Cardlytics Inc

NASDAQ:CDLX

Earnings Call Analysis

Cardlytics Reports Mixed Q3 Results with UK Growth Amid Delivery Challenges

In Q3, Cardlytics experienced a 13% revenue decline to $67.1 million, affected by delivery challenges but increased consumer incentives by 20% to $44.9 million. Adjusted contribution was $36.4 million, down 11%, while adjusted contribution margin rose to 54%. The UK segment thrived, achieving a notable 33% revenue growth and marking its fourth profitable quarter. For Q4, the company forecasts revenue between $62 million and $67 million and billings from $102 million to $108 million, indicating a 18% to 22% decline from the previous quarter. Management remains focused on stabilizing delivery and enhancing operational performance moving forward.

Navigating Through Challenges

Cardlytics recently held its earnings call where CEO Amit Gupta outlined a path through ongoing operational challenges. Following several quarters of difficulty, Gupta emphasized the commitment to transforming the company’s operations to stabilize their core platform performance. The company is currently facing under-delivery issues with their advertising campaigns, impacting their revenue alongside recent budget allocations from advertisers. As a result, total billings for Q3 amounted to $112 million, showing a 2% decrease year-over-year. However, the company recorded sequential improvements during the quarter as initiatives to enhance delivery began to take effect.

Financial Overview

In Q3, revenue declined by 13%, totaling $67.1 million due to an increased focus on user engagement, with a notable 20% rise in consumer incentives, amounting to $44.9 million. Despite reduced revenues, the adjusted contribution margin improved to 54%, highlighting operational efficiency. The adjusted contribution for Q3 was $36.4 million, albeit an 11% decline from the previous year. Looking forward, the company anticipates Q4 revenues to fall between $62 million and $67 million, with billings projected in the range of $102 million to $108 million, reflecting a reduction of 18% to 22% year-over-year.

Geographical Performance Insights

The US market presents challenges with a 17% decrease in revenue attributed to delivery issues; however, there was growth in total budgets from new brands. Meanwhile, the UK market continues to thrive with a significant 33% growth in revenue, marking the fourth consecutive quarter of profitability. Gupta noted July as the peak billings month in their long-term partnership with Lloyd’s, showcasing solid engagement in the UK compared to US counterparts.

Optimizing Advertising Solutions

The company is pivoting towards engagement-based pricing for its advertising services, with 84% of new advertisers utilizing this pricing strategy in Q3. This transition is expected to enhance campaign performance and advertiser retention, aiming for a majority of advertisers to adopt engagement-based pricing by the end of next year. Gupta reiterated that their ultimate goal is to maximize consumer rewards, aligning their operations with advertisers’ KPIs.

Future Outlook

For Q4, Cardlytics has set ambitious growth expectations despite seeing a decline in billings as they navigate under-delivery challenges. Gupta and CFO Alexis DeSieno expressed confidence in the operational enhancements underway, which are expected to yield results in 2025, including a ramp-up from a new major financial institution partner. The focus remains on stabilizing delivery while expanding the company’s financial partnerships and exploring additional advertiser verticals.

Earnings Call Transcript 2024-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Cardlytics Third Quarter 2024 Financial Results Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Nick Lynton, Chief Legal and Privacy Officer. You're ready to go.

[Nick Lynton, executive]

Good evening, and welcome to the Cardlytics Third Quarter 2024 Financial Results Call. Before we begin, let me remind everyone that today's discussion will contain forward-looking statements based on our current assumptions, expectations and beliefs, including expectations regarding our future financial performance and results, including for the fourth quarter of 2024, the rollout of new financial institution partners and operational and product initiatives and improvements. For a discussion of the specific risk factors that could cause our actual results to differ materially from today's discussion, please refer to the Risk Factors section of our 10-Q for the quarter ending September 30, 2024, which has been filed with the SEC.

