Ibotta Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 13, 2025

Key Takeaways

  • Negative Sentiment: Q2 revenue of $86 million fell 2% YoY and missed guidance, with Q3 revenue outlook of $79–84 million implying a 17% YoY decline due to short-term headwinds from pilot clients pausing campaigns.
  • Positive Sentiment: Obtained third-party validation from a leading media measurement firm showing Ibotta’s campaign results outperform its conservative in-house metrics, reinforcing client trust in its new performance marketing model.
  • Neutral Sentiment: Ongoing sales reorganization groups teams by industry subvertical and reduces account loads, with new leadership hires expected to strengthen long-term execution despite short-term disruptions and rep turnover.
  • Positive Sentiment: Publisher partnerships gained momentum, marked by a 17% YoY rise in third-party publisher redemption revenue and expanded offers via DoorDash, Instacart, and Walmart’s improved in-store digital integrations.
  • Positive Sentiment: Strengthened capital strategy by repurchasing $67.5 million of shares in Q2 at an average price of $46.59 and securing a $100 million increase to its share buyback authorization.
AI Generated. May Contain Errors.
Earnings Conference Call
Ibotta Q2 2025
00:00 / 00:00

There are 11 speakers on the call.

Operator

Good afternoon, and welcome to Ibotta's Q2 twenty twenty five earnings conference call. With us today are Brian Leach, Founder and CEO and Valerie Shepherd, Interim CFO. 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 Q3 twenty twenty five, our ability to grow our revenue, factors contributing to our potential revenue growth, and the capabilities of our offerings and technology, all of which are subject to inherent risks, uncertainties and changes. These statements reflect our current expectations and are based on the information currently available to us, and our actual results could differ materially.

Operator

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 and our 10 Q, which are available on our Investor Relations website at investors.ibata.com. Also, during the call today, we'll be referring to the slide deck posted on our website. Unless otherwise noted, revenue and adjusted EBITDA comparisons to prior periods are provided on a year over year basis.

Operator

With that, I'll turn it over to Brian.

Speaker 1

Thanks, Sean, and good afternoon, everyone. Thank you for joining us to discuss our second quarter results. I'm pleased to welcome our new chief financial officer, Matt Puckett. Matt most recently served as CFO of VF Corporation, a multibillion dollar public company that is a global leader in apparel and footwear. Over his twenty three year tenure at VF, Matt held multiple operating CFO roles, led a global finance team of over 1,000 professionals, and oversaw investor relations, capital allocation, m and a, and strategic planning.

Speaker 1

He brings deep expertise in stakeholder management, board and investor relations, and aligning financial strategy with business objectives. Matt will officially start with Ibotta on August 25. I'd also like to take this opportunity to thank our interim CFO and board member, Valerie Shepherd. Valerie stepped in earlier this year when we needed her, and she's done a terrific job leading our finance team during a time of transition. We're grateful that she will be returning to the positions of lead independent director and chair of our audit committee.

Speaker 1

Turning to our most recent financial performance, we reported revenue below the guidance range we provided on our first quarter earnings call, while adjusted EBITDA was in the lower half of the range. We're also guiding to third quarter results that are significantly below our prior expectations. These disappointing results can be explained by short term headwinds, but I think it's important to first pan back and provide context on the broader transformation we are undertaking. At the end of the day, those short term headwinds are almost all related to that transformation. At Ibotta, we face a classic innovator's dilemma.

Speaker 1

Should we focus on preserving our status as a leader in the CPG promotions industry by making relatively small refinements to our product offerings and going to market in largely the same way even though that might limit our long term upside as a business? Or should we instead implement a bold new strategy designed to capture a significantly greater portion of the total addressable market for CPG marketing spend and potentially deliver a much higher return for our shareholders over the medium to long term, even if that means introducing temporary disruptions to our business? We chose the second path and committed ourselves to a broader business transformation. We did this because we believe it's the best and fastest way for us to break out of the promotions category and tap into much larger media budgets. The first step has been changing how promotions are measured and purchased to more closely resemble other forms of digital performance media, where advertisers turn on campaigns and leave them on as long as they're delivering positive incremental returns on investment.

Speaker 1

We are in the process of bringing our clients a powerful new set of tools that we believe will allow them to buy and measure their promotions like never before. Simultaneously, we are rethinking how we can make our service more client friendly. We're streamlining and automating internal operations to allow our sellers to spend more time selling. Finally, we're continuing to bring in new talent and training our current team to help us improve overall execution. Thus far, I'm pleased with our progress on these fronts.

Speaker 1

We've seen clear signs that our new value proposition is resonating in a very different way with clients, and we believe this will cause them to really lean into our service. In recent months, we've gained access to higher level decision makers within several key clients, and in those cases, we are talking about future investments on a much larger scale. Based on these responses and the early results we've been delivering in our pilots, we are confident that we're on the right track. Transformation on this scale is never easy, especially in the public markets. Even though we're receiving stronger and more enthusiastic buying signals, our clients still need time to find budgets for pilots, review their results, and make sure they have the resources allocated in upcoming budget cycles.

Speaker 1

It can be difficult to predict the precise timelines for when these things will happen and to what degree. Now that I've provided that context, let me turn to the quarter itself. There are two key factors that explain our lower than anticipated performance and our guidance for the current quarter. Both of these are related to the broader transformation in our business. First, our two initial pilot partners for our new performance marketing model decided not to run additional campaigns in the second half of the second quarter, contrary to our expectations.

