QUOT Quotient Technology

Stacie Clements Vice President, Investor Relations
Steven Boal Chief Executive Officer
Ron Fior Chief Financial Officer
Shweta Khajuria RBC Capital Markets
Ralph Schackart William Blair
Chad Bennett Craig-Hallum
Tom Forte D.A. Davidson
Call transcript
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Welcome to the Third Quarter 2019 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.

the Relations. to turn President Clements, now Investor of will call Stacie over Vice I you. Thank Ms. you Clements, begin. now may

Stacie Clements

Thank you. Hello, quarter XXXX everyone. And welcome call. to earnings our third

On been will follow CEO, for slightly our different our are the summarized Fior, than, me alongside prepared CFO. the a a the remarks IR press Full and call of have remarks our interest call our time website Boal; earnings Q&A on Ron our In our Today release format. call with forward posted Steven corporate today presentation. usual. look have of we posted into to today’s and and section jumping quicker little

include please this acquisition and that expected during quarter and growth of, begin, expectations hear full business well call, year we investments FSI, XXXX, forward-looking our and the our Ubimo, note CPGs’ launches, for forward-looking generally. product projections plans solutions, partnerships, as in our fourth will Before -- statements plans for of you statements. and These as

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

or a filed update could Additional information, in SEC statements, information identified the factors any results of can on information our press to disclaim XXXX. as our with impact events, in X, these quarterly that about risk XX-Q contained the be forward-looking Form release factors obligation future new financial potentially on whether found otherwise. and We in report in August result today’s

certain the deck measures found result non-GAAP revenues, the exception the operating and adjusted and on be loss, issued and company’s gross press website. to expenses. have posted been on basis in slide a A Please reconciliation exclude the GAAP are can release non-GAAP net today between today expenses, note measures that discussed margins on and of with financial financial

With that, over call turn now I will the to Steven.

Steven Boal

to call. release. high ends these of in $XX.X of quarter’s EBITDA our and operations above that you, guidance, lowered and million We Thank $XXX.X after QX everyone were recognizing results came million in delivered targets cash adjusted last revenue, QX welcome earnings strong revenue EBITDA flow $X.X both in and our million. adjusted Stacie, the from

remarks As prepared and already accompanying were on Stacie our posted mentioned, of all slides website. our

are we color of having well as not as reading of provide initiatives, for rather been observation the the on strategic as additional will existing We time my some remarks on planning back forbid quarter. those to and them some take our full CEO

a Chief him Before take in announced his that Officer, retirement. we to Fior, to our end Ron get retiring the and year. and with him for today I’d we by like I be his contributions have Financial Ron the working enjoyed started, will thank wish of moment well

be I’d have to welcome XXth will the are with rock head to yet. us into over on Pam the solid her and will CFO as exciting and transition. our team. like we company join as Pam also public experience thrilled and to leadership finance to Quotient to Pam we Strayer brings believe what XXXX, year help November the most until we and the of continue year end Ron takes

development accelerate activation announced Quotient’s further a company. Ubimo, signed campaign will Media also to solutions, and performance data and we platform. believe self-service strengthen brings to have Quotient’s leading We efficiencies, the that acquire technology today improve agreement cost definitive digital best-in-class a of we which Ubimo media and

have and them on family. drive efficiencies to has excited expect better existing and closely and When effect even Ubimo XXXX. a join Quotient Ubimo on help for in are with integrated the fully our we deployments gross Quotient have positive margin worked us we our results five years to past platforms, in to campaign the

several we our topic be margin margin, of the have to in work automate to able the to on positive gross XXXX. business begun of have and gross a parts already effect On expect us

Given remains consistent mix roughly Ubimo. X process we sometime the and XXXX’s we are and increased expect assuming from anticipating medium of points growth gross QX Promotion points year, XXXX into in Promotion margin improvement next improvement X to automation,

to national CPGs three We the their promotions see three on over quarters. are large also from the spending had reduced starting positive who past signs

from these growth have and declines our As headwinds you significant impacted trends. overall represented three CPG know, have

of offers, advantage three, discussions in of and full half platform, a these audiences strategic are to growth digital the expect including starting the retailer looked breadth our targeted year-over-year XXXX. all take Media see and at return of Quotient We now for first with they to CPGs as performance

