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Ibotta's expansion into enterprise should set it up for a successful IPO

TechBrunchBy TechBrunchMarch 28, 20245 Mins Read
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Ibotta has confidently filed an S-1 filing with the SEC for the purpose of listing its stock on the New York Stock Exchange. The 13-year-old cashback startup has returned to profitability and aims to make its public debut in 2023 after recording impressive revenue growth.

The company reported revenue of $320 million in 2023, a 52% increase from 2022, when it had revenue of $210 million. Ibotta's gross profit increased 68% from his $164.5 million in 2022 to his $276 million in 2023.

The Denver-based company started as an app for consumers to receive cash back on purchases through Ibotta brand partnerships. The company later expanded to building back-end software for rewards programs for corporate customers such as Exxon, Shell, and Walmart.

Ibotta's move into B2B2C – selling to businesses, who then use those products to sell to consumers – is likely the main reason investors are interested in the IPO, Renaissance Capital said. said Nicholas Smith, senior equity research analyst at. His ETF focuses on Pre-IPO and IPO. Sales to corporations are also believed to have played a large role in Ibotta's recent financial gains.

“fact [Ibotta] “With Walmart, it's become more of an enterprise software business, and it's basically the back end of Walmart's cash rewards program, which gives it more credibility,” Smith said. “[Compared to] “Now that we have this app, we need to grow our users and continue down that path.”

The company began building its enterprise program in 2020, known as the Ibotta Performance Network (IPN). His partnership with Walmart also began in 2020, but he expanded his IPN partnership with the retail giant in 2022. According to the S-1, this partnership will play a major role in increasing Ibotta's revenue.

According to S-1, “The addition of new publishers to IPN has significantly accelerated our revenue growth.” “Most recently, we have expanded our offer on Walmart's digital assets. We have attracted a larger audience, which has resulted in increased spending for consumer goods brands and an increased number of offers redeemed. These developments have increased our size, growth and profitability.”

To put Ibotta's comments into perspective, the company's direct-to-consumer business will grow 19% from 2022 to 2023, which is quite a number. By contrast, the company's enterprise business (referred to as “Third Party Publisher Revenue” in the filing) grew 711% over the same period, expanding from just under $10 million to just over $80 million in one year. This growth, and the accompanying improvement in gross profit margins (from 78% in 2022 to approximately 86% in 2023), has enabled the company to return to consistent profitability from continued net losses.

Ibotta's quarterly data highlights how recently and rapidly the company has become a profitable company. From Q1 2022 to Q1 2023, the company continued to see declining net losses. Net income was negative $22.9 million in the first quarter of 2022, but it dropped to $4.3 million a year later. Then, from the second quarter of 2023, regular profits began to accrue, increasing him to $18.6 million by the final quarter of last year.

Rapid revenue growth, expansion of secondary revenue lines, improved quality of earnings, and GAAP margins all combined to enable Ibotta to go public. If the company stumbles despite these supportive characteristics, late-stage venture-backed startups may view its debut as a cautionary tale.

But there are reasons to expect that growth to continue. The company has IPN partnerships with Family Dollar, Kroger, Exxon, and Shell, suggesting broad corporate demand, even if the scope of those relationships is less clear than Walmart. S-1 did not disclose the length of Ibotta's partnership agreement with Walmart, but did note that if the retailer were to end the relationship, it would have a material impact on Ibotta's business.

The biggest question remaining is how Ibotta will price its stock. The company likely chose to file its intentions now, despite originally hiring bankers in November, to ride the wave of recent IPO successes by Astera Labs and Reddit. But Ibotta is very different from both of these companies.

According to secondary data platforms, Ibotta has seen very little secondary activity, which makes it difficult to gauge how investors currently value the startup. Smith said there could be several ways to price, given that the company traditionally has multiple revenue streams that are valued quite differently.

“It's difficult because there's no such thing as a perfect comp,” Smith said. “This is a small ad tech company, but it could potentially make more money.” [into] Enterprise software. [If it’s] If you really look at it from a technology perspective, it's probably going to be a high multiple, but if you're in ad tech or consumer facing, the multiple could be lower. ”

Smith added that if investors focus more on the company as an advertising or marketing company, it could be priced similar to what digital marketing company Klaviyo priced last fall. Klaviyo was priced at $31 per share, $1 above the $30 target and valued at $9.2 billion, slightly below its previous preliminary round valuation of $9.5 billion. The company's market capitalization is currently $6.8 billion.

Ibotta has raised over $90 million in venture capital from funds including GGV Capital, Great Oak Ventures, and Teamworth Ventures, as well as a number of angel investors including Beyond Identity co-founders Thomas Jermoluk and Jim Clark Did. . The company's final valuation was $1.08 billion.



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