Also, during this call, we will discuss non-GAAP measures of our performance. GAAP financial reconciliations and supplemental financial information are provided in the press release issued today, which you can find in the Investor Relations section of the Cardlytics website. Today's call is available via webcast, and a replay will also be available on our website. On the call today, we have CEO, Amit Gupta; and CFO, Alexis DeSieno. Following their prepared remarks, we'll open it up for your questions.

With that, I'll hand the call over to Amit.

[Amit Gupta, executive]

Thanks, Nick, and thank you all for joining us today. As you all know, I stepped into my new role shortly after we released Q2 earnings. Over the last 3 months as CEO, I have spent time going deeper with our teams and hearing feedback from our advertisers and bank partners. And a few things have become clear. Our data continues to be a superpower. Our ability to see approximately 50% of U.S. cardholder transactions representing nearly $4.7 trillion in annual consumer spend is unparalleled in the industry, and this number will continue to grow as we onboard new partners. It has also become evident that card-linked offers, CLO, have evolved and are becoming a more important differentiator than a year ago. There have been new entrants to the CLO market, increased competition between financial institutions and diversification in the way bank reward programs are run.

Some of this is a tailwind due to more focus on CLO programs than ever before, which is good for us and the broader ecosystem. However, as we have seen these market dynamics changing, we have not reacted quickly enough. We rightfully have been focused on evolving our technology and platform from static to dynamic. But as we look to our North Star, driving consumer engagement and rewards, we need to be even more focused on the end consumer. We want to make it easier for our consumers to find and utilize our offers. This means continuing to work to improve our offer relevance in addition to diversifying the channels through which we are engaging with them. More importantly, we get consistent feedback that our platform is unique, not only because of our diverse set of advertisers, but also our innovative offer constructs that meet advertiser KPIs.

We must continue to strengthen these key differentiators. We are staying true to our mission of making commerce more rewarding. We are in the business of helping consumers maximize their savings with the brands they love while also discovering new ones. And if we continue to build a more performant network, end consumers will benefit and our bank partners and advertisers will also clearly see benefits of partnering with us. We have laid out our path to bring more value to consumers, which I will talk about shortly. We acknowledge we have been on this journey for several quarters. Now we have narrowed our focus to the fundamentals of driving network performance. Our approach includes a renewed focus on all stakeholders, our bank partners, our advertisers and consumers as we continue to work towards our North Star.

We also acknowledge the backdrop of a more challenging macroeconomic environment for some of our largest advertisers, but we see bright spots on the feedback we've heard from them. They continue to see the value of CLO programs. As one CMO of a large advertisers said to us, they see Cardlytics as a strategic partner rather than a transactional relationship. That CMO noted that we successfully demonstrated the best incremental returns across their digital marketing channels. They are now looking to allocate more budget and integrate Cardlytics into their strategic plans for loyalty acquisition, audience identification and category cross-sells into higher-margin products. Looking forward, I have centered the team around 4 key pillars of our business: supply, demand, network performance and Bridg.

First, we will work to increase our supply so we can reach more consumers and help them maximize savings as well as diversify our revenue. We are broadening relationships with existing and new financial institutions in the U.S. and internationally. We are still on track to launch with a large financial institution in the U.S. before year-end, which will help expand our network and enable us to reach a larger audience to serve relevant offers. As expected, the initial launch of our partnership will involve testing with a small card member base and grow from there. We are also focused on engaging with potential new financial institution partners and other commerce platforms in the U.S. to continue to grow our supply and meet consumers where they are. In the U.K., we continue to ramp up our partnership with Monzo and are in active conversations with new financial institution partners. We are focused on increasing our supply and expanding our U.K. footprint in 2025.

Second, on the demand side, we are honing in on how we can drive more growth with our advertisers. We are focused on scaling our relationships with brands across core categories while exploring new advertiser verticals. The more diversified our advertiser base, the more rewards will bring to consumers. More than 1/4 of our advertisers are now on the Insights portal, a self-service portal powered by our unique purchase intelligence that offers market trends and competitive insights, empowering brands to make more informed business decisions. We expect to see increased interest and usage as more advertisers gain access to the portal. We see our insights on demand as a key differentiator and value-add for brands and ultimately a driver of new and stickier relationships.

