Quotient Technology Inc.

Good afternoon, ladies and gentlemen. Thank you for attending today's Quoted Q2 2022 earnings call. My name is Tia, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to your host, Mark Griffin, with questions. You may proceed.

Thank you, operator. Good afternoon and welcome to Quotient's second quarter 2022 earnings call. The company's press release and earnings presentation have been posted on the IR section of the company's corporate website, investors.quotient.com. Before we begin, please note that during this call, you will hear forward-looking statements, including the guidance we will be providing for the company's third quarter and full year 2022. These forward-looking statements are based on information available to and the good faith beliefs of the company's management as of the time of this call and are subject to known and unknown risks and uncertainties that could cause the 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 the company's investor relations website. Additional information about factors that could potentially impact the company's financial results can be found in the risk factors identified in our annual report on Form 10-K, filed with the SEC on March 1, 2022, as amended by Form 10-K-A, Amendment 1, filed with the SEC on April 29, 2022, and in our quarterly report on Form 10-Q, filed with the SEC on May 5, 2022, and in the company's future filings with the SEC. We may 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 gross profit, gross margin, adjusted EBITDA, and adjusted EBITDA margin and operating expense financial measures discussed today are on a non-GAAP basis, having each been adjusted from the corresponding GAAP measure to exclude certain expenses. The reconciliation between GAAP and non-GAAP measures can be found in the earnings presentation slides posted on the company's website. With that, let me turn the call over to Matt Krepsik, Quotient CEO.

