IBTA - NYSE

Greetings, and welcome to the Ibotta's First Quarter 2024 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Shalin Patel, Head of Investor Relations. Thank you, Shalin. You may begin.

Good afternoon, and welcome to Ibotta's Q1 2024 Earnings Conference Call. With us today are Bryan Leach, Founder and CEO; and Sunit Patel, CFO. Today's press release and this call may contain forward-looking statements, including our guidance for Q2 2024 that are subject to inherent risks, uncertainties and changes and reflect our current expectations and information currently available to us, and our actual results could differ materially. For more information, please refer to the risk factors in our recent SEC filings. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures and should be considered in addition to and not as a substitute for our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on our Investor Relations website at investors.ibotta.com. Also, during the call today, we'll be referring to the slides that are shown on our website. Unless otherwise noted, revenue and adjusted EBITDA comparisons to prior periods are provided on a year-over-year basis. Lastly, references to non-GAAP revenue growth reflect the exclusion of onetime breakage revenue benefit in 2023. This is due to an update we made in 2023 to fix the software error to correctly charge maintenance fees to inactive direct-to-consumer redeemers, which resulted in the short-term benefit to GAAP revenue last year. Please see Slide 31 in the appendix for more detail. With that, I'll turn it over to Bryan.

Thanks, Shalin, and good afternoon, everyone. Welcome to our first quarterly earnings call as a public company. Let me begin by saying thank you to all our employees, clients and most of all, the millions of consumers who use our services to save money and discover new products. To all our new investors, thank you for spending time getting to know our company, for sharing advice that will make us stronger and for choosing to partner with us. Given that this is our first earnings call, I'm going to take just a few minutes to provide a brief background on Ibotta and what makes us so excited about the future of our company. We began our journey 12 years ago in the basement of a 19th century fire station in Downtown Denver. Our first product was a free mobile app that allowed consumers to earn cash back rewards on everyday purchases in the grocery store. Previously, consumer packaged goods companies, CPG, did not have a reliable way to efficiently promote their products directly to millions of consumers via a single mobile application that worked across major retailers. Because we were outsiders who did not come from the coupon industry, we ask ourselves, if we could design a new system for promoting products using the latest technologies and aligning everyone's incentives, how would that change the way promotions have been delivered for the past 140 years? We started by introducing a success-based business model for CPG brands. For the first time instead of paying for impressions, clicks, clips or print, CPG brands could pay on a fee per sale basis, meaning only when our campaign led to a verified sale of their product. And instead of needing to reimburse retailers for the discounts they provided at checkout using an antiquated coupon clearing house, we paid consumers' digital rebates that went straight into their PayPal accounts without the retailer needing to discount the product at all. Over the years, we've grown the Ibotta app to over 50 million registered users and American consumers have earned over $1.8 billion in cash back rewards. Our direct-to-consumer properties have since expanded to include our website and our web browser extension. In addition to generating revenue, Ibotta's D2C products are strategically important because they allow us to experiment with new kinds of AI-driven promotional techniques. They help us attract a much larger quantity across retailer and national offers than our competitors, and they form the backbone of our unique data set across retailer item level purchase data that can be tied out to millions of individual consumers. Beginning in 2020, we realized that while our CPG brand clients loved our pay-per-performance model, in order for them to view us as a primary pillar of their marketing strategy, they needed us to deliver dramatically more scale. To achieve this, we took the technology underpinning our direct-to-consumer products and turned it into the foundation of what we now call the Ibotta Performance Network or IPN. The IPN is a first of its kind tech platform that allows CPG brands to distribute their digital promotions to tens of millions of American households in a coordinated way. Through our network, marketers can reach consumers on a variety of different websites all at once, and they can manage their campaigns through a single interface called the Ibotta Partner Portal. Our cloud-based technology allows us to ingest and process vast amounts of cross retailer item level purchase data. And this valuable data set powers proprietary AI models that help us put the right offer in front of the right consumer at the right time. Each content distribution point or node on the network is called a publisher and our original D2C app is now one of many publishers on the IPN. We also have a variety of third-party publishers that hook up to Ibotta's network for 2 main reasons: first, to gain access to Ibotta's unique selection of digital offers; and second, to leverage our AI-enabled offer delivery technology