Q1 2025 Ibotta Inc Earnings Call

With us today are Brian Leetch, founder and CEO and Valerie Shepard interim CFO.

Speaker Change: Today's press release and this call may contain forward looking statements forward looking statements include statements about our future operating results our guidance for Q2, 'twenty 25, our ability to grow our revenue factors contributing to our potential revenue growth our ability to support additional scale and the capabilities of our offerings and technology.

Speaker Change: <unk> all of which are subject to inherent risks uncertainties and changes.

Speaker Change: These statements reflect our current expectations and are based on the information currently available to us and our actual results could differ materially.

Speaker Change: 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 you and not as a substitute for our GAAP results reconciliations to the most comparable GAAP measures are available in today's earned.

Speaker Change: <unk> press release, and our 10-Q, which are available on our Investor Relations website at investors that I bought a dotcom.

Speaker Change: Also during the call today will be referring to the slide deck posted on our website unless otherwise noted revenue and adjusted EBITDA comparisons to prior periods are provided on a year over year basis with that I'll turn it over to Brian.

Brian: Thanks, Sean and good afternoon, everyone. Thank you for joining us to discuss our first quarter results I'm pleased to report that we delivered first quarter revenue and adjusted EBITDA above the guidance range. We provided on our fourth quarter earnings call. Our interim CFO Valerie we'll have more to say about this in a bit but first let me give you my.

Brian: On our industry and I bought is placed within it based on what I'm hearing out in the market.

Brian: Right now CPG companies are searching for new ways to reinvigorate their businesses.

Brian: More than ever they need every dollar to work harder and they're applying a higher bar for measuring the effectiveness of their spending.

Brian: They know they need to take advantage of new technologies like AI to grow their businesses and bolder and more creative ways.

Brian: But they haven't found the right solution.

Brian: Against this backdrop I bought it is positioning itself as an invaluable strategic partner that can deliver profitable revenue growth at a scale that moves the needle for their businesses.

Brian: We're doing this by bringing performance marketing to the CPG industry like never before.

Brian: The concept of performance marketing isn't new in fact, it's been one of the main drivers in the growth of digital commerce over the past two decades platforms, such as Google Meta App love and and the trade desk have proven the power of this model by giving advertisers a simple interface that lets them do three main things one <unk>.

Brian: It targets <unk>.

Brian: To measure their performance on an ongoing basis and three reach a large and growing population of consumers.

Brian: Because CPG brands sell most of their products in stores. They haven't had the benefit of cookies pixels or SDK to tell them, which adds or promotions are leading to incremental sales.

Brian: And without those real time signals of conversion they haven't been able to harness the power of machine learning to maximize conversion at the lowest possible cost.

Brian: I bought is changing all this by bringing the first omni channel performance marketing platform to the CPG industry.

Brian: Because of our access to data and our investment in next generation technologies. We believe we are uniquely well positioned to apply the proven best practices, our performance marketing to a massive new industry.

Brian: After a year of speaking directly with senior leaders and CPG companies I concluded that they all want more or less the same three things.

Brian: First incremental sales, meaning sales that would not have happened had they not run a promotion.

Brian: Second credible measurement, meaning a compelling system for measuring how many incremental sales have actually been delivered and third scale, meaning the ability to move the needle for their businesses.

Brian: I bought his platform delivers all three.

Brian: For the first time CPG companies can set specific targets for cost efficiency and volume of incremental sales measure their cost per incremental dollar or what we call C paid on an ongoing basis.

Brian: And optimize their campaigns based on these results.

Brian: This remains in pilot mode for now and only a select few of our top clients have been given access but as I will explain more below the early results have been exciting and they give us confidence in our roadmap over the coming year.

Our technology is making it possible for CPG brands to manage their businesses on a day to day basis like never before.

Brian: Once companies realize the power of these new tools, we believe they will embrace our platform like never before leading to significantly greater revenue for <unk>.

Brian: On our fourth quarter earnings call I referenced two large CPG clients that had recently launched campaigns that would leverage our latest capabilities.

Brian: We selected these two companies because they are widely regarded as pioneers within the CPG industry, they're known to invest time and money only when they believe our platform has the scale to become material to their business.

Brian: Both taken especially rigorous approach when it comes to analytics and measurement and this has made them skeptical of past promotional formats, such as paper coupons.

Brian: We knew that if we could deliver for these clients and address their concerns it would accelerate our learnings and allow us to improve product market fit.

Brian: I'm happy to report that both programs have been successful to date in general we've delivered incremental sales at an attractive cost per incremental dollar while delivering significant volumes of incremental sales.

Brian: Both clients have analyzed our performance in detail both have chosen to expand the number of brands or pack sizes in our program since the last earnings call.

Brian: Our redemption revenue for one of these clients is expected to almost double year over year through the first half of the year. We have seen this level of growth even though we are only working with a portion of the brands for this client and just one segment of their business.

Brian: With the other client or redemption revenue is expected to be up eight X year over year in the first half.

Brian: Beyond the numbers themselves there are a few other factors that we find encouraging.

Brian: First it's unusual for large CPG companies to ramp up their investment levels. This quickly, especially when it requires allocating dollars that were not previously earmarked within their annual budgets.

Brian: Second we are actively engaging with leaders at the highest levels of both organizations that is bringing us into their planning conversations much further upstream and allowing us to contribute more directly to their strategic goals.

Brian: Finally, both clients have set up meetings designed to encourage their retailer contacts to join the IPM. This kind of direct advocacy is new for us and it speaks to their strong belief in what we are building together.

Brian: In addition to our two initial clients we have now lined up another three CPG clients that are piloting our latest capabilities.

Brian: We expect this number to increase as we move into the second half of the year.

