Ibotta, Inc.

Good afternoon and welcome to Ibotas Q1 2025 earnings conference call. With us today are Brian Leach, founder and CEO, and Valerie Shepard, 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 Q2 2025, our ability to grow our revenue, factors contributing to our potential revenue our ability to support additional scale, 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. 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. Reconciliation to the most comparable GAAP measures are available in today's earnings press release and our 10Q, which are available on our investor relations website at .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 -over-year basis. With that, I'll turn it over to Brian.

Thanks, Shalin, and good afternoon, everyone. Thank you for joining us to discuss our first quarter results. I'm pleased to report that we delivered first quarter revenue and adjusted EBITDA above the guidance range we provided on our fourth quarter earnings call. Our interim CFO, Valerie, will have more to say about this in a bit, but first let me give you my perspective on our industry and IBATA's place within it based on what I'm hearing out in the market. Right now, CPG companies are searching for new ways to reinvigorate their businesses. More than ever, they need every dollar to work harder, and they're applying a higher bar for measuring the effectiveness of their spending. They know they need to take advantage of new technologies like AI to grow their businesses in bolder and more creative ways, but they haven't the right solution. Against this backdrop, IBATA is positioning itself as an invaluable strategic partner that can deliver profitable revenue growth at a scale that moves the needle for their businesses. We're doing this by bringing performance marketing to the CPG industry like never before. The concept of performance marketing isn't new. In fact, it's been one of the main drivers in the growth of digital commerce over the past two decades. Platforms such as Google, Meta, Applovin, and the Trade Desk have proven the power of this model by giving advertisers a simple interface that lets them do three main things. One, set targets. Two, measure their performance on an ongoing basis. And three, reach a large and growing population of consumers. Because CPG brands sell most of their products in stores, they haven't had the benefit of cookies, pixels, or SDKs to tell them which ads or promotions are leading to incremental sales. And without those real-time signals of conversion, they haven't been able to harness the power of machine learning to maximize conversion at the lowest possible cost. IBATA is changing all this by bringing the first omnichannel performance marketing platform to the CPG industry. Because of our access to data and our investment in next-generation technologies, we believe we are uniquely well positioned to apply the proven best practices of performance marketing to a massive new industry. After a year of speaking directly with senior leaders and CPG companies, I concluded that they all want more or less the same three things. First, incremental sales, meaning sales that would not have happened had they not run a motion. Second, credible measurement, meaning a compelling system for measuring how many incremental sales have actually been delivered. And third, scale, meaning the ability to move the needle for their businesses. IBATA's platform delivers all three. For the first time, CPG companies can set specific targets for cost efficiency and volume of incremental sales, measure their cost per incremental dollar or what we call CPID on an ongoing basis, and optimize their campaigns based on these results. This remains in pilot mode for now, and only a select few of our top clients have been given access. But as I will explain more below, the early results have been exciting, and they give us confidence in our roadmap over the coming year. Our technology is making it possible for CPG brands to manage their businesses on a -to-day basis like never before. Once companies realize the power of these new tools, we believe they will embrace our platform like never before, leading to significantly greater revenue for IBATA. On our fourth quarter earnings call, I referenced two large CPG clients that had recently launched campaigns that would leverage our latest capabilities. We selected these two companies because they are widely regarded as pioneers within the CPG industry. They're known to invest time and money only when they believe a platform has the scale to become material to their business. Both take an especially rigorous approach when it comes to analytics and measurement, and this has made them skeptical of past promotional formats such as paper coupons. We knew that if we could deliver for these clients and address their concerns, it would accelerate our learnings and allow us to improve product market fit. I'm happy to report that both programs have been successful to date. In general, we've delivered incremental sales at an attractive cost per incremental dollar while delivering significant volumes of incremental sales. Both clients have analyzed our performance in detail. Both have chosen to expand the number of brands or pack sizes in our program since the last earnings call. Our redemption revenue for one of these clients is expected to almost double over a year through the first half of the year. We have seen this level of growth, even though we are only working with a portion of the brands for this client, in just one segment of their business. With the other client, our redemption revenue is expected to be up 8x year over year in the first half. Beyond the numbers themselves, there are a few other factors that we find encouraging. First, it's unusual for large CPG companies to ramp up their investment levels this quickly, especially when it requires allocating dollars that were not previously earmarked within their annual budgets. Second, we're actively engaging with leaders at the highest levels of both organizations. That is bringing us into their planning conversations much further upstream and allowing us to contribute more directly to their strategic goals. Finally, both clients have set up meetings designed to encourage their retailer contacts to join the This kind of direct advocacy is new for us, and it speaks to their strong belief in what we are building together. In addition to our two initial clients, we have now lined up another three CPG clients that are piloting our latest capabilities. We expect this number to increase as we move into the second half of the year. I want to stress that in these initial stages, we are not focused on the number of companies we're working with. Rather, we are handpicking a small number of industry thought leaders who share our vision for how transformative this can be for the CPG industry and who are committed to providing us with detailed feedback. Their feedback is allowing us to pressure test our systems, standardize our approach, and automate our processes in ways that will lay groundwork for scaling up to our full client base. Based on recent progress, we've begun to schedule -to-top meetings with a small number of additional clients with the goal of ramping CPED-related revenue over the next several quarters. We're excited to begin pitching our new capabilities more widely, but we're also cognizant that any true paradigm shift takes time. We are up against decades of entrenched habits and partners who are accustomed to measuring things with very imprecise tools. So far, our clients have been extremely receptive as we have explained to them our vision of bringing well-established concepts from the world of media and digital commerce to the world of CPG. For others, it will take more time, and they will need to test the platform before deciding to make it a central part of their strategy going forward. As you can imagine, these efforts have consumed a significant amount of management bandwidth and required us to begin shifting resources across sales and technology. As we begin to allocate more of our sales resources toward CPED-related efforts, we are at the same time trying to make sure that the majority of the sales force continues to service our clients as well as we always have, to ensure we maximize the non-CPED promotional dollars flowing onto our network. That provides a good segue to the topic of our sales execution. Since joining us in January, our Chief Revenue Officer, Chris Reedy, has spent significant time with our CPG clients and publishers to determine what we're doing well and where we have room to improve. From a client service perspective, Chris is working to address pain points on certain accounts, while at the same time improving the crispness of account handoffs when they are necessary. Internally, he is working to right-size account assignments, increase seller time on task, reduce administrative burdens on our sellers, improve communication across teams, and standardize our -to-market processes. The process of streamlining our sales motion takes time and requires a high degree of coordination with other departments to ensure that all our systems internally are operating in harmony, from account mapping all the way through to billing. Over time, organizations outgrow the systems that have worked for them up to that point. Transitioning to new and better systems can be an essential step to unlocking the next phases of growth. We believe tackling these challenges now will pay big dividends for the business over the long run. I'm pleased with the steps we're taking and how our sales team has responded to the challenge. One positive leading indicator is that turnover among sellers has gone down substantially from the fourth quarter of 2024 to the first quarter of 2025. To wrap up my remarks, let me say we are happy with the performance of our initial CPIT campaigns and with the strong initial client response to these results. We're making progress establishing Ibotta as the first true omni-channel performance marketing platform for the CPG industry. By breaking out of the promotions category, we will be in a stronger position to capture a greater portion of the $200 billion annual addressable spend in the US CPG industry. While the journey may not always be linear, we are excited about the destination, and our conviction in this approach is higher than it ever has been. With that, let me briefly introduce Valerie Shepard, our interim CFO and board member. I've had the great pleasure of working with Valerie over the last four years on our board. She's played an invaluable role both for me and for Ibotta as our former lead independent director and as the former chair of our audit committee. Valerie brings 34 years of financial leadership experience at Dr. & Gamble where she was the treasurer, controller, EVP transition leader among many other roles. Her devotion to Ibotta and her belief in what we're building is so strong that she volunteered to step in as our interim CFO. On short notice, she temporarily relocated to Denver to work closely with our team in person and I've been extremely grateful for her support. In addition to stepping in as the leader of Ibotta's finance and accounting functions and helping us search for a permanent CFO, we're also leveraging Valerie's deep subject matter expertise in the CPG industry. As it turns out, that has been especially helpful as we take to market an exciting new set of solutions. I'll hand it over to her now to discuss our first quarter results and second quarter guidance in more detail. Valerie, the floor is yours.