and analytical tools. Partnering with Ibotta helps publishers build loyalty with their consumers, grow their basket sizes and increase trip frequency in their stores and on their website, all at no cost to them. As you'll soon hear from Sunit, these third-party publishers now account for a majority of the offer redemptions on our network. Our largest third-party publisher is Walmart, which relies on Ibotta to deliver digital manufacturer offers that appear on Walmart's website in white label fashion. That means consumers can earn Walmart cash regardless of how they shop in-store, online, buy ahead, pick up in store without needing to create an Ibotta account. Ibotta has an exclusive relationship with Walmart, meaning that all categories of products, we're the only company that manufacturers can use to deliver item-level promotions on Walmart's digital properties in the U.S. Walmart's program rolled out to 100% of consumers with the Walmart.com account last year, and the program is growing steadily since then. We continue to work closely with our counterparts at Walmart to prioritize the initiatives that we believe will help grow redeemers and redemptions per redeemer as quickly as possible. In addition to Walmart, we also powered digital loyalty programs for other leading retailers such as Dollar General, Kroger and Shell. Our team is constantly working with each of these publishers to help them improve their loyalty program, add more redeemers and grow redemptions per redeemer. At the same time, our team of sellers and account managers focuses on sourcing digital promotions from the world's leading CPG brands. Our goal is to grow budgets within our current CPG brands, add new CPG brands with the clients that we already work with, add new clients and expand into new categories outside of groceries, such as pet, toys and other general merchandise. Year-to-date, we've had particular success in expanding our general merchandise content to include offers within automotive, home improvement, video games and more. In terms of our progress with new partners, users of our various Ibotta properties might notice that nearly 50 new partnerships have been formed in 2024 with new CPG and general merchandise brands such as Jockey, Philips, Castrol, Alcon, PowerStop and Solo Cup. Today, we have more than 2,400 CPG clients. With our campaigns, our clients typically see strong incremental sales and high returns on their investments. This explains why we've retained 60% -- sorry, 96% of our top 100 clients last year, and why we believe we represent a compelling alternative to other marketing channels such as social media, search, display ad, linear television, streaming television and other channels that are not performance based. Our network benefits from powerful flywheel effect. The more offers we source from CPG brands, the greater value we were able to deliver for consumers and the more likely that they continue to engage with and recommend our offers to friends. The more consumers engage, the more investments we receive from CPG brands, eager to influence that greater spending power. And in addition, as retailers make offers easier to redeem, more consumers use them, which in turn attracts greater investments in offers from CPG brands, which ultimately results in more consumers using the retailer loyalty program. Turning to this quarter's results. We are pleased with our strong financial performance, which has allowed us to maintain our trajectory of profitable growth for the sixth straight quarter. We saw strong performance in redemption revenue on our third-party publishers, which we expect will be the primary driver of overall revenue growth going forward. We were successful in adding new retailer publishers to the IPN such as Schnucks, a $3 billion grocery chain with 115 stores located in Missouri, Illinois, Indiana and Wisconsin. Family Dollar, which has approximately 8,000 store locations nationwide. And AppCard, which represents 375 independent grocers across 2,000 store locations. We are ramping up each of these new publishers, while at the same time, building upon our strong foundation with existing publishers. We believe Ibotta remains well positioned to capitalize on a large and growing market opportunity. CPG brands compete fiercely to influence the spending habits of American consumers investing approximately $200 billion on marketing annually in the U.S. In addition to the size of the market, consumers today are looking for value, perhaps more than ever given the inflation of recent years. According to the Bureau of Labor Statistics, U.S. grocery prices have risen by 25% since pre-COVID levels. As these price increases cause more consumers to consider switching from national brands to private label brands, our targeted promotions represent a highly efficient way for CPG brands to influence current and future consumer behavior, holding on to their existing consumers while adding new ones. Our data allows us to demonstrate to our clients that their campaign dollars not only drive sales volume today, but also enhance lifetime value as consumers continue to purchase post campaign on a full price basis. We expect these trends to continue, causing more brands to launch more promotions in the back half of the year. We're excited about the future and remain focused on building upon our track record of profitable growth. With that, let me hand the call over to Sunit to discuss our first quarter results as well as our second quarter guidance. I'll then wrap up with some final thoughts before fielding your questions. Sunit?