Brian: I want to stress that in these initial stages, we are not focused on maximizing the number of companies. We're working with rather we are hand picking a small number of industry thought leaders who share our vision for how transformative. This can be for the CPG industry, and who are committed to providing us with detailed feedback.

Brian: Their feedback is allowing us to pressure test our systems standardize our approach and automate our processes and ways that will lay the groundwork for scaling up to our full client base.

Brian: Based on recent progress we've begun to scheduled top to top meetings with a small number of additional clients with the goal of ramping seafood related revenue over the next several quarters. We're excited to begin pitching our new capabilities more widely but we're also cognizant that any true paradigm shift. It takes time, we are up against that.

Brian: AIDS of entrenched habits and partners, who are accustomed to measuring things with very imprecise tools.

Brian: So far our clients have been extremely receptive as we've explained to them our vision of bringing well established concepts from the world of media and digital commerce to the world of CPG.

Brian: For others, it will take more time and they will need to test the platform before deciding to make it a central part of their strategy going forward.

Brian: As you can imagine these efforts have consumed a significant amount of management bandwidth and required us to begin shifting resources across sales and technology as.

Brian: As we begin to allocate more of our sales resources towards seafood related efforts. We are at the same time trying to make sure that the majority of the sales force continues to service our clients as well as we always have to ensure we maximize the non fee paid promotional dollars flowing onto our network.

Brian: That provides a good segue to the topic of our sales execution.

Brian: Since joining us in January our Chief revenue Officer, Chris Reidy has spent significant time with our CPG clients and publishers to determine what we're doing well and where we have room to improve.

Brian: From a client service perspective, Chris is working to address pain points on certain accounts, while at the same time, improving the Christmas of account handoffs when they are necessary.

Brian: Internally he is working to rightsize account assignments increased seller time on task reduce administrative burdens on our sellers improve communication across teams and standardize our go to market processes.

Brian: The process of streamlining our sales motion takes time and requires a high degree of coordination with other departments to ensure that all our systems internally are operating in harmony from account mapping all the way through to billing.

Brian: Over time organizations outgrow the systems that have worked for them up to that point transitioning to new and better systems could be an essential step to unlocking the next phases of growth.

Brian: We believe tackling these challenges now will pay big dividends for the business over the long run I.

Brian: I am pleased with the steps, we're taking and how our sales team has responded to the challenge.

Brian: One positive leading indicator is it turnover among sellers have gone down substantially from the fourth quarter of 2024 to the first quarter of 2025.

Brian: To wrap up my remarks, let me say, we are happy with the performance of our initial seafood campaigns and with strong initial client response to these results, we're making progress establishing <unk> as the first true omni channel performance marketing platform for the CPG industry.

Brian: Breaking out of the promotions category, we will be in a stronger position to capture a greater portion of the 200 billion annual addressable spend in the U S CPG industry.

Brian: While the journey may not always be linear we are excited about the destination and our conviction in this approach is higher than it ever has been.

Brian: With that let me briefly introduce Valerie Shepard, our interim CFO and board member I've had the great pleasure of working with Valerie over the last four years on our board. She has played an invaluable role both for me and for I border as our former lead independent director and is the former chair of our audit Committee.

Brian: Salary brings 34 years of financial leadership experience at Procter <unk> Gamble, where she was the treasurer controller Edp transition leader among many other roles.

Brian: Her devotion to I border and her belief in what we're building is so strong that she volunteered to step in as our interim CFO on short notice she temporarily relocated to Denver to work closely with our team in person and I've been extremely grateful for her support in addition to stepping in as the leader of I bought as finance and accounting functions and helping.

Brian: A search for a permanent CFO, we're also leveraging Valerie deep subject matter expertise in the CPG industry as it turns out that has been especially helpful. As we take to market and exciting new set of solutions I'll hand, it over to her now to discuss our first quarter results and second quarter guidance in more detail Valerie the Florida.

Brian: Thank you, Brian and good afternoon, everyone as Brian said I have been a strong supporter of iPad app for many years and I'm pleased to be with you here today in my role as interim CFO.

Brian: In summary, we delivered revenue and adjusted EBITDA that were 3% and 22% above the midpoint of the guidance range that we provided on our fourth quarter earnings call.

Brian: With redemption revenue and AD and other revenue outperformed our expectations expenses, where it largely is forecast at which resulted in revenue outperformance following entirely to the bottom line.

Brian: Let's break down our revenue results in more detail.

Brian: Revenue in the first quarter with $84 $6 million, representing revenue growth of 3% year over year.

Brian: Within that redemption revenue was $73 $4 million up 8% year over year.

Brian: Third party publisher redemption revenue was $48 $2 million up 38% year over year, while D to C redemption revenue with $25 $2 million down 24% year over year.

Brian: Add in other revenues, which now represents 13% of our revenue.

Brian: $11 $2 million down 22% year over year.

Brian: Turning to our key performance metrics.

Brian: Total redeemers were $17 1 million in the quarter up 37% year over year we.

Brian: We saw healthy growth in third party b gamers across the ICANN on a year over year basis, highlighting the continued strength at the demand side of our network.

Brian: Growth was driven by the launch of <unk> during the fourth quarter at 2024 like for like for Walmart.

Brian: Walmart audience and the launch of family dollar in the second quarter of 2024.

Brian: Redeemers were about flat sequentially, primarily reflecting the ramp up against the clock, which offsets the pronounced seasonal decline, we typically see in the first quarter.

Brian: Redemptions per Redeemer were four eight down 15% year over year, driven primarily by the growth in third party, redeemers, which have a lower redemption frequency as compared to our D to C retailers.