Speaker 1

Had this not happened, we believe our results would have come in above consensus. As of now, neither client has reactivated their campaigns in q three. Based on our most recent conversations, we believe both are happy with our initial results and planning to resume their programming. That said, given our experience in q two, the q three guidance we're giving today does not assume any participation in our latest performance marketing model from either client. With our first partner, they chose to hold off on further programming until they had a chance to review third party validation of our q one results.

Speaker 1

Given the magnitude of the investment we are now proposing, we understand why they wanna ensure that our new measurement methodology is corroborated by independent sources. We've been working on obtaining third party validation for several months, but the process has taken longer than expected. Formalizing partnership agreements, setting up the pipes, and getting the data to these third parties has taken time. I'm happy to report that recently we've received third party validation from a leading media measurement company. Their study shows that our campaign results are better than the data we reported using our own more conservative methodology.

Speaker 1

Based on these initial results, we are in active dialogue with our client about resuming and expanding their programming on the Ibotta Performance Network. We believe that having the ability to offer these periodic sales lift studies will build trust and help us more quickly drive alignment with other large CPGs in the future. I wanna underscore that our strategic partnership with this first client has continued to deepen even as we work through this temporary obstacle together. They continue to run non CPID related programming with us and cooperate with us on national marketing campaigns relating to those offers. With our second client, the challenges have been more administrative.

Speaker 1

They agree that our results have been strong across the board, but have needed more time to align all the necessary stakeholders and unlock additional budgets. Getting their attention has been particularly challenging in this political and economic environment, which is causing them to proceed with more caution when it comes to any net new expenditure no matter how promising the ROI. The bottom line is this. Progressing from initial enthusiasm about a pilot to rolling campaigns on a much larger scale requires navigating complex matrix organizations that can't always move as quickly as we would like. Chris Reedy and his team are doing everything possible to get this back up and running as soon as we can.

Speaker 1

To summarize, as I discussed during our q one earnings call, we delivered attractive cost per incremental dollar or CPIDS and incremental sales for both clients that were broadly in line with the results we had projected. The clients have been pleased with our performance, and they have already demonstrated a willingness to ramp up their investments on our network. As we went to take the next steps, we encountered process obstacles that postponed our efforts to turn on rolling campaigns with these clients. This is the reality of trying to shift a decades old paradigm and launch a new product that is designed to provide capabilities that do we do not believe exist within the CPG industry today. It takes time to become accepted as a new performance marketing channel and to tap into new and larger budgets even with senior executive support.

Speaker 1

The good news is that what we are providing has received very positive reactions across the industry, and we believe it's only a matter of time until that begins to flow through to our financial performance. The second key factor affecting our short term performance has been our ongoing commitment to improving sales execution and strengthening our go to market motion. In q three, we're implementing our reorganization of the sales department. We shifted from a territory based model to one grouped by industry subvertical, which is more akin to how sales teams operate in other areas of digital media. In addition, we have meaningfully reduced the account load for our enterprise sellers.

Speaker 1

We believe these changes will enable a much more consultative and client centric sales motion. We are now organized into two channels, enterprise and emerging, each of which has a leader. Enterprise is subdivided into four industry verticals, food, beverage, health and beauty, and household and general merchandise. The roles of our outside and inside sales teams have been clarified, and our quota system has been refined and improved. Chris Reedy has assumed responsibility for our b to b marketing function, which previously reported up to our CMO, Rich Donahue.

Speaker 1

David Parisi joined as SVP of enterprise sales in June, bringing with him valuable experience in the promotions industry as well as experience at Twitter. Christopher Boyd joined us as SVP of business marketing from Seeker in April, leading all of our sales enablement and training. Andrew Altman joined us as SVP of sales operations from LinkedIn in August, leading our revenue operations function, something that we did not previously have at Ibotta. What these new leaders all share in common is that they've all seen excellent sales execution at scale and operated successfully in the digital media industry. They are helping us raise the bar across the board.

Speaker 1

At the same time, we're continuing to learn each day about both the product capabilities and go to market processes we need to make this business transformation successful. Each top to top meeting yields new learnings, which we are continuously incorporating into our road map and pitch materials. These kinds of organizational changes can be disruptive in the short term and have resulted in turnover. Our new employees are coming up to speed and ramping to be in a position to maximize revenue from their clients. In addition, our reorg has caused us to transition a significant number of accounts from one seller to another.

Speaker 1

Many of our top 50 clients have or are anticipated to have a new client partner rep by the start of the fourth quarter. Over the past year, accounts which have had a rep handoff have generated a change in revenue that is 16% lower than accounts which have not had a sales rep change. As our new structure takes hold, we expect to see much greater continuity here, reducing disruption in sales execution. Despite the revenue challenges we've faced over the last two quarters, the top to top conversations we've had since we last reported earnings have only strengthened our conviction that Ibotta is on a very exciting trajectory. We have held approximately 20 top to top meetings over the last few months with some of our largest clients while at the same time reaching out to about a 100 of our smallest emerging clients.

