Quotient Technology Inc.

Thank you for attending the Quotient Technologies first quarter earnings call. My name is Matt and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call for 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 turn the conference over to our host, Veronice Palansky. Please go ahead.

Thank you, Operator. Good afternoon and welcome to our first quarter 2023 earnings call. With me on the call today are the company's CEO, Matt Krepsik, and Yaniv Khan, our CFO and COO. The company's press release and earnings presentation have been posted to 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 second quarter and full year. These forward-looking statements are based on information available to and the good faith beliefs of the company's 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 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 filings with the Securities and Exchange Commission, including our annual report on Form 10-K filed with the SEC on March 16, 2023, as amended by our 10-K-A filed with the SEC on April 28, 2023, and future filings and reports by us. 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, gross profit, and net income slash adjusted EBITDA financial measures discussed today are on a non-GAAP basis, each having been adjusted for the corresponding GAAP measure to exclude certain expenses. A reconciliation of GAAP and non-GAAP measures can be found in the financial results section of the press release and earnings presentation that we put out today on the company's website. With that, let me turn the call over to Matt.

Good afternoon, and thank you for joining us on Quotient's first quarter 2023 earnings call. Joining me on today's call is our CFO and COO, Younib Khan. Our first quarter results were in line with guidance ranges given across all metrics, including revenue, gross margin, adjusted EBITDA, and operating cash flow. In particular, I'm pleased with the strong momentum we demonstrated on profitability in the first quarter with positive adjusted EBITDA of 1.8 million versus a loss of 7 million in the prior year comparable period. First quarter results are reflective of the early stages of our transformation as we have shifted our business model from being a managed services agency to a technology-based solution designed to provide greater value to brands and retailers. This transition, as we have communicated in prior quarters, is intended to deliver a superior margin profile and scale quotient relative to our legacy model. On the top line, promotions continue to deliver growth with our network performance becoming stronger. We saw our savings delivered grow by 22%, again, outpacing overall retail sales on promotions growth of 7.9%, as reported by NielsenIQ, demonstrating our ability to capture share and expand our addressable market. In Q1, we saw the underlying fundamentals of our network and platform continue to strengthen, with activators on our network up 15% year-over-year and redemptions up 14%. that each of these internal key performance metrics demonstrate the positive momentum for our network as we grow the reach of our audience and we deliver results for brands. This, in our view, is creating a virtuous cycle with new brands bringing new content onto the platform and engaging new consumers, delivering more savings and driving results. Looking forward, the strength of these internal indicators underlies our outlook for the rest of the year and are reflected in our guidance for Q2 where we begin to show top line growth. From a macro perspective, we are seeing brands face pressure on volume as they begin to lap their price increases from last year as price sensitivity is creating headwinds for our consumers. As a result, we are seeing growth in content on our platform given our ability to programmatically deliver offers to consumers, increasing performance and reducing waste in promotion spend for brands. Content growth is reflective of our transition to a technology platform and our programmatic capabilities, where we can now more easily support new content for smaller brands, regional players, and new consumer purchase occasions. During the quarter, we also expanded coverage of our network to include the adult beverage category. If you recall, this expansion is one of our key strategic growth initiatives for the promotion business, driving revenues at higher margins. In our view, this expansion to a category that is incremental for consumers and complementary for our network and retail partners enables us to expand our addressable market and increase the monetization of our existing network. While we are still in the early innings of our business model transformation, I am pleased with the work our new chief revenue officer, Alison Metcalf, has done to refine our go-to-market strategy with a focus on winning net new business. In Q1, we brought 92 net new brands onto our promotions network, and our pipeline growth is ahead of our historical norms with particular strength in the promotions business. Turning to our media business. As you may recall, we have been executing a strategic pivot for this business with the in-housing of retail media and our transition from an agency managed media model to an ad tech self-service product. We have