IBTA

Shalin Patel: Good afternoon, and welcome to Ibotta's Q4 2024 Earnings Conference Call. With us today are Bryan Leach, Founder and CEO; and Sunit Patel, CFO. Today's press release and this call may contain forward-looking statements, including our future operating results, guidance for Q1 2025, our ability to grow our revenue and factors contributing to such potential revenue growth, our ability to realize cost efficiencies, our ability to improve the forecast ability of our business, our ability to increase our sales to existing and new customers, our future opportunities in the performance, functionality and potential impact of our product development efforts that are subject to inherent risks, uncertainties and changes and reflect our current expectations and information currently available to us and our actual results could differ materially. For more information, please refer to the risk factors in our recent SEC filings. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures and should be considered in addition to and not as a substitute for our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release and our 10-K, which are available on our Investor Relations website at investors.ibotta.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 year-over-year basis. Lastly, references to non-GAAP revenue growth reflect the exclusion of one-time breakage revenue benefits in 2023. This is due to an update we made in 2023 to fix a software error to correctly charge maintenance fees to inactive direct-to-consumer redeemers, which resulted in a short-term benefit to GAAP revenue last year. Please see Slide 33 in the appendix for more detail. With that, I'll turn it over to Bryan.

Bryan Leach: Thanks, Shalin. Good afternoon everyone. Thank you for joining us to discuss our fourth quarter results. We reported revenue and adjusted EBITDA below the guidance range we provided on our third quarter earnings call. We're also guiding to a softer than anticipated outlook in the first quarter. We are disappointed in this performance. We believe we've taken steps to improve our near-term execution and we're beginning to see evidence that our key initiatives are bearing fruit. The current softness in our business is attributable to the fact that we have not secured enough offer supply from CPG brands relative to the rapid growth of redeemers across our network. As a result, our redemptions per redeemer are lower than anticipated and that is flowing through to lower redemption revenue. Through the end of 4Q, we continued to face the same challenge we discussed on our last earnings call relating to the depletion of offer budgets over the course of 2024. Entering 2025, as expected, many of our top clients increased their Ibotta budgets to take advantage of our larger audience of redeemers. Others continue to have always on content with us. Nonetheless, we have still yet to see the overall increase in spending that we anticipated, and in this economic climate, our growing redeemer base remains hungry for additional offers that remain live longer on our network. We attribute this to three main factors. First, at the higher levels of investment we're now seeking, CPG brands increasingly expect a greater level of rigor when it comes to measuring the ROI of our campaigns. This is especially true in an environment where downward pressure on top line sales has caused some CPG companies to reflexively cut or pause growth in marketing spend across the board. As I mentioned on our last call, we're in the process of overhauling and upgrading our approach to both measurement and targeting, and as you'll hear, we've made significant progress on both fronts. But we are only just now taking these exciting new solutions to market and we haven't had them in time to materially affect Q1. Second, we fell short of our expectations when it comes to sales execution, plain and simple. As we've been upgrading our sales organization at times there was an inadequate account coverage and there were account handoffs that could have been crisper, this disrupted our ability to secure offer supply in the short-term. At the end of December, we announced the hiring of Chris Riedy as our new Chief Revenue officer. Chris spent 11 years at Twitter, ultimately overseeing all global revenue. More recently, he was Chief Revenue Officer at Tvscientific, which is a leader in the connected television space. Chris's deep experience running a larger sales organization, combined with his ability to move quickly in a smaller and more nimble startup environment are exactly what I bought a needs for the next stage of our growth. Chris's onboarding has highlighted additional opportunities to improve our sales operations, sales enablement and account prioritization, as well as continuing to streamline our offer setup process. Despite the disruptions we've seen, I'm confident that Chris's arrival and the changes he is already bringing about are positioning us for long-term success. Finally, we're not yet fully on cycle with certain CPG clients. In some cases, we've been unable to persuade our clients to set aside budgets in anticipation of our redeemer growth rather than a full planning cycle after they have seen it. Compounding that challenge, some clients have separate e-commerce budgets that we anticipate tapping into, but which were finalized prior to our announcement of Instacart and DoorDash joining our publisher network. These considerations inform our broader strategy of moving beyond traditional promotions budgets which are annually allocated. I'll say more on this in a moment. Let me take a moment to address the cost side of our business. As we look at our strategic priorities for 2025, we have identified several opportunities to streamline our operations and better allocate our resources to align with our key initiatives. As part of this effort last week we reduced the size of our workforce by 8%. This decision was necessary to maximize our potential and advance our mission. For the employees who were impacted, however, it was difficult news to receive and I want to take this opportunity to thank them and all our employees for their tireless effort on behalf of Ibotta. To be clear, we are not implementing a hiring freeze. We will continue hiring and investing heavily in R&D and sales. Sunit will discuss what we’re expecting for our full year operating expenses later. What we’ve heard from top clients is remarkably consistent. Our clients are happy with the service Ibotta provides and we are seen as a leader within the promotions industry. We continue to see very high rates of client retention overall. That said, to unlock the much higher levels of investment from our clients that we aspire to, it has become clear that we need to bring to market a more rigorous form of measurement that goes beyond the industry standard return on ad spend or ROAS