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Cardlytics, Inc. (NASDAQ:CDLX)
Q2 2018 Earnings Conference Call
Aug. 14, 2018 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

You've joined Cardlytics' second-quarter financial results conference call. [Operator instructions] And as a reminder, this conference may be recorded. I would now like to turn the call over to your host, Mr. Kirk Somers.

Kirk Somers -- Chief Legal and Privacy Officer

Good afternoon, and welcome to Cardlytics' second-quarter financial results call. Before we begin, let me remind everyone that today's discussion will contain forward-looking statements, including projected 2018 third-quarter and full-year financial results and operating metrics; 2019 preliminary growth expectations; business strategies and other forward-looking topics, such as anticipated growth in the Cardlytics Direct with expanded credit card purchases and new and existing customers, including those from JPMorgan Chase and Wells Fargo; growth in monthly average users and in new verticals, including travel, entertainment, e-commerce, grocery and luxury retail; expanding market budgets; improving marketer adoption and customer engagement; and anticipated investments in sales and marketing and R&D in preparation for the launch of two national bank partners. Actual results and timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance. Please note that these forward-looking statements made during this conference call speak only as of today's date, and Cardlytics undertakes no obligation to update them to reflect subsequent events or circumstances other than to the extent required by law.

For a discussion of the specific risk factors that could cause our actual results to differ materially from today's discussion, please refer to our financial results press release and the Risk Factors section of our Form 10-Q filed May 10, 2018 and in subsequent periodic reports that we file with the Securities and Exchange Commission. 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 and the 8-K filed with the SEC. Today's call is available via webcast and a replay will be available for two weeks.

You can find all the information I've just described on the Investor Relations section of Cardlytics' website. Joining us on the call today are Cardlytics' leadership team, including CEO and Co-Founder Scott Grimes; COO and Co-Founder Lynne Laube; and CFO David Evans. Following their prepared remarks, we'll open the call to your questions. With that said, let me send it over the Scott Grimes, Cardlytics' CEO and co-founder.

Scott?

Scott Grimes -- Chief Executive Officer and Co-Founder

Thanks, Kirk, and thank you to everyone for joining us on our second-quarter earnings conference call. We are pleased to report another solid quarter, which outperformed our expectations for both revenue and adjusted EBITDA. In today's call, we'll discuss our second-quarter 2018 results, provide you with an update in some new business developments and discuss our plans for the remainder of 2018. We will also briefly touch on 2019.

Total revenue for the quarter was $35.6 million. Our core Cardlytics Direct revenue grew 21% year over year to $35.1 million, primarily reflecting continued growth with new and existing marketers and early entry into new verticals. Our adjusted EBITDA for the quarter was a $2.2 million loss compared with a loss of $2.8 million in the prior-year period. David will discuss additional details around our revenue and adjusted EBITDA, along with other financial and operating metrics later in his prepared remarks.

As we discussed in our last few calls, we are increasingly confident in our ability to drive substantial MAU growth by consolidating the U.S. banking market for Purchase Intelligence. Today, I am pleased to announce that after completing a successful pilot with Wells Fargo, we recently signed an agreement with Wells Fargo for a national launch of Cardlytics Direct across their digital banking channels. Based on the Nielsen reports published in February and April of 2018, Wells Fargo is the largest debit card issuer in the United States, and their cards produce $446 billion in debit and credit purchases annually.

As we discussed last quarter, we are investing across Cardlytics to support a step-function increase in MAUs. We are currently expanding our technology, our infrastructure and our operations to support 150 million or more MAUs in the United States. We expect to see significant MAU growth in the first half of 2019 and continuing throughout 2020. We drove growth in ARPU by increasing the number of advertisers and advertising verticals we serve and by growing their investment in Cardlytics Direct.

