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II

Ibotta, Inc. (IBTA)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $98.4M and adjusted EBITDA was $27.8M, both below the prior Q4 guidance ($100–$106M revenue, $30–$34M adj. EBITDA); management cited insufficient offer supply relative to strong redeemer growth and sales execution issues as key drivers .
  • Non-GAAP redemption revenue grew 7% YoY to $82.4M, while total redeemers rose 27% YoY to 17.2M; however, redemptions per redeemer fell 20% YoY due to mix shift toward third-party publishers and constrained offer supply .
  • Q1 2025 guidance implies flat revenue growth ($80–$84M) and a 15% adj. EBITDA margin (midpoint), reflecting continued near-term offer supply headwinds and a full quarter of Instacart-related costs before anticipated improvement through 2025 .
  • Strategic pivots include a new CPID (cost per incremental dollar) measurement framework and upgraded programmatic buying via Campaign Manager; two major CPG clients have greenlit CPID-driven campaigns with several-times-higher daily spend versus last year, a potential catalyst for supply recovery and estimate re-rating .

What Went Well and What Went Wrong

What Went Well

  • Third-party publisher strength: 3PP redemption revenue rose 39% YoY in Q4 to $52.3M, supported by Instacart launch and Family Dollar expansion, demonstrating network demand even as D2C softened .
  • Redeemer growth: IPN redeemers increased 27% YoY to 17.2M, aided by Instacart launch, Walmart audience growth, and Family Dollar in Q2; management highlighted strong demand-side momentum .
  • Strategic innovation: Management introduced real-time incrementality measurement (CPID) and programmatic buying upgrades; two top global F&B clients approved CPID-based campaigns after pilots, indicating early traction at materially higher daily spend levels .
    • “We’ve begun shifting…toward the concept of cost per incremental dollar (CPID)…For the first time, CPG brands will be able to log in to a dashboard and track the volume of incremental revenue they have generated” .
    • “Both clients have decided to greenlight campaigns…several times higher on an average daily basis than what we observed last year” .

What Went Wrong

  • Guidance miss: Q4 revenue ($98.4M) and adj. EBITDA ($27.8M) fell below Q3 guidance ranges; management attributed this to insufficient offer supply and sales execution lapses (account coverage and handoffs) .
  • D2C softness: D2C redemption revenue and ads declined; ad & other revenue fell 27% YoY to $16.0M, and management expects ~ $10M in Q1 ads with improvements only after mid-year ad infrastructure changes .
  • Lower usage intensity: Redemptions per redeemer dropped to 5.5 (down 20% YoY), reflecting mix shift toward 3PP (lower frequency) and constrained offer inventory across channels .

Financial Results

Headline Results vs Prior Periods

MetricQ4 2023Q3 2024Q4 2024
Revenue ($MM)$99.7 $98.6 $98.4
Redemption Revenue ($MM)$77.9 $84.5 $82.4
Ad & Other Revenue ($MM)$21.8 $14.1 $16.0
Net Income ($MM)$18.6 $17.2 $76.2
Diluted EPS ($)$0.69 $0.51 $2.27
Net Income Margin (%)19% 17% 77%
Adjusted Net Income ($MM)$26.6 $31.4 $22.4
Adjusted Diluted EPS ($)$0.99 $0.94 $0.67
Adjusted EBITDA ($MM)$33.0 $36.5 $27.8
Adjusted EBITDA Margin (%)33% 37% 28%

Notes and drivers:

  • Q4 net income margin spike reflects a one-time GAAP tax benefit from releasing a valuation allowance; adjusted metrics strip this out .
  • Mix shift toward 3PP and inventory constraints pressured usage intensity and margins; cost of revenue rose sequentially with Instacart contract activation .