Brian: Redemptions per Redeemer on our third party publishers were down only 4% year on year comparison.

Brian: Redemption revenue per redemption, with 89 cents down 7% year over year, primarily reflecting a mix shift towards third party redemptions and to a lesser extent from a modest negative mix within CPE key.

Brian: And our third party publishers this metric, but only down 2% by comparison.

Brian: As a reminder, redemption revenue per redemption can vary quarter to quarter based on seasonal patterns and variation and offer a mix.

Brian: Now, let's discuss the cost side of our business.

Brian: non-GAAP cost of revenue with that $6 million versus a year ago.

Brian: Driven by an increase in its the cart related costs revenue sharing agreements with certain other publishers as well as increased variable tech technology costs and higher amortization of capitalized software.

Brian: This resulted in a Q1 non-GAAP gross margin of 81% down nearly 700 basis points year over here.

Brian: non-GAAP operating expenses as a percent of revenue were 65% and.

Brian: An increase of approximately 360 basis points year over year.

Brian: Within that non-GAAP sales and marketing expenses decreased by 2% year on year.

Brian: non-GAAP research and development expenses increased by 9%.

Brian: Lastly, non-GAAP general and administrative expenses increased by 29%.

Brian: Or a $3 $7 million.

Brian: As a reminder, Q1 2024 with the last full quarter prior to our IPO and thus did not contain any public company cost.

Brian: We delivered Q1, adjusted EBITDA of $14 $7 million, representing an adjusted EBITDA margin of 17%.

Brian: We delivered adjusted net income of $12 $1 million and adjusted diluted net income per share of 36 cents.

Brian: Our adjusted net income excludes $13 $8 million and stock based compensation $1 $6 million in restructuring charges and includes a $3 8 million dollar adjustment for income taxes.

Brian: We ended the quarter with $297 $1 million of cash and cash equivalents.

Brian: In Q1, we spent $72 $7 million repurchasing $8 1 million shares of our stock at an average price of $39.47.

Brian: We had $31 3 million fully diluted shares outstanding at the end of the quarter.

Brian: In March our board authorized $100 million increase to our share repurchase program.

Brian: As a result at the end of the quarter, we had $96 $1 million remaining under our current authorization.

Brian: Turning to our Q2 outlook.

Brian: We currently expect revenue in the range of $86 five to $92 $5 million, representing 2% revenue growth at the midpoint.

Brian: We expect Q2 adjusted EBITDA in the range of $17 million to $22 million, representing about a 22% adjusted EBITDA margin at the midpoint.

Brian: And a 4% increase in adjusted EBITDA margin relative to the first quarter.

Brian: This is a byproduct of higher revenue and flattish operating costs consistent with our commentary on our fourth quarter earnings call.

Brian: I'd like to provide you with a little more color on our Q2 outlook.

Brian: While we continue to make progress on validating and rolling out CP based campaigns, we are still early days.

Brian: We expect a gradual increase in prepaid related contribution as well as slow and steady improvements to our sales expectation.

Brian: There will likely be some short term disruptions as we continue to refine and enhance our go to market processes and incorporate key learnings from our first few CPI based campaign ads.

As a result, we expect to continue to be supply constrained in the short term, but expect to drive sequential improvement.

Brian: Copper supply over the course of this year.

Brian: We now expect our adjusted tax rate to be in the low twenties for the full year.

Brian: Our full year cash taxes expectations are broadly unchanged.

Brian: And with that operator, let's please open up the call for Q&A.

Brian: Yeah.

Speaker Change: I will just before we do that one small clerical correction, we've repurchased one 8 million shares I think Valerie may have said $8 one.

Speaker Change: Sorry about that that would be cool, but its 1.81 for Nick.

Speaker Change: Sorry about that.

Speaker Change: Yeah.

Speaker Change: Now for today's Q&A session, we will be utilizing the raise hand feature if he would like to ask a question click on the right hand button at the bottom of the screen. When prompted please unmeet yourself and begin with your question. We ask that you. Please limit to one question and one follow up we will now pause a moment to assemble the queue. Thank you.

Speaker Change: Our first question will come from Eric Sheridan with Goldman Sachs. Your line is open please on mute and ask your question. Thank.

Eric Sheridan: Thank you so much for taking the question.

Speaker Change: No if we could get a bidder a better sense of sort of early learnings from the <unk> integration. How do you think that will be a driver of growth both on volumes and users as you look out deeper into the year and then layer on top of that as a follow up sort of elements about how to think about door dash being layered into that.

Eric Sheridan: As the year progressed, thanks, so much.

Speaker Change: Thanks, Eric Yes, we're excited about the progress we've made with both <unk> and door Dash. This represents a substantial amount of the online grocery marketplace market. That's part of the I bought a performance network in terms of some early learnings it into the cart. We found that we have very attractive redemption rates based on the path.

Speaker Change: The purchase that exists online being one where it is relatively easy to find it and counter and be influenced by the various offers that gives us confidence because we know that.

Speaker Change: That's <unk>.

Speaker Change: Her to the way that you shop in those environments and is going to stay that way. We've also seen steady growth in redeemers on both platforms in the case of instant card, we've managed to expand into beer wine and spirits, which is a new out there, but I think we're calling it a new category for us Eric that's been <unk>.

Speaker Change: Successful. However, one learning is that that's the only operative in about 13 states because it is a discount model, whereas if we can transition that over time to a a reward model or an online rebate model. It would be available in 41 states. So that's a learning with door dash we have.

Speaker Change: <unk> some of the learnings from the way we rolled out into the cart there were some bumps in how we handle that in terms of just change management from a client perspective, there were some clients that into the car already had that were using their promotions platform in self service tools that we had to transition over to our self service tools I think we've learned from that.

