quot - q3 fy16 earnings presentation - final - …...q3 fy2016 earnings call ©2016 quotient...

©2016 Quotient Technology Inc.

QuotientQ3 FY2016 Earnings Call

©2016 Quotient Technology Inc. 2

Forward Looking Statements

This presentation and the accompanying oral presentation contain “forward-looking” statements that are based on our management’s beliefs and assumptions and on information currently available to management, including our projections regarding future financial performance, our expectations regarding the effects of our strategy which is focused on both investments and operational efficiency, our expectations about the growth of media revenue, projections for our fourth quarter and full year 2016, including our expectations regarding revenue per promotion transaction and our operating expenses, our ability to grow our business, our plans for our future investments and expansion, the continued shifts in our industry, and our expectations with respect to consumers’, retailers’ and consumer packaged goods companies’ (CPGs’) future demand and behavior, our expectations regarding the continued scaling of the Retailer iQ platform and its ability to grow and perform and meet the expectations of consumers, retailers and CPGs, as well as the anticipated financial benefits therefrom, our expectations regarding the expanded distribution of the Shopmium platform and the expected benefits, the growth potential of Quotient Insights and the expected benefits, our digital print and digital paperless initiatives, our expectations regarding our targeted promotions and targeted media offerings, our efforts with respect to attracting additional retailers and the anticipated benefits from our partner program, and our expectations to successfully leverage our investment and operating expenses. The Company operates in a very competitive and rapidly changing environments, and new risks may emerge from time to time. It is not possible for the Company’s management to predict all risks, nor can it assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements the Company may make. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available to the Company’s management at the date of this presentation and its management’s good faith belief as of such date with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, the Company’s financial performance, including its revenues, margins, costs, expenditures, growth rates and operating expenses, and its ability to generate positive cash flow and become profitable; the amount and timing of digital promotions by CPGs, which are affected by budget cycles, economic conditions and other factors; the Company’s ability to adapt to changing market conditions, including the Company’s ability to adapt to changes in consumer habits, including mobile device usage; seasonal variations in consumer behavior; the Company’s ability to retain and expand its business with existing CPGs and retailers; the company’s ability to negotiate fee arrangements with CPGs and retailers; the impact of mobile on the Company’s platform; the Company’s ability to maintain and expand the use by consumers of digital promotions on its platforms and add retailers to such platforms; the Company’s ability to attract and retain third-party advertising agencies, performance marketing networks, distribution and channel partners, other intermediaries; the Company’s ability to effectively manage its growth; the effects of increased competition in the Company’s markets and its ability to compete effectively; the Company’s ability to effectively grow and train its sales team; the rate of adoption by consumers of new technology, such as our mobile print solution, introduced by the Company; the Company’s ability to obtain new CPGs and retailers and to do so efficiently; the Company’s ability to successfully integrate acquired companies into its business; the Company’s ability to maintain, protect and enhance its brand and intellectual property; costs associated with defending intellectual property infringement and other claims; the Company’s ability to successfully enter new markets; the Company’s ability to develop and launch new services and features; and the Company’s ability to attract and retain qualified employees and key personnel. These factors, together with those described in greater detail in the Company’s quarterly report on Form 10-Q filed with the SEC on August 9, 2016 and in the Company’s future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings made with the SEC, may cause our actual results, performance or achievements to differ materially and adversely from those anticipated or implied by our forward-looking statements. The Company disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise. In addition to the U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. The non-GAAP measures have limitations as analytical tools and you should not consider them in isolation or as a substitute for an analysis of our results under U.S. GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. The Company considers these non-GAAP financial measures to be important because they provide useful measures of the operating performance of the company, exclusive of unusual events or factors that do not directly affect what we consider to be our core operating performance, and are used by the Company's management for that purpose. The use of non-GAAP measures is further discussed in the accompanying press release, which has been furnished to the SEC on Form 8-K and posted on the Company’s website. The press release also defines our non-GAAP financial measure of Adjusted EBITDA. A reconciliation between GAAP and non-GAAP measures can also be found in the accompanying press release and in the Appendix hereto. A reconciliation of Adjusted EBITDA, a non-GAAP guidance measure, to a corresponding GAAP measure is not available on a forward-looking basis without unreasonable efforts due to the high variability and low visibility of certain (income) expense items that are excluded in calculating Adjusted EBITDA.

©2016 Quotient Technology Inc. ©2016 Quotient Technology Inc.

