Q1 2024 Ibotta Inc Earnings Call
Greetings and welcome to the I bought a first quarter 'twenty 'twenty four financial results conference call.
At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Shaalan Patel head of Investor Relations. Thank you Charlotte you may begin.
Yeah.
Good afternoon, and welcome to our Q1 'twenty 'twenty four earnings conference call.
With us today are Brian Leetch, founder and CEO.
Yep.
Today's press release and this call may contain forward looking statements, including our guidance for Q2 2024.
Subject to inherent risks uncertainties and changes and reflect our current expectations and information currently available to us and our actual results to differ materially.
For more information please refer to the risk factors in our recent SEC filings. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures.
It should be considered in addition to and not as a substitute for our GAAP results.
Conciliation to the most comparable GAAP measures are available in today's earnings press release, which is available on our Investor Relations website.
That's correct Scot I bought a dot com.
Also during the call today will be referring to the slide deck posted on our website unless otherwise noted revenue and adjusted EBITDA comparisons to prior periods are provided on a year over year basis.
Lastly, references to non-GAAP revenue growth reflect the exclusion of one time breakage revenue benefit in 2023.
This is due to Q2 and update we made in 2023 to pick the software Eric correctly.
Inactive direct to consumer with your marriage, which resulted in the short term benefit to GAAP revenue last year.
Please see slide 31 in the appendix for more detail with that I'll turn it over to Brian.
Thanks, Sean and good afternoon, everyone welcome to our first quarterly earnings call as a public company.
Let me begin by saying, thank you to all our employees clients and most of all the millions of consumers, who use our services to save money and discover new products.
To all our new investors. Thank you for spending time getting to know our company for sharing advice that will make us stronger and for choosing to partner with us.
Given that this is our first earnings call I'm going to take just a few minutes to provide a brief background on my border and what makes us so excited about the future of our company.
We began our journey 12 years ago in the basement of a 19th century fire station in downtown Denver.
Our first product with a free mobile app that allows consumers to earn cashback rewards on everyday purchases in the grocery store.
Previously a consumer packaged goods companies CPG did not have a reliable way to efficiently promote their products directly to millions of consumers by a single mobile application it worked across major retailers.
Because we were outsiders, who did not come from the coupon industry. We asked ourselves if we could design a new system for promoting product using the latest technology and aligning everyone's incentives how would that change the way promotions have been delivered for the past 140 years.
We started by introducing a success based business model for CPG brands.
First time, instead of paying for impressions clicks clips or print CPG brands get paid on a fee per sale basis, meaning only when our campaign led to a verified sale of their products.
And instead of needing to reimburse retailers for the discounts they provided at checkout using an antiquated coupon clearinghouse we.
We paid consumers digital rebates it went straight into their Paypal accounts without the retailer needing to discount the product at all.
Over the years, we've grown the I bought apt over 50 million registered users and American consumers have earned over $1 $8 billion in cash back rewards our.
Our direct to consumer properties has since expanded to include our website and our web browser extension.
In addition to generating revenue I bought a D to C products are strategically important because they allow us to experiment with new kinds of AI driven promotional techniques.
US attract a much larger quantity across retailer national offers than our competitors.
And they form the backbone of our unique data set across retailer item level purchase data that can be tied out to millions of individual consumers.
Beginning in 2020, we realized that while our CPG brand clients loved our pay per performance model in order for them to view us as a primary pillar of their marketing strategy, because he needed us to deliver dramatically more scale.
To achieve this we took the technology underpinning our direct to consumer products and turned it into the foundation of what we now call V. I bought a performance network or IPM.
The ITN is a first of its kind tech platform that allows CPG brands to distribute their digital promotion to tens of millions of American households, and a coordinated way.
Through our network marketers can reach consumers on a variety of different websites all at once and they can manage their campaigns through a single interface called the I bought a partner portal.
Our cloud based technology allows us to ingest and process vast amounts of cross retailer item level purchase data and it's valuable dataset powers proprietary AI models that help us put the right offer in front of the right consumer at the right time.
Each content distribution point or node on the network, it's called a publisher and our original D to C. App is now one of many publishers on the Ips.
We also have a variety of third party publishers that Hookup July bought his network for two main reasons first the gain access to I bought its unique selection of digital offers and second to leverage our AI enabled offer delivery technology and analytical tools.
Partnering with I bought it helps publishers build loyalty with their consumers grow their basket sizes and increased trip frequency in your stores and on their websites all at no cost to them.
As you'll soon hear from soon at these third party publishers now account for a majority of the offer redemptions on our network.