Speaker Change: Broadly in terms of change management, but the big thing is that a door dash. They didn't have a preexisting promotions business, so that challenge and change management.

Speaker Change: <unk> less pronounced we've begun rolling out of door dash, but we've not achieved 100% rollout. We're taking the same approach, we always do which is making sure that it's working but there are no bugs that theres no issues with conversion rates and so forth and we're pleased with the steady progress of that and believe that we will be able to support alcohol.

Speaker Change: And beverage offers there and I think based on the learnings from both of those intend to roll out alcohol and beverage offers on Walmart and other parts of the network as well I think some of the other learnings relate to just how we.

Speaker Change: Work with our publisher partners to do lifecycle marketing and surrounding.

Speaker Change: Sort of programming to make sure people are aware of the offer content and we want to always take those best practices out across the rest of our network.

Speaker Change: Our next question.

James: James Thank you Sharon.

Speaker Change: Please go ahead great. Thanks. This is actually Ron Josey honest using James Michael the lag. So I wanted to ask a little bit more Brian on cheap it on a cost per incremental dollar and you talked about extending the pilot program to more clients and.

You gave us some good insights on how that's going I would love your thoughts on.

Speaker Change: What the Governor is maybe for the two clients have seen success in rolling out cheap. It's more brands. If you will and then as you think about rolling it out to the full client list. What what are the mile markers that are needed I guess to to give more confidence for that to go to the next level. Thank you. Thanks, Ron Great question.

<unk> taken them in turn we.

Speaker Change: We have seen our partners expand the brands that are participating with this tool, which is a great sign we've seen some of their flagship brand some of their most important brands that they don't entrust to just any partner and we've actually seen those brands.

Speaker Change: Good enough results that they've decided to include brands that initially they weren't sure. They wanted to put in the program. So it's as simple as getting on cycle with these companies. I mean, these are sort of dollars, they're finding mid cycle that were not part of the previously planned budget and I have a lot of confidence that if we continue to deliver these kind of results.

Speaker Change: They're going to be a lot of brands within these companies that are knocking on the door, saying I want to get the benefit of this I like the control. This gives me I like the ability to drive top and bottom line growth at the same time I think these organizations generally have either finance or measurement teams that want to go deep.

Speaker Change: On this and audit these things and scrutinize, how you're measuring and exactly what claims are making regarding incremental sales we've been going through that process and that's also an essential step before they open up to a much broader spigot of spend and what I found in this industry is that once.

Speaker Change: You go through that process and build that trust with credible measurement that is not something that has to occur over time, it's something that you're kind of travel through and then and then you can do.

Speaker Change: Deepen the relationship add more brands and also things like more pack sizes. So it's not just a brand that would be added it might be a new business unit it might be a new pack size and that could be rather significant for example.

Speaker Change: In terms of the mile markers and things that would be important for us to expand into additional clients. There are a number of things I think on the on.

Speaker Change: On the product side first of all some of the things we do today in terms of the deliverables around seafood both the the projected seafood ranges for example in the actuals are much more manual computations than they will be once we get a chance to standardize and automate those processes and so if we were to try to do what we're doing.

Speaker Change: For these clients for the other 798 clients that we have it would be challenging because theyre just not enough client analytics resources to to crank through that analysis, but what we're doing is by day, we're automating those procedures and making sure that we're automating the right thing is important and so you don't want to jump straight into automation before you've really confirm.

Speaker Change: Product market fit that's that's really important the second part of that is that we know that we don't want to be doing manual targeting and optimization, we want to move toward more of a machine learning implementation and so that's a matter of training models on the early data that you've run in as they get smarter and smarter, they get better and better.

Speaker Change: <unk>.

Speaker Change: <unk> cost per incremental dollars in these volumes of incremental dollars and so that gives more and more confidence as you get more and more precision and that I think allows you to get.

Speaker Change: Beyond just the early adopters of this kind of technology, because they're reassured by that I think being able to have a more weekly and then ultimately even more frequently daily ability to check on your results will be an important thing for this industry to really claim that this is the same kind of performance marketing interface that.

Speaker Change: We've seen in other areas right now that process again is inhibited by just the lack of automation and so I think we.

Speaker Change: We're moving rapidly in that direction I'm pleased with the progress that our product team has on that I think we're on track I think we're all I mean, we have a call every single morning to talk about learnings and it sometimes feels like we're on kind of a vertical learning curve, but it's truly an exhilarating time at I border because unlike anything else that I can remember us developing the reaction that were.

Speaker Change: Getting to this both the idea of it and the performance of it is extremely positive and so that's giving us the energy that that we need to to work as hard as we're working to to crank it out to the other 798 and hopefully we'll bring in some new clients that are persuaded by this model who might not have been interested in traditional promotions.

Speaker Change: That's great great to hear thank you Brian.

Curtis Nagle: Our next question comes from Curtis Nagle with Bank of America. Please go ahead.

Curtis Nagle: Great. Thanks, so much for taking my question.

Speaker Change: A quick one for you Brian.

Curtis Nagle: Just maybe give an outlook.

Brian: How to think about total CPG budgets for this year.

Curtis Nagle: Has it changed from the start of the year. Thank.

You mentioned that.

Brian: Supply is obviously still constrained but.

Curtis Nagle: Any updates there on how to think about the <unk>.

Curtis Nagle: It's from your clients show more holistically.

Speaker Change: Yeah. Thanks, that's great to hear your voice Curt appreciate the question I mean, I think there are a couple of dimensions to this there's the macro and then there is kind of the sales execution dimension to that so taking those I think if you think about the macro.

