Market Overview

Quotient Technology Inc. Reports Second Quarter 2018 Financial Results

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Total revenue was $89.5M, up 20% over Q2 2017

Media revenue increased 77% over same period, powered by proprietary
shopper data

Delivered 954 million transactions, a 20% increase over Q2 2017

Strong market adoption of Quotient Analytics, already delivering
20,000 reports per month

Quotient Technology Inc. (NYSE:QUOT), the leading data-driven digital
promotions and media company, today reported financial results for the
second quarter ended June 30, 2018.

"We had a great second quarter, driven by the continued success of
Retailer iQ and our data-driven media solutions," said Mir Aamir,
President and CEO of Quotient. "In a few short years, we have evolved
from a digital coupons company into an integrated digital commerce
marketing company focused on the $225 billion dollars CPGs spend
annually in marketing. We're successfully delivering an integrated suite
of digital solutions, including coupons, media and analytics – resulting
in accelerating revenue growth. To help fuel this growth, we'll continue
to invest in retail partnerships, data relationships, technology,
solutions and services."

Second Quarter 2018 Financial Results

  • Total revenue was $89.5 million in Q2 2018, an increase of 20% over Q2
    2017.
  • Revenues from promotions and media were $60.9 million and $28.6
    million, respectively, compared to Q2 2017 revenues of $58.4 million
    and $16.1 million, respectively.
  • GAAP net loss for Q2 2018 was $4.7 million, compared to net loss of
    $5.8 million in Q2 2017.
  • Adjusted EBITDA was $12.9 million in Q2 2018, compared to $13.0
    million in Q2 2017.
  • Transactions totaled 954 million in Q2 2018, up 20% over Q2 2017.

Adjusted EBITDA, a non-GAAP measure, is reconciled to the corresponding
GAAP measure at the end of this release.

Business Highlights

Delivered Significant Revenue Growth in Key Areas

  • Q2 2018 promotion revenue from Retailer iQ grew 20% over Q2 2017.
  • Media revenue in Q2 2018 grew 77% over Q2 2017.
  • Revenue from Retailer iQ and Media combined grew over 40%
    compared to a year ago, representing 73% of total revenue.

Expanded Retail Partnerships for Continued Long-Term Growth
Opportunities

  • Expanded partnership with Southeastern Grocers in which Quotient
    manages all CPG digital media for shopper marketing – from creative to
    ad delivery to analytics and measurement. This partnership will allow
    CPG brands to use in-store shopper data and online behavioral data to
    deliver relevant digital ads to engage with shoppers, whether they are
    on the retailer's app, across the web, or on social media channels –
    all by working with Quotient.
  • Expanded relationships with several other retailers, including two
    expected to launch soon.

Acquired Influencer Marketing Firm Ahalogy, Bringing Social Media
Expertise

  • Influencer marketing is projected to reach $10 billion annually by
    2020.
  • Ahalogy delivers premium influencer content across social media
    channels for CPGs by tapping into a roster of more than 5,000
    influencers. Ahalogy uses 100% paid media, offering transparency,
    while ensuring legitimate impressions. Points North Group, a
    third-party that analyzes influencer marketing, gave Ahalogy high
    marks for their approach, which includes measurement and oversight
    against fraudulent practices within the influencer marketing industry.

Executed Purchase in Stock Buyback Program

In the second quarter, we used approximately $6.7 million in cash to
repurchase 500,000 shares of our common stock.

Business Outlook

As of today, Quotient is providing the following business outlook.

For the third quarter 2018, total revenue is expected to be in the range
of $101.0 million to $105.0 million. Adjusted EBITDA for the third
quarter 2018 is expected to be in the range of $13.0 million to $15.0
million.

For the full year 2018, we are raising revenue expectations above the
incremental revenue we expect from the Ahalogy acquisition. Total
revenue is now expected to be in the range of $390.0 million to $405.0
million. Adjusted EBITDA for the full year 2018 is expected to be in the
range of $58.0 million to $65.0 million, reflecting a higher proportion
of media revenue in the back half of 2018.

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 and expenses items that are excluded in
calculating Adjusted EBITDA.

Conference Call Information

Management will host a conference call and live webcast to discuss the
Company's financial results and business outlook today at 4:30 p.m.
EDT/ 1:30 p.m. PDT. Questions that investors would like to see asked
during the call should be sent to ir@quotient.com.