Additionally, In-Lane so offers, deliver they both can platforms, Companies digitally and to retailers right In-Lane has XXXX store. targeted the Albertsons to digital effective coupons in rolled and and shoppers of in use engage enables over with out data the their merge to physical promotions stores. maximum make

target This use industry a is same online offers first, superior than before. solution far from brands touch and was platform an the scale, across and can same available and what shoppers to data offline retailers where the points at

replace printing with We are in In-Lane their adding retailers service. standalone to discussions coupon their about legacy to additional stores checkout

scale with to continues partners two integrated. business strategic already Audiences Our

also CPG allows key Audience to our Nielsen leverages to their with data serve partnership This integrate that connecting brands Nielsen our solution. agencies. and with measurement Cloud, our first segments Marketing us their DSPs The

scale, solutions, greater data were Facebook the Additionally, leadership, a our as we market planning process to marketing for the access named into and validate year platform. in calendar Facebook clients leading QX our marketing with our dollars industry data, give head of These partnerships annual to the capabilities us XXXX. bringing and partner, we and strength our

the Quotients’ I weeks, services the clients of to as of I witnessed eight engagement and never and been and Over many receptivity level past have our and have products partners, has visited high.

of offices leadership thought of within and with teams. was to What have out opportunity most the had and our to Quotient. the stood most the I also expertise level visit me

months. in underway new several coming the have exciting sharing look new We of about partnerships, existing weeks I and and engagements these some forward and to more with

With regard few been decision and gone had first to made to recently development back, that past weeks product had terminate portfolio, just the for I year live. during under an the my initiative our

product members was on market. I considered off their help something The as not negative initiative to it this strategy, been products additionally, of a to morale, team get and of pulled on effect having our was many had

core the important Given delivery and we of after, portfolio. we seeing are going strategy. reenergized we our focused are innovation and on the that size now stay Teams meaningful are market it’s product in

to talking the and taking processes change the retailers. in about is annual reality. point that I’d first client and like make digital place we final budgeting becoming been about The is approach have The between CPGs

the retailers seen past we collaboratively quarter, on and plan CPGs digital engagement. Over meaningful to have shift to dollars

of RPM are to marketing to commit to gross X.X% their Quotient retailers spent cases, CPGs be on digital up requiring some In sales and merchandising.

industry is that’s me in a this, the change big now. right contextualize Let this happening as

that a shift retailer. sits billion on would then worth platform products in specific in marketing that believe CPG those million sells Quotient the to to prime If of Quotient spend $XX a help $X digital up position marketing powers in dollars. We digital retailer, they

a serve with with retailers online for is business where been redirecting shift a the catalyst to analytics brands. core to and dollars highest return Our of measurement and and This spend. from has shoppers change this in both on X.X% offline driver marketing be a as are to and dollars placed the beyond the expand ad

distributed industries all our in started ultimately replaced was the we The other efficient the technology. in or disrupted by be like was Insert company more thesis that commonly FSI XXXX, by coupon a it solution. Free-Standing ultimately be When would digital would paper

exit past we CPGs, much have making of expected, been the over course of had distribution over FSI during XXXX. the that entirely the all they longer FSI While quarter, up top told it we planning took are coupon XX% originally than by to

The moves like wide-reaching. are implications of this

and connected other it their paper to them value also digital for it to platforms. to more redeploy. legacy to more the provide will of to the CPGs, retailers, savings better deployed enables to CPGs digital dollars experiences For shoppers in could allow additional and FSIs, non-working via distribution that significant them and have more retailers their vehicles, effective dollars There like paper clearing, are coupons find

around not be could FSI several CPGs years. this in further now the are I of how unfolds next excited see engaged planning to capitalize how to on meaningful eliminating more and the digital, the over scale

In focus are summary, business I and our about in. am feeling headed direction the confident we

ready digital with discipline regularly meeting to to forward that tremendous our Our in we make greater teams offices meeting deliver in focus services market is a believe clients XXXX. leap our continued together with time with with and and a and After large opportunity and have a spending and into believe teams, visiting our I what products working we great collaboration. are

in Investor all to see hope I Day New first next York. at you week our

For who be webcast those will the and make we at our on also a website you of November be Conference will available RBC it, can’t XXth. on

look turn up. taking your and I will Ron he call forward Ron? over when to to wraps now questions the

Ron Fior

we grow reflected Ahalogy. XX% revenue year and welcome was Total generate over and Steven, Thanks, up cash. last and gain continue everyone. growth In RPM digital and paperless, to in QX, revenue, efficiencies operating

think year-over-year starting headwind start return three CPGs growth about a for Additionally, to positive are show the last three that XXXX they signs to budgeting. the their quarters been to have over a as

was CPG flat and I declined delivered decline another the last related X% CPGs, and expected one three In the Total specialty XX% retail. to promotions essentially QX third digital mentioned, primarily year, quarter, growth. over in just

year. were up year-over-year, XX% last for grew paperless digital XX% digital from revenues print XX% Media over declined Revenue year-on-year and QX.