Speaker Change: Obviously things like tariffs have created some uncertainty in certain pockets of our business. We've seen that with regard to general merchandise in particular, where they are more exposed to those kinds of supply chain abroad, we've seen that in smaller and emerging brands to some degree taking kind of a wait and see approach. We think based on what we know.

Speaker Change: We factor that into the guidance, we provided but we're keeping close a close eye on that in terms of what impact that might have on supply in the short term I think in terms of sales execution. There are things, we can be doing better and I think we've gotten our arms around what those challenges are and what needs to be different one of the things that Chris has brought to us is.

Speaker Change: Perspective from having seen this at a much later stage in a much more successful kind of up on the plane of version of of this kind of operation sales operations and so I think that the supply is out there and in some cases, we can be doing even more to support our sellers and getting that supply even with the value.

Speaker Change: Proposition, we have today don't forget we're reaching over 17 million Redeemers are we've got a great story to tell our redemption.

Speaker Change: Our volume of on the third party publisher network. In particular is really up dramatically you know we've seen redeemers on third party publishers up 45% year over year redemption revenue up 38% year over year total redeemers up 37% on the platform year over year. So, we're making sure that we get to market with that mess.

Speaker Change: And we don't sort of roll everything into the next generation solution and founder in the short term. So it's a balance striking that balance I think is important but I would say our outlook is broadly the same except to say that I am greatly heartened by what we've what we've proven in the last quarter in terms of the comp.

Speaker Change: <unk> around.

Speaker Change: Getting to an always on understanding with our clients and that is really about convincing them that we can deliver incremental sales with credible measurement at scale. Because if you can do that and demonstrate through your contribution margin positive, meaning that every single incremental dollar, they're making money on the bottom line. We're one of the few.

Speaker Change: Tactics, they want to plow money into at a time with or otherwise, perhaps pausing or pulling back and so I think if we were just to speak in terms of kind of traditional promotions budgets I might have a different answer but I'm looking at the future of our business in a very very different way than that and we're starting to see that it's now not a binary do I turn on a promotion.

I don't know if I need to right now I'm not in a window, where I'm launching a new product that kind of episodic tactical approach has been how it's been but what we're now seeing is a different conversation, where we're saying what number would we need to hit in terms of cost per incremental dollar for you to keep this on and the understanding is that as long as we're within that can.

Speaker Change: Strength, they will do so and of course, if we're not then they want and they can decide where they want to set that threshold. That's just a completely different conversation and one that I think will ultimately get us out of this sort of fixed supply conversation.

Speaker Change: Thanks very much.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Ken <unk> with Wells Fargo. Please go ahead.

Speaker Change: I'm just trying to phone can starts to go.

Speaker Change: Go ahead.

Speaker Change: Can you hear me okay, yes.

Speaker Change: Okay. Thanks, Thanks, sorry about that.

Speaker Change: Just two for me first first maybe if you could talk a little bit about the publisher side I know that you I appreciate the commentary on the card and the door Dash partnership starting up but maybe you could talk about some of the existing publishers kind of prior to those those digital service providers coming on what are you seeing in terms of <unk>.

Speaker Change: He asked the adaptations that they've made and the offline to online side that may have that may be easing the opportunity.

Speaker Change: You kind of grease the wheels for you to two two.

Speaker Change: To accelerate redemption activity there. So maybe just first on the publisher side you could talk about Attritional publishers and then secondly, maybe I just wanted to return to the question on supply.

Speaker Change: I may be a real specific question is.

Speaker Change: Do you see as like as the seabed like is converting.

Speaker Change: Those.

Speaker Change: The supply side, the CPG players and to kind of see bid.

Buyers as the key unlock or or other things just clearly in EMEA.

Speaker Change: The traditional sales channel that you can improve that you think will help you grow supply throughout the year. Thank you can you just clarify the second question for me can I am not sure I quite follow you are saying on the supply side, we see the seafood value proposition as the key unlock.

Speaker Change: That's right.

Speaker Change: When we think about.

Speaker Change: You talked about the supply side.

Speaker Change: Apply a promotion improving throughout the year sequentially.

Speaker Change: How dependent is that upon your ability to kind of get seated penetration into new accounts or is it just improved.

Speaker Change: The existing go to market sales strategy. Thank you got it great. Thank you taking those two questions and turn it first on the publisher side, Yes, there has been nice.

Speaker Change: Consistent improvements in the Walmart experience for example, as you may see now out there in the public domain. We now have telephone number as a way to check out and earn your Walmart cash. This is a pretty big improvement in the experience from having to download the Walmart app.

Speaker Change: The advocate to the QR code scan subsection of the Walmart App, which is tricky and then scan a QR code on the screen at the self checkout or the checkout.

Speaker Change: Imagine all the different ways in which that could go wrong someone doesn't have a phone doesn't have the app can't find the scanner.

Speaker Change: Here's my phone number and.

Speaker Change: That's exciting because we believe that even further illustrates how central our program is to digital identification, which lies at the heart of everything Walmart is achieving in terms of their their progress on things like retail media. So that that is further entrenching that that strategic relationship with Walmart and it's also I think one of the reasons why.

Speaker Change: We're seeing very nice redeemer growth there and everywhere else is that we continue to bring those best practices to them. Some other examples of things on on Punch list that we've mentioned or I mentioned earlier in the call ways of incorporating this content into regular touch points, both in the store or online or.

Speaker Change: In terms of email correspondents reminding people that they have this or that offer. So we continue to see a lot of opportunity for ongoing improvement not just growth in number of people, but the yield from those people because of the punch list that we're working through with our partners. There we had several excellent meetings not just with that one.

Speaker Change: Sure, but multiple publishers are on things that we can do some of them.

