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QUOT Quotient Technology

Participants
Stacie Clements VP, IR
Mir Aamir CEO and President
Ronald Fior CFO
Steven Boal Founder and Executive Chairman
Mark Mahaney RBC Capital Markets
Jason Helfstein Oppenheimer & Co. Inc.
Matthew Yamamoto D.A. Davidson & Co.
Ralph Schackart William Blair & Company
Christian Sidak Bank of America Merrill Lynch
Steven Frankel Dougherty & Company LLC
Call transcript
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Operator

Welcome to the First Quarter 2018 Quotient Earnings Conference Call.

During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded and will be available for replay from the Investor Relations section of Quotient's website following this call. I will now turn the call over to Stacie Clements, Vice President of Investor Relations. Ms. begin. now may you Clements,

Stacie Clements

IR Thank you. XXXX accompany our quarter on welcome remarks corporate everyone call. Please and the available earnings are to today's to of note our on website. first call Hello section that the slides

call Chairman, today are with questions well available is and here our Mir Steven CFO. after here Fior, remarks. for Ron as and our me our Boal, the Aamir, President On CEO; our prepared Executive and

Quotient solutions, this call, our Before will please the full we consumer for as expanding and shopper that during in data patterns, success company's Analytics the well statements our of for begin, statements. and forward-looking growth investments our projections new year for the business forward-looking and marketing of expectations second you our These iQ and expectations as media note shopper hear use pricing and platform its and regarding Retailer business, expectations CPG generally. XXXX, its include our the expected strategies the regarding company's quarter

uncertainties known actual based unknown statements differ call and belief faith and good of team available subject the our information performances management are or to Forward-looking results the of as and this cause to risks of on that materially. are could time and to

as today Form otherwise. operating update expenses, new the release financial GAAP found or whether forward-looking on information any have adjusted measures obligation deck slide in company's website. to report the disclaim potentially issued that in can certain identified information a and exception slide February filed A impact events, and the information, press our measures press are on result loss, expenses. XXth, the future could contained exclude can note these in gross results SEC and financial about margins, in on quarterly and today's and We factors a be been risk on with Additional our the with to in of basis financial -- posted statements, on found non-GAAP reconciliation non-GAAP the Please be XXXX. results that between in of the release discussed today net factors revenues, deck XX-K

Mir. Before we approximately that our New Exchange, the today, market XX briefly saw I'd before informed Stock our I up will stock, like to we We over to now some started, released halted get mention turn on who results. after which closed the minutes of our results show we Twitter. York earnings the call

Mir Aamir

of a year, and start everyone. ago and year had Thank high last the XX% year the iQ from combined revenue. the a you, Stacie XX% media delivering and to compared in Retailer great first with We grew guidance. our represented up of Revenue at from of welcome revenue total $XX.X and quarter, end million XX%

underscores delivered transactions, increase QX, last increase we I'm last X network on power our also over than Such effect Retailer thrilled $XX.X billion EBITDA in more to that growth delivering milestone of year. platform. We adjusted over year. the today an exciting a of million, crossed of a transaction QX XX% announce iQ XX% the

and that which As strengthens or data value. business to goods spend promotions our grow demand packaged creates to and enables more the base shopper opportunities brands media. on and the platform, it user shareholder on more shopper grows, CPG consumer All digital further and all activity solutions enhances

at simply, of data will Analytics, is a the example, we the moment. Put more everything I For talk just we do. about of core announced in Quotient release which

deliver in-store As media digital sales. personalized we at the CPGs leading retailers, of driving and provider scale, digital solutions and to online them and marketing coupons help

has that Retailer iQ. $XXX is coupons. spend expanded partner The integrated beyond billion brands digital our Just approximately opportunity opportunity billion paper coupons the retail site e-commerce the their the another week, by relaunch larger CPGs $X in this we on powered spend annually with years, that helped marketing. annually Through all

by around paperless the to the starting by data of XX% are is With and enabled then highlights Revenue marketing Quotient and exciting I color this on at now year-over-year promotions to provide media the shift converge and digital, center strategies will coupons. significant announcements. promotions transformation. quarterly some grew driven review from digital