Speaker 1

Out of those 20 conversations, we've signed pilot agreements with six clients, and another 11 are moving toward a pilot in two h. Our outreach on the emerging side has been much more light touch, but our progress there has been similar in terms of the number of clients that have agreed to pilots and those that are moving toward one. Now that we have third party validation from an industry leading measurement provider, we're able to provide timely lift studies for pilots. We believe this will be a big unlock with our existing clients and new clients. In some cases, we believe that even just knowing that a third party measurement tool is available will help move our conversations down the funnel faster.

Speaker 1

On the publisher side of our business, we rolled out our offers to a majority of DoorDash customers during the second quarter. We are also working more effectively with existing publishers like Walmart to drive greater program awareness and increase adoption of digital manufacturer offers amongst in store shoppers. Examples of how we've done this in the last quarter include Walmart rolling out the ability to self ID using a phone number at checkout in Walmart stores all across The US and a stronger call out of manufacturer offers and Walmart cash on all self checkout screens. In summary, we're excited to begin rolling out our new capabilities more widely. But as I said on the last call, a paradigm shift like this takes time.

Speaker 1

We're working to reshape entrenched habits and change the minds of clients who are accustomed to measuring promotions with very imprecise tools. So far, those we have approached have been very receptive to our new performance marketing solutions. We're encouraged by this early traction and believe the transformation we're undertaking will create value for our shareholders, clients, publishers, and consumers. I'll now turn it over to Valerie to review our q two results and q three guidance in more detail. Valerie?

Speaker 2

Thank you, Brian, and good afternoon, everyone. I would also like to welcome Matt Puckett to our team. In summary, we delivered revenue and adjusted EBITDA that were 48% below the midpoint of the guidance range we provided on our first quarter earnings call. Redemption revenue underperformed our expectations, while operating expenses were slightly lower than forecasted. Let's break down our revenue results in more detail.

Speaker 2

Revenue in the second quarter was $86,000,000 a decline of two percent year over year. Within that, redemption revenue was $73,200,000 down 1% year over year. Third party publisher redemption revenue was $48,600,000 up 17% year over year, while DTC redemption revenue was $24,700,000 down 24% year over year. Ad and other revenues, which now represents 15% of our revenue, were $12,800,000 down 8% year over year. Turning to our key performance metrics.

Speaker 2

Total redeemers were $17,300,000 in the quarter, up 27 year over year. We saw healthy growth in third party redeemers across EIPN on a year over year basis, highlighting the continued strength of the demand side of our network. Growth was driven by the launch of Instacart during the 2024, the launch of offers to the majority of DoorDash customers in the second quarter and like for like growth at our existing publishers. Redemptions per redeemer were 4.6, down 21% year over year, driven by the quantity and quality of offers available to each redeemer as well as the growth in third party redeemers, which have a lower redemption frequency as compared to our D2C redeemers. Redemptions per redeemer on our third party publishers were down 15% year over year in comparison.

Speaker 2

Redemption revenue per redemption was $0.91 down 1% year over year, primarily reflecting a mix shift toward third party redemptions. On our third party publishers, this metric was up 4% by comparison. As a reminder, redemption revenue per redemption can vary quarter to quarter based on seasonal patterns and variations in offer mix. Now let's turn to the cost side of our business. Non GAAP cost of revenue was up $5,400,000 versus a year ago, driven by an increase in publisher related costs, higher amortization of capitalized software and increased variable technology costs.

Speaker 2

This resulted in Q2 non GAAP gross margin of 80%, down nearly six sixty basis points year over year. Non GAAP operating expenses as a percent of revenue were 61%, an increase of approximately 180 basis points year over year. Within that, non GAAP sales and marketing expenses increased by 1%. Non GAAP research and development expenses decreased by 9%. Lastly, non GAAP general and administrative expenses increased by 10% or $1,500,000 We delivered Q2 adjusted EBITDA of $17,900,000 representing an adjusted EBITDA margin of 21%.

Speaker 2

We delivered adjusted net income of $14,900,000 and adjusted diluted net income per share of $0.49 Our adjusted net income excludes $13,600,000 in stock based compensation, dollars 600,000.0 in restructuring charges and includes a $1,800,000 adjustment for income taxes. We ended the quarter with $250,500,000 of cash and cash equivalents. In Q2, we spent approximately $67,500,000 repurchasing approximately 1,400,000.0 shares of our stock at an average price of $46.59 We had 29,900,000.0 fully diluted shares outstanding at the end of the quarter. In June, our Board authorized $100,000,000 increase to our share repurchase program. As a result, at the end of the quarter, we had $128,600,000 remaining under our current authorization.

Speaker 2

Turning to our Q3 guidance. We currently expect revenue in the range of 79,000,000 to $84,000,000 representing a 17% revenue decline at the midpoint. We expect Q3 adjusted EBITDA in the range of $9,500,000 to $13,500,000 representing about a 14% adjusted EBITDA margin at the midpoint and a 7% decrease in the adjusted EBITDA margin relative to the second quarter. I'd like to provide you a little more color on our Q3 outlook. Combined with the short term challenges in scaling up our new performance marketing clients as well as a disruption caused by the sales reorg that Brian discussed, we are guiding to a year over year decline in revenue in the third quarter.

Speaker 2

We continue to make improvements to our performance marketing platform with regards to product, go to market and measurement, but we are still in the early days and thus are not building in any performance marketing campaigns into our guidance that are not already in flight. A few other housekeeping items to mention. We anticipate that operating expenses in the fourth quarter will increase sequentially by several million dollars driven by our investment in our sales organization and seasonal marketing expenses. We are now anticipating de minimis cash taxes driven primarily by our expectation for lower full year performance as well as due to impacts from the new tax legislation. With that, operator, let's please open it up for Q and A.

