Ibotta, Inc. (IBTA) Earnings Call Transcript & Summary

I guess that's the cue. So great. Thanks, everybody. Thanks for joining. I'm Ron Josey. I cover the Internet sector here at Citi. And excited to have with me Matt Puckett, who's the CFO of Ibotta. I think most people in the room know what Ibotta does, and there's a lot going on at Ibotta, a big turnaround that I think we're starting to see some traction, which is exciting. So as we kick off, Matt, tell us a little bit about what Ibotta does and maybe your background and what Ibotta does, and then we'll get through the list of questions that I've prepared here.

Yes, absolutely. Well, thank you for having me, Ron, and happy to be here. It's great to be in New York in the fall, always good.

U.S. Open as well.

U.S. Open, yes, I didn't stay up till 3:30 -- but evidently, that was pretty exciting. Yes. So Ibotta, a digital promotions provider, really kind of the first of its kind. And today, work with all of the major CPG companies and leverage the Ibotta Performance Network, which has been a real boon for us as we established that several years ago. It allows us to -- we have the app, which is kind of the origin of the company, the Ibotta app, which was able to really be a direct-to-consumer offering, providing digital promotions to consumers on the app that they could redeem across retailers, the spectrum of retailers, but created the Ibotta Performance Network a few years ago, and where a number of retailers, we're really kind of the white label provider of digital coupons, digital promotions for them, whether it's in the mass space with Walmart or in the grocery space with a number of retail -- regional grocers, whether it's in the dollar space, whether it's in last mile delivery, a number of publishers across the network that we can then procure offers. That's kind of the supply of the business for us is budgets from CPG, promotions, the offers that we then serve up on the network to our publisher partners. And then the Ibotta app is, in essence, one of those publishers as well. And so bringing that to bear for consumers and kind of think about working -- it's kind of the flywheel, if you will, of the network effect of retailers where offers are served CPG, where the budgets are procured and consumers who benefit from that. And a little bit about -- I've been in the company a little over a year. And I came to the company, I kind of describe us as a technology company who sits at that kind of that intersection. My background is in retail, in footwear and apparel actually. And I came into the company thinking how much can I add strategically to this business coming in as a very specific mandate from a finance perspective as the company had been public for a little bit. But understanding how retailers think and how -- really how brands make decisions about marketing spend and the trade-offs across their P&L is something that's been -- that I found pretty valuable from my background. And so it's been really good. I'm happy to be here.

That's great. No, very helpful. You said something that I wanted to sort of dive a little bit deeper on. The comment was working with most all CPG companies, I think, was the comment. Yes. Could we have said that 6 months ago?

Yes. I think you probably could have said that 6 months ago. Certainly, we're adding CPGs. But the big ones, yes, right? I mean we're today working with something like 900 clients across 3,000 or north of 3,000 brands.

It was more of the brand comment.

Yes. So a number of brands are much higher because some of our clients, obviously, are multi-branded, many are. We are adding clients for sure. We've probably call that the emerging part of our business, emerging part of our portfolio. But yes, 6 months ago, absolutely. What you would also say, though, is that 6 months ago, we're we, as effective at managing those businesses and being a good partner to our clients as kind of what we aspire to be and kind of where we are moving toward today and thus growing with a number of those businesses. No, that wouldn't have been the case. And so while the relationships were there, in some cases, a little more nascent than others or not as optimized and certainly not meeting the full potential. And by no means are we there today. We are making steps along that journey in terms of, I would say, the client penetration, client relationship and becoming a more strategic partner to them, not just a provider of a commoditized coupon, but much more strategic in what we can do for them. And that's a big part of our journey today and really the future.

And so we've been watching and being a part of the Ibotta story for some time now and becoming that strategic partner to your both CPG partners or call it, CPG partners and brands, but also with your retailers. And so maybe talk a little bit more about becoming that strategic partner. I guess the question here specifically is with the changes in the product, with the ability to add more measurement and sort of efficacy of the product, has that strategic partnership evolved? How much is that strategic partnership evolved? Are we in the early -- or are we in the early days of that?

