Q3 2024 Ibotta Inc Earnings Call
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Speaker Change: Greetings and welcome to the I bought a third quarter 'twenty 'twenty four financial results conference call. At this time, all participants are in a listen only mode.
Speaker Change: <unk> and answer session will follow the formal presentation. If you require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded its now my pleasure to introduce you to your host Sean Patel, Vice President of Investor Relations. Thank you solid you may begin.
Sean Patel: Good afternoon, and welcome to I bought US Q3, 'twenty 'twenty four earnings conference call with US today are Brian Leetch, founder and CEO and Spirit Patel CFO today's press release and this call may contain forward looking statements, including our guidance for Q4, 'twenty 'twenty four implementation.
Sean Patel: Of our instant card relationship and the potential impact of our product development efforts 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.
Sean Patel: For more information please refer to the risk factors in our recent SEC filings. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures and should be considered in addition to and not as a substitute for our GAAP results reconciliations to the most comparable GAAP measures are available in today's earnings press release, which.
Sean Patel: Available on our Investor Relations website at investors Dot I bought a dot com.
Sean Patel: Also during the call today will be referring to the slide deck posted on our website.
Sean Patel: Unless otherwise noted revenue and adjusted EBITDA comparisons to prior periods are provided on a year over year basis.
Sean Patel: Lastly, references to non-GAAP revenue growth reflect the exclusion of one time breakage revenue benefits in 2023. This is due to an update we made in 2023 depicts the software are to correctly charged maintenance fees to inactive direct to consumer Redeemers, which resulted in a short term benefit to GAAP revenue last year.
Please see slide 20 for India appendix for more detail with that I will turn it over to Brian.
Speaker Change: Good afternoon, everyone and thank you for joining us to discuss our third quarter results we.
We delivered revenue and adjusted EBITDA above the high end of the guidance range. We provided on our second quarter earnings call. We are making progress in increasing the value we deliver to our three key constituencies consumers publishers and clients.
Speaker Change: The total number of Redeemers on the I P and continues to grow at a rapid pace, increasing 63% year over year and 12% sequentially from the second quarter, we successfully rolled out our digital offers on Schnooks properties in the third quarter setting a new company record for shortest time to deploy.
Speaker Change: Subsequent to the quarter. We also successfully integrated our offers with their electronic shelf labels, providing a glimpse into the future of in store shopping and offer redemption, which I will cover briefly later in my remarks. We also deployed our digital offers on into the cart as part of a testing phase and expect to offers to be available to 100% of.
Speaker Change: The card customers by the end of the year.
Speaker Change: Overall, our redemption revenue grew 32% year over year on a non-GAAP basis evidence of the traction we saw with our CPG brand clients.
Speaker Change: I'll dive into all three of these areas in more detail.
Speaker Change: First regarding consumers the IP and is continuing to reach more and more consumers setting a new record for Redeemers at $15 3 million in Q3, I'll Redeemers redeem more than six times per quarter on average, resulting in nearly 100 million total redemptions in the third quarter exceeding the record we previous.
Speaker Change: We said in Q4 of last year.
Speaker Change: According to a bank of America Institute report published last month, approximately half of all Americans describe themselves as living paycheck to paycheck well nearly a third of consumers are in fact spending 90% of their income on necessities.
Speaker Change: Both of these metrics have consistently trended up as compared to pre COVID-19 for all household income cohorts.
Speaker Change: Necessity is clearly a strong driver, prompting consumers to seek value even those consumers who are in relatively better financial health are impacted by higher prices, while the rate of inflation has slowed according to the bureau of Labor statistics food at home prices are still up 27% over the last five years outpacing overall C. P I want to consume.
Speaker Change: <unk> lost to another brand or a private label, but cost to reacquire them is very high which suggest that brands are almost always better off using promotions to retain price sensitive consumers than letting them churn.
Speaker Change: We're expanding the surface area of our network and growing savings opportunities for consumers by making it easier to find and use our offers on our existing publishers, adding new publishers and Onboarding, New CPG brand partners, while at the same time deepening the offer budgets, we have with our existing partners.
Speaker Change: Moving to publishers I'm very proud of our teams for a fully launching schnooks and deploying into the card in a test phase I'm also grateful to these publishers for being such excellent partners throughout the implementation process a rollout of Schnooks took less than 90 days, which set a new record for time to market with a new publisher.
Speaker Change: Highlights our growing efficiency and helping bring publishers onto the network even when they are switching from another provider as was the case here our partnership with Schnooks is focused not only on increasing savings available to their shoppers, but also on innovation related to in store technologies, such as our recent integration of I bought a offers with their electronic shelf.
Speaker Change: Labels or E. S. L. Now at all 115, Schnooks locations consumers can quickly and easily see which products have an associated I bought a offer and scan a digital QR code to unlock that offer we're excited to experiment with new ways of intercepting consumers in the aisle, where the majority of purchase intent arises.
Speaker Change: As this opens up new vistas for CPG brand marketers and should increase redemption rates for our offers particularly in store.
Speaker Change: As it relates to insert the card we are still in the initial testing and piloting stage and we're working to have our offers rolled out to all into the cart customers by the end of the year with all publisher Rollouts, we anticipate a gradual ramp in revenue over the first 12 months of our offers being lives first the implementation of certain technical capabilities and marketing best practices.
Speaker Change: Really occurs in phases with some of the most important components, becoming live within 180 days. After the full launch second in order to expedite initial launch we often withhold certain types of offers such as beer wine and spirits offers and so after the launch of grocery offers until now beer wine and spirits offers have only been a small category for us.
Speaker Change: As they've only been available on our D to C properties, but we expect these offers that become available to multiple publishers in the coming quarters and we regard. The addition of instant card is an important catalyst to this category.
Speaker Change: Finally, when a publisher has an existing digital offers business that we're taking over either from the publisher themselves or another third party provider, there's a gradual transition progress or process to migrate over hundreds of customers to our own sales teams and self service platform and this transition could take some time to finalize.
Speaker Change: With regard to our existing publishers, we've been pleased with our progress in growing redeemers and redemptions as well as making progress on our joint Punch list items initiatives. We have successfully tackled include implementing UX enhancements, including offer led clipping implementing a new offer recommended that has lifted redemption activity and gaining access to <unk>.
Speaker Change: <unk> marketing offers one of our publishers in the dollar channel we expect to see continued progress along these lines in 2025 now.
Speaker Change: Now, let's turn to our CPG clients.
Speaker Change: This year, we've seen a 65% increase in gross billings and our C. D. G redemption business year to date. This is the result of a lot of hard work by our sellers and account managers, who have worked with our CPG clients to rapidly step up their investments in our fast growing network.
