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01/11 18:30
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Revenue $86 million, a decline of 2% year-over-year. Redemption revenue was $73.2 million, down 1% year-over-year. Third-party publisher redemption revenue was $48.6 million, up 17% year-over-year, while D2C redemption revenue was $24.7 million, down 24% year-over-year. Ad and other revenues were $12.8 million, down 8% year-over-year. The decline in revenue is attributed to underperformance in redemption revenue and challenges in scaling new performance marketing clients.
Total Redeemers 17.3 million in the quarter, up 27% year-over-year. Growth was driven by the launch of Instacart in Q4 2024, the launch of offers to DoorDash customers in Q2 2025, and growth at existing publishers.
Redemptions per Redeemer 4.6, down 21% year-over-year. This decline was driven by the quantity and quality of offers available to each redeemer and the growth in third-party redeemers, who have a lower redemption frequency compared to D2C redeemers.
Redemption Revenue per Redemption $0.91, down 1% year-over-year. This was primarily due to a mix shift toward third-party redemptions. On third-party publishers, this metric was up 4%.
Non-GAAP Gross Margin 80%, down nearly 660 basis points year-over-year. The decline was driven by increased publisher-related costs, higher amortization of capitalized software, and increased variable technology costs.
Non-GAAP Operating Expenses as a Percent of Revenue 61%, an increase of approximately 180 basis points year-over-year. Non-GAAP sales and marketing expenses increased by 1%, research and development expenses decreased by 9%, and general and administrative expenses increased by 10%.
Adjusted EBITDA $17.9 million, representing an adjusted EBITDA margin of 21%. This was 8% below the midpoint of the guidance range provided earlier.
Adjusted Net Income $14.9 million, with adjusted diluted net income per share of $0.49. Adjusted net income excludes $13.6 million in stock-based compensation and $0.6 million in restructuring charges.
Cash and Cash Equivalents $250.5 million at the end of the quarter. Approximately $67.5 million was spent repurchasing 1.4 million shares of stock at an average price of $46.59.
New Performance Marketing Model: Introduced a new performance marketing model to capture a larger share of the CPG marketing spend. This model allows advertisers to measure and purchase promotions like other digital performance media.
Third-party Validation: Received third-party validation from a leading media measurement company, confirming better campaign results than previously reported.
Client Engagement: Gained access to higher-level decision-makers within key clients, leading to discussions about larger-scale investments.
Publisher Expansion: Rolled out offers to a majority of DoorDash customers and enhanced collaboration with Walmart to increase adoption of digital manufacturer offers.
Sales Reorganization: Shifted sales structure from a territory-based model to industry subverticals, reducing account loads for enterprise sellers and improving client-centric sales motion.
Leadership Changes: Hired new leaders with experience in digital media and promotions, including SVPs for Enterprise Sales, Business Marketing, and Sales Operations.
Business Transformation: Undertaking a transformation to shift from traditional promotions to a broader performance marketing approach, aiming to tap into larger media budgets.
Sales Execution Improvements: Implemented changes to improve sales execution, including new quota systems and clarified roles for sales teams.
Revenue Performance: Revenue fell below guidance for Q2 2025 and Q3 guidance is significantly below prior expectations. This is attributed to short-term headwinds related to the company's ongoing business transformation.
Client Engagement: Two pilot partners for the new performance marketing model paused campaigns, impacting revenue. One client awaits third-party validation of results, while the other faces internal administrative delays and budget constraints.
Sales Reorganization: The shift from a territory-based to an industry subvertical sales model caused short-term disruptions, including turnover and account transitions, leading to a 16% revenue decline for accounts with sales rep changes.
Economic Environment: Clients are cautious about new expenditures due to the current political and economic environment, delaying decision-making and budget allocation.
Operational Costs: Non-GAAP gross margin decreased by 660 basis points year-over-year, driven by higher publisher-related costs, software amortization, and variable technology costs.
Market Transformation Challenges: The company is undergoing a paradigm shift to transform its business model, which involves navigating entrenched client habits and complex organizational structures, causing delays in adoption and scaling.
Revenue Guidance for Q3 2025: The company expects revenue in the range of $79 million to $84 million, representing a 17% revenue decline at the midpoint.
Adjusted EBITDA Guidance for Q3 2025: The company expects adjusted EBITDA in the range of $9.5 million to $13.5 million, representing about a 14% adjusted EBITDA margin at the midpoint.
Performance Marketing Campaigns: The company is not building in any performance marketing campaigns into its guidance that are not already in flight.
Operating Expenses for Q4 2025: Operating expenses in the fourth quarter are expected to increase sequentially by several million dollars, driven by investment in the sales organization and seasonal marketing expenses.
Cash Taxes: The company anticipates de minimis cash taxes due to lower full-year performance expectations and impacts from new tax legislation.
Dividend Program: No mention of a dividend program was made in the transcript.
Share Repurchase Program: The company repurchased approximately 1.4 million shares of its stock at an average price of $46.59, spending approximately $67.5 million in Q2 2025. Additionally, the Board authorized a $100 million increase to the share repurchase program, leaving $128.6 million remaining under the current authorization at the end of the quarter.
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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