Ibotta Inc

Results of Operations

The following tables set forth our results of operations in dollars for each of the periods presented (in thousands):

(1)Amounts include stock-based compensation expense as follows (in thousands):

Comparison of the three months ended September 30, 2024 and 2023

Revenue

Total redemption revenue increased $18.5 million, or 28%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, due to a $29.0 million increase in revenue from third-party publishers, partially offset by a $10.5 million decrease in revenue from the Ibotta D2C properties. The increase in revenue from third-party publishers was primarily driven by the expansion of revenue related to Walmart, Dollar General, and Family Dollar. Walmart initially launched in the third quarter of 2022 to members of Walmart’s paid membership program, Walmart+, and expanded to all Walmart customers with a Walmart.com account in September 2023. Dollar General launched in the third quarter of 2023, and Family Dollar launched in the second quarter of 2024. The decrease in D2C redemption revenue was driven primarily by a decrease in redemptions on the Ibotta D2C properties, as well as the one-time breakage benefit of $2.1 million incurred during the three months ended September 30, 2023.

Ad & other revenue decreased $5.1 million, or 27%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, due to a shift in CPG client spend from ad products to redemption revenue and the deprecation of our consumer insights business.

Cost of revenue

Cost of revenue increased $1.4 million, or 13%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, flat at 12% as a percent of total revenue, due to an increase in revenue. The primary drivers were revenue share and data hosting costs.

Sales and marketing decreased $9.9 million, or 26%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, due to decreases of $5.3 million in stock-based compensation expense and $4.7 million in self-funded user award expense. The decrease in stock-based compensation was comprised of a decrease of $6.8 million related to the common stock purchase warrant that we issued to Walmart on May 17, 2021 (Walmart Warrant), partially offset by an increase of $1.5 million related to equity awards for which expense recognition commenced after the IPO. The decrease in Walmart Warrant expense resulted from a $9.1 million cumulative expense adjustment recorded in September 2023 when the performance conditions required for vesting were deemed probable. The decrease in self-funded user awards resulted from a shift in marketing strategy.

Research and development increased $3.9 million, or 31%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, due to increases of $1.9 million in stock-based compensation expense, $1.1 million in other personnel-related costs driven by an increase in headcount to support our growth, and $0.6 million in capitalized software impairment costs.

General and administrative increased $8.5 million, or 70%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, due to increases of $5.9 million in stock-based compensation expense, $1.0 million in other personnel-related costs, $1.2 million in ongoing public company costs, and $0.5 million in bad debt expense. The increase in stock-based compensation expense was primarily related to equity awards for which expense recognition commenced upon IPO.

Depreciation and amortization decreased $0.4 million, or 29%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Interest income (expense), net, increased $6.0 million, or 385%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, due to an increase in interest earned on cash and cash equivalents driven largely by the IPO proceeds and a decrease in interest expense resulting from the extinguishment of the convertible notes.

Other expense, net, decreased $1.5 million, or 99%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 due to a $1.5 million decrease in the loss on the convertible notes derivative liability, which was settled in connection with the IPO.

Provision for income taxes increased $8.5 million during thethree months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to higher pre-tax book income and the impact of non-deductible items, including certain executive compensation costs, stock-based compensation, and the tax expenses related to uncertain tax positions. These increases are partially offset by the benefit of research and development tax credits.

Comparison of the nine months ended September 30, 2024 and 2023

Revenue

Total redemption revenue increased $60.4 million, or 36%, during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, due to a $85.4 million increase in revenue from third-party publishers, partially offset by a $25.0 million decrease in revenue from the Ibotta D2C properties. The increase in revenue from third-party publishers was primarily driven by the expansion of revenue related to Walmart, Dollar General, and Family Dollar. Walmart initially launched in the third quarter of 2022 to members of Walmart’s paid membership program, Walmart+, and expanded to all Walmart customers with a Walmart.com account in September 2023. Dollar General launched in the third quarter of 2023, and Family Dollar launched in the second quarter of 2024. The decrease in D2C redemption revenue was driven by the one-time breakage benefit of $12.7 million incurred during the nine months ended September 30, 2023, as well as a decrease in redemptions on Ibotta D2C properties.

Ad & other revenue decreased $11.9 million, or 22%, during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, due to a shift in CPG client spend from ad products to redemption revenue and the deprecation of our consumer insights business.

Cost of Revenue

Cost of revenue increased $3.3 million, or 10%, during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, a 1% decrease as a percent of total revenue, due to an increase in revenue. The primary drivers were revenue share and data hosting costs.

Sales and marketing increased $24.5 million, or 30%, during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, due to increases of $24.0 million in stock-based compensation, $4.4 million in B2B marketing, and $2.7 million in media spend, partially offset by a decrease of $6.8 million in self-funded user award expense. The increase in stock-based compensation was comprised of $18.0 million related to the Walmart Warrant, of which $17.5 million was associated with the additional shares granted upon the closing of the IPO under the warrant’s anti-dilution provision, and $5.8 million related to equity awards for which expense recognition commenced after the IPO. The increases in B2B marketing and media spend were driven by campaigns to build company brand awareness, and the decrease in self-funded user awards resulted from a shift in marketing strategy.

