Q2 2024 Ibotta Inc Earnings Call
Speaker Change: Greetings and welcome to the IBOTA Second Quarter 2024 Financial Results Conference Call.
Speaker Change: At this time, all participants are in a listen-only mode.
Speaker Change: A question and answer session will follow the formal presentation.
Speaker Change: If you will require any 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 you to your host, Shalin Patel, Head of Investor Relations. Thank you, Shalin. You may begin.
Speaker Change: Good afternoon and welcome to IBOTA's Q2 2024 Earnings Conference Call.
Speaker Change: With us today are Bryan Leach, founder and CEO, and Sunit Patel, CFO.
Speaker Change: Today's press release and this call may contain forward-looking statements, including our guidance for Q3 2024, that are subject to inherent risks, uncertainties, and changes, and reflect our current expectations and information currently available to us.
Speaker Change: and our actual results could differ materially.
Speaker Change: For more information, please refer to the risk factors in our recent SEC filings.
Speaker Change: In addition, our discussion today will include references to certain supplemental non-GAAP financial measures and should be considered in addition to, and not as a substitute for, our GAAP results.
Speaker Change: Reconciliations to the most comparable gap measures are available in today's earnings press release, which is available on our investor relations website at investors.ibata.com.
Speaker Change: Also, during the call today, we'll be referring to the slide deck posted on our website.
Speaker Change: Unless otherwise noted, revenue and adjusted EBITDA comparisons to prior periods are provided on a year-over-year basis.
Speaker Change: Lastly, references to non-GAAP revenue growth reflect the exclusion of one-time breakage revenue benefits in 2023.
Speaker Change: This is due to an update we made in 2023 to fix a software error to correctly charge maintenance fees to inactive direct-to-consumer redeemers, which resulted in a short-term benefit to GAAP revenue last year. Please see slide 26 in the appendix for more detail.
Speaker Change: With that, I'll turn it over to Bryan.
Speaker Change: Thanks Shalin and good afternoon everyone. Thank you for joining us to discuss our second quarter results.
Bryan Leach: We're happy to announce that we delivered revenue and adjusted EBITDA above the high end of the guidance range we provided on our first quarter earnings call.
Speaker Change: The IPN is resonating strongly with all three of our key constituencies.
Speaker Change: consumers, publishers, and CPG brand clients.
Speaker Change: The total number of redeemers on the IPN continues to grow at a rapid pace increasing 158 percent year-over-year and 10 percent sequentially from Q1
Speaker Change: We successfully rolled out the IPN to new publishers in the second quarter while announcing two new publisher wins with Schnucks and with Instacart, demonstrating our success in building the ibotta flywheel.
Speaker Change: Our redemption revenue grew 51% year-over-year on a non-gap basis, highlighting the value that our clients are seeing by leveraging the unique scale of the Ibotta platform.
Speaker Change: I'll dive into all three of these areas in more detail.
Speaker Change: First, regarding consumers.
Speaker Change: The IPN is reaching more Americans than ever before, setting a new record for redeemers at $13.7 million in Q2, which is higher than our seasonally strong Q4 last year.
Speaker Change: With persistent elevated prices and high levels of household debt, U.S. consumers are looking for value more than ever, and they are finding a greater quantity of IBOTA digital offers across a larger number of categories in more and more locations.
Speaker Change: We are still in the early phases of driving penetration and adoption across the large customer bases of our existing third-party publishers, and are working hand-in-hand with each publisher to increase discoverability of our offers for both online and in-store shopping experiences.
Speaker Change: We have a long list of initiatives in the pipeline and expect our partners to continue upgrading their savings programs between now and the end of the year.
Speaker Change: The implementation of these best practices will help consumers more easily discover, clip, and redeem offers on each of our publishers' digital properties, ultimately resulting in continued redeemer growth.
Speaker Change: Moving on to Publishers.
Speaker Change: We've seen an acceleration of inbound interest from potential partners over the last few months.
Speaker Change: I've never been more excited about our publisher pipeline, and I view it as confirmation of the market's strong desire for a new, more technologically advanced platform for delivering digital promotions.
Speaker Change: We're working hard to diversify our network by signing up new category-leading publishers across different verticals. In this way, we hope to accelerate the Ibotta flywheel, better serve our CPG brand clients, and capture the related network effects.
Speaker Change: On that note, we are pleased to announce that Instacart, a leading grocery technology company in North America, will soon be joining the IPN, giving Instacart's customers access to Ibotta's industry-leading catalog of offers and promotions.
Speaker Change: Instacart's marketplace of more than 1,500 retail banners with a footprint of more than 85,000 stores will give our CPG brand partners even greater opportunity to reach high intent audiences as they build their shopping baskets.
Speaker Change: We believe Instacart's decision to entrust Ibotta as its preferred third-party coupon provider reflects their commitment to delivering the greatest possible value to their consumers, as well as an alignment regarding the importance of technological innovation in shaping the future of the grocery industry.
Speaker Change: We expect our depth of offers combined with our targeting capabilities and Instacart's UX to result in strong redemption rates similar to or above what we've seen in the online-only businesses of our current publisher partners.
Speaker Change: To put in perspective the potential value of our deal with Instacart, according to eMarketer, Instacart's share of the grocery e-commerce market is two-thirds the size of Walmart, at 18% and 27% respectively.
Speaker Change: Our teams are working hard to get our digital offers live on the Instacart platform during the fourth quarter and we believe that once this is wrapped up, it will be a significant ongoing contributor to our growth.
Speaker Change: Specifically with regard to Walmart, we are pleased with the growth of our audience there. While we don't break out our Redeemers by publisher, we are tracking ahead of our expectations.
Speaker Change: We are in regular dialogue with our counterparts at Walmart, working together to drive greater awareness of our cash back offers and improve the online and in-store redemption experience for Redeemers.
Speaker Change: In terms of our other publishers, we anticipate a successful launch with Schnucks later this quarter, which will deliver a more personalized savings experience for their customers.
Speaker Change: The joint R&D initiatives that we envision with Schnucks are still in their nascent stages, but we remain excited about the potential to integrate our digital offers into their retail media and other in-store technologies.
Speaker Change: We are more than one quarter through our rollout at Family Dollar, which began in early April. The partnership is off to a strong start, and we are continuing to refine the UX and the marketing communication around the new and improved Smart Coupon program.
Speaker Change: We also began to roll out Ibotta offers to the retailers in the AppCard network at the start of April. Because individual grocers are coming online at their own pace, this is a more gradual ramp than that of a typical publisher partner. That being said, it is in line with our expectations, and we are pleased with the progress being made.
Speaker Change: We have seen a step up in daily redemptions as more retailers have gone live. We expect that we should be fully rolled out to all retailers that ingest digital coupons from AppCard by the end of the year.
Speaker Change: Finally, switching gears to talk about clients.
Speaker Change: Our team of sellers and account managers has been focused on growing our budgets with existing CPG clients while adding new brand partnerships and expanding into new verticals and product categories. As we look out onto the horizon, we see three important tailwinds for Ibotta's business.
Speaker Change: First, there is a growing desire within CPG companies to use digital promotions to recapture consumers who are price sensitive, many of whom have trended away from national brands and toward private label alternatives.
Speaker Change: Several of our CPG clients have recently commented publicly that they plan to increase promotional spending in the back half of the year to combat weaker volumes and respond to increasing price sensitivity among consumers.
Speaker Change: As an example, the CEO of General Mills made a comment in their last earnings call about their plan to increase coupon spend in 1H fiscal 2025 by 20%.
Speaker Change: citing Ibotta as an example and underscoring the value of using first-party data to target specific customers in a more sophisticated way. We believe that the size and scale of the IPN will make it one of the biggest beneficiaries of the greater promotional investments these companies intend to make.
Speaker Change: Second, many large CPG companies are pulling back on marketing investments that have a less definite return on investment.
Speaker Change: In this environment, we believe our business is especially well-positioned because we offer a pay-per-sale alternative that de-risks their marketing investments and delivers measurable incremental sales in a highly cost-effective manner.
Speaker Change: When every dollar invested either converts to a measurable sale or you don't pay, CPG brand managers and their media agencies can invest with greater confidence.
Speaker Change: Third, we continue to hear from CPG leaders that they want to see a much higher degree of rigor when it comes to measuring the return on investment of their marketing spend.
Speaker Change: Until now, marketers have relied heavily on assumption-driven models to determine how much credit to attribute to various forms of media they buy.
Speaker Change: This can be a difficult task.
Speaker Change: After all, how can you disentangle whether it was your TV commercial, billboard, radio ad, or paper coupon promotion that led to sales?
Speaker Change: How much did each tactic contribute? Should the attribution window be seven weeks or 70 weeks? These are thorny problems and different models often yield different results depending on their underlying assumptions.
Speaker Change: Further complicating matters, these modeling exercises can take up to 12 months.
Speaker Change: which prevents a brand manager from using them to optimize marketing mix in real time. Previously, promotions have been measured in a less rigorous way because these models assumed they were one-size-fits-all and little data existed on how consumers actually behaved after redeeming an offer.
Speaker Change: What if, instead, you could look at purchase trends over time, paying careful attention to whether redeemers continue buying the product, and if so, whether they pay full price.
Speaker Change: Ibotta's data allows for more definitive answers to these questions. It also allows brand marketers to receive these answers right away, unlocking a much more agile approach to budget allocation that can become an important strategic advantage for brands.
Speaker Change: What becomes clear is that Ibotta's promotions are both far more measurable and more effective than historical forms of promotion. In short, this is not your grandma's coupon, and that message is starting to sink in.
Speaker Change: It takes time to affect a sea change in how marketing spend is measured, but we're encouraged by the momentum we see in the market. The median CPG budget on Ibotta for advertisers spending more than $50,000 year-to-date has grown by more than 50% on a year-over-year basis.
Speaker Change: Increasingly, CPG brands not only view Ibotta as a way of quickly moving the needle on sales to close a quarter, but also as one of their more efficient marketing investments.
Speaker Change: When it comes time to determine their annual marketing budget, we anticipate that CPG brands will continue to increase their investments in the IPN, particularly as we socialize the scale of the new opportunities on Instacart, the growth of our existing publisher audiences, and the addition of new publishers.
Speaker Change: Within our existing CPG clients, some of our biggest year-over-year increases have occurred in the home care and personal care categories. In addition, some of our biggest category wins outside of grocery include general merchandise such as toys, pet, home, and lawn and garden care.
Speaker Change: We continue to make progress in these areas with General Merchandise Redemption Revenue as a percentage of total Redemption Revenue almost doubling as compared to the same quarter last year.
Speaker Change: To wrap up, we believe our initiatives with our existing retailers, our recently announced publisher wins, and our growing confidence in our network effects and ability to continue adding new third-party publishers sets us up very well for strong redemption revenue growth in 2025 and beyond.
Speaker Change: With that, let me hand the call over to Sunit to discuss our second quarter results as well as our third quarter guidance. Sunit?
Sunit Patel: Thank you, Bryan, and good afternoon, everyone. We delivered strong revenue, adjusted EBITDA, and free cash flow growth with revenue and adjusted EBITDA, three and twenty percent above the midpoint of the guidance range we provided on our first quarter earnings call, respectively.
Sunit Patel: We were particularly pleased with our free cash flow of $32.7 million in the quarter and nearly $50 million year-to-date, which for the first half of the year represents a free cash flow margin of 29%.
Speaker Change: We saw significant growth in third-party redeemers across the IPM on both a year-over-year and a quarter-over-quarter basis, highlighting the unique skill that we can bring to our clients.
Speaker Change: Revenue in the second quarter was $87.9 million, representing non-gap revenue growth of 29% year-over-year, exclusive of $9.4 million in one-time breakage revenue in the prior year period.
Speaker Change: We delivered Q2 adjusted EBITDA of $25.3 million, representing an adjusted EBITDA margin of 29%.
Speaker Change: Adjusting for the $9.4 million in one-time breakage revenue last year, this compares to a 20% margin in Q2 of 2023 and implies north of adjusted EBITDA growth of 80% year-over-year.
Speaker Change: In Q2, Redemption Revenue comprised 84% of our total revenue, with ADD and other products comprising the balance of 16%. This compares to 75% in Q2 of last year.
Speaker Change: 3PP Redemption Revenue comprised 47% of total revenue with D2C Redemption Revenue representing 37%.
Speaker Change: This compares to 17% and 55% for 3PP and D2C non-gap redemption revenue, respectively, a year ago in second quarter of 2023, and also illustrates the dramatic makeshift in our business.
Speaker Change: In Q2, our redemption revenue was $74 million, up 51% year-over-year on a non-gap basis.
Speaker Change: Our total redeemer and redemption growth continues to be strong and we continue to see an accelerated mix shift with relatively stronger performance than we thought in our third-party publisher business compared to the D2C business.