Thank you, Brian, and good afternoon, everyone. As Brian said, I've been a strong supporter of Ibotta for many years and I'm pleased to be with you here today in my role as interim CFO. In summary, we delivered revenue and adjusted Ibotta that were 3% and 22% above the midpoint of the guidance range that we provided on our fourth quarter earnings call. Both redemption revenue and ad and other revenue outperformed our expectations. Expenses were largely as forecasted, which resulted in revenue out performance falling entirely to the bottom line. Let's break down our revenue results in more detail. Revenue in the first quarter was $84.6 million, representing revenue growth of 3% year over year. Within that, redemption revenue was $73.4 million, up 8% year over year. Third-party publisher redemption revenue was $48.2 million, up 38% year over year. While D2C redemption revenue was $25.2 million, down 24% year over year. Ad and other revenues, which now represents 13% of our revenue, were $11.2 million, down 22% year over year. Turning to our key performance metrics, total redeemers were $17.1 million in the quarter, up 37% year over year. We saw healthy growth and third-party redeemers across the IPN on a year over basis, highlighting the continued strength of the demand side of our network. Growth was driven by the launch of Instacart during the fourth quarter of 2024, -for-like growth of Walmart's audience, and the launch of Family Dollar in the second quarter of 2024. Redeemers were about flat sequentially, primarily reflecting the ramp up of Instacart, which offsets the pronounced seasonal decline we typically see in the first quarter. Redemptions per redeemer were 4.8, down 15% year over year, driven primarily by the growth and 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 only 4% year on year in comparison. Redemption revenue per redemption was $0.89, down 7% year over year, primarily reflecting a mix shift toward third-party redemptions, and to a lesser extent, from a modest negative mix within CPG. On our third-party publishers, this metric was only down 2% by comparison. As a reminder, redemption revenue per redemption can vary quarter to quarter based on seasonal patterns and variation in offer mix. Now let's discuss the cost side of our business. Non-GAAP cost of revenue was up $6 million versus a year ago, driven by an increase in Instacart related costs, revenue sharing agreements with certain other publishers, as well as increased variable technology costs and higher amortization of capitalized software. This resulted in a Q1 non-GAAP gross margin of 81%, down nearly 700 basis points year over year. Non-GAAP operating expenses, as a percent of revenue, were 65%, an increase of approximately 360 basis points year over year. Within that, non-GAAP sales and marketing expenses decreased by 2% year on year. Non-GAAP research and development expenses increased by 9%. Lastly, non-GAAP general and administrative expenses increased by 29%, or $3.7 million. As a reminder, Q1 2024 was the last full quarter prior to our IPO, and thus did not contain any public company costs. We delivered Q1 adjusted EBITDA of $14.7 million, representing an adjusted EBITDA margin of 17%. We delivered adjusted net income of $12.1 million and adjusted diluted net income per share of 36 cents. Our adjusted net income excludes $13.8 million in stock-based compensation, $1.6 million in restructuring charges, and includes a $3.8 million adjustment for income taxes. We ended the quarter with $297.1 million of cash and cash equivalents. In Q1, we spent $72.7 million repurchasing 8.1 million shares of our stock at an average price of $39.47. We had 31.3 million fully diluted shares at standing at the end of the quarter. In March, our board authorized a $100 million increase to our share repurchase program. As a result, at the end of the quarter, we had $96.1 million remaining under our authorization. Turning to our Q2 outlook, we currently expect revenue in the range of $86.5 to $92.5 million, representing 2% revenue growth at the midpoint. We expect Q2 adjusted EBITDA in the range of $17 to $22 million, representing about a 22% adjusted EBITDA margin at the midpoint. And a 4% increase in adjusted EBITDA margin relative to the first quarter. This is a byproduct of higher revenue and flattish operating costs, consistent with our commentary on our fourth quarter earnings call. I'd like to provide you with a little more color on our Q2 outlook. While we continue to make progress on validating and rolling out CPIT-based campaigns, we are still in the early days. We expect a gradual increase in CPIT-related contribution, as well as slow and steady improvements to our sales execution. Although there will likely be some short-term disruptions as we continue to refine and enhance our -to-market processes and incorporate key learnings from our first few CPIT-based campaigns. As a result, we expect to continue to be supply constrained in the short term, but expect to drive sequential improvement in offer supply over the course of this year. We now expect our adjusted tax rate to be in the low 20s for the full year. Our full year cash tax expectations are broadly unchanged. And with that, operator, let's please open up the call for Q&A.