Research and development increased $11.1 million, or 31%, during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, due to increases of $5.3 million in stock-based compensation related to equity awards for which expense recognition commenced after the IPO, $4.7 million in other personnel-related costs driven by an increase in headcount to support our growth, and $0.6 million in software licensing costs.

General and administrative increased $24.3 million, or 64%, during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, due to increases of $18.8 million in stock-based compensation related to equity awards for which expense recognition commenced upon IPO, $3.1 million in other personnel-related costs, $2.2 million in ongoing public company costs, and $0.8 million in bad debt expense. The increase in other personnel-related costs includes $1.5 million related to one-time IPO costs. Increases were partially offset by a $0.6 million decrease in software licensing costs.

Depreciation and amortization increased $0.1 million, or 3%, during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Interest expense, net

Interest income (expense), net, increased $10.1 million, or 211%, during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, due to an increase in interest earned on cash and cash equivalents driven largely by the IPO proceeds and a decrease in interest expense resulting from the extinguishment of the convertible notes.

Loss on debt extinguishment

Loss on extinguishment of debt increased $9.6 million during the during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 due to the conversion of the convertible notes into shares of our Class A common stock concurrently upon the closing of the IPO.

Other expense, net, decreased $0.1 million, or (4)%, during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Provision for income taxes increased $12.7 million during thenine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to the impact of non-deductible items including certain executive compensation costs, stock-based compensation, and the tax expenses related to uncertain tax positions, partially offset by the benefit of research and development tax credits.

Liquidity and Capital Resources

As of September 30, 2024, our principal sources of liquidity included $341.3 million of cash and cash equivalents and $50.0 million of available capacity under a revolving line of credit. On April 22, 2024, we closed our IPO and received net proceeds of $198.0 million after deducting underwriting discounts and commissions of $13.2 million and offering costs of approximately $8.8 million.

Our primary cash needs are for personnel-related expenses, sales and marketing expenses, user award payables, data hosting costs, and software licensing costs. We believe our existing liquidity will be sufficient to meet our projected operating and capital requirements for at least the next 12 months. Our future cash requirements will depend on many factors, including our pace of growth, the timing and extent of spend to support research and development efforts, the timing of cash collected from clients, the expansion of sales and marketing activities, the introduction of new and enhanced platform offerings, the continuing market acceptance of the platform, and the volume and timing of our share repurchases. As a result of these and other factors, we may be required to seek additional equity or debt financing. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. Further, recent volatility in the global financial markets due to heightened inflation, rising interest rates, and geopolitical events, could reduce our ability to access capital and negatively affect our liquidity in the future. If we are unable to raise additional capital when desired, our business, financial condition, results of operations, and prospects would be adversely affected.

2021 Credit Facility

On November 3, 2021, we executed the Third Amended and Restated Loan and Security Agreement with Silicon Valley Bank, which consists of a $50.0 million revolving line of credit with a maturity date of November 3, 2026 (2021 Credit Facility). As of September 30, 2024, we had no outstanding borrowings under the 2021 Credit Facility and $50.0 million of unused borrowings available.

Common Stock Warrant

On May 17, 2021, we issued the Walmart Warrant in connection with a multi-year strategic relationship that makes Ibotta the exclusive provider of digital item-level rebate offer content for Walmart U.S. If the shares available for exercise as of September 30, 2024 were fully exercised, the warrants could provide up to $245.6 million in proceeds to us. However, the exercisability of a portion of the Walmart Warrant is subject to certain performance conditions and forfeiture features, and we cannot make assurance that any such warrant will be exercised. For further details regarding the Walmart Warrant, see Note 7 - Redeemable Convertible Preferred Stock and Stockholders' Equity to our condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Share Repurchase Program

On August 22, 2024, we announced that our board of directors approved a share repurchase program, with authorization to purchase up to an aggregate of $100 million of the Company’s Class A common stock (Share Repurchase Program). The Share Repurchase Program has no expiration date. Repurchases under the Share Repurchase Program may be made from time to time through open market repurchases or through privately negotiated transactions subject to market conditions, applicable legal requirements, and other relevant factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended (Exchange Act). We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of shares of our Class A common stock under this authorization. We are not obligated under the Share Repurchase Program to acquire any particular amount of Class A common stock, and we may terminate or suspend the Share Repurchase Program at any time. The timing and actual number of shares repurchased may depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.

During thethree months ended September 30, 2024, we repurchased 274,902 shares of our Class A common stock for an aggregate repurchase amount of$15.7 million, inclusive of immaterial broker commissions and legal costs. As of September 30, 2024, $84.4 million remains available and authorized for repurchase under the Share Repurchase Program.