Speaker Change: Third-party publisher Redemption Revenue was $41.7 million, up 255% year-over-year.
Speaker Change: While D2C redemption revenue was $32.3 million, down 13% on a non-GAAP basis, excluding the one-time break benefit in Q2 of last year.
Speaker Change: Add in other avenues, now 16% of our revenue or $14 million, which is similar to the first quarter and down 27% year-over-year.
Speaker Change: We are seeing CPG brands reallocate their dollars towards fee-for-sale promotions on our network at the expense of non-performance-based banner ads on our mobile app, which is evident in the strength of our redemption revenue.
Speaker Change: As many other companies in the advertising ecosystem have highlighted, certain display ad and other non-performance ad spending by large CPG brands has been weaker.
Speaker Change: While we see opportunity to be more aggressive in executing our advertising go-to-market strategy, we have continued to see more client interest on the redemption side of our business.
Speaker Change: Turning to our key performance metrics.
Speaker Change: Total Redeemers were $13.7 million in the quarter, up 158% year-over-year driven by one, the rollout of Ibotta Power Manufacture offers on Walmart, to all U.S. Walmart customers with a Walmart.com account towards the end of the third quarter of 2023.
Speaker Change: to the subsequent growth of Walmart's audience.
Speaker Change: $3.00 General Launching in July 2023 and $4.00 Family Dollar Launching in April 2024.
Speaker Change: Redemptions for Redeemer were 5.9, down 39% year-over-year, driven by the growth in third-party Redeemers, which have a significantly lower redemption frequency as compared to our D2C Redeemers.
Speaker Change: Redemption revenue per redemption was 92 cents down 4% year-over-year on a non-gap basis, primarily reflecting the mixed shift toward third-party redemptions.
Speaker Change: This was partially mitigated by the growing contribution from higher MSRP general merchandise and like-for-like price increases.
Speaker Change: As a reminder, redemption revenue per redemption can vary quarter to quarter based on seasonal patterns but also due to variations in offer mix.
Speaker Change: Turning to third-party publishers.
Speaker Change: Redemption revenue was up 255 percent year-over-year. Redeemers were 11.9 million in the quarter, up 253 percent year-over-year.
Speaker Change: Redeemers rebounded strongly in Q2 after a normal and expected seasonal decline in the first quarter of 2024.
Speaker Change: Redemptions per Redeemer were down 6% as compared to the prior period to 4.4 and offset by Redemption Revenue per Redemption which was 80 cents or up 7% year-over-year.
Speaker Change: Turning to our D2C business, D2C redemption revenue was down 13% year over year, excluding last year's one-time breakage revenue benefit.
Speaker Change: We expect
Speaker Change: D2C redemption revenue to be down year-over-year in Q3 as well as we are lapping a high benchmark of 20 plus percent growth in the same period last year similar to the comparison in Q2.
Operator: Holds Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If you will require any operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: The year-over-year comparison for D2C redemption revenue should ease materially in Q4, as revenue growth in Q4 of 2023 slowed to 7%.
Shalin Patel: It is now my pleasure to introduce you to your host, Shalin Patel, head of investor relations. Thank you, Shalin. You may begin.
Speaker Change: D2C redeemers were 1.8 million, down 7% year-over-year, while redemptions per redeemer were 15.9, down 13% year-over-year, leading to a decline in total D2C redemptions.
Bryan Leach: Good afternoon, and welcome to Ibotta's Q2 2024 earnings conference call. With us today are Bryan Leach, founder and CEO and Sunit Patel, CFO. Today's press release in this call may contain forward looking statements, including our guidance for Q3 2024 that are subject to inherent risks, uncertainties, and changes, and reflect our current expectations and information currently available to us. And our actual results could differ materially. For more information, please refer to the risk factors in our recent SEC filings.
Speaker Change: Our D2C redemption revenue per redemption was $1.13, an increase of 8% year-over-year, excluding last year's one-time breakage revenue benefit.
Speaker Change: Although D2C redemption revenue is down year-over-year, we remain focused on overall redemption revenue growth, which is very robust.
Speaker Change: Given the outperformance of third-party redeemer growth, a greater portion of budgets are getting consumed on third-party properties, leaving relatively fewer redemption opportunities for D2C redeemers, as offers are distributed across the IPN democratically.
Bryan Leach: In addition, our discussion today will include references to certain supplemental non gap financial measures and should be considered in addition to and not as substitute for our gap results. Reconciliation to the most comparable gap measures are available in today's earnings press release, which is available on our investor relations website at investors.ibata.com. Also, during the call today, we'll 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.
Speaker Change: Ultimately, however, advertiser budgets follow audiences and thus we expect client budgets to grow in proportion to the growth in Redeemers network-wide as we've seen over the last couple of years.
Speaker Change: a combination
Speaker Change: of strong revenue growth and operating leverage resulted in adjusted EBITDA BOA guidance age.
Speaker Change: We generated 25.3 million of Adjusted EBITDA, which represents an Adjusted EBITDA margin of 29%. Q2 non-GAAP gross margin was 86%.
Bryan Leach: Lastly, references to non gap revenue growth reflect the exclusion of one-time breakage revenue benefits in 2023. This is due to an update we made in 2023 to fix a software error to correctly charge maintenance fees to inactive direct to consumer redeemers, which resulted in a short term benefit to gap revenue last year. Please see slide 26 in the appendix for more detail.
Speaker Change: Adjusting for the one-time breakage gross margin would have been up 40 basis points year-over-year.
Speaker Change: Non-GAAP operating expense as a percent of revenue was 58.9 percent. Adjusting for the one-time breakage revenue benefit in the prior year period, non-GAAP operating expenses as a percent of revenue would have declined by approximately 800 basis points.
Bryan Leach: With that, I'll turn it over to Bryan. Thank you for joining us to discuss our second quarter results. We're happy to announce that we delivered revenue and adjusted EBITDA above the high end of the guidance range we provided on our first quarter earnings call. The IPN is resonating strongly with all three of our key constituencies, consumers, publishers and CPG brand clients. The total number of redeemers on the IPN continues to grow at a rapid pace, increasing 158% year over year and 10% sequentially from Q1.
Speaker Change: Within that, our non-gap sales and marketing grew by 7% as we increased our brand marketing spend year-over-year offset by a decline in less efficient D2C marketing expense.
Speaker Change: Non-GAAP research and development expenses increased by 15% as we continue to prioritize investing in product and technology.
Speaker Change: Lastly, non-GAAP general and administrative expenses increased by 24%, reflecting $1.5 million in one-time IPO costs in the quarter, as well as recurring public company costs.
Bryan Leach: We successfully rolled out the IPN to new publishers in the second quarter, while announcing two new publisher wins with Schnooks and with Instacart demonstrating our success in building the iBata flywheel. Our redemption revenue grew 51% year over year on a non-gap basis, highlighting the value that our clients are seeing by leveraging the unique scale of the iBata platform.
Speaker Change: We delivered adjusted net income of $19.9 million and adjusted diluted net income per share of $0.68.
Speaker Change: Our adjusted net income excludes $44.8 million in stock-based compensation and $11 million loss on the convertible notes and derivative, which were extinguished at the time of the IPO and a negative $2 million adjustment for income taxes.
Bryan Leach: I'll dive into all three of these areas in more detail. First, regarding consumers, the IPN is reaching more Americans than ever before, setting a new record for redeemers at 13.7 million in Q2, which is higher than our seasonally strong Q4 last year. With persistent elevated prices and high levels of household debt, US consumers are looking for value more than ever, and they are finding a greater quantity of iBata digital offers across a larger number of categories in more and more locations.
Speaker Change: We generated $32.7 million of free cash flow in the quarter and have generated $49.6 million of free cash flow year-to-date.
Speaker Change: We ended the quarter with $317.9 million of cash and cash equivalents. We realized $198 million of net proceeds from the IPO.
Speaker Change: For Q3, we are estimating approximately weighted average fully diluted shares outstanding of 34 million.
Bryan Leach: We are still in the early phases of driving penetration and adoption across the large customer bases of our existing third party publishers and are working hand in hand with each publisher to increase discoverability of our offers for both online and in-store shopping experience. We have a long list of initiatives in the pipeline and expect our partners to continue upgrading their savings programs between now and the end of the year. The implementation of these best practices will help consumers more easily discover, clip, and redeem offers on each of our publisher's digital properties, ultimately resulting in continued redeemer growth.
Speaker Change: Turning to our Third Quarter Outlook.
Speaker Change: We currently expect revenue in the range of $91 to $96 million, representing 12% non-GAAP revenue growth at the midpoint. We expect third quarter adjusted EBITDA in the range of $28 to $32 million, representing a 32% adjusted EBITDA margin at the midpoint.
Speaker Change: I'd like to provide you a little more color on our Q3 outlook. Similar to last quarter, we are seeing strong redemption revenue growth offset by softer ad revenue performance.
Speaker Change: Within our redemption revenue, third-party publisher redemption revenue is continuing to outperform, driving a greater mix of third-party redemption revenue as a percent of total redemption revenues relative to our prior expectations.
Bryan Leach: Moving on to publishers, we've seen an acceleration of inbound interest from potential partners over the last few months. I've never been more excited about our publisher pipeline, and I view it as confirmation of the market's strong desire for a new, more technologically advanced platform for delivering digital promotions. We're working hard to diversify our network by signing up new category leading publishers across different verticals. In this way, we hope to accelerate the Ibotta flywheel, better serve our CPG brand clients, and capture the related network effects.
Speaker Change: We anticipate that this strong growth in third-party redemption revenue, driven by better than expected third-party redeemer growth, will drive healthy year-over-year revenue growth in our total redemption revenue.
Speaker Change: We anticipate third-party redeemers to continue to step up in Q3 as our partnerships with existing publishers ramp and get a seasonal bump from back to school.
Bryan Leach: On that note, we are pleased to announce that Instacart, a leading grocery technology company in North America, will soon be joining the IPN, giving Instacart's customers access to Ibotta's industry-leading catalog of offers and promotions. Instacart's marketplace of more than 1,500 retail banners with a footprint of more than 85,000 stores will give our CPG brand partners even greater opportunity to reach high-intent audiences as they build their shopping baskets. We believe Instacart's decision to entrust Ibotta as its third preferred third-party coupon provider reflects their commitment to delivering the greatest possible value to their consumers as well as an alignment regarding the importance of technological innovation in shaping the future of the grocery industry.
Speaker Change: Similar to other companies in the ad space, non-performance based ad revenue has been impacted by a softer macro environment.
Speaker Change: We expect ADD and other revenue for the quarter and the rest of the year to be in line with the second quarter.
Speaker Change: However, promotions should continue to see strong demand given their role as a performance-based alternative to traditional brand advertising and the tangible impact on our clients' volumes.
Speaker Change: As a result, the implied third quarter non-GAAP redemption revenue growth rate at the midpoint of our guidance range is in the mid-20s.
Speaker Change: We are not planning for significant improvement in our ad revenue for the balance of the year.
Speaker Change: As we lap easier advertising comps in 2025 and benefit from continued growth in our redemption revenue, we do expect our overall revenue growth rate to reach a trough in Q4 before re-accelerating in 2025.
Bryan Leach: We expect our depth of offers, combined with our targeting capabilities, and Instacart's UX to result in strong redemption rates, similar to or above what we have seen in the online only businesses of our current publisher partners. To put in perspective, the potential value of our deal with Instacart, according to EMarketer, Instacart's share of the grocery e-commerce market is two-thirds the size of Walmart, at 18% and 27% respectively. Our teams are working hard to get our digital offers live on the Instacart platform during the fourth quarter, and we believe that once this is wrapped up, it will be a significant ongoing contributor to our growth.
Speaker Change: On the expense side, we estimate stock-based compensation expense to be about $14 million per quarter in Q3 and Q4 of this year, with that number declining to about roughly $10 million a quarter next year.
Speaker Change: We anticipate a gap tax rate in the mid-30s for the balance of the year with an expectation of a more normal gap tax rate of mid-20s in 2025 and beyond.
Bryan Leach: Specifically with regard to Walmart, we are pleased with the growth of our audience there. While we don't break out our redeemers by publisher, we are tracking ahead of our expectations. We are in regular dialogue with our counterparts at Walmart, working together to drive greater awareness of our cashback offers and improve the online and in-store redemption experience for redeemers. In terms of our other publishers, we anticipate a successful launch with Schnucks later this quarter, which will deliver a more personalized savings experience for their customers.
Speaker Change: We expect our adjusted tax rate to be approximately 22 to 23 percent in the second half of 2024 and beyond.