Speaker Change: In many cases, when a new marketing channel is expected to scale rapidly CPG brands take a wait and see approach, meaning they prefer to see that scale demonstrated before they allocate budgets large enough to take advantage of that scale. This can create temporary imbalances between the supply and demand for offers this year with our network.
More capacity growing by such a large percentage relative to the prior year, our sellers have often found themselves sourcing incremental budget midway through the year before the next planning cycle has come around during the third quarter. We were successful in doing just that unlocking major investments from several CPG brands that had previously invested only lightly on our platform.
Speaker Change: Within our existing clients some of our biggest year over year increases have occurred in laundry pet food yogurt snacks cleaning supplies and protein among others. In addition, some of our biggest category wins outside of grocery include general merchandize, such as toys household essentials office supplies and pet supplies we.
Speaker Change: Continue to make progress in these areas with general merchandise redemption revenue as a percent of total redemption revenue almost doubling as compared to the same quarter last year and increasing sequentially as well. We also began to see greater investments from private label brands at a handful of leading retailers, reflecting their recognition that the IP and can be a useful platform.
Speaker Change: We're growing their market share, we anticipate that trend will continue further increasing the need for national brands to participate in their categories.
Speaker Change: As we look out onto 2025, there are several exciting initiatives on our roadmap. These are designed to do three things one improve the rigor and credibility of our measurement framework, allowing our clients to track how many incremental sales, they're delivering in near real time.
Speaker Change: To increase the efficiency of our campaigns by delivering the right offer to the right consumer at the right time.
Speaker Change: Three making it easier for our clients to do business with us.
Speaker Change: Based on early feedback from some of our largest clients. We are optimistic that these innovations will continue to help us attract more dollars from annual promotions budgets. As these budgets are reset in the strategic planning processes and break out of the promotions category, allowing us to earn more continuous investments from larger national marketing budgets.
Speaker Change: By doing these things we believe we can improve our ability to keep up with the growth in redeemer demand that shows no signs of abating.
Let's start with measurement, it's clear that brands desire a more rigorous way to measure the return on investment of their advertising spend I bought his unique dataset allows us to measure incremental sales, meaning sales compared to a baseline of what would have occurred without a live promotion. This helps us evaluate the true lifetime value of a campaign in relation to its full.
Speaker Change: He burden cost and 2025 for the first time, our clients will have the ability to see in near real time exactly how many incremental sales their campaigns are delivering and the predicted cost per incremental units sold or cost per incremental dollar achieved.
Speaker Change: Instead of relying on lagging indicators of how certain forms of marketing spend are performing now brand managers will be able to see exactly how hard their marketing dollars are working that scale and efficiency goals and see the immediate results of their sales figures.
Speaker Change: This kind of measurement represents a major breakthrough not just for the promotions category, but for the CPG industry more broadly.
Speaker Change: Turning to the efficiency or ROI of our campaign, we're leaning further into our targeting capabilities with an ambitious plan to upgrade how promotional campaigns operate by moving beyond one size fits all promotions toward promotions that can be tailored based on the observed purchase behaviors of each consumer we can dramatically reduce unnecessary subsidization.
Speaker Change: Deliver more incremental sales.
Speaker Change: Lastly, in terms of making us easier to work with I'd like to highlight the recent recent beta launch of our new campaign manager tool during the fourth quarter. Our campaign manager tool streamlines offer setup and allows us to focus more time on selling while some clients will always want white glove service plenty of others, particularly in the long tail of emerging brands will prefer a cell.
Speaker Change: Serve model.
Speaker Change: Pain manager is available to a limited number of clients today and will be rolled out broadly in 2025.
Speaker Change: I'd now like to briefly address some of the dynamics, we've seen in our business more recently.
Speaker Change: As you can see from our Q3 results, we had a very strong end to the third quarter moving through CPG promotional budgets faster than anticipated as we look at the current quarter. However, despite it being our seasonally strongest quarter in the past the rapid growth in our redeeming Redeemer base, coupled with intense demand for savings on everyday items as caused us to exhaust twenty-two.
Speaker Change: For budgets faster than anticipated. This has put short term downward pressure on our redemption revenue in Q4, resulting in our guidance. We believe this downward pressure is temporary because we continue to see extremely high rates of client retention, indicating our clients are happy with the quality of what we are delivering we've received indications for many.
Speaker Change: Our top clients that they intend to increase their investment levels as their annual budgets reset in 2025.
Speaker Change: As in the cart rolls out we believe we will benefit from e-commerce specific budgets to supplement the office supply.
Speaker Change: And the macro environment for CPG in 2020 five we'll continue to favor marketing channels that can demonstrate that they deliver incremental sales at scale at lower cost in a way that can be measured with precision and in near real time over time, we will continue to lead a paradigm shift in this industry away from fixed annual promotions budgets and toward our way up.
Speaker Change: Buying smarter promotions on our network much the same way brands buy ads on the trade desk or on the walled garden sites today.
Speaker Change: We believe our initiatives to add new publishers on the I P N implement best practices with our existing publishers improve our targeting and measurement and increase automation and self service capabilities to meet our clients' strategic and tactical objectives, all support our runaway for growth, while we're dealing with what we believe to be near term supply.
Speaker Change: The constraints, we're confident that we're taking the right steps to alleviate them and accelerate revenue growth with that I'll hand, the call over to soon it to discuss our third quarter results and fourth quarter Guide Sumit.
Sumit: Thank you, Brian and good afternoon, everyone. We delivered strong revenue adjusted EBITDA and free cash flow growth with revenue and adjusted EBITDA, 5% and 22% above the midpoint of the guidance range. We provided on our second quarter earnings call, respectively. We are pleased with our free cash flow of $36 seven.
Sumit: Million in the quarter, which brings our year to date free cash flow generation to 86.3 million, we saw healthy growth in third party dealers across the I P. M on both a year over year and quarter over quarter basis, highlighting the unique and growing scale that we bring to our CPG clients.
Sumit: Revenue in the third quarter was $98 6 million, representing non-GAAP revenue growth of 19% year over year exclusive of 2.1 million in one time breakage revenue in the prior year period.
Sumit: We delivered Q3, adjusted EBITDA of 36.5 million, representing an adjusted EBITDA margin of 37% adjust.
Sumit: Adjusting for the $2 1 million in onetime breakage revenue last year. This compares to 26% in Q3 of 2023 and implied 66% adjusted EBITDA growth in.
In Q3 redemption revenue comprised 86% of our total revenue with AD products and other comprising the balance of 14%. This.
Sumit: This compares to 77% in Q2 of last year three.
Sumit: Three P. P redemption revenue comprised 52% of total revenue with D to C redemption revenue representing 34%. This compares to 27 and 50% for three P. P. N D. D C. non-GAAP redemption revenue respectively in the third quarter of 2023.
Sumit: In Q3, a redemption revenue was 84.5 million up 32% year over year on a non-GAAP basis.
