Valuing Cardlytics based on personal data, conservative data, current market cap, and under realistic assumptions.
For all my notes on CDLX, check out my Qualitative and Quantitative “Research Notes”:
Simple Valuation Based on Personal Data
The average redemption, or consumer incentives (CI), between my friends and family that are eligible, and redeemed within the last 1 year, is an average of $24.3. Average of $72, $75, $9, $8, $3, $3, $0 = $24.3.
x$2.16 of Revenue per CI = $52.5 of revenue per monthly active user (MAU).
x163M MAU = $8.6B total revenue.
x36% gross profit margin = $3.1B gross profit.
-$800M in OpEx + Tax + CapEx = $2.3B cash flow.
x20 CF multiple = $45B.
Current market cap is approx $4B.
(Assumptions are listed further down below)
More Conservative Value
Beyond ignoring growth in monthly active users (MAU) and ignoring more redeemed offers as more ads come onto the platform, I will assume average redemption or CI is 25% of the average $24.3 listed above.
This leads to an average redemption or CI of $6/year.
Using the same assumptions and numbers above, it results in a market cap of $8.9B.
Current Price
Reversing it based on current market cap (approx. $4B), essentially a reverse DCF, keeping all assumptions, backs you into an average redemption of $3.64/MAU.
Assuming users on average are redeeming a 10% offer, on a $10 item, this is less than 1 offer redeemed per quarter.
Therefore, this situation currently has a possibly protected downside, with a good potential upside.
Assumptions
$2.16 of revenue per $1 of CI is based on the average of the last 3 years of numbers within the 2020 10-K. This number includes numbers under both pricing models of Cost per Served Sale (CPS) and Cost per Redemption (CPR).
163M MAUs is based on current 2021 company data.
36% gross profit margins is from the average of the last 3 years.
$200M OpEx (operating expenses), is based on the last 3 years, with an added margin due to the assumed increase in expenses from the recently acquired companies (Dosh + Bridg). This expense will grow over time, but will remain generally fixed in relation to growing revenue, and therefore provides operating leverage.
21% tax rate (could very well increase over time).
$6.5M of CapEx (capital expenditures), based on the average of the last 3 years.
More Realistic Value
If you keep all the assumptions the same, but believe in the next 10 years MAUs will grow from more banks and financial institutions using Cardlytics or Dosh, and from the gradual increase in users of digital banking, 200 MAU seems reasonable.
Also, for a company that can continually grow their revenue and cash flow over time, and with operating leverage, a 20x cash flow multiple is fairly low, especially with a long runway. Therefore, more realistically one could assume 30x FCF will be paid by investors.
The average redemption, or consumer incentives (CI) = $24.3.
x$2.16 of Revenue per CI = $52.5
x200M MAU = $10.5B
x36% gross profit margin = $3.8B
-$1B in OpEx + Tax + CapEx = $2.8B
x30 CF multiple = $85B.
Biggest Risk
If new advertisers do not join the platform and add additional offers to the mix, you will not have enough applicable offers to push awareness and use by MAUs. Users have no incentive to use offers that do not appeal to them, or are not applicable to them. Without more marketers advertising on the platform, revenue will stay flat or decline, decreasing the value of the company.
Catalysts
American Express (AmEx) joining the Cardlytics platform (low probability for now) is one catalyst towards closing the gap between current price and intrinsic value. AmEx would join out of the need to be a part of a larger scale, to get access to more marketers that require the additional advertising base to make it worth it to advertise. AmEx would want this, as it adds more revenue than they would be earning on their own, even if there retained portion of revenue is lower.
The self service platform put in the hands of more advertisers, leads to more ads, more MAU usage, more revenue, more CF, and then higher value assigned by the market.
More Detail
I will be posting a more detailed write up on my substack in the future.
-Austin Swanson (Swany407)
Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis. Please see the Disclaimer page for more details.
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