For our advertising clients, the addition of two new national banks will give us the unmatched ability to provide powerful actionable insights for our marketing clients at massive scale. With Cardlytics Direct, we could find exactly the right customers, reach them in a brand-safe trusted channel and fully close the loop to help advertisers understand the impacts and return of their return marketing investments. Significantly increased MAU scale creates new opportunities for us to serve these new advertisers further driving ARPU growth. We are investing to penetrate the travel, e-commerce, entertainment, luxury, retail and grocery verticals.

The rollout of our services to the large credit and debit populations of our two national bank partners -- our two new national bank partners is expected to connect us with the majority of U.S. consumers, whether affluent or millennial when they are thinking about how to spend their money. Lynne and I are proud of our teams' hard work and strong execution as we begin to bring online two new national bank partners. I'll now hand the call over to Lynne to highlight some accomplishments from Q2 and explain how our anticipated growth is being received by our current marketing clients, as well as brands new to our platform.

Lynne?

Lynne Laube -- Chief Operations Officer and Co-Founder

Thank you. As Scott mentioned, we're pleased to announce our agreement to launch Cardlytics Direct nationally with Wells Fargo. More broadly, we are really excited about our team's work to massively expand Cardlytics Direct with the addition of two national banks. As you know, our marketers, it's crucially important to be able to target likely buyers at scale.

With the anticipated launch of these two new banks, the scale of our channel is set to grow substantially in the coming year, and both existing and new marketing clients are responding well to the anticipated launch. Marketers continue to leverage Purchase Intelligence to better understand the rapidly changing dynamics of their business and use these insights to drive better business outcomes. We're also seeing strong momentum as we enter new verticals. As we launch new credit portfolios, we will be able to reach affluent customers at scale.

In particular, the majority of purchases in the travel, entertainment and luxury retail verticals are on the credit card. Large credit card portfolios bring affluent customers. Debit card portfolios reach more price-sensitive millennials. Importantly, all customers frequently access their bank's digital channels to manage their finances.

In addition, we are working closely with our bank partners to enhance our payment data to provide even more value for marketers. Increasingly, we are receiving purchase data in real-time. This allows us to create engaging new experiences for customers. In the next few quarters, we'll be able to target customers based not only on where they purchased, but the time of day they make a purchase.

This is really important as many of our retail and restaurant clients want to drive traffic during summertime. As I mentioned earlier, marketers are finding new ways to use Purchase Intelligence to influence business outcomes. In Q2, we helped many of our restaurant clients understand how their customers are using restaurant delivery services. These insights helped them to understand how to transform their business in a rapidly changing restaurant industry.

We helped them understand markets where they need to build alternative services to compete and who they need to partner with to drive increased delivery sales. And of course, as restaurants develop new offerings, we can profitably introduce them to exactly the right customers with Cardlytics Direct. With Purchase Intelligence, we are also helping new luxury marketers understand the price sensitivity of different segments of their customers and the propensity to shop down market. With Cardlytics Direct, luxury marketers can defend against the loss of these customers, while preventing the cannibalization of higher profitable, less price-sensitive customers.

Our marketers continue to find new ways to use Purchase Intelligence that fundamentally changes how they think about certain segments of their customers and aspects of their business. Now I'll turn the call over to David to walk you through our second-quarter results and updated guidance.

David Evans -- Chief Financial Officer

Thanks, Lynne. Revenue within our core Cardlytics Direct business was $35.1 million, representing a 21% year-over-year growth for the second quarter of 2017. Total revenue for the second quarter was $35.6 million, representing an increase of 8% over the second quarter of 2017. Revenues from other platform solutions was up approximately half a million reflecting the de-emphasis of this business as we focus on launching new national banks as we discussed in our first-quarter call.

I'd like to point out that our U.K. operations have also been performing very well. Q2 2018 revenue in the U.K. grew 22% at constant currency.