Our largest third party publishers, Walmart, which relies on I bought it to deliver digital manufacturer offers that appear on walmart's website in white label fashion.
That means consumers can earn Walmart cash regardless of how they shop in store online buy ahead pick up in store without needing to create anti bot accounts.
I bought it hasnt exclusive relationship with Walmart, meaning that all categories of products. We are the only company that manufacturers can use to deliver item level promotions on Walmart digital properties in the U S.
Walmart program rolled out to a 100% of consumers with a Walmart dot com account last year and the program has grown steadily since then.
We continue to work closely with our counterparts at Walmart to prioritize the initiatives that we believe will help grow Redeemer then redemption her redeemer as quickly as possible.
In addition to Walmart, we also powered digital loyalty programs for other leading retailers such as dollar general Kroger and Chicago.
Our team is constantly working with each of these publishers to help them improve their loyalty program add more redeemers and grow redemptions per redeemer.
At the same time, our team of sellers and account managers focuses on sourcing digital promotions from the world's leading CPG brand. Our goal is to grow budgets within our current CPG brands add new CPG brands with the clients that we already work with add new clients and expand into new categories outside of groceries such as.
Pet toys and other general merchandise.
Year to date, we've had particular success in expanding our general merchandise content to include offers within automotive and home improvement video game and more in terms of our progress with new partners users of our various I bought a property might noticed that nearly 50, new partnerships had been formed in 2024 with new CPG.
And general merchandise brands, such as Jackie Phillips.
Straw Alcon power stop and solo Cup.
Today, we have more than 2004 hundred CPG clients and with our campaigns are clients typically see strong incremental sales and high returns on their investment.
This explains why we've retained 60% I'm sorry, 96% of our top 100 clients last year and why we believe we represent a compelling alternative to other marketing channels, such as social media search display AD linear TV streaming TV and other channels that are not performance based.
Our network benefits from powerful flywheel effect. The more offers we source from CPG brand the greater value, we were able to deliver for consumers and the more likely that they continue to engage with and recommend our offers to friends. The more consumers engage more investments we received from CPG brands eager to influence that greater.
Spending power and in addition, as retailers make offers easier to redeem more consumers use them, which in turn attracts greater investments in offers from CPG brand, which ultimately results in more consumers using the retailers loyalty program.
Turning to this quarter's results, we're pleased with our strong financial performance, which has allowed us to maintain our trajectory of profitable growth for the sixth straight quarter. We saw strong performance in redemption revenue on our third party publishers, which we expect will be the primary driver of overall revenue growth going forward.
We were successful in adding new retailers publishers to the Ips such as Schnooks, a $3 billion grocery chain with 115 stores located in Missouri, Illinois, Indiana and Wisconsin.
Family dollar, which is approximately 8000 store locations nationwide and App card, which represent 375 independent grocers across 2000 store locations.
We are ramping up each of these new publishers, while at the same time building upon our strong foundation with existing publishers.
We believe <unk> remains well positioned to capitalize on our large and growing market opportunity.
CPG brand compete fiercely to influence the spending habits of American consumers investing approximately $200 billion on marketing annually in the U S. In addition to the size of the market consumers today are looking for value, perhaps more than ever given the inflation in recent years. According to the Bureau of Labor Statistics U S grocery prices have risen.
By 25% since pre COVID-19 levels.
At these prices increases as these price increases caused more consumers to consider switching from national brand to private label brands are targeted promotions represent a highly efficient way for CPG brand influence current and future consumer behavior holding on to their existing consumers, while adding new ones are data allows us to demonstrate to our.
Clients that their campaign dollars not only drive sales volume today, but also enhance lifetime value as consumers continue to purchase post campaign on our full price basis.
We expect these trends to continue causing more brands to launch more promotions in the back half of the year.
We're excited about the future and remain focused on building upon our track record of profitable growth.
With that let me hand, the call over to soon to discuss our first quarter results as well as our second quarter guidance. I'll, then wrap up with some final thoughts before fielding your questions soon it.
Thank you Dan and good afternoon.
Strong revenue growth profitability and free cash flow in the first quarter during the quarter. We continued to make progress in expanding the I bought a performance mechel, adding new advertisers offers with dealers and retail publishers.
This drove significant year over year growth in third party publisher, Redeemers and redemptions, which reflects the increasing traction of what we believe to be a unique success basically what looks platform across all our key metrics. We delivered results at the high end of the preliminary results. We provided in our final S. One registration statement.