Speaker Change: It's sort of proprietary for me to get into the details. So I won't do that on this on this call, but rest assured that feel good about the ones, we have growing and remind you that even if we didn't add a single additional publisher.

Speaker Change: Our supply constraints. So we believe that we could accommodate.

Speaker Change: Up to 10% five 5% to 10%.

Speaker Change: Of the redemptions sites are five to 10 extra redemptions, we have now with the audience. We have now and that's probably the biggest misconception that I hear out there is that.

Speaker Change: Well will they be able to get their publisher audience larger yes is the answer but even if we didn't we've got so much room to run on the second question of yours, which is supply side, so let's turn to that.

Speaker Change: Look I think execution is still an important part of this and I think that the sales execution improvements that I alluded to will cause a sequential improvement in the supply of offers over the course of the year into totally independent of the success of the unlock of seafood and the penetration of that I think we expect that that is also a function.

Speaker Change: Of just seasonality.

Speaker Change: There are things that improve with back to school and time of year, and so forth and we think that we've seen those spike in the summer that's baked into our our business forecasting and planning I also think that the penetration of <unk>.

Speaker Change: We're still early stages, it's a bit of a wildcard some of these brands choose to embrace these things and go Wow, we want to be at eight X, where we were this time last year, because we really really need this in our business right now we're going to go find this money and we have senior enough contacts there where we can go make that happen relatively quickly.

Speaker Change: In other contexts, it moves more slowly where we move sort of more of a bottoms up much much smaller test.

Speaker Change: Build a win with one brand and then they bring it to another versus starting out with six or eight brands or whatever with all of their most important pack sizes and brands. So it depends on the mix of those and how those go I think it also just depends on whether what we saw with the first two turns out to be representative I mean, I think I mentioned that it's been.

Speaker Change: Eight months since we really approach these companies and now we're really seeing this hit stride.

Speaker Change: It would be six to eight months of lead time every time or now that we have all of these new learnings and tools and better materials and sharper value proposition and case studies and so forth can we substantially shorten those timelines and that remains to be seen to be honest.

Brian: Thank you Brian.

Speaker Change: Our next question comes from Mark Mahaney with Evercore. Please go ahead.

Mark Mahaney: Okay. Thank you I wanted to follow up on the first question.

Speaker Change: From Eric about.

Speaker Change: The success of the traction you're gaining with instant card and door dash and category expansion and so I guess the simple question is as you.

Speaker Change: The addition of those two partners really helps fill the category are there other kind of major Greenfield category opportunities you see ahead for them for the company.

Speaker Change: That there are other there are similar kind of instant card door dash solutions for thank you very much.

Mark Mahaney: Mark that's a tricky one to answer in a public forum, yes is the answer.

Mark Mahaney: I definitely don't want to give our competitors a lighted roadmap into all the wins, we're going to announce in the future, but suffice to say that there is still a huge amount of untapped opportunity in the publisher ecosystem and so some of those are expansions of the kinds of things that our current publishers are doing so for example may.

Mark Mahaney: Be a publisher as heavy into in store and doesn't have much of an E. Commerce presence, but then decides that they want to lean into that some of that might be an extension of what they do so for instance, there are a lot of other adjacent extensions of of some of these marketplaces that our content isn't live in right now and then there may be whole verticals that we.

Mark Mahaney: See opportunity in <unk>.

Mark Mahaney: Both within and beyond fast moving consumer goods as you think about things like specialty retail how do you leverage the learnings of the value of these high redemption rate environments like E. Commerce to look at pure play E Commerce players in specialty retail so there's a lot of different.

Mark Mahaney: A lot of different things.

Tempted to go into but we will not in response to your question with apologies.

Mark Mahaney: Okay. Thank you very much Brian.

Speaker Change: Our next question comes from Chris <unk> with UBS. Please go ahead.

Chris Reidy: Great. Thanks for taking the question.

Speaker Change: Brian I want to go back to a comment that you had made in the prior question.

Chris Reidy: And it was with regards to.

Chris Reidy: Just asking to help unlock supply what cost.

Chris Reidy: For incremental dollars.

Chris Reidy: Yes.

Chris Reidy: Yes.

Speaker Change: It's been continuing to continuing to stay on platform. Just curious are you seeing that.

Speaker Change: The brands are now demanding a higher offering or a lower offer incremental dollar than what you had in the past any sort of kind of.

Speaker Change: Our framing of the magnitude that there would be helpful. And then just as we think about the big ramp in going after the broader pool of.

Speaker Change: Brands that you have on the platform today.

Speaker Change: Should we think about the resources that you have to continue to engage with more brands and a manual fashion and until needs to expand resources around continuing to ramp the manually versus investing more in the automation business.

Speaker Change: It's something we're thinking about 5% of these brands.

Speaker Change: Allocating spend through keep it by the end of the year.

Chris Reidy: I like that still third question in there I don't think I missed that Chris, but yes, let's go through those in turn.

Chris Reidy: Great questions I think the first one is so fascinating which is that there is not one answer to the what's the target seafood question, it's a bit like saying what cost per install do you have to achieve app love and in order to be successful well up love and as just a platform right. They each have their clients that have different values or lifetime Val.

Chris Reidy: Your horizons or value propositions. So what's interesting is we've seen a.

Chris Reidy: A different answer to that question, depending not only on the brand and where they are in the the balance between cost efficiency and volume. So that's obvious right. If you give me a higher CPI to work with I can give a richer offer with a lower threshold to a larger number of people and I gave you a whole lot.

Chris Reidy: Of incremental dollars you give me a really constrained secret I can hit it I can hit any CPA, that's not the issue and the question is how much volume can I deliver at that seafood and that is really the big change in the industry to go from an industry, where people kind of buy a program and then weeks after the program and they get this kind of.