framework. With this in mind, we’re pursuing two main strategic goals. Goal number one, establish the unrivaled value of what we sell. Last quarter we began unveiling a new framework for measuring incremental sales lift. This framework will allow us to demonstrate that targeted promotions drive profitable revenue growth and close key sales gaps. Goal number two, change the way clients buy on our network. This means getting away from annual promotions budgets and evolving our network into a more programmatic interface for buying performance-based media through our campaign manager product. On goal number one, our approach looks at millions of shopping trips and takes into account the actual incremental dollars generated by a campaign relative to an otherwise statistically identical population of consumers who are not exposed to our campaign. We’ve begun shifting our product and go-to-market toward the concept of cost per incremental dollar, which I will refer to as CPID for simplicity c p i d. We then calculate a CPID using the fully loaded cost of the campaign, inclusive of our fees, any consumer awards and any setup costs. If a campaign costs – $3 million to run and generates $9 million of incremental revenue for the client, the CPID would be $0.33. This is a simple concept, but in the offline world, CPG brands have generally been unable to measure true sales lift in near real-time. For the first time, CPG brands will be able to log into a dashboard and track the volume of incremental revenue they have generated, the CPID, and decide how to optimize their campaigns. We believe we’re in a unique position to be able to bring this important new capability to market due to our data and large network of publishers. With regard to goal number two, we are also in the process of upgrading campaign manager to support a more rich, programmatic buying experience, including the automatic configuration of offers and more self-service features. In the future, we anticipate that our clients will be able to more easily sign up, fund, set up, measure and optimize campaigns with us, all without needing the same level of time intensive, back and forth with our sellers and account managers. Over the course of the year our progress against these goals will allow us to tap into budgets that are much larger than what we have today and move us to an always on performance marketing model. We believe this will improve the forecast ability of our business and protect us from the challenges associated with annual promotional budget planning cycles. So far, we’ve only implemented our new go-to-market strategy with two CPG companies, which happen to be among the largest food and beverage companies in the world. We are pleased to announce that within just the last week, based on the success of pilots completed during the fourth quarter, both clients have decided to greenlight campaigns. By measuring incremental sales and tracking CPID with our latest technology, we are helping these partners drive profitable revenue growth and close key sales gaps with optimized promotional strategies, all at a scale we believe will move the needle for their brands. These two programs represent exactly the kind of performance advertising model we’re moving towards. These dollars are being sourced from a purpose dedicated Ibotta budget that has been created at the direction of senior executives within each company, executives who share our broader vision. To give you a sense for the potential we see here, the amount of money that is being invested by these two companies is several times higher than on an average daily basis than what we observed last year. In the coming months, we plan to build on our early success with these two large CPG clients by bringing our new measurement and targeting capabilities to all our remaining clients. Lastly, let me touch briefly on D2C ads. While we saw seasonal strength in Q4, we expect some ongoing weakness in the first half of this year. Let me talk about why we are seeing this and what we’re doing about it. Our D2C ads’ functionality has not historically been a priority area of investment, given that, one, it functioned well for many years; and two, it was not a core focus of growth for the business. That being said, given the deterioration we observed in the ads business in 2024, we believe we have opportunities to improve performance meaningfully. For example, today our ads business is only capable of flat fee pricing, meaning it’s not CPM-based. Over the course of 2025, we intend to serve display ads through a new third-party ad server and use CPM pricing for banners, while making it easier for advertisers to tap into run of site and remnant inventory. We believe this will allow our clients to buy ads on our D2C platform, similarly to how they buy media elsewhere, which should result in much higher fill rates. We’ll have more to say on this topic later this year as we make progress on this initiative. Although the focus of my remarks has been on how we unlock greater offer supply, we continue to make progress in terms of adding new publishers. In January, we announced that DoorDash will be going live on our network later this year. We also introduced alcoholic beverage offers on Instacart in February, which we believe will help us attract greater investments from beer, wine and spirits companies over time. To wrap up, let me clearly say that I recognize it's been a bumpy couple of quarters for Ibotta and our investors. We know we need to deliver consistent results in the near-term to get investor confidence back and we anticipate being able to do so. The way we will get there is through remaining focused on innovation and improved execution. In terms of innovation, we believe we're on the cusp of reshaping our industry and breaking out of the promotions category as our new measurement tools allow us to demonstrate that we're delivering incremental revenue growth that is also contribution margin positive on every transaction. We believe our clients will grow their investments on the platform. In this way, we believe our company can follow a similar trajectory to other performance marketing platforms that have taken off once credible measurement has been established. By introducing a more programmatic media buying interface, we will also make it easier for brands and their agencies to invest on our network and that in turn should help us get better at forecasting our business. As I mentioned, we've begun to see clear validation of our newer go-to-market strategy and we look forward to keeping you updated on our progress. In terms of execution, we brought in a new Chief Revenue Officer and he's helping us upgrade our sales execution and better position ourselves for long-term success. With that, I'll hand the call over to Sunit to discuss our fourth quarter results and first quarter guidance in greater detail. Sunit?