Revenue in the fourth quarter was $82 3 million, representing non-GAAP revenue growth of 46% year over year.
Inclusive of $1 2 million in one time in breakage revenue in the prior period revenue growth was 43%.
We delivered Q1, adjusted EBITDA of $22 7 million, representing an adjusted EBITDA margin of 28% a material increase over Q1 of 2023.
In Q1, the redemption revenue comprised 83% of our total revenue with AD products and other comprising the balance. This compares to 72% in Q1 of last year.
C redemption revenue.
<unk>, 40% of total revenue with third party publisher Ademption revenue representing 43%.
Q1 was the first quarter ever where it is.
Redemption revenue across our third party publishers exceeded redemption revenue from our D to C channel.
In Q1.
Alright redemption revenue was 68 million up 68% year over year on a non-GAAP basis.
Performance was strong in the quarter and we saw a mix shift the redemption side of our business within the redemption business. We are also seeing a slight mix shift with relatively stronger performance than we thought and our third party publisher business compared to the DTC business third party publisher redemption revenue was 35.
315% year over year, while D to C. Redemption revenue was $33 million up 3% on a non-GAAP basis, excluding the onetime breakage benefit in Q1 of last year.
Add another revenues were $14 3 million down 10% year over year due to the mix shift that I mentioned, which has continued in Q2.
In this environment, where inflation pressures continue to persist in humans that even more of them to save money on everyday purchases CPG companies are keen to Brazil brand loyalty and sensitive.
Switching to private labels.
Clients are excited about our third party publisher network.
Turning to our DTC business, you just see redemption that revenue was up 3% year over year, excluding last year's onetime breakage revenue benefits <unk>.
<unk> were $1 9 million down 1% year over year, while redemptions for edema with $14 four down 12% year over year, leading to a decline in builder D to C redemptions.
Excluding last year's onetime breakage revenue benefit non-GAAP redemption revenue per redemption was $1 19, an increase of 18% year over year.
<unk> revenue per redemption can vary quarter to quarter based on seasonal patterns, but also due to variations in offer mix in Q1, we saw benefits from all from mix as well as an improvement in like for like pricing, we do not expect similar year over year growth in redemption revenue for redemption in Q2.
Turning to third party publishers redemption revenue was up 315% year over year, Redeemers with $10 6 million in the quarter up nearly 300% year over year, driven by the rollout of Walmart cash to all U S. Walmart customers with a Wal Mart docs on Macau worthy.
End of the third quarter of 2023 as well as dollar general launching I bought ousted offers in July of 2023.
Redemptions for an email with largely stable versus the prior year period at $4. One despite the large increase in the base of Redeemers.
Redemption or Dan.
<unk> was 84 up 10% year over year, reflecting the mix of office and like for like pricing.
A combination of strong revenue growth and operating leverage drove significant year over year margin expansion, we generated $22 7 million of adjusted EBITDA, which represented an adjusted EBITDA margin of 28%.
Q1, non-GAAP gross margin was 87% an improvement of 650 basis points year over year non-GAAP operating expense declined as a percent of revenue by approximately 1700 basis points within that non-GAAP sales and marketing grew by 16% and <unk>.
<unk> declined as a percent of revenue by approximately 650 basis points as we increased our brand marketing spend year over year non.
non-GAAP research and development expenses increased by 17% and declined as a percent of revenue by approximately 350 basis points.
Invested behind the IP and lastly, non-GAAP G&A expenses declined by 1% and declined as a percent of revenue by approximately 700 basis points as we were able to leverage our fixed overhead costs we.
We delivered adjusted net income of $15 4 million and adjusted diluted EPS of <unk> 54.
Adjusted net income excludes $4 8 million in stock based compensation $1 7 million in change in fair value of the derivatives and a <unk> 4 million adjustment for income taxes.
We ended the quarter with $79 5 million of cash and cash equivalents.
Realized $197 5 million of net proceeds from the IPO.
The hallmark of the net proceeds from the IPO cash and cash equivalents was $286 3 million also our basic shares outstanding as of April 30 were about $35 million and our fully diluted shares of about $35 7 million.
Turning to our second quarter outlook. We currently expect revenue in the range of $83 five to $86 5 million, representing 25% non-GAAP revenue growth at the midpoint.
We expect second quarter adjusted EBITDA in the range of 19, five to $22 5 million, representing a 25% adjusted EBITDA margin at the midpoint.
Like to provide you a little more color on our Q2 outlook in general we are seeing better than expected redemption revenue growth.