Also, year to date, first-half Cardlytics Direct grew 26% versus the first half of 2017. Our second-quarter core Cardlytics Direct revenue growth reflects continued growth of new marketers, improved engagement enhancements with our banks and moderate year-over-year growth in MAUs. MAUs grew 9% over the second quarter of 2017 from 53.7 million to 58.8 million. While our MAUs remain relatively flat compared to the first quarter of 2018, we still have ample headroom to grow our MAUs within our existing bank relationships and have demonstrated our ability to show outpaced ARPU growth.

We are continuously working with all of our bank partners to ensure they have the latest and greatest engagement features. Consistent with Scott and Lynne's commentary, we expect significant MAU growth in the first half of 2019 and continuing into 2020 as we launch Wells Fargo and Chase. Our second-quarter 2018 ARPU was $0.60, up 11% from $0.54 in the second quarter of 2017, reflecting continued momentum with our marketer base. Our year-to-date ARPU was $1.14, up 13% from $1.01 in the first half of 2017 highlighting our ability to enhance the monetization of our MAU base.

Total adjusted contribution profit was $16.2 million in the second quarter, up 8% from $15 million in the second quarter of 2017. Cardlytics Direct adjusted contribution profit was $16.2 million in the second quarter, up 26% from $12.9 million in the second quarter of 2017. Both of these metrics exclude the shortfall accrual of $1.5 million that occurred in Q2 2017. Adjusted EBITDA was a $2.2 million loss for the second quarter of 2018 compared to a $2.8 million loss in the second quarter of 2017 driven by our revenue growth and additional scale on business.

Our second-quarter adjusted EBITDA also benefited from the timing of increased investments we expected to make in the areas of sales, marketing, R&D and implementations in preparation for two new national bank launches. We would expect these investments to continue at a more expeditious pace going forward now that we have just recently signed Wells. This is reflected in our updated guidance, which I will discuss in a moment. I think it's also important to note that Q2 included $8.3 million of stock-based compensation expense related to the acceleration of management RSUs in connection to our revised expectations around revenue growth.

Our year-over-year Q2 growth in operating expenses, excluding stock-based compensation, was around 11.5%. We ended the quarter with $70.5 million in cash, of which $20 million was restricted compared to $89.8 million at the end of Q1 2018. This was primarily driven by restructuring our debt facilities and reducing overall debt. In May, we refinanced our credit facilities with Square 1 Bank.

Our new facilities include a $20 million cash secured term loan at an interest rate of prime minus 275 basis points and a $30 million AR facility with an interest rate of prime minus 75 basis points. This restructuring will save the company over $8 million in cash savings over the next two years. We also ended the quarter with $2.5 million in availability on our AR facility. For further detail, please see our 8-K filed May 21, 2018.

Now turning to our guidance, we are reiterating our full-year 2018 revenue guidance of $153 million to $156 million. We expect 2018 adjusted EBITDA to be between minus $13 million and minus $12 million, excluding any FI commitment shortfall. This is a $2.5 million improvement from the midpoint of our previous full-year guidance as we begin to show some operating leverage and accrue some of the Q2 savings that flow through the remainder of the year. Adjusted EBITDA for the year excludes any accruals for FI share commitment shortfall, which we estimate to be roughly $1 million in the fourth quarter of 2018 and between $4 million and $6 million over the rest of the 12-month contract.

As we discussed on our Q1 call, we continue to make investments across sales, marketing, R&D and implementations across both OPEX and CAPEX, and have begun to put those dollars to work. We continue to expect to partially offset some of these costs by redeploying approximately $2 million of resources that previously were focused on other platform solutions. For the third quarter, we currently expect revenue to be between $36 million and $38 million. We expect adjusted EBITDA loss for the third quarter to be between minus $4.5 million and minus $4 million.

In Q3, we also expect to issue 792,434 shares upon exercise of warrants issued in connection with our 2017 Series G redeemable convertible stock issuance, which was reflected in our guidance of 20.0 shares outstanding at year end. Now I'd like to discuss our preliminary expectations for revenue growth beyond 2018 in line of the recent Wells and Chase announcements. As we have discussed many times, predicting the timing around bank launches is challenging, especially when they are as meaningful as the two new national banks we have signed this year. For 2019 and 2020, while it is difficult to pinpoint specific timings of bank launches, we do expect accelerating revenue growth over the next few years.