To access the call, please dial (866) 393-4306, or outside the U.S.
(734) 385-2616, with Conference ID# 7991648 at least five minutes prior
to the 1:30 p.m. PDT start time. The live webcast and accompanying
presentation can be accessed on the Investor Relations section of the
Company website at: http://investors.quotient.com/.
A replay of the webcast will be available on the website following the
conference call.

Use of Non-GAAP Financial Measure

Quotient has presented Adjusted EBITDA, a non-GAAP financial measure, in
this press release, because it is a key measure used by Quotient's
management and Board of Directors to understand and evaluate core
operating performance and trends, to prepare and approve its annual
budget, to develop short and long-term operational plans, and to
determine bonus payouts. In particular, Quotient believes that the
exclusion of certain income and expenses in calculating Adjusted EBITDA
can provide a useful measure for period-to-period comparisons of its
core business. Additionally, Adjusted EBITDA is a key financial metric
used by the compensation committee of our Board of Directors in
connection with the determination of compensation for our executive
officers. Accordingly, Quotient believes that Adjusted EBITDA provides
useful information to investors and others in understanding and
evaluating Quotient's operating results in the same manner as Quotient's
management and Board of Directors.

Quotient defines Adjusted EBITDA as net income (loss) adjusted for
stock-based compensation, depreciation and amortization, interest
expense, other income (expense) net, provision for (benefit from) income
taxes, change in fair value of escrowed shares and contingent
consideration, net, charges related to Enterprise Resource Planning
Software implementation costs, certain acquisition related costs, and
restructuring charges. We exclude these items because we believe that
these costs (benefits) do not reflect expected future operating
expenses. Additionally, certain items are inconsistent in amounts and
frequency making it difficult to contribute to a meaningful evaluation
of our current or past operating performance.

Quotient's use of Adjusted EBITDA has limitations as an analytical tool
and should not be considered in isolation or as a substitute for
analysis of Quotient's financial results as reported under GAAP. Some of
these limitations are:

  • Although depreciation and amortization are non-cash expenses, the
    assets being depreciated and amortized may have to be replaced in the
    future, and Adjusted EBITDA does not reflect capital expenditure
    requirements for such replacements or for new capital expenditure
    requirements; and
  • Adjusted EBITDA does not reflect: (i) changes in, or cash requirements
    for, working capital needs; (ii) the potentially dilutive impact of
    stock-based compensation; (iii) tax payments that may represent a
    reduction in cash available to Quotient; (iv) the effects of
    stock-based compensation, depreciation and amortization, interest
    expense, other income (expense) net, provision for (benefit from)
    income taxes, net change in fair value of escrowed shares and
    contingent consideration, charges related to Enterprise Resource
    Planning software implementation costs, certain acquisition related
    costs, and restructuring charges; and (v) other companies, including
    companies in its industry, may calculate Adjusted EBITDA or similarly
    titled measures differently, which reduces its usefulness as a
    comparative measure.

This non-GAAP financial measure is not intended to be considered in
isolation from, as substitute for, or as superior to, the corresponding
financial measures prepared in accordance with GAAP. Because of these
and other limitations, Adjusted EBITDA should be considered along with
other GAAP-based financial performance measures, including various cash
flow metrics, net income (loss), and Quotient's other GAAP financial
results.

For a reconciliation of this non-GAAP financial measure to the nearest
comparable GAAP financial measure, see "Reconciliation of Net Loss to
Adjusted EBITDA" included in this press release.