Steven Boal, CEO

Business Review


Q3 Highlights

• Strong performance this quarter, momentum continues

• Record # of transactions in the quarter, increased 69% over Q3 2015

• Over 30 million shoppers registered on programs powered by Retailer iQ,

represents ~24% of U.S. households

• Signed new large drug retailer, further expanded partnership channel

• Retailer iQ market reach now over $375B of sales

• Expanded our partnership with Albertsons Companies, Inc. to include certain

exclusivity around promotions, media and use of shopper data

• Continued development of Quotient Insights to expand data-driven media

targeting and measurement


Accelerated Transaction Growth

Over 8B Digital Coupon Transactions Since 2011

2011 2012 2013 2014 2015 YTD 2016

Tran

sact

ions

710M

1.6B 1.7B

~2B

917M

1.3B


Retailer Marketing Activities Grow Transaction Volumes

Retailer A & B are approximately comparable in CPG sales.

Tran

sact

ions

Retailer A Retailer B


Leading brands using newspaper FSI to drive digital

pgeveryday.com/tag/venus

pgeveryday.com/tag/gillette


Scale Drives Growth Across The Network

Drive Sales

Quotient Insights - Data & Capabilities

QuotientPromotionsDigital Coupons ~

Targeted Offers ~ Digital Circular ~ Codes ~ Card

Linked Offers

Quotient Media

Targeted Media ~Shopper Marketing ~

Programmatic

Quotient Analytics

Campaign Analytics ~ Media Measurement ~ Shopper Analytics ~

Quotient Network - ShoppersCoupons.com, retailers, publisher partners

Brands & Retailers


Ron Fior, CFO

Financial Review


Q3 FY2016 Financial Summary

• Revenue was $66.5 million• Up 18% YoY, due to strong performance in digital paperless • YTD Revenue of $199.8 million, up 19% YoY

• Total digital coupon transactions were 682 million• Up 69% YoY, driven by continued strength in digital paperless and reflecting our ability to

increase scale on the platform• YTD transactions ~2 billion, up 48% YoY

• GAAP net loss was $11.3 million, including one-time charge of $7.4 million; excluding charge, net loss was $3.9 million

• Adjusted EBITDA was $8.8 million, reflecting strong revenue and balanced approach between investment and operational efficiencies. One-time charge of $7.4 million does not impact Adjusted EBITDA.

• Ended the quarter with a cash and investment balance of $162 million, up $5.1 million QoQ


Revenue

Revenue $56.5 $69.4 $66.1 $67.2 $66.5

QoQ 1% 23% -5% 2% -1%YoY -4% 16% 19% 20% 18%

Millions

$41.7 $51.3 $51.0 $50.9 $51.7

$14.8 $18.1 $15.1 $16.3 $14.8

Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16Promotions Media


Transactions

QoQ 8% 16% 15% 0% 28% YoY -8% 25% 30% 44% 69%

• Record volume of transactions; drives scale and demand on platform

• 28% QoQ growth driven by 41% growth in digital paperless and 4% growth in digital print

• YoY growth driven by 134% increase in digital paperless and 3% increase in digital print

• Average revenue per promotion transaction was $0.076 driven by mix of customers and pricing structures

A transaction is defined as any action that generates revenue, directly or indirectly, including per item transaction fees,

revenue sharing fees, set up fees, and volume-based fixed fees. Transactions continue to exclude self-generated retailer

offers where no revenue is received. Transactions indirectly generate revenue when the action is not paid for on a per

item basis, but is part of an agreement which generates revenue for other services; for example, transactions after a fixed fee cap has been reached would be included in our definition.

Millions

403469

537 535

682

Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16

Digital Print Digital Paperless


Retailer iQ Rollout

By Retailer Banners and Distributors Q2 FY16 Q3 FY16 As of Today

ImplementedRetailer iQ deployed at POS and live at retail

stores

17 19 19

MarketingRetailer has begunmarketing digital

coupon program to build consumer

adoption

13 13 13

• Signed major retailer in Drug Channel• Retailers starting to ramp digital marketing with steady cadence of activities• Expanded breadth of partnership agreements for future growth in promotions, media

and insights


Gross Margin

• GAAP Q3 FY16 impacted by ~2% increase in amortization of intangible assets acquired as part of a new partnership agreement, and by 11% due to a one-time charge of $7.4M.

• Q3 Non-GAAP excludes $1.8M in amortization of acquired intangible assets and $0.5M for SBC expense

• QoQ decline driven by increased distribution fees from Retailer iQ associated with revenue mix

GAAP & Non-GAAP

59.7% 62.6%47.2%

61.3% 64.5% 61.7%

Q3 FY15 Q2 FY16 Q3 FY16

GAAP Non-GAAP

Non-GAAP Gross Margin has been adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, and a one-time charge associated with certain distribution fees. A reconciliation table for the periods presented can be found in the Appendix section of this presentation.


Operating Expenses

Non-GAAP (as % of revenue)

Q3 FY2016 GAAP Operating Expenses: $43.0M Q3 FY2016 Non-GAAP Operating Expenses: $36.6M

• Q3 improvement primarily due to continued focus on operational efficiencies and expense management.