Can be mitigated by softer AD revenue performance within our redemption revenue third party publisher redemption revenue is outperforming driving a greater mix of third party redemption revenue as a percent of total redemption revenues relative to our prior expectations.
We anticipate that this strong growth in third party redemption revenue driven by better than expected third party that EMA growth will drive healthy year over year revenue growth in our total redemption revenue.
Family dollar and App Guard began rolling out in early Q2 and.
And similar to what we saw these other retail publishers, we expect a slow and steady ramp.
You must transition to the new platform and more offers become available we are working hard to increase our rewards content in the second half to satisfy the strong redemption demand.
On the expense side.
Two we will also have approximately $1 $5 million of IPO related expenses, which will not recur going forward and I included adjusted EBITDA guidance.
We estimate the stock based compensation expense to be about $45 million of which about half with equal employee stock compensation driven by stock awards granted as part of the IPO and the other half total Walmart warrants.
While the second half of the year, we expect about $14 million per quarter in stock based compensation expense.
Lastly, I wanted to point out that our convertible notes outstanding as of March 31 were converted to class a shares upon the successful completion of our IPO as a result with no debt outstanding post IPO before we go into Q&A I'll pass it onto Brian for some closing remarks.
Thank you soon it as you've heard I bought our delivered a positive set of results in Q1, driven by especially strong growth in our third party redemption revenue, which is testament to the rapid expansion of the IPO over the past year, we're off to a great start in Q2, as we continue to attract CPG brand investments build out our new publisher pie.
Wine and help our existing publishers grow their audiences and drive adoption of their loyalty program through a variety of ongoing and upcoming initiatives.
Never been more excited about the volume of conversations we're having with potential new publishers, we remain confident that our current publishers will afford us a long runway for growth over the next few years as well.
This is the completion of our IPO I've been out on our second roadshow traveling across the country to visit with our CPG brand clients I've been excited by their responses as we shared with them what we're building to better serve their needs. We believe we are still in the very early innings of exploring how rewards based promotion can revolutionize the way brand target consumers.
And arrive at the optimal net price for their product using AI.
We see a future where our scale first party datasets and AI driven targeting capabilities become uniquely valuable.
This is especially true as privacy regulations continue to limit the effectiveness of other marketing channels.
Our goal is to be recognized not just the best platform for promotional marketing, but is the single most efficient way for a CPG brand to deploy marketing dollars to gain market share and build brand loyalty.
Thanks again for your time and attention today, we are committed to being responsible stewards of your capital and creating long term shareholder value, we intend to be active and with regard to investor relations and look forward to high levels of engagement with investors and analysts alike.
Stay tuned to our IR site for updates and we look forward to seeing you with that operator, let's open up the call for questions.
Thank you we will now be conducting a question and answer session.
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One moment, please while we poll for questions.
Thank you.
Last question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question.
Thanks, so much for taking the questions and thank you again for all the details in the prepared remarks wanted to ask a two parter no need for a follow up but you called out the redeemer growth Youre seeing and I wanted to know if we could separate that into two pieces. The Walmart partnership continues just sort of evolved and what are you seeing as Walmart as a potential tailwind.
Redeemer growth as we move deeper into 2024 and as you continue to add new publisher partners, how should we be thinking about the tailwind to redeemer growth as those partners.
Sort of get sort of fold it into the business as announcements proceed through the year. Thank you so much.
Thanks, Eric appreciate the question, we're very excited about the momentum we have in terms of redeem or growth in the business, we're seeing that redeemer growth across the network on the third party publisher side and Youre absolutely right. Walmart is no exception to that we have a lot of ongoing initiatives with all of them.
Our publisher partners that give us confidence that we'll continue to be able to grow redeemers as we grow awareness and adoption of the loyalty programs and the digital offers.
Those are the primary drivers as you know our business is growing that redeemer growth.
Also very confident in addition to the headroom we have in the existing third party publishers, which is significant we're still in the very early innings. There. We believe we have a good pipeline. So that we can grow redeemers over time by adding more.
Onto the network you heard about Schnooks for example, we're hoping to.
Get some redeemers from rolling out that in some of the other ones that are still in the early stages of the rollout.
Thank you.
Thank you. Our next question comes from the line of Ron Josey with Citi. Please proceed with your question.
Alright, Thanks for taking the question, Brian I wanted to dig in a little bit more on the Walmart partnership.
Now that we're about two quarters I think of being live and love to hear your thoughts on just growing awareness of walmart's user base and adoption of the rewards program.