Sumit: Our total Redeemer and redemption growth continues to be strong and we continue to see very strong growth in our third party publisher business.
Sumit: Actually offset by softer performance in our D to C segment.
Sumit: Third party publisher redemption revenue was 51 3 million up 129% year over year, while D to C. Redemption revenue was $33 1 million down 20% on a non-GAAP basis, excluding the onetime breakage benefit in Q3 of last year.
Sumit: And other revenues now 14% of our revenue were $14.1 million, which is similar to the first two quarters of the year and down 27% year over year.
Sumit: We continue to see CPG brands reallocate their dollars toward deeper sales promotions on our network at the expense of Nonperformance based banner ads on our mobile App, which is evident in the strength of our redemption revenue.
Turning to our key performance metrics, daughter, Redeemers were 15 3 million in the quarter up 63% year over year, driven by the rollout of I bought up our manufacturer offers on Walmart to all U S. Walmart customers with the Walmart Dot com account towards the end of the third quarter of 2023, the subsequent grow the Walmart.
Sumit: Ex audience dollar general launching in July 20th twenty-three and family dollar launching in April 'twenty 'twenty four.
Sumit: Redemptions for Redeemer was 6.4 down 12% year over year, driven by the growth in third party Redeemers, which have significantly lower redemption frequency is complete to our Adidas either demers redemption revenue per redemption was 87 cents down 7% year over year on a non-GAAP basis, primarily refer.
Sumit: <unk> the mix shift towards third party redemptions, but also some negative mix shift within our CPG portfolio.
Sumit: This was partially Michigan mitigated by the growing contribution from higher MSRP general merchandise and like for like price increases as a reminder, redemption revenue per 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 129% year over year, Redeemers with $13.4 million in the quarter up 85% year over year.
Sumit: Greedy must continue to grow on a quarterly basis due to the natural growth within our existing publisher base, but also due to seasonal drivers such as back to school.
Sumit: Redemptions per Redeemer were up 20% as compared to the prior period to 4.9 redemption revenue for redemption was 78 cents or up 4% year over year.
Sumit: Turning to our D to C business D to C. Redemption revenue was down 20% year over year on a non-GAAP basis, excluding last year's onetime breakage revenue benefit and up 3% sequentially.
Sumit: We do see Redeemers, well 1.9 million down 10% year over year, while redemptions for redeem or was 16.5 down 8% year over year, leading to a decline in total DTC redemptions I.
Sumit: Our D to C redemption revenue per redemption was.
Sumit: $1.05, a decrease of 5% year over year, excluding last year's onetime breakage revenue benefit.
Sumit: A combination of strong revenue growth and operating leverage resulted in an adjusted EBITDA above our guidance range, we generated $36 5 million of adjusted EBITDA, which represented an adjusted EBITDA margin of 37% Q3, non-GAAP gross margin was 88%.
Sumit: Adjusting for the onetime breakage revenue benefit in Q3 of 2023 non-GAAP gross margin would have been up by approximately 90 basis points year over year.
Sumit: non-GAAP operating expense as a percent of revenue was 52%.
Sumit: Adjusting for the onetime breakage revenue benefit in the prior year period non-GAAP operating expenses as a percent of revenue would have declined by approximately 970 basis points within that non-GAAP sales and marketing declined by 16% as we refined our marketing strategies across the business.
Sumit: non-GAAP R&D expenses increased by 17% as we continue to prioritize investing in product and technology.
Sumit: Lastly, non-GAAP G&A expenses increased by 22% or $2.6 million, driven by miscellaneous costs as well as recurring public company costs.
Sumit: We delivered adjusted net income of $31.4 million and adjusted diluted net income per share of 94 cents.
Sumit: Our adjusted net income excludes $13 7 million in stock based comp and a point 5 million adjustment for income taxes, we generated $36 7 million of free cash flow in the quarter and have generated $86 3 million, while free cash flow year to date.
Sumit: We ended the quarter with $341.3 million of cash and cash equivalents.
Sumit: We spent approximately $15 6 million in Q3 repurchasing approximately 275000 shares of our stock at an average price of $56 and 77.
Sumit: For Q4, we are estimating approximately weighted average fully diluted shares outstanding of approximately 34 million, excluding any potential future stock repurchases.
Sumit: Turning to our four key outlook. We currently expect revenue in the range of $100 million to $106 million, representing 4% non-GAAP revenue growth and mid teens redemption revenue growth at the midpoint.
Sumit: We expect <unk> adjusted EBITDA in the range of 30 to 34 million, representing a 31% adjusted EBITDA margin at the midpoint.
Like to provide you a little more color on our Q4 outlook as Brian discussed earlier near term supply constraints driven by the depletion of 'twenty 'twenty four look allocated promotional budgets is likely to result in software redemption revenue performance in Q4 relative to our prior expectations. While we've launched offers an instant card we're still.
Sumit: The testing and piloting stage. Thus we are planning for only a small contribution in Q4.
Sumit: We continue to expect that our revenue growth rate will drop in Q4 before re accelerating in 'twenty 'twenty five as will no longer be facing difficult comparisons in our add another avenues and we will be able to increase the size of our allocated budgets with the new planning cycle on.
Sumit: On the expense side, our EBITDA margin in Q4, it will step down sequentially from Q3, we expect a typical increase in sequential marketing around the holidays, including a Thanksgiving program and increased spend on R&D, specifically with regards to our targeting efforts as well as client analytics.
Sumit: In addition, we expect instant got specific costs, including <unk> launch costs and a step up in cost of revenue driven by the <unk> contract going live which include certain costs associated with taking over into cards preexisting promotions business.
Sumit: We expect these cost items aside from the holiday related marketing spend do you have an impact on expenses in the first half of 2025.
Sumit: We anticipate.
Sumit: Yeah, that's right in the low to mid thirties in Q4 before taking into account an expected $52 million to $56 million positive noncash tax benefit from the release of a valuation allowance against the company's deferred tax assets, given the company's profitability and the greater likelihood.
Sumit: That these deferred tax assets will be utilized we continue to expect a GAAP tax rate of mid twenty's in 'twenty to 'twenty five and beyond we expect our adjusted tax rate to be approximately low point is in Q O Q4 and beyond.
Sumit: Lastly, with regards to free cash flow keep in mind that the fourth quarter typically has a little higher working capital usage driven by greater cash out for the holidays by a D to C Savers, Inc.
Sumit: In conclusion, we generated strong revenue growth with healthy adjusted EBITDA margins above the high end of our guidance range for Q3 for the reasons. We have mentioned, we expect the revenue growth drops in Q4 and accelerate significantly in 2025.
With that operator, let's so let's please open up the call for Q&A.
Speaker Change: Thank you well now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
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Speaker Change: One moment, please while we poll for questions.