Forward-Looking Statements

This press release contains forward-looking statements concerning the
Company's current expectations and projections about future events and
financial trends affecting its business. Forward looking statements in
this press release include the Company's current expectations with
respect to revenues and Adjusted EBITDA for the third quarter and fiscal
year 2018; the Company's expectations for the continued growth of the
Retailer iQ digital platform; the Company's expectations regarding the
future demand and behavior of consumers, retailers and CPGs, including
the shift to digital and a digital convergence in marketing; the
Company's expectations regarding the potential audience reach of its
platforms; the Company's expectations regarding its data-driven
promotions and media offerings, the Company's expectations regarding
Ahalogy and the opportunity within the influencer market, the Company's
expectations regarding access to and use of shopper data for its
solutions and its data relationships; the Company's expectations
regarding retailer partnerships; the Company's expectations regarding
its new pricing strategies; the Company's expectations regarding its
product mix; and the Company's expectations with respect to its future
investments and growth and ability to leverage its investments and
operating expenses. 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
press release 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, the Company's ability to
negotiate fee arrangements with CPGs and retailers; the Company's
ability to maintain and expand the use by consumers of digital
promotions on its platforms; the Company's ability to execute its media
strategy; the Company's ability to effectively manage its growth; the
performance of the Company's various products; the Company's ability to
successfully integrate acquired companies into its business; the
Company's ability to develop and launch new services and features; and
other factors identified in the Company's filings with the Securities
and Exchange Commission (the "SEC"), including its quarterly report on
Form 10-Q filed with the SEC on May 4, 2018. Additional information will
also be set forth in the Company's future quarterly reports on Form
10-Q, annual reports on Form 10-K and other filings that the Company
makes with the SEC. Quotient disclaims any obligation to update
information contained in these forward-looking statements whether as a
result of new information, future events, or otherwise and does not
assume responsibility for the accuracy and completeness of the
forward-looking statements.

About Quotient Technology Inc.

Quotient
Technology Inc.
 (NYSE:QUOT) is the leading digital promotions,
media and analytics company using proprietary data to deliver
personalized digital coupons and ads to millions of shoppers daily. Our
core platform, Quotient
Retailer iQ™
, connects to a retailer's point-of-sale system and
provides targeting and analytics for consumer packaged goods (CPG)
brands and retailers. Our distribution network also includes our Coupons.com app
and website, thousands of publishing partners and, in Europe, the Shopmium mobile
app. We serve hundreds of CPGs, such as Clorox, Procter & Gamble,
General Mills and Kellogg's, and retailers like Albertsons Companies,
CVS, Dollar General, Kroger and Walgreens. We operate Crisp
Mobile
, which creates mobile ads aimed at shoppers, and Ahalogy,
a leading influencer marketing firm. Founded in 1998, Quotient is based
in Mountain View, California, with offices across the U.S., in
Bangalore, India; Paris and London. Learn more at Quotient.com,
and follow us on Twitter @Quotient.

Quotient, the Quotient logo, Quotient Retailer iQ, Shopmium and Ahalogy
are trademarks or registered trademarks of Quotient Technology Inc. and
its subsidiaries in the United States and other countries. Other marks
are the property of their respective owners.

 
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
  June 30,   December 31,
2018 2017
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 307,836 $ 334,635
Short-term investments 50,175 59,902
Accounts receivable, net 95,659 81,189
Prepaid expenses and other current assets   10,275     8,737  

Total current assets

463,945 484,463
Property and equipment, net 15,205 16,610
Intangible assets, net 64,080 46,490
Goodwill 102,665 80,506
Other assets   1,612     1,006  
Total assets $ 647,507   $ 629,075  
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,978 $ 6,090
Accrued compensation and benefits 9,601 13,914
Other current liabilities 41,351 35,538
Deferred revenues 8,520 6,276
Contingent consideration related to acquisitions   24,500     18,500  
Total current liabilities 87,950 80,318
Other non-current liabilities 3,404 3,205
Convertible senior notes, net 150,704 145,821
Contingent consideration related to acquisitions 14,582
Deferred tax liabilities   1,871     1,690  
Total liabilities   258,511     231,034  
 
Stockholders' equity:
Common stock 1 1
Additional paid-in capital 696,104 686,025
Accumulated other comprehensive loss (818 ) (700 )
Accumulated deficit   (306,291 )   (287,285 )
Total stockholders' equity   388,996     398,041  
Total liabilities and stockholders' equity $ 647,507   $ 629,075  
 

 
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
Revenues $ 89,545 $ 74,493 $ 176,311 $ 147,072
Costs and expenses:
Cost of revenues (1) 47,769 30,021 88,222 59,233
Sales and marketing (1) 20,530 21,617 44,360 45,454
Research and development (1) 12,122 12,774 24,748 25,894
General and administrative (1) 11,528 11,803 22,920 23,696
Change in fair value of escrowed shares and contingent
consideration, net
  -     3,900     7,350     1,315  
Total costs and expenses   91,949     80,115     187,600     155,592  
Loss from operations (2,404 ) (5,622 ) (11,289 ) (8,520 )
Interest expense (3,326 )

(6,634

)