Thank you, Bryan, and good afternoon to everyone. We delivered strong revenue growth, profitability and free cash flow in the first quarter. During the quarter, we continued to make progress in expanding the Ibotta Performance Network, adding new advertisers, offers, redeemers and retail publishers. This drove significant year-over-year growth in third-party publisher redeemers and redemptions, which reflects the increasing traction of what we believe to be our unique success-based rewards platform. Across all our key methods, we delivered results at the high end of the preliminary results range we provided in our final S-1 registration statement. The revenue in the first quarter was $82.3 million, representing non-GAAP revenue growth of 46% year-over-year. Inclusive of $1.2 million in onetime breakage revenue in the prior year period, revenue growth was 43%. We delivered Q1 adjusted EBITDA of $22.7 million, representing an adjusted EBITDA margin of 28%, a material increase over Q1 of 2023. In Q1, redemption revenue comprised 83% of our total revenue with ad products and other comprising the balance. This compares to 72% in Q1 of last year. D2C redemption revenue comprised 40% of total revenue with third-party publisher redemption revenue representing 43%. Q1 was the first quarter ever where redemption revenue across our third-party publishers exceeded redemption revenue from our D2C channel. In Q1, our redemption revenue was $68 million, up 68% year-over-year on a non-GAAP basis. Our revenue performance was strong in the quarter, and we saw a mix shift to the redemption side of our business. Within the redemption business, we are also seeing a slight mix shift with relatively stronger performance than we thought in our third-party publisher business compared to the D2C business. Third-party publisher redemption revenue was $35 million, up 315% year-over-year while D2C redemption revenue was $33 million, up 3% on a non-GAAP basis, excluding the onetime breakage benefit in Q1 of last year. Ad & other revenues of $14.3 million, down 10% year-over-year due to the mix shift I mentioned, which has continued in Q2. In this environment where inflation pressures continue to persist, consumers are even more driven to save money on everyday purchases. CPG companies are keen to preserve brand loyalty and sensitive to consumer searching for private labels. Our CPG clients are excited about our third-party publisher network. Turning to our D2C business. D2C redemption revenue was up 3% year-over-year, excluding last year's onetime breakage revenue benefit. D2C redeemers were 1.9 million, down 1% year-over-year while redemptions per redeemer were 14.4, down 12% year-over-year, leading to a decline in total D2C redemptions. Excluding last year's onetime breakage revenue benefit, non-GAAP redemption revenue per redemption was $1.19, an increase of 18% year-over-year. Redemption revenue per redemption can vary quarter-to-quarter based on seasonal patterns but also due to variations in offer mix. In Q1, we saw benefits from offer mix as well as an improvement in like-for-like pricing. We do not expect similar year-over-year growth in redemption revenue per redemption in Q2. Turning to third-party publishers. Redemption revenue was up 315% year-over-year. Redeemers were 10.6 million in the quarter, up nearly 300% year-over-year driven by the rollout of Walmart Cash to all U.S. Walmart customers with a walmart.com account towards the end of the third quarter of 2023 as well as Dollar General launching Ibotta-hosted offers in July of 2023. Redemptions per redeemer were largely stable versus the prior year period at 4.1 despite the large increase in the base of redeemers. Redemption revenue per redemption was $0.80 or up 10% year-over-year reflecting the mix of offers and like-for-like pricing. A combination of strong revenue growth and operating leverage drove significant year-over-year margin expansion. We generated $22.7 million of adjusted EBITDA, which represented an adjusted EBITDA margin of 28%. Q1 non-GAAP gross margin was 87%, an improvement of 650 basis points year-over-year. Non-GAAP operating expense declined as a percent of revenue by approximately 1,700 basis points. Within that, non-GAAP sales and marketing grew by 16% and declined as a percent of revenue by approximately 650 basis points as we increased our brand marketing spend year-over-year. Non-GAAP research and development expenses increased by 17% and declined as a percent of revenue by approximately 350 basis points as we invested behind the IPN. Lastly, non-GAAP G&A expense declined by 1% and declined as a percent of revenue by approximately 700 basis points as we were able to leverage our fixed overhead costs. We delivered adjusted net income of $15.4 million and adjusted diluted EPS of $0.54. Our adjusted net income excludes $4.8 million in stock-based compensation, $1.7 million in change in fair value of the derivative and a $0.4 million adjustment for income taxes. We ended the quarter with $79.5 million of cash and cash equivalents. We realized $197.5 million of net proceeds from the IPO. Pro forma for the net proceeds from the IPO, cash and cash equivalents were $286.3 million. Also, our basic shares outstanding as of April 30 were about 30.5 million and our fully diluted shares were about 35.7 million. Turning to our second quarter outlook. We currently expect revenue in the range of $83.5 million to $86.5 million, representing 25% non-GAAP revenue growth at the midpoint. We expect second quarter adjusted EBITDA in the range of $19.5 million to $22.5 million, representing a 25% adjusted EBITDA margin at the midpoint. I'd like to provide you a little more color on our Q2 outlook. In general, we are seeing better-than-expected redemption revenue growth, partly mitigated by softer ad revenue performance. Within our redemption revenue, third-party publisher redemption revenue is outperforming driving a greater mix of third-party redemption revenue as a percent of total redemption revenues relative to our prior expectations. We anticipate that this strong growth in third-party redemption revenue driven by better-than-expected third-party redeemer growth will drive healthy year-over-year revenue growth in our total redemption revenue. Family Dollar and AppCard began rolling out in early Q2. And similar to what we saw with other retail publishers, we expect a slow and steady ramp as consumers transition to the new platform and more offers become available. We are working hard. We increased our rewards content in the second half to satisfy the strong redemption demand. On the expense side, Q2 will also have approximately $1.5 million of IPO-related expenses, which will not recur going forward and are included in our adjusted EBITDA guidance. We estimate Q2 stock-based compensation expense to be about $45 million, of which about half will be for employee stock compensation driven by stockholders granted as part of the IPO and the other half for the Walmart warrants. For the second half of the year, we expect about $14 million per quarter in stock-based compensation expense. Lastly, I want to point out that our convertible notes outstanding as of March 31 were converted to Class A shares upon the successful completion of our IPO. As a result, we have no debt outstanding post IPO. Before we turn to Q&A, I'll pass it on to Bryan for some closing remarks.