Looking at our top line results, we had a solid quarter with budget growth. However, billings were down 2%, excluding entertainment due to the ongoing challenges with delivery, which we will cover in more detail. In the U.S., we saw continued growth in categories like travel and everyday spend. We were able to close some large upsells intra-quarter, which led to beating our original billings guidance. In the U.K., we continued strong double-digit growth and saw the highest amount of consumer rewards in the history of our U.K. business. We signed 26 new brands, which is an increase of 27% and also strengthened our key partnerships with existing advertisers. To meet a diverse set of advertiser KPIs and reward consumers in new ways, we are continuing to develop new offer constructs. In addition to generalized brand-level offers, we can deliver offers with higher values for specific purchases based on product category, purchase channel and store location.

We can also report on what products were purchased, which helps advertisers better understand the profitability of a campaign and tap into category-level marketing budgets. This quarter, we saw success with an everyday spend advertiser that ran SKU-level insights integrating both their own transaction data and Cardlytics data. As an example, these insights could help inform future campaigns for premium versus regular fuel and show not only what fuel grade was purchased, but also if customers were loyalty members and what other products were purchased in store. This helps advertisers drive regional growth and increase store level sales. We continue to test these kinds of offers and are working to automate them next year. We are encouraged to see consumers engaging more with these new ad formats, which we believe help differentiate our offers and open additional advertiser budgets.

Moving on to our third pillar, our continued focus on enhancing the performance of our network and stabilizing our core platform. We continue to actively address the delivery challenges that we discussed last quarter. We've taken several measures, including placing more stringent limits on campaigns, enhanced daily monitoring and budget management improvements. We are also making improvements to our ads decisioning engine and seeing good initial results with our budget management tools. These are helping to adjust the pace at which serves are made based on campaign type, media fees and targeting. We've made initial progress with improving delivery this quarter through these efforts. As we've said, some level of over and under delivery will always be inherent to any ad business, and we are working to get to a more stable place where these extremes are no longer a concern.

We are working on automating our efforts to further narrow the bookends of delivery outcomes. We also want to continue optimizing for engagement as increasing rewards powers our flywheel. As part of our network enhancements and to help with stabilizing delivery, we also continue to work with our advertisers to shift to engagement-based pricing, which includes CPE, CPR and CPT pricing models. We've seen strong interest from our new advertisers with 84% of new logos and 51% of all logos in the U.S. in Q3 on engagement-based pricing. We expect the majority of our advertisers to transition to engagement-based pricing by the end of next year, which should help us optimize campaign performance through faster engagement-based feedback.

We're also making progress on the dynamic marketplace, which allows advertisers to see their campaign performance on a daily basis and make ongoing changes to their ROAS goals, fees and budgets. This will lead to better performance of campaigns and higher retention of advertisers. We had 58 campaigns running on our dynamic marketplace in Q3, up from 20 in the previous quarter. And regarding measurement, we are working with leading marketing measurement experts to appropriately integrate Cardlytics data into media mix models and help our advertisers understand the incremental impact of our CLO campaigns. This helps ensure that we can participate in industry standard measurement, making it easier for advertisers to measure our impact.

Our fourth and final pillar is continuing to invest in Bridg and Rippl as a significant growth driver for our business. In October, we welcomed Enrique Munoz Torres as our new General Manager of Bridg, who is focusing on maximizing connectivity and further scaling our platform to address a larger suite of advertisers and retailers. Enrique led the advertising and search business at Yahoo and also brings a range of experience from Sunshine and Google. With Rippl, we continue to make progress in Q3. We reached our goal of 100 million active unique shopper profiles ahead of schedule, making Rippl one of the largest networks of regional grocers and convenience stores in the U.S. These shoppers have been historically hard to reach and Rippl presents a unique opportunity for CPG brands to engage with these shoppers at scale.