And then any insights on just driving potentially newer verticals on Walmart I think you mentioned there is some improvement videogames Im sure thats across your retailer mix publisher mix, but would love to hear just how Walmart is at the center there and then also when it comes to.
More targeted rewards I think in the past you've talked about 50% of the rewards you offer a personalized <unk> targeted I'd love to hear just more details about that targeting and that 50% is AI becomes a bigger part thanks guys.
Thanks, Ron.
Taking those question didn't turn Walmart, yes, I mean, there are a number of different ways in which we are benefiting from not only walmart's growth as you may have seen our recent earnings and their growth in E. Commerce. For example, but also the growth of awareness, we don't measure that in terms of surveys what we see is just growth in <unk>.
<unk> simply growth in the number of redemptions that are derived from Walmart as one of our third party publishers, we're seeing that consistently across all of our publisher partners and I want to stress. We believe that we're still in the very very early innings. There. The program has only been out to a 100% of people <unk> dot com account for less than a year.
Here and there are a number of initiatives that we believe will continue to benefit Redeemer growth. We also just think time in market leads to awareness of the program people telling other people about the program et cetera with regard to your second question targeting that as a major strategic focus of the company and you put your finger on something Thats really important and we like to say this.
Not your Grandma's coupons one of the reason why it's not is that we have sophisticated capabilities that we've been honing on our D to C properties for a long time, we're focusing right now on the greatest extent, we can enabling targeting network wide and so the goal is to be able to create more efficiency and especially specifically.
Incremental sales by putting that right offer in front of the right consumer at the right time that starts with our data and understanding what each person's propensity to buy is and then you can think of it as trying to arrive at the correct net price based on their willingness to buy or elasticity of demand if a given group of shoppers and we think there is enormous.
Unlock there in terms of the new efficient frontier of pricing product and that's going to be critical to our strategy going forward.
Thank you.
Our next question comes from the line of Curtis Nagle with Bank of America.
Please proceed with your question.
Okay terrific. Thanks, very much for taking the question.
Maybe just another one on Walmart.
It seems to be going.
Plus you a really good start in terms of Redeemers and scaling and it's early and all of that.
I'm curious what the trends are in terms of.
The redemption rates Youre seeing.
On the Walmart cash right.
Obviously, another important part of I guess the relationship right in that theoretically should drive incremental business, but.
Are the people who are using these redemptions.
Transaction again, and redeeming that net cash.
How does that look.
Terry: Thanks, Terry I appreciate the question to clarify what we focus on is driving redemptions of manufacturer offers on Walmart properties. Those then turn into Walmart cash the disposition of that cash is something that Walmart controls and we don't have visibility into what I can say is we don't comment on the specific redemptions.
<unk> rates by publisher, what I can tell you that generally speaking, where we see a large and thriving online shopping presence or E. Commerce presence. That's good for us because we are intercepting those shoppers as they are searching for products as they are putting products into their shopping cart and thats a very.
Terry: Important for brands to be part of that path to purchase.
Got it Okay, and then just a follow up I guess, just thinking about context in the environment.
Increasingly promotional.
More focus on private label trade down and stuff like that.
Can you sort of alluded to it but are you seeing your brand partners just more actively.
I, just try and target.
<unk>.
I bought a trying to win back share from some branding is that is that part of the business a bigger mix now.
How do you think that evolves through the year.
That.
Speaker Change: It's driving incremental revenue.
We speak right.
Right now.
Yes, I think your question is about whether brands see the benefit of capturing market share or protecting market share vis vis store brands.
We see as very much there in the last couple of years.
TG brands have taken price.
Speaker Change: This increases have caused some consumers to reconsider whether they want.
To remain in that branch franchise or maybe they are price sensitive enough.
When I tried to store brand, we can demonstrate those trends proactively to our CPG clients and almost every conversation we have with the CPG client. This topic comes up I think they are going to be more promotional because of it and I think the targeting is really something that you can always do as long as you can do it intelligently as long as you.
That this is going to be a really incremental sale for you and you can look at the lifetime value of that customer who would be kept or acquired relative to losing them to private label, It's really a mindset shift to thinking about customers on lifetime value and the reason why we're able to do that of course is that we have that longitudinal purchase data. So we can show that <unk>.
<unk> don't just condition consumers to look for offers on sale, but actually resulting consumers trying the product loving the product by it again repeatedly and very often not on sale so be able to show all of that with data is what is most convincing to our CPG partners.
Got it okay. Thanks very much.
Thank you. Our next question comes from the line of Ken <unk> with Wells Fargo. Please proceed with your question.
Thank you and good afternoon, everyone I appreciate the opportunity.