Thank you, Sunit. As you've heard, Ibotta delivered a positive set of results in Q1 driven by especially strong growth in our third-party redemption revenue, which is a testament to the rapid expansion of the IPN over the past year. We're off to a great start in Q2 as we continue to attract CPG brand investments, build out our new publisher pipeline and help our existing publishers grow their audiences and drive adoption of their loyalty program through a variety of ongoing and upcoming initiatives. We've never been more excited about the volume and conversations we're having with potential new publishers. We remain confident that our current publishers will afford us a long runway for growth over the next few years as well. Since the completion of our IPO, I've been out on a second roadshow, traveling across the country to visit with our CPG brand and clients. I've been excited by their responses as we shared with them what we're building to better serve their needs. We believe we're still in the very early innings of exploring how rewards-based promotion can revolutionize the way brands target consumers and arrive at the optimal net price for their product using AI. We see a future where our scale, first-party data sets and AI-driven targeting capabilities become uniquely valuable. This is especially true as privacy regulations continue to limit the effectiveness of other marketing channels. Our goal is to be recognized not just as the best platform for promotional marketing but as the single most efficient way for a CPG brand to deploy marketing dollars, to gain market share and build brand loyalty. Thanks again for your time and attention today. We're committed to being responsible stewards of your capital and creating long-term shareholder value. We intend to be active and with regards to Investor Relations and look forward to high levels of engagement with investors and analysts alike. Stay tuned to our IR site for updates, and we look forward to seeing you. With that, operator, let's open up the call for questions.

[Operator Instructions] Our first question comes from the line of Eric Sheridan with Goldman Sachs.

I wanted to ask a 2-parter. No need for a follow-up, but you called out the redeemer growth you're seeing. And I wanted to know if we could separate that into 2 pieces. The Walmart partnership continues to sort of evolve? And what are you seeing as Walmart as a potential tailwind for redeemer growth as we move deeper into 2024. And as you continue to add new publisher partners, how should we be thinking about the tailwind to redeemer growth as those partners sort of get -- sort of hold it into the business as announcements proceed through the year?

Thanks, Eric. Appreciate the question. As we're very excited about the momentum we have in terms of redeemer growth in the business, we're seeing that redeemer growth across the network on the third-party publisher side. You're absolutely right, Walmart is no exception to that. We have a lot of ongoing initiatives with all of our publisher partners that give us confidence that we'll continue to be able to grow redeemers as we grow awareness and adoption of the loyalty programs and the digital offers. Those are the primary drivers, as you know, of our business, is growing at redeemer growth. We're also very confident in addition to the headroom we have of the existing third-party publishers, which is significant, we're still in the very early innings there. We believe we have a good pipeline so that we can grow redeemers over time by adding more onto the network. You heard about Schnucks, for example. We're hoping to get some redeemers from rolling out that and some of the other ones that are still in the early stages of the rollout.