Speaker 3

For today's Q and A session, we will be utilizing the raise hand feature. If you would like to ask a question, click on the raise hand button at the bottom of the screen. Once prompted, please unmute yourself and begin with your question. We ask that you please limit to one question and one follow-up. We'll pause a moment for the queue to assemble.

Speaker 3

Our first question will come from Ron Josey with Citi. Your line is open. Please ask your question.

Speaker 4

Great. Thanks for taking the question. Brian, I wanted to understand maybe a little bit more on just the rollout of CPID, and would love to hear, you know, the the the better results of the third party data provider suggested were coming in better than your results. Talk to us more about, you know, what what they were seeing and and and sort of what this means going forward. And then on the six new pilots that I think you mentioned are are coming on here in the back half, you know, how do they compare to the pilots that you were seeing earlier on in the year as CPID continues to evolve?

Speaker 4

Thank you.

Speaker 1

Thanks, Ron. I appreciate those questions. Let me quickly address them. On the rollout of CPID and the results that we've seen, the big breakthrough here is the ability to measure statistically the difference between an exposed and an unexposed audience in a same time period. That's been the gold standard for media measurement for years.

Speaker 1

It's never been provided in the promotions industry, and it's also never been provided in near real time. That is so what we've done is gone to these third party companies that do the media list studies and said, we'd like to replicate that approach with digital promotions. And they've used their own data. They're entirely independent panel of data. They have used their own methodology with their own statisticians.

Speaker 1

And what they're doing is saying there's a statistically significant lift, and therefore, we can say that the promotions are causing a significant amount of incremental sales. They then break that out by net new households gained, buy rate increases, basket size increases. And, again, totally independent of the analysis that we're providing, they can then calculate a total incremental sales and a CPID. And what we're seeing when you look at that is that those are more favorable, thus suggesting that Ibotta is conservative. And we've seen that now consistently across a number of studies with this provider that I alluded to.

Speaker 1

On the question of the six new pilots and how they compare, I would say that we have a mix of smaller, emerging, faster moving companies and some of the largest CPG companies in the world, which is new from the last time we spoke. And the conversations that we've had, particularly with the larger companies, are now breaking out of conversations with the promotions team. And for the first time ever, we're talking to the people who manage multibillion dollar sales organizations and the p and l. They're simply unfamiliar with Ibotta entirely. And when we presented our new capabilities to them, it's been met with real enthusiasm leading to pilots that are that are slated to go out.

Speaker 1

So I think that we'll have to see how those perform. And keep in mind, we have 2,200 brands and, you know, hundreds of almost a thousand clients, 800 or so clients. So we have a long way to go to roll this out more broadly, but we continue to choose partners we think we can gain the most valuable feedback and where the size of the prize is material.

Speaker 4

Super helpful. Thank you, Brian. Thanks, Ron.

Speaker 3

Our next question will come from Eric Sheridan with Goldman Sachs. Your line is open. Please ask your question.

Speaker 5

Thanks so much for taking the question. When maybe it's a two parter. When you think towards the remainder of this year, how should we be thinking about the pieces of this strategy that still need to be put in place to execute as you move out of 2025 and into 2026, sort of paraphrase that as the things inside your control? And then second, when you think about that timing or duration narrative of the things inside your control, how much are they aligned against budget decisions that tend to be very lumpy and and concentrated around the November, to February time frame when when people are sort of setting one year forward priorities just so we can align up the the typical cadence of marketing spend with the things inside your control on the strategic side? Thank you.

Speaker 1

Thanks, Eric. The remainder of the year, what needs to be done? I think you can group this into three broad categories. First, we need to consolidate the benefits of our sales execution, including our reorganization. We've completed the reorganization, but there are still unfilled positions that need to be filled.

Speaker 1

People need to be trained in these new go to market approaches and new products. That remains, I think, something that's within our control and can be done by the end of this year. Second, you have the implementation of the new go to market, and that is something that we we need to broaden the aperture beyond the small number of clients that have have been pitched on this new capability. And to do that, you know, we're gonna gain learnings. And it, honestly, it's unclear how long it's gonna take for us to dial that.

Speaker 1

It could be that that goes very smoothly, and we're able to, you know, be in a position at the end of the year where that is largely how we're gonna continue to go to market in 2026 or maybe that we gain learnings and need to modify that, but that's largely within our control. And then there are some product and tools challenges that we need to resolve. So it's it's one thing to be able to create these calculations, predicted incremental sales and CPIDS. It's another to be able to do that at the full scale of our entire business in an automated fashion so that you don't need manual calculations that take time so that they are able to be done in flight so that all of the reporting can be automated so our sellers aren't spending time, and our client analytics team isn't spending time doing that instead of selling and mastering the businesses of our clients. So there are productionization, if you will, and the scaling up of this does require some things that we hope will be will will have made significant progress by the end of this year.

Speaker 1

But, you know, it being a product, we have to wait and see how much of it we get done. I think we've identified what all those are and have a clear sense of what needs to be done. And, of course, you know, products meet the real world and and are also refined, but I think that is on our racket, broadly speaking. The question of how that lines up with budget allocation and and, you know, you you asserted November to February time frame, you're right. There are a variety of different fiscal calendars across all of our partners.

