertible notes, and more).

Therefore, the current market price is far too low from giving too much weight to this fear of a zero (from thinking CDLX cannot make it through the Bridg earnouts / dispute) or from thinking there will be too my dilution (which I addressed in this analysis). This is why I continue to buy more, and in larger quantities through leverage, as discussed in this email at the very end.

And if CDLX gets through the short term like I believe, then the market cap is far too cheap in relation to future cash flow. For instance, Bridg has the ability to help lower revenue share with the banks, which can lead to single digit P/E and P/FCF, all the way to P/FCF<1, even with assuming no revenue growth, as I will show and discuss.

While I prefer to wait longer between update emails for the notes, I want to make sure I deliver timely information to all of you with access to the Research Notes, especially given the all-time-low stock price.

The CDLX Research Notes Updates

At this time, all of the following notes are under

  • “General CDLX Growth Factors”

  • “Thoughts on Market Price Over Time / My Actions”

For convenience, I copied over the corresponding sections of the Research Notes and pasted them at the end of this post.

Note, I do tweet out when I make an update to the Research Notes. Therefore, if you want more real-time updates, follow me on Twitter.

The order below matches how I copied them to the end of this post to read.

CDLX Research Notes: Update #155

Added on 3.29.2023

  • How Bridg Can Lower FI Revenue Share

    • Leading to single digit P/E and P/FCF

      • All the way to P/FCF <1

      • Assumes no revenue growth

    • This is NOT related to Bridg having higher gross profit margins

      • That is separate and additive

CDLX Research Notes: Update #154

Added on 3.28.2023

  • My latest purchases of CDLX (with CDLX closing at $2.60 on 3.28.2023)

    • Discussion on my use of leverage

    • Similarities to Buffett’s thoughts when buying GEICO in 1976

      • From similarities between the two situations

      • That specific purchase in 1976 ended up being one of his best investments

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In addition to gaining access to the notes above, upgrading your subscription will give you access to all Research Notes.

Research Notes contain information I have collected while researching, investigating, analyzing, and thinking through businesses, such as CDLX.

This is where I continue to add additional notes, observations, and thoughts.

Some of the notes have never been made, nor will be made, into official posts that are public to read.

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Cardlytics ($CDLX) Research Notes:

Cardlytics CDLX Quantitative Qualitative Research Notes Swany407 Research Notes Austin Swanson, Competitive Advantages, Dosh, Bridg, product-level offers, new ad server, attribution, conference, presentation, partners, affirm, apple pay, google pay, POS Systems, API, insights, google, facebook, visa, mastercard, concentration, advertisers, risks, BofA renewal, self-service, short thesis, differentiation, execution risk, engagement, insider selling, glassdoor reviews, purchase data, twitter, additional resources, earnings, market price, sentiment, valuation, intrinsic value, measurement, incrementality, multi-touch attribution, marketing mix modeling, total marketing modeling, iOS14.5, IDFA, growth, massive scale, loyalty programs, 100 bagger, charlie munger, LTV/CAC, ROAS, total addressable market, TAM, $CDLX
  • Cardlytics ($CDLX): Qualitative Research Notes #1

  • Cardlytics ($CDLX): Qualitative Research Notes #2

  • Cardlytics ($CDLX): Quantitative Research Notes #1

  • Cardlytics ($CDLX): Quantitative Research Notes #2

Carvana ($CVNA) Research Notes:

Carvana CVNA Qualitative Research Notes Swany407 Research Notes Analysis Austin Swanson, 2018 Analyst Day, Competition, CarMax, Vroom, Shift, AutoNation, GM, Local, Dealers, and more, Disadvantages, selection, delivery, inspection and reconditioning, IRCs, Financing, Vehicle Service Contracts, VSC, Extended Warranties, GAP, Fees, Commission, Site Visits, Footprint, capacity, size, processes, root, insurance, hertz, new cars, drivetime, silverrock, blueshore, short thesis, Twitter, resources, Valuation, Market Penetration, Total Addressable Market, SG&A, Valuation, Intrinsic Value, Advertising, Securitizations, Operating Leverage, Retail Margin, Gross profit per unit, GPU, $CVNA, Austin Swanson, Carvana CVNA Quantitative Research Notes Swany407 Research Notes Analysis Austin Swanson, 2018 Analyst Day, Competition, CarMax, Vroom, Shift, AutoNation, GM, Local, Dealers, and more, Disadvantages, selection, delivery, inspection and reconditioning, IRCs, Financing, Vehicle Service Contracts, VSC, Extended Warranties, GAP, Fees, Commission, Site Visits, Footprint, capacity, size, processes, root, insurance, hertz, new cars, drivetime, silverrock, blueshore, short thesis, Twitter, resources, Valuation, Market Penetration, Total Addressable Market, SG&A, Valuation, Intrinsic Value, Advertising, Securitizations, Operating Leverage, Retail Margin, Gross profit per unit, GPU, $CVNA, Austin Swanson
  • Carvana ($CVNA): Qualitative Research Notes

  • Carvana ($CVNA): Quantitative Research Notes

General Research Notes on Businesses, Investments, and CEOs (Historical to Current):

  • General Research Notes

Reviews on the Research Notes

@MoneyMetroid

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If would like access all these “Research Notes”, upgrade your subscription here:

For convenience, I copied over the corresponding sections of the Research Notes and pasted them directly below.


The Updates:

(#155) 3.29.2023: How Bridg Can Lower FI Revenue Share (leading to single digit P/E and P/FCF, including P/FCF<1, assuming no revenue growth)

Note: In this section I am not talking about the opportunity of higher overall gross profit margins from Bridg having higher gross profit margins than CDLX. That is separate and additive. This is in regard to Bridg leading to lower rev share with the banks for CDLX which would also increase gross profits (and have a much larger financial impact).

While there has recently been much more focus on the short term, I think it is still important to discuss the long term for CDLX.

  • For one, if CDLX gets through the short term like I believe, then the focus should shift more to the long term to determine the correct value of CDLX (which is much higher than today’s price, where the current all-time-low price is largely a function of the weight given the the fear of the Bridg earnouts and dispute).

  • Additionally, the long-term outcome of CDLX is still a function of the investment today. If the future of CDLX wasn’t much more than today, then this would not be a worthwhile investment, and therefore no time would need to be spent focusing on the short term.

The ability for Bridg to 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.

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