Other income (expense), net   1,270     134     2,208     261  
Loss before income taxes (4,460 ) (5,488 ) (15,715 ) (8,259 )
Provision for income taxes   200     270     302     173  
Net loss $ (4,660 ) $ (5,758 ) $ (16,017 ) $ (8,432 )
 
Net loss per share, basic and diluted $ (0.05 ) $ (0.06 ) $ (0.17 ) $ (0.10 )
Weighted-average shares used to compute net loss per share, basic
and diluted
  93,643     88,985     93,180     88,242  
 
(1) The stock-based compensation expense included above was as
follows:
 
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Cost of revenues $ 579 $ 485 $ 1,119 $ 936
Sales and marketing 1,735 1,694 3,335 3,026
Research and development 1,862 1,985 3,689 3,996
General and administrative   4,063     3,902     7,892     7,864  
Total stock-based compensation $ 8,239   $ 8,066   $ 16,035   $ 15,822  

 
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
  Six Months Ended
June 30,
2018   2017
Cash flows from operating activities:
Net loss $ (16,017 ) $ (8,432 )
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 10,507 8,677
Stock-based compensation 16,035 15,822
Amortization of debt discount and issuance cost 4,883
Loss on disposal of property and equipment 34
Allowance for doubtful accounts 49 (497 )
Deferred income taxes 302 173
Change in fair value of escrowed shares and contingent
consideration, net
7,350 1,315
Changes in operating assets and liabilities:
Accounts receivable (10,741 ) 2,097
Prepaid expenses and other current assets (1,967 ) (2,066 )
Accounts payable and other current liabilities (3,152 ) (471 )
Accrued compensation and benefits (4,535 ) (2,468 )
Deferred revenues   1,109     1,119  
Net cash provided by operating activities   3,857     15,269  
 
Cash flows from investing activities:
Purchases of property and equipment (2,327 ) (3,166 )
Purchase of intangible assets (6,500 )
Acquisitions, net of cash acquired (20,947 ) (21,048 )
Purchase of short-term investments (50,175 ) (59,659 )
Proceeds from maturity of short-term investment   59,902     94,250  
Net cash provided by (used in) investing activities   (20,047 )   10,377  
 
Cash flows from financing activities:
Proceeds from issuances of common stock under stock plans 4,515 3,641
Payments for taxes related to net share settlement of equity awards (8,240 )
Repurchases of common stock (6,734 )
Principal payments on promissory note and capital lease obligations   (156 )   (85 )
Net cash provided by (used in) financing activities (10,615 ) 3,556
Effect of exchange rates on cash and cash equivalents   6     18  
Net increase (decrease) in cash and cash equivalents (26,799 ) 29,220
Cash and cash equivalents at beginning of period   334,635     106,174  
Cash and cash equivalents at end of period $ 307,836   $ 135,394  
 

 
QUOTIENT TECHNOLOGY INC.
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA AND TRANSACTION DATA
(Unaudited, in thousands)
 
  Three Months Ended Six Months Ended
June 30, June 30,
2018   2017 2018   2017
Net loss $ (4,660 ) $ (5,758 ) $ (16,017 ) $ (8,432 )
Adjustments:
Stock-based compensation 8,239 8,066 16,035 15,822
Depreciation, amortization and other (1) 7,033 6,608 12,652 12,012
Change in fair value of escrowed shares and contingent
consideration, net
- 3,900 7,350 1,315
Interest expense 3,326 6,634
Other (income) expense, net (1,270 ) (134 ) (2,208 ) (261 )
Provision for income taxes   200     270     302     173  
 
Total adjustments $ 17,528   $ 18,710   $ 40,765   $ 29,061  
 
Adjusted EBITDA $ 12,868   $ 12,952   $ 24,748   $ 20,629  
 
Transactions (2) 954,146 793,238 1,981,443 1,588,508
(1) For the three and six months ended June 30, 2018, Other includes
enterprise resource planning ("ERP") software implementation costs
of zero and $0.05 million, respectively, certain acquisition related
costs of $0.7 million for each of the respective periods, and
restructuring charges of $0.2 million and $1.4 million,
respectively. For the three and six months June 30, 2017, Other
includes ERP software implementation costs of $0.4 million and $0.6
million respectively, certain acquisition related costs of $0.8
million and $1.5 million, respectively, and restructuring charges of
$1.3 million for each of the respective periods.
 
(2) A transaction is 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 exclude
self-generated retailer offers where no revenue is received.
 

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