savings now revenue retail, iQ, equivalent by Retailer quarter. XX% more We of shoppers CPGs registered specialty Excluding XX U.S. all have the half the grew of to in million programs than households. from powered

help spending to to their the With work offline continue shopper them promotion shopper growing digital growing, we our their to demand. meet and with from base clients shift scale at to

increasingly, billion spend and and e-mails Digital digital whether factor that's are live such proprietary of personalized QX, with as media, our programs. taking on as personalized partners key messaging, capture solution Circular shopper we circulars. incorporate all paper fueling coupons more work algorithms, offers, or with In quarterly and share learning. to includes marketing planning merchandising major CPGs their data, the teams strategies circulars, coupons and that retailers another digital continued machine advantage and and, in our our targeted retail increasingly innovation, communication. featured to Another of in-store tactics work Clients growth This grocery with based went circulars, annual which than annually to are retailers into deliver a and $X our in and is coupons with client

on paper. and to also relevant shopper make circulars solution, compelling stores' believe Digital will the Circular iQ, is Our offers uses digital which data we what make personalized, than Retailer built more

this five with momentum number three number of the on than brands We ran QX times are QX also versus campaigns times year. More as our platform year targeted brands last in of greater the achieve results. targeted offers of strong seeing

are products. new to strategies digital As we're coupons, brands will we seeing revenue. have grow versus mentioned One is help national before, and we adopt targeted offers the which priced sample believe premium area to targeted promote

well new The buyers. a and on both campaign and buyers. a increases product incremental on launched recently ran as targeted brand sales incremental focused coupons was driving food frozen XX% huge a example, sales digital For success, incremental as driving

which improve on retailers large this budget to shelves We've each more targeted starting with efficiency on is year. on Another to two more deliver digital initiated spend and spend, discounts billion thrift the of efficiently. is programs coupons pilot trade than CPGs that CPGs $XXX in-store application coupons using the digital of

also and We popular our -- property, coupon continue to enhance grow Coupons.com. consumer

relaunched app As mentioned, we capabilities Retailer redesigned with mobile we year. and last iQ our

mobile our earlier web year. We this also enhanced experience

of had our to app As expand additional our launch Coupons.com we visitors grow million on unique for consumers. expect this to consumer further of providing and set first both party Throughout to scale monthly year, we mobile, reach CPGs to actionable XX March, data. functionality

is platform, Retailer spend for by media. that our now go A iQ programs. growth expected quarter our Quotient whereby the their proportion CPG revenue Media to that partner in to excited year, to of few is last the growing to exclusive first Turning We're announce we spend QX next marketing, estimated signed over media where in reach marketing. years. also XX% continued in to shopper digital digital $XX partner into annually is another grew in QX, shopper media billion driven

millions January, such creating as relevant specials in brands data sales. in-store integrated exclusive shoppers media targeting retailer segments formally with coupons call-to-action with of by audience to reach Albertsons end-to-end ads an shop launched partnership our and digital with solution media -- Quotient's using that or Companies drive As helps purchase

Our a media a technology by also purchase, outcomes provides linking marketers. to analytics ad ambition shopper's to measure views by verified long-held

at buyers or media platform, today are Media Media delivering Quotient are right well-positioned the on the solutions, as as right creative on Exchange Retail shopper Our path-to-purchase. QMX part top-quality moment digital of the our focused to

As results efficiency CPG have a verified significant been mentioned And earlier, the audience we XXX of delivering more strong. have million, and reach brands. buyer spend for than

partner. brands publishing $X return a our advertising drive For The the our within spend. was Bowl-themed across delivered the campaign retail network, large every an for example, of right successful across $X a media we in and shopper quarter, generated a average sales audience, specific the to we CPG on looking of platform, delivered campaign Super Using targeted CPG. multiple

brand for retailer. awareness and sales the drove campaign the Additionally,

to our marketplace. We in also objectives further innovate performance clients' media driving bring digital to new technology offerings of delivering and the differentiate further and continue media our to

are e-commerce to our campaigns look on e-commerce platform, exciting this on we I partners' capability media more quarters. adding specifically sponsored new and properties. product our for future retail in example, search For solutions details forward now to sharing