Our next question comes from the line of Ron Josey with Citi.

Bryan, I want to dig in a little bit more on the Walmart partnership that now that we're about 2 quarters, I think, of being live. And I'd love to hear your thoughts on just growing awareness of Walmart's user base and adoption of the rewards program. And then any insights on just driving potentially newer verticals on Walmart. I think you mentioned auto, some improvement in video games. I'm sure that's across your retailer mix, but -- the publisher mix, I would love to hear just how Walmart is at the center there. And then also, when it comes to more targeted rewards, I think in the past, you talked about 50% of the rewards you offer are personalized or targeted. I'd love to hear just more details about that targeting and that 50% as AI becomes a bigger part.

Thanks, Ron. Yes, taking those questions in turn. Walmart, yes. I mean there are a number of different ways in which we are benefiting from not only Walmart's growth as you may have seen their recent earnings and their growth in e-commerce, for example, but also the growth of awareness. We don't measure that in terms of surveys. What we see is just growth in redeemers. Simply growth in the number of redemptions that are derived from Walmart as one of our third-party publishers. We're seeing that consistently across all of our publisher partners. And I want to stress, we believe that we're still in the very, very early innings there. The program has only been out to 100% of people who have a DotCom account for less than a year. And there are a number of initiatives that we believe will continue to benefit redeemer growth. We also just think time and market leads to awareness of the program, people telling other people about the program, et cetera. With regard to your second question, targeting, that is a major strategic focus of the company. And you put your finger on something that's really important. We like to say this is not your grandma's coupon. One of the reason why it's not is that we have sophisticated capabilities that we've been honing on our D2C properties for a long time. We're focusing right now on to the greatest extent we can, enabling targeting network-wide. And so the goal is to be able to create more efficiency and specifically more incremental sales by putting that right offer in front of the right consumer at the right time. That starts with our data and understanding what each person's propensity to buy is. And then you can think of it as trying to arrive at the correct net price based on the willingness to buy or elasticity of demand of a given group of shoppers. And we think there's enormous unlock there in terms of a new efficient frontier of pricing products, and that's going to be critical to our strategy going forward.

Our next question comes from the line of Curtis Nagle with Bank of America.

Maybe just another one on Walmart. Obviously, it seems to be going off to a really good start in terms of redeemers and scaling, and it's early and all that. Curious, I guess, what the trends are in terms of the redemption rates you're seeing on the Walmart Cash, right? That's obviously another important part of, I guess, the relationship, right? And that theoretically should drive incremental business. But are the people who are using these redemptions, I guess, then transacting again and redeeming that net cash? How does that look?

Thanks, Curt. Appreciate the question. To clarify, what we focus on is driving redemptions of manufacturer offers on Walmart properties. Those then turn into Walmart Cash. The disposition of that cash is something that Walmart controls and we don't have visibility into. What I can say is we don't comment on the specific redemption rates by publisher. What I can tell you is that, generally speaking, where we see a large and thriving online shopping presence or e-commerce presence, that's good for us because we're intercepting those shoppers as they are searching for products, as they are putting products into their shopping cart, and that's a very important for brands to be part of that path to purchase.

Okay. And then just a follow-up, I guess, just thinking about context of the environment, increasingly promotional, more focus on private label, trade-down stuff like that. You sort of alluded to it but are you seeing your brand partners, I guess, more actively, I guess, try and target through Ibotta, trying to win back share from branding. Is that part of the business a bigger mix now? How do you think that evolves through the year? And is that driving incremental revenue as we speak right now?

Yes. I think your question is about whether brands see the benefit of capturing market share or protecting market share vis-a-vis store brands. What we see is very much that in the last couple of years, CPG brands have taken price. Price increases have caused some consumers to reconsider whether they want to remain in that branch franchise or maybe they're price sensitive enough that they want to try the store brand. We can demonstrate those trends proactively to our CPG clients. And in almost every conversation we have with the CPG client, this topic comes up. I think they're going to be more promotional because of it. And I think the targeting is really something you can always do as long as you can do it intelligently. As long as you know that this is going to be a really incremental sale for you and you can look at the lifetime value of that customer who you've kept or acquired relative to losing them to private label. It's really a mindset shift to thinking about customers on lifetime value. And the reason why we're able to do that, of course, is we have that longitudinal purchase data, so we can show that promotions don't just condition consumers to look for offers on sale, but actually result in consumers trying the product, loving the product, buying it again repeatedly and very often not on sale. So being able to show all of that with data is what is most convincing to our CPG partners.