Speaker Change: In conclusion, we generated strong revenue growth with healthy adjusted EBITDA margins above the high end of our guidance range for Q2. We continue to expect strong third-party publisher redeemer growth, both from our existing publishers and from new publishers that we are in the process of launching.
Speaker Change: Signing the Instacart deal gives us further confidence in our revenue growth 2025 and on.
Bryan Leach: The joint R&D initiatives that we envision with Schnucks are still in their nascent stages, but we remain excited about the potential to integrate our digital offers into their retail media and other in-store technologies. We are more than one quarter through our rollout at Family Dollar, which began in early April. The partnership is off to a strong start, and we are continuing to refine the UX and the marketing communication around the new and improved SmartCoupon program.
Speaker Change: Ultimately, we measure our performance through three main lenses.
Speaker Change: 1. Redemption Revenue Growth
Speaker Change: Two, redeemer growth. And three, the pace of new wins with additional third-party publishers. We are pleased with our progress along all three dimensions and believe it puts us on a path to deliver long-term shareholder value.
Speaker Change: With that, operator, let's open up the call for Q&A.
Bryan Leach: Ram. We also began to roll out Ibotta offers to the retailers in the AppCard Network at the start of April because individual grocers are coming online at their own pace. This is a more gradual ramp than that of a typical publisher partner. That being said, it is in line with our expectations and we are pleased with the progress being made. We have seen a step up in daily redemptions as more retailers have gone live. We expect that we should be fully rolled out to all retailers that ingest digital coupons from AppCard by the end of the year.
Speaker Change: Thank you. We will now be conducting a question and answer session. Please limit yourself to one question and one follow-up per caller. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Bryan Leach: Finally, switching gears to talk about clients. Our team of sellers and account managers has been focused on growing our budgets with existing CPG clients while adding new brand partnerships and expanding into new verticals and product categories.
Speaker Change: One moment, please, while we poll for questions.
Speaker Change: Thank you.
Speaker Change: Thank you. Our first question comes from the line of Bernie McTernan with Needham and Company. Please proceed with your question.
Bryan Leach: As we look out onto the horizon, we see three important tailwinds for Ibotta's business. First, there is a growing desire within CPG companies to use digital promotions to recapture consumers who are price sensitive. Many of whom have trended away from national brands and toward private label alternatives. Several of our CPG clients have recently commented publicly that they plan to increase promotional spending in the back half of the year to combat weaker volumes and respond to increasing price sensitivity among consumers.
Bernie Mcternan: Great. Thanks for taking the questions. Congrats on signing the Instacart deal. That's really exciting. That's where I wanted to focus my questions.
Bernie Mcternan: Maybe first, Bryan, if you could just provide any additional help in terms of, you know, sizing the potential benefit of the deal and any timing.
Speaker Change: And then as a follow-up, just any color that you can provide, if there was any equity associated with the deal or revenue sharing relative to other third-party publishers that you signed. Thank you.
Bryan Leach: As an example, the CEO of General Mills made a comment in their last earnings call about their plan to increase coupon spend in 1h fiscal 2025 by 20%. Sighting Ibotta as an example and underscoring the value of using first-party data to target specific customers in a more sophisticated way. We believe that the size and scale of the IPN will make it one of the biggest beneficiaries of the greater promotional investments these companies intend to make.
Speaker Change: Thanks, Bernie. Yeah, we're incredibly excited to be partnering with Instacart.
Speaker Change: believe it represents a really important
Speaker Change: Catalyst for Growth.
Speaker Change: in the future. You know, I cited some data from eMarketer that their e-commerce grocery business is roughly two-thirds the size of Walmart's.
Speaker Change: ecommerce grocery business. As you know the the majority of our redemptions on Walmart today are actually from the online transaction ecommerce flow and so we believe that there is a quite a large opportunity at Instacart that's
Bryan Leach: Second, many large CPG companies are pulling back on marketing investments that have a less definite return on investment. In this environment, we believe our business is especially well positioned because we offer a pay per sale alternative that de-risk their marketing investments and delivers measurable incremental sales in a highly cost effective manner. When every dollar invested either converts to a measurable sale or you don't pay, CPG brand managers and their media agencies can invest with greater confidence.
Speaker Change: That proportion provides a reasonable guide to the size of the opportunity.
Speaker Change: Part of that is because we believe that there's going to be a very strong user experience, real commitment to market the program, and just a lot of interest among the entire CPG brand community in making sure they have access to this fast-growing audience.
Speaker Change: In terms of timing, we're really looking at making sure we try and get this out before the end of the year. The timing is always a little bit tricky because it's a function of rolling it out, making sure it's moving well, that there's no bugs. We don't commit to fixed ship dates and then just ship no matter what, damn the torpedoes. We take a little bit more of a make sure it's really working approach, but certainly both sides are motivated to get this opportunity in front of their shoppers, and we think we can do that by the end of the year. Recall there's a ramp period to get it to where it's something that consumers are aware of using regularly, but we feel confident we can do that in the fourth quarter of this year. And as we look out to 2025, feel like that's going to be a significant change.
Bryan Leach: Third, we continue to hear from CPG leaders that they want to see a much higher degree of rigor when it comes to measuring the return on investment of their marketing spend. Until now marketers have relied heavily on assumption-driven models to determine how much credit to attribute to various forms of media they buy. This can be a difficult task. After all, how can you disentangle whether it was your TV commercial billboard, radio ad or paper coupon promotion that led to sales?
Bryan Leach: How much did each tactic contribute? Should the attribution window be 7 weeks or 70 weeks? These are thorny problems and different models often yield different results depending on their underlying assumptions. Further complicating matters, these modeling exercises can take up to 12 months which prevents a brand manager from using them to optimize marketing mix in real time.
Speaker Change: Bryan Leach, Sunit Patel
Bryan Leach: Previously, promotions have been measured in a less rigorous way because these models assumed they were one size fits all and little data existed on how consumers actually behaved after redeeming an offer. Ibotta's data allows for more definitive answers to these questions. It also allows brand marketers to receive these answers right away, unlocking a much more agile approach to budget allocation that can become an important strategic advantage for brands. What becomes clear is that Ibotta's promotions are both far more measurable and more effective than historical forms of promotion. In short, this is not your grandma's coupon and that message is starting to sink in.
Speaker Change: That's great. Thanks, Bryan.
Speaker Change: i
Speaker Change: Thank you. Our next question comes from the line of Ron Josie with Citi. Please proceed with your question.
Ron Josie: Great, thanks for taking the question. Bryan, I want to ask a little bit more about the D2C and the 3PP network.
Ron Josie: and the expectations here. I think you said 3PP Redeemers are tracking ahead of expectations at Wal-Mart. And I want to understand a little bit more about what might be driving the strength at the Wal-Mart partnership that clearly was a positive in the quarter. And similarly, the challenges it'd be to see. Sunit, you talked about several, but I want to understand that a little bit more as 3PP becomes a bigger part of the business.
Speaker Change: Thank you. Thanks, Ron.
Speaker Change: Let's start with Walmart and the strength of 3PP redeemers.
Bryan Leach: It takes time to affect the sea change in how marketing spend is measured, but we're encouraged by the momentum we see in the market. The median CPG budget on Ibotta for advertisers spending more than $50,000 a year to date has grown by more than 50% on a year over your basis. Increasingly, CPG brands not only view Ibotta as a way of quickly moving the needle on sales to close a quarter, but also as one of their more efficient marketing investments.
Speaker Change: I think overall you have
Speaker Change: The opportunity to save money in this climate is extremely compelling, especially at a place like Walmart, where the mission is save money, live better. We have strong offer content available to Walmart shoppers, and they're taking advantage of that, coming back, using it more frequently, telling their friends, growing organically.
Speaker Change: There are a number of initiatives that we are excited to look out to that we think will further catalyze growth.
Bryan Leach: When it comes time to determine their annual marketing budgets, we anticipate that CPG brands will continue to increase their investments in the IPN, particularly as we socialize the scale of the new opportunities on Instacart, the growth of our existing publisher audiences, and the addition of new publishers. Within our existing CPG clients, some of our biggest year-over-year increases have occurred in the home care and personal care categories. In addition, some of our biggest category wins outside of grocery include general merchandise such as toys, cat, home, and lawn and garden care. We continue to make progress in these areas with general merchandise redemption revenue as a percentage of total redemption revenue almost doubling as compared to the same quarter last year.
Speaker Change: And so the growth that we've seen and the strength that we've seen in 3PP is it's not as if it's on the back of all of our best ideas. In fact, it's mostly organic. And I think that's that's really promising.
Speaker Change: I will say in terms of the D2C business, I wouldn't say there's...
Bryan Leach: To wrap up, we believe our initiatives with our existing retailers are recently announced publisher wins and our growing confidence in our network effects and ability to continue adding new third-party publishers sets us up very well for strong redemption revenue growth in 2025 and beyond.
Speaker Change: a challenge to the D2C business per se, I would say that there's been so much strength in the 3PP growth of that Redeemer audience that there's been a lot more mouths to feed in terms of just the amount of opportunity to redeem and offer on D2C or the length of time that that offer might be available somewhat less than we might have anticipated because there's a lot of interest in redemptions occurring on third party.
Speaker Change: And that makeshift, as you know, strategically is one that we're excited about. You know, we believe the opportunity to scale this network is especially strong in the third-party environment. And as we see that grow, we're excited because there's very strong economics in that environment as well.
Sunit Patel: With that, let me hand the call over to Sunit to discuss our second quarter results as well as our third quarter guidance. Sunit? Thank you, Brian, and good afternoon, everyone. We delivered strong revenue, adjusted EBITDA and free cash flow growth with revenue and adjusted EBITDA, 3 and 20% above the midpoint of the guidance range we provided on our first quarter earnings call, respectively. We were particularly pleased with our free cash flow of $32.7 million in the quarter and nearly 50 million year-to-date, which for the first half of the year represents a free cash flow margin of 29%.
Speaker Change: We do think that as...
Speaker Change: Overall audience size grows, so to go advertiser investment levels. And so these are not completely continuous processes as we step up and are able to go back to our advertisers and say, look, we're really growing faster than anticipated here in terms of overall redemption revenue. We're doing really well, we're growing. And then third party, we're way ahead of expectations and that makes shift is kind of accelerated.
Speaker Change: We're confident that they will allocate the kind of budgets to take advantage of not only the third-party growth But also the the exciting audience that we have on D2C So again, we really focus on overall redemption revenue growth and we're very pleased with how that's playing out
Sunit Patel: We saw significant growth in third-party redeemers across the IPN on both a year-over-year and a quarter of a quarter basis highlighting the unique scale that we can bring to our clients. Revenue in the second quarter was 87.9 million, representing non-gap revenue growth of 29% year-over-year, exclusive of 9.4 million in one-time breakage revenue in the prior year period. We delivered Q2 adjusted EBITDA of 25.3 million, representing an adjusted EBITDA margin of 29%.
Speaker Change: Thank you, Bryan, and congrats again on it, Shikhar.
Bryan Leach: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question.
Eric Sheridan: Thanks for taking the question. Maybe two if I could. One, I don't think you mentioned it, so I just want to come back on the Instacart partnership. Is there anything we should be keeping in mind between now and the end of the year in terms of either integration costs or things that might put a more one-time pressure on EBITDA that obviously would fall away as you moved past the integration and they were fully on the IPN? That would be number one. And then number two, Bryan, you know when you think about the share taking position you're in with respect to CPG and in marketing budgets more broadly, what do you think longer term is pretty critical in terms of putting in place to continue to some of that momentum on the advertising side as you look out not towards the back part of this year but the budgeting cycle ahead of 2025?
Sunit Patel: Ajusting for the $9.4 million in one-time breakage revenue last year, this compares to a 20% margin in Q2 of 2023 and implies north of adjusted EBITDA growth of 80% year-over-year. In Q2, redemption revenue comprised 84% of our total revenue, with add and other products comprising the balance of 16%. This compares to 75% in Q2 of last year. 3PP redemption revenue comprised 47% of total revenue, with D2C redemption revenue representing 37%. This compares to 17% and 55% for 3PP and D2C non-gap redemption revenue respectively a year ago in second quarter of 2023.
Speaker Change: Thanks so much.
Speaker Change: Thank you, Eric. First question, Instacart. No, is the short answer. I don't foresee any one-time integration costs of note that were not anticipated. It's in the ordinary course of our business.
Speaker Change: I will say that we're getting better at launching these programs more quickly. We've done it now many, many times, and I think that that's going to...
Speaker Change: benefit the timeline as well as the cost profile. There's just a certain amount of reusable technology, APIs and so forth that are largely in place. And I would say much of the cost is on the publisher side to get up to speed. And even that is not very significant in the grand scheme of things.