I'll just, before we do that, one small clerical correction. We repurchase 1.8 million shares. I think Valerie may have said 8.1.

Oh, sorry about that.

That would be cool, but it's 1.8.

1.8. Sorry about that, Mariah.

For today's Q&A session, we'll 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 will now pause a moment to assemble the queue. Thank you. Our first question will come from Eric Sheridan with Goldman Sachs. Your line is open. Please unmute and ask your question.

Thanks so much for taking the question. I wanted to know if we could get a better sense of sort of early learnings from the Instacart integration. How do you think that will be a driver of growth both on volumes and users as you look out deeper into the year and then layer on top of that as a follow-up sort of elements about how to think about DoorDash being layered into the platform as the year progresses? Thanks so much.

Thanks, Eric. Yes, we're excited about the progress we've made with both Instacart and DoorDash. This represents a substantial amount of the online grocery marketplace market that's part of the Ibotta Performance Network. In terms of some early learnings, at Instacart we found that we have very attractive redemption rates based on the path to purchase that exists online being one where it is relatively easy to find an encounter and be influenced by the various offers. That gives us confidence because we know that that's inherent to the way that you shop in those environments and is going to stay that way. We've also seen steady growth in redeemers on both platforms. In the case of Instacart, we've managed to expand into Beer, Wine, and Spirits, which is a new, Alkbev I think we're calling it, a new category for us, Eric. That's been successful. However, one learning is that that's only operative in about 13 states because it is a discount model. Whereas if we can transition that over time to a reward model or an online rebate model, it would be available in 41 states. So that's a learning. With DoorDash, we've applied some of the learnings from the way we rolled out Instacart. There were some bumps in how we handled that in terms of just change management from a client perspective. There were some clients that Instacart already had that were using their promotions platform and self-service tools that we had to transition over to our self-service tools. I think we've learned from that broadly in terms of change management. But the big thing is that at DoorDash, they didn't have a pre-existing promotions business. So that challenge of change management is significantly less pronounced. We've begun rolling out at DoorDash, but we have not achieved a 100% rollout. We're taking the same approach we always do, which is making sure that it's working, that there are no bugs, that there's no issues with conversion rates and so forth. And we're pleased with steady progress of that and believe that we will be able to support alcohol and beverage offers there. And I think based on the learnings from both of those, intend to roll out alcohol and beverage offers on Walmart and other parts of the network as well. I think some of the other learnings relate to just how we work with our publisher partners to do life cycle marketing and surrounding sort of programming to make sure people are aware of the offer content. And we want to take those best practices out across the rest of our network.