We saw increased adoption of our syndicated and custom audiences of these shopper profiles from CPG brands and agency partners who find value in the ability to reach deterministic purchasers at the brand and product level. These 4 pillars continue to underpin what we believe is necessary to deliver maximum savings for our consumers, which we believe will help power our flywheel and drive growth in our business. We remain relentlessly focused on addressing our short-term challenges while also taking a deliberate approach on how we prioritize our initiatives moving forward.

I'll now turn the call over to Alexis to discuss the financials.

[Alexis DeSieno, executive]

Thank you, Amit. This quarter exceeded our expectations as we focused on stabilizing our core platform. We beat the high end of our guide on all metrics, primarily due to higher-than-expected budgets. Turning to our specific third quarter results. My comments will be year-over-year comparisons to the third quarter of 2023, excluding entertainment, our former subsidiary that we sold in December 2023, unless stated otherwise. In Q3, our total billings were $112 million, a 2% decrease. As expected, our billings were impacted by continued challenges with delivery rather than pipeline weakness. As Amit mentioned, we took decisive action during Q3 and made initial progress in improving delivery, and we saw sequential improvements throughout the quarter.

Stabilizing delivery remains an all-hands-on deck priority for us so that our billings can start to reflect our ability to capture bigger budgets, and we can drive both performance and predictability for our advertisers. As a reminder, our North Star is consumer rewards, which materialize as consumer incentives in our financials. We believe that consumer rewards are a key indicator that our technology is delivering the most relevant offers to each person and driving value for our advertisers and bank partners. This quarter, consumer incentives increased by 20% to $44.9 million. As we've seen in the last 2 quarters, revenue, which was $67.1 million in Q3, decreased 13% due to driving more user engagement with our offers.

Over delivery peaked in July and has sequentially improved as our efforts began to take effect, and we do not expect this level of revenue as a percentage of billings to persist at 60%. We continue to believe that adjusted contribution is a better metric for assessing the health and performance of our business as it reflects how much we keep of every dollar we make. In Q3, adjusted contribution was $36.4 million, down 11% from the prior year. As a percentage of revenue, adjusted contribution margin was 54%, up 1% year-over-year. Partner mix partially offset the margin decline we saw from elevated rewards, and we expect similar or improved margins as we onboard new bank partners. Looking at our segment results. U.S. revenue decreased 17% due to delivery challenges, but we saw growth in total budgets, especially from new brands, which helped broaden and diversify our advertiser base.

In the U.K., we continue to see strong double-digit revenue growth at 33% as well as the fourth consecutive quarter of profitability. July was the highest ever billings month in our 10-year partnership with Lloyd's. As Amit mentioned, we are pleased to see consumer rewards in the U.K. reach an all-time high, demonstrating strong engagement with our offers. Bridg revenue was flat compared to last year. But as Amit mentioned, we've made good progress with Rippl. We have early positive signals from ongoing and active engagement with advertisers and agencies. First-party data is valuable. And according to eMarketer, the retail media market is expected to double in the next 3 years. We believe we are well positioned to capture market share in this sector.

Adjusted EBITDA declined year-over-year from $3.6 million to negative $1.8 million. Total adjusted operating expenses, excluding stock-based compensation, came in at $38.2 million. While we continue to believe in the investments, we are making to support longer-term growth, we are tightly managing our expenses and maintaining cost discipline. We expect operating expenses to remain below $40 million in Q4. In Q3, operating cash flow was positive $1.4 million. Free cash flow was negative $3.9 million, driven by increased internally developed software expense. On the balance sheet, we ended Q3 with $67.0 million in cash and cash equivalents, and we had $60 million of unused available borrowings under our line of credit, which was recently extended through July 2026.