Speaker Change: Thank you. Our first question comes from the line of Andrew <unk> with Raymond James. Please proceed.
Speaker Change: Hi, Thanks for taking my questions, maybe if we could start on the commentary around the exhaustion of budgets I guess, maybe a simple question, but from the inside perspective of a brand what are some of the blockers to allocating incremental spend to see how the rest of the year. If this is a performance based channel posting the ROI metrics at the <unk>.
Speaker Change: Brand wants to see.
Speaker Change: Yeah. It's a great question Andrew. Thank you is I think goes to the heart of the temporary imbalance between supply and demand look.
Speaker Change: The CPG industry has for a long time now had an annual cadence for planning and that is because the measurement process is typically taken a you know a year to come in so they use a a system where they allocate budgets and then they measure using a mixed media model or what have you and that's been the case for years and years and years.
Speaker Change: Planning in the context of paper promotions. For example was often done six months in advance because you had to literally place it in the newspaper and so forth, we're going in and saying look we don't need a multi you know a M. M M model to be able to prove the ROI here's how we look at the lift and so forth and this is actually a tool that you can use.
Speaker Change: When you're lagging your year over year comps and we've had success doing that in many cases as I mentioned and that was something that we did too.
Speaker Change: To accelerate our way through the budgets in the third quarter and one of the reasons for the over performance I think the the what we sometimes encounter though is brand, saying look our next annual plan has been baked you guys are going live in January and we have an annual calendar of seasonal calendar and we're aligned with you and here's how much more we're spending I mean this year the app.
Speaker Change: [noise] amount was 60% more.
Speaker Change: And then that gets flight it against their key windows in the following year versus sort of this mindset of being more of an always on as long as you like the cost per incremental unit I think we're not quite there yet in terms of bringing to market. The solution that I described where we're building. This tool that allows for real time or near real time measurement of that.
Speaker Change: Roy in terms of a cost per incremental dollar cost for incremental sale I believe from the early indications we have from some of our top clients that they're very excited about that idea and that once that sort of takes hold I think you will see a relaxation of this idea of annual planning in a much more agile allocation of dollars and that's one of the reasons.
Speaker Change: Why we're doing it.
Speaker Change: Thank you I appreciate the color there and maybe one more if I could that could tie into the product piece.
So you mentioned the integrations with new publishers that time to market is coming down pretty nicely I guess, one whats going on whats going.
Speaker Change: On under the Hood, there, that's driving that time to market down and are there broader implications for the rest of your product org in terms of getting out our products like your cost per incremental faster. Thank you.
Speaker Change: Yes.
Speaker Change: Time to market is coming down because we have better technical documentation, because we've seen everything under the sun now or more more under the sign in terms of requests that we get from a given publisher for something that is important to them that might be might have been sort of bespoke before it's something that we built and built to be able to replicate in the future context.
So that's now done so for example, there might be a different type of offer that they wanted to support that wasn't supported previously well now it is right or we have the ability to launch beer wine and spirits for a given publisher. So the next time, we want to launch beer wine and spirits, it's much easier to do that.
I do think our technical team has become very efficient in helping guide publishers through this process. We were able to do this with a relatively small number of resources that the publisher in 80 something days. That's a dramatic decrease in I think that's just the learning curve, primarily I do think we want to continue to take that philosophy and apply it to other <unk>.
Speaker Change: Areas of our business. So for example, the ability to launch offers much more quickly and easily Ah is really important to making sure that our sellers spend as much time as possible selling it's important to be able to have just a level of constant background demand coming in through our self service platform in the past we've never allowed that because we didn't have that.
Speaker Change: And a logical capability of campaign manager.
Speaker Change: And we've actually said no to many brands that we're willing to spend but we we had a minimum of say a 50000 dollar spend requirement that we've imposed so we're excited about applying that philosophy of kind of a scalable piece of technology.
Speaker Change: And then you know, we're always learning and win where we make mistakes in terms of the previous Rollouts were doing a postmortem on those we had better project management all those sorts of operating efficiencies that all goes into under the Hood why the time to deploy a shorter.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Bernie Mcternan with Needham and company. Please proceed.
Speaker Change: Great. Thanks for taking questions, maybe just to start.
Speaker Change: Especially with adding in CCAR, and we think there's still room to grow Redeemers with Walmart, We think Redeemers gonna grow over the next 12 to 24 months, Brian Let's just get your confidence that you're able to fill this demand or redeem or growth with with budgets.
Speaker Change: Yeah, absolutely. Thank you were focused on the right thing Bernie which is the supply.
Speaker Change: Look in our history, we've been doing this for 12 years. There has never been a situation, where we did not see supply catch up to demand there haven't been that many situations where demand has grown in absolute dollars anywhere near this amount year over year, maybe on a percentage basis, but you're talking about a very large step up in total billings and so you know we.
Speaker Change: It is natural to expect that it'll take a cycle to catch up but it has in every other contexts done so and we're getting really good reviews from our clients as I said based on the client retention and we believe that you know things like e-commerce budgets tend to be allocated separately from other budgets in many organizations. So.
Speaker Change: You come to something like in the cart, while you can't necessarily go from the time, we announced that you know which was what the middle of August until now has been a very short amount of time to be able to go out and talk to CPG and say hey, we need you to give us dollars for instant card, but as those budgets reset and we're looking at a new year, we know.
Speaker Change: There's a lot of interest in investing on into cart. They just they can't pull dollars out of programs that had been in flight and ready to go for the last three months. So I think a combination of factors give us that confidence, but I think it goes back to the original question that Andrew asked as well, which is that we really want to move the industry to a place where you can simply go and say.
Speaker Change: I want to pay this cost per incremental dollar I want. This many units sold I have this much money to spend go and the system determines where to find that and allocate that across the network and uses the targeting capabilities that we're building to get smarter and smarter about delivering that efficient outcome that is sort of the way the other.
Speaker Change: Forms of media are bought and I'm starting to see a lot of excitement around the idea because it starts with a more credible approach to measurement, we've talked in the past about things like ROE as and that is one way to measure, but when you start talking about the true fully loaded cost of an incremental sale they get really excited about that.
That has never been brought into the CPG environment. The way that you know conversion might be in the case of other forms of advertising digitally and so I think that as you get into that we'll start to see more of a continuous ability to just hit the available demand, but I also agree with your assessment of the demand I believe that.
Speaker Change: It is the wrong question to ask is there enough run rate at Wal Mart I mean, if we right now doubled the budgets and the offers that we have today with the audience that we have today at Walmart, we would nearly double the revenue that we have today. You know there is you don't need to do anything more than deepen the existing budgets you don't even need new brand partners you just need more.
Speaker Change: Our powder to keep the offers live longer and they will be gobbled up extremely quickly on Walmart D to C and every other part of the network.