Sunit Patel: Thank you, Bryan, and good afternoon, everyone. We delivered revenue and adjusted EBITDA 4% and 13% below the midpoint of the guidance range we provided on our third quarter earnings call respectively. Our revenue was below our guidance range as a result of a shortfall in redemption revenue driven by a lack of sufficient offer supply. Adjusted EBITDA fell below our guidance range as our expenses were largely as we forecasted, but the revenue shortfall fell almost entirely to our bottom line. We generated free cash flow of $19.4 million in the quarter which brings our full year 2024 to $105.7 million. We saw healthy growth in third-party redeemers across the IPN on both a year-over-year and quarter-over-quarter basis, highlighting the continued strength of the demand side of our network. Revenue in the fourth quarter was $98.4 million, representing a non-GAAP revenue decline of 0.5% year-over-year exclusive of $0.8 million in one-time breakage revenue in the prior year period. We delivered Q4 adjusted EBITDA of $27.8 million, representing an adjusted EBITDA margin of 28%. Adjusting for the $0.8 million in one-time breakage revenue, this compares to 33% in Q4 of 2023 and represents a 14% decline in adjusted EBITDA. In Q4, our redemption revenue was $82.4 million, up 7% year-over-year on a non-GAAP basis. Ad and other revenues, now 16% of our revenue were $16 million, down 27% year-over-year. Our total redeemer growth continues to be healthy and we continue to see strong growth in our third-party publisher business offset by softer performance in our D2C segment. Third-party publisher redemption revenue was $52.3 million, up 39% year-over-year, while D2C redemption revenue was $30.1 million, down 24% on a non-GAAP basis excluding the one-time breakage benefit in Q4 last year. Turning to our key performance metrics, total redeemers was $17.2 million in the quarter, up 27% year-over-year and 13% quarter-over-quarter. The year-over-year growth was driven by the launch of Instacart during the fourth quarter, like-for-like growth of Walmart's audience and the launch of Family Dollar in Q2. Redemptions per redeemer were 5.5 down 20% year-over-year driven by the growth in third-party redeemers which have a significantly lower redemption frequency as compared to our D2C redeemers, in addition to a lack of sufficient offer supply which impacted both D2C and third-party. Redemption revenue per redemption was $0.87, up 6% year-over-year on a non-GAAP basis, primarily reflecting a mix shift within our CPG portfolio and a growing contribution from higher MSRP general merchandise. As a reminder, redemption revenue per redemption can vary quarter-to-quarter based on seasonal patterns but also due to variations in offer mix. Q4 non-GAAP gross margin was 85%, adjusting for the one-time breakage revenue benefit in Q4 of 2023. Non-GAAP gross margin would have been down by approximately 260 basis points year-over-year. Non-GAAP gross margins were down approximately 300 basis points sequentially, driven by a $3 million sequential increase in cost of revenue which as we discussed last quarter was a function of both the Instacart contract going live for a partial quarter as well as increased technology related personnel costs. Non-GAAP operating expense as a percent of revenue was 58%. Adjusting for the one-time breakage revenue benefit in the prior year period, non-GAAP operating expenses as a percent of revenue would have increased by approximately 250 basis points. Within that, non-GAAP sales and marketing increased by 1%. Non-GAAP research and development expenses increased by 3%. Lastly, non-GAAP general and administrative expenses increased by 11%. We delivered adjusted net income of $22.4 million and adjusted diluted net income per share of $0.67. Our adjusted net income excludes $12.9 million in stock-based compensation and has a $66.7 million adjustment for income taxes. As I previewed in our third quarter earnings call, during the fourth quarter, we recognized a one-time GAAP tax benefit of $58.6 million reflecting the release of our valuation allowance against deferred tax assets. We ended the quarter with $349.3 million of cash and cash equivalents. In Q4, we spent approximately $15.6 million repurchasing approximately 244,000 shares of our stock at an average price of $64.12. In Q4, our weighted average fully diluted shares outstanding were 33.6 million. We have 68.8 million remaining under our current authorization. Turning to our Q outlook. We currently expect revenue in the range of $80 million to $84 million, representing flat revenue growth. We expect Q1 adjusted EBITDA in the range of $10 million to $14 million, representing about a 15% adjusted EBITDA margin at the midpoint. I’d like to provide you a little more color on our Q1 outlook as well as some thoughts on 2025 as a whole. We continue to face near-term supply constraints impacting our revenue growth in Q1. We believe that this is driven by the factors Bryan discussed earlier, including sales execution and the fact that we are still early in bringing our new measurement breakthroughs and the CPIT framework to our clients. We believe our guidance for Q1 captures the headwinds we have described. We expect add another revenue of about $10 million in Q1. However, we expect the year-over-year rate of decline to moderate as we rollout our ad infrastructure improvements in the middle of the year. Underlying D2C ad revenue trends are expected to improve when we see improvement in D2C redeemer trends, which itself is a function of offer supply. Our total year-over-year revenue growth dipped into negative territory in the second half of the fourth quarter before troughing in January. The year-over-year growth rate is improving sequentially in February and is positive and we anticipate further sequential improvement in March. We expecting overall revenue growth rates to continue to gradually improve over the course of the year driven by better execution, driving offer supply recovery, the ramp of Instacart and DoorDash, the launch of alcoholic beverage campaigns at our third-party publishers and continued progress in winning more CPIT based campaigns with our clients. As it relates to total redeemers, we are expecting a small seasonal decline from Q4 to Q1, but we expect this decline to be smaller than last year given the ongoing ramp of Instacart which was only live for a portion of Q4. Compared to Q4, our adjusted EBITDA outlook in Q1 is principally driven by a sequential decline in revenue as well as an increase in cost of revenue. Separately and excluded from adjusted EBITDA, we anticipate taking a small one-time GAAP restructuring cost of less than $2 million in conjunction with our efficiency efforts that Bryan discussed. In Q1, we are expecting non-GAAP cost of revenue to increase by $2 million sequentially from Q4, primarily reflecting a full quarter of Instacart related costs. That should be a decent quarterly run rate to model for the rest of the year with the very slight sequential increases driven by revenue growth. Total non-GAAP operating expense excluding any restructuring charges in Q1 should decline sequentially from Q4 by $3 million driven by a decline in sales and marketing partially offset by growth in R&D and G&A. Non-GAAP operating expenses should be flattish from Q1 levels through the course of the year. Our adjusted EBITDA margin should show improvement every quarter as we grow revenue given our flattish expense guidance for the rest of the year. We anticipate our GAAP income taxes to be de minimis in Q1 and our GAAP income tax rate to be in the high-teens for the full year. We expect our adjusted tax rate to be in the low-teens in Q1 and mid-teens for the full year. With regards to free cash flow, we anticipate a step up in cash taxes in 2025. We paid approximately $13 million in cash taxes in 2024, which represented 12% of 2024 adjusted EBITDA. In 2025, we expect that cash tax rate to be in the mid to high-teens as a percentage of adjusted EBITDA. We also expect a one-time cash outflow of approximately $6 million related to our new office space. This will show up as a $20 million increase in capital expenditures offset by approximately $14 million of tenant improvement allowance that will flow through working capital. Working capital excluding the tenant improvement allowance will also be a use of cash in 2025. In summary, we expect free cash flow as a percent of adjusted EBITDA in the 60% to 65% range. Lastly, on stock based comp, for the full year 2025, we are now expecting stock based comp between $50 million and $60 million, which captures both the cost of the Walmart warrants and employee based stock comp expense. The end of 2024 and the start to 2025 has been challenging on several fronts, including offer supply and add another revenue. That being said, we are focused on improving near-term sales execution and we are seeing early signs of success in our CPIT based sales effort, which should drive a recovery in our offer supply. We expect to see good margin expansion sequentially over the balance of the year, driven by revenue growth and flattish expenses. With that, operator, let's open up the call for Q&A.

