Q3 2024 Earnings Summary
- Significant growth in client budgets and gross billings up 65% year-over-year year-to-date, with some clients increasing their spend by 5x, 10x, or even 20x. Bryan Leach noted that clients are planning to take advantage of the larger volume, especially with the addition of Instacart, indicating strong confidence in Ibotta's platform.
- Integration with Instacart expected to drive substantial growth, as Ibotta brings improved promotions capabilities, such as better targeting and variable pricing based on MSRP. Early indicators show high redemption rates due to the ease of redeeming offers on Instacart, which could significantly boost revenue.
- Anticipated significant acceleration in revenue growth in 2025, driven by favorable year-over-year comparisons, ramp-up of new publisher partnerships like Instacart, and continued strong growth in the third-party publisher business. CFO Sunit Patel mentioned that they are troughing in Q4 and expect revenue growth to accelerate pretty significantly next year.
- Increased Operating Expenses Impacting EBITDA Margins: The company expects adjusted EBITDA margin to step down sequentially in Q4 due to higher marketing expenses around the holidays, increased R&D spend on targeting and client analytics, and Instacart-specific costs associated with launching and taking over Instacart's existing promotions business. These expenses are anticipated to impact costs into the first half of 2025.
- Supply Constraints Due to Depletion of Promotional Budgets: The company is experiencing near-term supply constraints driven by the depletion of 2024 allocated promotional budgets, leading to softer redemption revenue performance in Q4. The rapid growth in redeemers is outpacing the available promotional budgets from CPG brand clients, causing offers to exhaust budgets faster than anticipated.
- Dependency on Client Budget Cycles Causing Lag in Revenue Growth: The company's growth is dependent on clients adjusting their budgeting cycles and increasing promotional budgets, which may not align with the company's growth in redeemers. There is a lag in clients adjusting their budgets, as many are on an annual planning cadence, potentially leading to uneven or slower revenue growth in the near term until client budgets reset in 2025.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Increased approximately 12% (from $87.9M in Q2 2024 to $98.6M in Q3 2024) | Total Revenue growth is primarily driven by a robust recovery in overall business performance. The balanced mix of increased Direct-to-Consumer and a 23% jump in Third-Party Publisher revenue illustrates how improved market execution and strategic partnerships from previous periods (e.g., successful expansions in Q2 2024) have translated into higher revenue in Q3 2024. |
Direct-to-Consumer Revenue | Reported at $47.3M in Q3 2024 (contributing to overall revenue stability) | Direct-to-Consumer revenue maintained a solid contribution while acting as a stable revenue base, offsetting variances seen in other segments. This continuity reflects ongoing client engagement and steady digital promotions, a combination that built on consistent performance seen in prior periods. |
Third-Party Publisher Revenue | Increased by approximately 23% (from $41.7M in Q2 2024 to $51.3M in Q3 2024) | Third-Party revenue growth was fueled by the expansion of key partnerships and new program launches (e.g., Dollar General, Family Dollar), building on momentum from previous quarters where these initiatives were first introduced. This strategic focus has now translated into a strong quarter-over-quarter revenue boost. |
Operating Income | Reversed from a loss of $21.7M in Q2 2024 to a profit of $20.7M in Q3 2024 | The remarkable turnaround in Operating Income reflects effective cost management and a shift in expense dynamics, including a stabilization of previously high stock-based compensation and other operating costs. The revenue increase helped offset these expenses, leading to a swing from significant losses in Q2 2024 to robust profitability in Q3 2024. |
Net Income | Turned positive at $17.2M in Q3 2024 compared to prior quarter losses | Net Income’s positive trend indicates that the improvements in revenue mix and operating efficiency (shown by the turnaround in Operating Income) have led to a full recovery from the prior quarter's losses. Enhanced management of interest items and one-off expense reductions, building on prior period challenges, supported this significant recovery. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q3 2024 | $91M–$96M, 12% non‐GAAP revenue growth | no guidance | no prior guidance |
Adjusted EBITDA | Q3 2024 | $28M–$32M, 32% adjusted EBITDA margin | no guidance | no prior guidance |
Weighted Average Fully Diluted Shares | Q3 2024 | Approximately 34 million | no guidance | no prior guidance |
Stock-Based Compensation Expense | Q3 2024 | About $14M per quarter | no guidance | no prior guidance |
GAAP Tax Rate | Q3 2024 | mid-30s for balance of the year | no guidance | no prior guidance |
Adjusted Tax Rate | Q3 2024 | Approximately 22%–23% (2nd half of 2024) | no guidance | no prior guidance |
Revenue | Q4 2024 | no prior guidance | $100M–$106M; 4% non‐GAAP revenue growth and mid‐teens redemption revenue growth | no prior guidance |
Adjusted EBITDA | Q4 2024 | no prior guidance | $30M–$34M; 31% margin | no prior guidance |
Weighted Average Fully Diluted Shares | Q4 2024 | no prior guidance | Approximately 34 million | no prior guidance |
GAAP Tax Rate | Q4 2024 | no prior guidance | Low–mid-30s; also factors in a $52M–$56M noncash tax benefit | no prior guidance |