In addition and media technology, been and provide of market-leading impact analytics industry-leading to our to sales measurement focus promotions. has media of

mid-flight. Analytics, client ability As lets measure insights we adding to suite launched analytics recently to monitor they I rich make self-service near can Quotient performance them real and solution already our time, of so and in their campaigns giving This our called capabilities. portal changes clients data the evaluate mentioned, a

further growth. this technology, in efficiency platform, the rolling of and process to of retailers the shoppers year and of data, all to now pressure over the is very of the demonstrate out hundreds our strong power ahead I'm With tremendous. In that summary, in Analytics opportunity our CPG are help believe and increased to of brands believe the to start about to We excited Quotient us digitally this analytics one on under spend from call online, billion $XXX relentlessly transformation provide the Ron. I'll CPG will turn and drive to focused their brands to the marketing and in drive we platform annually in-store drive engaging industry. sales leading

Ronald Fior

was value million and $X.X net down ended ERP the In million, XX% our settlement consideration, year of primarily We million at in excludes very year-on-year $X.X comp, continued $XXX,XXX We to in restructuring had up to the XXXX. of We RSUs. payment from up shares GAAP we're last a a compared of in recorded year stock-based quarter first pleased loss strong contingent $XX.X and over primarily growth quarter loss quarter GAAP promotions. a of related $X.X year. to change everyone. the the compared revenues of in and QX Retailer in welcome and net $XXX.X XXXX. due change in up QX XXXX. of of the certain billion, XXXX in costs costs, acquisition-related investment Mir consideration. charges, XXXX. QX net cash due Adjusted QX, and $X balance XX% million operations million Total fair with accruals which the QX of Media were in end of EBITDA, you, charge used a first was net GAAP XX% from first the first in shares The were to million the We of driven and by performance record in QX net over value contingent versus escrowed escrowed in vested and quarter. summary, quarter a of first short-term iQ to quarter $XX.X $XX.X net million, QX $X.X in the cash Thank implementation of Transactions fair the million a typical with loss

expected at into million, our Drilling XX% over Looking revenues, by in XX% media revenue $XX.X down shopper an revenue from million CPGs, retail. decline from increased and reflecting at in year, $XX acquisition Crisp. the quarter an XX% million, over from specialty promotions $XX.X which was QX last a offset our revenues. growth of year, in XX% contribution included increase Media came last increase Revenue

our XX% for by iQ approximately in some proportion Retailer in year-on-year; XX% the Retailer of last grew year. revenue; total XX approximately their One, quarter are of and and into XX% Media insights grew Here CPGs accounted two, XX% XXXX over first last other revenues grew three, combined iQ the QX our quarter and promotion quarter over our revenues. first of revenue year top first

Let's the transactions representing iQ first last same ago, transactions decreased grew a XX% up in year X% quarter transactions. sequentially. Digital were and $X XX% a Total the XX% total from print from in period sequentially. slightly up billion, from year transactions and ago the quarter. first XX% Retailer of at look year transactions

quarter changes margin of QX XX.X%. first restructuring and gross charges, compares up intangible margin, revenues. last in amortization of function XXXX. in gross XX.X% a acquired between previously. product XXXX XXXX to continuing reflected the This quarter, compensation XX.X% slightly Non-GAAP XX.X% in and of media I the at was on in GAAP of P&L. and and This gross QX mix came and -- of QX promotion to described was change Moving which stock-based from down the mix in primarily from a of product of assets, the expense, margin excludes

operating at expenses. look Let's

shares, excludes in contingent restructuring operating GAAP and which included of expenses million million, and efforts implementation lower quarter, annual escrowed Continuing were operationally first consideration in XXXX. about our the restructuring for in operating expenses even were to value the consideration, slightly $XX.X in assets, $X.X escrowed which the and more net For fair and change operating charges. be a contingent intangible ERP charge were amortization million, for value net FICA absorbing while stock-based our compensation, Non-GAAP expenses QX change efficient, the of QX charges. sequentially of $X fair the reset $XX.X million acquired costs, shares