Operator: [Operator Instructions] Thank you. Our first question comes from Andrew Marok with Raymond James. Please unmute your line and ask your question.

Andrew Marok: Hi. Thanks for taking my question. Wanted to go back to the three issues that you called out at the top of the call, the measurement framework, sales execution, and the CPG client cycles. I guess, if you could give us an idea over what timeframe you believe that each of those three issues can be addressed and kind of what are some of the mile markers, especially on the measurement framework things that we can use to kind of assess your progress from the outside?

Bryan Leach: Yeah. Thank you, Andrew. I think that's a very good question. So let's tackle the first one first, which is the measurement framework. We've got that now in market. We've run pilots on that already, that methodology. We've had a multi month back and forth with these two clients that I mentioned that have gone beyond the pilot stage toward substantial green lit programming that's live right now. So this is not a concept that we have. This is something that is live in the market and getting very positive feedback as evidenced by the investment. There will continue to be ongoing investment in that approach. The more data that we're able to capture by adding more redeemers, the more publishers we add to our network. And then, of course, we're training these models based on running ultimately thousands and ultimately even more than that, of different campaigns. And so the models get more and more effective in terms of their ability to not only observe but also predict the level of cost per incremental dollar or the level of volume that a given advertiser could achieve at a constraint of a certain target CPIT. So I think that – in terms of the metrics that you could look at, to continue to see if that's working, I think certainly, following up, we'll want to make sure that we give you a brief on how these two first clients are doing in terms of follow on continued investment in this product and give you a sense for what their gross billings look like in terms of compared to prior years. What kind of a step up is this in terms of access to a different level of budget? And then additional brands that are piloting and converting those pilots into a full time programming. I think those are things that would be evidence of continued traction there. And we will come up with a set of metrics that I think make sense based on what we're observing. So that may be some way of understanding how many of our clients are using these automated tools like campaign manager, in the future. So I think it's a slow and steady rollout over the course of the rest of this year. We spent the last six to nine months, really bringing this to a place where we think we have clear product market fit, and now it's about rolling that out, expanding and evangelizing that. On the second question about execution on sales execution, I believe that we've identified most of the issues. How you would know we're making progress there, I think, there would be – we would know internally that there are fewer handoffs happening between a seller and a new seller, for example, that we have less friction would be – would show up in the fact that we would have resumed growth in the accounts where we've had, that turnover within our sellers. I think this is just a lot of small things that we need to do better. So being able to have Chris on board and bring in people from his network to do things like sales operations, sales enablement better than we've done them in the past, I think I can give you a qualitative update on those in the future. I think, ultimately, that's going to show up in the form of the quality of the – depth of offer supply that we have and that's going to be the best way to objectively measure that. But I do believe we're well down the path in terms of identifying the problems. I do think it's going to take some time for us to get to a place where those – with a new go to market that's more analytical, we have a different type of sale. We have a larger client analytics component to that sale. We need to make sure our sellers are trained to be effective in that sale. We're selling into much more senior people within the organizations that we're speaking with. We're talking – we're much more upstream in the strategic planning process of those clients. And so to do that is a little bit different than what we've done as sort of the go to partner within the tactical zone of promotions in the past. And so those are some things that will take us, I think, perhaps a quarter or two to iron out from this point. As far as the third issue of getting on cycle, that is something that we are doing every day. I think that we are starting to see, even in the second quarter, there should be some companies that say, well, we now have had enough time to set aside e-commerce budgets so that we can participate in DoorDash for example, that roll out will happen over the course of the rest of this year. But I think that by the time we are – because Instacart was our first e-commerce player, a pure marketplace player and DoorDash our second. We’re now on radar with a number of these marketplaces. And for those brands that have separate dedicated budgets for that kind of thing, I think it should be a matter of a couple quarters until we can start to see really getting on to cycle with those. I think that’s by far the least important factor of the three however. So hopefully that’s directly responsive to your question, Andrew.