While we expect a significant increase in MAUs in the first half of 2019, it will take several years to fully and effectively deploy across our partners' digital touchpoints. Additionally, we believe it will take multiple years to increase budgets from our marketing customers commensurate with the increase in Cardlytics Direct MAUs. We still have a lot of work to do over the next several months as we develop our strategic plan for 2019 and beyond. We felt that providing some perspective around our growth expectations over the next few years was prudent, knowing where the external estimates were positioned today.

We will, of course, provide full 2019 guidance in our Q4 call in 2019. With that, I'll hand it back to Scott for his closing remarks before we open the call to your questions. Scott?

Scott Grimes -- Chief Executive Officer and Co-Founder

Thanks, David. We are really pleased with the performance our team has delivered since going public in February. With the addition of two new national banks, we are now positioned to deliver great value to the majority of bank customers in the United States and to consolidate Purchase Intelligence in the United States. We will be able to bring powerful new insights to our marketing partners.

And with these insights, we can deliver profitable sales growth at scale, both in-store and online through our trusted, brand-safe, fraud-free Cardlytics Direct native advertising channel. With that, I will open the call up for your questions. Thank you.

Questions and Answers:

Operator

[Operator instructions] And our first question is from Andy Hargreaves with KeyBanc Capital.

Andy Hargreaves -- KeyBanc Capital Markets Inc. -- Analyst

Hi, thanks. I have a few or a couple here. I'll try one to two. Just on the '19 and '20 outlook, I wonder if you could clarify a little bit more, was the suggestion that you would see acceleration in '19 and '20 meaning both of those years would independently be higher than '18 or that we would literally see acceleration in '19 and then another year of acceleration in '20? And then I wanted – this is probably a question for Lynne.

On the advertiser side, can you just comment on sort of what retention has been so far? And then you mentioned the new areas. Just wondering sort of what pipeline in there it is? And sort of how long it would for those to start to have an impact? Thanks.

David Evans -- Chief Financial Officer

Hey, thanks. This is David. Thanks for dialing in. We appreciate it.

On the accelerating revenue growth comment, it's the latter of your question. I think what's important to note, and that was the reason why I wanted it in the prepared remarks, is really around the timing of the banks. And certainly, as you think about two large banks like Wells and Chase, there will be associated budgets that we're going to be drawing out trying to capture to fulfill the MAU growth that we experience there. And so as part of the comment was to say that we would experience accelerating growth in '19 and then we would accelerate off of '19 and '20.

Lynne Laube -- Chief Operations Officer and Co-Founder

And this is Lynne. On the retention side with advertisers, we don't report on any of those specific metrics. I do think our growth rates sort of somewhat speak for themselves there. But we do penetrate new verticals based on where and how we see the most transaction data and where we can be the most valuable to those advertisers.

So as we are adding these new portfolios, we're seeing different types of purchases, which is particularly convenient for us to go attract new verticals. And we're seeing very, very high initial engagements with those verticals. I really can't speak to the retention of those, obviously, since we're just engaging.

Scott Grimes -- Chief Executive Officer and Co-Founder

But developing the verticals is definitely a multi-year effort, not a single-year effort.

Lynne Laube -- Chief Operations Officer and Co-Founder

Yes.

Andy Hargreaves -- KeyBanc Capital Markets Inc. -- Analyst

Yes. And then maybe just one last one for David, just sort of a technical question. On the SBC, there's obviously a management component of it, but it was higher than at least I thought for all of the categories. Should we expect sort of something closer to what we've seen in the first half this year going forward for stock comp? Or is it going to be -- it will revert more to what we got last year?