Sunit Patel: And also illustrates the dramatic mix shift in our business. In Q2, our redemption revenue of 74 million up 51% year-over-year on a non-gap basis. Our total redeemer and redemption growth continues to be strong and we continue to see an accelerated mix shift with relatively stronger performance than we thought in our third party publisher business compared to the D2C business. Third party publisher redemption revenue was 41.7 million up 255% year-over-year, while D2C redemption revenue was 32.3 million down 13% on a non-gap basis, excluding the one-time breakage benefit in Q2 of last year.
Speaker Change: So that's exciting. And then on the second question about taking share, given this position we're in and kind of this counter cyclical element to our business, the performance element to our business,
Speaker Change: You know, I think that since the IPO, I've been on a sort of second road show, and I've been visiting with C-level executives at many of our top 20 CPG accounts. What I think is absolutely critical is to get across to them that these types of promotions are targeted, they're intelligent, they're not subsidizing just people who are going to buy your product anyway needlessly, and they can be designed in a way with a very measurable payback period.
Sunit Patel: Add and other revenues now 16% of our revenue were 14 million, which is similar to the first quarter and down 27% year-over-year. We are seeing CPG brands reallocate their dollars towards fee-for-cell promotions on our network at the expense of non-performance-based banner ads on our mobile app, which is evident in the strength of our redemption revenue. As many other companies in the advertising ecosystem have highlighted, certain display ads and other non-performance ads spending by large CPG brands has been weaker.
Speaker Change: And there's a way to do that with the data that we have that truly has never been introduced to the market. In terms of looking at kind of a test and a control and tracking behaviors into the future, that kind of scientific method is really exciting to an industry that frankly Eric has had to settle for a lot more blunt instruments in the form of some of these assumption-driven models. And so as that conventional wisdom around the limitations of the promotions of old falls away, what you get is both a really immediate lever to regain market share, but also a super efficient tactic that I think is getting a really serious look from much more senior people within these organizations. So it's continuing to demonstrate that that is.
Sunit Patel: While we see opportunity to be more aggressive in executing our advertising go-to-market strategy, we have continued to see more client interest on the redemption side of our business. Turning to our key performance metrics, total redeemer was 13.7 million in the quarter of 158% year-over-year driven by one, the roll-out of Ibotta Power Manufacture offers on Wal-Mart to all US Wal-Mart customers with a Wal-Mart.com account towards the end of the third quarter of 2023.
Speaker Change: a function of, not only the scale of our network, but also the intelligence of being able to put the right offer in front of the right consumer. I'll also just highlight, I think there's a lot of opportunity for us in the tools that we make available to clients.
Speaker Change: You know, that is something that really focuses on real-time optimization. I mean, we're in a moment of transition from someone calls us...
Sunit Patel: Two, the subsequent growth of Wal-Mart's audience, $3 general launching in July 2023, and $4 family launching in April 2024. Redemptions for redeemer were 5.9, down 39% year-over-year driven by the growth in third-party redeemers, which have a significantly lower redemption frequency as compared to RDC redeemers. Redemption revenue per redemption was 92 cents, down 4% year-year on a non-gab basis, primarily reflecting the mix shift toward third-party redemption. This was partially mitigated by the growing contribution from higher MSRP general merchandise and like for life price increase.
Speaker Change: We help them configure an offer. There are a certain set of parameters or rules that are sort of manually put in place and then it runs.
Speaker Change: to a world where it is dynamic, where AI can determine a lot of the parameters, where you're solving for a key metric, much the way that digital advertisers have done for years in environments like Facebook, Google, TikTok, etc. So that agility that it enables, that gives something that's really exciting. And it's going to take some time to get out there and socialize just what a major opportunity that is, because you can now really be opportunistic and let dollars flow to the most efficient channel intra-quarter. So those are some things I'm focused on.
Speaker Change: We really appreciate it. Thank you.
Sunit Patel: The Reminder, Redemption Revenue for Redemption, can vary quarter to quarter based on seasonal patterns but also due to variations in offer mix. Turning to third party publishers, Redemption Revenue was up 255% year-over-year. Redeemers were 11.9 million in the quarter up 253% year-over-year. Redeemers rebounded strongly in Q2 after a normal and expected seasonal decline in the first quarter of 2024. Redemptions per Redeemer were down 6% as compared to the prior period to 4.4 and offset by Redemption Revenue for Redemption which was 80 cents or up 7% year-over-year.
Speaker Change: Thank you. Our next question comes from the line of Curtis Nagel with Bank of America. Please proceed with your question.
Speaker Change: [inaudible]
Speaker Change: Curtis, you seem to still be muted.
Curtis Nagel: Apologies, I was. Good afternoon. So yeah, I guess just going back to the 3Q guidance, I think I understand the movement pieces here.
Bryan Leach: Right, so just kind of looking at 2Q, right, some weakness, obviously, from advertising flowing through. 3P, redemption revenue doing particularly well. I guess it's sort of simply, you know, Bryan, you mentioned that, you know, some of your CPG
Sunit Patel: Turning to our D2C business, D2C Redemption Revenue was down 13% year-over-year, excluding last year's one-time breakage revenue benefit. We expect D2C Redemption Revenue to be down year-over-year in Q3 as well as we are lapping a high benchmark of 20% growth in the same period last year similar to the comparison in Q2. The year-over-year comparison or D2C Redemption Revenue should ease materially in Q4 as revenue growth in Q4 of 2023 slowed to 7%.
Speaker Change: Clients and kind of the industry in general, right, are pointing to more, you know, pricing investments, right, need to get volume up. To what degree is that baked into, you know, the guidance for 3Q, if at all?
Speaker Change: Yeah, I mean if you look at our guidance as I said, I mean based on our conversations with our clients
Speaker Change: We think that the ads business is kind of the way it will be, the way it was the second quarter and the third quarter.
Speaker Change: But what we are seeing, we talked about the macro, but we are seeing just in the month of August, we've seen strong interest from clients in increasing the budgets, which is benefiting both our third party publisher business and our D2C business. So it's a little beyond just a seasonal pickup. So I think that
Sunit Patel: D2C Redemers were 1.8 million down 7% year-over-year while Redemption's per Redeemer were 15.9 down 13% year-over-year leading to a decline in total D2C Redemption. Our D2C Redemption Revenue Per Redemption was $1.13 and increase of 8% year-over-year excluding last year's one-time breakage revenue benefit. Although D2C Redemption Revenue is down year-over-year, we remain focused on overall Redemption Revenue growth which is very robust. Given the art performance of third-party Redeemer growth, a greater portion of budgets are getting consumed on third-party properties, leaving relatively fewer redemption opportunities for D2C Redemers as offers that distributed across the IPN democratically.
Speaker Change: you know, there are specific clients that talk to us just about getting volumes up without naming them in the chickens category, for example, we just want to hit certain volumes. So, we are seeing the impact of some of the
Speaker Change: macro trends that you heard the CPG clients talking about on earnings call. They are trying to drive more volumes and I think we're going to benefit from that and we are seeing recent strength there.
Speaker Change: Okay, sorry go ahead Brad. Sorry, go ahead. You go ahead, Kurt.
Speaker Change: yeah so just I guess what one just again for soon it's just on the I want to make sure I get the
Sunit Patel: Ultimately, however, advertiser budgets follow audiences and thus we expect client budgets to grow in proportion to the growth in Redeemer's network-wide as we've seen over the last couple of years. A combination of strong revenue growth and operating leverage resulted in adjusted EBITDA boa guidance each. We generated 25.3 million of adjusted EBITDA which represents an adjusted EBITDA margin of 29%. Q2 non-gap growth margin was 86%. Adjusting for the one-time breakage revenue benefit in Q2 of 2023, non-gap growth margin would have been up 40 basis points year-over-year.
Brad: structure the revenues correctly did you say we still think total redemptions are going to be kind of up 20% year-over-year I didn't quite catch that if you would yeah I think what we're saying is if you assume that the ad revenues in the third quarter
Speaker Change: are flat compared to the second quarter, which is about 14 million. And what that implies for the midpoint of our revenue guidance.
Speaker Change: you know, meaning deriving from that the redemption, overall redemption revenue growth, it means we'll be at like a mid-20s revenue growth and overall redemption revenues in the third quarter.
Speaker Change: Okay, appreciate it
Sunit Patel: Non-gap operating expense as a percent of revenue was 58.9%. Adjusting for the one-time breakage revenue benefit in the prior period, non-gap operating expense as a percent of revenue would have declined by approximately 800 basis points. Within that, a non-gap sales marketing grew by 7% as we increased our brand marketing spend year-over-year offset by decline in less efficient D2C markets. NGAP Research and Development Expenses increased by 15% as we continue to prioritize investing in product and technology.
Curt: Thanks, Curt.
Speaker Change: Thank you. Our next question comes from the line of Chris Kunakri with UBS. Please proceed with your question.
Chris Kunakri: Thanks for taking the question.
Chris Kunakri: I just want to go back to the Instagram or Instacart partnership. You called out in the press release they have about 6,000 CPG brands versus your 2.4 thousand.
Speaker Change: Could you just maybe help us think about how a marquee partnership such as this one either helps you engage with either new brands or reignite that conversation with existing brands that may not have been over the line? How should we be thinking about the incrementality from the brand side of things with this Instacart partnership? Thanks.
Sunit Patel: Lastly, NGAP General and Administrative Expenses increased by 24% reflecting 1.5 million in one time IPO costs in the quarter as well as recurring public company costs. We delivered adjusted net income of 19.9 million and adjusted deuted net income per share of 68 cents. Our adjusted net income excludes 44.8 million in stock based compensation and 11 million loss on the convertible notes and derivative which were extinguished at the time of the IPO and a negative 2 million adjustment for income taxes.
Speaker Change: Yes, first of all you have now joined me in conflating the word Instacart and Instagram virtually every other sentence in my life so as far as
Speaker Change: That specific question, you're absolutely right. I mean, think about all the places where you can use Instacart.
Speaker Change: It's not just in the grocery store, it's also at Costco, it's also at Lowe's, it's also at Best Buy. So it really does support our effort to reach out beyond the core grocery brands and expand into new verticals in general merchandise.
Sunit Patel: We generated 32.7 million of free cash flow in the quarter and have generated 49.6 million of free cash flow year to date. We ended the quarter with 317.9 million of cash and cash equivalents. We realized 198 million of net proceeds from the IPO. For Q3, we are estimating approximately weighted average fully diluted shares outstanding of 34 million. Turning to our third quarter outlook, we currently expect revenue in the range of 91 to 96 million, representing 12% non-GAP revenue growth at the midpoint.
Speaker Change: It is a way of diversifying our network.
Speaker Change: Very, very important to our CPG brands because when you can say there's this much volume coming from, you know, non-Walmart sources, that is really important in terms of making sure you're accessing the largest possible national budgets.
Speaker Change: We don't want to be pigeonholed in the sense that there's only, you know, people saying, oh, well, this is principally a Walmart vehicle, et cetera. So I think that it is important in that sense.
Speaker Change: I think it's also a different audience, you know, it is a it is an incremental audience that is different in kind from what you might find at Dollar General or at Family Dollar, for example, and so getting in front of this, this younger technologically savvy audience.
Sunit Patel: We expect third quarter adjusted EBITDA in the range of 28 to 32 million, representing a 32% adjusted EBITDA margin at the midpoint. I'd like to provide you a little more color on our Q3 outlook. Similar to last quarter, we are seeing strong redemption revenue growth offset by softer ad revenue performance. Within our redemption revenue, third party publisher redemption revenue is continuing to our perform driving a greater mix of third party redemption revenue as a percent of total redemption revenues relative to our prior expectations.
Speaker Change: is super important to brand managers that are thinking about this in terms of lifetime value.
Speaker Change: I'd also point out that it gives you access to kind of the e-commerce budgets within these companies.
Speaker Change: So there are general brand manager promotional budgets and in many cases they have a special focus in dollars allocated to e-commerce.
Speaker Change: And while we have a very large e-commerce presence today in our network, a pure play e-commerce grocery of this kind is really important to those people. And frankly, they cannot afford to sit outside of this kind of flow and shape purchase behaviors at this moment in the inflection of online groceries.
Sunit Patel: We anticipate that this strong growth in third party redemption revenue driven by better than expected third party redeemer growth will drive healthy year over year revenue growth in our total redemption revenue. We anticipate third party redeemers to continue to step up in Q3 as our partnerships with existing publishers ramp and get a seasonal bump from back to school. Similar to other companies in the ad space, non performance based ad revenue has been impacted by a softer macro environment.
Speaker Change: I also want to stress the validation of this. I mean, Instacart is a very savvy organization that could have chosen any number of different partners and the fact that they have chosen to partner with Ibotta and to let us help them take this promotions business and make it something much more exciting for their customers to help offset the cost of delivery and so forth is a really big signal to CPG brands. I think they say, all right, these people know what they're doing when it comes to the future of technology and grocery, you've probably seen some of the things they're doing in store that are really exciting and cutting edge.
