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01/11 18:39
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates declining revenues in key areas and a weak revenue guidance for Q3 2025, suggesting ongoing challenges. Although adjusted EBITDA exceeded expectations, the lack of specific guidance for 2026 and vague management responses create uncertainty. The macroeconomic environment also poses risks. While partnerships with Instacart and DoorDash show potential, they may not offset the overall negative sentiment. The decline in gross margins and cautious client behavior further contribute to a negative outlook. Without a significant positive catalyst, the stock is likely to experience a negative movement.
Revenue Revenue was $83.3 million, a decline of 16% year-over-year. The decline was attributed to difficult comparisons after a very strong third quarter last year, lagged impact of some execution challenges, and the continued noisy macro environment, particularly in the CPG space.
Redemption Revenue Redemption revenue was $72.1 million, down 15% year-over-year. This was due to the same factors affecting overall revenue.
Third-party Publisher Redemption Revenue Third-party publisher redemption revenue was $49.3 million, down 4% year-over-year. This decline was relatively smaller due to the continued strength of the demand side of the network.
Direct-to-Consumer Redemption Revenue Direct-to-consumer redemption revenue was $22.8 million, down 31% year-over-year. The decline was attributed to a shift in redemption activity to third-party publishers.
Ad and Other Revenues Ad and other revenues were $11.2 million, down 21% year-over-year. This was due to continued pressure on direct-to-consumer redeemers.
Total Redeemers Total redeemers were 18.2 million in the quarter, up 19% year-over-year. Growth was driven by the launch of Instacart in Q4 2024 and the launch of offers to a majority of DoorDash customers in Q2 2025.
Redemptions per Redeemer Redemptions per redeemer were 4.6, down 28% year-over-year. This was driven by the quantity and quality of offers available to each redeemer and the growth in third-party redeemers, which have a lower redemption frequency compared to direct-to-consumer redeemers.
Redemption Revenue per Redemption Redemption revenue per redemption was $0.87, flat year-over-year.
Non-GAAP Gross Margin Non-GAAP gross margin was 80%, down nearly 800 basis points year-over-year but up 30 basis points sequentially. The decline was driven by an increase in publisher-related costs.
Non-GAAP Operating Expenses Non-GAAP operating expenses were down 1% year-over-year and slightly below expectations due to the timing of spend between the third and fourth quarters and modestly lower labor costs.
Adjusted EBITDA Adjusted EBITDA was $16.6 million, representing an adjusted EBITDA margin of 20%. This was 44% above the midpoint of the guidance range provided in the second quarter.
Adjusted Net Income Adjusted net income was $16.3 million, excluding $12.6 million in stock-based compensation and $400,000 in restructuring charges.
Cash and Cash Equivalents Cash and cash equivalents were $223.3 million at the end of the quarter.
LiveLift: Launched as a new innovation to help brands drive incremental sales at scale in a cost-effective way. It improves sales lift measurement during campaigns. Initial client feedback has been positive.
Strategic partnership with Circana: Announced a partnership with Circana to provide independent lift studies for clients, enabling them to measure the full impact of promotional campaigns and benchmark against other media spends.
Sales team reorganization: Reorganized and upgraded sales team to improve infrastructure, systems, and processes, resulting in better client service and continuity.
Third-party measurement investment: Investing in third-party lift studies to validate incremental lift of the platform, with several million dollars allocated for this purpose.
Transformation to performance marketing platform: Continued progress in transforming into a full-service performance marketing platform for the CPG industry, focusing on automation and scale for 2026.
Outcomes-based marketing: Positioning as a strategic partner for CPG brands by focusing on measurable ROI and outcomes-based performance media.
Macro Environment Challenges: The current macro environment presents challenges for CPG companies, including depressed organic sales growth, low consumer sentiment, and potential pullbacks in consumer spending, particularly among lower- to middle-income consumers. This is compounded by disruptions to the SNAP program and ongoing tariff uncertainties.
Client Spending Behavior: Some large clients are adopting a 'wait-and-see' approach, pausing spending in discretionary areas like promotions due to economic uncertainties and the need for demonstrable ROI.
Increased Demand for Measurement: CPG companies are demanding rigorous evidence of ROI for marketing spend, increasing pressure on Ibotta to provide measurable outcomes and validate its solutions.
Sales Organization Restructuring: The reorganization and restructuring of the sales team in early Q3 led to turnover and account handoffs, potentially impacting client relationships and execution in the short term.
Revenue Decline: Revenue declined by 16% year-over-year in Q3, with specific declines in redemption revenue and ad revenues, reflecting challenges in the CPG space and execution issues.
Cost Pressures: Non-GAAP gross margin declined by 800 basis points year-over-year, and there are anticipated increases in seasonal marketing expenses and investments in third-party measurement studies.
Client Adoption of New Solutions: While initial feedback on LiveLift has been positive, the adoption rate among clients is still low, and it will take time for this to meaningfully impact top-line results.
Q4 2025 Revenue Guidance: Revenue is expected to be in the range of $80 million to $85 million, representing a 16% revenue decline at the midpoint.
Q4 2025 Adjusted EBITDA Guidance: Adjusted EBITDA is expected to be in the range of $9 million to $12 million, representing about a 13% adjusted EBITDA margin at the midpoint.
2026 Revenue Seasonality: 2026 is expected to more closely resemble the seasonal patterns of prior years, with a low double-digit decline in revenue from Q4 2025 to Q1 2026, followed by sequential increases in revenue each quarter thereafter.
2026 Growth Investments: The company plans to invest in third-party measurement, including purchasing several million dollars' worth of third-party lift studies to validate incremental lift of the platform.
LiveLift Expansion in 2026: LiveLift is expected to be brought to market in a more scaled and automated fashion to a broader client base, requiring patience as clients go through testing, evaluation, and budget allocation cycles.
Share Repurchase Program: In Q3, the company spent approximately $38.7 million repurchasing approximately 1.4 million shares of its stock at an average price of $26.73. As of the end of the quarter, $89.9 million remained under the current share repurchase authorization.
The earnings call indicates declining revenues in key areas and a weak revenue guidance for Q3 2025, suggesting ongoing challenges. Although adjusted EBITDA exceeded expectations, the lack of specific guidance for 2026 and vague management responses create uncertainty. The macroeconomic environment also poses risks. While partnerships with Instacart and DoorDash show potential, they may not offset the overall negative sentiment. The decline in gross margins and cautious client behavior further contribute to a negative outlook. Without a significant positive catalyst, the stock is likely to experience a negative movement.
The earnings call summary shows moderate financial growth and a focus on strategic initiatives like CPID and partnerships with large CPG companies. However, concerns about supply constraints, missed guidance, and unclear timelines for growth reacceleration create uncertainties. The Q&A reveals enthusiasm for new pilots and partnerships, but also highlights challenges with client budgets and economic conditions. Overall, the mixed signals and conservative guidance result in a neutral sentiment.
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