Our next question will come from James Michael Sherman Lewis, WIC City. Please go ahead.

Great, thanks. This is actually Ron Josiano using James Michael Lake. So I wanted to ask a little bit more, Brian, on CPED, on the cost per incremental dollar. And you talked about expanding the pilot program to more clients. And you gave us some good insights on how that's going. I would love your thoughts on what the governor is maybe for the two clients that have seen success in rolling out CPED to more brands, if you will. And then as you think about rolling it out to the full client list, what are the mile markers that are needed, I guess, to give more confidence for that to go to the next level? Thank you.

Thanks, Ron. Great questions. Taking them in turn. We have seen our partners expand the brands that are participating with this tool, which is a great sign. We've seen some of their flagship brands, some of their most important brands that they don't entrust to just any partner. And we've actually seen those brands have good enough results that they've decided to include brands that initially they weren't sure they wanted to put in the program. So it's as simple as getting on cycle with these companies. I mean, these are dollars they're finding mid cycle that were not part of the previously planned budget. And I have a lot of confidence that if we continue to deliver these kinds of results, that there are going to be a lot of brands within these companies that are knocking on the door saying, I want to get the benefit of this. I like the control this gives me. I like the ability to drive top and bottom line growth at the same time. I think these organizations generally have either or measurement teams that want to go deep on this and audit these things and scrutinize how you're measuring and exactly what claims you're making regarding incremental sales. We've been going through that process and that's also an essential step before they open up to a much broader spigot of spend. And what I've found in this industry is that once you go through that trust with credible measurement, that is then not something that has to recur over time. It's something that you kind of travel through and then you can deepen the relationship, add more brands and also things like more pack sizes. So it's not just a brand that would be added. It might be a new business unit. It might be a new pack size and that could be rather significant, for example. In terms of the mile markers and things that would be important for us to expand this to additional clients, there are a number of things. I think on the product side, first of all, some of the things we do today in terms of the deliverables around C-PID, both the projected C-PID ranges, for example, and the actuals are much more manual computations than they will be once we get a chance to standardize and automate those processes. And so if we were to try to do what we're doing for these clients, for the other 798 clients that we have, it would be challenging because there are just not enough client analytics resources to crank through that analysis. But what we're doing is by day, we're automating those procedures and making sure that we're automating the right thing is important. And so you don't want to jump straight into automation before you've really confirmed product market fit. That's really important. The second part of that is that we know that we don't want to be doing manual targeting and optimization. We want to move toward more of a machine learning implementation. And so that's a matter of training models on the early data that you've run. And as they get smarter and smarter, they get better and better at projecting these costs per incremental dollars and these volumes of incremental dollars. And so that gives more and more confidence as you get more and more precision. And that I think allows you to get beyond just the early adopters of this kind of technology because they're reassured by that. I think being able to have a more weekly and then ultimately even more frequently daily ability to check on your results will be an important thing for this industry to really claim that this is the same kind of performance marketing interface that we've seen in other areas. Right now, that process again is inhibited by just the lack of automation. And so I think we're moving rapidly in that direction. I'm pleased with the progress that our product team has on that. I think we're on track. I think we're all, I mean, we have a call every single morning to talk about learnings. And it sometimes feels like we're on kind of a vertical learning curve, but it's truly an exhilarating time at IBADA because unlike anything else that I can remember us developing, the reaction that we're getting to this, both the idea of it and the performance of it is extremely positive. And so that's giving us the energy that we need to work as hard as we're working to crank it out to the other 798. And hopefully, we'll bring in some new clients that are persuaded by this model who might not have been interested in traditional promotions.

That's great. Great to hear. Thank you, Brian.

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

Great. Thanks very much for taking the question. Maybe just a quick one for you, Brian. Just maybe an outlook on how to think about total CPG budgets for this year. How has that changed from the start of the year? I think you mentioned that supplies obviously still constrained, but any updates there on how to think about the budgets from your clients more holistically?