David Evans -- Chief Financial Officer

Yes, we had -- because -- when you think about when the management RSUs were put in place, we obviously did not know about Chase or the timing around Wells. And so therefore, we had a timeline for accruing those expenses. Obviously, now that we have signed them both in the first year, we had a little bit of a catch-up quarter. And so that's why you see the large number this quarter and then that will continue at a slightly smaller level, but at least up and until we reach those thresholds for MAUs, which as per the prepared remarks, based on the amount of significant growth we expect in the first half of next year, we are accruing toward that with that stock-based comp.

Does that help?

Andy Hargreaves -- KeyBanc Capital Markets Inc. -- Analyst

I think so, yes.

David Evans -- Chief Financial Officer

So the timeline got compressed in other words, right? You got a three-year and a five-year, and then those three and five years got compressed because of the number of MAUs that we expect to see coming on over the next 12 months or so.

Andy Hargreaves -- KeyBanc Capital Markets Inc. -- Analyst

Yes. That makes sense. Thank you.

Operator

Thank you. Our next question is from Youssef Squali with SunTrust.

Youssef Squali -- SunTrust Robinson Humphrey -- Analyst

Hi, thank you very much. Two quick questions from me. Can you speak to, again, the MAU has been -- at any point been flat in Q4 of '17. Understandably, we should see an acceleration going forward these two huge wins.

But some of your existing businesses or existing FI relationships, just trying to see if those have effectively been capped out and all of the way do you expect going to be coming from these new relationships? Or is there maybe something that kind of is concepted and represented from being able to add MAUs to the existing FI relationships? And then on the Wells Fargo rollout, if you can just maybe help us understand the cadence at least as far as your understanding. I know it's early, but just how should we be thinking about the cadence of the rollout over the next six to 12 months, just to see how we can connect that in our models?

Scott Grimes -- Chief Executive Officer and Co-Founder

Hey, Youssef, this is Scott. Thanks for the questions. Let me speak to the MAUs, a couple points that you should be aware of there. We've always thought it's -- there's a lot of noise between the MAUs quarter to quarter, and so looking at quarter-to-quarter changes is not terribly productive.

Versus the year over year, I think it's more telling. And I believe we saw about a 9% MAU growth year over year. The second point that's really important is we've obviously had our implementation teams working on launching two very large banks. So our implementation efforts have been much more focused on bringing the new banks online then frankly, tapping into additional MAUs in the existing banks.

But rest assured, there's a ton of MAU dry powder even in the existing network. We're just investing in two more, what I call, kind of step-function MAU areas right now.

Lynne Laube -- Chief Operations Officer and Co-Founder

Yes. And MAU, as a reminder, MAU growth is always going to be spiky, because even with the existing banks, it requires extending into a new channel or a major new UI upgrade. And so that literally gets turned on overnight, and then there is a spike. If we are not focused on new channels or new upgrades with existing MAUs for a particular quarter, you're not going to see growth because you won't see one of those spikes.

And then I'll answer your Wells Fargo question. Obviously, we don't talk about any individual bank and timing. I do think it is reasonable to assume that both Chase and Wells will deploy in some type of phased rollout way. It could be by geography, it could also be by channel.

I think both options are being explored. But I would expect that from the initial rollout to having us fully deployed nationally across all of the banks' digital channels, I would expect that to be at least a 12-month process unless and until we tell you otherwise.

David Evans -- Chief Financial Officer

And another thing that I would point on – point to with regards to MAU, and Scott touched on this a little bit. I mean, we are going to be far more budget-constrained here over the next 12, 24 months than we are MAU-constrained. We've got plenty of real estate as we sit here today with regards to deploy our product, and that's only going to be magnified pretty significantly over the 12 or 18 months. So we're much more focused on making sure that we're going out and capturing advertising budget.

Youssef Squali -- SunTrust Robinson Humphrey -- Analyst

Great. Thank you.

David Evans -- Chief Financial Officer

Thank you.