Chris Reidy: Recap deck to one where they can log in and on a regular basis see exactly how its trending and make adjustments. So the answer is always you should be using this tool. The question is just can you get the volume you were hoping for at the constrained efficiency that you.

Speaker Change: Impose and as we grow the network you can get more and more volume as we teach the machine learning you can get more and more volume because we learn is hey, Chris didn't need that level of incentives. He could have been stretched one unit further and we steadily improve on those seafoods over time.

Speaker Change: I will say there are multiple use cases right. So even even within the idea of a trade off for one period of time, you may say, well I'm really interested in closing the sales gap and so we're going to tolerate a more relaxed seated or you may say I'm really looking for a kind of a baseline of profitable growth in which case you may impose a more strict CPA and you.

Speaker Change: We may do some of both think of it like a slide or that you can adjust at different moments in time in the course of your year and that agility is so different from an industry than one where you have an annual plan and very episodic measurement often annual measurement now you are effectively real time or near real time measurement and your plan can it.

Speaker Change: Change in adjusted dollars can flow, where they need to in that moment now.

Speaker Change: Now, sometimes there'll be other considerations as well so our brand will need to shoot for a lower seafood for a period of time because of other spend they have going on at that period of time, we're learning a lot about this and I think ultimately the more of these we do the more we'll be able to factor in all of these things like seasonality and the <unk>.

Speaker Change: We're training the model the better will be predicting.

Speaker Change: And informing these decisions that they make but what I can say is there is an awful lot of enthusiasm about even be able to have this conversation right. So even having someone ask you what would be a seafood at which you're generating contribution margin positive profitable revenue growth is like not a question that a lot of these company.

Speaker Change: Have really ever been asked.

Speaker Change: So, it's bringing that level of control at a time that they feel a desire for that real control in their business that is psychologically very powerful part of our sale.

Speaker Change: The question of resource expansion and manual versus automation I mean, our aspiration is very clear, which is that this should be as much of an automated process as possible that said there will always be tools that can be used entirely self service and also tools that can be used as part of a broader managed service.

Speaker Change: <unk>. So you may get additional insights or support or more proactive expertise and recommendations wrapped around some of these automated tools, if you're one of our top tier clients and so we're always going to need excellence and our client analytics.

Speaker Change: But it is clear that on our roadmap, we already have a very detailed and clear plan to get to a place where these processes that are rate limiting steps now back to Ron's question will not be right. They will not be and I think the power of that is extremely exciting because what we're what we're seeing is that.

Speaker Change: If we can get one or two or three brands to participate they'll take it in and they'll tell their agency about it they'll tell their procurement about it they'll tell their senior leadership about it and if we then teach them the vocabulary and teach them how to use these tools. We view this as sort of like you know the moment that Bloomberg came to the finance industry.

Speaker Change: That lets us came to the legal industry, we want to be an indispensable tool for the next generation of brand management and that means we need to be much more self service and that's following the arc that we've seen with many other companies that have done travel a similar path and built those tools out we have the talent that we need on the team to build those tools, it's already on the <unk>.

Speaker Change: Roadmap, it's already in the budget, we just need time to go build those tools and it's partly making sure. We're building the right tools. So it's incorporating all of those learnings that we're getting and Thats why we have that morning call with all of those people because we're shortening those decision cycles and were then codify that into a new set of go to market best practices that.

Speaker Change: Taking into account all of those key learnings I mean, we're now able to get to a place where we can launch offers.

Speaker Change: In a matter of a much shorter period of time than we ever were before.

Speaker Change: So anyway.

Speaker Change: And then your last question was something about.

Speaker Change: Can we expect this to be 5% of the spend of the I don't know I don't know I can't speculate what I can say is that the two clients that have seen it.

Speaker Change: It's eight X and it's two weeks right and so those are two data points out of 800, I think it would be a little bit churlish of me to try to answer your questions. So I'll answer that more in the future.

Speaker Change: Super helpful. Thank you.

Speaker Change: Our next question comes from Andrew Boone with citizens Bank. Please go ahead.

Speaker Change: Thanks, So much for taking the question I wanted to go back to the sales force question and ask it in slightly different way.

Speaker Change: Given some of those constraints that you're having around teaching seated Brian are you limited in terms of bringing on new CPG is or going after newer opportunities like are you more in a harvest mode.

Speaker Change: And then Valerie gross margin stepped down you did a good job explaining it.

Speaker Change: But can you double click on that and help us understand whether that's a sustainable difference or is that just temporary thanks. So much.

Speaker Change: I'll answer the the harvest mode question, you answered the gross margins question. Okay. Okay. Great. So yeah look I mean I think.

Speaker Change: If we wanted to we could go out to <unk>.

Speaker Change: 500 clients right now and say would you like to test this revolutionary new capability.

Speaker Change: We want to make sure that when we get our chance to make a first impression that we absolutely kill it and make a great first impression and so we're picking clients that we can really spend significant time with our senior leadership team their finance team their measurement team their agencies and make sure that we dialed a formula and that we become aware of any outlier.

Speaker Change: Here's our scenarios that we werent aware of before and then we're building those into the tools that we have I think what we're now going to shift into the mode, where we go out and reach out to a number of other.

Speaker Change: Science and broadened our learnings a little bit further that's very different from hey. This is the new I bought it I think we're still a ways away from that but it's voluntarily throttled I think is the spirit of the answer to your question Andrew I'll, let Valerie address the gross margin question, Yeah, and if you wouldn't mind could you just repeat that question because I wasn't sure which period you were talking about.

Speaker Change: And exactly what you were looking for.

Speaker Change: Gross margin step down I think you explained it for the quarter, but how do we think about gross margins on a go forward basis.