Our total MAUs were $166 million for the third quarter, an increase of 2%, driven primarily by organic growth in the U.S. as well as auto enrollment at Lloyd's and ramping up Monzo in the U.K. ARPU was $0.40, down 18% as a result of the 20% increase in consumer incentives as we continue to deliver more rewards to cardholders.

Turning to our Q4 outlook. For Q4, we expect billings between $102 million and $108 million, revenue between $62 million and $67 million, adjusted contribution between $33 million and $36 million, adjusted EBITDA between negative $5 million and negative $1 million. Our billings guidance represents negative 22% to negative 18% growth, excluding our former subsidiary Entertainment. This weakness is driven by continued but improving challenges with delivery as well as with pipeline. Let me start with delivery. We expect continued disruption in Q4, but continue to believe that modernizing our technology and evolving our pricing are necessary to our long-term success. As Amit mentioned, CLO is becoming more important to our banks. They are continuing to make changes to their channels and user experience, which includes improved placement of the widget and more communication with their customers, but makes forecasting more difficult.

We are assuming improvement to over delivery as illustrated by our improved revenue as a percentage of billings of 62%. That said, we believe some level of elevated rewards will continue as our targeting services the right offers to the right users. However, billings are suppressed due to continued under-delivery. We have more work to do to improve the efficiency of our ad network around under-delivering campaigns. We continue to assume that our new financial institution partner will have no material impact to Q4. On pipeline, we are seeing advertiser caution around budgets, especially in the restaurant and travel verticals. While we continue to grow the number of advertisers we work with in restaurant, overall spending has declined as a result of industry performance.

We also expect to see some headwinds this holiday season, including the shorter period between Black Friday and Christmas, but we are seeing areas of strength in everyday spend, and this continues to be a key differentiator for Cardlytics in the market. We also are lapping the reduction of a few key accounts in Q4 of last year. While the number of new logos are up 38%, they do not fully offset the decline in these large accounts. These accounts have turned for various reasons, including large-scale reorganizations, shifts in marketing strategy or their own company performance. The U.K. continues to be a bright spot, and we expect continued double-digit billings growth as we continue to work well with our new bank partners that enable us to unlock larger advertising budgets. We expect adjusted contribution to be similar on a margin basis.

Our adjusted EBITDA guidance reflects the impact of our billing’s guidance and the fact that we will continue to make strategic hiring decisions where we believe the return will be realized in the near term. We will continue to evaluate our investments and ongoing costs as we monitor performance. For 2025, we believe performance will accelerate as we improve our operational execution, scale a major new FI partner, see continued strength in the U.K. and start to more fully realize contributions from Rippl. We expect to invest only as top line performance improves and remain focused on improving delivery and launching a new bank partner in the near term.

Now I'll turn it back to Amit for closing remarks.

[Amit Gupta, executive]

Thank you, Alexis. Overall, we are encouraged by the progress we've made this quarter. Above all, our Q3 results indicate better predictability of our business and our relentless focus on addressing our short-term challenges. Our efforts will take time, but we are focusing on the right priorities to maximize consumer engagement and rewards.

I'll now turn it over to the operator to begin Q&A.

[Operator]

[Operator Instructions]. Our first question comes from Robert Culbreth with Evercore ISI.

[Robert Culbreth, analyst]

This is Rob on the call for Mark. It sounds like you're getting a handle on over delivery. Can you talk a little bit about some of the key drivers of under-delivery and sort of the plan to address some of those? And then also with the growth in logos, which I think is encouraging, could you talk about trends in billings per logo, your ability as you continue to improve platform capabilities through ADE and the dynamic marketplace, maybe your ability to go back to some of the customers where you've seen churn or budget reduction and sort of reintroduce yourself to some of those and also just organically grow billings per logo over time?