XX% In even after lower million, percentage margin, level, expenses slightly were the combination overall leverage efficiencies QX of up ago. from continued first and these over year XX% absorbing due adjusted quarter, and growth XX% significant a quarter's were last operating from and to a at non-GAAP reflecting Crisp down from came management. year revenue slightly but of than over costs operating EBITDA, expenses nicely level last up In in fact, also in up operating non-GAAP of XXXX, QX year XX% QX ago a last cost year's Adjusted a improvement revenues quarter, slightly our last in and operating in EBITDA a XX% $XX.X XX% terms, representing expenses.

operational business to and our a investments on approach media, improving EBITDA and digital and between efficiencies. balanced continue As in with revenue we growth promotions focus evolves, continuing margins,

$XX.X seasonally ended revenue cash. commission end the RSUs net million, accompany share year-end reduction the quarter. $XXX.X primary causes of the The the less was as to strong brunt from We prior relates $X payments. cash quarter, coming used impact for and bonus QX on from cash flow, operations for with year cash, of to the end Stock million from a cash Moving from quarter related GAAP expenditures settlement In and year payments, were down we flows the Historically, of negative Free $X.X quarter, off capital timing as bears in QX. million to operations. the defined million. it a buyback.

May Our buyback previously Xth. million announced $XX expires

to plan announcing we're XXBX-X next months. of open-windowed $XXX up through XX stock new a plan and a program one-year today, an effective May a of XXB-XX the combination So, million buyback for new Xth

one, dilutive continue flexibility to to market tools and Our more and goals our ongoing twofold; and these our of of grants; stock are prudent. our about undervalue we shares. available excited impact the future provide believe We're the having offset two, to is misunderstand some should potential

Let's talk now guidance. about

revenue For to to range the expect second quarter XXXX, the be million of in million. $XX we $XX

million. We expect adjusted million in range to be the to EBITDA $XX of $XX

our year guidance. the full are XXXX, we reiterating For

XX% to We of the revenue in million midpoint. growth continue $XXX the to at range expect million $XXX or approximately

QMX acquisition. to be somewhat expect than the we higher as We full growth well iQ, year the Crisp given rate the Retailer media have product impact of as our

quarter to to and towards and XX%. for is engage be of We'll between We of patterns also margin as improving tightly million a the expected of or and stronger of seasonality have in XXXX in fourth to expenses of that reach our expect XXXX's while CPGs be full margins the We revenue managing Adjusted the the range believe portion we front significantly in given over $XX approximately year through media increase in a business. us EBITDA the $XX of continue opportunity million stronger, XX% growth to to strength shareholder for channels. building retailers large continue and shoppers driving balance digital revenue, solid to value. XX%

look will you forward in America Tech and Conference Francisco York Merrill Bank This Conference to the San and quarter, in of New be Lynch there. we attending Needham Emerging the Tech seeing

Operator? We will now for the call questions. open

Operator

first Markets. Instructions] question with Your RBC [Operator Mahaney Capital Mark comes from

Your open. line is

Mark Mahaney

please. Two Thanks. questions

secondly, talked little quantify problems targeted And those? could or sense would rolling distribution And or adoption improvements in you the bit of a improvements broad looking And a offers the mean business offers of they First, or you. talk give broad of time, migration address? bit what talk just us implications targeted maybe sort period -- the some Mir, are What what to years, more this of issues Could couple later offers? you that maybe adoption some -- offers. of about app how to then, targeted a Quotient you or talked about, the the of about out of Thank significant targeted just model? little about just of year. you functionality a of

Mir Aamir

Sure, Mark.