Our next question comes from the line of Ken Gawrelski with Wells Fargo.

Appreciate the opportunity. One question just around this time and this kind of macro environment, maybe from 2 angles, both from the redeemer side, what information or what data do you see in terms of -- anything you can read from the types of items that are redeemed, the types of offers that are redeemed that gives you insight into where the consumer is today. And then second maybe is from the advertisers from the CPG base, could you talk a little bit about your opportunity to provide real time -- as close to real-time feedback through your CPA model that's what tell those brand advertisers. What consumers are looking for at this moment and help them inform both their kind of product strategy and the pricing strategy going forward?

Thanks, Ken. To your first question, what you're seeing is that consumers are really hurting. We know that a very high percentage of them are living paycheck to paycheck. They are really focused on finding value and saving money on core nondiscretionary items. And so what we see is the velocity of the campaigns that are for nondiscretionary high-frequency products that are in almost every American basket. And you like cereal, for example, very, very sensitive to price. We still have offers across a wide range of products, including, as I mentioned, general merchandise products, maybe those are a little bit less nondiscretionary. Maybe they're a little bit longer purchase cycle but we do have a component of our consumer base that loves to shop to the sale, and loves to find value when it's available to be found. So what we tend to do is we lead with these essential staples that are there for everyone. They're very often bubbling up in the personalization elements of our offering. And then once people get into the program and have kind of committed to saving money using a given loyalty program, they are then more likely to look around and say, okay, what else can I get that's valuable in this given category. There are a number of different ways in which we see those trends continuing. But I think in this environment, it's one where it's particularly important to have the high-frequency nondiscretionary item. The second question is a fascinating one. Real-time feedback based on our CPA model. As you know, the standard of measurement in the digital advertising industry is a snapshot weeks or months after a campaign has concluded, which makes it very hard to do effectively real-time optimization when what you're optimizing for is an in-store sale. So this is as distinct from if you were optimizing for a click-through on Google to a flight booking, for example, very hard to optimize when you are promoting or advertising products that are 87% of which are sold in store. So there's a huge opportunity to create an ever more real-time feedback signal that allows brands not only to pay on a performance basis, let's put the right tailored offer in front of the right user. And as you run a campaign, you're gathering information, first party data that belongs to you, the brand manager that is helping you get ever smarter about your overall strategy, which packshot to use, which SKUs to include, which audiences should get which offers. And this is the great promise of AI. In the future, we hope to take this to a place where it is truly close to real time, and you can optimize against a greater and greater variety of different customer segments. So what you're effectively doing is achieving a net price that is the ideal net price for that customer based on their previous propensity to buy. So that relies on building out a series of AI-enabled client tools. That's something we're going to continue focusing on, especially in the back half of this year, and we're really excited about the potential of that in the coming years.

Our next question comes from the line of Mark Mahaney with Evercore ISI.

Okay. I think I'll just ask one on the cadence of bringing in new retail publishers. And what's a reasonable expectation? I know you just -- the most recent announcement of Schnuck and it sounds like that will come in later this year. What's the -- is that kind of a normal cadence of how long it takes to bring in a new retail publisher of that size, kind of medium size, small, medium-size, call it, 3 to 6 months? And does that mean that we should expect with -- we would hope to see something like 2 to 3 new retail publishers added on to the Ibotta Performance Network every year. Just talk about the cadence and then the lift required to bring on a new medium-size retail publisher.

Thank you, Mark. Yes. So the question about new retail publishers, I would say that we are trying to fill the pipeline with a variety of retailer publishers and also a variety of other kinds of publishers, and they all are differently situated. So some of them are more coming to us and saying what would it take to get access to your content, in which case the cadence would tend to be shorter. Some of them are -- have never had a loyalty program or never had the content of this kind before. But they may be more technologically sophisticated, which would then increase our ability to collaborate with them more quickly and bring it to market more quickly. Our general philosophy in terms of providing guidance on this has been to be conservative and to describe what I like to call weddings, not engagement. So I never want to get out in front of myself and describe a pipeline and then have people build that into their models and estimates when we've seen those things not materialize. What I can tell you is that we believe we're getting shorter. We're getting better and better at making it easier, easier and quicker for publishers to join the network. And so what we've typically seen in the past has been about a 12-month ramp for new publisher. We're hoping that we can make that ramp more efficient over the coming years. But I think that, well, what I can say without getting into the specifics of the pipeline is that we feel really good about the value proposition resonating with the amount of inbound interest we have in the network. And we think that network effect being what they are, the more you can add publishers in theory anyway, the more quickly other publishers should want to join the network and get the benefit of all the bandwagon effect of all the CPG investment dollars. And so I can't say that we're at that tipping point per se yet, but I'm very optimistic that as we continue to add publishers and make announcements in the future, that, that will incrementally increase our chances of adding the next publisher.

