Q4 2021 Quotient Technology Inc Earnings Call
Speaker 1: uncertainties are set forth in the earnings presentation slides located in our investor relations site.
And the earnings presentation slides located in our Investor Relations site.
Speaker 1: Additional information about factors that could potentially impact our financial results can be found in our stockholder letter issued today and in the VIS factors identified in our annual report on Form 10-K filed with the SEC on February 23, 2021, and quarterly reports on Form 10-Q filed on May 10, 2021, August 6, 2021, and November 5, 2021, respectively, and in our future filings with the SEC.
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 quarterly reports on Form 10-Q filed.
On May 10, 2021 August six 2021, and November five 2021, respectively and in our future filings with the SEC.
Speaker 1: We disclaim any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise.
We disclaim any obligation to update information contained in these forward looking statements, whether as a result of new information future events or otherwise.
Speaker 1: Please note that operating expenses, gross margins, and net loss financial measures to discuss today are on a non-GAAP basis, each having been adjusted from the corresponding GAAP measure to exclude certain expenses.
Please note that operating expenses gross margins and net loss financial measures to discuss today on a non-GAAP basis, each having been adjusted from the corresponding GAAP measure to exclude certain expenses.
Speaker 1: A reconciliation between GAAP and non-GAAP measures can be found in the financial results section of the stockholders' 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. Stephen? Thank you, Marla, and welcome to the team. You joined at a very exciting time. Hello, everyone, and welcome to our Q4 and full year 2021 earnings call.
A reconciliation between GAAP and non-GAAP measures can be found in the financial results section of the stockholders' 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 Stephen Thank you Paula and welcome to the team joined at a very exciting time Hello.
Hello, everyone and welcome to our Q4 and full year 2021 earnings call.
Speaker 2: As you've seen from our release and stockholder letter, we ended the year with a solid Q4, delivering revenue of $146 million and adjusted EBITDA of $12 million. For the full year, we delivered $521 million in revenue and $41 million in EBITDA. As we look forward to 2022 and beyond, the quotient of today is a transformed company.
As you've seen from our release and stockholder letter we ended the year with a solid Q4, delivering revenue of $146 million and adjusted EBITDA of $12 million for the full year, we delivered $521 million in revenue and $41 million in EBITDA as we look forward to 2022 and beyond.
The quotient of today is a transformed company.
Speaker 2: Over the past two plus years since I returned to the company, we have significantly transformed our product portfolio, our business operations and our network expansion model, which we believe positions us well to deliver sustainable and profitable growth.
Over the past two plus years since I returned to the company, we have significantly transformed our product portfolio, our business operations and our network expansion model, which we believe positions us well to deliver sustainable and profitable growth.
Speaker 2: We have restructured our sales, operations, product, engineering, finance, customer success, and human resources organization.
We have restructured our sales operations product engineering finance customer success and human resource organization.
Speaker 2: We have decommissioned infrastructure and legacy systems and rolled out more modern, efficient ones, which include self-service capabilities that allow our partners to use the Quotient platforms on their own. This new structure provides for clearer accountability, more transparency, and reduces manual work, which has re-energized our teams and aligned Quotient behind a single culture and purpose.
We have decommissioned infrastructure and legacy systems and rolled out more modern efficient one which includes self service capabilities that allow our partners to use the quotient platforms on their own.
This new structure provides for clearer accountability more transparency and reduces manual work, which has re energized our teams and aligned to quotient behind a single culture and purpose.
Speaker 2: And while we have made tremendous strides to date, we plan to drive further efficiencies over the course of 2022.
And while we have made tremendous strides to date, we plan to drive further efficiencies over the course of 2022.
Speaker 2: Turning to network growth, we are pleased to share that in addition to Microsoft, Fig and Redbox, Amazon is the latest partner to join our national promotions network. And that's not all. We expect to announce and launch several exciting partnerships in the coming months and quarters.
Turning to network growth, we are pleased to share that in addition to Microsoft Fig and Red Bar Amazon is the latest partner to join our National promotions network and that's not all we expect to announce and launched several exciting partnerships in the coming months and quarters.
Speaker 2: Supply chain issues continue to dominate the news and impact many of our customers.
Supply chain issues continues to dominate the news and impacts many of our customers. While we would expect to see this debate over the next couple of quarters. We did see some impact in Q4 2021, and we continue to see some impact in CPG spending so far in Q1 2022.
Speaker 2: While we'd expect to see this debate over the next couple of quarters, we did see some impact in Q4 2021, and we continue to see some impact in CPG spending so far in Q1 2022.
Speaker 2: As you will hear shortly, and you can read in our financial release, our remaining support for Elverton's is scheduled to conclude by the 26th of this month. And several of our products are making their final way through the operational changes necessary for accounting transition from gross to net revenue recognition over the current quarter.
