Quotient Technology Inc.

Good afternoon, everyone, and welcome to Quotient's first quarter 2021 earnings conference call. During the conference call, all participants will be in a listening mode. After the presentation, we will conduct a question and answer session. At that time, anyone with a question should lift their phone receiver and press the star key followed by one on their telephone keypad. To cancel a question, you may press star and two. If at any time during the conference you need to reach an operator, please press star then zero. As a reminder, this conference call is being recorded and will be available for replay in the investor relations section of Quotient's website following the call. At this time, I would like to hand the call over to Christine Marcheska, Vice President of Investor Relations. Miss, you may go ahead and begin.

Great. Thank you, Operator. Hello everyone, and welcome to our first quarter 2021 earnings call. I am Christine Marcheska, Vice President of Investor Relations for Quotient Technology, and on the call with me today are our CEO, Stephen Bull, Pam Strayer, our CFO, and Scott Raskin, our President. The company's stockholder letter has been posted on the IR section of our corporate website, investors.quotient.com, alongside our press release and earnings presentation. Before we begin, please note that during this call, you will hear forward-looking statements, including the guidance we will be providing for our second quarter and full year 2021. These forward-looking statements are based on information available to and the good faith beliefs of our management team as of the time of this call and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These forward-looking statements and the related risks and uncertainties are set forth in the earnings presentation slides located on our investor relations site. Additional information about factors that could potentially impact our financial results can be found in our stockholder letter issued today and in the risk factors identified in our annual report on Form 10-K filed with the SEC on February 23, 2021, and in our future filings with the SEC. We disclaim any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise. Please note that operating expenses, gross margins, and net loss financial measures discussed today are on a non-GAAP basis, each having been adjusted from the corresponding GAAP measure to exclude certain expenses. A reconciliation between GAAP and non-GAAP measures can be found in the financial results section of the stockholder's letter issued today and in the earnings presentation slides posted on the company's website. With that, I will now turn it over to Stephen.