Yeah, thanks. It's great to hear your voice, Kurt. Appreciate the question. I mean, I think there are a couple of dimensions to this. There's the macro and then there's kind of the sales execution dimension to that. So taking those, I think if you think about the macro, obviously things like tariffs have created some uncertainty in certain pockets of our business. We've seen that with regard to general merchandise in particular, where they are more exposed to those kinds of supply chains abroad. We've seen that in smaller and emerging brands to some degree taking kind of a wait and see approach. We think based on what we know, we factor that into the guidance we provided, but we're keeping a close eye on that in terms of what impact that might have on supply in the short term. I think in terms of sales execution, there are things we can be doing better. And I think we've gotten our arms around what those challenges are and what needs to be different. One of the things that Chris has brought to us is perspective from having seen this at a much later stage and a much more successful kind of up on the plane version of this kind of operation, sales operations. And so I think that the supply is out there. And in some cases, we can be doing even more to support our sellers in getting that supply, even with the value proposition we have today. Don't forget, we're reaching over 17 million redeemers. We've got a great story to tell. Our redemption, our volume on the third party publisher network in particular is really up dramatically. We've seen redeemers on third party publishers up 45% year over year. Redemption revenue up 38% year over year. Total redeemers up 37% on the platform year over year. So we're making sure that we get to market with that message and we don't sort of roll everything into the next generation solution and founder in the short term. So it's a balance. Striking that balance, I think, is important. But I would say our outlook is broadly the same, except to say that I am greatly heartened by what we've proven in the last quarter in terms of the conversations around getting to an always on understanding with our clients. And that is really about convincing them that we can deliver incremental sales with credible measurement at scale. Because if you can do that and demonstrate that your contribution margin positive, meaning that every single incremental dollar, they're making money on the bottom line, we're one of a few tactics they want to plow money into at a time when they're otherwise perhaps pausing or pulling back. And so I think if we were just to speak in terms of kind of traditional promotions budgets, I might have a different answer, but I'm looking at the future of our business in a very, very different way than that. And we're starting to see that it's now not as binary. Do I turn on a promotion? Ah, I don't know if I need to right now. I'm not in a window where I'm launching a new product. That kind of episodic tactical approach has been how it's been. But what we're seeing is a different conversation where we're saying what number would we need to hit in terms of cost per incremental dollar for you to keep this on. And the understanding is that as long as we're within that constraint, they will do so. And of course, if we're not, then they won't and they can decide where they want to set that threshold. That's just a completely different conversation. And one that I think will ultimately get us out of this sort of fixed supply conversation.

Okay. Thanks very much.

Our next question comes from Ken Gawielski with Wells Fargo. Please go ahead. Here's your phone, Ken. Oh, there you go. Excellent. Go ahead.

Can you hear me okay? Yes. Okay, thanks. Thanks. So sorry about that. Just two for me first. First, maybe if you could talk a little bit about the publisher side. I know that I appreciate the commentary on Instacart and the DoorDash partnership starting up, but maybe you could talk about some of the existing publishers kind of prior to those digital service providers coming on. What are you seeing in terms of any app adaptations that they've made in the offline to online side that may be easing the opportunity, you know, kind of greasing the wheels for you to accelerate redemption activity there? So maybe the first on the publisher side, you could talk about traditional publishers. And then secondly, maybe I just want to return to the question on supply and, you know, maybe a real specific question is, do you see as like, is the as CPID, like is converting those, the supply side, the CBG players, and to kind of CPID buyers as the key unlock or are other things just clearly in the traditional sales channel that you can approve that you think will help you grow supply throughout the year? Thank you.

Can you just clarify the second question for me, Ken? I'm not sure I'd quite follow. You're saying when on the supply side, do we see the CPID value proposition as the key unlock? That's right.

When we think about, you talked about the supply side and the supply of promotions improving throughout the year sequentially. How dependent is that upon your ability to kind of get CPID penetration into new accounts? Or is it just improving the existing go to market sales strategy? Thank