Segment Breakdown (D2C vs 3PP)

SegmentQ4 2023 ($MM)Q3 2024 ($MM)Q4 2024 ($MM)
D2C Redemption Revenue$40.3 $33.1 $30.1
3PP Redemption Revenue$37.6 $51.3 $52.3
D2C Ad & Other Revenue$21.8 $14.1 $16.0
Total Revenue$99.7 $98.6 $98.4

KPIs

KPIQ4 2023Q3 2024Q4 2024
Total Redeemers (000s)13,579 15,287 17,215
D2C Redeemers (000s)2,154 1,909 1,819
3PP Redeemers (000s)11,425 13,378 15,396
Total Redemptions (000s)93,867 97,366 94,552
D2C Redemptions (000s)39,522 31,571 28,276
3PP Redemptions (000s)54,345 65,795 66,276
Redemptions per Redeemer – Total6.9 6.4 5.5
Redemptions per Redeemer – D2C18.3 16.5 15.5
Redemptions per Redeemer – 3PP4.8 4.9 4.3
Redemption Revenue per Redemption – Total ($)0.83 0.87 0.87
Redemption Revenue per Redemption – D2C ($)1.02 1.05 1.07
Redemption Revenue per Redemption – 3PP ($)0.69 0.78 0.79

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ActualChange
RevenueQ4 2024$100–$106M $98.4M actual Lower vs guide (miss)
Adjusted EBITDAQ4 2024$30–$34M $27.8M actual Lower vs guide (miss)
RevenueQ1 2025N/A$80–$84M Initial guide
Adjusted EBITDAQ1 2025N/A$10–$14M; ~15% margin midpoint Initial guide
GAAP Tax RateFY 2025N/AHigh teens (full year); de minimis in Q1 New detail
Adjusted Tax RateFY 2025N/AMid-teens (full year); low teens in Q1 New detail
Stock-based CompensationFY 2025N/A$50–$60M New detail
Free Cash Flow as % of Adj. EBITDAFY 2025N/A60%–65% New detail
Capex / Office Build-outFY 2025N/A~$20M capex, offset by ~$14M TIA; ~$6M one-time cash outflow New detail
Cost of RevenueQ1 2025N/A+$2M sequential (full quarter of Instacart costs) New detail
Operating Expenses (non-GAAP)FY 2025N/AFlattish from Q1 levels; -$3M seq. in Q1 (sales & marketing down, R&D/G&A up) New detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Measurement/CPIDFramed need for rigorous, real-time incrementality; set up for 2025 roll-out Plan to provide real-time incremental sales and cost per incremental unit/dollar in 2025; beta Campaign Manager CPID framework launched; two major CPGs greenlit campaigns; dashboard-level measurement in market Accelerating implementation
Sales executionNot a focusBudget exhaustion noted; expected reacceleration in 2025 Sales execution shortfalls called out; CRO hired; process improvements underway Remediation in progress
Offer supply vs demandDemand-side strength across publishers Near-term supply constraints from budget depletion; Q4 growth to trough Still tight entering Q1; CPID and new sales ops expected to recover supply across 2025 Gradual improvement expected
Publishers (Instacart, DoorDash)Announced Instacart; expected launch by YE24 Testing Instacart; ramp over ~12 months Instacart live; DoorDash partnership announced post year-end; alcoholic beverages on Instacart Network expanding
D2C adsWeakness vs performance spend Ads ~ $14M/quarter; weakness persists Expect ~$10M in Q1; plan ad server and CPM shift mid-year to raise fill rates Rebuild mid-2025
Tax/GAAP itemsIPO effects in Q2; SBC elevated Expect valuation allowance release in Q4; tax normalization in 2025 $58.6M GAAP tax benefit in Q4; GAAP rate de minimis Q1, high teens FY25 One-time then normalize

Management Commentary

  • Strategy: “We’re pursuing 2 main strategic goals…establish the unrivaled value of what we sell [incremental sales lift]…[and] change the way clients buy on our network [programmatic via Campaign Manager]” .
  • Execution: “We fell short…on sales execution, plain and simple…inadequate account coverage and…handoffs…We announced [a new CRO],” with sales ops/enablement upgrades underway .
  • Demand vs supply: “We have not secured enough offer supply…relative to [rapid redeemer growth]…resulting in lower redemptions per redeemer and lower redemption revenue” .
  • Financial posture and guidance color: “We generated free cash flow of $19.4M [Q4]…Q1 adjusted EBITDA margin ~15%…non-GAAP cost of revenue +$2M sequential from Q4 [full quarter Instacart]…non-GAAP opex down $3M sequential” .