on quarter margin down as in has GAAP down margin non third grow QX and was revenue GAAP a than to continues Gross promotions. XXXX, lower from both and of gross from margin, slightly a a Media gross QX basis and the

Ubimo quarter-on-quarter, Looking automation, to take These our improvement improvement and of we of at initiatives increased as include initiatives margin gross hold. relatively some flat technology. QX, process utilization be margin expect

operating We QX continue and essentially up flat manage expenses. invest appropriate, where QX were XXXX. to operating actively leveraging QX expenses costs and while of with from our

to $X.X were compared Non-GAAP operating up expenses million QX ago. in year a approximately

XXXX. non-GAAP a revenues XX% leverage XX% QX of QX in to to of As from continue operating revenues revenues, last of of expenses percentage show in declining year

costs net certain restructuring Non-GAAP exclude escrow operating acquired related and and the of charges. and fair change compensation, contingent assets, acquisition amortization intangible consideration, of stock-based shares expenses value

million, product margin, adjusted leverage continued EBITDA over year gross representing mix a was expenses. offset basis, operating XX% impacted by year decline margin. EBITDA it a and $XX.X EBITDA, was On Adjusted in by the

expense excludes Adjusted value charges, EBITDA and other acquisition-related stock-based restructuring escrow interest taxes, depreciation compensation, amortization. certain continued fair income consideration, in of shares The costs. net change and expense, income and

new a Stock buyback, buyback program. completed approved approximately program. XXXX $XX.X million $XX back X.X August, buyback for in the shares million stock million bought May third quarter, the In and we our Board

to Moving used stock with cash, end repurchase related Primarily ended $XX.X program. our $XX.X to we of XXXX. cash, million from $XXX.X down in QX quarter million million the the of the on

pleased as an noted certain million to attainment announce for two over earlier, signing up acquire definitive targets. are Guidance, to based of $XX we the earnout to years $XX agreement of million upfront and Ubimo of a on

Ubimo’s of is Aviv, New team sales York. while out Tel in is based engineering team their

expect We acquisition with XXXX. contribution month for the to the minimal of close QX in end by revenue the

We a accretive acquisition on in be to gross margin to this XXXX. expect and impact positive have EBITDA

to range revenue For at revenue to million XX% last the million XXXX, versus million. of growth translates $XXX.X the year in $XXX midpoint. $XXX expect the of This approximately full fourth million we or year quarter $XXX.X into range

million Adjusted is million. midpoint. $XX EBITDA a XX% the million be fourth $XX XXXX quarter range range or year revenue to EBITDA translates of of to million for approximately the the This expected $X.X into at to $XX.X of in full

have the welcome help next all the to as well with on here years, working I all after years call. company this looking I to the people months retiring past this at for I the great would XX at like with thank great of couple you Pam be Steven transition. the three Quotient around of I Finally, year. and straight, for to I forward am to of as this end and worked will

you. please Thank the for Operator, open questions. call


comes our line Khajuria first the question Capital RBC from Shweta Instructions] with Markets. And [Operator of

Shweta Khajuria

the a in three impact guidance bit kind and seen you. terms you. how you kind the seen with XXXX in second, from questions, specific of expecting potential live full you Thank so far? talk a stores retailers? And then, have in now little One, X,XXX of what -- the other far, what CPGs can giving Great. please. targeted much how you you have within it are new for Albertsons, is of please without is the what product partnerships of you Two promotions Steven, tracking across year, the can -- about based -- on sort what and that on is timeline Thank so

Steven Boal

question. Thanks the Sure. for

just other hear than it’s regard with so meeting early really first me? to and In-Lane, have on regard what the question to the on too additional, looks like scope We it’s rolled mute… XXXX a So, to you we With to are on expectations. can say that are performance and out

Shweta Khajuria


Steven Boal

Oh! I think…

Shweta Khajuria

you I hear? can

Steven Boal

that, Sorry it Oh! red, we mute. about were thought went I on

Okay. There go. we

You see I go. you rusty everybody With and XXXX retailers. to here am regard additional

retailers with RPM we that about current, also customers, drill and specificity, any would IQ said, ones. both I potential discussions RiQ In-Lane As are apply now probably I into implementing with that. and other in new couldn’t But some retailer, to

CPGs. The question? the what’s on, then three And

talking growth in just hard which, pin we see we so down pretty that expected to that, when for exactly exciting as been would us Just but now happen. seeing year-on-year now have anticipating XXXX, that we for we It to returning are was us. we about, that them would are that’s

Shweta Khajuria

Okay. Thank Steven. you,


comes question of line the William with next Blair. Ralph Your Schackart from

Ralph Schackart

to kind and/or wanted kind of kind then, three product industry looked hood, those three it or the that standpoint, a from of to over added XXXX the the get of another like was you square gaps get that’s do had the marketing for you perspective just portfolio potentially And the acquisitions contemplates specific your product that a of decreased you further just acquisition, overview more have the to under outlook perspective, or you road? obviously, actually of you -- afternoon. place think the what Thanks. change or Was Do in down gave the how came feel Are that comments sort brands. sort your strategic with last sounds to I grow guess want large I three related a meaningful like that made shutdown over digital of seen of Steven, last budget shutdown Good you have budget I just for there would comments quarters? CPGs shift -- struggled kind any explore today? you in. when you of for on quarters?

Steven Boal


go in me reverse Let order.

and the balance I -- and portfolio and of right Ubimo is product So, do right think, work comprehensive made that I we the believe quick now with has of product right has the reviewing going of product the addition portfolio forward. our set the portfolio

So I feel very good about that.

that’s think the We But I are innovating on the portfolio that product portfolio product intact for exciting. foreseeable very is and future. core

are On that. the brand, there two pieces to

dollars. the just pieces those. both And to on retailers discussions X.X% was is around sales. performance FSI. One Quotient and the retail gross that the let So are me most to the exiting of Media up then that other address shifting And recent -- on of reference

both those. explain me just Let

way would It that thought On take many disrupted years. going take. look, the that didn’t by the go years XX digital. The of five FSI was FSI, the we XXXX, was I expectation industries company. took are to that It in the started it the other

entirely they clients the hearing and exiting of XXXX. pretty the of now shattering XXXX are But news. tell the in that course us That’s during FSI year

better And it’s view perspective year means. quarterly a release tuned, pretty have But so next what forecasting looks On of we stay right? that we like, to will trying from unpack are our what but next exactly a exciting.

lot we at now to EnCap the real side, discounting done scale. that have brands the platforms circulars merchandising the with partnered retailers money in in retailers the displays gets [ph], stores, look, and physical that build form that are media, On of and retailer in-store with spend a of

ad They and can these dollars shift return there’s into a vehicles on higher actually spend. now

products. proven have who digital We the more engaged more often and people already the shoppers, stores digitally retailers, frequent are with buy

so And CPGs and are we industry in a are working margin harder work in, those dollars dollars slim that important. very for

and in our change spend that’s big taking about retailers at on excited case, a sales of asking for to that’s yeah, we the its that. XXXX, that’s And platform, least digital for very X.X% so brand obviously are brands new marketing. their up industry retailers to place And pretty that so and the brands are now that in are total

Ralph Schackart

Great. would points at in you XXXX, of X X margin terms that be ramp exiting I to about that time that? points should and would just more the year, improvement? through year Thanks. think for we perhaps, XXXX. that X you points X sort or of points How How gross we One gross the in think talked if about improvement margin of some the for Just could, about of linearity should that?

Steven Boal

say at way to the it you I right automation exiting the there, probably work is it. think have would of got and some we about that will should don’t process I to be year straight a because the linear yeah. exiting but into think year definitely the the that change, know about improvement system,

Ralph Schackart

Thanks, Okay. Steven.

Steven Boal

Thank you.


question of comes with line Craig-Hallum. Bennett Chad the next from Your

Chad Bennett

questions. Great. for taking my Thanks

it then gain least which like quarter because In-Lane to in are do you guess growth I quarter the expectations at Audience promotions is Can expecting very that all haven’t that? or with is business about, yet guess to that’s address fact is on and low? for wise. analyze quarter -- sponsored decelerated real anything catch seen margin looks Albertsons next then low guess your you didn’t the this hear didn’t anything cloud either this expectations meaningfully are we search, and you my traction. And being or annualized my Ahalogy? and And you aren’t So due improvement Media next quarter, any the meaningfully gross is My to

Steven Boal

Yeah. No.

Media QX. much that’s think of probably I higher set the in typically conclusions. is wrong

in Media be would actually business accelerating we so expect QX. And the would

items balances how that all Those operate. other the expect do in will well. about that Media business businesses and out Media question we so as kind And accelerate be historically of QX growing, the the I but the that’s think to

Chad Bennett

a be So seasonally when it business even expected? typically up, ticks to QX weaker than to Promotion you and be it’s expect going weaker in

Steven Boal

the opposite. No. It’s

stronger and We expect the QX in to even a be be Promotion to business business stronger. Media

impact expect would that So that’s on we see margin, Promotion… is that that the you

Chad Bennett

right? go are revenues sequentially, to forecasted down Your

Steven Boal

with now, In at order higher took they said, quarters estimates the our We shifting we QX. the re-forecasted sure make see because clients in. we to for in that we we are And QX our we for many ship of took better from our came the the than QX we as have because and maintaining them years year budget than beat the quarters we had -- predicting the the are year. budgets guidance for that didn’t causing to for

are those was That are from set not make on based why that’s at numbers. So that to the and we last to out to numbers again. ahead our sure we take you guide looking that of see And going quarter. out budget ourselves we didn’t just move QX, beat QX the get

Chad Bennett

you One look that improvement next not that year? would how gross about acquire without would talked that you for like What last question, if Ubimo, did Okay. margin them?

Steven Boal

Ubimo points. is X be of component X to going to smaller the much points

Chad Bennett

Okay. Thanks.

Steven Boal

you. Thank


next from Sean comes Henderson Davidson. [Operator with D.A. Your line question Instructions] of the

Tom Forte

taking is Forte. my Yes. Hi. Thanks It Tom for question.

working pleasure Pam retirement Ron, So welcome you, a first enjoy Quotient. off, your and to it’s with

and often the about how So including your privacy we asked which in I business? should in I from Steven, am potential for the impact investors, the had most is new the you getting question question California think is laws,

Steven Boal

the the much Thanks, Most as laws privacy continuing all the recall law referenced and evolve. That’s if that we California. are recently, Sure. to in GDPR CCPA The industry, GDPR a big topic Tom. obviously had. you across obviously, impact like

opportunity in all this. an there’s of Look,

to the with are how implement our closely We on new clients regulations. working

impact expect of now, we see to result material a our to business laws. As these of a don’t as

laws are make a that set all impact material some Now, to their be federally we of on don’t to in try to own business. laws, right And be states. expect sort other a up going mandated go-forward privacy will our to of coming order basis, just hits and it as thesis independent kind some our is laws the privacy they of ultimately, there states but with now,

Tom Forte

one then And Great. follow quick up.

is Steven, an excellent something, context. about this So and you provide talked historically,

if know on out do partners? will to on were, then And your So impact free thoughts What think I rolling have you have groceries. any Amazon’s want will that retail on what do you what Quotient? think your shipping impact

Steven Boal


So, great it’s a question. look,

say, that’s program yourself, have they out, delivery why isn’t rolled back to You they So a their why growing they you have be ask and course, cost to, way doing right? if are of to because step the it that, a must grocery And them. be. obviously it have second, expected that

retailers shoppers marketplace a now, that their relationship with to the traditional where in have e-commerce brick-and-mortar roll particularly starting got And out are own initiatives.

competition environment a free a in now operating and the was Amazon not that’s for long So case. time

And thesis and going physical of will rolling here, locations be to still in shoppers E-commerce store free most the so Amazon develop least impact the this the X%-ish from with to total towns of is at is grocery win going is that, advanced. their our in what their delivery retailers so marginal is to out are closest market.

have delivery thought store, very though again And in from really store, of some most a has have fresh, the that retailers, like the as for been at initiatives, up them. things and have their who pickup the do are traditionally to in got to shopping exciting reacting pick because groceries have they selected well the of customers their curb, shopper are pre-bag opportunities even we retailers brick-and-mortar experience development seen

going better that’s proposition. just and shopper much overall, experience And to a a winning be

luck So to wish clearly and cost are be this, a -- I they there’s Amazon but in on I taking why try competitive. reason am

Tom Forte

next Day Thank Analyst the to you. forward week. Look points. Excellent Right.

Steven Boal

very Thank much. you


further CEO, Steven would back at There to are call the time now to and I turn like Boal. this questions no over

Steven Boal

us for everyone joining you today. Thank

personally at taking Thanks leading transformation retail the and I back given As playing hope changes to next digital you you of be industries. and Day it We be the professionally the gratifying New see the in CPG to is thrilled to York. again. both role in now our week all a hopefully tell Analyst am can in and place industry,


today’s concludes conference call. This

now may You disconnect.