Adjusted Tax Rate | Q4 2024 | no prior guidance | Approximately low-20s | no prior guidance |
Free Cash Flow | Q4 2024 | no prior guidance | Working capital usage expected to be higher due to D2C savers and holiday cash outflows | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Instacart Integration | Q2 discussions emphasized minimal one‐time integration costs with reusable tech and a planned launch by end‑2024, while Q1 provided no commentary. | Q3 discussions focus on the testing/piloting stage with phased launch components, a step‑up in fixed costs, and expectations for a gradual revenue ramp-up (including delayed cost impact in Q4/Q1 2025). | Shift from an efficiency narrative in Q2 to more explicit cost dynamics and phased implementation concerns in Q3, indicating short‑term margin caution but long‑term revenue optimism. |
Third‑Party Publisher Redeemer Growth | Q1 and Q2 highlighted robust growth (with figures like nearly 300% and 255% YoY increases) driven by new partnerships and expanded networks. | Q3 continues to report strong growth (e.g., 85% YoY increase and seasonal boosts) but with slightly different metrics, reflecting ongoing expansion. | Consistent robust growth with evolving quantitative figures; overall sentiment remains positive despite metric adjustments. |
Supply‑Demand Imbalances | Q1 remarks noted balanced supply with rising demand, and Q2 emphasized that historically there were no major supply constraints. | Q3 explicitly identifies temporary imbalances caused by faster depletion of promotional budgets and inventory constraints. | An emerging near‑term challenge noted in Q3 that contrasts with earlier periods, though management expects it to be temporary. |
Client Budget Growth, Promotional Spend Trends, and Budget Cycle Dependencies | Q1 and Q2 discussions described strong client budget increases (up to 50%+ growth), a shift toward fee‑per‑sale promotions, and reliance on annual budget cycles that sometimes delay mid‑year reallocations. | Q3 reaffirms strong client budget growth (with average increases around 60% and high 96% retention) while still acknowledging annual planning limitations affecting near‑term spend. | A consistently positive long‑term growth sentiment, with ongoing challenges from traditional annual planning cycles. |
Accelerated Revenue Growth Projections and Timing Challenges | Q1 provided no details, while Q2 projected accelerated revenue growth (driven by Instacart and third‑party publishers) with some timing lags in rollout. | Q3 projects Q4 as a temporary trough with significant acceleration expected in 2025, noting timing challenges from rapid budget depletion and rollout phases. | Maintained long‑term optimism with more pronounced short‑term timing challenges in Q3. |
Increased Operating Expenses (Marketing, R&D, Ad Revenue) | Q1 noted increases in sales and R&D spend but maintained improved EBITDA margins; Q2 mentioned softer ad revenues yet managed expenses effectively. | Q3 details higher marketing expenses (e.g., for the Thanksgiving program), ramped-up R&D headcount, Instacart‑related launch costs, and a decline in ad revenues contributing to temporary margin pressure. | Greater visibility of cost pressures in Q3, reflecting short‑term margin concerns amid ongoing investments for long‑term benefit. |
Promotional Budget Depletion Leading to Supply Constraints | Q1 had no mention of this topic, and Q2 stated that historically promotional budgets did not create supply issues. | Q3 explicitly highlights that faster-than‑expected depletion of promotional budgets is creating temporary supply constraints and headwinds for Q4 performance. | A new and emerging concern in Q3 that signals potential near‑term challenges until budgets reset in the new planning cycle. |
Decline in Direct‑to‑Consumer Redemption and Softness in Ad Revenues | Q1 mentioned modest D2C growth (only a 3% increase) with soft ad revenues (around a 10% decline), whereas Q2 saw a more marked 13% decline in D2C with softer ad performance. | Q3 shows a sharper decline in D2C performance (down 20% YoY) and a 27% decline in ad revenues, partly due to inventory constraints affecting campaigns. | A worsening trend from modest challenges to sharper declines in both D2C redemptions and ad revenues, intensifying near‑term bearish sentiment. |
Expansion into General Merchandise and Uncertain Timelines for New Retail Publisher Additions | Q1 noted rapid growth in general merchandise (over 12x YoY in some segments) and optimistic pilot programs with roughly 12‑month publisher ramp‑ups; Q2 observed nearly doubled revenue share with ongoing uncertainty in onboarding timelines. | Q3 reports continued strong growth with almost doubled revenue share in general merchandise and reiterates uncertainty in onboarding new retail publishers due to phased technical rollouts. | Continued robust expansion into new categories alongside persistent caution regarding precise timelines, signaling both opportunity and execution risk. |
Evolution of AI and Data‑Driven Targeting Capabilities | Q1 and Q2 extensively discussed the importance of AI‑driven targeting, dynamic real‑time optimization, and leveraging first‑party data to enhance promotional effectiveness. | Q3 does not explicitly mention AI or related capabilities, with targeting improvements being discussed more generally. | A decreased explicit focus in Q3, potentially indicating consolidation of these capabilities into broader targeting efforts rather than a standalone focus. |
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Budget Exhaustion Impact
Q: How widespread is budget exhaustion, and its Q4 impact?