Andrew Marok: I appreciate the color. Thank you.

Operator: Our next question will come from Andrew Boone with JMP Securities. Please unmute your line and ask your question.

Andrew Boone: Hi. Thanks so much for taking my question. I wanted to understand targeting in terms of some of the newer grocers that are available and the difference versus Walmart’s kind of everyday low price strategy. So can you guys help us just better understand the unlock that may be a DoorDash or maybe an Instacart and some of the newer platforms that may be available in terms of creating more of that incrementality and that targeting? Thanks so much.

Bryan Leach: Yes. Thank you, Andrew. I think it’s a terrific question and I didn’t touch on it. But we’re excited that DoorDash, for example, is going to allow the full scope and functionality of targeting that we think is so valuable in terms of delivering a maximum amount of incremental dollars, ultimately delivering volume with a low CPID. So that means we’ll be able to target there the same way we can on Ibotta D2C and the same way we can on Instacart. So I think these are just two examples that you raised. But generally speaking we’re finding the new publishers are excited about the idea of personalization. And so that continues to be an important part of why we’re happy with the progress on the publisher side of our business.

Andrew Boone: And I wanted to ask about just the cost savings that you initiated. Can you provide any additional details in terms of where we should be thinking about those savings taking place? Which organizations? How do we think about that kind of rolling through the P&L in terms of 2025? Thanks so much.

Bryan Leach: Yes. The cost savings primarily focus on a couple of areas. So first of all, D2C, that is not as much of a strategic priority as it was two years ago. And so we were overweighted in terms of our investment areas there across the organization relative to the R&D that we want to put into things like this new go-to-market approach. We are also focused on the marketing side. So as we think about things like B2B marketing, we had took a hard look at that and said, it’s more important for us to focus on the R&D and on having as many of these conversations with our clients that we’ve had with these two clients I mentioned and less important for us to do a bunch of B2B marketing and trade publications and things like that. So we’re scaling that back substantially both in terms of the labor cost and some cost in terms of the B2B side of the marketing budget. And then there’s also just streamlining operations across the organization. But what I want to make clear is that we’re not cutting in air any – strategic areas that relate to these key innovations that I’m talking about. In fact, we’re leaning in, we’re hiring more people in those areas. So we’re leaning into client analytics, we’re leaning into real-time measurement of incremental sales, we’re leaning into being able to use machine learning in the future so that we’re really applying principles of artificial intelligence to promotions in novel ways. We’re really differentiated in how much we invest in those areas and we are not losing that. Some of the areas of our business that are cost areas are areas that we targeted in that reduction in force and also in some adjacent areas that are no longer needed when we reduce that that part of the org.

Andrew Boone: Thank you.

Operator: Our next question comes from Eric Sheridan with Goldman Sachs. Please unmute your line and ask your question.

Eric Sheridan: Thanks so much for taking the question. Maybe just two if I could. First just following up on the first question, is there any way to frame out how receptive CPG advertisers are to the changes you’ll be implementing from Q1 to Q4? When we go out and talk to advertisers in that part of the ecosystem, they typically are a little slow to move and they only revisit product initiatives once or twice a year. So I just want to make sure we understand better how quick receptivity might be to implementation. That would be number one. And number two, I thought it was interesting. I think you implied that redeemer growth could be impacted right now by the lack of offer supply. Is there a way to quantify that as well? Or things you’re seeing that could prove out headwinds to growth beyond just the monetization side of the equation, but even slowing some of the redeemer growth. Thank you.

Bryan Leach: Thanks, Eric. Taking your questions in turn, how do you tell how quickly these brands will be receptive to this? I think it’s a great question. I think what we did was ran pilots in the fourth quarter with these companies and now here we are within the last week. So halfway through the first quarter standing up programming that’s based on the success of those pilots. And so that should give you some sense of the rough frame it could take when it’s a sort of happy path. And that’s the only path we’ve seen so far. Obviously with any innovation, I don’t want to be out in front of my skis here. I don’t want to over promise and under deliver. So I’m encouraged by the timeline and the ability to find, frankly, in period budgets that are material for these companies tells you the level of interest they have in the way we're now approaching this question, which I think is encouraging. But what I found is that the more senior you are in the organization, the more quickly that sort of in-period budget can be found. This is going to be kind of an exceptional process in this first year where we're going and saying, look, this is an opportunity when you're light on top-line growth, when you're having year-over-year misses brands to both close those gaps in a reliable way and also do that in a responsible and profitable way. There are not a lot – the impression I get is there are not a lot of folks coming and offering them that at scale, which is why they've been as sort of biased to action as I've seen. I've not seen this level of bias to action in the time that we brought things like this to market up to this point. So that's exciting. At the same time, they also say, things to us like, well, we've already got this in the budget and this is accrued for and so we need to burn through this planned expenditure in this less efficient area. So we can then turn to this, which we're very excited about, but you need to give us a quarter or two to get through those other commitments. The way we're positioning this is, if it's profitable growth, it doesn't necessarily need to come from something else. It is generating incremental EBIT for you. And that's the whole point of having a CPID that's below your contribution margin threshold. As far as the second question. Yes, look, there is an interrelationship in both directions between offer supply and intensity of usage in particular. What we're finding though is that notwithstanding that we're still growing the redeemers at a very good clip and if anything, putting more pressure on the offer supply. In the D2C product in particular, we have seen some of our power savers, the most intense users of our app, when they don't have an offer, live for as long or as many offers as they were accustomed to at one point, they may go away for a cycle and come back. But what we found, historically, at least what we've seen is that when we've exited periods of lower inventory and entered periods of higher inventory, such as in the fourth quarter of 2023, we see that snap back relatively quickly. And so we're hopeful that that will happen again. But for sure, we do know that as we build the offer supply back in the manner that we're describing, we do think that will have knock on benefits in terms of redeemers. And in the short term, the longer it goes where we're dissatisfied with the offer supply, the more that's as you say, a break on what would otherwise be especially redemptions per redeemer.