Sunit Patel: We expect ad and other revenue for the quarter and the rest of the year to be in line with the second quarter. However, promotions should continue to see strong demand given their role as a performance based alternative to traditional brand advertising and the tangible impact on our clients volumes. As a result, the implied third quarter non gap redemption revenue growth rate at the midpoint of our guidance range is in the mid twenties.
Speaker Change: And we're really honored that they've placed that trust in us, and I think it's not lost on others who are trying to say, look, I don't want to place scattered bets all across the universe here. I want a single interface through which to execute a truly national promotional strategy. And this is a network effect business. So for us to carry that momentum I think will help us in this vertical more broadly, and it will then, I think, accelerate the addition of new publishers, all of which brands are going to see and want to get out in front of with their allocation of budgets, especially as we head into 2025 and we get those budget allocations refreshed. Everyone's on a different fiscal, but as those refresh, that's going to be a very important factor.
Sunit Patel: We are not planning for significant improvement in our ad revenue for the balance of the year. As we lap easier advertising comps in 2025 and benefit from continued growth in our redemption revenue, we do expect our overall revenue growth rate to reach a drop in Q4 before re accelerating in 2025. On the expense side, we estimate stock-based compensation expense to be about 14 million per quarter in Q3 and Q4 of this year, with that number declining to about roughly 10 million a quarter next year.
Speaker Change: Got it. Very helpful. Maybe just one quick follow-up on Walmart. Anything to call out as it relates to the 3P Redeemers and 2Q as it relates to in-store Walmart activity? Any movement on initiatives there worth calling out? Thanks.
Sunit Patel: We anticipate a gap tax rate in the mid-30s for the balance of the year with an expectation of a more normal gap tax rate of mid-20s in 2025 and beyond. We expect our adjusted tax rate to be approximately 22 to 23% in the second half of 2024 and beyond. In conclusion, we generated strong revenue growth with healthy adjusted EBITDA margins above the high end of our guidance range for Q2. We continue to expect strong third-party publisher Redeemer growth, both from our existing publishers and from new publishers that we are in the process of launching.
Speaker Change: Definitely movement on initiatives.
Speaker Change: you know because out of respect for our partners we don't want to disclose the initiatives that they have.
Speaker Change: coming up. I would say that there haven't been really material initiatives in the second quarter, per se, at Walmart. I mean, we're really happy with the organic growth of the Walmart Cash program. I think the macro has been a tailwind. We're ahead of where we expected to be on that. It's something that's very popular with the Walmart shopper, and we've seen that in a lot of different ways. We have been testing a few new capabilities with Walmart and other publisher partners in the second quarter that, if rolled out more broadly, we believe could be significant, could be material. And we believe that between now and the end of the year, there are two or three initiatives that we're looking forward to seeing the impact that those may have. As you know, and I've said this all along, we tend to sort of take a way...
Sunit Patel: Signing the Instacart deal gives us further confidence in our revenue growth in 2025 and beyond. Ultimately, we measure our performance through three main lenses, one, Redemption Revenue Growth, two, Redeemer Growth, and three, the pace of new wins with additional third-party publishers.
Sunit Patel: We are pleased with our progress along all three dimensions and believe it puts us on a path to deliver long-term shareholder value.
Speaker Change: Bryan Leach, Sunit Patel
Operator: With that operator, let's open up the call for Q&A. Thank you.
Operator: We will now be conducting a question and answer session. Please limit yourself to one question and one follow-up per caller. If you would like to ask a question, please press star one on your telephone keypad. A confirmation to indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please while we pull for questions.
Operator: Thank you.
Speaker Change: And sometimes, frankly, you know, they tell us a couple or, you know, two, three, four weeks in advance, but not quarters in advance, exactly when things are going to be going live. And so as we get that information and we start to see that and feel like it's a stable, predictable inflection point, we'll certainly relay that.
Speaker Change: Got it. Very helpful. Thanks, Bryan.
Russ: Thank you, Russ.
Speaker Change: Go to Beadaholique.com for all of your beading supplies needs!
Speaker Change: Thank you. Our next question comes from the line of Andrew Marok with Raymond James. Please proceed with your question.
Bernard McTernan: Our first question comes to the line of Bernie McTernan with Needham and Company. Please proceed with your question. Great. Thanks for taking the question. Congrats on signing the Instacart deal. That's really exciting.
Andrew Marok: Hi, thanks for taking my question. Maybe a bit of a follow-on to a prior question, but now that Instacart is on board, I guess, is there any change to the thinking about prioritization for the different types of IP and partners?
Bryan Leach: That's why I wanted to focus my question. Maybe first, Brian, if you could just provide any additional help in terms of sizing the potential benefit of the deal and any timing, and then as a follow-up, just any color that you can provide, if there was any equity associated with the deal or revenue sharing relative to other third-party publishers that you signed. Thank you. Thanks, Bernie. We're incredibly excited to be partnering with Instacart.
Andrew Marok: Is it the case where you still will take national and regional grocery chains as the relationships develop or does the Instacart Agreement maybe give you a bit of a toehold and some momentum among those types of companies? Thank you.
Speaker Change: Thank you, Andrew.
Speaker Change: Yeah, look, I mean, what I can tell you is that the biggest surprise for me coming out of the IPO has been the effect that it has had on inbound interest in joining our network.
Bryan Leach: Believe it represents a really important catalyst for growth in the future. I cited some data from E-Marketer that their E-commerce grocery business is roughly two-thirds the size of Wal-Mart's E-commerce grocery business. As you know, the majority of our redemptions on Wal-Mart today are actually from the online transaction E-commerce flow, and so we believe that there is quite a large opportunity at Instacart that that proportion provides a reasonable guide to the size of the opportunity.
Speaker Change: I'm really pleased to see that happen across a variety of verticals.
Speaker Change: So, as we think about some of the things that, you know, we're pursuing, yes.
Speaker Change: of course, the core mass grocery.
Speaker Change: space is a real, you know, area of strength. But now that we have this, you know, grocery technology delivery service publisher and we can show the power of that, I think that that is a validation and and creates and certainly creates interest among other e-commerce.
Speaker Change: companies. We've had a number of conversations in the specialty retail area and even in non-retailer publishers continuing to see opportunity there. I think we are able to walk and chew gum at the same time, you know, so I believe we're able to pursue multiple different opportunity strands with different publishers.
Bryan Leach: Part of that is because we believe that there's going to be a very strong user experience, real commitment to market the program, and just a lot of interest among the entire CPG brand community and making sure they have access to this fast-going audience. In terms of timing, we're really looking at making sure we try and get this out before the end of the year. The timing is always a little bit tricky because it's a function of rolling it out, making sure it's moving well that there's no bugs.
Speaker Change: This one is especially exciting in material just because of the sheer scale and because of the fit and overlap between their product catalog and our current offer catalog and because of their sophistication as a technologically savvy company that's got a lot of interesting things both in-store and online coming down the pike. But look, the more we are seen to be on the front edge of demonstrating what is possible with a sort of showcase publisher.
Bryan Leach: We don't commit to fixed ship dates and then just ship no matter what, damn the torpedoes. We take a little bit more of a make sure it's really working approach, but certainly both sides are motivated to get this opportunity in front of their shoppers, and we think we can do that by the end of the year. Recall there's a ramp period to get it to where it's something that consumers are aware of using regularly, but we think we feel confident we can do that in the fourth quarter of this year, and as we look out to 2025, feel like that's going to be a significant driver of redemption revenue growth.
Speaker Change: right, where they do things in the user experience, in the lifecycle communications, in the way they tie into the in-store technologies of the future. I think the more people pay attention to that and say, I want to be associated with that best-in-class both technology and it also just begets more offer content. Recall that, you know, my library analogy, the more you bring in, you know, kind of publishers and increase the size of the student base, it actually, in my analogy of a library, it actually attracts.
Bryan Leach: And then in terms of your question about the commercials, we don't get into the particulars of the commercial arrangement, except I can say that there's no equity component to this deal of the kind that you might have seen with the warrant arrangements with Walmart. Hopefully that's helped. Thank you.
Speaker Change: more interest in.
Speaker Change: and being a part of that library, right, and being part of our offer catalog.
Ronald Josey: Our next question comes from the line of Ron Josey with City. Please proceed with your question. Great, thanks for taking the question. Brian, I want to ask a little bit more about the D2C and the 3PP network and the expectations here. I think you said 3PP redeemers are tracking ahead of expectations at Walmart and I want them to understand a little bit more about what might be driving the strength at the Walmart partnership.
Speaker Change: The presence of Instacart and its growth and so forth, I think, will benefit not only the existing publishers that we have and bring more offers to them, it'll benefit D2C, and it'll also, I think, speed up our success rate in converting both the inbound and some of the longstanding outbound ongoing conversations. But only time will tell, Andrew, but I'm optimistic.
Ronald Josey: Clearly was a positive in the quarter. And similarly, the challenges at D2C and Sunit, you talked about several, but I just want to understand that a little bit more as 3PP becomes a bigger part of business. Thank you. Thanks Ron.
Andrew Marok: All right, really helpful call, thank you.
Andrew Marok: Thank you.
Andrew Marok: Our next question comes from Andrew Boone with JMP Securities. Please proceed with your question.
Bryan Leach: Let's start with Walmart and the strength of 3PP redeemers. I think overall you have the opportunity to save money in this climate is extremely compelling, especially at a place like Walmart where the mission is saved money live better. We have strong offer content available to Walmart shoppers and they're taking advantage of that coming back using it more frequently telling their friends growing organically. There are a number of initiatives that we are excited to look out to that we think will further catalyze growth at Walmart.
Andrew Boone: Thanks so much for taking my questions. I wanted to ask about expanding budgets.
Speaker Change: They were really healthy, right? 50k budgets grew, I think, 50% this quarter, but it sounds like some 3p redemption, just demand, pushed out demand on
Speaker Change: on B2C. And so the question is, can you help us understand how you can unlock more budgets to better match supply and demand across the network? Is that a thought or am I misinterpreting that? And then secondly, general merchandise almost doubled year over year.
Bryan Leach: And so the growth that we've seen and the strength that we've seen in 3PP is not as if it's on the back of all of our best ideas. In fact, it's mostly organic. And I think that's really promising.
Speaker Change: Can you just help us understand the drivers of that growth just given the potential size of that category? Thanks so much
Speaker Change: Thank you, Andrew. Great questions. Let's take them in turn. First, expand budgets within the CPG universe.
Bryan Leach: I will say in terms of the D2C business, I wouldn't say there's a challenge to the D2C business per se. I would say that there's been so much strength in the 3PP growth of that redeemer audience that there's been a lot more mouth to feed in terms of just the amount of opportunity to redeem an offer on D2C or the length of time that that offer might be available somewhat less than we might have anticipated because there's a lot of interest in redemptions occurring on third party.
Speaker Change: You know, the thing we've seen over the last 12 years consistently is that advertisers want to capitalize on large and growing audiences. And so as the overall Redeemer audience on our network grows,
Speaker Change: So, too, is the interest in getting out in front of the audience very high. I think particularly so because of the macro. Sometimes, you know, we have a company that is not yet in a kind of agile posture. I described earlier that some of our measurement techniques will enable a world where
Bryan Leach: And that makes shift, as you know, strategically is one that we're excited about. We believe the opportunity to scale this network is especially strong in the third party environment. And as we see that grow, we're excited because there's very strong economics in that environment as well. We do think that as, you know, overall audience size grows so to go advertiser investment levels. And so these are not completely continuous processes as we step up and are able to go back to our advertisers and say, look, we're really growing faster than anticipated here in terms of overall redemption revenue.
Speaker Change: You can actually monitor the efficiency of your campaign live and decide, wow, that is one of the most efficient channels that I have. Look at how well it's paying back, how high that return is, and you can then allocate kind of
Speaker Change #100: Dollars intra period but we're dealing with an industry that for decades has had sort of a fixed annual planning process
Speaker Change #100: and then they may have some dollars that have some discretion with their media agencies. And so what we've been doing is getting out in front of them and saying, look, you know, we're ahead of pace here on growing this network. Look, this is a very efficient tactic if you actually look at this test and control and so forth. And that is starting to, I think, cause them to take a look at this as a much more strategic pillar within their marketing program, not just a layer or a tactic that rides along, a seasonal marketing campaign. And then there are competitive dynamics. As you see a competitor, Sunit mentioned chicken. We've seen over the summer a very large spike in investment by one major chicken producer lead to offers from another chicken producer.