As you will hear shortly and you can read in our financial release, our remaining support for Albertsons is scheduled to conclude by the 26th of this month.
Several of our products are making their final way through the operational changes necessary for accounting transition from gross to net revenue recognition over the current quarter.
Speaker 2: As a result, and adjusting for these two items, we plan to exit Q1 with a non-GAAP gross margin run rate of between 50 and 55 percent of revenue and exit the year with non-GAAP Q4 gross margin in excess of 60 percent of revenue.
As a result and adjusting for these two items, we plan to exit Q1 with a non-GAAP gross margin run rate of between 50, and 55% of revenue and exited the year with non-GAAP Q4 gross margin in excess of 60% of revenue.
Speaker 2: I'll now go into some detail regarding our growth businesses and their respected forecasted growth rates over 2022.
I'll now go into some detail regarding our growth businesses and their respected forecasted growth rates over 2022.
Promotions in 2022, we expect our national promotions business to see revenue growth of 25% to 30% over 2021 on a like for like basis, excluding albertsons.
Speaker 2: In 2022, we expect our national promotions business to see revenue growth of 25 to 30% over 2021 on a like-for-like basis excluding Alberta.
Speaker 2: Over the past two years, we have focused intently on growing our promotions network, attracting valued partners like Microsoft, Fig, Redbox, and now Amazon, as well as on launching new products like cashback rebates, which expand our footprint in the industry.
Over the past two years, we have focused intently on growing our promotions network, attracting valued partners like Microsoft Big Red box and now Amazon as well as on launching new products like cash back rebates, which expand our footprint in the industry.
Speaker 2: Moreover, as we've previously mentioned, over the last year, we implemented a business model change to better align our customers' promotions planning with in-store and online shopper marketing campaigns.
Moreover, as we've previously mentioned over the last year, we implemented a business model change to better align our customers' promotions planning with in store and online shopper marketing campaign.
Adoption of this new model has exceeded our expectations and as of today over 75% of all national promotions programs are being booked under this new model, which we believe will unlock more ways for <unk> to drive higher rois across their promotions and media spending and providing a bigger.
Speaker 2: Adoption of this new model has exceeded our expectations, and as of today, over 75% of all national promotions programs are being booked under this new model, which we believe will unlock more ways for CBGs to drive higher ROIs across their promotions and media spending, and providing a bigger opportunity to shift more dollars from legacy offline coupons into digital.
Opportunity to shift more dollars from legacy offline coupons into digital.
Today I am also excited to share that we're bringing our shop me and brand to the US Later this year to replace our consumer facing brand coupons Dot com.
Speaker 2: Today I'm also excited to share that we're bringing our Shopmeam brand to the US later this year to replace our Consumer Facing brand coupons.com.
Speaker 2: Quotient has been running Shopmium in Europe for many years, and recently we have been meeting with our US customers to share the rich set of features and capabilities launching in the US.
Quotient has been running shop me I'm in Europe for many years and recently, we have been meeting with our U S customers to share the rich set of features and capabilities launching in the U S.
Speaker 2: Our national promotions business is a key pillar of our company strategy. And we are very pleased with the progress we have made over the past 24 months, which we believe set us up for strong growth going forward, even considering the impact from current supply chain constraints.
Our national promotions business is a key pillar of our company strategy and we are very pleased with the progress we have made over the past 24 months, which we believe sets us up for strong growth going forward, even considering the impact from current supply chain constraints.
Speaker 2: Media. This is the part of our business that is often difficult to understand as we continue to move much of the business to net revenue recognition.
Media.
This is the part of our business that is often difficult to understand as we continue to move much of the business to net revenue recognition.
Speaker 2: We expect our media segment to deliver 15 to 20% revenue growth over 2021 on a light for light basis, excluding Albertsons, and reflecting adjustments for growth to net revenue records.
We expect our media segment to deliver 15% to 20% revenue growth over 2021 on a like for like basis, excluding albertsons and reflecting adjustments for gross to net revenue recognition we.
Speaker 2: We have made great strides in upgrading our technology and releasing self-service tools that we believe will allow us to achieve operating leverage as we continue to scale our booths.
We have made great strides in upgrading our technology and releasing self service tools that we believe will allow us to achieve operating leverage as we continue to scale our business.
Speaker 2: Partners large and small can now connect directly to our platform and we have had some recent wins with large CPGs that are using quotient on a self-service basis to deploy their retail performance media campaign.
Partners large and small can now connect directly to our platform and we have had some recent wins with large cpg's that are using quotient on a self service basis to deploy their retail performance media campaigns.
An example of quotient, leading innovation and focus on operational efficiencies is a new feature we call dynamic price integration.
Speaker 2: An example of quotient leading innovation and focus on operational efficiencies is a new feature we called dynamic price integration.