Operator

Thank you. Our next question is from Douglas Anmuth with JP Morgan.

Douglas Anmuth -- J.P. Morgan -- Analyst

Great. Thanks for taking the questions. Congratulations, guys, on the Wells signing. Just first, can you talk a little bit about the timing of investments just related to Chase and Wells? It sounds like you didn't spend as much as you expected in 2Q.

If you could just kind of lay out a little more how that plays out over the rest of the year and then just remind us on the overall investment levels required for those two? And then secondly, just, I guess, digging deeper into your comments on '19 and perhaps '20 as well, could you just help us understand ARPU trajectory a little bit more as you're building MAUs and kind of the lag time involved there in terms of monetization? Thanks.

David Evans -- Chief Financial Officer

Yes, you bet. So with regards to the investment spend, you folks remember from the Q1 call, we talked about a $14 million to $16 million investment trajectory for the launch of both Wells and Chase. Some of that, obviously, we had started to deploy to some degree. I think with all things being considered, it's always a process in trying to get banks launch, especially when they're two of the largest in the country.

And so we did start to make some investments in the second quarter. I'd put it in a couple of million-dollar range. But there were also other investments that were pending per the Wells contract and so that was the purpose of the accelerate in the press release in that. Now that that's been signed here as of late, I would expect some of those investments to accelerate between now and the rest of the year.

And so I would say, we're kind of a third of the way through that projection. We're obviously learning a lot as we go through all of this. We're seeing some efficiencies and some of the redeployment of some of the resources that were in our Platform business. And so from an efficiency standpoint, I feel good about how the capital is being deployed.

As to whether we'll get through that entire, call it two-thirds of the rest of that piece between now and end of year, it's TBD, but I still feel like -- I still feel pretty good about the range that we gave you before. And then the second question was on ARPU. Look, I think as it relates to ARPU, there will be a -- to quote Lynne, a spiky step-change with regards to MAU growth. So you should expect ARPU to decline along with that.

And the hope is obviously that as we go out and continue to acquire ad budgets, the ARPU will revert back to the levels that we see today and then, hopefully, improve over time.

Scott Grimes -- Chief Executive Officer and Co-Founder

And David, just to be crystal clear. The constraint for Cardlytics growth in 2019 and 2020 is strictly the rate at which we can see new advertisers and grow advertising budgets. We have all the MAUs we need for our growth. So it really is all around the rate at which we ramp our advertising business.

David Evans -- Chief Financial Officer

But I would expect -- obviously, stating the obvious, I would expect a slight decline in ARPU just given the magnitude of the impact of MAU growth going into '19.

Douglas Anmuth -- J.P. Morgan -- Analyst

Just a quick follow-up there. Just as you're talking about the constraint around ramping the advertiser business, do you feel like you're positioned right now just in terms of feet on the street, sales force size and how you're kind of going to market there?

David Evans -- Chief Financial Officer

Yes, I'll answer and I'll let Scott and Lynne chime in as well. I mean, certainly, as we look at the number of heads across the organization, engineering, R&D implementations and sales and marketing, it's a pretty good size. And we're making our way through that. And so do we have all the feet on the street that we'd like to have? No.

Are we making good progress? Yes. And so I would expect here over the next three to four months to have everybody in place.

Lynne Laube -- Chief Operations Officer and Co-Founder

Yes. And just to add a little more color to that. I think we are well staffed for existing verticals. We are obviously staffing up and learning on some of the new verticals that we talked about earlier.

And so we're not quite where we want to be there and those will take a little bit more time. But I think existing verticals are well staffed and very aware of what's coming and have significant proposals in front of them.

Douglas Anmuth -- J.P. Morgan -- Analyst

Great. Thank you.

David Evans -- Chief Financial Officer

Thank you.

Operator

Thank you. [Operator instructions] And our next question is from Matt Trusz with Gabelli & Company.