I think it's evolving. We're probably in the early days. We're in the early innings. I'm a sports guy. I use sports analogies, probably in the early innings. That's okay. I think I would say a couple of things. First of all, you referenced product, the product road map and the product capabilities, and I certainly will talk about that. But I would suggest that what's really, in essence, driving call it the turnaround that we've begun to see, right, in our business, both from a -- in the financials now. There was a period of time we were talking about it more in nonfinancial leading indicator kind of metrics, but we're starting to see that now in the financial results. The turnaround that we're seeing is, I would call it more execution-driven from a go-to-market perspective. And this time last year, about the time I joined the company, the company was in dealing with a substantial amount of change and particularly in the go-to-market, not so much necessarily in other parts, but clearly in the sales organization, the revenue organization. And maybe we had kind of a sales organization before, and we've kind of built a more holistic revenue organization. And I'll tell you what I mean by that. We were dealing with a lot of transition. Chris Riedy, now been in the company 1.5 years, a little over 1.5 years as CRO, fairly quickly identified opportunity to strengthen what we're doing from a go-to-market perspective. And that included how we're organized against the opportunity from a geographic-focused sales organization to a vertical-focused sales organization, food, beverage, health and beauty, general merchandise, splitting enterprise clients to the bigger opportunity clients from emerging clients, bringing in high-level leaders for parts of that organization that hadn't existed before, elevating our B2B marketing capabilities and actually moving that part of the business into revenue, multi-threading with our clients. So talking -- instead of just talking to a procurement specialist or someone who kind of rolls up to a finance organization, who's managing budgets in the promotion space more in a commoditized way to having conversations with CMOs and even CEOs and a much more strategic focus of those conversations. All of those things are beginning to show up. And I would suggest there's a lag time. The business was difficult in the back half of last year. It's no secret. We declined double digits. That wasn't necessarily driven by something that was happening then. It was largely driven by actions that were happening late '24, early '25, right, in terms of execution, right, missing opportunities, not being in the right conversations. As we've begun to change, and started to execute differently late last year in the early part of this year, we're now beginning to see that show up actually a little bit quicker than we thought even in Q2 returning to growth, right?

That's what I was going to...

That's been really a really important part of what we're driving. And I think that gives us a lot of confidence in what we're doing. I talked about the runway, the opportunity to do more. And that's even without, at this point, a huge impact from some of the things we're doing on the product side. Now clearly, our core product is resonating. LiveLift is beginning to show up in the market. And we've got a product road map that takes us over the next several quarters and even a couple of years that we're really excited about.

That is one of the questions that we often get is we reached revenue growth a quarter, I think, or so before expected. How durable is this revenue growth? So to hear your conversation or your comments around better execution, following up with clients and demand. All that is a blocking and tackling that is the right thing to do. But the product has also gotten better. you mentioned -- the question number one is durability and the question number two is the product getting better and then LiveLift.

Yes. So yes, that's -- I'll try to take those in order. The durability, we're confident, right, in the opportunity that we see. We're certainly pleased with the progress, but we're not declaring victory at all. And there's a lot of work to do for sure. But when you think about very specifically durability, it's broad-based what we're seeing in terms of, I'll say, the improving performance, particularly in redemption revenue, which is kind of the core of what we do and really the future, right? In that business, we grew 3% overall in the most recent quarter, we grew redemption revenue 10%, right? So really, really encouraged by that. But it's broad-based. It's not just a couple of big programs or one big win or a handful of clients. It's been broad-based across our client base. A number of those clients were declining last year, particularly in the back half of the year, but for the year. We've started to see that turn, and we're seeing some of those clients return to growth. And so that potential -- the fact that it's happening in such a broad way gives us confidence, the fact that we still have room to recover some of what we've lost -- and the fact that we're looking at these clients in terms of redemption revenue and kind of the underlying health metrics of each of those. And we know in some cases, we've got a lot of penetration opportunity. When we look at where we're -- we're closer to optimize in terms of what we think is the right level of opportunity within a particular client, a number of clients are sitting well below that. So we think about that. I would also -- you're right, the product is resonating. We've talked about LiveLift, which is maybe the first instance of some of the next-generation capabilities and tools that we're bringing to bear. As we developed LiveLift, which to Bryan and the team's credit, the realization that, that opportunity existed to really to lean into more performance-based capabilities and being able to measure more like performance marketing, measurement being really critical and kind of the white space that was there. Nobody is playing in that. Our development of that has been really critical.

Was measurement the #1 pushback that you got amongst the CPGs and...

I think so. If you talk about the opportunity to, I'll call it, grow more significantly, right? I mean, clearly, the CPGs were also saying that, be a better partner, be a more consistent partner. When you come see us, don't have to introduce yourself every time because it's a new face. So clearly, the ability to be a better partner, that was one, which -- okay, that's table stakes. That's totally like, shame on us, right? And that's what we're doing. And to the team's credit, that's what they've done. And -- but also, really, to your point about, okay, that's table stakes. -- beyond table stakes, where is the growth going to come? Measurement is a linchpin to that, right? Because it's -- yes, I know that I can call you and you can help me move units for sure. You can do that. But what does that really mean? Is it incremental? Is it subsidized? What's the profit impact? So our ability to -- the measurement capabilities, the first-party measurement capabilities that we have and are building are really critical to that. And then I would say one of the things that's been kind of confirmatory and also really helpful is the partnership with Circana, the partnership with ABCS as well, which is that third-party validation of our measurement capabilities. That's probably been I can't quantify it, but qualitatively, it's probably been, in some cases, maybe more impactful. I think Bryan and Chris will probably both say that in conversations that they're having with CPGs at senior levels and at different levels. And when you have someone who's an advocate for Ibotta inside an organization and they can point to Circana validating what we're saying, that's been really good air cover for them.