Great. Thanks, Brian appreciate all the color.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Kurt It's an agile with Bank of America. Please proceed.
Speaker Change: Great. Thanks, very much for taking the question maybe.
Speaker Change: Maybe just in the same vein one for you Brian.
Speaker Change: What gives you the confidence we're going to see a larger re up and brand budgets.
Speaker Change: Like are you in the process of negotiating now or is it just kind of more brands.
Speaker Change: Brands are telling you you know where I spend more and we like what we're seeing but.
Speaker Change: It's more kind of a sitting weight.
Speaker Change: Yeah. It's a combination I mean, we are absolutely aware of commitments that are being made right. Now plans are in place for a seasonal calendar for every brand that we work with you know so someone might be planning on hitting resolution as they call. It in January really hard with a lot of offer content.
Speaker Change: Someone else might be planning on superbowl someone else might be planning on you know back to school. So we do have visibility into.
Speaker Change: What we believe to be continued to be approximately 96% or tension of our clients and and we were projecting the growth in the network and letting them know listen last year. We told you. It was going to grow by a lot and you said I won't see it but I believe it I can't just allocate budget and risk not being used well. This is how much you left on the Te.
Speaker Change: This year, we're telling you it's going to grow by this percent you need to believe us and not miss out on the opportunity to get some of the most efficient marketing that you can get done I also think there's a climate that we're increasingly aware of where people have tried things a lot of these companies took price a year ago. There, therefore, lapping really tough comps on the topline.
Speaker Change: And theyre looking at year over year declines and that's causing a lot of stress and pressure and so they're trying to various tactics and this is really separating the wheat from the chaff there, they're saying well my model told me that if I invested in this tactic it would increase sales, but I don't see that so how reliable is that model or you know I invested in this.
Speaker Change: Other way that I thought would produce immediate results and it didn't and so when we come along and say you don't bear the risk you only pay on a success basis, we have genuine scale, especially with the addition of into the cart, we've diversified that network and we've now got a culture of you know.
Speaker Change: The ability to to verify our measurement and various ways that are much more robust rigorous incredible theres a lot of I think willingness to lean in on that we just had a major CPG company in our office is earlier. This week you know really at the cutting edge of talking about how you would change the mindset.
Speaker Change: Toward this being something that you could do continuously as long as you liked the cost per incremental you know, it's no longer well how many of these are incremental they're all incremental in the sense that you can stretch someone's behavior from whatever it is now to something beyond what it is at an acceptable cost then they'll do that and they should always be doing that so that all.
Gives me confidence that this will balance out in the coming year.
Speaker Change: Curtis and I think it's the right question to be asking.
Speaker Change: Okay, and then just a fall.
Brian Leetch: Sure Brian So.
Brian Leetch: So I think you defined.
Brian Leetch: The rollout of kind of gearing up to cart through next year is gradual which I think makes sense, but just in terms of comparatives kind of take your picnic maybe Walmart.
Brian Leetch: How should we frame that in terms of.
Brian Leetch: You know how quickly or not or how quickly you can build revenue or.
Yeah, I mean, I think Walmart was no exception and the first 180 days, we saw a a ramp that had sort of controlling for offer quality. There was still a ramp as people became accustomed to.
Brian Leetch: Knowing this program existed looking out for the program telling their friends about the program.
Brian Leetch: Part of it is that we started out with with Walmart plus members only of course and there was still a ramp even within that and then you know we rolled out to all of Walmart consumers and that further enhance the ramp I think that allowed us the time that we needed to go and get the the large enough budgets that we would need to sort of sustain that kind of growth period that we saw.
Brian Leetch: Over that time, and and you know in this case I expect there will be a comparable type of ramp part of that is contractual I mean, we've learned that to move faster on the time to deploy back to the question earlier to move fast they're part of that is chunking things out in two phases, and so contractually our counterparties are not actually required.
Brian Leetch: You have kind of everything ready to go day, one and so there are certain capabilities that we want to make sure we get which are really important but we don't absolutely have to have on day. One it's not just things like beer wine and spirits their fundamental tube feeding into our measurement approach for example, certain types of formats of data that we'll be getting but there.
Brian Leetch: There are also yeah, just the marketing best practices are you sending out lifecycle marketing are you sending out hey, we've now got a new type of offer. There's also changes in UX. So is there is every change in UX delivered right away. You know do you have a single gallery for your offers for example can you see offers alongside temporary.
Brian Leetch: Price reductions or is that something that is enabled in the future do you have offer led clipping. That's one that is common for example at Walmart you didn't have the ability to group things as offers and then see the eligible items for that offer underneath you'd kind of have to see an item and then you know that that item might be one of 50 flavors in that offer and it was.
Brian Leetch: So up 50 different times instead of groups by offer these are things that we know have an impact on the usability and the repeat usage rate of these programs and so we just want to manage expectations that there is that ramp.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed.
Eric Sheridan: Thanks, so much for taking the question maybe two quick follow ups on this topic, we've been talking about it could you identify how widespread the budget exhaustion deem is across.
Eric Sheridan: Clients is it concentrated to a handful or is it widespread across the CPG landscape in its entirety, given maybe some dynamics around the marketing cadence of this year and is there a way to sort of frame up.
Eric Sheridan: Pontification of that headwind, you're facing in Q4, and how much of it might have been pulled forward into Q3 versus now.
Eric Sheridan: Now, creating a headwind on Q4 that'd be number one and then just sticking with this theme of moving towards always on the direct response mentality in the industry, but I just want to come back and just go a little bit deeper than what you see as the key unlocks between either education of clients or capabilities on the tech side that you have to build.
Eric Sheridan: So we can sort of from the outside in look at how would you assess the transition the industry is going to go through towards towards that type of landscape. Thanks. So much.
Speaker Change: Great. Thanks, Eric let's take those in turn I think the first question is you know this question of kind of how widespread is the budget exhaustion and to what extent is there a pull forward into the third quarter over performance.
Speaker Change: There there's.
Speaker Change: Two parts of that question I mean as far as how widespread is it.
Speaker Change: It's at some cases, there are dramatic increases in in budgets from a client and there is no exhaustion of those budgets and we've you know we've we're working to get more clients in that bucket in some cases, you know they just didnt allocate nearly enough and now are realizing gosh I wish I had allocated a whole lot more it's not.
Speaker Change: What sort of a widespread phenomenon I wouldn't say I think that it can only it can be a matter of a small number of large clients are.
Speaker Change: Needing to re up that budget that can have a pretty outsized effect because they have high frequency will be we call high inventory score items, and so just being able to get them back and live makes a big difference right. So that I think when we can and I mentioned the client that was in our office earlier. This week that is an example of one that if we can get them into this deal.