A: Bryan Leach explained that budget exhaustion is not widespread but can be significant if large clients need to re-up budgets. Some clients have dramatically increased budgets, while others didn't allocate enough and are now realizing they should have. He noted that while they secured incremental budgets mid-cycle in Q3, contributing to overperformance, they are realistic about the availability of incremental dollars in Q4.
[Cited from documents [5]] -
Revenue Growth Acceleration
Q: Can you elaborate on expected acceleration next year?
A: Sunit Patel stated that Q4 is the trough in year-over-year revenue growth, and they expect significant acceleration next year due to factors like stabilizing D2C revenues, continued strong growth in the third-party publisher business, and contributions from Instacart. He believes the growth will accelerate as they work through year-over-year comps and see strong growth in third-party publishers.
[Cited from documents [7]] -
Instacart Partnership Rollout
Q: How should we frame revenue build-up from Instacart?
A: Bryan Leach mentioned that the Instacart rollout will be gradual, with a ramp similar to Walmart's over the first 180 days. They expect high redemption rates but are managing expectations due to contractual phases and ongoing UX enhancements. He emphasized that some capabilities will be phased in, impacting the pace of revenue growth.
[Cited from documents [4]] -
Supply Side Confidence
Q: When will you have visibility into supply meeting demand?
A: Bryan Leach expressed confidence in the supply side due to historical patterns of supply catching up to demand. They have visibility into client commitments and believe that budget allocations will step up to match network growth, particularly as clients plan for the new year. He noted that they are projecting growth and encouraging clients to align their budgets accordingly.
[Cited from documents [9]] -
D2C vs. Third-Party Strategy
Q: How are you balancing D2C and third-party redeemers?
A: Sunit Patel noted that D2C revenues have stabilized, and they focus on overall redemption revenue rather than prioritizing between D2C and third-party. Bryan Leach added that the primary factor affecting D2C performance is inventory availability and that content allocation is based on delivering scale and efficiency across all channels.
[Cited from documents [6], ] -
Measurement & Always-On Model
Q: What are key unlocks for always-on DR mentality?
A: Bryan Leach emphasized the need for credible, real-time measurement of incremental sales to move the industry toward an always-on direct response model. They are building tools for near real-time ROI measurement and are educating clients to shift from annual planning to more agile allocation of dollars. He believes that enhanced measurement and targeting capabilities will drive this transition.
[Cited from documents [0], ] -
OpEx and Investments
Q: What's causing the increase in OpEx in Q4?
A: Sunit Patel explained that the OpEx increase is due to higher marketing expenses for their Thanksgiving program, adding headcount in technology for targeting and analytics, and costs associated with the Instacart partnership. These expenses are expected to ramp up in Q4 and level out in the first half of next year.
[Cited from documents [6]] -
Early Results from Instacart
Q: What results are you seeing with Instacart live?
A: Bryan Leach reported that early indicators are positive, with high redemption rates expected due to ease of use. They are excited about upgrading Instacart's promotion capabilities and are looking forward to launching Beer, Wine & Spirits offerings. He mentioned that while it's too early for definitive results, they are optimistic about Instacart's impact.
[Cited from documents [8]] -
Client Budget Re-Ups
Q: How consistent are client budget increases over years?
A: Bryan Leach noted that overall budgets have grown from about $2 million to approaching billions over time. Clients have consistently stepped up budgets, with some increasing by 5x or more. He expects this trend to continue as they engage with more senior decision-makers and become integral to clients' strategic plans.
[Cited from documents [10]] -
Time to Market Improvements
Q: What's driving reduced time to market for publishers?
A: Bryan Leach attributed the faster time to market to better technical documentation and accumulated experience. They have built tools to replicate features more efficiently and are applying this approach to other areas, such as launching offers more quickly with Campaign Manager. This has resulted in a significant decrease in deployment times.
[Cited from documents [1]]