• Expect Q4 Opex to be higher due to seasonal expenses & continued investments for growth

37% 32% 29%

17%16% 16%

10%11% 10%

Q3 FY 15 Q2 FY16 Q3 FY16Sales & Marketing Research & Development Gen'l and Administrative

64%59% 55%

Non-GAAP operating expenses exclude stock-based compensation expense and any changes in fair value of escrowed shares and contingent consideration. A reconciliation table of the periods presented can be found in the Appendix section of this presentation.

©2016 Quotient Technology Inc.

Adjusted EBITDA

Margin 4% 11% 7% 12% 13%

Millions

• Q3 reflects continued effort to manage expenses and balance investments for future growth

• One-time charge does not impact Q3 Adjusted EBITDA

$2.2

$7.5

$4.3

$8.1 $8.8

Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16

16

Adjusted EBITDA, a non-GAAP financial measure, is net loss adjusted for interest expense, other income (expense) – net, provision for (benefit from) income taxes, depreciation and amortization, net change in fair value of escrowed shares and contingent consideration, stock-based compensation and a one-time charge for $7.4M associated with certain distribution fees. A reconciliation table of the period presented can be found in the Appendix section of this presentation.

Adjusted EBITDA margin is the ratio of Adjusted EBITDA and Revenues.


Q4 Full Year 2016 Outlook

FY2016

Q4 FullYearLow High Low High

Revenue(M) $68.0 $71.0 $267.8 $270.8YoYGrowth -2% 2% 13% 14%

Q4 FullYearAdjustedEBITDA(M) $6.0 $7.0 $27.2 $28.2Margin 8% 10% 10% 11%

©2016 Quotient Technology Inc. ©2016 Quotient Technology Inc. Confidential and Proprietary - Please do not copy or distribute.

Thank You


Appendix


Reconciliation of Non-GAAP Gross Margin

*Non-GAAP gross margin excludes stock-based compensation expense, amortization of acquired intangible assets, and a one-time charge associated with certain distribution fees.

Q3 FY 15 Q2 FY 16 Q3 FY 16

Revenues 56,467$ 67,247$ 66,470$

Cost of revenues (GAAP) 22,778$ 25,162$ 35,126$ (less) Stock-based compensation 419 493 467 (less) Amortization of acquired intangibles 532 795 1,797 (less) One-time charge for certain distribution fees — — 7,435

Cost of revenues (Non-GAAP) 21,827$ 23,874$ 25,427$

Gross margin (GAAP) 33,689$ 42,085$ 31,344$ Gross margin percentage (GAAP) 59.7% 62.6% 47.2%

Gross margin (Non-GAAP)* 34,640$ 43,373$ 41,043$ Gross margin percentage (Non-GAAP) 61.3% 64.5% 61.7%

(Unaudited, in thousands)RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

QUOTIENT TECHNOLOGY INC.


Reconciliation of Non-GAAP Operating Expense

*Non-GAAP operating expense excludes stock-based compensation expense and the net change in fair value of escrowed shares and contingent consideration.

Q3 FY 15 Q2 FY 16 Q3 FY 16

Revenues 56,467$ 67,247$ 66,470$

Sales and marketing expenses 23,403 22,741 20,415 (less) Stock-based compensation (2,723) (1,541) (1,155)

Non-GAAPSalesandmarketingexpenses 20,680$ 21,200$ 19,260$

Non-GAAP Sales and marketing percentage 37% 32% 29%

Research and development 11,890 12,473 12,414 (less) Stock-based compensation (2,411) (1,651) (1,837)

Non-GAAPResearchanddevelopmentexpenses 9,479$ 10,822$ 10,577$

Non-GAAP Sales and marketing percentage 17% 16% 16%

General and administrative expenses 8,382 11,103 10,041 (less) Stock-based compensation (2,521) (3,624) (3,269)

Non-GAAPGeneralandadministrativeexpenses 5,861$ 7,479$ 6,772$

Non-GAAP General and administrative percentage 10% 11% 10%

Non-GAAPOperatingexpenses* 36,020$ 39,501$ 36,609$

Non-GAAP Operating expense percentage 64% 59% 55%

QUOTIENT TECHNOLOGY INC.RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

(Unaudited, in thousands)


Reconciliation of Net Loss to Adjusted EBITDA

(1) Adjusted EBITDA, a non-GAAP financial measure, is net loss adjusted for interest expense, other income (expense) – net, provision for (benefit from) income taxes, depreciation and amortization, net change in fair value of escrowed shares and contingent consideration, stock-based compensation and a one-time charge for $7.4M associated with certain distribution fees.

(2) Adjusted EBITDA margin is the ratio of Adjusted EBITDA and Revenues.

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