Speaker Change: Our mindset I think would dramatically affect the inventory score for the entire year right and so I think that there's an awful lot of different campaigns running it at I bought it at 100 million redemptions in a single quarter, we have a lot of different clients.
Speaker Change: They're certainly not uniformly saying I'm out of budget, but I think generally speaking.
Speaker Change: It tends to be towards the end of the year, when they're kind of running dry on these things and you combine that with.
Speaker Change: Just the fact that some of them are kind of a little conscious of making sure. They protect their bottom line in their upcoming earnings calls having missed the top line and you get some situations where people say I need another month or two to come back with a vengeance and they need to advocate for that in their process looking at the next year's budget, but.
Speaker Change: But I can't really quantify it for you any any better than that what I can say is that a lot of the most valuable content that's come out of his.
Speaker Change: As content that we know is coming right back in you know so I don't want to use specific client examples, but our biggest clients. The ones that are doing some of the highest inventory score things you know, they're very very happy with our program, they're pushing content live and I think we're going to see meaningful step up in that content next year and we've been working with them.
Speaker Change: For over a decade, and our capabilities and our scale are just better and it just requires them to to plan ahead for that type of scale as far as the pull forward. Yeah. I do think that's a dimension in some cases I mean, we were able to go and get some of those incremental budget's mid cycle. You know, we were able to hit that back to school window pretty hard.
Speaker Change: I think that was valuable in some cases, there were clients that responded to other clients participation.
Speaker Change: I think soon it on our last call I mentioned, the Chicken Wars, you know, we certainly had a examples of clients leaning in heavily in spending in key categories, where there was a competitive dynamic that drove some of that pull forward in the third quarter and yeah. We are continuing to look for those incremental dollars, but we are also.
Speaker Change: Cognizant that we need to be realistic about that in this quarter. So as far as the Dr mentality and the key unlocks there. It's a couple of different things I think first of all it starts with the credibility of next generation measurement I don't believe the promotions industry has ever really had a truly next generation real time measurement of incremental sales.
Speaker Change: Keep in mind. This is an industry that still charging people on a cost per clip basis, it's still charging people on a cost per print basis, and you know the idea that you can measure the lift from something like that is really speculative. It ends up being just a one input and a large econometric model or it's something you don't even attempt to defend from an ROI standpoint because.
Speaker Change: It's just done in order to curry favor with your merchant or get an end cap or close a quarter. Our aspiration is very very different in that we want to be measured and we want to be measured. So that we can establish that there is no tactic or strategic pillar of your plan that generates higher true ROI. Yes, you can always use promotions to close the quarter, yes, the scale driver.
Speaker Change: <unk> adjust your price point quickly you saw some of that going on in the third quarter as people needed to adjust their price point, but we wanna be earning our place in the pantheon of the Facebooks the trade desk, the googles of the world and that's done by having incredible measurement framework. That's validated by third party companies and that is accepted by the people in the <unk>.
Speaker Change: Arnold measurement teams of these companies and I think we've made great progress on that this year, but we're going to continue to.
Speaker Change: You know pushed that out so it would be the ability to log in and see a real time cost per incremental projected cost per incremental is something that's coming in the first half of next year.
Speaker Change: Already got a version of that but I think that will continue to be a very important product development for us. So theres work on our N. Two two to socialize that and there is also work to iterate on that then there's also the more sophisticated targeting I mean, it's one thing to measure your cost per incremental it's another thing to make your cost per incremental lower so that's about using sophisticated.
Speaker Change: Decatur modeling and projections technology to put the right offer in front of the right group of people and project the cost per incremental based on all the data that youre crunching, eventually making that a more machine learning driven process and driving even more efficiency and I think that is something that in the back half of next year, we'll see more and more and more and more automation.
<unk> more sophistication lower and lower cost per incremental unit. So it's the second step if you will after the credible measurement and then of course, the third thing as you continue to deliver scale, that's not a problem right now we have you know.
Tons of Redeemers growing like weed and we have you know like a weed and we have lots of different publishers that were excited about it and our pipeline. Our focus is on really changing that mindset and that is all if there's a lag to actually go out and telling that story, telling CMO and CEO listen if you don't want to lose market share. This is what.
Speaker Change: You should do this is the lowest this is the cheapest way to grow your market share in an observable way and that's something we've really invested in with our <unk> brand in this year of our IPO I think we've raised the profile of our network dramatically. This year, that's been great. But those are all ingredients that are going to be necessary to to create that you're changing hearts and minds about an industry that is.
Speaker Change: Not had any of these capabilities and you're trying to kind of really get into the into the upstream and the planning and strategic planning process with this type of sort of technology and so there's a little bit of lead time, you need to be in that that planning process, which can be one or two years out, but what's super encouraging is that.
Speaker Change: As we talk to the most sophisticated CPG companies in the industry and we walk them through this methodology of measurement in this type of targeting they get really really excited and the scale that we're able to deliver coupled with that efficiency is not something that they're finding elsewhere. So I'm super bullish about what that means for the long term prospects of our business in our network.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Andrew Boone with JMP Securities. Please proceed.
Speaker Change: Thanks, So much for taking my questions I wanted to go back to PTC.
Speaker Change: Changing the topic slightly.
Speaker Change: With a 15% or mid teens kind of redemption revenue growth that kind of implies a pretty significant decrease for D. C. At in other revenue.
Speaker Change: While data C redemption revenue missed at least our estimate for it in this last quarter. So can you just talk about the balance of how you're viewing the D to C side persistent party for gamers and then if I look at it for Q EBIT guidance. It implies a pretty significant step up in terms of Opex. Soon it can you just talk about where you guys are investing and how we should think about that cadence as we enter <unk>.
Speaker Change: 25, thanks, so much.
Speaker Change: Sure I think on the DTC side sequentially anyway. Their revenues had been stabilizing you can see that.
Speaker Change: I think we see much of a change sequentially in.
Speaker Change: In the fourth quarter.
Speaker Change: The reading was also up.
Speaker Change: Staying fairly level.
Speaker Change: The AD revenues as we mentioned last quarter at around 40 million a quarter I think we still feel we're on the same place with respect to the fourth quarter.
Speaker Change: In terms of expenses they are really kind of.
Speaker Change: Three things one is we usually have a higher marketing expense for our Thanksgiving program, which has been very popular and we get a lot of good publicity about it in terms of providing cashback during the Thanksgiving period. Those we were featured on the today show a just a couple of days ago. So that's that's an expense that several million dollars.
Speaker Change: That's just once a year that steps away.
Speaker Change: Secondly.
Speaker Change: You know with all the things Brian has been talking about we've been looking to add headcount in the AR and the technology side, a four for targeting for analytics, we didn't manage to do much of that in the third quarter, but we did add them on.