One question just around this time in this kind of macro environment.
Maybe from two angles, both from the Redeemer side.
What information or what data do you see in terms of anything you can read from the types of items that are are redeemed.
<unk> offers that are redeemed that gives you insight into where the consumer is today and then second maybe is from the advertiser from the CPG base.
Could you talk a little bit about your opportunities you provide.
Real time as close to real time feedback through their survey your CPA model.
Speaker Change: What are those.
Speaker Change: Those those brand advertisers.
Consumers are looking for at this moment and it helps them inform both the kind of product strategy and pricing strategy going forward.
Thanks, Ken and good afternoon to you to your first question what you're seeing is that consumers are really hurting we know that a very high percentage of them are living paycheck to paycheck. They are really focused on finding value in saving money on core non discretionary items and so what we see as the.
<unk> is a campaign that are for non discretionary high frequency products that are in almost every American basket than you'd like cereal. For example are very very sensitive to price.
We still have offers across a wide range of products, including as I mentioned general merchandise products, maybe those are a little bit less non discretionary maybe they're a little bit longer purchase cycle, but we do have a component of our of our consumer base that loves to shop to the sale and thus to find value when it's available to be found so what we tend.
And to do as we lead with these essential staple that are there for everyone. There very often bubbling up in the personalization elements of our offering and then once people get into the program that are kind of committed to saving money using a given loyalty program. There has been more likely to look around and say, okay. What else can I get that's valuable.
Given category there are a number of different ways in which we see those trends continuing but I think in this environment. It's one where it's particularly important to have the high frequency non discretionary item. The second question is a fascinating one real time feedback based on our Cta model as you know.
<unk> of measurement in the digital advertising industry is a snapshot weeks or months. After a campaign has concluded which makes it very hard to do effectively real time optimization, when what you're optimizing for as an in store sale. So this is as distinct from if you were optimizing for a click through on Google to a.
Flight booking for example, very hard to optimize when you are promoting or advertising products that are 87% of which are sold in store. So there's a huge opportunity to create an ever more real time feedback signal that allows brand not only to pay on a performance basis, but to put the right tailored offer in front.
To the right user and <unk>.
As you run a campaign you are gathering information first party data that belongs to you. The brand manager is helping you get ever smarter about your overall strategy, which pack shot to use which skews to include which audiences should get which offers and this is the great promise of AI in the future we hope to.
This to a place where it is truly close to real time, and you can't optimize against a greater and greater variety of different customer segment. So what you're effectively doing is achieving a net price that is the ideal net price for that customer based on their previous propensity to buy so that relies on building out.
A series of AI enabled client tools, that's something we're going to continue focusing on especially in the back half of this year and we're really excited about the potential of that in the coming years.
Thank you.
Thank you. Our next question comes from the line of Mark Mahaney with Evercore ISI. Please proceed with your question.
Okay.
Thanks, I think I'll just ask one on the cadence of bringing in new retail publishers and what's the what's a reasonable expectation I know you are just the most recent announcement is schnook and it sounds like that will come in later this year, which is that kind of a normal cadence of how long it takes to bring in a new retail publisher.
That size kind of medium medium sized small medium size call. It three to six months and does that mean that we should expect.
We would hope to see something like two to three new retail publishers added onto the I bought it performance network.
Every year just talk about the cadence and then the lift required to bring on a new medium size.
Retail publisher thank you.
Thank you Mark.
Yes, so the question about new retail publishers.
I would say that.
We are trying to fill the pipeline with a variety of retailer publishers and also a variety of other kinds of publishers and they all are differently situated so some of them are more.
Coming to us and saying what would it take to get access to your content in which case the cadence would tend to be shorter. Some of them are have never had a loyalty program or never had the content of this kind of them before but they may be more technologically sophisticated which would then increase our ability to collaborate with them more quickly and bring it to market more quickly.
Our general philosophy in terms of providing guidance on this has been to be conservative and to describe what I like to call wording not engagements. So I never want to get out in front of myself and describe a pipeline and then have people build that into their models and estimates when we've seen those things.
Not materialize what I can tell you is that we believe we're getting shorter.
Better and better at making it easier easier and quicker for publishers to join the network.
So what we typically seen in the past it's been about a 12 month ramp for new publisher, we're hoping that we can make that ramp more efficient over the coming years, but I think that.
Well, what I can say without getting into the specifics of the pipeline is that we feel really good about the value proposition resonating the amount of inbound interest we have in the network and we think that network effect being what they are the more you can add publishers in theory anyway. The more quickly other publishers should want to join the network and get the benefit of.