Speaker 1

Many of them are actually midyear to midyear, you know, June to July, etcetera, rather than calendar year. But we are we are finding that the the companies that we're pitching this to right now say, this is a good time to be talking about this. You know, we're starting to think about our our annual operating plan for 2026. The reality is, though, we will probably not be able to get this out to all of our clients before their next annual cycle. And what we've seen is that it has taken, you know, anywhere between nine to twelve months so far, and we'll see if past is prologue.

Speaker 1

But with these first two major companies, you know, we began this effort in October, and we're coming up on nine months. And we're not live with them right now. So that is just a matter of socializing the opportunity, running a pilot, having them interpret the results, perhaps get a third party study, advocate for allocation of resources internally, and that might be, you know, inter interim resources, or it might be part of the budget allocation process. But I do think that that is why I would say, you know, each client may take the arc of closer to a year to scale to something materially larger than what they've done in the past. And I think, you know, we're not going out to all the clients today, so it'll be staggered.

Speaker 1

But I do believe that some of the clients that have heard this story are quite a bit further along in that process, which gives me hope that we'll have, you know, something to show for it before a year plus from now.

Speaker 5

K. Thank you.

Speaker 3

Our next question will come from Mark Mahaney with Evercore. Your line is open. Please ask your question.

Speaker 6

Okay. Let's see here. Hopefully, you can hear me. I wanna go back to some of the original relationships you had, particularly Walmart, and just get us a sense of how those, the retention you've had with those, the rollouts you've had in terms of the the loyalty programs with them and just, you know, some of the core things that we looked at when we first looked at Ibotta, how those are faring? Thanks.

Speaker 1

Thanks, Mark. The publisher side of our business is a real bright spot, especially with our existing publishers. We've picked up steam and gained momentum in terms of our the tightness of our collaboration and these efforts they're making to increase awareness and decrease friction in terms of using the programs that feature our digital manufacturer offers. With Walmart, for example, we've been collaborating ever more closely across the board, ranging from how they communicate with their customers at every touch point, you know, digitally and in the store beyond just search results. You'll now see that there are certain display ads that have a reference to a relevant digital manufacturer offer that wasn't true before.

Speaker 1

They're badging other forms of digital media with something that indicates that there's a digital manufacturer offer. We're collaborating with them on routine communications that can notify people of personalized savings, decreasing friction in in using the phone number instead of the app, putting it on the self checkout, thinking through how we can be helpful with other strategic priorities of theirs, which will make these bubble up much more in the store. That's been a real commitment that's that's been noticeable from Walmart. I think, you know, we've hit a major milestone in how much Walmart cash has been earned. I think it's clearly helping them drive loyalty in in you know, online and in store, and they're leaning into it more.

Speaker 1

So I'm very pleased with how that's going. I think with with regard to the the adoption of it, you know, it continues to grow very nicely and be cited as as a, you know, a bright spot in in shot in the shopping experience at Walmart. With regard to other publishers, you know, we continue to see those roll out and grow and contribute to the the Redeemer base. Broadly, the third party Redeemer are are growing nicely. Course, d to c is is not growing as much, and that is, you know, we think, purely a function of the low number of redemptions per redeemer.

Speaker 1

And when that inventory of offers increases again, we've seen that be very resilient. But I think, you know, the pipeline of publishers is also strong. I have nothing to announce right now except to say that we have terrific momentum, we believe, internally, and, you know, that is not our problem right now. We we feel like the scale of our network is un unparalleled. You there is not another tool that you can use to drive more incremental sales if you are a CPG brand manager, full stop.

Speaker 1

We are we are out in front and widening that lead. What we need to do is unlock offer supply, and I think, you know, that's why the focus of my remarks was there. But but it is true that this has been a bright spot.

Speaker 6

Okay. Thank you very much, Brian.

Speaker 1

Thank you, Mark.

Speaker 3

Our next question will come from Ken Groszky with Wells Fargo. Your line is open. Please ask your question.

Speaker 7

Hi, thank you for the time. I appreciate it. Maybe kind of following up on a couple of these questions. Could you just talk about the environment more broadly, Away from the CBID side, but more the traditional IPN, what are you hearing from the supply side, not the publisher side, but the supply side on promotions? Can you talk a little bit about the environment?

Speaker 7

Are you seeing reticence among some of those to increase supply? My understanding is over the past years, there have been times where you would see new budgets come in for the back half at a midyear point. I'd just be curious as to see about that. And then the second thing is, maybe back and this kind of circles around to your investment levels and the marketing. How do you think about the right level of investment?

Speaker 7

How should we think about the right level of investment over the next, say, twelve to eighteen months to get the CBID to get everything you need to kind of validate the CBID approach and really drive drive market adoption there? Thank you.

Speaker 1

Yeah. Those are the right questions for sure, Ken. Thank you. I think on the first one, the environment, you know, I didn't spend much time on that in my remarks, but it's true that the macro is not helping us right now. There are a few of our larger clients who have taken an approach of pausing on promotional spend in the back half, taking a wait and see approach, having to do with the the economic climate, the the tariffs, the political climate, in some cases, of food regulation on the horizon.