and address Let one me then first the second one. the

I'm it, assuming to terms big trade, the consumer in like year. There's of piece of of a that therefore, thinking the retailers' about you $XXX a that consumers in-store circular kind is functionality, grocery on on latter functionality working other provide that will you can in the and or and that you coupon thinking in very referring in of Coupons.com if we're up part imagine putting the in are Coupons.com. app app the we're So, billion exciting about to the but promotions together And of being at marketing consumer able bringing number that that there to things value look of things one app discounts, and in sense on you example, CPGs for shows spend the and give space.

rate targeted is great. the offers, the On growth look,

We in have advantage a competitive there.

good. we now results is We and very of but We have building. It's that scale is as The good. started very, shoppers year last of rate growth still a really the about piloting small are last momentum talked year. base,

this In really good. on of brands year. in again, magnitude, can running of offers of ROI terms And in think our terms right their now, quarter targeted hundreds is of it platform one you of looking

is -- in and targeted the number big, that As it very are happens you to CPGs the big of for relates spend hundreds coupons dollars. in at marketplace offline look for can big of there how millions some a that's

to well very are after. go and our be to -- as able size market to excited as have we So, that

Mark Mahaney

Thank you, Mir.

Operator

Helfstein with comes Your next from Oppenheimer. question Jason

is open. line Your

Jason Helfstein

trajectory growth, of the it If media it like you few Thanks. the slowed. we business? did guess questions. of understand organic the look help Can A us kind

you Maybe us acquisitions could question the maximum year off think quarter the authorization. you And one that bit help think over can kind Just buyback want second table you're -- something margin impacts on of rest quarter weaker. and about guidance? the Thanks. flexibility? second basically margin of just on whether just look take then then, that. happen you how the that Does I how trends this a did and anything or think share saying that guidance

Mir Aamir

the Let me two. first take

quarter to media the strong four and So, as expect media well. us can year in trajectory, very quarter is of in strong this be you four

So, is, and way, it, shopping. in to similar grocery patterns there's which in the a to generally, seasonal some seasonality shopping within

to So, saw trend what and inherent QX Overall, the said this as seasonally, soft We've and of the of coupons QX CPG but and July. not half strong and to end And our QX not QX of versus applies grocery of and for and in QX more marketing year. than in and an is trend seasonally you will promotions be continue media, there. before, picks was the because by is well. very half seasonal shopping up summer this the back and just year-over-year back media, on spend to the -- is back then, the strong then

enter not four CPGs quarter. for then, is an a has of when as seasonally the And where strong we been seen you've especially spend -- few as September. just course, years, quarter a So, us but season, last the and area the for back-to-school August we lot, which, in into in industry,

year. it way it So, you can of that the terms out in for of think spreading

a effect guidance, within margin the do bigger of media mix. we relates rapidly. effect, of as have off talked effect we've again, growing a to portion that very with being in the to also property terms reasons media of mix As portion for Mix bigger but year-over-year The we're about has mix this margin before. change -- being it

-- combined the So, factoring with two, year. we accordingly the you soft margin in compared the factored guidance think quarter for and that and for can seasonally us about quarter

You want pipeline? to address

Steven Boal

is Steven. This Yes.

up the question table. to $XXX not M&A answer the The no, million. buyback So, to is your is off is

being on end We have at the we pretty going robust in too is opportunistic as the for that sit long. We're cash on time, of over and quarter. our last opportunities. $XXX to cash on we're said hand pipeline million not And

Jason Helfstein

you. Thank

Steven Boal

Thank you.

Operator

comes question next Davidson. Yamamoto Matt Your with from D.A.

open. is line Your

Matthew Yamamoto

Hi, Quotient launched thanks the for taking my of we guidance? in full effort your question. was Analytics about impact How year the April on that think should

Mir Aamir

officially very a just It's So, Matt, it's exciting, got Analytics Quotient robust launched. very product.

time monetization into then, factored way, of large we where some I through large for that charge in course, our has that any in a we guidance. campaigns, happens we from campaigns its think Quotient Analytics would and last early mentioned But it and and promotion incorporate it. revenues incremental other do been it's media for

Matthew Yamamoto

Thanks. I'll slip back.