Thank you, Christine. Hello, everyone, and welcome to our Q1 2021 earnings call. We started the year building upon the success of our internal transformation in 2020, as well as the continuation of the strong momentum from last quarter as demand for our platforms and solutions from current and potential customers and partners grows. A great example demonstrating our market leadership with the collaboration between Quotient's innovative solutions, our customers, retail partners, and ultimately consumers is the launch of our new patent pending promotion amplification tool. one of several exciting products making their way through our innovation pipeline and into the marketplace. Temporary price reductions, or TPRs, are discounts traditionally given at a grocery shelf to reduce the price of certain products for a temporary amount of time, generally a limited number of weeks. On average, CPG advertisers run over 2,000 TPRs each week to promote and drive in-store sales at grocery retailers. TPRs have been both a mainstay of CPG and retailer marketing, and at the same time, one of the least efficient vehicles in the industry. For example, it would be nearly impossible for shoppers to be aware of all of the available TPRs. Only approximately 10% of TPRs are featured in a retailer's weekly circular, the primary way TPRs are advertised. shoppers would have to walk up and down every aisle of the retailer to see items via in-store and on-shelf messaging to discover the bulk of the remaining 90% of that week's TPRs. From a retailer perspective, the manual processes behind thousands of weekly markdown products or SKUs or SKUs are primarily kept in spreadsheets without an efficient way to communicate or measure the impact TPRs have on shoppers has remained an ongoing challenge for decades. there was clearly a business need for a better solution that would solve the inefficiencies and suboptimal results in the current process for brands, retailers, and shoppers. After surveying our retail sales teams, as well as analyzing our customers' and partners' needs, We created a digital automated solution on our retail media platform that, in our view, would not only be desirable to brands and retailers, but would also be appreciated by shoppers who could now take advantage of more savings targeted to their preferences during a time when every dollar matters. I'm pleased to announce that at the end of Q1, we launched our patent-pending promotion amplification tool in partnership with one of our retail network partners, Ajo Del Haze USA. This solution allows CPGs and retailers to work much closer than they generally have in the past and is designed to provide them with a competitive advantage by driving better price awareness, more sales, and more shopper trips. An early statistic demonstrating the success of our solution was noted by PepsiCo, who participated in a test of the new tool and saw a 6.4% sales lift from the effective combination of marketing and trade budgets. we are already in talks with several of our retail partners who are interested in adding Quotient's promotional amplification tool to their solution set. Also, we see this tool opening the door to additional retailers looking to work with us. From a CPG or advertiser's perspective, this capability drives demand as they see the potential to target the right audiences at the right time with pricing incentives that have traditionally not been optimally deployed. all with quotients industry-recognized and measurable results. Now I'd like to share some additional highlights from the quarter. Smaller CPGs, a continued focus area and growth driver for us. We saw over 100% annual growth in the number of long-tail or smaller CPG customers in Q1, and we believe we will see this growth trend continue throughout the year as this segment of CPGs is eager to utilize our digital solutions. National promotions. Although one of the areas hardest hit by the pandemic, we saw this segment continue its bounce back that started last quarter with 23% growth in bookings on a dollar basis in Q1 2021 over the prior year. We have repackaged how this product is sold, and the changes have been very well received by our CPG advertising customers, leading to more scale and deployments that line up with overall merchandising calendars. The certainty around dates of promotion availability and the connection to merchandising events is making it easier for CPGs to move their freestanding insert or FSI dollars to digital, something that is continuing to gain momentum. Retailer performance media. We saw an increase of over 170% in bookings dollars from our CPG customers in the first quarter over the prior year. In turn, our RPM retailers using this platform saw approximately 175% increase in alternative revenue streams, something that is becoming increasingly important to retailers as they face price and margin pressure in addition to challenging performance comps in the second half of the year forward. And we'll be looking to offset this with alternative revenue sources wherever possible. Digital out of home. At the end of Q1, we had inventory of over 194,000 screens nationwide with access to over 60,000 screens in store. Our ability to use exclusive shopper data to identify the right screens and match them to the right audiences combined with measurable ROIs continues to drive customer demand for this offering, especially at a time when shoppers are spending more time in store due to COVID-19 testing and vaccination protocols. National Rebate Solutions. Since our launch at the end of last year, we have seen 125 advertisers activate on this platform. This offering, when paired with our new national promotion sales packaging, which I mentioned earlier, provides brands of all sizes a true digital option, allowing them to shift spend away from offline channels, primarily the FSI and paper circulars, to online, a more efficient and measurable format. Sponsored Search. We continue to see demand for this solution as advertisers and retailers look for more ways to connect when consumers are planning and building their shopping lists and carts. As of the end of Q1, we had over 250 of our CPG customers using quotient-sponsored search, with a growing number opting for the self-service capabilities. We have several innovations for this platform that we'll be bringing to market over the next two quarters and look forward to continued growth and success of CPG and retailer engagement in sponsored search. Finally, I'm pleased to share that we continue to see growing demand for our retail network. We recently signed regional grocery chain Plum Market as they look to our retail promotion platform to offer savings to more consumers. Additionally, we expanded our partnerships with two of our existing retailers, a major drug chain that we signed for our in-lane offering, and as I noted earlier, Ajo Del Haze USA added our promo amplification tool to provide a more comprehensive solution to better optimize trade spend deployment and shopper engagement. We continue to focus on growing our retailer network, adding new retailers in our core and non-core verticals, and expanding relationships with our current retail partners as they look to add more of our innovative capabilities to their platforms to garner more sales and a better shopping experience for their consumers. Data analytics and measurement are one of the key components of our success and why we continue to be a market leader in our space with growing demand for our platform from advertisers and retailers. On that note, I'm thrilled to share that we recently hired Matt Krepsik as our Chief Analytics Officer at Quotient. In this role, Matt will lead our company's data analytics and measurement strategy and practice designed to enable our clients and retail partners to deliver high-performing data-driven marketing strategies fueled by our powerful data-driven insights into consumer purchase behavior. Matt brings to quotient a wealth of experience with more than 15 years of experience with data analysis in various managerial roles at Nielsen, where he most recently led attribution, media planning, and activation products. As evidenced by his background and reputation, it is clear Matt is a visionary leader who has the ability to transform data into insights and, more importantly, commercial applications. He has had Quotient on his radar for some time and believes we are well positioned to continue to be a leading innovator in the retail space through technologies and solutions that help retailers and advertisers deliver more valuable interactions with consumers, and we're thrilled to have him on board. Moving on to our outlook for Q2 and the rest of 2021. Based on early indications, we're seeing strong Q2 bookings as well as continued healthy momentum for our pipeline for the latter part of the year. We believe this will result in revenue growth of approximately 18% in the second half of 2021 over the first half of the year. We believe the continued market tailwinds, our growth drivers, and our ability to execute will propel us through the upcoming quarters and year. Our updated annual revenue guidance for 2021 represents 15% growth over 2020 at the midpoint, and our adjusted EBITDA guidance for the year is approximately 25% growth at the midpoint. Both are higher than we previously guided our Q4 call as we're seeing strength in demand for our solutions witnessed through our bookings and pipeline visibility for the remainder of the year. We're doing what we set out to do, and I'm proud of our team's ability to rise to the occasion in an evolving environment to deliver on our goals, putting our key stakeholders first. I remain confident that Quotient is well positioned for growth for the upcoming quarters, year, and future. And with that, I'll now turn the call over to Pam. Pam?