Hi Austin. Long time follower, recent subscriber here. Thanks for your good work on Cardlytics.
Just FYI regarding the LOC / Accounts Receivable factoring: I believe the vast majority of LOCs will prevent a company from factoring its receivables, given they are often used as collateral for the LOC.
Hi Bryce. Thanks for reaching out. I know the 10Q states that with the LOC the requirement is to “maintain a minimum level of adjusted contribution and a minimum adjusted cash of $25.0 million, which is reduced by eligible accounts receivable in excess of the loan capacity.” Maybe there are further requirements as it relates to the accounts receivable in the agreement, but I would have to look. One reason I have believed there is still potential for both to be used is given how much CDLX currently has ($97M) making it possible to at least monetize or collect a little, and given CDLX was in talks with Pacific Western to change the growth covenant on the LOC making it a possibility they would seek to change other covenants if needed. I guess if they can’t use both, likely better to make use of the accounts receivable given could lead to more cash and less carrying costs. As of today though, including what I added to my Research Notes today, I don’t think CDLX with need both liquidity resources, and very well may not need either, but they do provide some cushion.
I completely agree. I don’t think they will need both and hopefully they’ll be able to use the LOC for the 2nd earn-out (unless the stock price increases significantly between now and then). I just have been assuming they wouldn’t be able to factor the AR if they use the LOC, so your assumptions were a little different than mine. They’d just need to weigh the math on how much cash they need and which will offer a lower cost of capital.
Even before seeing your comments, I did some slightly different Bridg earnout and liquidity calculations in my Research Notes tonight, ignoring the accounts receivable and not paying 100% cash for the second earnout (given the recent stock price increase). They are more rough numbers, but may be more similar to yours.
I’m looking forward to these earnouts being behind us!
Hi Austin. Long time follower, recent subscriber here. Thanks for your good work on Cardlytics.
Just FYI regarding the LOC / Accounts Receivable factoring: I believe the vast majority of LOCs will prevent a company from factoring its receivables, given they are often used as collateral for the LOC.
Hi Bryce. Thanks for reaching out. I know the 10Q states that with the LOC the requirement is to “maintain a minimum level of adjusted contribution and a minimum adjusted cash of $25.0 million, which is reduced by eligible accounts receivable in excess of the loan capacity.” Maybe there are further requirements as it relates to the accounts receivable in the agreement, but I would have to look. One reason I have believed there is still potential for both to be used is given how much CDLX currently has ($97M) making it possible to at least monetize or collect a little, and given CDLX was in talks with Pacific Western to change the growth covenant on the LOC making it a possibility they would seek to change other covenants if needed. I guess if they can’t use both, likely better to make use of the accounts receivable given could lead to more cash and less carrying costs. As of today though, including what I added to my Research Notes today, I don’t think CDLX with need both liquidity resources, and very well may not need either, but they do provide some cushion.
I completely agree. I don’t think they will need both and hopefully they’ll be able to use the LOC for the 2nd earn-out (unless the stock price increases significantly between now and then). I just have been assuming they wouldn’t be able to factor the AR if they use the LOC, so your assumptions were a little different than mine. They’d just need to weigh the math on how much cash they need and which will offer a lower cost of capital.
Even before seeing your comments, I did some slightly different Bridg earnout and liquidity calculations in my Research Notes tonight, ignoring the accounts receivable and not paying 100% cash for the second earnout (given the recent stock price increase). They are more rough numbers, but may be more similar to yours.
I’m looking forward to these earnouts being behind us!
Current direct link to those calculations here: https://swany407.substack.com/p/cdlx-quant-research-notes#footnote-1-48483134