Operator

from comes question with Blair. Schackart next Your Ralph William

Your open. line is

Ralph Schackart

afternoon. Good

you fairly or revenue metric, the looking been transaction Just don't metric, I at per terms around the business It's last on know run this so just average quarters. of stable, the in the three reported promotion but basis. $X.XX

then Just focus in metric bolt-on forward you X% it's was know going see to to that, just but curious year-over-year that a of the the up first is how not business, trending revenue. I And print, question. huge digital it

out call category? that within you'd product sort Thanks. of anything that Just

Mir Aamir

Hard right, hoping modeling population. and year to there the saw terms same at like cater that. We're So, going seen you're of -- of that. seeing quarters. many future Best revenue little quarters, total by We calculated is, see section at in how this bit growth. -- print is the Print home, demand to at. to again, -- And of think ago the we a looking revenue. in We'll goes quarters, what versus a effects. for per trending at the I to total a again, you've revenues a the transaction, quarter in We're home all this in been quarter. metric. you're the in it's say promo mix it's changes revenue it Look, few all model many, for last we

Ralph Schackart

you. Thank Great.

Operator

from with Christian America. Sidak Bank Your next of question comes

is open. line Your

Christian Sidak

in on could seen give wanted good the some Retailer just XQ? that iQ, we Last quarter, depressing to of comment I had Hi, you ask. color from overhang any retail impact afternoon. or specialty

Ronald Fior

down year specialty think, a at in the to it first most down, we end So, was It last that expect that expected quarter. this and continue of to we XX%. year. roughly year, last continue the go down and or third And indicated -- saw went will XX% of we as it's that retail, I

Christian Sidak

you. Thank

Operator

Your from Dougherty. with Instructions] comes next Frankel question [Operator Steven

Your line is open.

Steven Frankel

bit I kind how ROI-based adoption you where I afternoon. little that? we from an early and you but if talked know pricing maybe a of about in are it. are Good wonder the last it's doing might about the curve? in talk marketing time days, And you update

Mir Aamir

Sure. I would say marketplace that most large phase, idea engage CPGs were planning to engaged It's the very in in those conversations. the And in it's you conversations. those that a are in time right would effective as imagine. the

Of example, that did we for that there's time, last budget an -- the course, with come require coupons. do always-on like, mentioned that we for something as we

the that ongoing we And we'll on CPGs keep as the go through you right working and the planning, that. through so And on that's year, the for now. updated progress

Steven Frankel

many how launch? yet customers iQ have And to Okay. Retailer

Mir Aamir

be launched We would get and last there's that that's live. about case. -- soon there them are of that a talked very most Well, the couple should still

Steven Frankel

to the to have has of major Okay. are been by -- then, have I are base, and much time? to you not that terms a of penetrating of decided How adopted in platform customer you And people on go that just special in terms guess, business. over where Media that your dollars, pretty where in you CPGs? seem across opportunity Kind but your awareness

Mir Aamir

per or year started -- start happen. frequency The inherent more CPGs of And brands do stems our an across the mind, does in we're and those -- we platform. do of shopper even some from to that with media -- to come in. have new in media the of And brands more small-sized midsized to media as been to now seeing campaigns program brand also and have opportunity also advantage for the we're Keep CPGs then, of then, and within give They really able hope does brands growth done started and have platform large that tied Most sales. and actually on Board. seeing larger do those out the other we a to media to expect we more Sure. our be customer scaled campaign have drive It's data brands. us. sizes might see opportunities

Steven Frankel

Great. you. Thank

Operator

for concludes Aamir to the like for closing remarks. This turn now Q&A it I'd the session to conference. back Mir

Mir Aamir

you Thank an joining for for year exciting This is all us. us today.

relationships, us the have and provides you. helping believe data drive of sustainable competitive a this proprietary scale. overall We We differentiated retailer and to our growth CPG advantage, technology, Thank business.

Operator

concludes This call. today's conference

now may disconnect. You