Cash Flows

The following table summarizes our cash flows for the periods presented:

Operating Activities

Our collection cycles can vary based on payment practices from our clients, and we are required to pay our third-party publishers within a contractual timeframe, regardless of whether we have collected payment from our client. As a result, timing of cash receipts related to accounts receivable and due to third-party publishers can vary from period to period and significantly impact our cash provided by operating activities for any period.

Net cash provided by operating activities increased $94.9 million during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was a result of a $26.9 million increase in net loss, adjusted for a $58.5 million increase in non-cash charges, partially offset by a $63.3 million increase in net cash inflows as a result of changes in operating assets and liabilities. The increase in net loss was largely driven by non-cash charges as a result of the IPO, including accelerated stock-based compensation and losses on the extinguishment of the convertible notes and derivative liability, partially offset by an increase in revenue. The increase in net cash inflows from changes in operating assets and liabilities was primarily due to a $60.7 million decrease in accounts receivable driven by the larger increase in gross billings in 2023 as compared to 2024, a $6.2 million increase in other current and long-term liabilities driven by an increase in uncertain tax positions, and a $3.4 million increase in the user redemption liability. These cash inflows were partially offset by cash outflows from a $3.2 million decrease in accrued expenses and a $3.0 million decrease in liabilities due to third-party publishers related to the timing of third-party publishers joining the IPN.

Investing Activities

Net cash used in investing activities increased $29.3 million during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, driven by a $27.9 million decrease in maturities of short-term investments and a $1.1 million increase in additions to capitalized software development costs.

Financing Activities

Net cash provided by financing activities increased $191.3 million during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, driven by $200.7 million of net IPO proceeds and a $6.5 million increase in proceeds from the exercise of stock options, partially offset by $15.6 million in purchases of treasury stock.

Material Cash Requirements

Operating leases

Our operating lease commitments include our corporate office. As of September 30, 2024, we had noncancellable lease obligations of $2.0 million, of which $1.8 million is payable within 12 months. For additional discussion on our operating leases, refer to Note 10 – Operating Leases to our audited consolidated financial statements included in the Prospectus.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. In preparing the condensed financial statements, we apply accounting policies and estimates that affect the reported amounts and related disclosures. Inherent in such policies are certain key assumptions and estimates made by management, which we believe best reflect the underlying business and economic events. Our estimates are based on historical experience and various other factors and assumptions that we believe are reasonable under the circumstances. We regularly re-evaluate our estimates used in the preparation of the consolidated financial statements based on our latest assessment of the current and projected business and economic environment. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty and actual results could differ materially from the amounts reported based on these estimates.

There have been no material changes to our critical accounting policies and estimates as described in our Prospectus, expect as described below:

Stock-Based Compensation

Stock-based compensation for equity awards, including stock options, restricted stock units (RSUs), and awards granted under our employee stock purchase plan (ESPP), is measured based on the grant date fair value of the award. For awards with service conditions only, we recognize compensation expense, net of actual forfeitures, on a straight-line basis over the requisite service period, which is generally four years. For awards with both service and performance conditions, we recognize compensation expense, net of actual forfeitures, under the accelerated attribution method when performance conditions are considered probable of being achieved.

The fair value of RSUs with only service or performance conditions is equal to the fair value of the underlying common stock at the date of grant. For RSUs with market-based conditions, we determine the grant date fair value utilizing a Monte Carlo simulation, which incorporates the probability of achievement of the market-based condition. The fair value of stock options and ESPP awards is estimated on the grant date using the Black-Scholes option-pricing model. Our use of the valuation models requires the input of subjective assumptions. The assumptions used in our valuation models represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment.

These assumptions and estimates are as follows:

•Expected Dividend Rate. The expected dividend assumption is based on our history and expectation of dividend payouts. We have not paid dividends and do not expect to do so in the foreseeable future, and as such, the dividend yield has been estimated to be zero.

•Expected Volatility. The expected volatility is determined with reference to historical stock volatilities of comparable guideline public companies over a period equivalent to the expected term of the award as we do not have an extensive trading history for our common stock.

•Expected Term. The expected term is the period of time for which the award is expected to be outstanding, assuming that it vests. We estimate the expected term for stock options using the simplified method, calculated as the midpoint between the requisite service period and the contractual term of the award. The simplified approach is applied as we do not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. For ESPP awards, the expected term is the time period from the grant date to the respective purchase dates included within each offering period.

•Risk-Free Interest Rate. The risk-free rate is determined based on the U.S. Treasury Yield Curve with respect to the stock options' expected term.

•Fair Value of Common Stock. Prior to the IPO, as our common stock was not yet publicly traded, we engaged a valuation specialist to estimate the fair value of our common stock. Subsequent to the IPO, the fair value of our common stock is based on the closing price of our Class A common stock.

We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis. As we continue to accumulate additional data related to our common stock, we may have refinements to our estimates, which could materially impact our future stock-based compensation expense.

Recent Accounting Pronouncements

See Note 2 – Basis of Presentation and Summary of Significant Accounting Policies to our condensed financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.