Speaker 1

I think that that they also face just difficult, you know, growth trajectories, a lot of these CPG companies. And, you know, there have been efforts to be really careful on the bottom line of their business by cutting and pausing costs. And I think, you know, traditionally, promotions have been seen as a as a discretionary cost. We hope to convince them, and we are convincing them that, in fact, we are one of the best ways to inflect top and bottom line growth, and that this should lean in now more than ever into our platform. But at a time when, you know, they are pulling back on discretionary spending, they're demanding more rigor and more credibility and and measurement and and clear ROI.

Speaker 1

And so I think that, you know, we started this journey late last summer, and I think it's good that we did because we're now kind of closing in on a year of real aggressive r and d, and we find ourselves, you know, being able to respond to all the things that we're hearing on the supply side with direct new fresh products that address those concerns. So, typically, when someone says, I can't give you a multiple of what I've given you in the past, their explanation is that they don't believe that the promotion is delivering profitable revenue growth. They fear that it might be subsidizing people who already would have bought the product, and, you know, they have not seen a credible form of measurement that is graded by a third party ever in the past. And so when we go in and hear that complaint, you know, or valid criticism rather, we say, that's exactly right, and that's why we spent the last year innovating and bringing you something that that can give you control. So it's not a binary question.

Speaker 1

It's not, are promotions profitable? It's how profitable would you like them to be? The more profitable they are, the lower the scale they can deliver in terms of top line revenue, the less efficient and less profitable, you know, they are gonna deliver more top line revenue. And so educating them on that has been very helpful. I think being able to show them, hey.

Speaker 1

This is how many dollars of incremental sales you can come get from us at this cost. Do you wanna buy that that bundle of incremental sales? Really reframes the conversation and and and without, you know, overpromising because we truly don't know, you know, how this will roll out across our entire client base. I can tell you that the tenor of these conversations, Ken, is categorically different than anything I've seen in my last fourteen years, and that is because we are starting by by thinking about what their problems are and bringing a solution that is much more credible and and and saying, you know, don't take our word for it. Yeah.

Speaker 1

You can measure it. And and those things are really landing and resonating, and I think we're just gonna have to wait to see that flow through. With regard to investment levels over the next twelve to eighteen months, yeah, I think we are investing very, very heavily in r and d. I mean, we are spending the overwhelming majority of our time on the on the technology side of our business thinking about what's next that I bought and this whole new paradigm. And, you know, building tools and building systems that allow our sellers to to be more efficient, internal go to market systems, things that also are client facing tools that are client facing.

Speaker 1

And I feel like the rate limiting step on innovation at this point is not the number of dollars or the number of people working on that at Ibotta, but just the amount of, you know, noncompressible time it takes to incorporate learnings in an iterative product cycle. And we're moving very fast. I think I described this as feeling like we're on a vertical learning curve last quarter. It continues to feel like that, and I think that's exciting, and we're getting more and more and more proof points. The one place we may, you know, look to continue to augment is in the analytics client analytics function.

Speaker 1

As we automate some of the processes we have, we should be able to get our people focused more on truly client facing analytical assignments rather than sales support functions. This is just an example of where resolving tech debt, you know, pays off later. And so we're taking this pain right now. In the short term, I think it'll really begin to bear fruit.

Speaker 8

Thank you.

Speaker 3

Our next question will come from Chris Kontarc with UBS. Your line is open. Please ask your question.

Speaker 8

Great. Thanks for taking the question. I just want to touch on general merchandise here for a second. Anything that you're seeing here that would indicate that this part of the client base is reacting differently to the current environment versus your CPG brands? And same question, just as it relates to the CPET offering, are they requiring similar amount of pilot period and third party testing?

Speaker 8

That'd be it for me. Thanks.

Speaker 1

Thanks, Chris. I think that's one where the impact of tariffs has been more pronounced, where there's more exposure to international supply chains than you would see in the American food, fast moving consumer goods brands. And so if anything, those those some some of those trends I alluded to creating some broader reticence about discretionary spend are a little bit more pronounced. That said, we have taken this CPID, what we call now the performance marketing product. We've taken the performance marketing product out to a number of general merchandise brands and had a very positive reception to that.

Speaker 1

What we need to go and further validate is how that will perform when they run a larger number of pilots. There are many categories where we haven't run pilots yet. You have to have a certain amount of data in order to make the CPID real time measurement work and be statistically significant. And, you know, the more purchase cycles there are, the more you have the opportunity to benefit from a follow on purchase that is not on offer. So for instance, if, you know, you're doing an offer on a Barbie Dreamhouse, you can't count on someone coming and buying necessarily another Barbie Dreamhouse, but do they come back and buy other Barbie products that aren't aren't on sale, and how much does that contribute to the overall value of the program relative to the cost and and and so forth.

Speaker 1

So there are some real unknowns there in terms of how this model is going to map onto different formats. I would say, broadly speaking, though, we continue to be excited about general merchandise. This is, you know, an industry that has never really had promotions at all, digital promotions. And so to to bring them something that's this innovative as their first exposure to the category is just creating even more excitement about giving it a try. And I think one of the things that's increasing our credibility is, you know, no longer are we sending a recap deck afterwards where they find out, you know, weeks after the campaign whether it worked or not.

Speaker 1

They can see on a regular basis how it's going just the way they would if they were buying on, you know, The Trade Desk or Facebook or Twitter, and they can make changes and optimizations while that's happening. And that has been a source of, I think, significant excitement as well from from both general merchandise and more broadly.

