Ibotta, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited annual financial statements and related notes for the year ended December 31, 2023, filed with the Securities and Exchange Commission (SEC) on April 18, 2024, pursuant to Rule 424(b) under the Securities Act of 1933, as amended (Prospectus). The following discussion contains forward-looking statements that reflect our plans, objectives, expectations, intentions, and beliefs, which involve risks and uncertainties. Our actual results may differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” included in Part II, Item 1A. Our historical results are not necessarily indicative of the results that may be expected for any period in the future, and our interim results are not necessarily indicative of the results we expect for the full fiscal year or any other period. Overview Ibotta is a technology company that allows consumer packaged goods (CPG) brands to deliver digital promotions to over 200 million consumers through a single, convenient network called the Ibotta Performance Network (IPN). We are pioneers in success-based marketing; we only get paid when our client’s promotion results in a sale, not when a consumer merely views or clicks on the promotion. We have built the largest digital item-level promotions network in the United States by forming strategic relationships with major retailers such as Walmart Inc., a Delaware corporation (Walmart), Dollar General Corporation, a Tennessee corporation (Dollar General), and Family Dollar, a Virginia corporation (Family Dollar), which use our digital offers to power their loyalty programs on a white-label basis. Through the IPN, our clients can also reach millions more consumers on our widely used rewards app digital properties, which include the Ibotta-branded cash back mobile app, website, and browser extension (collectively, Ibotta D2C). Initial Public Offering On April 17, 2024, our registration statement on Form S-1 (File No. 333-278172) related to our initial public offering (IPO) was declared effective by the SEC, and our Class A common stock began trading on the New York Stock Exchange (NYSE) on April 18, 2024. Our IPO closed on April 22, 2024. As a result, our condensed financial statements as of March 31, 2024 do not reflect the impact of our IPO. For additional information, see Note 14 – Subsequent Events to our condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Impact of Macroeconomic Conditions Our business and results of operations are subject to global economic conditions. Our revenue depends on the ability of consumers to buy products that are featured on the IPN. Deteriorating macroeconomic conditions, including slower growth or a recession, inflation, bank failures, supply chain disruption, increases in interest rates, increases to fuel and other energy costs or vehicle costs, geopolitical events, including the potential for new or unforeseen conflicts such as the impact of the Russia and Ukraine conflict and Hamas and Israel conflict, changes in the labor market, or decreases in consumer spending power or confidence, are likely to result in a decline in client spending which could adversely affect the number of offer redemptions. Management continues to actively monitor the impact of these macroeconomic factors on our financial condition, liquidity, operations, and workforce. For more information on risks associated with macroeconomic conditions, see the risk factor titled “Macroeconomic conditions, including slower growth or a recession and supply chain disruptions, have previously and could continue to adversely affect our business, financial condition, results of operations, and prospects.” 28 Table of Contents Financial and Operational Highlights Three months ended March 31, 2024 2023 (in thousands, except percentages and per redeemer figures) Redemptions (1) 71,466 43,273 Redeemers (1) 12,487 4,682 Redemptions per redeemer (1) 5.7 9.2 Redemption revenue per redemption (1) $ 0.95 $ 0.96 Revenue $ 82,327 $ 57,691 Gross profit $ 71,812 $ 46,441 Gross margin 87 % 80 % Net income (loss) $ 9,297 $ (4,283) Net income (loss) as a percent of revenue 11 % (7) % Adjusted EBITDA (1) $ 22,659 $ 2,504 Adjusted EBITDA margin (1) 28 % 4 % ______________ (1) See section “Performance Metrics and Non-GAAP Measures” for more information and a reconciliation to the most directly comparable GAAP financial measure. Performance Metrics and Non-GAAP Measures We use the following key performance metrics and non-GAAP measures to help us evaluate our business, identify trends affecting our performance, and make strategic decisions. For more information regarding how we use non-GAAP measures in our business, the limitations of these measures, and a reconciliation of these measures to the most directly comparable GAAP financial measures, refer to the section titled “Non-GAAP Measures.” Note that certain figures shown within this section may not recalculate due to rounding. Performance Metrics The performance metrics below are presented in two categories: direct-to-consumer (D2C) and third-party publishers, which sum to the total metric. The underlying trends and drivers of our D2C business often vary from those of our third-party publisher business. Our D2C business caters to consumers who are focused on savings, irrespective of the retailer. Our third-party publisher business tends to reach consumers who may be more loyal to a specific retailer and are engaging with offers powered by Ibotta’s technology platform. The explanation of the changes in the total metric can be found in the D2C and third-party publishers sections. 