All the bandwagon effect of all the CPG investment dollars and so I can't say that we're at that tipping point per se, yet, but I'm very optimistic that as we continue to add publishers and make announcements in the future.
Incrementally increase our chances of adding the next publisher.
Thank you Brian.
Thank you.
Our next question comes from the line of Chris Harris.
With UBS. Please proceed with your question.
Chris Harris: Alright, Thanks for taking the question, maybe just on the promotional environment, you've called out that the consumers really engaging with promotions here just wanted to focus on on the brand side of things.
Can you just talk about what your expectations were at the beginning of the year for the promotional environment and just how much what we're seeing is maybe potentially the environment. We're operating in brands more willing to promote and what you had originally anticipated and then the second part of that question would be just as.
As we enter into a more promotional environment here.
Really what is that visibility that the brands have just the visibility increase or decrease.
We're in a ramping period or is there really any impact at all thanks, so much.
Thanks, Chris.
I'd say generally the environment is more the same than then dramatically different I mean, we've been in a very inflationary environment with more than half of the country living paycheck to paycheck and more than 70%.
Saying that their financial and secure for many quarters, it's not a new 2024 phenomenon I do think that.
There is a lot of commentary right now in the media about the risk of erosion of brand market share to private label, but there have been articles about that drive dating back 18, 36 months and we've been citing those in our conversation I do think that in terms of visibility and in terms of just.
<unk> investment.
Brands are looking for an app scale place, where they can earn them, where they can put money to work, where it's completely measurable and where its all charged on a fee per sale basis, but more we add redeemers. That's the key thing because the redeemers all what attracts those brand and.
And we've always seen throughout the history of the company that as you build that scale, while maintaining the efficiency.
Those those investments are more and more attractive and get made in larger and larger amount in terms of the visibility that we have to that there are a number of different ways that.
That we track that we know when a campaign is running the breadth the quality of that campaign and we are always encouraging our clients to use best practices in a way that is most advantageous for both them and the ultimate end consumer.
And we also have visibility as we enter into partnerships.
With companies that are going to use us with a seasonal calendar and we can see okay. We know that theyre going to spike during these periods of time during the year and every company is different we worked with 750 different clients.
Some cases, we have more visibility in some cases less but overall, we feel good about the environment being one in which as long as we do our part in growing redeemers and those addressable audiences.
We will have plenty of interest from the advertiser.
Advertiser side.
Thank you.
Our next question comes from the line of Bernie Mcternan with Needham <unk> Company. Please proceed with your question.
Great. Thanks for taking the question Brian I believe you mentioned 50, new partnerships on the platform already in 'twenty four of how does that compare to other years and are these new companies or are you growing brands within existing clients.
Thanks Bernie.
I would say that I don't have the data in front of me in terms of relative number of net new brands joining it when we give 2400 brands on the platform that we've accumulated over many years is not a typical for us to add.
50, or nearly 50, new new brands, but what I do think it is noteworthy that these brands are in many cases the ones that are new are outside of the fast moving grocery brands and so what you see as those don't have a huge impact on the business in the short term.
Frankly, because they are just brand new in terms of performance marketing period, but what's exciting is that they also get the value proposition. So if you talk about a company like jockey for example, or one of these other brands were the first company that's coming to them that this value proposition and we believe and hope that this will traveled out a similar trajectory that we have.
Seen in the first decade of the business, where as it picks up momentum people get a chance to look at the readout of their first pilot I get a chance to tailor the program to use some of our more advanced features start getting used to the client tools and make that occur.
A critical business process part of their the way they do business as marketers that we will gain a real toehold there and we believe we're the only.
Performance based solution that can scale to that degree for this industry. So excited about that but it's early early days in terms of thing that will have a definitive material impact back to the question that was asked earlier about high frequency.
Versus low frequency, we want a portfolio I think those are some of those are.
Both.
Jackie: General merchandise categories that we are prioritizing all ones that generally are about a little bit more frequently. So we are the reason why it Jackie there is a reason why a casserole and not refrigerators.
But yes, we are excited about that I think that the IPO and then a variety of the company has led to.
Additional interest.
All of these vertical.
Great. Thanks, Brian.
General merchandise business, which is still small is running at about twice what we earned last year.
Thank you.
Our next question comes from the line of Andrew Boone with JMP Securities. Please proceed with your question.
Thanks, So much for taking the question I wanted to go back to one of your earlier answers about the flywheel of the business Brian.