Speaker 8

Got it. Thank you very much. Thanks, Chris.

Speaker 3

Our next question will come from Bernie McTurnan with Needham. Your line is open. Please ask your question.

Speaker 9

Great. Thanks for taking the question. Two for me. Maybe just to start, Brian, just interesting you've had knee jerk reactions on Amazon moving to free same day delivery on perishable items or grocery, what it means for the category more broadly and and impacts on Ibotta potentially. And then second, also in your prepared remarks, Brian, you mentioned how you would have, beat consensus in the quarter, heading up in those two accounts that that, stopped spending in the second half of the second quarter.

Speaker 9

I mean, does that imply that VC declines were on track to spend, like, a high single digit millions of dollars in the quarter?

Speaker 1

Thanks, Bernie. Never any flies on you. I appreciate those questions. With regard to the first one, yeah, look, I think the whole industry regards same day delivery and speedy delivery as kind of table stakes at this point. I know Walmart has made great strides in the number of products that you can get within twenty minutes.

Speaker 1

It's pretty remarkable. I think that, you know, we are a totally omnichannel solution, and so we don't you know, we're actually excited as the industry moves more toward ecommerce and sort of buy ahead, pick up in store. You know, we're integrated into those user experiences. So I think that's broadly positive for us. And and as we get more, you know, marketplaces that do that kind of same day delivery, like DoorDash and Instacart, you know, we think that perhaps the other ones that are out there will will see the benefit of what we offer and and will be a big part of the consumer adoption of things like free same day delivery.

Speaker 1

On the second question, you know, yeah, we we missed by by a low single digits percentage. I said we would have been ahead of consensus. You can do the math on that. And what I can tell you is that, you know, we wouldn't have provided that in our guidance unless we had an extremely high degree of conviction that it was gonna be in there. And sometimes, you know, after you provide guidance, the circumstances change in ways that are really hard to anticipate.

Speaker 1

And that sounds extremely lame and unimpressive, but that is what happened. And so having learned our lesson on that and feeling chagrinned about that, you know, we're gonna take a more conservative approach with regard to the current quarter and the fourth quarter.

Speaker 9

Got it. Thanks, Brian.

Speaker 3

Our next question will come from Andrew Boone with JMP Securities. Your line is open. Please ask your question.

Speaker 8

Thanks for taking the questions. I wanted to go back to your answer for Ron's question and really double click in terms of measurement and automated processes with third parties. Can you help us specifically understand what you need to do there to unlock incrementality measurement that's more automated? And then what kind of timeline should we expect before that really gets mature and fully implemented across your guys' processes? And then, Brian, just going back to some of your comments earlier, it it sounds like there may be, you know, a six, nine, maybe even a year long lag in terms of kind of the comfort of a CPG brand.

Speaker 8

If I kind of extrapolate that across the model and kind of this transition, it is should we not expect growth to really start to reaccelerate for this to get going until 2027? Is that fair, or is it is it sooner than that? Thanks so much.

Speaker 1

Yeah. Well, that's great. Thanks, Andrew. Let's start with your first cluster of questions regarding, you know, measurement automation. I wanna distinguish between two two topics.

Speaker 1

The measurement that we provide through Ibotta's tools, which is allowing you to have essentially a free rolling lift study, that is something that is very far along the path. We are providing that to several clients now on a a regular basis with sort of a color coded how's it going and optimization opportunities. But to do that at the scale of all of our clients will require us to continue to develop some things on our road map in the back half of this year. We're hopeful that we can offer that to all of our clients, you know, heading into 2026. With regard to what I think you're asking about is sort of the third party measurement side and how can we speed that up or automate that.

Speaker 1

A lot of that is very front loaded effort, you know, reaching out to them, explaining that the promotions industry has never been treated as media, has never had a third party list study, describing the financial opportunity that might exist, making sure they understand the data assets we have, going through a process that allows them to, you know, basically tailor what they do, what's industry standard. They can apply it, you know, in their their unique approach and datasets to to the the circumstance of Ibotta. That has taken time, a business development timeline. Once that's in place, you know, you do a few studies, you work out some kinks, and then it should be something that is a matter of weeks to generate a study. Obviously, we would ultimately like to get that down to where somebody could generate a study in a day or even mid campaign rather than having to wait until after the campaign to generate a study.

Speaker 1

That is not typical in the media industry, but I think what's really important here is that we think outside the box because we have this powerful tool in terms of, you know, optimizing this price lever that is that's really, really valuable. Right? And so the sooner you can get that read, the more you can kinda build models that that can solve for the the CPID or the incremental sales. That's what's so cool about the Ibotta offering, right, is it's sort of acting as the only real time signal of sales lift in the CPG industry. And I just wanna underscore that this is, like, the last industry where this concept has not landed.

Speaker 1

Right? Virtually every other industry, digital sales industry in particular, you have, you know, basically instantaneous knowledge of whether or not an ad resulted in a conversion. And in those industries and all those forms of media, open web, social media, walled garden, doesn't matter, that has become a very bankable place where people invest, and they know exactly how to invest, and they do so on a rolling basis. Here you have this industry, 1 point some trillion dollar industry, $200,000,000,000 being spent on marketing and trade with annual planning and annual measurement or half annual measurement with models where there is no capacity for performance marketing. So we believe we're following a playbook that is pretty well trodden or well well played, I guess.