Our next question comes from the line of Chris Kuntarich with UBS.

Maybe just on the promotional environment. You called out that the consumer is really engaging with promotions here. Just want to focus on the brand side of things. Can you just talk about what your expectations were at the beginning of the year for the promotional environment and just how much what we're seeing is maybe potentially the environment we're operating in brands more willing to promote than what you had originally anticipated? And then the second part of that question would be just as we enter into a more promotional environment here, really, what is that visibility that the brands have? Does the visibility increase or decrease as we're in a ramping period or is there really any impact at all?

Thanks, Chris. Yes. I would say, generally, the environment is more the same than dramatically different. I mean, we've been in a very inflationary environment with more than half of the country living paycheck-to-paycheck and more than 70% saying that they're financially insecure for many quarters, it's not a new 2024 phenomenon. I do think that there is a lot of commentary right now in the media about the risk of erosion of brand market share to private label, but there have been articles about that dating back 18 and 36 months, and we've been citing those in our conversations. I do think that in terms of visibility and in terms of just continued investment, look, brands are looking for an at-scale place where they can earn and where they can put money to work where it's completely measurable and where it's all charged on a fee per sale basis. The more we add redeemers, that's the key thing because the redeemers are what attract those brand dollars and we've always seen throughout the history of the company that as you build that scale, while maintaining the efficiency, those investments are more and more attractive and get made in larger and larger amounts. In terms of the visibility that we have to that, there are a number of different ways that we track that. I mean we know when a campaign is running the breadth, the quality of that campaign, and we are always encouraging our clients to use best practices in a way that is the most advantageous for both them and the ultimate end consumer. And we also have visibility as we enter into partnerships with companies that are going to use us with a seasonal calendar, and we can see, okay, we know that they're going to spike during these periods of time during the year. And every company is different. We work with 750 different clients. In some cases, we have more visibility; in some cases, less. But overall, we feel good about the environment being one in which as long as we do our part in growing redeemers and those addressable audiences that we'll have plenty of interest from the advertiser side.

Our next question comes from the line of Bernie McTernan with Needham & Company.

Great. Bryan, I believe you mentioned 50 new partnerships on the platform already in '24. How does that compare to other years? And are these new companies? Or are you growing brands within existing clients?

Thanks, Bernie. I would say that I don't have the data in front of me in terms of relative number of net new brands joining, and we have 2,400 brands on the platform that we've accumulated over many years. It's not atypical for us to add 50 or nearly 50 new brands. What I do think is noteworthy is that these brands are, in many cases, the ones that are new are outside of the fast-moving grocery brands. And so what you see is those don't have a huge impact on the business in the short term, frankly, because they're just brand new in terms of performance marketing period. But what's exciting is that they also get the value proposition. So if you talk about a company like Jockey, for example, or one of these other brands, we're the first company that's coming to them with this value proposition. And we believe and hope that this will travel down a similar trajectory that we've seen in the first decade of the business where as it picks up momentum, people get a chance to look at the readout of their first pilot, I get a chance to tailor the program and to use some of our more advanced features start getting used to the client tools and they've got a critical business process, part of their -- the way they do business as marketers. That will gain a real toehold there. We believe we're the only performance-based solution that can scale to that degree for this industry. So excited about that, but it's early, early days in terms of saying that we'll have a definitive material impact. Back to the question that was asked earlier about high frequency versus low frequency. We want a portfolio. I think those are -- some of those general merchandise categories that we're prioritizing are ones that generally are bought a little bit more frequently. So we're -- there's a reason why it's Jockey. There's a reason why it's Castrol and not refrigerators but yes, we are excited about that. I think that the IPO and then variety of the company has led to additional interest across all these verticals.

Our general merchandise business, which is still small, is running at about more than 12 [indiscernible] than last year.

Our next question comes from the line of Andrew Boone with JMP Securities.