29 Table of Contents Three months ended March 31, 2024 2023 (in thousands, except per redeemer and per redemption figures) Redemptions: Direct-to-consumer redemptions 27,675 31,687 Third-party publisher redemptions 43,791 11,586 Total redemptions 71,466 43,273 Redeemers: Direct-to-consumer redeemers 1,928 1,948 Third-party publisher redeemers 10,559 2,734 Total redeemers 12,487 4,682 Redemptions per redeemer: Direct-to-consumer redemptions per redeemer 14.4 16.3 Third-party publisher redemptions per redeemer 4.1 4.2 Total redemptions per redeemer 5.7 9.2 Redemption revenue per redemption: Direct-to-consumer redemption revenue per redemption $ 1.19 $ 1.05 Third-party publisher redemption revenue per redemption $ 0.80 $ 0.73 Total redemption revenue per redemption $ 0.95 $ 0.96 Redemptions A redemption is a verified purchase of an item qualifying for an offer by a client on the IPN. The number of redemptions are an indicator of the scale and consumer engagement of our business, as well as the value we bring to our clients and publishers. Generally, redemptions grow as we increase budget with existing clients and/or add new CPG brands as clients. In addition, redemptions grow from adding publishers and redeemers, and/or increasing engagement from existing redeemers. D2C redemptions are redemptions on any Ibotta D2C property. Third-party publisher redemptions are redemptions on all publishers excluding the Ibotta D2C properties, namely our retailer publishers. Ibotta D2C redemptions For the three months ended March 31, 2024 compared to the same period in 2023, D2C redemptions were approximately 27.7 million and 31.7 million, respectively. The year-over-year decrease was driven by a decrease in the offers available. Third-party publisher redemptions For the three months ended March 31, 2024 compared to the same period in 2023, our third-party publisher redemptions were approximately 43.8 million and 11.6 million, respectively, primarily driven by the expansion of redemptions through Walmart, which 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 the third quarter of 2023. Total redemptions For the three months ended March 31, 2024 compared to the same period in 2023, total redemptions were 71.5 million and 43.3 million, respectively. 30 Table of Contents Redeemers Redeemers are defined as consumers who have redeemed at least one digital offer within the quarter. If one consumer were to redeem on more than one publisher, they would be counted as a redeemer on each publisher. Redeemers are an indicator of the scale and growth of our business, as the number of redeemers typically drives our revenue and is an indication of our ability to grow redemptions. D2C redeemers are consumers who have redeemed at least one digital offer on any Ibotta property within the quarter. Third-party publisher redeemers are consumers who have redeemed at least one digital offer on any publisher property that is not an Ibotta property, namely our retailer publishers. Ibotta D2C redeemers For the three months ended March 31, 2024 compared to the same period in 2023, D2C redeemers were 1.9 million and 1.9 million, respectively. Third-party publisher redeemers For the three months ended March 31, 2024 compared to the same period in 2023, third-party publisher redeemers were approximately 10.6 million and 2.7 million, respectively. These redeemers grow as we add third-party publishers and as these publishers ramp up consumers on their properties. The primary driver of growth the three months ended March 31, 2024 is driven by the expansion of the Walmart program, which 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 the third quarter of 2023. Total redeemers For the three months ended March 31, 2024 compared to the same period in 2023, total redeemers were approximately 12.5 million and 4.7 million, respectively. Redemptions per redeemer Redemptions per redeemer are the redemptions divided by the redeemers in that period. This metric is useful as redemptions per redeemer is an indication of our redeemers’ level of engagement with our platform. We aim to grow redemptions from our redeemers by expanding the breadth of offers available and increasing engagement by continuing to improve the consumer experience. In general, redemptions per redeemer are driven by rewards content. For new redeemers, redemption frequency initially increases before stabilizing. Our D2C business caters to consumers who are focused on savings, irrespective of the retailer. Our third-party publisher business tends to reach consumers who may be more loyal to a specific retailer and are engaging with offers powered by Ibotta’s technology platform. Ibotta D2C redemptions per redeemer For the three months ended March 31, 2024 compared to the same period in 2023, D2C redemptions per redeemer were approximately 14.4 and 16.3 , respectively, due to the quantity and quality of offers available to each D2C redeemer. Third-party publisher redemptions per redeemer For the three months ended March 31, 2024 compared to the same period in 2023, third-party publisher redemptions per redeemer were approximately 4.1 and 4.2 , respectively. Total redemptions per redeemer For the three months ended March 31, 2024 compared to the same period in 2023, total redemptions per redeemer were approximately 5.7 and 9.2 , respectively. 