Q&A Highlights

  • Timing and milestones for CPID rollout: Pilots converted to live programs in Q1; monitoring follow-on spend and breadth across brands; expect gradual rollout through 2025 .
  • Instacart ramp: Strong fundamentals (UX, redemption rates), but contribution gated by offer supply; initial hiccups in client migration acknowledged; alcoholic beverages to help category coverage .
  • Ads trajectory: Expect ~$10M Q1 ad revenue with structural improvements (third-party ad server, CPM pricing) mid-year to raise fill rates; fill improves as D2C redeemer trends recover .
  • Free cash flow and taxes: FY25 free cash flow 60%–65% of adj. EBITDA; GAAP tax rate high teens (FY), adjusted tax mid-teens; step-up in cash taxes and office capex (offset by TIA) .
  • Tone: Candid about near-term challenges, confident on long-term transformation via measurement rigor and programmatic buying; targeting senior decision-makers to unlock larger budgets .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue could not be retrieved due to an S&P Global request limit in this session; therefore, explicit vs-consensus comparisons are unavailable. We anchor relative performance to company guidance and actuals disclosed.
  • Q4 actuals versus company guidance: Revenue and adjusted EBITDA both missed the Q3-issued ranges, implying potential negative estimate revisions near term .

Key Takeaways for Investors

  • Near-term: The quarter missed internal guidance, and Q1 guide is conservative amid offer supply constraints and full-quarter Instacart costs; expect muted early-2025 prints until CPID/programmatic initiatives scale .
  • Medium-term: CPID-backed campaigns at two major CPGs and expanded publishers (Instacart live; DoorDash announced) should drive supply recovery, higher spend per day, and improved forecastability; watch for redeemers to sustain, offers per redeemer to improve .
  • Mix shift: Third-party publisher strength continues; as offers deepen across categories (including alcoholic beverages), redemption revenue per redemption and overall growth should benefit despite lower usage intensity versus D2C .
  • Margin trajectory: Adj. EBITDA margin should improve sequentially through 2025 on flattish opex and revenue growth; monitor Instacart cost absorption and ads infrastructure transition timing .
  • Cash discipline: Solid free cash generation with FY25 free cash flow targeted at 60%–65% of adj. EBITDA, even with higher cash taxes and office capex (offset by TIA) .
  • Execution watchpoints: Sales ops enablement under new CRO, offer setup automation via Campaign Manager, and client budget cycle alignment are key to unlocking larger, always-on budgets .
  • Proof points to track: Additional CPID client wins, measured lift outcomes, Instacart/beer-wine-spirits ramp, DoorDash go-live timing, and stabilization in D2C ads post mid-year tech stack changes .

Appendix: Additional Data Points

  • Q4 non-GAAP gross margin was 85%; sequential decline (~300 bps) due to a $3M increase in cost of revenue (Instacart go-live and tech personnel costs) .
  • Cash from operations and free cash flow in Q4: $22.0M and $19.4M, respectively; full-year 2024 cash from ops $115.9M and FCF $105.7M .
  • Balance sheet strength: Cash & equivalents $349.3M at year-end; no long-term debt outstanding .
  • Non-GAAP adjustments: 2023 breakage benefit ($13.5M FY; $0.8M Q4); no breakage benefit in 2024; Q4 2024 adjusted net income $22.4M, adjusted EBITDA $27.8M .