I wanted to go back to one of your earlier answers about the flywheel of the business, Bryan. For Family Dollar and AppCard and other large retailers that come on board, can you talk about what happens with CPG budgets as you do have major retailers come on board? Do they expand with those? Is there a lag? How do we think about that? And then you just talked about the success with general merchandise. Understood it's still small. But what are the key operational unlocks that you guys need to complete over the next 1, 2 years to really make that a larger category?

Thanks, Andrew. Yes, to the flywheel, yes, it's a 2-sided market. You are -- well, really it's a 3-sided market, right? You have these consumers, you have publishers and you have the CPG brands. I think what we're focused on is spinning that flywheel by growing redeemers primarily across the network. One way in which we do that is we bring in a new publisher. But the main way we do that is by growing within the substantial headroom we have at the current publishers. As far as the relationship between those different things, I mean, I think we do our best to signal to our brand partners when we believe we're going to have additional capacity, far enough in advance for them to be able to unlock incremental dollars. What we've seen in the past very often is that we will see an annual budget get expanded midyear or they'll find discretionary funds because they're excited about the efficiency of our platform or for instance, the rollout of a significant new publisher like Walmart. And I think that, that will continue. I think it depends a little bit on how material relative to the current size of the network a new publisher is. But certainly, the message is, hey, if you are looking for efficiency, we want to earn your business up to the level that we have redeemer capacity. And I think that message is getting across. As far as general merchandise, and what are the 2 things we need to do, 1 or 2 things we need to do to make that a bigger area of our business. I mean quite simply, I think it's demonstrating that we have a high efficiency, good return on advertising spend, relatively low cost for incremental sales, highly measurable solution. The bar is not as high as you might think, Andrew. In many of the ways that people are spending money on marketing in these channels now, it really is a pretty black box LLM model or something to that effect. And I think we need to find people within these organizations who are champions just as we found them in the first 2,000-plus brands in CPG areas of our business. I think that, that ultimately will be going through the same playbook that we've been going through up into this point with CPG, and it's just a matter of they go through a pilot program, it goes well, then they make a much more substantial cross brand investment. Very commonly what we see is basically 1 brand will be the canary in the coal mine. And then we'll go and we'll teach that out to all the other brands in the building. We'll get a strategic agreement with the parent company. It gives them a negotiated rate, but makes them commit to a longer-term, more predictable chunk of money. That's something that I think using case studies, we'll be able to do to secure larger and larger investments over time.

Our last question comes from the line of Andrew Marok with Raymond James.

Maybe one more on the general merchandise opportunity, if I could. Is there a milepost or some sort of critical mass in the scaling of those general merchandise brand relationships maybe starts to make sense to bring in general merchandise retailers onto the IPN in greater quantities that don't have significant grocery components to them?

Yes, Andrew, you are completing my incomplete answers. I love it, my man. Thank you. You're absolutely -- I think when we get a critical mass of offer content in a category, let's take pet or let's take toy or let's take home improvement or auto, it can then become much more exciting to bring a potential new third-party publisher in that has a lot of strength in that area. So for example, whether it's an online or an in-store omnichannel retailer that focuses on pet, that would be a great publisher to have. And then as they get excited, they can help us symbiotically accelerate the inventory of offer content that we have there. And the beautiful thing about that is that because a general-purpose mass retailer like a Walmart or Dollar General, Family Dollar actually carries a lot more than grocery, we're able to build up that bolus of offers outside of grocery and then approach those specialty retailers. I think that our priority has been up to this point to focus on retailers that have a high degree of overlap with the offers that we have that are kind of center of the bull's eye, high frequency, like I said before. But we're starting to see that in a 2-sided market, one of the advantages we have with the unique content that we have is that we -- and only we believe we have the best value proposition for some of these specialty retailer publishers that are out there. And so I think having an initial strong relationship in the mass field with a company like a Walmart gives us that one side of the market because we're their exclusive provider of manufacturer offers across every category in the store. As I like to say, from Mountain Dew to mountain bikes. And that means that once we solve that side of the market, the next order of business, as you say, is to go out and flesh out the publisher side of that equation.

There are no further questions at this time. I'd like to turn the floor back over to management for closing comments.

Yes. I just want to thank everyone for the questions and the analysis and all of the engagement. We really appreciate it. I've said this many times, but I found the last 12 months to be an extremely exciting and invigorating opportunity to talk to people who are new to our business, who have fresh new ideas. We learned a lot out on the road talking to investors, and I expect that, that will continue. So thank you for today's dialogue, and we look forward to that.