For family dollar on App card and other large retailers that come on board can you talk about what happens with CPG budgets as you do have to major retailers come onboard and they expand with those is there a lag how do we think about that.
And then you just talked about the success with general merchandize understood. It's still small, but what are the key operational amongst you guys need to complete over the next one two years to really make that a larger category. Thanks. So much.
Thanks, Andrew yes to the flywheel.
Yes, it's a two sided market you are really it's a three sided market right. You have these consumers you have publishers and you have the CPG brand I think what we're focused on extending that flywheel by by growing redeemers, primarily across the network one way in which we do that as we bring in a new publisher, but the main way we do that is by <unk>.
Growing within the substantial headroom, we have in the current publishers as far as the relationship between those different things I mean, I think we do our best to.
Signal to our brand partners. When we believe we're going to have additional capacity far enough in advance for them to be able to unlock incremental dollars and what we've seen in the past very often is that we will see an annual budget get expanded midyear or they'll find discretionary funds because they are excited about the efficiency of our platform or for instance, the Roe.
Out of a significant new publisher like like Walmart.
And I think that that will continue I think it depends a little bit on how material relative to the current size.
The network a new publisher is but certainly the message is hey, if you are looking for efficiency, we want to earn your business up to the level that we have redeemer capacity and I think that message is getting your crop as far as general merchandise.
And what are the two things we need to do one or two things that you do to make that a bigger area of our business I mean quite simply I think it's demonstrating that we have a high efficient good return on advertising spend relatively low cost for incremental sales highly measurable solution. The bar is not as high as you might think Andrew.
In many of the ways that people are spending money on marketing in these channels now it really is a pretty.
Black box.
M model or something to that effect and I think we need to find people within these organizations who are champion just as we found them in the first 2000, plus brands and CPG areas of our business.
I think that that that ultimately will be.
Going going through the same playbook that we've been going through up and up into this point with with TPG and its just a matter of they go through a pilot program. It goes well then they.
Make a much more substantial cross brand investment very very commonly what we see is basically one brand will be the Canary in the coal mine and then we'll go and we'll teach that out to all the other brands in the building, we will get a strategic agreement with the parent company. It gives them a negotiated rate, but makes them commit to a law.
Longer term more predictable chunk of money, that's something that I think using case studies, we'll be able to do to secure larger and larger investments overtime.
Thank you.
Thank you.
Our last question comes from the line of Andrew Robb.
With Raymond James. Please proceed with your question.
Thanks for taking my question, maybe one more on the general merchandise opportunity if I could.
Is there a milepost or some sort of critical mass and the scaling of those general merchandise brand relationships, but it maybe starts to make sense to bring in general merchandise retailers onto the IPM in greater quantities that don't have significant grocery components to them.
Yes, Andrew you are completing land incomplete answers I Love My man. Thank you.
Absolutely.
When we get a critical mass of offer content in a category, let's take Pat or let's take toy or let's take home improvement or auto. It can then become much more exciting to bring a potential new third party publisher and that has a lot of strength in that area. So for example, whether it's an online or in store.
Omnichannel retailer that focuses on pet that'd be a great publisher to half and then as they get excited.
Can help us symbiotically accelerate the inventory of offer content that we have there and the beautiful thing about that is that because a general purpose.
Mass retailer like a Walmart or a dollar general family dollar actually carries a lot more than grocery we're able to build up that bolus of offers outside of grocery and then approach those those specialty retailers I think that our priority.
Has been up to this point to focus on retailers that have a high degree of overlap with the offers that we have that are kind of center of the bullseye high frequency like I said before but we're starting to see that in the two sided market one of the advantages we have with the unique content that we have is that we only week we believe.
The best value proposition for some of these specialty retailer publishers that are out there and so I think having an initial strong relationship in the math.
Field with a company like a Walmart gives us that one side of the market because we are their exclusive provider of manufacturer offers across every category in the store as I like to say for mountain Dew to mountain bikes and.
And that means that once we saw that side of the market. The next order of business. As you say is to go out and flush out the publisher side of that equation.
I appreciate it thank you.
Thank you.
There are no further questions at this time.
I'd like to turn the floor back over to management for closing comments.
Yes, I just want to thank everyone for the questions and the analysis and all of the <unk>.
Engagement, we really appreciate it I've said this many times, but I found the last 12 months to be an extremely.
Exciting and invigorating opportunity to talk to people, who are new to our business, who have fresh new ideas. We learned a lot out on the road talking to investors and I expect that that will continue so thank you for today's dialogue and we look forward to that.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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Goodbye.
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Okay.
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