Bryan Leach: We're doing really well. We're growing. And then third party, we're way ahead of expectations and that makes shift is kind of accelerated. We're confident that they will allocate the kind of budgets to take advantage of not only the third party growth, but also the exciting audience that we have on D2C. So again, we really focus on overall redemption revenue growth, and we're very pleased with how that's playing out. Thank you, Brian.
Bryan Leach: Congrats again on Instagram.
Operator: Thank you.
Eric Sheridan: Our next question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question. Thanks for taking the question. Maybe two if I could. One, I don't think you mentioned it. So I just want to come back on the Instacart partnership.
Speaker Change #100: consistently are vying to capture that consumer.
Speaker Change #100: demonstrating that this is our projection of what we can what your capacity is on our network. You know we may be guilty of underestimating that capacity but we always want to have a view on what that capacity is and then of course the efficiency the the actual return on investment efficiency and I think we're really getting turning heads in terms of being seen as thought leaders on how you can look at that differently and I think it's going to take a little bit of time just to socialize some of these methodologies in our go-to-market but as we've updated that go-to-market I'm more excited about it than I than I have been in years so I think that's how we're going to be successful in expanding the budgets.
Eric Sheridan: Is there anything we should be keeping in mind between now and the end of the year in terms of either integration costs or things that might put a more one time pressure on EBITDA that obviously would fall away as you moved past the integration and they were fully on the IPN? That would be number one.
Bryan Leach: And then number two, Brian, when you think about the share-taking position you're in with respect to CPG, add in marketing budgets more broadly, what do you think longer term is pretty critical in terms of putting in place to continue to some of that momentum on the advertising side as you look out, not towards the back part of this year, but the budgeting cycle ahead of 2025. Thanks so much. Thank you, Eric.
Speaker Change #100: and you know these things step up and and they are it's not a completely continuous thing but we've always seen them step up so our focus has always been on driving growth in Redeemers across the network and and in turn getting those those redemptions where they need to be. Your second question on a general merchandise doubling and the drivers of that it's been an area of focus of our sales team we're going out and telling the story of performance marketing to industries that have never had it before I think it is important to be able to socialize that we now can support a more diverse array of publishers where those products are sold as I mentioned earlier using the examples of how Instacart is available at places like Best Buy and and Lowe's and Costco
Bryan Leach: First question into the cart. No, is the short answer. I don't foresee any one-time integration costs of note that we're not anticipated. It's in the ordinary course of our business. I will say that we're getting better at launching these programs more quickly. We've done it now many, many times and I think that that's going to benefit, you know, the timeline as well as the cost profile. There's largely in place and I would say much of the cost is on the publisher's side to get up to speed and even that is not very significant in the grand scheme of things. So that's exciting.
Bryan Leach: And then on the second question about taking share given this position we're in and kind of this countercyclical element to our business, the performance element to our business, you know, I think that since the IPO, I've been on a sort of second road show and I've been visiting with C-level executives at many of our top 20 CPG accounts and what I think is absolutely critical is to get across to them that these types of promotions are targeted. They're intelligent.
Speaker Change #101: I think that's important. I mean, this is still a single-digit portion of our revenue. So it's really a huge upside, to your point. This is a big opportunity. And we are really not finding that, you know, the challenge here is not we don't have the best offering. The challenge is that this is an industry that
Speaker Change #101: unlike grocery has not understood the power of this model in the past and you know has not for instance been a you know high users of things like paper coupons in the past so but I'm really proud of the progress we're making and I think it's a significant driver of growth in the future
Bryan Leach: They're not subsidizing just people who are going to buy your product anyway needlessly and they can be designed in a way with a very measurable payback period. And there's a way to do that with the data that we have that truly has never been introduced to the market in terms of looking at kind of a test and a tracking behaviors into the future. That kind of scientific method is really exciting to an industry that frankly Eric has had to settle for a lot more blunt instruments in the form of some of these assumption driven models.
Speaker Change #101: Just one other thing on the previous question, I mean, Tian's question on budgets.
Tian: You know, we've literally more than doubled the business over the last couple of years and still seeing significant growth, so sometimes you might see slight lags, but...
Tian: As I was saying...
Speaker Change #103: We are seeing interest pick up a lot with our clients just here in this month.
Bryan Leach: And so as that conventional wisdom around the limitations of the promotions of old falls away, what you get is both a really immediate lever to regain market share, but also a super efficient tactic that I think is getting a really serious look from much more senior people within these organizations. So it's continuing to demonstrate that that is a function of, you know, not only the scale of our network, but also the intelligence of being able to put the right offer in front of the right consumer.
Speaker Change #103: So, you know, over time we've not had that issue as audiences have grown.
Speaker Change #103: We've generally been able to grow our budgets with our clients without much of a problem.
Speaker Change #104: Yeah, I mean, when you're growing, you know, third party redemption revenue 254%.
Speaker Change #104: year-over-year, you're having to accommodate, you know, substantial increases in investment and...
Speaker Change #105: One of the reasons why we built the network was that what we kept hearing was look We love the fee-per-sale model. We just need more scale. You need to give us more scale. We would like to replace
Bryan Leach: I also just highlight, I think there's a lot of opportunity for us in the tools that we make available to clients. That is something that really focuses on real-time optimization. I mean, we're in a moment of transition from someone calls us, we help them configure and offer. There are certain set of parameters or rules that are sort of manually put in place and then it runs to a world where it is dynamic, where AI can determine a lot of the parameters where you're solving for a key metric.
Speaker Change #105: tactics that do not have this level of efficiency and predictability you know I don't have to bear the risk of whether this particular piece of ad creative converts
Speaker Change #106: Even if I can measure that, let's say you can measure that with certainty, which is always proven difficult, you still have to bear the risk of whether a given ad is going to work.
Speaker Change #106: With our system, you don't. If the ad doesn't work, there is no redemption, there is no fee. And so I think that marrying that notion with the scale has sort of been the missing ingredient.
Bryan Leach: Much the way that digital advertisers have done for years in environments like Facebook, Google, TikTok, etc. So that agility that it enables and gets something that's really exciting and it's going to take some time to get out there and socialize just what a major opportunity that is because you can now really be opportunistic and let dollars flow to the most efficient channel in for a quarter.
Speaker Change #107: And I think with these high-profile publisher editions, it's going to become clear that this is a You know, you're going to get asked the question. What is your ibota strategy no matter what brand you work out in the u.s
Speaker Change #107: Thank you.
Bryan Leach: So those are some things I'm focused on. Really appreciate it. Thank you.
Speaker Change #107: Thank you. Our next question comes from the line of Mark Mahaney with Evercore ISI. Please proceed with your question.
Curtis Nagle: Our next question comes from the line of Curtis Nagel with Bank of America. Please proceed with your question. Curtis, you seem to still be muted. David. Apologies. I was. Good afternoon. So, yeah, I guess just going back to this week you got. And so, I think I understand the movement pieces here. Right, so just kind of looking at two cubes, right, some weakness, obviously, from advertising flowing through 3P redemption revenue to do it particularly well.
Mark Mahaney: Okay, thanks. Two questions, please. With Instacart, you now have a...
Speaker Change #109: Wal-Mart and Kroger and
Mark Mahaney: Maybe some others. A good chunk of maybe the top 10 grocery chains. Just give us a status update on how many of those you actually have of the top ones and any expectations you want to set on your ability to bring in some of the other largest grocery publishers.
Speaker Change #110: And then secondly, I know you're not disclosing specifics on where you are with Walmart, but could you give us a sense, at least qualitatively, of how much adoption or penetration you have amongst Walmart Plus or Walmart.com customers so we get a sense of what the ramp looks like going forward? Thank you very much.
Curtis Nagle: I guess it's sort of simply, you know, Brian, you mentioned that, you know, some of your CPG clients and kind of the industry in general are pointing to more pricing investments, right, need to get volume up. So, to what degrees that is that baked into, you know, the guidance to through Q, is it all? Yeah, I mean, if you look at our guidance, as I said, I mean, based on our conversations with our clients, we think that the ads business is kind of way, it will be a way, it wasn't second quarter in the third quarter.
Speaker Change #111: Sure, Mark. Thank you. Let's tackle your first question on sort of big ones, the top 10.
Speaker Change #112: in core grocery. Keep in mind our network, you know, we think in terms of retailers as one kind of publisher and then within that you have, you know, the core grocery mass club and then have things like pharmacy, convenience, specialty retail. So it's a broad category, but if you mean sort of sort to send top 10 in terms of all sale, all commodity sales volume, yes. I mean, we are speaking to all 10 of those companies about the opportunity on Ibotta. You mentioned that some of those are already live on the platform. Some of them aren't. A good example of one that's not is Target. That's an example where we believe we have something that could be very valuable to their guests.
Curtis Nagle: But what we are seeing, we talked about the macro, but we are seeing just in the month of August, we've seen strong interest from clients in increasing the budgets, which is benefiting both our third party publisher business and our D2C business. So, it's a little beyond just the seasonal pickups. I think that, you know, there are specific clients that talk to us just about getting volumes up without naming them in the chicken's category, for example, we just want to hit certain volumes.
Speaker Change #113: that there is no reason for them not to have access to our national content, particularly as there's fierce.
Curtis Nagle: So, we are seeing the impact of some of the macro trends that you heard the CPG clients talking about on earnings call. They are trying to drive more volumes, and I think we're going to go ahead. You're going ahead, Kurt. Yeah. So, just, I guess, one, just, again, for soon, it's just on the, I want to make sure I get the structure of revenues correctly. Did you say we still think total revisions are going to be kind of up 20% year-rear?
Speaker Change #113: competition on price you know being able to have access to the resources in our network at no cost feels like a very compelling value proposition to these other top ten publishers and so some of those the reasons why we don't have them yet are very kind of mundane reasons having to do with
Speaker Change #114: you know, their strategic planning cycle or the prioritization of their roadmap or, you know, waiting to outlast a contract that will come open and allow us an opportunity. But I think there are, you know, we're focused very much on having kind of category leaders in each category, you know. So we have Walmart as a category leader in mass, for example. We have Dollar General and Family Dollar in the Dollar Channel, which is very powerful. We have Instacart now. And we're certainly looking out at Amazon. We're looking at Target. We are looking at, you know, the Walgreens of the world, the PetSmarts of the world and specialty retail. So there's no structural reason why we couldn't supply them with this really exciting product.
Curtis Nagle: I didn't quite catch that if you would. Yeah, I think what we're saying is if you assume that the ad revenues in the third quarter are flat compared to the second quarter, which is about 14 million, then what that implies for the midpoint of our revenue guidance, meaning deriving from that the overall redemption revenue growth, it means that we'll be at like a mid-20s revenue growth on overall redemption revenues in the third quarter. Oh, okay. Appreciate it. Thanks, Kurt. Thank you.
Speaker Change #114: The second question you asked is about kind of qualitatively the adoption rate and room to run at Wal-Mart. Enormous, enormous room for growth at Wal-Mart, very early innings.
Curtis Nagle: Our next question comes from the line of Chris Kunak-Free with UBS. Please proceed with your question. Thanks for taking the question. I just want to go back to the Instagram or Instagram partnership. You called out in the press release. They have about 6,000 CPG brands versus your 2.4,000. Could you just maybe help us think about how a marquee partnership, such as this one, either helps you engage with either new brands or reignite that conversation with existing brands that may not have been over the line and just kind of how should we be thinking about the incrementality from from the brand side of things with the sense to create an Instacorp partnership thing.
Speaker Change #114: still in just, I think, a small percentage of the total addressable audience at Walmart. And the reason for that is that
Speaker Change #114: up to this point.
Speaker Change #114: Most of the activity we see there is from online grocery behavior.
Speaker Change #114: really exciting and bodes very well for Instacart. But you think about the other kind of 85% of Walmart shoppers who we still have a long way to go in making sure they're aware of this program, making sure that it's easier for them to
Speaker Change #115: navigate their way to a product that has a manufacturer offer, making sure that they can redeem more easily. Right now, you scan a QR code within the Walmart app in order to get your Walmart cash. Are there ways we could make that dramatically easier to use? And there's a lot of ideas there coming from our decade of experience and coming from Walmart on ways to increase awareness of these opportunities. So, yeah, we're not even.
Curtis Nagle: Yes, first of all, you have now joined me in conflating the word Instacart Instagram, actually every other sentence in my life. So as far as that specific question, you're absolutely right. I mean, think about all the places where you can use Instacart. It's not just in the grocery store, it's also at Costco, it's also at lows, it's also at Best Buy. So it really does support our effort to reach out beyond the core grocery brands and expand it to new verticals in general merchandise.
Speaker Change #115: close to kind of, you know, saturation at Walmart. I think we'll have a lot of opportunity there for for quite a while to come.