31 Table of Contents Redemption revenue per redemption Redemption revenue per redemption is the redemption revenue divided by the number of redemptions. Redemption revenue per redemption is an indication of our fee, which is generally charged as a fixed dollar amount per redemption. In any period, our redemption revenue per redemption can fluctuate based on the category mix of offers being redeemed and the impact of inflation on a product’s MSRP . Category mix can be impacted by factors such as seasonal promotions, including back-to-school items in the third quarter or holiday promotions on grocery and food items in the fourth quarter of each year. Our fee is generally charged as a fixed dollar amount per redemption based on the retail price of the specific item being promoted. D2C redemption revenue per redemption represents redemption revenue generated from offers on any Ibotta property divided by the redemptions on any Ibotta property in that period. Third-party publisher redemption revenue per redemption represents redemption revenue generated from offers on all publishers other than those on Ibotta properties divided by redemptions on all publishers other than those on Ibotta properties. Refer to “Results of Operations” for the disaggregation of revenue by Ibotta D2C and third-party publisher. Ibotta D2C redemption revenue per redemption For the three months ended March 31, 2024 compared to the same period in 2023, D2C redemption revenue per redemption was $1.19 a nd $ 1.05 , respectively, driven primarily by offer mix. Third-party publisher redemption revenue per redemption For the three months ended March 31, 2024 compared to the same period in 2023, third-party publisher redemption revenue per redemption was $ 0.80 and $0.73, respectively, driven primarily by offer mix . Total redemption revenue per redemption For the three months ended March 31, 2024 compared to the same period in 2023, total redemption revenue per redemption was $0.95, and $0.96, respectively. Non-GAAP Measures To supplement our condensed financial statements prepared and presented in accordance with U.S. generally accepted accounting policies (GAAP), we use certain non-GAAP financial measures, including Adjusted EBITDA and Adjusted EBITDA margin. Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. These non-GAAP measures are not meant to be considered in isolation or as a substitute for the comparable GAAP measures, but are included solely for informational and comparative purposes. Non-GAAP financial measures are subject to limitations and should be read only in conjunction with our condensed financial statements prepared in accordance with GAAP. In light of these limitations, management also reviews the specific items that are excluded from our non-GAAP measures, as well as trends in these items. Adjusted EBITDA and Adjusted EBITDA Margin We define Adjusted EBITDA as n et income (l oss ), adjusted to exclude interest expense, net, depreciation and amortization expense, stock-based compensation expense, change in fair value of derivative, loss on equity investment, provision for income taxes, and other expense, net . We define Adjusted EBITDA margin a s Adjusted EBITDA as a percent of revenue. Adjusted EBITDA and Adjusted EBITDA margin are used by our management team as additional measure s of our performance for purposes of business decision-making, including managing 32 Table of Contents expenditures and developing budgets. Period-over - period comparisons of Adjusted EBITDA and Adjusted EBITDA margin help our management team identify additional trends in our financial results that may not be shown solely by comparisons of net income ( loss ) and net income (loss) as a percentage of revenue, respectively . In addition, we may use Adjusted EBITDA and Adjusted EBITDA margin in the incentive compensation programs applicable to some of our employees in order to evaluate our performance. The following table provides a reconciliation of n et income (l oss ) to Adjusted EBITDA and n et income (l oss ) margin to Adjusted EBITDA Margin for each of the periods presented (in thousands, except percentages): Three months ended March 31, 2024 2023 Net income (loss) $ 9,297 $ (4,283) Interest expense, net 1,805 1,672 Depreciation and amortization (1) 1,909 1,615 Stock-based compensation (2) 4,845 1,829 Change in fair value of derivative 1,700 1,500 Provision for income taxes 3,101 166 Other expense, net (3) 2 5 Adjusted EBITDA $ 22,659 $ 2,504 Revenue $ 82,327 $ 57,691 Net income (loss) as a percent of revenue 11 % (7) % Adjusted EBITDA margin 28 % 4 % _______________ (1) Amortization of capitalized software development costs included in cost of revenue for the three months ended March 31, 2024 and 2023 was $0.9 million and $0.9 million, respectively. (2) Amounts include stock-based compensation expense as follows (in thousands): Three months ended March 31, 2024 2023 Cost of revenue $ 158 $ 220 Sales and marketing 3,622 564 Research and development 553 527 General and administrative 512 518 Total stock-based compensation $ 4,845 $ 1,829 (3) Other expense, net is comprised of loss (gain) on disposal of assets and penalties. Breakage Benefit On our balance sheet, we have a user redemption liability balance that is an accumulation of direct-to-consumer redeemers’ account balances net of estimated breakage. Consumers’ accounts that have no activity for six months are considered inactive and charged a $3.99 per month maintenance fee (i.e., breakage) until the balance is reduced to zero or new activity ensues. Every month the user redemption liability increases by the amount credited to D2C redeemers for redemptions and is offset by D2C redeemer cash outs, actual inactivity maintenance fees, and estimated breakage. We estimate breakage at the time of user redemption and reduce the user redemption liability accordingly. In 2023, we made an update to fix a software error to correctly charge maintenance fees to all inactive D2C redeemers on a go-forward basis. This change resulted in a short-term benefit to U.S. GAAP revenue in 2023. For the three months ended March 31, 2023, the breakage benefit to revenue 33 Table of Contents totaled $1.2 million. There was no breakage benefit associated with the three months ended March 31, 2024. D2C redemption revenue declined 1% period-over-period; excluding the breakage benefit, D2C redemption revenue growth would have been 3%. Revenue growth period-over-period was 43%; excluding the breakage benefit, revenue growth would have been 46%. Components of Results of Operations Revenue We provide a platform to CPG brands to deliver digital promotions to consumers. The majority of our revenues are derived from the fees we charge to clients when consumers redeem offers on the IPN by purchasing promoted products. We also derive revenue from the sale of ad products to customers to promote their offers, as well as from data products. We expect our redemption revenue to increase as a percentage of revenue for the foreseeable future as we continue to grow the IPN. Cost of revenue Cost of revenue consists primarily of personnel-related costs attributable to personnel in our engineering department who maintain our platform, data hosting costs, certain user award costs net of breakage, amortization of platform-related software development costs, revenue share with third-party publishers, software licensing costs, and processing fees. Personnel-related costs include salaries, benefits, stock-based compensation, and bonuses. User award costs net of breakage recorded in cost of revenue are associated with awards earned from gift card purchases and sponsored user awards earned from watching an advertising video. Breakage represents the undistributed earnings of consumers never expected to be cashed out due to inactivity. User award costs also include user awards that are cashed out and subsequently identified as violating our terms of use. We expect that cost of revenue will increase as we continue to invest in our infrastructure and acquire new publishers and customers. Operating expenses Sales and marketing Sales and marketing expenses consist primarily of personnel-related costs for our sales and marketing departments, self-funded user awards, net of the related breakage, media spend, B2B marketing, common stock warrant expense, software licensing costs, market research, and public relations. Self-funded user awards are awards related to campaigns and other incentive bonuses on our D2C properties that are funded directly by Ibotta as part of our customer acquisition and retention strategy. Personnel-related costs include salaries, bonuses, benefits, taxes, stock-based compensation, and travel. We expect that sales and marketing may increase for the foreseeable future as we continue to invest in marketing efforts to increase engagement and brand awareness. However, we expect sales and marketing expenses to decrease as a percentage of total revenue over time due to growth in revenue from third-party publishers. Research and development Research and development expenses consist primarily of personnel-related costs for our technology departments, software licensing costs, professional fees, and impairment of certain capitalized software development costs. Personnel-related costs include salaries, benefits, bonuses, taxes, stock-based compensation, and travel. We capitalize certain software development costs that are attributable to developing new features and adding incremental functionality to our platform or infrastructure. Costs incurred during the preliminary project stage and post-implementation operation stage are expensed as 34 Table of Contents incurred in research and development expenses. In addition, impairment of in-progress software projects for which completion is subsequently determined not to be probable is recorded in research and development expenses. We expect research and development may increase for the foreseeable future as we focus on further improvements to, and maintenance of, our platform. However, we expect our research and development expenses to decrease as a percentage of total revenue over time, although they may fluctuate as a percentage of total revenue from period to period. General and administrative General and administrative expenses consist primarily of personnel-related costs for our administrative departments, software licensing costs, professional fees for external legal, accounting and other consulting services, facilities costs, corporate insurance, taxes and licenses, and bad debt. Personnel-related costs include salaries, benefits, taxes, bonuses, stock-based compensation, and travel. We expect to increase the size of our general and administrative function to support the growth of our business and may incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a U.S. securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC. In addition, as a public company, we expect to incur increased expenses such as insurance, investor relations, and professional services. As a result, we expect the dollar amount of our general and administrative expenses to increase for the foreseeable future. However, we expect our general and administrative expenses to decrease as a percentage of total revenue over time, although they may fluctuate as a percentage of total revenue from period to period. We expect additional operating expenses following the IPO due to stock-based compensation expenses associated with stock awards for which liquidity event-based vesting conditions will be satisfied or probable upon such effectiveness. Depreciation and amortization Depreciation and amortization consists of depreciation of property and equipment and amortization of intangible assets, including infrastructure-related software development costs and acquired technology. Interest expense, net Interest expense, net consists of interest expense incurred on outstanding debt instruments, net of interest income earned on cash and cash equivalents. Other expense, net Other expense, net consists primarily of gains and losses incurred on both the convertible notes derivative liability and disposals of assets and leases and penalties. Provision for income taxes Provision for income taxes consists primarily of income taxes related to state jurisdictions in which we conduct business. Due to uncertainty as to the realization of benefits from our deferred tax assets, we have a full valuation allowance reserved against such assets. Based on our assessment of current income and anticipated future earnings, there is a reasonable possibility that we will have sufficient evidence to release the valuation allowance within the next 12 months. However, our judgment regarding future earnings and the exact timing of the valuation allowance release is subject to change due to many factors, including future market conditions and the ability to successfully execute our business plans. 35 Table of Contents Results of Operations The following tables set forth our results of operations in dollars for each of the periods presented (in thousands): Three months ended March 31, 2024 2023 Revenue $ 82,327 $ 57,691 Cost of revenue (1) 10,515 11,250 Gross profit 71,812 46,441 Operating expenses (1) : Sales and marketing 28,129 21,602 Research and development 13,641 11,695 General and administrative 13,154 13,334 Depreciation and amortization 983 752 Total operating expenses 55,907 47,383 Income (loss) from operations 15,905 (942) Interest expense, net (1,805) (1,672) Other expense, net (1,702) (1,503) Income (loss) before provision for income taxes 12,398 (4,117) Provision for income taxes (3,101) (166) Net income (loss) $ 9,297 $ (4,283) _______________ (1) Amounts include stock-based compensation expense as follows (in thousands): Three months ended March 31, 2024 2023 Cost of revenue $ 158 $ 220 Sales and marketing 3,622 564 Research and development 553 527 General and administrative 512 518 Total stock-based compensation $ 4,845 $ 1,829 36 Table of Contents Comparison of the three months ended March 31, 2024 and 2023 Revenue Three months ended March 31, Change 2024 2023 $ % (in thousands) Direct-to-consumer revenue Redemption revenue $ 32,982 $ 33,271 $ (289) (1) % Ad & other revenue 14,338 15,988 (1,650) (10) % Total direct-to-consumer revenue 47,320 49,259 (1,939) (4) % Third-party publishers revenue Redemption revenue 35,007 8,432 26,575 315 % Ad & other revenue — — — — % Total third-party publishers revenue 35,007 8,432 26,575 315 % Total Redemption revenue 67,989 41,703 26,286 63 % Ad & other revenue 14,338 15,988 (1,650) (10) % $ 82,327 $ 57,691 $ 24,636 43 % Total redemption revenue increased $26.3 million, or 63%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, due to a $26.6 million increase in revenue from third-party publisher properties, partially offset by a $0.3 million decrease in revenue from the Ibotta D2C properties. The increase in revenue from third-party publishers is primarily driven by the expansion of revenue related to Walmart and Dollar General. 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 the third quarter of 2023. Dollar General launched in the third quarter of 2023. Ad & other revenue decreased $1.7 million, or 10%, during the three months ended March 31, 2024 compared to the three months ended March 31, 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 Three months ended March 31, Change 2024 2023 $ % (in thousands) Cost of revenue $ 10,515 $ 11,250 $ (735) (7) % Cost of revenue decreased $0.7 million, or 7%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, due to a $1.2 million decrease in personnel-related expenses resulting from an increase in capitalized labor, partially offset by a $0.3 million increase in data hosting costs and $0.2 million increase in revenue share. 