[Amit Gupta, executive]

Thank you, Robert, and thanks, everyone, again for joining the call. I think thanks, first of all, thank you for recognizing the progress we've made on overall delivery challenge that we had. And that's something that, as Alexis mentioned in her prepared remarks, that continues to be our all-hands-on deck priority. Now we've made delivery improvements sequentially, especially on over-delivery, but there's more work to be done on under. So, things like ranking under-delivering campaigns differently, better forecasting, using mid-flight changes, testing different reward amounts. All of those are different parts of the product that we're going to test and assess the underdelivering campaigns. And then just like what we did with under-delivery, our typical approach, Robert, is that we'll test a set of things initially and then over time, we'll automate it. And so, we're going to follow the same approach on this.

In terms of billings per logo, I think as we mentioned, we're quite happy to see that overall, the advertiser count has steadily grown and continues to increase. And as market conditions start to get better, we also expect the budgets per logo or budgets per advertiser to continue to grow. And to that end, we are actually working actively with advertisers to map out their 2025 budgets and their 2025 strategies.

[Robert Culbreth, analyst]

Got it. If I could ask one quick follow-up just on the issue of under delivery. As you address some of those issues, are you able to automate those capabilities or create a feedback loop with advertisers? Do they need to master sort of the way that they handle the platform to optimize delivery? Or is it fairly sort of an automated or process of continual optimization?

[Amit Gupta, executive]

Yes, Robert, that's a good question. I think our typical mantra in this case is that we should take away all friction from the advertiser that it is our internal product teams work to fix that and engineering team's area to fix. So, for an advertiser, it would not be something that they need to optimize. Our teams will work with the advertisers to inform and work with them how best to structure the campaign on an ongoing basis.

[Operator]

Our next question comes from Jason Kreyer with Craig-Hallum.

[Jason Kreyer, analyst]

I just wanted to see if you can give maybe some details on like contrasting Q3 and Q4. Like it seems like you had a lot of success in Q3 with billings and things like that, but there's a growth step down as we get into Q4. So, if you could parse those 2 things out, that would be great.

[Alexis DeSieno, executive]

Jason, thanks for the question. Yes, I think all I really want to point out there is delivery did sequentially improve in Q3. So, we are seeing that continuing into Q4. I think what's different this time is that going into Q4, we are lapping some large accounts that did not reoccur from Q4 2023. If we did not have that happen, the retail sector actually would be up in terms of dollars and brands for Q4. So underlying advertisers are still spending more with us, committing budgets, but we did have a difficult comp, I would say, versus last year. So that is a lot of that driver of some of the performance you're seeing in the pipeline.

And then I just wanted to elaborate on something that Amit said in the prior answer, solving under-delivery is really important because it enables us to not over serve people and then open up serves for some of those underdelivering campaigns. So, it was really important that we did that first. And so, as you can see from the margin guide, delivery has improved, especially on the over-delivery side, going from 60% of revenue as a percent of billings to 62% at the high end of the range, but still more work to do to kind of close the gap on the under-delivery side, and that is part of the reason why you're seeing the, I guess, Q4 guide that we provided today.

[Jason Kreyer, analyst]

Okay. And then just maybe any updates over the last quarter in your conversations with customers just around the CPE pricing solution. I don't know if there's anything in terms of number of customers or just kind of receptivity of what you're hearing.

[Amit Gupta, executive]

So, I think on pricing, I think we've talked about that we want to move towards engagement-based pricing, and that progress has continued to go well. Our advertisers who were engaging, they like it quite a bit and a large number, as I mentioned in my prepared remarks, a large number of the new advertisers are opting for those. And so, we continue to see success on that side. And in terms of our billings, I think over time, as I mentioned in my prepared remarks, we continue to expect that we'll have a higher proportion of our advertisers move towards engagement-based pricing.

[Operator]

Our next question comes from Jacob Stephan with Lake Street Capital Markets.

[Jacob Stephan, analyst]

On the engagement-based price model, I'm just curious, it sounded like 5% or so of your customer base was using the engagement-based pricing as last quarter. But maybe could you just kind of help us understand, is this going to be a 5-, 6-quarter sort of transition? Or is this fully elective by the actual customer?