Sunit Patel: Yes, I would just underline what Bryan is saying on that. I mean, on the D2C side, you're right, we did see, our redeemer account went from about 1.9 million at the beginning of last year and we ended up at 1.8 million. On the other hand, on the third party publisher side, our redeemer count went from 10.4 million to 15.4 million. So we continue to see pretty good strength on the third party side.

Eric Sheridan: Yes, great, thank you.

Bryan Leach: Thanks, Eric.

Operator: Our next question comes from Ron Josey with Citi. Please unmute your line and ask your question.

Ron Josey: Great. Thanks for taking the question. Bryan, I wanted to understand a little bit more. Maybe you can help us understand the changes that are needed. The salesforce, I think the new leader announced, you talked about adding maybe sales operations and enablement functions and maybe one to two quarters before we start seeing this. But talk to us specifically, do we need to hire more sales? Is it retooling the sort of feet on the street that currently exists today? Any more insights on the go-to-market would be helpful. And then on the measurement side and the CPID, I think in the past we've talked about, upwards of 50% of offers are personalized and targeted to users. And so I'm assuming that goes back to the CPG over time. So we'd love to hear more just about how measurement is improving for these CPGs so they can make these decisions at a faster pace? Thank you.

Bryan Leach: Thanks, Ron. Tackling the first one, it's 100 small optimizations in the way our operations work. I think it's one thing when you're going out and asking someone for a $10 million budget. It's very different when you're going out and asking for $100 million or $200 million budget. And so the ability to do that, it requires you to lead with a clear alignment on measurement. And that measurement has to be very analytically rigorous and pass muster with the entire finance organization, the entire measurement organization, perhaps a third-party measurement partner. So it's a matter of putting in place the tools, the raw tools to give to our sellers and then maybe sure they know how to sell in the way we want to sell based on our new go-to-market, which is really focused on this point you're making about incrementality. In the course of that that means a lot of things have to be different. The collateral that you're using the to enable your sellers to win the training, the on-boarding folks that have that type of experience selling at that level. You may also in some cases be talking to a different kind of buyer at an agency, for example, and there are people with that kind of experience. I think it's a matter of better prioritization of accounts. So making sure that if we have an account that we think is potentially as big as one of these two, that we're putting our best people in that. And in some cases we've gotten that wrong. I think it's a matter of simple things in sales operations like having a proper playbook. So everyone's on the same sheet every week, understanding, looking at the data and spending more of their time selling and less of their time in sort of consultative functions. So things like the campaign manager tool should free up our own ability so that we're not spending a bunch of time going back and forth. Well, I think campaign could be configured this way or that way. Instead it's no, no, no. This tool is going to automatically configure these parameters based on the goal of CPID or incremental dollars that you've set. And that whole idea means that the function of the sellers is much more elevated and much more focused on selling in that that grander opportunity and vision. And so I think those are things I’m confident Chris has experience doing. He comes from an organization in Twitter with a $4 billion roughly revenue and understood from running their entire EMEA business and then their entire global revenue business, how you operate at scale. I think we got to a point where what got us here won’t get us there. And in terms of execution and that’s ultimately my responsibility to fix. I think that those – that gives you hopefully a little bit of color on what we’re going to be doing in terms of the day to day to upgrade that. In terms of your second question, yes, look, I mean this is a really big deal. If you think about ROAS what that is basically in period one, there were this many sales of your product. And then in period two, we ran a promotion and there were this many sales of your product. Ergo, your product sold more because of our campaign. Well, the question that that naturally begs is well, did it sell more because of your campaign or were there other lurking variables going on at the same time? I also ran this or that execution with merchandising or I had a super bowl ad going or whatever to be able to look in the same period of time at two otherwise statistically identical populations where you’re isolating the variable that you care about. That’s the gold standard. That really is like the scientific method applied to measurement. And what’s different is that instead of a snapshot or what’s called a lift [ph] study, you can now see that in a real time way, which is valuable to brands. And so yes, the personalization and the targeting are how you then tweak the program parameters so that they achieve the target CPID, so that something is always contribution margin positive and that it’s profitable growth. So you’re not talking about sales, you’re talking about their actual takeaway profit. And comparing that to the fully loaded cost, which is the honest to goodness, this sucker should turn on and never turn off. And that’s what the industries never really had. The promotions industry hasn’t really concerned itself adequately with that because promotions serve a lot of different purposes. They have a strategic purpose in driving sales on a short period of time. They support innovation launches, they’re traded in exchange for merchandising and so forth. What we’re doing is taking it to a level of legitimacy in terms of ROI that makes the claim that this is actually the single, one of the most efficient ways in which you can allocate a dollar.