37 Table of Contents Sales and marketing Three months ended March 31, Change 2024 2023 $ % (in thousands) Sales and marketing $ 28,129 $ 21,602 $ 6,527 30 % Sales and marketing increased $6.5 million, or 30%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, due to increases of $3.0 million in stock-based compensation expense related to the common stock purchase warrant that we issued to Walmart on May 17, 2021 (Walmart Warrant), $2.6 million in B2B marketing, and $2.2 million in media spend, partially offset by a $1.3 million decrease in self-funded user awards. The increases in B2B marketing and media spend were driven by campaigns to build company brand awareness, while the decrease in self-funded user awards resulted from a shift in marketing strategy. Research and development Three months ended March 31, Change 2024 2023 $ % (in thousands) Research and development $ 13,641 $ 11,695 $ 1,946 17 % Research and development increased $1.9 million, or 17%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, due to a $2.0 million increase in personnel-related expenses driven by an increase in headcount to support our growth. General and administrative Three months ended March 31, Change 2024 2023 $ % (in thousands) General and administrative $ 13,154 $ 13,334 $ (180) (1) % General and administrative decreased $0.2 million, or 1%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, due primarily to a decrease in professional fees, that was largely offset by increases in corporate insurance and personnel-related costs. Depreciation and amortization Three months ended March 31, Change 2024 2023 $ % (in thousands) Depreciation and amortization $ 983 $ 752 $ 231 31 % Depreciation and amortization increased $0.2 million, or 31%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to an increase in capitalized software development costs. 38 Table of Contents Interest expense, net Three months ended March 31, Change 2024 2023 $ % (in thousands) Interest expense, net $ 1,805 $ 1,672 $ 133 8 % Interest expense, net, increased $0.1 million, or 8%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, due to an increase in the SOFR interest rate on our outstanding convertible notes, largely offset by an increase in interest income on cash and cash equivalents. Other expense, net Three months ended March 31, Change 2024 2023 $ % (in thousands) Other expense, net $ 1,702 $ 1,503 $ 199 13 % Other expense, net, increased $0.2 million, or 13%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to an increase in the fair value adjustment on our convertible notes derivative liability. Provision for income taxes Three months ended March 31, Change 2024 2023 $ % (in thousands) Provision for income taxes $ 3,101 $ 166 $ 2,935 NM (1) _______________ (1) NM - not meaningful Provision for income taxes increased $2.9 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to profitability in the current year . Liquidity and Capital Resources As of March 31, 2024, our principal sources of liquidity included $79.5 million of cash and cash equivalents and $50.0 million of available capacity under a revolving line of credit. 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, and the continuing market acceptance of the platform. 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 39 Table of Contents 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, 2025 (as amended, the 2021 Credit Facility). In the event of a public offering, the maturity date of the 2021 Credit Facility will be extended to November 3, 2026. As of March 31, 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 March 31, 2024 were fully exercised, the warrants could provide up to $136.1 million in proceeds to us, subject to certain adjustments. However, the exercisability of a portion of the Walmart Warrant is subject to certain performance conditions 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, Common Stock, Restricted Stock Purchase, and Common Stock Warrant to our condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Cash Flows The following table summarizes our cash flows for the periods presented: Three months ended March 31, 2024 2023 (in thousands) Net cash provided by operating activities $ 19,366 $ 2,692 Net cash (used in) provided by investing activities (2,467) 9,494 Net cash provided by financing activities 9 260 Net change in cash and cash equivalents $ 16,908 $ 12,446 Operating Activities Net cash provided by operating activities increased $16.7 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was largely a result of a $13.6 million increase in net income driven by an increase in revenue, adjusted for a $3.1 million increase in non-cash charges primarily driven by stock-based compensation expense for the Walmart Warrant. 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 significantly impact our cash provided by (used in) operating activities for any period. Investing Activities Net cash used in investing activities decreased $12.0 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, driven by a $10.5 million decrease in 40 Table of Contents maturities of short-term investments and a $1.3 million increase in additions to capitalized software development costs. Financing Activities Net cash provided by financing activities decreased $0.3 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, driven by a $1.7 million increase in deferred offering costs, partially offset by a $1.5 million increase in proceeds from the exercise of stock options. Material Cash Requirements Operating leases Our operating lease commitments include our corporate offices. As of March 31, 2024, we had noncancellable lease obligations of $2.9 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. Item 4. Mine Safety Disclosures Not applicable. 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.