User Redemption Liability Extinguishment
The Company reflects a user redemption liability in the balance sheets associated with the undistributed earnings of consumers on Ibotta’s D2C properties. A portion of these undistributed earnings is never expected to be cashed out by consumers due to inactivity and will therefore be recognized as breakage by the Company.
Consumers’ accounts that have no activity for six months are considered inactive and charged a $3.99 per month maintenance fee until the balance is reduced to zero or new activity ensues. Balances associated with accounts that are deactivated for violation of the Company’s terms of use are also recognized as breakage. The Company estimates breakage at the time of the redemption and reduces the user redemption liability accordingly. Breakage estimates are made based on historical breakage patterns, and the preparation of estimates includes judgments of the applicability of historical patterns to current and future periods. Breakage is recorded in revenue related to funded rewards, as an offset to sales and marketing expense related to self-funded rewards, and as an offset to cost of revenue related to gift card purchases and sponsored rewards earned from watching an advertising video.
The Company’s breakage is recorded as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2025 | | 2024 | | 2023 |
| Revenue | $ | 8,244 | | | $ | 12,998 | | | $ | 26,025 | |
| Cost of revenue | 144 | | | 191 | | | 558 | |
| Sales and marketing | 1,181 | | | 1,663 | | | 4,965 | |
| Total breakage | $ | 9,569 | | | $ | 14,852 | | | $ | 31,548 | |
The user redemption liability was $65.5 million and $74.0 million as of December 31, 2025 and 2024, respectively.
Revenue
Disaggregation of Revenue
The Company’s disaggregated revenue by type of service is as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2025 | | 2024 | | 2023 |
| Redemption revenue | $ | 297,236 | | | $ | 308,824 | | | $ | 243,886 | |
| Ad & other revenue | 45,153 | | | 58,430 | | | 76,151 | |
| Total revenue | $ | 342,389 | | | $ | 367,254 | | | $ | 320,037 | |
Deferred Revenue
Deferred revenue, a contract liability, consists of fees and rewards collected from clients that will be applied to future campaigns. Deferred revenue is expected to be recognized as consumers redeem offers over the term of the campaigns, net of the reward, which generally occurs within twelve months. Deferred revenue was $2.9 million and $5.0 million as of December 31, 2025 and 2024, respectively.
Revenue recognized from deferred revenue at the beginning of the year is as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2025 | | 2024 | | 2023 |
| Revenue recognized | $ | 4,361 | | | $ | 2,370 | | | $ | 2,659 | |
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.