Ron Josey: Very helpful. Thank you, Bryan.

Operator: Our next question comes from Curt Nagle with Bank of America. Please unmute your line and ask your question. Looks like we’ve lost Curt. So our next question comes from Chris Kuntarich with UBS. Please unmute your line and ask your question.

Chris Kuntarich: Great. Thanks for taking the question. Maybe just one question on growth visibility throughout the year. I think you indicated that there should be some acceleration here that you were kind of hitting the trough in December, January. Can you just talk about your supply visibility at this point into 2Q? Are there enough commitments at this point that you should be accelerating in 2Q? And I have one follow-up. Thanks.

Sunit Patel: Yes. Yes. I mean clearly, we have good visibility into March sitting where we sit here. And we feel good about the second quarter and then some of it as Bryan was saying, as we run this campaigns with these clients in the new measurement framework that could help us too, but probably still too early to have a very firm view on the whole quarter. But the tone feels good, but we will have to see how it goes. But we feel very good about March, obviously.

Bryan Leach: Yes. Look, I mean I would say that there’s the normal business where we still face – we’re still cleaning up these same issues that I mentioned. These three issues are not going to just be solved by the beginning of the second quarter and that’s going to continue to be a headwind. On the other hand, we have these new clients that we’re really excited about. So I would say it’s best to think about it as a gradual improvement and rebound in the course – over the course of the year. But depending on how these continue to go, we think that there’s going to be upside as more and more companies follow that path and that is also important because it will lead to a level of predictability that it is obviously frustrating that we are not providing. And so if I can get a company to conclude, look, this is contribution margin positive, we’re going to leave it on the way we leave on our Google campaign because we know it’s contribution margin positive that leads to a level of stable forecastable commitment that is much more attractive than having to kind of rely on the annual promotion cycle. But yes, so we are going out and making the baseline argument. Look, our redeemer base has grown. You therefore need to allocate commensurately more content and we believe we’ll have success. There’s also some seasonal improvement generally from the first to the second and then the third quarter. But we’re climbing out as we retool and look, our focus is on the long term. So we as a company are retooling to be something far greater than we are right now. And that can be painful in the public market context. But we’re really excited when you’re in these meetings and you’re having these conversations. We feel like we’re really on the right track for the long-term vision that we’ve been pursuing.

Sunit Patel: Yes. I mean the only one thing I would add to what Bryan said is remember our redemptions revenue are growing. What has hurt us on the margin has been the ad revenue as we talked about our outlook for the first quarter. So as we said, we expect to see gradual improvement both driven by over the course of the year driven both by better job on sales execution and as some of these new measurement methodologies are taking grip with our clients.

Bryan Leach: I would also add, I think, to the extent that these ad product improvements do help us improve, reverse the deterioration of that, I would expect that to manifest later in the year.

Chris Kuntarich: Got it. And just kind of one on the migration of clients to CPID, is this something that we should be thinking about adding kind of two clients per quarter? Is there an opportunity for that process to scale in and of itself? And do you have any kind of goals as far as where we should be thinking about you potentially exiting the year as far as clients that would be migrated over? Thanks.

Bryan Leach: Yes. I think I'll have to tell you more about that later. I mean, it's so early in the process, Chris, that for me to say we're going to have 16 clients are going to be here. And frankly, these clients that we have are so large and so significant that their continued investment and participation would be, by itself, very exciting development. So it is partly about the number and breadth of clients. It's also about the depth and number of brands within a client that are that are ultimately investing. So it's about getting more money from those partners and delivering results so they want to build more and more and more trust and more and more and more investment. I think that's probably more important than spray and pray and have a bunch of clients all trying it at the same time. We're certainly on a very steep learning curve, over the last six months from how different this is from what folks have ever seen in this space before. And so daily, we are gaining, gleaning some information and refining our tools. So I think in the next quarter, perhaps in a quarter from now, I could have a more intelligent answer to that question.

Chris Kuntarich: Very helpful. Thank you.

Operator: Our next question comes from Curt Nagle with Bank of America. Please unmute your line and ask your question.

Curt Nagle: Good afternoon. Can you guys hear me?

Bryan Leach: Yes.

Curt Nagle: Oh, perfect. Hey, Bryan. Okay. Maybe just, let's see. First one, I don't think we heard too much in terms of Instacart, in terms of how that's scaling, maybe an update in terms of progression relative expectations, growth of the year, things like that, that'd be very helpful? That's my question.

