Cardlytics ($CDLX): Updated Guidance + Updated Liquidity Analysis and Projections (Updates #158 - #159)
New notes following today's announcement on updated guidance, with related updates to the liquidity analysis and financial projections (with future value per diluted share estimates).
Market Cap as of 4.4.2023: ~$6.24/ Share x 33.6M Shares ~ $210M Market Cap.
Given today’s announcement on updated guidance for Q1 earnings, I updated my liquidity analysis (using the same structure as before). This analysis also includes the calculations for potential future dilution, and the corresponding future value per dilution share (vs today’s stock price).
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 the last few weeks (included in the last 6 update emails for updates #133-139, #140-144, #145-149, #150-153, #154-155, #156-157), and that downside has decreased further with today’s updated guidance and higher stock price (given its impact on the 2nd Bridg earnout payment).
While I prefer to wait longer between update emails for the CDLX Research 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 (as well given the quick price changes).
The CDLX Research Notes Updates
At this time, all of the following notes are under
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 #159
Added on 4.4.2023
Updated Liquidity Analysis / Share Count / Future Value
Multiple scenarios included
Factors in recent LOC drawdown + earnouts + dispute + updated guidance + different stock prices for VWAP for 2nd earnout payment
Estimates of future diluted share count (with earnouts + dispute + if equity raise)
Estimates of future value per diluted share (vs today)
(Follow-up to yesterday's notes)
CDLX Research Notes: Update #158
Added on 4.3.2023
Dates for 2nd Bridg Earnout Payment VWAP
Timing of Possible Announcements / Earnings
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For convenience, I copied over the corresponding sections of the Research Notes and pasted them directly below.
The Updates:
(#159) 4.4.2023: Updated Liquidity Analysis / Share Count / Future Value (Based on higher stock price for VWAP + updated guidance)
Yesterday (included in the next section of notes below) I reposted the 6 possible announcements that could occur before or at Q1 earnings to help increase the stock price for the volume-weighted average price (VWAP) used for the 2nd Bridg earnout payment (reposted from the original update #153, where I discussed all of these possible announcements in much more detail, and why they could occur).
Today, CDLX announced updated guidance for the first quarter results:
This relates to #6 below (and in update #153), regarding the possibility of CDLX announcing better than-expected earnings.
In update #153, I mentioned CDLX could pre-announce earnings, if results where better than most expect or versus previous guidance. Today’s announcement is a little different, given it is not releasing the official earnings, so it would likely not open up insider buying yet, especially with other information not yet announced (like Chase on the new ad server and rolling out the new user experience, and the Bridg resolution and updated expected earnout amounts).
However, I do wonder given CDLX likely has pretty good visibility into earnings for Q1 with it now being 4/4, I wouldn’t be surprised if official results come in towards the high end of the updated guidance. Because again, CDLX is highly motived to increase the stock price in the short term for the 2nd Bridg earnout VWAP. So CDLX could get another little pump from releasing the official earnings with results at the high end (leading to even less cash burn).
Given the updated guidance and higher stock price, I wanted to update the liquidity analysis. I believe the updated projections below show why both the updated guidance from today + higher stock price are quite impactful (where the higher stock price leads to less cash needed for the second earnout, leading to more liquidity, which could lead to further increases in the stock price, improving liquidity further, and so on).
Below I include the following liquidity projections (with dilution estimates and future value per dilution share vs today’s price):
Previous analysis for comparison purposes (assumes higher burn + $3 VWAP)
Updated burn based on updated guidance provided today
Updated VWAP to $6
Updated VWAP to $10
A few things to note with these projections:
Assumptions:
I still assume CDLX raises equity with their $100M shelf, even where CDLX has plenty of liquidity and doesn’t need it. I assume it for conservatism to factor in potential dilution (given many continue to worry about the future potential returns if there is more dilution, without actually doing the calculations)
I also left the first equity raise at $4 for conservatism, and to provide consistency for comparing to the previous analysis.
Ending share count is 33.6M today + 6M for RSUs + the additional shares calculated based on the scenario (depending on the earnouts + raises)
The multiples at the bottom are off of the current stock price.
(Note that the conditional formatting may make the multiples appear strange, but this is simply due to ending share count being the same, leading to the same multiples. But this does not take into consideration the different ending liquidity levels)
For more information on these scenarios and the set up (such as why it is broken out the way that it is), see these notes (where I also included a video walking through the analysis and the reasoning)
I got the most value from clicking and viewing these projections full screen and flipping between the 4 projection sets to see the differences more easily. I would recommend reading what is different between the projections first though.
Or I recommend focusing on one scenarios / column as you scroll down through the 4 projection sets (and even better is focusing on one column as you flip through the full screen pictures)
Projection 1: Previous Analysis (starting point for comparison purposes)
Before today, I was using a $3 VWAP and much higher cash burn. For 23Q1 & Q2 burn, I was using the previous low end of EBITDA guidance of -$17M to get even lower FCF.
These results below (as well as those where I was assuming 100% cash for the second earnout, which is still a very possible and likely scenario) were what got me comfortable to keep buying with leverage (do note, the multiples vs today’s stock price are truly as of today’s close, rather than when I first did this analysis).
Here is the first projection: