- Earnings call transcript Q3 2022

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Operator

Thank you for attending today's Quotient Q3 2022 Earnings Call. My name is Tamia and I will be your moderator for today. [Operator Instructions] It is now my pleasure to pass the conference over to your host, Marc Griffin, Investor Relations. Please proceed.

Marc Griffin

Thank you, operator. today, the listening everyone to apologies delay. for And our XXXX earnings afternoon and quarter to welcome Good call. second our me With on Khan, Matt the the CFO. are company's call CEO, and Krepsik; today Yuneeb of presentation press company's posted IR website, release earnings the The have corporate company's and to been the investors.quotient.com. section

based of you this Relations the forward-looking quarter we management information we forward-looking providing will of earnings forward-looking are the statements on call, actual risks during for cause results in unknown begin, statements call and statements, the forward-looking the to risks on beliefs company's the that note set hear Before Investor fourth and full team differ time be forth These the statements. year. and including These related are please those and and company's the subject and known faith materially to this uncertainties will the presentation uncertainties of in could available to as and guidance located good that from company's website. slides are contained the

filed financial obligation Form again that the potentially X, XX-Q as disclaim Additional May X, future We annual factors update on XX-Q filed XXXX, to company's filed with X identified August amended on Form April our found the information, or today results be turn GAAP filed over adjusted whether each on presentation the discussed the results Form of and the that result measures that, report quarterly measures of out exclude XXXX, having risk could basis, SEC. found measure March and of information about me Please future With impact factors section XX, filed quarterly on loss SEC contained to been in today financial margins gross and filings in the reconciliation these note website. X, as any certain and expenses. in the on report on GAAP the report XX-K are to on non-GAAP the a our press our company's non-GAAP call XXXX on net XX-K/A can Matt. Amendment Form forward-looking a put events statements, can SEC A information operating expenses, on be earnings with we the from company's in by otherwise. let release financial new XXXX, that with corresponding the

Matt Krepsik

Quotient for of quarter promotions and Everything you the Thank customers afternoon. drive joining Khan. call. Quotient's with our earnings I'm be and we Good do for is XXXX at here Yuneeb around that today software, built leverage their the to third our network CFO, data scale platform, efforts. us our

terrific that network scale, X,XXX to add more we and last as our billion compared than delivered $X.X consisting $X.X we partners. more over representing grow of And scale, has of platform over XXX-plus the American quarter. Our from to savings the to brands. consumer CPGs In continues quarter, billion third

successfully to evolving retailers more media a consumer data-driven retail their networks, are to ownership of media to seek consumers As retail and and look leading we network ways promotions save take platform.

position due our changed network, of our has provider technology and data-driven outsourced us higher-margin software marketplace. evolving top digital business with more we to retailers of be choice Our of the industry. for promotions that durable a our our across Undertaking partners for On products a We creating of rapidly P&L. developing are programmatic of believe company agency platform. to managed service future for provider the is change this enable to a the the needs from partners, and platform, the and data to software new scale

in platform potential positioning technology-focused wins structure, improved us software capital the balance third and while look in more the consumer believe solidified with sheet exiting cost work significantly and and base the our much retail media. unlock several of realigned to quarter the our have and discussing internal future. our company behind promotions are we We growth We broadly, to forward

third revenue the the outperformance with QX highlights. of clear quarter promotional point a landed of quarter spend market Overall, guidance range, business. in a versus Media share. We is are X% decline headwinds within broader revenue this This decline. in increased by offset business were macro growing impacting that particularly revenue and our we driven Promotions the a in outperformance was we to believe results market by part Turning We our sequentially $XX.X our pleased from CPG, the Promotions proof as million. despite business a partially overall in achieving

due the close to million in profit I EBITDA business start, flow we gross delivered on million, at breakeven. non-GAAP the $XX.X QX, to evolving model, adjusted $XX of and cash our focus As discussed operating of non-GAAP

our We We model will partners. roughly to gross retail serve continue and with our non-GAAP the quarter optimize to CPG our platform margins. scaled exited XX% best and technology business

this expect retail as From evolve margins was align our we with our better our consumer platform-centric cost perspective, enhance a network certainly we promotions by our While reduce our overhead cost to we as media continue revenue relationships platform. drive and retail and to efficiency, improvement superior operational organization solutions. efficiencies net continue a technology driven deliver to to and

much into no facility entered a cloud structure adjustments rate in and near-term This are performance revolving delivering scale on of position loan the and convertible opportunities and capital stronger $XX vendor through higher-margin line an a alongside binding customers. retire forward our of and for platform's our debt deeper EBITDA see capital in focus million of line term moving a areas. on and we view. these have million have commitments strengthening outstanding sight migration We puts credit our Delving dilution into to we shifts shareholders. in $XX our further improvement, our $XX more our Looking consolidation, focus our will to cost our to in million data structure strategic operational our company efficiency run on other with believe we products with our that additional ahead,

I'd overall is This according hold sales promotions volume. earnings back leveraging performance are our data developments business like with discuss power heard of And minimal step broadly quarter, in our and on resulted to this market our increase core impact promotion in this more from as from how a underway by and the software, you've able across price retail our the network to win to taking Now CPGs platform, business. the season, on of the we're our and brands Consumer NielsenIQ. an to X% market. decline has or

believe promotion and and for billion to revenue addressable for deliver a to these by at X% clear last a increase we promotions U.S. to XX% as our to effectively in we right achieved we promotions. over market by broader content savings growth more $XXX the deliver are However, segment, in brand X% estimated targeted saw quarter. trips is to of increase in compared our partners. of consumer sequentially the proof and touch We our a spend for despite lies future right savings the impacting promotion becoming of the macro The points in reach that our the the CPGs, for the We cycle digital CPGs platform across efficiently programmatic of points spend provider we believe from right the retail market for promotions Quotient moment overall delivery are the sales headwinds is winning virtuous strongly preeminent consumer, represent the platform and consumer What offer share.

as of American Promotions consisting has CPGs, XXX-plus third we As call, X,XXX the the retained add we consumer. over Again, terrific I quarter, scale, our to savings our than partners. said $X.X of grow at in business delivered the brands more more and start billion continues of representing to the network

maximizes network delivers CPGs targeted it's activations the savings cost promotional our that data that of seen ROI advertising our units retailers. our higher moved and have redemptions and and to for and partners, true consumer. We drives a and This

continuing are partnerships multiple and grow as consumers platform scale more and ways points. We announced our up save also we to touch offer across to existing newly

operators one to of and the our the continue States, largest of promotions digital supermarket is ability Delhaize For platform. we instance partnership Ahold with evolve recently to renewed United grow USA, This example, our in just promotions. our one provide to

retail other variety are the We media capabilities promotions, announcing as into in data-driven a the that platform partnerships in-house foundation future. invest retailers are bring many to evolving on we media. as in Building of looking look working technology forward support supports and brands to on of they that we retail a also to to start are

in-house large with high-margin critical media a technology platform be and for software built to be and costly We strategy, technology retail are positioning network them. Executing data platform and have underpinning to Retailers are shift. undergoing complex on believe working a our and our campaign the with us our transition we a enables customers this are and been software, the brands going We moving provider. our is retailers. highly process retail that and

to is platform able to returns advertising a one be of become This efficiency to their off is of system. consumers high-intent improve target of Retail volume piece creative, them enabling to their We consumer and spend built of retailers process of into tens performance. simplify create touch AI multiple the simplify technology they as the by buying. leveraging of to to buyers Our button, critical our to reach their easy becoming and brands aim to CPGs that ads ability enabling network across dynamically points. due driver and enabling thousands monetize drive will digital media for capabilities advertisers, major

every dollar retail and for advertising We mission trips are investment our sales to a drives partners. and outcomes, on ensure of

of implement X retail platform a We retail continues. XX% CPGs are this digital set out-of-home one is over media categories diverse With evolution media sales physical to of programmatic store, retail currently of occurring of as across growing channels. media working our a rapidly the with in data-driven

to platform proprietary demand-side digital to exclusive leverage powerful technology for customized programmatically designed a allows planning, have building audience data. targeting as consumers on We well screens. This as and reach location-based

to key the mobile To and Our to across with than we traffic we're traffic over via measure XXX,XXX impressions million XX sales, enable weekly enable be screens performance, or U.S. platform be partners the largest whether impact we foot loop brands billion more to XXX viewership. it our to close devices. access inventory over to is illustrate all able on the what in in even out-of-home the believe also integrated Furthermore, supply digital scale,

cautious we the intend and in opportunities invest and this While share. long-term with value spending, capture market to business we to media the continue believe in market offering of CPGs to remain gain

In from market strong us putting home, and market on a X/X nearly programmatic to analog more for the of total represents addition, out leading the see the of linear of of growing Quotient out-of-home addressable a we market. digital digital changing segment. programmatic and edge

a hidden portfolio. At launched in we consider Shopmium we Moving Quotient. officially important an to which gem our the our of October, is direct-to-consumer United relations in milestone the end product which States for

been product for the United threshold. a leading in next direct-to-consumer savings As we a originated. you we evolution about able a and consumers earn in original also in we've and shoppers. generation of in minimum American where our Belgium. is Shopmium will platform offer delivering it's to through available the decades Coupons.com this without to appeals and the Shopmium an back and know, Europe brand our are to France discover trusted next savings to excited grocery launch, app It's journey. interactive Kingdom platform products now this consumers be cash With

and relationships their points through addition, audience In new insights. powerful revenue-driving retailers and consumer touch brands grow can

Coupons.com We experience, which engagement. expectations have have and our currently encouraged exceeded from terms results Shopmium retention in by initial users our user extremely usability, been and of are transitioning to

launching our the users. Shopmium in universe are process of We our grow marketing to further of program

put you all evolving our strategy when capitalize on better Quotient positions we it So together, an new to believe landscape.

brands to on on both consumers out And CPGs proven our partners around focused execute durability a platform against software, data on to as scale. a significant platform has and CPG pressure navigate base and landscape the of and changed The in our and our the and our built network media promotions reflecting are that our strategy. our our and We networks remains us choppy has business take economic strong business that retail building view, market of inflationary around economic and, uncertainty. realign technology, reductions cost enabled

ability work challenging current us consumers. these point expect the believe opportunities We more share to deliver if our even times. our it to to and be persists, results in Promotions CPGs quarter's Yuneeb. With However, for this market there to I will savings gain business to turn will with that, over we in

Yuneeb Khan

to our the on including be and non-GAAP encourage relevant GAAP reconciliation. Thank remarks you, visit for and Matt My all everyone afternoon, I focused our Investor good financial today to page our documents, everyone. highlights will Relations

at a And Torch last with such our it our convertible Capital convertible notes stated quarter, fulfill business journey. that. took term critical with does company the On dilution. Matt transformation and and pay the also we financing an does into existing did we Most dilute and Blue equity us all. cash it facility. Bank. million letters debt looking the way shareholders our successfully allows as to highlighted, all provide provides to position under address PNC entered account million November Blue off As $XX with asset-based structure P&L, needs. Under separate This commitment in will revolving that we X $XX letters, binding Torch Further, and importantly, to as Capital not us optimized in to continue were into just over position X, an will cash our years advancing overburden we our commitment not provide PNC factors new capital credit

to quarter. on our Moving results for the

Our was third quarter million $XX.X million, million. range of our to $XX guidance within $XX revenue

As ongoing challenges decline as promotions the which macroeconomic sequentially versus these by Matt retail media revenue spend. X% lower-than-expected are promotions measured was and market Despite by a businesses in impacted CPG our X% resulting NielsenIQ. QX stated, headwinds, increased revenue of our affecting

$XX.X Our was non-GAAP gross profit million.

expectations Our line points with gross basis XX%, non-GAAP up was roughly in XXX margin our year-over-year. and

the reduce well costs high-margin was QX we as the our were Our $XX to throughout operating to non-GAAP positively products by expenses continue business. margin take focus gross million, down steps the impacted well as on have as from previously and we management. decline to prior disciplined year-over-year million $XX sequentially. The taken year our $XX spending primarily was cost down million due OpEx in actions as announced

was to of adjusted marginally $X $XX non-GAAP our million million, beating million. guidance Our EBITDA $XX range

breakeven an the We operating to Turning at upper to the cash cash. end quarter our had range. in of close flow guidance

journey, million progress our of last continue we those of to rate we as structure of profitability. part part as this our efforts. appropriately transformation to reduction on Matt communicate our make is mentioned As plans and $XX quarter, that mentioned We'll efficiencies expense further we optimize approximately intend to drive run The cost initiative.

improved We our flow, cash laser our focused capital focus significant our XX by especially are that and which days improving structure in working put our a to made requirements. we and liquidity Additionally, on us around quarter, improved business during capital sequentially. progress the have our believe DSOs with strong available on our position have all combined meet

our driving Our that continuous turn sustainable a that demonstrates EBITDA flow convert believe into healthy with we fundamentals, cash and cash. into P&L, focus on what performance revenues is financial profits durable

quarter Moving year full on and our fourth guidance. to XXXX

built we As and are have at committed to an data dynamics market the on quarter, I sharing and fact-based we today. last outlook said

quarter. of Our revenue guidance the fourth anticipation our condition reflects in continued headwinds macro

anticipate implementing. reflects that we additional cost as guidance reductions expense as Our cost last from actions well ongoing cost benefits quarter's

product in revenue for our are EBITDA strength cash also and Given our guidance our and belief of cash management. we diversity given year. the margins cost operating maintaining our our our for year guidance our flow continuous reiterating on the focus We're as promotions business, the flow well gross and as

$XX range million For range be to non-GAAP million. million, quarter to $X revenue in of XXXX, of in million in million to to the and in cash to the the profit adjusted to range of to flow $XX fourth expect be million, EBITDA of $XX million gross range of $XX the $XX be $XX operating million the we $XX

to to the with to in range guidance range EBITDA million, in previous estimate the $XXX of shares in $XX in be we to million million, XX.X and million. year the our million range to $XXX in basic flow gross million, our to XXXX, the million $XX full be million outstanding be non-GAAP line range guidance of million $XXX operating cash We of the adjusted weighted $XXX $X estimates. of For average approximately to $X to profit be revenue maintaining for are

for Let me remarks. a to turn it back Matt closing few

Matt Krepsik

foundation us we've strengthened believe and summary, us believe differentiated successfully we Thanks, confident stable as position, and We the Yuneeb. more positions begin durable we operational will Q&A strong With our which established the now in we business. In that, a enable well our are to macro through operator call to the with challenges. the products along manage the will over near-term session. turn financial to

Operator

[Operator Instructions] Our first Mattiacci Nick question comes with Craig-Hallum. from

Nick Mattiacci

you right? This on Chad is hear Can for Bennett. Nick all me

Matt Krepsik

hear can you. we yes, Nick,

Nick Mattiacci

or in there? company on changed now on expand more stack, RPM a expand others adding strategy start want side media and strategy media the or business. in-house driver on ad today the partners back take their you with you of of at changed to being the kind evolved the And Delhaize and value guess, seeing primary just data partners business. talked I receive just has know Ahold I has more including the are to the if how can So partners uniqueness of the about tech for from retailers has Maybe the just I point retail us recently. business for if the that had all? how we that could the past, you for

Matt Krepsik

the an Media Those talk about to we unique our Nick, at speak, that to whether with role guys influencer X.X the have of say model. Media deep kind Retail of that a then retail the being we assets, as model. space media see good out-of-home question. question look of audience would overall for the ability really I of so of have marketplace true It's our that's media that's technology bring more an digital Retail ad X.X this sell-side active some and for us. retail we agency DSP, thanks areas they several and really as to retail our network, the Retail look evolution play outsourced from network, in an our When going X.X as before, Media that partnering We data. are and kind be in-housing where I heard key in-house. we Yes. think strategy joining a bring retailers with us, side, look -- can do me and at on you

demand-side now on opportunities CPGs easier see also I with across side. We And it retail implement and access to what retail to mentioned the them earlier in the invest is right media to a platform call on make working networks. for the demand few the media buying overall

a So a the retailers in on really quickly on CPGs. with quite technology both industry and the very that retail in the be mature, our more would evolving see we we see of macro standpoint, and I with demand side. And say role to both ecosystem, our and partner really evolving becoming our

Nick Mattiacci

with Got in maybe could XX spend speak like you changed from it. Quotient CPGs spend you if versus then to CPGs? then And changes smaller market And how disaggregate between overall year-over-year? spend of could to maybe the change clients. if has maybe that changes relative has in these how the just in And biggest trended share

Matt Krepsik

step a Taking remain still Yes. strong we lot relationships top a partners. of say CPG our I would back, with

new diversification adding the manufacturers brands in I we've overall terms seen net certainly net and new to think platform. more of

the our side, specifically So growth, partners. promotion the spot Where most we've national especially of been with fairly recent CPG seeing feel major lot retained we in revenue promotions. around quarter, on robust like has a we're our a relationship

efficient it So much to more consumers, and it's to a ability deliver offer unique programmatically given our platform, deliver promotions. our way to

a marketplace reach in as we that marketing can consumers or to to a useful volume, keep CPGs distribution basket, pressure relevant, the on channel consumer to brand in tool a useful take a in become and category, keep where keep and wallets. maintain consumer a a price to the consumer see And so channel especially their

Nick Mattiacci

of previously looks on the your pressures visibility guess, business. for revenue? about an me for in guide the focus has question company been revenue can given on you just forward than of some you improvement know area some the range for QX a visibility of spoke And I guided guidance of last into but to improve with about visibility efforts just one like macro for prepared guess, that it then in kind your can is of just expand And visibility, is, remarks? wider to. I the you I And talk the QX

Matt Krepsik

absolutely. Yes,

start it me I'll pass Yuneeb. let then to So and

holidays the QX As or we back the at QX quarter of fell unique the also is a the QX, is the look media quarter. in and sense end in that half

right quarter see that think shorter a So it's see we would I believe, team say other the pipelines. the where the season booking been managing both more the healthy the as full do job throughout going in some a our some but good P&L discipline, to now, we quarter holiday into of Yuneeb leadership we look at year. so of I dive late to guess guidance that We Yuneeb's expect of be under the as has quarters doing little But on let driving our kind a I'll there. versus well in

Yuneeb Khan

and Matt the for thanks you, Thank question. then

would from that guidance philosophy So for the dynamics is of facts I That market our account very reiterate based into the and today. our firstly, has beginning. takes right been revenue to like on

range, have There why a are few Now wide? it guidance the comes kept it we for to that. when reasons

a we market have own with all, dynamics and visibility with portfolio their it. products of diverse specific like different associated First of

trend timing stuff we pretty towards outperformed the latter also lot a is plan. given will execution quarter, Their like business of per of built pipeline is continue. it's Promo going half towards a of in Matt happening of quarter market the the up up, part later the lot part building in nicely. happens lot the the quarter the And season. the pipeline quarter. of said, and quarter Our later the quarter, sales a the of a But holiday media the with spending optimistic where the are that happening and of is media towards that big third has Fourth

reflection representation our our guidance trends, a of that range good and for So of a is revenue good reality of projections given fourth the these the feel today quarter. we

Operator

with comes from next Frankel Rosenblatt. Our question Steve

Steven Frankel

tilts into So quarters traditionally, opposite. the more promotional to And guidance your gross media, expect it in to we'd that go where margin and pressure. mix, media implies

margin commentary you material sequential So maybe high-level why improvement. on give expect some us gross

Matt Krepsik

Yes.

I So say I'll and But joining give we've it you. good here start philosophy looking Steve, from taken I'll thanks then pass to across you would for efficiencies and driving the the details. back to overall, some hear Yuneeb of company. to at operational guys

execute so the really how generate. how separating of And mix out and we we operate revenue at of Quotient, independent that we streams

we efficient lines. -- as we the product I on so even as look Specific QX to we chime continue XXXX, in like a customers for and of or, continue, here to progressively our said, And a I'll driving little bit Yuneeb as our and platform at look more we QX, look technology into software let across laser-focused kind like on mix.

Yuneeb Khan

Yes.

So I margin. on my laser-focused mentioned our remarks, in gross is company as

margin. gross strength seen have in We

our have strength in business. We Promotions seen

optimistic quarter very going well. calories strength is that it. in pretty with also that, fourth are And We continue as the high-margin that to brings

profile when So together, the combine of could that our in margin expect coming reflection range quarter. you true guidance these what in all fourth is a you we see the of

Steven Frankel

then guidance question. another And Okay.

and forecast? the operating the in any to margin. material in amount dollar you that embedded In terms dollar the between at us you get are QX the But add-backs non-GAAP terms the a saw in QX that there of your gave line, of differences add-backs gross amount

Yuneeb Khan

of add-backs. Not terms in

second comes or are be been disclosed when as those material quarter QX, very in the not Now for disclosed the it as will have purposes, is to add-backs a add-backs? Q. nature quarter. in add-backs Fourth in we saw the quarter, in all the clean practical And

Steven Frankel

tell on in you congratulations using And Okay. balance converts repay look you versus to likely the sheet the much us like the what to how is Could reliance are cash refinancing. So debt? on debt the QX?

Yuneeb Khan

Right.

the -- like little in give one answer. elaborated So you of a reasons me let

that's to notes, going $XX convertible on and We that all, And the the of operating its creates that right million now the all And to evaluation will detailed to as investing improve. The us we to also, it manage an the does entirety capital the cash capital And first in our that range is going balance of have. structure have right the way. with a have dilute did. experts our to in that It pretty this basically P&L we the we we of and terms it allows in kind and meet balance cash $XX smooth most flow. This our path outcome That market. business ran in we does for working it diligence us capital very expenditure business be importantly, structure requirements flow, our not because in our all. shareholders debt of to position process that our is advisers the us. balance allows of of So after keep not like overburden optimized in of and number And right the cash an transformation. is million. progressively have capital goes continues at company the settled is it cash

structure is retired, we transformation. that path to its very going will to come have been think balance just and it So of be the with not optimized company capital of also operate this cash out needs we cash the once continue but the that happy are notes balance actually to very, that the

Operator

the no pass currently Matt are back Krepsik in it to further queue. questions There closing for any remarks. will I

Matt Krepsik

all update progress our forward we near again continue thank all the you. to want We joining look in to Thank you future. and us today for to on you

Operator

This concludes the call. earnings XXXX participation. QX Quotient your Thank you for

your You may lines. disconnect now

Marc Griffin	Senior Vice President of Investor Relations
Matt Krepsik	Chief Executive Officer
Yuneeb Khan	Chief Financial Officer
Scott Raskin	President
Nick Mattiacci	Craig-Hallum
Steve Frankel	Rosenblatt

Quotient Technology (QUOT) 12 Nov 222022 Q3 Earnings call transcript