Speaker Change: As we ended the third quarter or so so some is just head count expenses. They will go forward and the third thing is and still got that I talked about in my remarks, and always getting that cost will continue but again those are more <unk>.
Fixed type costs are ramping up this year this quarter, the fourth quarter, and then kind of leveling out in the first quarter in them. They don't really go up much. So those are the things you are seeing on the expense side.
Alright, thank you.
Speaker Change: Thank you. Our next question comes from the line of Mark Mahaney with Evercore ISI. Please proceed.
Speaker Change: Maybe I'll just ask one question so that you talked about acceleration.
Speaker Change: That Q4, I'm, sorry, being the trough in terms of year over year revenue growth machine acceleration next year, and just help us flesh that out a little bit and you want a range that what kind of acceleration, we could see and it's just something that you think looking at the comps thinking about the product rollouts thinking about the customer.
Speaker Change: The partner Rollouts deployments is that something that should steadily accelerate as you go through the year is there any reason to think that a really simple and I couldn't be jerky, but but generally accelerating so just give us a little more color on that comment thanks a lot.
Speaker Change: Sure I think the main thing has to do with our comps year over year comps in terms of what happened. This year. So I mean, if you look at this year, we've had negative comps on the DTC side on the AD revenue side as you switch.
Speaker Change: Into the first quarter those negative comps recede like on the AD side don't see much change there.
Speaker Change: That remains fairly flat like you said about 14 million a quarter.
Speaker Change: Similarly, the D to C side and then.
Speaker Change: Well, we obviously see is continued add on new publishers will get start getting more into cod revenues going forward continued strong growth in the third party publisher business. So just as you work through the math of it is a it's it's clear that we are dropping here in the fourth quarter and it should accelerate pretty significantly next year.
Thank you very much.
Speaker Change: Thank you. Our next question comes from the line of Ron Josey with Citi. Please proceed.
Great. Thanks for taking the question Bryan with ensuring that lives at least testing live just wanted to get a bit more on the results were seeing thus far just given the digitally native audience and sort of are you seeing greater and greater usage of coupons and everything and then.
Speaker Change: Sticking to answer cards soon it maybe following up on Andrew's comment you talked about costs and Scott cost impacting Cogs expenses in the first half of 'twenty five a little more insights on that would be helpful. And then so that was in CCAR and maybe just one last one we saw <unk> redemptions to redeem or up 20% year over year, that's great to see just wanted to understand if you're seeing a broader.
Speaker Change: Mix of demand.
Speaker Change: In other verticals that youre offering thank you.
Speaker Change: Great Hi, Ron Thanks for the question I'll tackle your first and third question and then I'll hand, it to sooner to tackle the into the cart cost question. So with regard to early indicators in <unk>.
Speaker Change: The cards are the good news is you know we believe that when we have offer inventory, we're going to enjoy a very high redemption rate on into the card in the same way that we do on E. Commerce on Walmart because you are seeing it's a very easy way to redeem offers you simply find them in the flow of discovering you search for laundry detergent you.
Speaker Change: Find a product that has an associated offer you put it in your car you check out you get your a discount in this case, it's a discount.
Speaker Change: So we're excited about you know it's very very early its just the pilot, but we're excited about the redemption rates I think really the key is just the inventory that we that we supply and needing to make sure. We have a deep budget that that overlap with the kinds of products that are sold on the card. It is also something that supports the growth of our general merchandise as well.
Speaker Change: About the pipeline of retailers, we do want to focus on our.
Speaker Change: Non grocery retailers as well things that give us access to an inventory of products that go beyond grocery in that regard. It's the card is super helpful. Because it works in places like Costco and Lowe's and elsewhere.
Speaker Change: So we believe it'll be that'll be a dimension and propelling in kind of diversification beyond just Walmart is really important for that general merchandising business.
Also think the beer wine and spirits.
Speaker Change: You know that's obviously a part of what happens when you get delivered items you get those items delivered as well and so that'll be an interesting thing we haven't launched yet we're gonna be paying close attention to that I think you know one thing I'll be paying close attention to as well as just the reaction of the market to the improvements in promotions that were bringing relative to what they are.
Speaker Change: <unk> had within the cart.
Speaker Change: Think that it's the carts focus has not been on promotions, it's been on a lot of other things and they're doing a great job.
Speaker Change: But we're upgrading a lot of their capabilities, whether it's targeting which wasn't available whether it is a pricing system that makes more sense than is more variable based on the MSRP of the product whether it is being able to show promotions alongside temporary price reductions those are things that it's too early to tell the impact of that in some of those are on that 180 day rollout but.
Speaker Change: It's still those are the things I'm excited about in terms of your third question, which is.
Speaker Change: The the the the mix of redemptions and the redemption for redeem or et cetera.
Speaker Change: Yeah, we're we're continuing to see as I said, the doubling in the percentage of general merchandise, that's a bullish especially in the toy category I would emphasize that that's been pretty exciting I think that is going to that mix shift is going to have an impact on the deeper redemption and on the number of redemptions per redeemer, but overall as we get more and more mix shift toward <unk>.
Speaker Change: Third party versus D to C youre going to see lower redemptions per redeemer, but just a lot more redemptions just because the intensity of usage has always been different on third party from D to C. I'll, let Sunil answer the cost question.
Speaker Change: Yeah. So on the instant card cost question, just remember that that business is different from other publishers that are we've added to the network. In this case, we were assuming we are assuming instant guts or taking over into cuts.
Speaker Change: You know existing promotions business. So there are certain costs that come with that there's a little bit of a step up in the cost of revenue given our contract with them. So that's what I meant but these costs are relatively fixed.
Speaker Change: Except that the fourth quarter is that transition first quarter, they'll generally be in place, which will continue in the second quarter, but after that if they don't ramp as much.
Speaker Change: So so what that means is it impacts our margins in the short term Q4 to some extent Q1 Q2, but after that incrementally the incremental margin expansion. The margin expansion story, we've been talking about either no nothing nothing has fundamentally changed with that.
Got it thank you.
Speaker Change: Thank you. Our next question comes from the line of Ken <unk> with Wells Fargo. Please proceed.
Thank you two questions if I may 1st.
Speaker Change: Brian.
Speaker Change: How do you think about what at what point do you think youll have confidence in.
Speaker Change: And the supply side of offers.
Speaker Change: To fulfill what could be a very strong demand here in terms of the number of Redeemers and as you add the interest the cart demand to the platform. When do you have visibility into that will it be.
Speaker Change: At year end in January February into annual budget.
Speaker Change: <unk> or will it evolve over the course of the year. That's the first one and the second one.
Speaker Change: Could you just talk about how you how the how it how D. C is prioritized versus relative to three P. So.
Speaker Change: When when there's a when there's a supply demand imbalance more more demand in the marketplace, which you have today.