you. Great. Thank you. Taking those two questions in turn, first on the publisher side, yes, there's been nice, consistent improvements in the Walmart experience. For example, as you may see now out there in the public domain, we now have telephone number as a way to check out and earn your Walmart cash. This is a pretty big improvement in the experience from having to download the Walmart app, navigate to the QR code scan subsection of the Walmart app, which is tricky, and then scan a QR code on the screen at the self checkout or the checkout. Imagine all the different ways in which that can go wrong. Someone doesn't have a phone, doesn't have the app, can't find the scanner, versus here's my phone number. That's exciting because we believe that even further illustrates how central our program is to digital identification, which lies at the heart of everything Walmart is achieving in terms of their progress on things like retail media. That is further entrenching that strategic relationship with Walmart. It's also, I think, one of the reasons why we're seeing very nice redeemer growth there and everywhere else is that we continue to bring those best practices to them. Some other examples of things on punch lists that we've mentioned are, I mentioned earlier in the call, ways of incorporating this content into regular touch points, both in the store or online or in terms of email correspondence reminding people that they have this or that offer. We continue to see a lot of opportunity for ongoing improvement, not just growth in number of people, but the yield from those people because of the punch lists that we're working through with our partners there. We had several excellent meetings, not just with that one publisher, but multiple publishers on things that we can do. Some of them, it's sort of proprietary for me to get into the details, so I won't do that on this call, but rest assured that feel good about the ones we have growing and reminder that even if we didn't add a single additional publisher, we are supply constrained, so we believe that we could accommodate up to 5 to 10% of the redemptions, sorry, 5 to 10x the redemptions we have now with the audience we have now. That's probably the biggest misconception that I hear out there is that, well, will they be able to get their publisher audience larger? Yes is the answer, but even if we didn't, we've got so much room to run on the second question of yours, which is supply side. Let's turn to that. Look, I think execution is still an important part of this, and I think that the sales execution improvements that I alluded to will cause a sequential improvement in the supply of offers over the course of the year, totally independent of the success and the unlock of CPIT and the penetration of that. I think we expect that that is also a function of just seasonality. There are things that improve with back to school and time of year and so forth, and we think that we've seen those spike in the summer. That's baked into our business forecasting and planning. I also think that the penetration of CPIT, we're still early stages. It's a bit of a wild card. Some of these brands choose to embrace these things and go, wow, we want to be at 8x where we were this time last year because we really, really need this in our business right now. We're going to go find this and we have senior enough contacts there where we can go make that happen relatively quickly. In other contexts, it moves more slowly where we move more of a bottoms up, much, much smaller test, build a win with one brand, and then they bring it to another versus starting out with six or eight brands or whatever with all their most important pack sizes and brands. It depends on the mix of those and how those go. I think it also just depends on whether what we saw with the first two turns out to be representative. I think I mentioned that it's been eight months since we really approached these companies and now we're really seeing this hit stride. Will it be six to eight months of lead time every time or now that we have all of these new learnings and tools and better materials and sharper value proposition and case studies and so forth, can we substantially shorten those timelines? That remains to be seen, to be honest. Thank you, Brian.

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

Okay, thank you. I want to follow up on the first question from Eric about the success, the traction you're gaining with Instacart and DoorDash and category expansion. I guess the simple question is, the addition of those two partners really helps fill a category. Are there other kind of major greenfield category opportunities you see ahead for the company that there are similar kind of Instacart DoorDash solutions for? Thank you very much.

Thanks, Mark. That's a tricky one to answer in a public forum. Yes is the answer. I definitely don't want to give our competitors a lighted roadmap into all the wins we're going to announce in the future, but suffice to say that there is still a huge amount of untapped opportunity in the publisher ecosystem. And so some of those are expansions of the kinds of things that are current publishers are doing. So for example, maybe a publisher is heavy into in-store and doesn't have much of an e-commerce presence, but then decides that they want to lean into that. Some of them might be an extension of what they do. So for instance, there are a lot of other adjacent extensions of some of these marketplaces that our content isn't live in right now. And then there may be whole verticals that we see opportunity in both within and beyond fast moving consumer goods. You think about things like specialty retail. How do you leverage the learnings of the value of these high redemption rate environments like e-commerce to look at pure play e-commerce players in specialty retail? So there's a lot of different things I'm tempted to go into, but will not in response to your question with apologies.

Okay. Thank you very much, Brian.

Our next question comes from Chris with UBS. Please go ahead.

Great. Thanks for taking the question. Brian, I want to go back to a comment that you'd made in a prior question. And it was with regards to just asking to help unlock supply, what cost for incremental dollar do we need to hit to keep this spin continuing to say on platform? Just curious, are you seeing that the brands are now demanding a higher cost per or a lower cost for incremental dollars and then what you have in the past, any sort of kind of framing of the magnitude of that there would be helpful. And then just as we think about the C-Pig ramp and going after the broader pool of brands that you have on the platform today, how should we think about the resources that you have to continue to engage with more brands in a manual fashion and potential needs to expand resources around continuing to ramp them manually versus investing more in the automation? And could this be something where we're thinking about 5% of these brands being allocating spend through C-Pig by the end of the year? Thanks.