Good afternoon, everyone. Thank you for joining our second quarter earnings call. Today marks the beginning of a new chapter for Quotient. I'm excited to be here with you as Quotient's new CEO, alongside our new CFO, Unib Khan, and our president, Scott Raskin. It has been a busy couple of months as we've taken an in-depth look at the company and had valuable conversations with employees, key customers, and key partners. Since I became CEO, we've made significant progress in focusing our strategy and positioning the company to maximize the value of our leading promotions network and retail media platform. Throughout this time, I've been able to leverage my prior experience as quotient CTO, where I work closely on strengthening our strategy and product offerings and growing our promotions network. Let's start with a quick review of second quarter performance. Despite a complex macro environment, we were in the range of our guidance, delivering a total revenue of 69.3 million, non-GAAP gross profit of 36.2 million, an EBITDA loss of 1.3 million, and positive operating cash flow of 19.5 million. I'm proud of our margin expansion as we have continued to improve our operational efficiencies and reduce our overhead costs to streamline the business. We exited the second quarter with approximately 52% non-GAAP gross margin. In addition, we've made significant strides to improve our working capital by creating greater focus and rigor on our DSOs throughout the quarter. We expect continued margin improvement into the second half of this year as we see the result of the recent steps we've taken to optimize our expenses including the difficult but necessary decision to reduce our headcount by approximately 7% globally. In addition, we've also consolidated our offices to better align our real estate footprint with our hybrid work model. As you need we'll discuss further, we continue to make strong progress to address the upcoming maturity of our debt. We have brought in an external financial advisor to assist in this process. Our philosophy is to find a balance between cost of capital, equity dilution, and other factors. We believe we have a strong foundation with our core assets, and the team has made significant progress in transforming Quotient. Over the past few quarters, we have worked hard to integrate businesses, sunset legacy systems, and simplify our technology. We continue to realign our expenses and organizational structure to capture the market opportunity. Additionally, in the past few months, we have hired incredible talent in critical areas of the organization that will help to drive change and value for our shareholders. This includes a refreshed management team, new technology leaders with significant ad tech experience. The new leaders we've hired over the past six months, including our new CFO, CIO, and CTO, bring a fresh perspective, and are already having an impact accelerating the change that is underway. The high-caliber talent that we brought to our company, especially in a complex hiring market environment, in my view, is a testament to the strength of our business, their confidence in our go-forward strategy, and the growth opportunities ahead. In addition, we've appointed six new members to the board over the past 12 months, They bring decades of technology, media and brand experience with proven track records of scaling businesses through execution and transformation. They are contributing to a collaborative and constructive dialogue as we enter our next chapter. Together, our refreshed leadership team, board and company are moving forward with a shared vision and purpose. In my view, The foundational heavy lifting is behind us, and now we are focused on executing our go-forward strategy. I believe the hidden value of Quotient is the strength of our network and ability to deliver value to consumers and help brands drive performance through our promotions network and media platform. During the second quarter, we delivered $2.6 billion of savings to the American population, an increase of 8 percent versus prior quarter and 14 percent versus the prior year. We believe this is an important metric that demonstrates the value of our network as consumers look to quotient for savings and CPGs look to engage consumers at scale and drive sales. In our view, the power of our network, the breadth of our touchpoints, The scale of our consumer reach and our data quality provide a strong foundation for us to drive profitable and sustainable growth. Speaking with you today, I am confident as ever in our long-term strategy and our ability to execute. To fully leverage the power of our network and to drive focused execution, we are realigning our organization around four key product families. First is promotions. We have been evolving our promotions business as a broad network across our retailers, publishers, and our direct-to-consumer app. We continue to scale up existing and recently announced partnerships, and we believe this has significant growth potential as we offer consumers more ways to save across multiple touchpoints, whether it's cash now, cash back, or earning rewards in their shopping journey. Second is direct-to-consumer. Earlier this year, we announced plans to bring Shopmium to the U.S., our premium direct-to-consumer brand that provides a rich set of features and capabilities to our partner network and drives consumer engagement and savings. We are moving into beta testing and expect to fully launch Shopmium in the U.S. later this year. Third is retail media. Retail media has become a significant focus for brands, given the quality of the data and the ability to reach shoppers close to the point of sale to directly influence purchasing decisions. Our retail media business and the industry are going through a significant transformation as retail media moves from an outsourced model to an in-house model. We believe retail media will eventually evolve into a marketplace model where retailers own their supply and CPGs buy across multiple networks. Our opportunity is to be the easy button, enabling retailers to monetize their network and CPGs to simplify their buying. In a recent report from Wakefield Research, 64% of CPGs expect to increase their retail media spending in 2023. We are excited about the potential and expect a high degree of innovation and evolution in this area over the coming quarters. Fourth is digital out of home. Our proprietary location-based technology allows agencies and advertisers to plan against very specific sets of consumers, reach shoppers in and out of stores, and measure the direct impact of sales. Quotient's self-service platform is built for the unique challenges of out-of-home advertising. One of our large CPG advertisers recently grew their billings through our platform by over 60% quarter over quarter. In addition, we announced a partnership with Rapport, the global out-of-home media buying and planning agency arm of IPG Media Brands to be their end-to-end out-of-home technology partner. Digital out-of-home has been a strong driver for us in the first half of the year, delivering high double-digit growth and providing us with tremendous opportunities with agencies. We believe in the solid fundamentals of these four product families and the distinct growth opportunities that each represents. That said, we continue to be impacted by supply chain challenges and input cost pressures despite the macroinflationary environment. As a result, some CPG brands have been cautious with promotions and media spending to prevent overselling. This uncertainty has affected the volume of offers and content on our network. However, we are still delivering significant value to consumers and to those CPGs that are not experiencing the same level of constraints. We believe the inflationary environment should become a favorable tailwind for our promotions business as consumers look for savings and as CPGs work through their supply chain constraints and cost pressures. As we look to the back half of the year, we're factoring in the current environment and these macro conditions into our guidance. which you need, we'll discuss shortly. Now that we've gone through our four product families, let's discuss the three pillars of our growth strategy, which are expanding our promotions network, simplifying retail media buying, and integrating promotions and media. We expect these three pillars to provide benefits across all of our product families. Starting with expanding our promotions network, A key tenet of growing our promotions business is increasing the scale of our network to reach consumers across more touch points. Shoppers options are constantly evolving, making reaching them and providing them with promotions more complex. In this environment, our network's reach has provided to be valuable for our CPG customers and their consumers. For example, PepsiCo was able to leverage our network to reach their consumers with a national promotion campaign that moved over 3 million units and drove more than 17 million of incremental sales for their brands. Our next strategic growth pillar is simplifying retail media buying. We have created a platform that leverages artificial intelligence to automate our customers' media programs. This enables our customers to more efficiently deploy their media dollars and allow brands to target buyers where they shop across relevant media channels with reduced complexity, time to execute, and cost to serve. In a recent Tylenol campaign using our location-based technology, we were able to reach 35% new purchasers to the category, 17% new purchasers to the brand, resulting in 36% return on advertising spend, which is almost three times greater than the average return on advertising spend. Finally, our last pillar of growth is combining our promotions network and media platform, which enables brands to amplify their message by serving a timely promotion to a consumer to increase awareness and drive purchase with a call to action. While we are still early in the process of implementation, A recent beauty brand case study showed the power of bringing together promotions and media to drive performance. By adding in media exposure with a value-based call to action to a shopper's journey, we increased the overall sales performance of the campaign by 1.4 times versus a standalone promotion or media unit. To wrap up, in our view, the strength of our network value of our data and the capabilities of our technology provide Quotient a competitive advantage that will enable us to drive profitable growth and unlock shareholder value. I want to reiterate that we are pleased with the results we see as we continue to drive our transformation forward. We are moving quickly and urgently to position Quotient to capitalize on its avenues of growth across our four product families and execute on the strategy I've outlined above. Finally, we are excited to announce that we are planning to host an investor day by the end of the year to provide more detail on our current business model and our go-forward strategy to drive sustainable growth and profitability. With that, let me turn the call over to Yannid.