[Alexis DeSieno, executive]

Yes. Let me just clarify a little bit here. So dynamic pricing was 5%, which is more specifically around CPC or cost per click. Engagement-based pricing is encompassing CPT, which is cost per transaction, cost per redemption and as well as cost per click. So more broadly, we're at 38% of total billings in Q3. That's up sequentially and that continues to grow. So, we do expect to be majority on CPE by end of next year. In terms of the dynamic pricing specifically and CPC specifically, that went from 20 brands in Q2 to 58 this quarter. So hopefully, that's a little clearer about the trend. But overall, we're not seeing pushback on pricing from brands. This aligns to industry standards. And again, it improves visibility to us and improves campaign performance. And it's also what the brands are used to buying. And so really, this is where we expect to be by the end of next year.

[Jacob Stephan, analyst]

Got it. Very helpful. And then Amit, you've been in the CEO seat for 3 months now. It'd be kind of great to get a sense of what are your kind of top 3 priorities, maybe near term and just kind of medium term?

[Amit Gupta, executive]

Yes, absolutely. Thanks for that question. I probably want to say at the top level, my belief in the company and our place in the ecosystem continues to be very strong. And that is very much reflected by our team's excitement about what we do and how we're showing up in the market and with our new partners and so on. In terms of priorities, I'll go back to what I mentioned. I've basically centered our teams around the 4 key pillars. We really are thinking about supply, our partners very differently. We're engaging with partners in a fundamentally different way. And likewise, we're going after our demand, our advertisers' engagement in a much more strategic and a broad-based way. We want to make sure the network performance continues to improve. And to that end, we're really looking at our network from an end-to-end point of view.

So, we're looking at all the way from the start of the process, which is around forecasting and projections and then we think about delivery and then all the way towards measurement. And then we're bringing Bridg closer to connect with our core business and the core platform. So those are the 4 key pillars, as I mentioned earlier. And I think the transforming of our business takes some time, but we strongly believe that this is the right path for us to grow the company.

[Operator]

[Operator Instructions] And our next question comes from Luke Horton with Northland Capital Markets.

[Lucas John Horton, analyst]

Just wanted to touch on -- I know, obviously, you're working through these delivery issues at the moment. But if we look ahead a little bit, if you're -- or once you're able to get the advertisers over to the CPE and kind of work through some of these delivery issues, the rollout of the major U.S. financial institution, is there any sort of kind of ballpark of where you see revenue as a percentage of billings normalizing?

[Alexis DeSieno, executive]

Yes, unfortunately, I'm not giving guidance around 2025 at this time. But I think you should expect -- we continue to believe that our North Star is rewards, and we want to continue to drive redemptions and kind of increase that ratio. I think we can only do that to the extent that we can improve our margins over time. And so, a little early to say where that's going to land. But driving redemptions is definitely still a key piece of our strategy. And I think we should be able to continue to improve both the bookends of over and under delivery as time goes on. And then once that's stable, we can start to test different reward formats, different reward amounts. But at this time, not ready to give a guide on longer-term margin.

[Lucas John Horton, analyst]

Fair enough. And then just with the rollout of the major bank partner in the U.S., I think you had mentioned there's no material impact in 4Q. Just wondering how that sort of plays out over 2025 if we see an initial impact or kind of a tiered approach with the rollout there?

[Alexis DeSieno, executive]

I know. I wish I could give you some more clarity here. Yes, we're doing an initial launch right now, very small, and it will continue to scale over time. So, we're not ready to provide additional guidance into 2025, but very optimistic and partnering really well with this large partner. So very excited to see how this plays out over time.

[Operator]

I'm showing no further questions at this time. So, I would now like to turn it back to Amit Gupta for closing remarks.

[Amit Gupta, executive]

Thank you all for joining us today. We look forward to discussing our fourth quarter and full year results on the next earnings call. Thank you again for all your questions.

[Operator]

This does conclude today's program. You may now disconnect.