And specifically, they've been talking about, what, a 16% or so incremental sales lift. I mean this is the type of stuff that you can actually see.

Yes, household -- incremental sales, household penetration, lift on all the -- not even the products on promotion, but all the products in the catalog. That's another number that's part of that study that actually is quite -- I think it's 11%. All of these numbers are multiples of what Circana would typically see, really important. And the other thing that I think is really important, and I don't -- I think people get it, but it's really important when we -- this work that we're doing with Circana, and we put out a meta study recently, which has the numbers you're quoting, that's kind of what you're pulling from. That's an Ibotta study, not a LiveLift-specific study, right? So that's across about 50 campaigns, some of which are LiveLift, some of which are not, right? So it suggests that the products, our core product offering, which we're consistently making better, obviously, as well as something new like LiveLift, it's working. Yes. So that's been a powerful message. Can you tie that to this to that from a revenue standpoint? Not necessarily, but I'm pretty confident to say that, that's certainly been a factor, a contributing factor that kind of gets lumped in somehow with execution.

So we have -- and that's a great way to sort of segue the next topic of conversation because I think we've gotten through execution just now. We've gotten through potentially how we are seeing revenue return to growth, the product getting better, the execution getting better, be a better partner, I think, was a comment. Let's talk about the supply side, the CPG. Can help us understand maybe bigger picture, how would you characterize the health of the broader CPG industry from an advertising perspective? That was point number one. And then point number two is just offer supply.

Yes. So I think the perception is that the it's a challenged space, which is probably not a new statement. And that perception, I certainly wouldn't argue, right? So I think probably for us, the food vertical maybe is most prominent in that and probably where a lot of that shows up when you think about inflation and some of those things. So that's clearly -- it's clearly challenged. And I think one of the things and probably another proof point for us is we're -- as we actually reported over the last couple of quarters, we've seen growth in the food vertical, right? And generally speaking, because of the nature of what we do, both the ability to prove that we can help drive incremental sales and incremental profits, we can be pretty helpful to CPG companies who are trying to figure out ways to grow. Certainly, we can be helpful when they've got objectives they're trying to hit and inventory they need to move because they've gotten overstocked, those types of things. Certainly, there's a lever there, and we take those phone calls as well. But the opportunity to help them drive incremental is really important and benefiting from us. And if you kind of look at the fact that we're seeing this business turn in an environment that is arguably pretty challenged, I think speaks to kind of the strategic opportunity that we have as we continue to kind of prove our point.

Yes. I think the ability for your CPGs to rely on you to drive incremental demand is something that is unique or differentiated from Ibotta here. And one of the -- as we were studying the business and going through the business, the planning cycle around CPG budgets was a little bit different in terms of when Ibotta could access the opportunity. So my question here is, now that we've gotten the execution to your point, another proof point of what's happening with your relationships, how are we on just -- how close are we to the budgeting cycles of these CPG companies that give you the visibility or the confidence, I guess, to see sort of continued strength or recovery in the business?

Yes. Great. Clearly, being a part of the budgeting cycle and the planning efforts is important. And this is happening all the time, right? I mean, certainly, there are moments where they're snapping the line and they're setting budgets, and we want to make sure we're part of those conversations and that happens on a calendar basis. In some cases, it happens in the middle of the summer, sometimes depends on their calendar. I think a couple of things I'd say. One, the fact that I talked about multi-threading, I talked about a much more strategic relationship. I talked about consistency of the relationship, the amount of times we're interacting, how much of that's in person. All of that strengthens the bond, so to speak, which allows us to be closer to kind of front and center when they're having those conversations, right? So we're kind of making sure we're there and we're understood and the opportunity is contemplated as budgets are set. So that's certainly really important. That said, the real kind of value proposition of what we're doing is how do we ultimately, because of our capabilities, drive incremental sales and incremental profit that can be understood and measured and planned for and programmed against such that you're not always reliant on setting of budgets. Now we'll be there in that process, and that's important. And the other thing that comes out of that, and I think we're seeing more and more of this is what we call preferred partnerships, right? And with our biggest clients having partnerships where there's some level of understanding going in as to what the partnership looks like, what's the pricing structure, what's the volume expectation. These are commitments. It's not a contract, but it gives us a pretty good understanding of what the potential would be, let's say, over the next 12 months or the next 6 months or next 1.5 years. And with the history we have with the clients, the conversations that lead to a preferred partnership gives us pretty good visibility into what we think the potential of the business is for that large bucket of business. That really helps us from a planning standpoint.