Curtis Nagle: It is a way of diversifying our network. That is very, very important to our CPG brands, because when you can say there's this much volume coming from non-wallmart sources, that is really important in terms of making sure you're accessing the largest possible national budgets. We don't want to be pigeonholed in the sense that there's only people saying, oh, this is principally a wallmart vehicle, etc. So I think that it is important in that sense.
Speaker Change #115: Yeah, next question. Thank you, Bryan. Yeah, thank you, Mark. No, thank you.
Speaker Change #116: Thank you. Our next question comes from the line of Ken Groski with Wells Fargo. Please proceed with your question.
Speaker Change #117: Thank you. Appreciate it.
Speaker Change #118: I'm going to explore the issue of kind of supply...
Speaker Change #119: versus demand constraints in the marketplace because it
Ken Groski: It feels like to me that you've made great progress, you're making great progress on the supply side, meaning like, I'm sorry, you're making great progress on the demand side with adding more redeemers or potential redeemers, etc. But how should, how should we think about
Curtis Nagle: I think it's also a different audience. It is an incremental audience that is different in kind from what you might find a dollar general or at family dollar, for example. And so getting in front of this younger, technologically savvy audience is super important to brand managers that are thinking about this in terms of lifetime value. I'd also point out that it gives you access to kind of the e-commerce budgets within these companies.
Ken Groski: you know, the ability to kind of
Ken Groski: meet that demand with the supply necessary to capitalize both on you know the existing partner
Speaker Change #121: the existing partner demand, but also as you bring Instacart online. I mean, just help us understand and frame this, you know, from a demand versus supply. I know historically you've talked about being more demand constrained, but it feels like.
Curtis Nagle: So there are general brand manager promotional budgets. And in many cases, they have a special focus and dollars allocated to e-commerce. And while we have a very large e-commerce presence today in our network, a pure play e-commerce grocery of this kind is really important to those people. And frankly, they cannot afford to sit outside of this kind of flow and shape purchase behaviors at this moment in the inflection of online grocery.
Speaker Change #121: where the business is today is a little different than that. Could you expand on that point, please, Bryan?
Bryan Leach: Yeah, Ken, thank you. I appreciate the question. Yeah, look, I mean...
Speaker Change #122: You know, the big picture is that we've grown
Speaker Change #123: The average spend, or the median I should say, the median CPG budget on Ibotta for advertisers who spent more than $50,000 is growing by 50% year over year, and in many cases obviously way more than that.
Curtis Nagle: I also want to stress the validation of this. I mean, Instacart is a very savvy organization that could have chosen any number of different partners. And the fact that they have chosen to partner with IBATA and to let us help them take this promotions business and make it something much more exciting for their customers to help offset the cost of delivery and so forth is a really big signal to CPG brands.
Speaker Change #124: There is a kind of outer limit to how much you can go to a brand and say, trust me, you know, volume is going to go up 3x. I need you to allocate 3, 4, 5, 10x what you allocated last year. And they tend to say in the industry, okay, that sounds really exciting. I can't park that much money on your assurance. Let's see you go ahead and get this audience. Let's see me run through a budget in 7 days and miss out on a huge opportunity to further gain market share. Let me see data that shows that my market share is moving by 2 percentage points while my competitor is live and I'm not live. And then I will go get you the budgets that you need to continue to make sure I don't lose market position.
Curtis Nagle: I think they say, all right, these people know what they're doing when it comes to the future of technology and grocery. You've probably seen some of the things they're doing in store that are really exciting and cutting edge. And we're really honored that they've placed that trust in us. And I think it's not lost on others who are trying to say, look, I don't want to place scattered bets all across the universe here.
Curtis Nagle: I want a single interface through which to execute a truly national promotional strategy. And this is a network effect business. So for us to carry that momentum, I think will help us in this vertical more broadly. And it will then I think accelerate the addition of new publishers, all of which brands are going to see and want to go out in front of with their allocation of budgets, especially as we head into 2025.
Speaker Change #124: As long as you are demonstrating to them that this is an efficient, cost-effective solution, they're going to come back with that. But it is just a little bit of the psychology of an industry with an annual planning cycle that getting them to spend maybe 100% or 200% more is something we very often succeed at. The median being 50% I think is pretty good.
Curtis Nagle: And we get those budget allocations refreshed. Everyone's on a different fiscal, but as those refresh, this is going to be a very important factor. Got it. Very helpful. Maybe just one quick follow-up on Walmart. Anything that call out as it relates to the 3P redeemers in 2Q as it relates to in-store Walmart activity, any movement on initiatives there worth calling out. Thanks. Definitely movement on initiatives, you know, because of out of respect for our partners we don't want to disclose the initiatives that they have coming up.
Speaker Change #124: But one of the challenges that we've had is that a lot of the growth
Speaker Change #124: has taken place in kind of existing publishers.
Speaker Change #124: And they're looking for the diversification, the catalyst of growth being things like Instacart. They're looking for to the new tools that we have that they're excited about that allow for a different level of targetability, which in turn means that their cost per incremental unit sold is going to look more attractive because you're putting a less.
Speaker Change #124: expensive offer in front of somebody who maybe is familiar with your brand, you're putting a richer offer in front of somebody who's not, who you're switching.
Curtis Nagle: I would say that there haven't been really material initiatives in the second quarter per say at Walmart. I mean, we're really happy with the organic growth of the Walmart cash program. I think the macro has been a tailwind. We're ahead of where we expected to be on that. It's something that's very popular with the Walmart shopper. And we've seen that in a lot of different ways. We have been testing a few new capabilities with Walmart and other publisher partners in the second quarter that if rolled out more broadly, we believe could be significant could be material.
Speaker Change #124: That is key to the economic calculus of how efficient all of this is. So, improvement in the tools.
Speaker Change #125: I think it's important that still the growth in redeemers and the proof point that, look, we continue to show up with a ton more redeemers than we had last time. That is what's going to continue to unlock that. And look, over the course of our entire 12-year history, we have essentially never been supply constrained.
Speaker Change #126: There have been periods of time where there's been slight lags, as Sunit says, but it is about growing. Because performance-based is seen as very desirable to put your marginal dollar there, we just have to prove the scale exists sometimes. And so I think that's been what you're picking up on. But I'm quite confident that the Instacart agreement and partnership
Curtis Nagle: And we believe that between now and the end of the year, there are two or three initiatives that we're looking forward to seeing the impact that those may have. As you know, and I said this all along, you know, we tend to sort of take a wait and see approach a kind of we announce marriages and not engagements here. And I bought an approach and so, you know, we have seen some of those capabilities really show up in the data in the past and some not so we'll be paying close attention to when those are rolled out more fully.
Speaker Change #126: and the opportunity to get in front of this audience on the e-commerce side, the presence of separate e-commerce budgets in terms of supply, all of that will help us quite a bit in the coming quarters.
Curtis Nagle: And sometimes frankly, you know, they tell us a couple or, you know, two, three, four weeks in advance, but not quarters in advance exactly when things are going to be going live. And so as we get that information and we start to see that and feel like it's stable, predictable inflections point will certainly relay that. Got it. Very helpful. Thanks, Frank. Thank you, Chris. Thank you.
Speaker Change #127: Can I ask a just a quick follow-up? Of course. Because as we think about the...
Speaker Change #128: Because the benefit of the DSP model is that it's
Speaker Change #129: all digital, right? And so unlike a Walmart, which has got a great, you know, it's a huge audience.
Speaker Change #130: The vast majority, as you've talked about, is offline, in-store, and it's tougher to get there, to get penetration there. But this, you know, Instacart brings...
Christopher Kuntarich: Our next question comes in the line of Andrew Marock with Raymond James. Please proceed with your question. I think we're taking my question. Maybe a bit of a follow on to a prior question, but now that Instacart is on board, I guess, is there any change to the thinking about prioritization for the different types of IP and partners? Is it the case where, you know, you still will take national and regional grocery chains as the relationships develop or does the Instacart agreement maybe give you a bit of a toe hold and some momentum among those types of companies? Thank you. Thank you, Andrew.
Speaker Change #130: a fully online, full digital logged in user, right? So there should be very strong demand immediately.
Speaker Change #131: Should we expect a lag, a bit of a lag, in terms of meeting that demand from the supply given what you just talked about? Maybe this is going to take a couple, I don't know, you tell me the time frame, to get to kind of fully utilize that demand.
Speaker Change #132: Yeah, look, I mean, the truth is we're going to find that out. We haven't brought a publisher into the network exactly like Instacart, and this is why we're careful with prognostication and looking too far out. It could be that when we speak next, I'm telling you, we've been able to talk to every e-commerce team, and we are swimming in content. There's no prospect of a delay. It could be that there is a slight stagger while we wait to get more than what is available on an interim basis at certain brands. I do think you're right. I mean, this whole paradigm is shifting from kind of a fixed annual client budget.
Bryan Leach: Yeah, look, I mean, what I can tell you is that the biggest surprise for me coming out of the IPO has been the effect that is had on in that interest and join our network. I'm really pleased to see that happen across a variety of verticals. So as we think about some of the things that we're pursuing, yes, of course, the core mass grocery space is a real, you know, area of strength.
Bryan Leach: But now that we have this, you know, grocery technology delivery service publisher and we can show the power of that. I think that that is a validation and creates and certainly creates interest among other e-commerce companies. We've had a number of conversations in the specialty retail area and even a non retailer publishers continuing to see opportunity there. I think we are able to walk and chew gum at the same time. You know, so I believe we're able to pursue multiple different opportunity strands with different publishers.
Speaker Change #132: to a more real-time, agile, you know, bidding process on these people that are incredibly valuable. And so, I think that that is going to really turn in the long run on Redeemer count.
Speaker Change #132: So, the more redeemers we have, the more there is available in that kind of agile model, and you're going to see a generation of marketers, not only within the brands, but within the media agencies say, oh, I know what to do with this kind of tool, right? I know how to flow dollars to this.
Speaker Change #132: because it's one of our best payback periods. I like the LTV of this cohort, et cetera, et cetera. Language you and I are very accustomed to using in the context of digital businesses like, you know, the original iBOTA D2C business is just now being made possible because of the ability
Bryan Leach: This one is especially exciting and material just because of the sheer scale and because of the fit and overlap between their offer catalog and our current, I mean, sorry, their product catalog and our current offer catalog. And because of their sophistication as a technologically savvy company that's got a lot of interesting things both in store and online coming down the pike. But look, the more we are seen to be on the front edge of demonstrating what is possible with a sort of showcase publisher where they do things in the user experience in the lifecycle communications in the way they tie into the in store technologies of the future.
Speaker Change #132: to look at purchases in the physical world over time. And it's really that data that we provide that unlocks that real-time optimization that's going to be, I think, quite a significant paradigm shift. How long that paradigm shift is going to take
Speaker Change #132: I would be unable to say with confidence, but I'm already seeing, you know, really strong, positive indications that the market has been, you know, long overdue, views this as a level of thought, leadership, and rigor that they've been waiting for.
Bryan Leach: I think the more people pay attention to that and say I want to be associated with that best in class, both technology and it also just big gets more offer content. Recall that, you know, my library analogy, the more you bring in, you know, kind of publishers and increase the size of the student base, it actually in my analogy of a library, it actually attracts, you know, more interest in and being a part of that library right and be part of our offer catalog.
Speaker Change #132: So, thank you for those questions, Ken, and to everyone, thank you for dialing in and joining us on this call. And thank you for your investment and interest in our company, and we look forward to speaking with you soon.
Speaker Change #133: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change #134: Alright, good job tech people. Alright, good job tech people.
Bryan Leach: And so the presence of Instacart and its growth and so forth, I think will benefit not only the existing publishers that we have and bring more offers to them, it'll benefit D to C. And it'll also I think speed up our success rate and in converting both the inbound and some of the long standing outbound ongoing conversations. But we'll only, you know, only time will tell Andrew, but I'm optimistic. Thank you.
Speaker Change #135: . . . . . . . . .
Bryan Leach: Our next question comes from the line of Andrew Boone with JMP Securities. Please proceed with your question. Thanks so much for taking my questions. I wanted to ask about expanding budgets. They were really healthy, right? 50K budgets, or I think 50% is quarter, but it sounds like some 3P redemption, just demand, pushed out demand on B2C. And so the question is, can you help us understand how you can unlock more budgets to better match supply to me and across the network?
Bryan Leach: Is that a thought, or I'm not necessarily interpreting that? And then secondly, general merchandise almost doubled your view. Can you just help us understand the drivers of that growth just given the potential size of that category? Thanks so much. Thank you, Andrew. Great questions. Let's take them in turn.
Andrew Marok: First, expand budgets within the CPG universe. The thing we've seen over the last 12 years consistently is that advertisers want to capitalize on large and growing audiences. And so as the overall redeemer audience on our network grows, so too is the interest in getting out front of that audience very high, I think particularly so because of the macro. Sometimes, you know, we have a company that is not yet in a kind of agile posture.