Bryan Leach: Great. Yes. I mean, we're very pleased with the fundaments of that program. The issue is that we aren't seeing the financial contribution that we want because we don't have the offer supply that we have had in the past. So if you were to look at the offer supply we had in 2023, for example, we and you flow that through the user base of Instacart, it would be very, very exciting. Right now, we're in a depleted posture, and therefore, we're not maximizing the potential of that audience. But if you look at the quality of the experience, the implementation that Instacart has done, the redemption rates, things of that, that's all very healthy. So we are very confident that as we recover on offer supply, we should see that continue to ramp over time. So I would say that, that's why I focused all my remarks on offer supply. That is really the other side of the flywheel. We've got a really high level of confidence that these places, especially the ones with marketplaces with high redemption rates, are just going to continue to grow in size. You're intercepting people who are searching for a category. Boom, they see the offer. It's pretty intuitive how to use it, how to check out with it. All we have to do is get more categories covered with these offers. The launch of beer, wine, and spirits or alc-bev is one example of doing that. So, Instacart is the first of those companies that will support that. DoorDash will be the next one, and we hope that Walmart will be at some point another one. And so those are examples of how we're going to do a better job in terms of redemptions per redeemer in those environments. But, no, we're happy with the ramp. There were a couple hiccups initially. Again, execution in terms of transitioning the 800 clients that they had off of their self-service tool onto our self-service tool. In the fourth quarter, there was some press around that, and I'll acknowledge we could have done a better job of that. But I think we're smoothing those out, and that's going to contribute to a continued ramp as long as we solve the other side of the equation.

Curt Nagle: Okay. Thank you.

Operator: Our last question will come from Bernie McTernan with Needham. Please unmute your line and ask your question.

Bernie McTernan: Great. Thanks for taking the question. Just given the concerns on offer supply, I think one of the implications that we should probably increasingly in our model will be looking at like that total redemptions number instead of maybe looking at the other building blocks. And so I think guidance for 1Q implies about 80 million redemptions versus the two prior quarters were mid-90s, high-90s. Like, is there, I understand they're being close to like the end of the offer content, but is there a reason why you couldn't produce at the same levels or fulfill the same number of as 3Q and 4Q?

Sunit Patel: Yes. Thanks. I mean, as you know, Q1 is seasonally our slowest quarter, but there's no lack of demand. The redeemer base continues to do really well. So some of that is just seasonal Q3 as back to school, Q4 as Thanksgiving and Christmas. And so Q1 is always a little bit slower that way. But your point is right, which is that the total number of redemptions is the whole key. And I think that on that front, usually the first quarter is our lowest point. So for example, if you look at last year, the total number of redemptions we had in the first quarter was 71.5 million. We ended the fourth quarter at 94.6, which was a little lower than 97.4 in the third quarter. So I think Q1 of this year, while higher than last year in terms of redemptions, is usually the low point. And then it goes up over the course of the year, driven both by continued offer supply growth and redeemer growth.

Bryan Leach: Yes, I would just add panning back, Bernie. I think if you're a brand and you think of a promotion as essentially a tactical marketing expense that you will do from time to time in your calendar to support a new product launch or to essentially trade in exchange for merchandising credit with some of your key retailers, that is episodic. And it's vulnerable in the sense that when you're cutting back to protect your bottom line because you're not doing well on your top line, there can be some bumps there. We've done relatively well, I think, compared to a lot of other marketing tactics that have been slashed because people know that consumers really want these prices adjustments and it's really important for them to combat the encroachment of private label. But if instead of thinking of it that way, you think of this as a way to buy a bundle of incremental dollars in a way that costs less than the incremental profit you get. That's a machine you want to turn on and leave on. And that's not a tactic that's not reserved for a particular launch of this product or that, or to carry favor with this person or that that's just straight up profitable growth. Right. And so, what's so interesting about this corner we're turning right now is that we're getting folks to really question the conventional wisdom and to see it as performance marketing. And because performance marketing is a well-established paradigm in the online world where people can see through a pixel or SDK what's converting and whether or not that's ultimately profitable. We believe that the analogy to that, if you could bring that idea to the, the world of goods that are sold in the physical world is going to be a quantum leap type of thing over time. But it's, these are large organizations that have been doing it this way for decades. So getting in and changing these perceptions takes a little bit of time. And so, and we understand that. So I'm actually really kind of surprised at how quickly we've gotten really senior within these organizations. I think their support and their vouching for this will ultimately inspire other companies to say, hey, I wonder what they're onto over there. But first we have to prove it to them. And so we're heads down doing that.

Bernie McTernan: Got it. Understood. And just one, one last one for me. And sorry to harp on this point, but are you hearing any feedback? I know that we're talking about expectations and guides relative to, what our expectations are, but are you hearing any feedback from publishers on this content point or is it pretty quiet on that front?

Bryan Leach: No, we're publishers still know that this is the largest source of content that they can get anywhere. We're still multiples better in terms of offer content than our competitors. That is, I think, just my point, which is that we're not content to be better than our competitors in the narrow sense of the promotions industry. We're playing for something completely different. And I think that publishers are rooting for us in that regard because, and that's one of the reasons why I think we'll get more and more publishers to join because they realize, okay, these folks are really innovating. They're the player in the space that's putting the most money into true innovation has the largest investment in R&D. And they're going to break this thing open. And I want to be there when they do.

Bernie McTernan: All right. Makes sense. Thanks for taking the questions.

Sunit Patel: Thank you, Bernie.

Operator: This now concludes the Q&A section of the Call. I would now like to turn the call back to your host Shalin for closing remarks.

Shalin Patel: Yes, I just want to thank everyone for joining the call today. I want to thank all of the folks who asked us questions. We really appreciate it. We look forward to our conversation in mid-May and to updating you on our progress. Thank you again.