Speaker 1

So we're really excited about that, and it's it's you know, I think speeding up the process of third party measurement is not at the top of the list of demands from our clients. So I don't think that's a huge short term priority, but it's more of a gut check periodically. To your second question, I think it's that's really the operative question. And, you know, I think it's difficult when you're in the middle of a paradigm shift to say with any credibility, I know exactly how long it's gonna take until there's a a step function increase in our in our revenue. And so we're we're resisting, you know, the the temptation to speculate on that.

Speaker 1

But I do think it's it is noteworthy that, you know, we're learning that it's taking nine to twelve months to get from what we believe will be you know, and we're not all the way there yet with these two clients, like like I said. But assuming we get them back as we expect to, and let's say that takes about a year, you know, from hearing about it to testing it, validating it, and really going big on it, you know, you then have to factor that in. And the question becomes, how impactful are those early adopters in in their level of investment? And does that, you know, really lift the the growth of the business significantly, or do we need to wait until we're kind of in the middle of the bell curve and we've crossed further into that chasm in in the business sense that is until we can see a really significant benefit in terms of growth? But I think that we'll we'll have to play it by ear.

Speaker 1

I I think the most I can say is just that, you know, we're we are prioritizing this and investing in this because we think that this ultimately results in a a real step function change in the level of investment. And whether it's quarter x or quarter y, there will come a time where we show a a very material change as a result of these investments.

Speaker 8

Thank you.

Speaker 3

Our last question will come from Andrew Merrick with Raymond James. Your line is open. Please ask your question.

Speaker 10

Hi. Thanks for taking my question. On the CPID framework, so with some of these budgets that you might have had maybe being a little bit knocked loose in the in the transition, do you have a sense of where they're going? Are are CPGs maybe allocating them to other performance channels requiring a win back at some point, or are they just kinda being parked in the meantime? Thank you.

Speaker 1

Thanks, Andrew. I think it's a a combination. There are certainly situations where these budgets are being parked, and we're being told, listen. It's not you. It's us.

Speaker 1

We have a freeze on all discretionary spend for the near term. And sometimes they'll unfreeze that, and we'll see significant investment. This third quarter last year, we had some quite exceptional heavy investments that created a very hard comp for us. So if you look at you know, we had these chicken wars that happened in the third quarter of last year where the leading providers of chicken products decided to to really invest millions of dollars in that quarter. We had another one of our top five clients spend, you know, about 50% more than they typically would in a quarter.

Speaker 1

So there is lumpiness, and sometimes that benefits you. You'll recall last third quarter last year, we guided down and then beat by, like, 7 or $8,000,000 because in the second half of the third quarter, that happened. So one of the reasons why we're we're transitioning our business model is to address the desire for much greater predictability and forecastability. The more people are investing on a rolling basis, the more we have a really clear understanding of of what we can expect in a given in a future quarter. There are, though I don't wanna shy away from and and own the fact that there are situations where we could have won business and did not because we didn't have a person manning the account.

Speaker 1

We didn't have our best foot forward in an RFP. And, look, a lot of this happened in November, December, and we didn't really realize until now the effect that might have on, you know, the knock on effect of that of of getting the up for grabs dollars, you know, that that have we been building those relationships from October, November, December, January, February, and people mastering those businesses to continuity, you know, we would have been able to to win that business. There are plenty of accounts that have grown in spite of that level of discontinuity. But, you know, just yesterday, I was with a partner of ours that told me they've had multiple Ibotta client reps and that it's frustrating to continue to explain their business to Ibotta, and yet they've spent more year on year with us and are excited to spend even more. So I think it's a mixture of those things, but I think we have to own the fact that, you know, we have to settle down and and have continuity with our people, our process, our product, our message, and we have to get much more client obsessed and really understand, you know, how to speak their language, how to provide what they're looking for in that moment, how to be proactive, and just break out of the notion that we're a sort of vendor that they can turn to for very specific narrow purposes and reframe ourselves as, hey.

Speaker 1

We are the answer to your prayers. You need more top and bottom line growth right now. We can get it for you, and we can allow you to be very nimble. So I think we're gonna find we'll see. But I think we're gonna find that while that's the party line with our current position, we will be able to get beyond that party line when we reposition the way they think about our value proposition.

Speaker 1

Got it. Thank you. Thank you. Appreciate it, Andrew.

Speaker 3

This concludes the q and a section of the call. I would now like to turn the call back to Brian Leach for closing remarks.

Speaker 1

Thank you very much to everybody for participating on today's call. We'll continue to be as transparent as we possibly can regarding the transformation of our business. We're super excited about the future of Ibotta. We have a lot of conviction that we're on the right track. I'm incredibly proud of our team that has had courage to lean into this paradigm shift, and I think that is ultimately what's gonna separate our company from the other companies that have not had success breaking out of this category.

Speaker 1

The things we're doing and trying now and bringing to market have never been done and tried and brought to market before. The responses are are really clear and consistent. And as an entrepreneur and founder who's been doing this for now nearly thirteen and a half, fourteen years, I believe that we're seeing something that is going to be a a, much more strategically valuable asset and tool and partner for America's leading CPG brands and emerging brands. Thank you very much, and we appreciate your time and attention.

Speaker 3

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

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