Speaker Change: From a margin standpoint, yes gross margin step down is that yeah, yeah. So our gross profit margin.

Speaker Change: As we said in the call within that within the high Eighty's that reflects the impact of.

Speaker Change: Having public company costs in there at this point in time and as we think about our cost going forward, we are expecting those to be sort of flattish ethylene and <unk>.

Speaker Change: The air and so you'll see the revenue growth, which of course, we said we expect to end the year with improved growth rate. So you'll see that revenue sort of falling to the bottom line.

Speaker Change: But not in a huge way.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Bernie Mcternan with Needham. Please go ahead.

Bernie Mcternan: Great. Thanks for taking my questions.

Speaker Change: Maybe just to start.

Speaker Change: Brian If you could just talk about.

Speaker Change: The sheep it transition or invest is a lot of your time investing but are there additional financial resources that are being used as well just trying to think there was a step up in R&D sequentially in the quarter and G&A.

Speaker Change: Wanted to get a sense in terms of.

Speaker Change: Aside from your time, but financial resources being allocated to this as well.

Speaker Change: Yeah, they're broadly flattish I would say Bernie I mean, we have shifted our focus of the resources, we already have very much towards this much as we did with the IPM transition in our business I think we still I think we said we will continue to hire as needed.

Speaker Change: Were they a specialized skill sets on the measurement side, particularly in the business and we've certainly beefed up our stable of experts on that.

Speaker Change: I would say it's broadly the same as what we said on the last call, which is that we plan on having flattish.

Speaker Change: You know cost sequentially and I think we can continue to gain leverage through the tools that we're building and then repurpose those resources to invest in the areas that we may need to invest in.

Speaker Change: Understood. Thanks, Brian.

Speaker Change: Our final question will come from Andrew Iraq with Raymond James. Please go ahead.

Andrew Iraq: Thanks for taking my question, maybe a two parter if I could on the.

Andrew Iraq: And we dollar deal.

Andrew Iraq: The encouraging partnership maybe hitting the lift off phase there is that trajectory, giving you increased confidence and other kind of the traditional grocery partnerships like the <unk> cards in the World and second do you think it's path is instructive to instant card door dash are those businesses different enough in kind of some of the features you talked about different enough that there was a notably different forecasts.

Speaker Change: Process. Thanks.

Okay.

Yes, we're very pleased with the trajectory of the dollar channel partners, we think Thats, a critical channel to win and given the value proposition. The affordability proposition. We also think that those are companies that are investing very heavily in their retail media and ecommerce futures and that portends very well for us because we know that.

What we do is very very symbiotic with retail media. The more you have manufacturer offers better performance. Your your sponsored search and display ads or we get more visibility onto those things because they show up in all of those different parts of the user journey.

Speaker Change: We also know that as we apply learnings from the network broadly to our more recent partners. We see unlocks right, we bring new solutions to them that that bring increased awareness of the offering and I think that.

Speaker Change: That's gonna be broadly true, including across to cart and dash I do think that card and dash or a desk different demographic, obviously than the dollar channel. They have a different path to purchase broadly speaking right. Now you know the overwhelming overwhelming majority of transactions. If you look at their public earnings calls are on R&R in.

Speaker Change: Store in the dollar channel very very few online if any to speak of and so.

Speaker Change: But look as we get online presence in and dollar you'll see I think very similar broadly performance in redemption rates.

Speaker Change: Even though it's a less value seeking audience intercepts people you search for laundry detergent and you see three and one of them has an offer and you may choose the one that has an offer even if you are affluent or focus on convenience and we've seen really good uptake, including from Walmart online I'm on Walmart plus users people, who are more affluent Walmart.

Speaker Change: <unk> and so.

Speaker Change: I think all of those are actually positive indicators in both directions for those new partners and then there are things that are TBD to be honest, Andrew I don't really know exactly how <unk> is going to perform the question would be.

Speaker Change: How much does it matter that we expand between the 13 states in 41 states when we when we finally do launch at Walmart.

Speaker Change: There are some considerations that we're working through.

Speaker Change: There to make sure that theres not overly too much friction in those experiences. So we're still learning we're still in a learning journey I would say, we're working through the punch list that we have but we're also rearranging the priorities of the items on the punch list based on what we're seeing hit or work elsewhere in the network and that's that's I think one of the compelling propositions for us as we go out to get.

Mark Mahaney: Additional publishers and back to Mark's question that I dodged base.

Mark Mahaney: Basically be able to say hey look we have yet another partner.

Mark Mahaney: These results.

Mark Mahaney: Youre alluding to it just it creates more momentum and people say I want to be with the innovative leader in this industry because what they know is this is where the dollars are going to flow onto this platform into this performance marketing future.

Mark Mahaney: The previous approach has been very much kind of a let's mop up the promotions dollars that exist and do our best to fight for a lot of retailers specific offers that brands, maybe feeling forced to do by the retailer that's out of all of our approach our approaches we're going to earn every single dollar every single day every dollar that you.

Mark Mahaney: Youre going to feel good about the performance of that Youre going to trust the measurement of that and youre going to want to spend more and more and more because rational people do rational things, we're not going to rely on you have to do this because someone told you you had to some merchants some retailers somewhere and that's the key to transcending the sort of confined space that is always.

Mark Mahaney: As our industry.

Mark Mahaney: This concludes the Q&A section of the call I would now like to turn the call back to Brian Leach for closing remarks.

Mark Mahaney: Thank you very much for everyone's attention. We're grateful for all of these great questions and we look forward to having an ongoing dialogue and having a further conversation in August.

Mark Mahaney: Thank you for joining today's session. The call has now concluded.