successfully transitioned the cost burdensome managed media business in 2022 with Q1 reflecting the new ad tech model for our media products as we become a technology partner for our retailers and a buying platform for brands. As we take this step forward for our media business, we are introducing gross billings this quarter as a leading indicator and key performance metric that is intended to provide transparency for our investors and demonstrate the utilization and solid momentum for the pivot of our media business to an ad tech product. Gross billings is an internal operational metric that provides a view on the utilization of our platform, our ability to capture share of the addressable market, and ultimately our ability to convert that strength into revenue. Turning to digital at a home, we saw our gross billings double in Q1 2023 over the same period a year ago, demonstrating the strength of our product as well as showing the potential for what we believe is one of our core long-term growth drivers for quotient. The digital at-home market is expected to grow at 15% through 2025, according to eMarketer. This growth is driven by two trends. First, the digitization of the traditional at-home placements, and secondarily, the digitization of the physical store. In-store audiences for retailers are 1.5 times larger than their digital audiences, and 90% of CPG transactions are still made in-store. With access to over 500,000 screens, of which over 200,000 are in or around a physical retail store, our digital out-of-home product is quickly becoming, in our view, the digital in-store product. We offer an industry-recognized demand-side platform that enables advertisers to programmatically reach consumers on digital screens wherever they are and wherever they shop. Quotient's self-service platform is designed for the unique opportunities of out-of-home, location-based advertising that enables brands to reach consumers on the move during their path to purchase. As a testament to our capabilities, our digital out-of-home business received nominations for DigiDays 2023 Media Buying and Planning Awards. We were named a finalist in the Best Digital at a Home campaign category, which recognized our successful campaign with the clothing retailer H&M USA, as well as the Best Multi-Channel Experience and the Best Digital Media campaign categories for our Summer Snacking campaign with Mondelez. This campaign was recognized for the power of taking an omnichannel strategy using multiple channels, including social, mobile display, and digital at a home to deliver a cohesive message to consumers across multiple touchpoints. Turning to the retail ad network. In the quarter, we shared initial campaign results from our retail ad network with our CPG pilot partners. These initial results are well received and speak to what we believe is the promise of simplifying the buying of retail media. This innovation is delivering on CPG expectations for performance while solving key pain points of supporting all retail media businesses. Looking to our future, as I mentioned briefly on our last call, in the coming years, we have a goal to return the business to a low to mid-teens growth rate, 60% plus gross margins, and 20% plus EBITDA margin. We believe, based on our current trajectory, we have a line of sight to achieving these targets by 2025. On the top line, we expect to achieve this growth rate through steady organic growth in our promotions product family and scaling up our strategic growth initiatives within our other product families, such as Digital Out of Home and Shopmium. On the promotion side, With the programmatic capabilities of our platform, we believe that we can more easily support new content for smaller brands, regional players, and new consumer purchase occasions, as well as new adjacent categories. Within Digital Auto Home and Shopmium, we are expanding the reach of our product offerings as we seek to capitalize on a growing TAM in these product areas. I spoke to some of the tailwinds we were experiencing in Digital Auto Home a moment ago. For Shopmium, we continue to build on the success of our European Shopmium app with the launch of Shopmium in the United States, growing our direct-to-consumer content by 23% in Q1 2023 versus the prior year. And we continue to be excited about the monetization opportunities given early reads on user engagement levels in the app. On the profitability side, the work we did in 2022 to reduce our operating cost structure has provided In our view, a path to a 60% gross margin and a 20% EBITDA margin by 2025. Achieving these targets will be dependent upon growth on our higher margin revenue initiative and leveraging the fixed cost base. In conclusion, while Q1 results were within our expectations, our leading internal indicators are showing green shoots across the business from the strengthening of our promotions network to the 92 net new brands and the increased gross billings through our digital at-home DSP. The hard work of transitioning to a technology provider is progressing, and our financial fundamentals continue to strengthen. We are focused on driving organic growth while simultaneously expanding margins. With that, I will now turn the call over to Yannid to review financials and guidance.