Matt Trusz -- Gabelli & Company -- Analyst

Good afternoon. Thank you for taking my question.

David Evans -- Chief Financial Officer

Sure.

Matt Trusz -- Gabelli & Company -- Analyst

I was wondering, can you all elaborate on any of the ways in which you've seen your talks with these advertisers change or accelerate recently due either to the IPO or due to the Chase and now Wells announcement? And can you just talk a little bit about your ability to start selling new advertising verticals now ahead of the uncertain launch time of the banks? And how long it would take those relationships to ramp to something meaningful?

Scott Grimes -- Chief Executive Officer and Co-Founder

Hey, Matt, thanks for the question. The -- top line, I think the discussions with advertisers had been really good. The advertisers, especially in the digital world, want to buy scale. We have good scale now, but our good scale is becoming great scale.

And we can really move the needle in the businesses. And you take that combined with the unique things that we offer at advertisers, which is a really great way to make sure you're targeting the right customers, the ability to close loop and then returning the advertising to the penny and where digital channel drives people into stores, not just online. So you take that and the scale, and I think it's being really, really well received. So we're pretty excited about it.

Lynne, you do want to add?

Lynne Laube -- Chief Operations Officer and Co-Founder

Yes, I'll just add to your point about how we penetrate them prior to launches. We actually receive several months -- at least several months in advance of launching any bank a full record of all their transaction data going back many, many months, upwards of 12 months. And we use that to measure to the penny the exact opportunity. Obviously, we're much better at doing that in verticals where we have experience.

So we can literally say, this is the new amount of opportunities that these launches will present to you. In verticals we have less experience, we still have all that data that we're using to better understand just what the size of the opportunity is. The response rates are little less clear. But our ability to go to advertisers many months before the launch and say this is what you could consume in this channel, and these are the return on ad spends that we could deliver to you measured very precisely as high.

Matt Trusz -- Gabelli & Company -- Analyst

Great, thanks for the color. And then just a follow-up on the ARPU discussion, as far as the implications of -- especially Chase as you add credit card mix. Is there any difference in long-term monetization potential of credit? I guess, specifically I'm asking is there a difference in how a credit card user is engaged with their digital channel versus debit card?

David Evans -- Chief Financial Officer

There is. Historically, our debit card users were our most valuable consumers. That has changed pretty dramatically over the past few years as we have learned how to get similar levels of engagement with credit. So we look in both credit and debit today as both very valuable.

What you will see is credit is more impactful in certain verticals. In fact, it's the verticals we're investing in: travel and entertainment, the e-commerce. E-commerce is almost purely credit card and the luxury brands. And so one of the key reasons we've decided to make the investments in these new verticals is we now think we would be bringing them to scale, that we can bring really good solutions to those advertisers.

So it's important more from a mix of the advertising areas we can serve in and the difference in how cards perform.

Matt Trusz -- Gabelli & Company -- Analyst

Great. Thanks so much.

David Evans -- Chief Financial Officer

OK.

Operator

Thank you. And sir, I'm not showing any other questions in the queue. I would like to turn the call back to Scott Grimes for his final remarks.

Scott Grimes -- Chief Executive Officer and Co-Founder

We are really excited about the quarter. It's a great quarter. The team is very excited about the scale we're going to bringing online the first half of next year. And so we'll get back to work, but we appreciate everybody's time today.

Operator

[Operator sign-off]

Duration: 36 minutes

Call Participants:

Kirk Somers -- Chief Legal and Privacy Officer

Scott Grimes -- Chief Executive Officer and Co-Founder

Lynne Laube -- Chief Operations Officer and Co-Founder

David Evans -- Chief Financial Officer

Andy Hargreaves -- KeyBanc Capital Markets Inc. -- Analyst

Youssef Squali -- SunTrust Robinson Humphrey -- Analyst

Douglas Anmuth -- J.P. Morgan -- Analyst

Matt Trusz -- Gabelli & Company -- Analyst

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