I like that still. Third question in there. Don't think I missed that, Chris, but yeah, let's go through those in turn. Great questions. I think the first one is so fascinating, which is that there is not one answer to the what's the target C-Pig question. It's a bit like saying what cost per install do you have to achieve AppLovin in order to be successful? Well, AppLovin is just a platform, right? They each have their clients that have different values or lifetime value horizons or value propositions. So what's interesting is we've seen a different answer to that question, depending not only on the brand and where they are in the balance between cost efficiency and volume. So that's obvious, right? If you give me a higher C-Pig to work with, I can give a richer offer with a lower threshold to a larger number of people and I get you a whole lot of incremental dollars. You give me a really constrained C-Pig, I can hit it. I can hit any C-Pig. That's not the issue. The question is how much volume can I deliver at that C-Pig? And that is really the big change in the industry to go from an industry where people kind of buy a program and then weeks after the program ends, they get this kind of recap deck to one where they can log in and on a regular basis see exactly how it's trending and make adjustments. So the answer is always you should be using this tool. The question is just can you get the volume you are hoping for at the constrained efficiency that you impose? And as we grow the network, you can get more and more volume. As we teach the machine learning, you can get more and more volume because what we learn is, hey, Chris didn't need that level of incentive. He could have been stretched one unit further and we steadily improve on those C-Pigs over time. I will say there are multiple use cases, right? So even within the idea of a one period of time, you may say, well, I'm really interested in closing this sales gap. And so I'm going to tolerate a more relaxed C-Pig. Or you may say, I'm really looking for kind of a baseline of profitable growth, in which case you may impose a more strict C-Pig. And you may do some of both. Think of it like a slider that you can adjust at different moments in time in the course of your year. And that agility is so different from an industry than one where you have an annual plan and very episodic measurement, often annual measurement. Now you have effectively real time or near real time measurement and your plan can change and adjust and dollars can flow where they need to in that moment. Now, sometimes there'll be other considerations as well. So a brand will need to shoot for a lower C-Pig for a period of time because of other spend they have going on at that period of time. We're learning a lot about this. And I think ultimately the more these we do, the more we'll be able to factor in all these things like seasonality. And the more we're training the model, the better we'll be predicting and informing these decisions that they make. But what I can say is there's an awful lot of enthusiasm about even being able to have this conversation. So even having someone ask you what would be a C-Pig at which you're generating contribution margin positive profitable revenue growth is like not a question that a lot of these companies have really ever been asked. So it's bringing that level of control at a time that they feel a desire for that real control in their business that is psychologically very powerful part of our sale. The question of resource expansion and manual versus automation, I mean, our aspiration is very clear, which is that this should be as much of an automated process as possible. That said, there will always be tools that can be used entirely as self-service and also tools that can be used as part of a broader managed service offering. So you may get additional insights or support or more proactive expertise and recommendations wrapped around some of these automated tools if you're one of our top tier clients. And so we're always going to need excellence in our client analytics. But it is clear that on our roadmap, we already have a very detailed and clear plan to get to a place where these processes that are rate limiting steps now, back to Ron's question, will not be. They will not be. And I think the power of that is extremely exciting because what we're seeing is that if we can get one or two or three brands to participate, they'll take it in and they'll tell their agency about it. They'll tell their procurement about it. They'll tell their senior leadership about it. And if we then teach them the vocabulary and teach them how to use these tools, we view this as sort of like the moment that Bloomberg came to the finance industry or that Lexus came to the legal industry. We want to be an indispensable tool for the next generation of brand management. And that means we need to be much more self-service. And that's following the arc that we've seen with many other companies that have done travel a similar path and built those tools out. We have the talent that we need on the team to build those tools. It's already on the roadmap. It's already in the budget. We just need time to go build those tools. And it's partly making sure we're building the right tools. So it's incorporating all those learnings that we're getting. And that's why we have that morning call with all those people, because we're shortening those decision cycles. And we're then codifying that into a new set of -to-market best practices that are taking into account all of those key learnings. I mean, we're now able to get to a place where we can launch offers in a matter of a much shorter period of time than we ever were before. So anyway, and then your last question was something about, can we expect this to be 5% of the spend of the... I don't know. I don't know. I can't speculate. What I can say is that the two clients that have seen it, it's 8X and it's 2X. And so those are two data points out of 800. I think it would be a little bit churlish of me to try to answer your question. So I'll answer that more in the future. Thank

you.

Our next question comes from Andrew Boone with Citizens Bank. Please go ahead.

Thanks so much for taking the question. I wanted to go back to the Salesforce question and ask it in a slightly different way. Given some of those constraints that you're having around teaching CPED, Brian, are you limited in terms of bringing on new CPGs or going after newer opportunities? Like, are you more in a harvest mode today? And then Valerie, gross margins have down. You did a good job explaining it in the preparation box, but can you double click on that and help us understand whether that's a sustainable difference or is that just temporary? Thanks so much.

I'll answer the harvest mode question. You answered the gross margins question. Okay. Okay, great. So yeah, look, I mean, I think if we wanted to, we could go out to 500 clients right now and say, would you like to test this revolutionary new capability? We want to make sure that when we get our chance to make a first impression, that we absolutely kill it and make a great first impression. And so we're picking clients that we can really spend significant time with their senior leadership team, their finance team, their measurement team, their agencies, and make sure that we dial the formula and that we become aware of any outliers or scenarios that we weren't aware of before. And then we're building those into the tools that we have. I think what we're now going to shift into is a mode where we go out and reach out to a number of other clients and broaden our learnings a little bit further. That's very different from, hey, this is the new Ayubata. I think we're still a ways away from that. But it's voluntarily throttled, I think is the spirit of the answer to your question, Andrew. I'll let Valerie address the gross margin question.