The supplier promotions or supply of budgets, how does the three P versus direct to consumer side get prioritized as that is the lack of supply driving some of the direct to consumer weakness we're seeing today. Thank you.
Speaker Change: Thanks, Ken both great questions. The first one.
Speaker Change: Look we have confidence in this in the supply side of our business because as I said, we have 12 years of history of watching it follow the growth in our network and we've had a lot of conversations that are with our top clients to the effect of we're excited we are so excited about the car coming on board, we're going to be ready to go in the beginning of the year. We're excited about the growth of your net.
Speaker Change: And there's just sort of a well you've earned the right to grow your budget by this person and so we have that visibility.
Speaker Change: We don't provide guidance out beyond this current quarter, because we just haven't done that in and you know it is difficult to see an entire year of that but we do have a lot of confidence in the rebound of our supply for the reasons that I cited earlier.
And so I don't want to overstate it and make it seem like we're flying blind here I mean, we do have a lot of visibility into it. It's just that the a lot of these brands are on an annual planning cadence, where they reset at the beginning of the calendar year, and we think we're going to do a better job of pacing that and making sure that we don't run out of inventory by the end of the year and I think that that's only going.
Speaker Change: To be further enhanced by the improved measurement targeting that I discussed earlier, which gives me a lot more confidence as far as the second question. It's it's it's pretty simple we focus on overall redemption revenue. So we're not trying to steer content toward the D to C or the third party, which means that if we have a massive amount of redeemers on.
Third party Gobbling up offers then so be it a particularly because there's a very low or no cost of acquisition in those environments versus the higher cost of acquisition on D to C with.
Speaker Change: I suppose we could kind of earmark a budget for D to C. But we don't do that it's one of the reasons why if I had it to do over again I'm not sure I would really break that out because its not terribly consequential our brand partners don't say well I want this much on D to C and this much on third party, they say I need a million units that this cost for incremental unit go right and so.
Speaker Change: Yes, it's absolutely at the explanatory factor for D to C is so almost sole factor is inventory availability. If a campaign you know a year ago would've stayed live for 16 days and nowadays lives for 12 days were 13 days that is the reason why redemption revenue on D to C is lower than that because.
Speaker Change: That's all coming out of the same a budget that's exactly why and that's why we focus on the overall redemption revenue and it being up 32% in this most recent quarter I do think that going forward. The important thing is just to deliver that efficiency at that scale D to C is great because we have a very high degree of.
Speaker Change: Patient and targeting and so it will be an important source of driving very efficient you campaign volume. So I can I have the ability to tailor that and say, okay can should be asked to buy two of these and be given 50 cents to do so and that works out to the right cost per incremental whereas in other environments. We have various degrees of sophistication.
Speaker Change: And targeting and so forth and so all of those things and the degree to which we allocate our content.
Speaker Change: <unk> channel, a b or C will be affected by this this mindset of delivering a certain degree of scale in a certain level of efficiency and this concept of kind of a slider or you can choose where you want to be on that curve.
Speaker Change: Thank you Brian.
Speaker Change: Thank you.
Speaker Change: Thank you our last question comes from the line of Chris Connor Rich with UBS. Please proceed.
Speaker Change: Great. Thanks for taking the question.
Speaker Change: Brian I just wanted to go back to the comment you had made about a small number of large clients that need to re up can you just talk about the consistency in the past either on a percentage basis or on a dollar basis, and which kind of over a multiyear period. Those budgets have stepped up are they consistent or are they kind of growing incrementally each year.
Speaker Change: Thanks.
Speaker Change: Yeah, that's a I wish I had all the data to answer that right now I can follow up with you Chris if we have more of that data, but look general what I can tell you is that we started out with overall budget or maybe $2 million.
Speaker Change: And now we're in the hundreds of millions approaching the billions of dollars of total investment on the <unk>.
Speaker Change: In the network there has been a very consistent track record of stepping that up to match. The you know to match the demand and the gross billings have gone up 65% year over year year to date.
Speaker Change: That's an average in some cases, they've gone up five X, 500% I mean, I can think of one or two clients that are up even more than five X 10 X 20 X.
Speaker Change: And then some clients that have.
Have remained flat or have a have not kept up with the growth of the network and so their percentages has declined relative to the available opportunity. When we go to these clients were very often have a slide that says this is the percentage of the overall opportunity that you're taking advantage of right now and it tends to be very very low.
Speaker Change: Oh, right and so again, we could not grow by a single Redeemer and still very substantially increase our revenue and to be able to show them that and say you're leaving this cost per incremental unit on the table is very powerful as far as empirically you know how much. It is is it are the large client stepping up.
Speaker Change: I would say that generally speaking you know you have a couple of different kinds of clients do you have the clients that are more or less always on and they're there you know therefore whatever level of growth you have in there great is it sort of stable backstop you have them you have a subscription agreement with them you have a lot of visibility into that or they just have a system where.
Speaker Change: They run it for this many days and that's that and they cost what it costs and that's that's great.
Speaker Change: There are other clients that really think about this as during key seasonal windows are episodic and then there are some clients that are looking at this as kind of gap fill and you know got to make sure. They catch up in a quarter, where we're dealing with different buckets of different situations, but what I would say is that overall I'm not aware of very many clients that arent planning on.
Speaker Change: I cant sitting here right now I'm not aware of any clients.
Speaker Change: That are planning on you know not taking advantage of the larger volume that we get from say in the card or just the growth of the networking and generally they're like this is great. You know are a problem for the first eight nine years was we would perpetually here theres not enough cowbell now, we're giving them. All this you know scale and there they are adjusting to the.
Speaker Change: Idea that I bought it is really the kind of tactics that you can use it can move the percentage of your Nielsen points by a point or two and in a matter of weeks and that mindset takes more than a minute to just sort of seep into planning and into the consciousness. The last thing I'll say, Chris, which I think I haven't said elsewhere on this call as it were.
Speaker Change: Now meeting with much more senior people right since the IPO the level of access that we've gotten is radically better than it had been before so we're now meeting with the CEO. The CMO the chief growth officer, whereas before maybe we were meeting with the head of promotions or the center of excellence and that you want to meet with those people, but now.
Speaker Change: You are in that conversation about a major strategic partnership that's got a horizon of multiple years in Europe, a major pillar in their marketing plan your upstream and they're multiyear strategy you understand the problems with their business and you can creatively respond to those problems.
Speaker Change: Think that combined with the innovation, we're bringing to the market is going to lead to really exciting places and that's why I spent so much of my time in the last six months on the road speaking with these people and I'm I'm Super bullish on what has come out of those conversations. Thank you.
Speaker Change: Thank you there are no further questions at this time I'd like to pass the call back over to management for any closing remarks.
Speaker Change: Thank you very much to everyone who has joined US today. We appreciate all the great questions and we look forward to engaging with you further.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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