Andrew Marok: I described earlier that some of our measurement techniques will enable a world where you can actually monitor the efficiency of your campaign live and decide, wow, that is one of the most efficient channels that I have. Look at how well it's paying back, how high that return is, and you can then allocate kind of dollars intra period, but we're dealing with an industry that for decades has had sort of a fixed annual planning process.
Andrew Marok: And then they may have some dollars that have some discretion with their media agencies. And so what we've been doing is getting out in front of them and saying, look, you know, we're ahead of pace here on growing this network. Look, this is a very efficient tactic if you actually look at this test and control and so forth. And that is starting to, I think, cause them to take a look at this as a much more strategic pillar within their marketing program, not just a layer or a tactic that rides along, you know, a seasonal marketing campaign.
Speaker Change #135: [music]
Andrew Marok: And then there are competitive dynamics, you know, as you see a competitor soon, it mentioned chicken, you know, we've seen over the summer of very large spike in investment by one major chicken producer lead to, you know, offers from another chicken producer and we've seen us consistently as poor are vying to capture that consumer. So I think the key to doing that is of course demonstrating that this is our projection of what we can, what your capacity is on our network.
Speaker Change #135: Subscribe!
Speaker Change #135: Thank you for watching!
Andrew Marok: You know, we may be guilty of underestimating that capacity, but we always want to have a view on what that capacity is. And then of course the efficiency, the actual return on investment efficiency and I think we're really getting turning heads in terms of being seen as thought leaders on how you can look at that differently. And I think it's going to take a little bit of time just to socialize some of these methodologies in our go to market, but as we've updated that go to market, I'm more excited about it than I have been in years. So I think that's how we're going to be successful in expanding the budgets. And you know, these things step up and they are, it's not a completely continuous thing, but we've always seen them step up.
Bryan Leach: So our focus has always been on driving growth in redeemers across the network and in turn getting those, those redemptions where they need to be your second question on general merchandise doubling in the drivers of that. It's been an area of focus of our sales team going out and telling the story of performance marketing to industries that have never had it before. I think it is important to be able to socialize that we now can support a more diverse array of publishers where those products are sold.
Speaker Change #135: Ibotta, Ibotta, Ibotta, Ibotta, Ibotta, Ibotta, Ibotta, Ibotta, Ibotta, Ibotta,
Bryan Leach: As I mentioned earlier, using the examples of how Instacart is available at places like Best Buy and and lows and Costco, I think that's important. I mean, this is still a single digits, you know, portion of our revenue. So it's really huge upside to your point. There's big opportunity and we are really not finding that, you know, the challenge here is not we don't have the best offering the challenges that this is an industry that unlike grocery has not understood the power of this model in the past.
Bryan Leach: And, you know, has not, for instance, been, you know, high users of things like paper coupons in the past. So, but I'm really proud of the progress we're making and I think it's a significant driver of growth in the future.
Speaker Change #135: Go to Beadaholique.com for all of your beading supplies needs!
Bryan Leach: Hey, just one other thing on the previous question. I mean, the answer is question on budgets. You know, we've literally moved in double the business all the last couple of years and still seeing significant growth. So sometimes you might see slight legs, but as I was saying, we are seeing interest pick up a lot with our clients just here in this month. So, you know, over time we've not had that issue as audiences have grown.
Bryan Leach: We've generally been able to grow our budgets for that clients without much problem. Yeah, I mean, when you're growing, you know, third party redemption revenue, 254% year over year, you're having to accommodate, you know, substantial increases in investment. And one of the reasons why we built the network was that what we kept hearing was, look, we love the fee per sale model. We just need more scale. You need to give us more scale.
Bryan Leach: We would like to replace tactics that do not have this level of efficiency and predictability. You know, I don't have to bear the risk of whether this particular piece of ad creative converts. Even if I can measure that, let's say you can measure that with certainty, which is always proven difficult, you still have to bear the risk of whether a given ad is going to work with our system. You don't. If the ad doesn't work, there is no redemption, there is no fee.
Bryan Leach: And so I think that marrying that notion with the scale has sort of been the missing ingredient. And I think with these high profile publisher additions, it's going to become clear that this is a, you know, you're going to get asked the question, what is your Ibotta strategy, no matter what brand you work at in the US. Thank you.
Mark Mahaney: Our next question comes from the line of Mark Mahani with Evercore ISI. Please proceed with your question. Okay, thanks two questions please. With Instacart, you now have and Walmart and Kroger and maybe some others a good chunk of maybe the top 10 grocery chains. Just give us a status update on how many of those you actually have of the top ones and any expectations you want to set on your ability to bring in some of the other largest grocery publishers.
Mark Mahaney: And then secondly, I know you're not disclosing specifics on where you are with Walmart, but could you give us a senseless qualitatively of how much adoption or penetration you have amongst Walmart plus or Walmart.com customers. So we get a sense of what the ramp looks like going forward. Thank you very much. Sure, Mark. Thank you.
Bryan Leach: Let's tackle your first question on sort of big ones, the top 10 in core grocery. Keep in mind our network, we think in terms of retailers as one kind of publisher and then within that you have the core grocery, mass club and then have things like pharmacy, convenience, specialty details. So it's a broad category. But if you mean sort of sort to send top 10 in terms of all sales, all commodity sales volume, yes, I mean we are speaking to all 10 of those companies about the opportunity on I bought it.
Bryan Leach: You mentioned that some of those are already live on the platform. Some of them aren't. A good example of one that's not as target. That's an example where we believe we have something that could be very valuable to their guests that there is no reason for them not to have access to our national content, particularly as there's fierce competition on price. Being able to have access to the resources in our network at no cost feels like a very compelling value proposition to these other top 10 publishers.
Bryan Leach: And so some of those, the reasons why we don't have them yet are very kind of mundane reasons having to do with their strategic planning cycle or the prioritization of their roadmap or waiting to outlast a contract that will come open and allow us an opportunity. But I think we're focused very much on having kind of category leaders in each category. So we have Walmart as a category leader in mass, for example.
Bryan Leach: We have Dollar General and Family Dollar in the Dollar Channel which is very powerful. We have Instacart now. And we're certainly looking out at Amazon. We're looking at Target. We're looking at, you know, the raw greens of the world, the pet smarts of the world and specialty retail. So there's no structural reason why we couldn't supply them with this really exciting capability. And that's the job of our business development team led by Amir L. Tobib.
Bryan Leach: The second question you asked is about kind of qualitatively the adoption rate and room to run at Walmart, enormous room for growth at Walmart, very early innings still in just, you know, I think a, you know, small, small percentage of the total addressable audience at Walmart. And the reason for that is that up to this point, most of the activity we see there is from online grocery behavior. And that is really exciting and both very well for Instacart.
Bryan Leach: But you think about the other kind of 85% of Walmart shoppers who we still have a long way to go and making sure they're aware of this program, making sure that it's easier for them to navigate their way to a product that has a manufacturer offer, making sure that they can redeem more easily. Right now you scan a QR code within the Walmart app in order to get your Walmart cash. Are there ways we could make that, you know, dramatically easier to use?
Bryan Leach: And there's a lot of ideas there coming from, you know, our decade of experience and coming from Walmart on ways to increase awareness of these opportunities. And so, yeah, we're not even close to kind of, you know, saturation at Walmart, I think we'll have a lot of opportunity there for quite a while to come. Thank you, Mark. No, thank you.
Ken Brosky: Thank you. Our next question comes from the line of Ken Brosky with Wells Fargo. Please proceed with your question. Thank you. Appreciate it.
Bryan Leach: I want to explore the issue of kind of supply versus demand constraints in the marketplace because it feels like you made great progress. You're making great progress on the supply side, meaning like I'm sorry, you're making great progress on the demand side with adding more redeemers or potential redeemers, et cetera. But how should we think about the ability to kind of meet that demand with the supply necessary to capitalize both on the existing partner, the existing partner demand, but also as you bring into the cart online. Just help us understand and frame this from a demand versus supply. I know historically you've talked about being more demand constrained, but it feels like where the business is today is a little different than that.
Bryan Leach: Could you expand on that point, please, Brian? Yeah, Ken, thank you. I appreciate the question. Yeah, look, I mean, the big picture is that we've grown the average spend or the median, I should say, the median CPG budget on Ibotta for advertisers who spend more than $50,000 is grown by 50% year over year. And in many cases, obviously way more than that, there is a kind of outer limit to how much you can go to a brand and say, trust me, volume is going to go up three X. I need you to allocate three, four, five, 10 X, what you allocated last year.
Bryan Leach: And they tend to say in the industry, okay, that sounds really exciting. I can't park that much money on your assurance. Let's see you go ahead and get this audience. Let's see me run through a budget in seven days and miss out on a huge opportunity to further gain market share. Let me see data that shows that my market share is moving by two percentage points while my competitors live and I'm not live.
Bryan Leach: And then I will go get you the budgets that you need to continue to make sure I don't lose market position. As long as you're demonstrating to them that this is an efficient cost effective solution, they're going to come back with that, right? And so, but it's just a little bit of the psychology of an industry with an annual planning cycle that, you know, getting them to spend maybe a hundred or two hundred percent more is something we very often succeed at.
Bryan Leach: The median being 50% I think is pretty good. But one of the challenges that we've had is that a lot of the growth has taken place in kind of existing publishers and they're looking for the diversification, the catalyst of growth being things like Instacart. They're looking for to the new tools that we have that they're excited about that allow for a different level of target ability, which in turn means that their cost per incremental unit sold is going to look more attractive because you're putting a less expensive offer in front of somebody who may be as familiar with your brand.
Bryan Leach: You're putting a richer offer in front of somebody who's not who you're switching. That is key to the economic calculus of how efficient all of this is. So, improvement in the tools I think is important. The growth the still the growth in redeemers and the proof point that look we continue to show up with a ton more redeemers than we had last time. That is that is what's going to, you know, continue to unlock that look over the course of our entire 12-year history.
Bryan Leach: We have essentially never been supply constrained. There have been periods of time where there's been slight lags as soon as it says, but it is about growing because performance-based is seen as very desirable to put your marginal dollar there. We just have to prove the scale exists sometimes and so I think that's been what you're picking up on.
Bryan Leach: But I'm quite confident that the Instacart agreement agreement and partnership and the opportunity to get in front of this audience on the e-commerce side, the presence of separate e-commerce budgets in terms of supply, all of that will help us quite a bit in the coming quarter.
Bryan Leach: Can I ask a quick follow-up? As we think about the, because the benefit of the DSP model is that it's all digital, right? And so unlike a Walmart, which has got a great, you know, as a huge audience, the vast majority, as you've talked about, is offline in-store and it's tougher to get there, to get penetration there. But this, you know, Instacarp brings a fully online, full digital logged in user. Right?
Bryan Leach: So there should be very strong demand immediately. I guess, should we expect a lag, a bit of a lag in terms of meeting that demand from the supply given what you just talked about. Maybe this is going to take a couple. I don't know, you tell me the timeframe to get to kind of fully utilize that demand. Yeah, look, I mean, the truth is we're going to find that out. We haven't brought a publisher into the network exactly like Instacarp.
Bryan Leach: And this is why we're careful with prognostication and looking too far out. It could be that when we speak next, I am, I'm telling you, you know, we've been able to talk to every e-commerce team and we are swimming in content. There's no prospect of a delay. It could be that there is a slight stagger while we wait to get more than what is available on an interim basis. At certain brand, I do think you're right.
Bryan Leach: I mean, we are this whole paradigm is shifting from kind of a fixed annual client budget to a more real time agile, you know, bidding process on these people that are incredibly valuable. And so I think that that is going to really turn in the long run on Redeemer count. So the more redeemers we have, the more there is available in that kind of agile model. And you're going to see a generation of marketers, but not only within the brands, but within the media agencies say, oh, I know what to do with this kind of tool, right.
Bryan Leach: I know how to flow dollars to this because it's one of our best payback periods. I like the LTV of this cohort, et cetera, et cetera. Language you and I are very accustomed to using in the context of digital businesses like, you know, the original I bought a D to C business is just now being made possible because of the ability to look at purchases in the physical world over time. And that's really that data that we provide that unlocks that real time optimization that's going to be, I think, quite a significant paradigm shift.
Bryan Leach: How long that paradigm shift is going to take? I would be I would be unable to say with confidence, but I'm already seeing, you know, really strong positive indications that the market has been, you know, long overdue view this as a level of thought leadership and rigor that they've been waiting for.
Bryan Leach: So thank you for those questions can and to everyone. Thank you for dialing in and joining us on this on this call and thank you for your investment and interest in our company.
Operator: We look forward to speaking with you soon.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: All right, good job, check people.
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