Yeah. And if you wouldn't mind, could you just repeat that question? Because I wasn't sure which period you were talking about and exactly what you were looking for.

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

From a margin standpoint?

Yeah. Gross margin step down.

Yeah. So our gross profit margin, as we said in the call, was in the high 80s. That reflects the impact of having public company costs in there at this point in time. And as we think about our costs going forward, we are expecting those to be sort of flattish as we end the year. And so you'll see the revenue growth, which of course we said we expect to end the year with improved growth rate. So you'll see that revenue sort of falling to the bottom line, but not in a huge way.

Thank

you.

Our next question comes from Bernie McTernan with Needham. Please go ahead.

Great. Thanks for taking the questions. Maybe just to start, Brian, if you could just talk about, you know, I'm sure the CPIT transition or invested a lot of your time investing, but are there additional financial resources that are being used as well? Just trying to think there was, you know, a step up in R&D sequentially in the quarter in G&A. Just wanted to get a sense in terms of, you know, aside from your time, but financial resources being allocated to this as well.

Yeah, they're broadly flattish, I would say, Bernie. I mean, we have shifted our focus of the resources we already have very much toward this, much as we did with the IPN transition in our business. I think we still, I think we've said we will continue to hire as needed, whether they have specialized skill sets on the measurement side, particularly in the business. And we've certainly beefed up our stable of experts on that. I would say it's broadly the same as what we said on the last call, which is that we plan on having flattish, you know, costs sequentially. And I think we can continue to gain leverage through the tools that we're building and then repurpose those resources to invest in the areas that we may need to invest in. Understood. Thanks, Brian.

Our final question will come from Andrew Merrock with Raymond James. Please go ahead.

Thanks for taking my question. Maybe a two-parter if I could on the family dollar deal. The encouraging partnership may be hitting the lift-off phase there. Is that trajectory giving you increased confidence in other kind of the traditional grocery partnerships like the schnooks and app cards of the world? The second, do you think its path is instructive to Instacart and Doornash? Or are those businesses different enough and kind of some of the features you talked about different enough that there is a notably different forecasting process? Thanks.

Okay. Yes, we're very pleased with the trajectory of the dollar channel partners. We think that's a critical channel to win in given the value proposition, the affordability proposition. We also think that those are companies that are investing very heavily in their retail media and e-commerce futures. And that portends very well for us because we know that what we do is very, symbiotic with retail media. The more you have manufacturer offers, the better performant your sponsored search and display ads are. We get more visibility onto those things because they show up in all those different parts of the user journey. We also know that as we apply learnings from the network broadly to our more recent partners, we see unlocks. We bring new solutions to them that bring increased awareness of the offering. And I think that that's going to be broadly true, including across to Cart and Dash. I do think that Cart and Dash are a different demographic, obviously, than the dollar channel. They have a different path to purchase, broadly speaking. Right now, the overwhelming, overwhelming majority of transactions, if you look at their public earnings calls, are in store in the dollar channel. Very, very few online, if any, to speak of. But look, as we get online presence in dollar, you'll see, I think, very similar, broadly, performance and redemption rates. Even though it's a less value-seeking audience, it intercepts people. You search for laundry detergent and you see three and one of them has an offer. And you may choose the one that has an offer, even if you are affluent or focused on convenience. We've seen really good uptake, including from Walmart online. Among Walmart Plus users, people are more affluent Walmart shoppers. And so I think all of those are actually positive indicators in both directions for those new partners. And then there are things that are TBD. To be honest, Andrew, I don't really know exactly how Alkbev is going to perform. The question would be, how much does it matter that we expand between the 13 states and the 41 states when we finally do launch at Walmart? There are some considerations that we're working through there to make sure that there's not overly too much friction in those experiences. So we're still learning. We're still on a learning journey. I would say we're working through the punch list that we have, but we're also rearranging the priorities of the items on the punch list based on what we're seeing hit or work elsewhere in the network. And that's, I think, one of the compelling propositions for us as we go to get additional publishers and back to Mark's question that I dodged. Basically, being able to say, hey, look, we have yet another partner. Look at these results that you're alluding to. It creates more momentum. And people say, I want to be with the innovative leader in this industry, because what they know is this is where the dollars are going to flow onto this platform, into this performance marketing future. The previous approach has been very much kind of a, let's mop up the promotions dollars that exist and do our best to fight for a lot of retailer specific offers that brands may be feeling forced to do by the retailer. That's not at all our approach. Our approach is we're going to earn every single dollar every single day. Every dollar that you invest, you're going to feel good about the performance of that. You're going to trust the measurement of that. And you're going to want to spend more and more and more because rational people do rational things. We're not going to rely on, you have to do this because someone told you had to, some merchant, some retailer somewhere. And that's the key to transcending the sort of confined space that is always characterize our industry.

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

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

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