Speaker 2: We can now connect a retailer's sales pricing fee, also known as temporary price reductions or TPRs, to their media creatives. Automatically adjusting media in real time, based on changing offer details. This sophisticated capability removes a significant amount of manual work, normally associated with these types of integrated campaigns.
We can now connect a retailer sales pricing fee also known as temporary price reductions or <unk> to their media creative automatically adjusting media in real time based on changing offer details.
This sophisticated capability removes a significant amount of manual work normally associated with these types of integrated campaigns.
Speaker 2: And lastly, quotient promotion amplification continues to demonstrate strong sales lift and has expanded our opportunities with both existing partners and new ones.
And lastly, <unk> promotion amplification continues to demonstrate strong sales lift and has expanded our opportunities with both existing partners and new ones.
Speaker 2: Digital Out of Home continues to be a shining star in the quotient media portfolio and will see no impact from the loss of Albert.
Digital out of home continues to be a shining star in the quotient media portfolio and we will see no impact from the loss of Albertsons.
Speaker 2: Quotions for proprietary technology allows advertisers to target very specific sets of shoppers both in and out of stores and then measure the direct impact on product sales.
<unk> proprietary technology allows advertisers to target very specific sets of shoppers both in and out of stores and then measure the direct impact on product sales.
Speaker 2: These capabilities combined with our leading location-based DSP are now fully self-service. And we have struck deals with some of the largest out-of-home agencies to integrate our technology directly into their office.
These capabilities combined with our leading location based DSP are now fully self service and we have struck deals with some of the largest out of home agencies to integrate our technology directly into their offering.
Quotient platform is built for the unique challenges of out of home advertising and our agency clients use quotient to identify valuable customer segment and determine how to reach them at the right moment to drive increased traffic sales and return on investment.
Speaker 2: Quotions platform is built for the unique challenges of out-of-home advertising, and our agency clients use quotient to identify valuable customer segments, and determine how to reach them at the right moment to drive increased traffic, sales, and return on investment.
Smaller cpg's.
Speaker 2: Another key pillar of hard growth strategy is our engagement with smaller CPG.
Another key pillar of our growth strategy is our engagement with smaller cpg's in 2022, we expect this part of our business to deliver between 40 and 50% revenue growth over 2021 with no impact from the loss of Albertsons.
Speaker 2: In 2022, we expect this part of our business to deliver between 40 and 50% revenue growth over 2021 with no impact from the loss of albors.
Speaker 2: By opening our network to these customers, smaller CPGs can, for the first time, reach shoppers at scale alongside larger brands who have traditionally been the only ones who could participate in legacy offline coupon vehicles like free standing inserts in the Sunday newspaper.
By opening our network to these customers smaller cpg's can for the first time reach shoppers at scale alongside larger brands, who have traditionally been the only ones who could participate in legacy offline coupon vehicles like freestanding inserts in the Sunday newspaper.
We believe that the growth of our network along with our focus on servicing this segment of the market creates a multiyear runway for strong continued growth.
Speaker 2: We believe that the growth of our network, along with our focus on servicing this segment of the market, creating multi-year runways for strong continued growth.
Speaker 2: I'd like to once again thank our team, our partners and our advertisers for doing their part to help make sure that shoppers have access to essential products over the course of the pandemic.
I'd like to once again, thank our team our partners and our advertisers for doing their part to help make sure that shoppers have access to a central products over the course of the pandemic.
Speaker 2: We will continue to do our part to help shoppers save when they need it most and continue to be a key partner to our advertisers, retailers, and network partners. And with that, I will now turn the page on.
We will continue to do our part to help shoppers save when they need it most and continue to be a key partner to our advertisers retailers and network partners and with that I will now turn the call over to Pam.
Pam.
Speaker 3: Thank you, Steven, and good afternoon, everyone. My remarks will be focused on our financial highlights. I encourage you all to read the full prepared financial results in our stockholder letter posted on the investor relations page, our website. We do have a solid financial results in Q4, with revenue at $146.4 million, up 3% over the prior year. Media revenue in Q4 was approximately 60% of total revenue, increasing 20% year over year with strength in sponsored search and digital out of home offerings.
Thank you Steven and good afternoon, everyone. In my remarks will be focused on our financial highlights I encourage you all to read the full prepared financial results in our stockholder letter posted on the Investor Relations page of our website.
Delivering solid financial results in Q4 with revenue of $146 4 million up 3% over the prior year.
Media revenue in Q4 with approximately 60% of total revenue, increasing 20% year over year with strength in sponsored search and digital out of home offerings.
Speaker 3: Promotion revenue decreased 15% year over year on difficult compares. We had expected declines in digital print and specialty retail driving 10 points of a decline with the remainder of the decline in revenue from digital paper width, which was driven primarily by lower national promotion revenues as supply chain issues led CPG to pull back on national campaigns.
<unk> revenue decreased 15% year over year on difficult compares we had expected declines in digital print and specialty retail driving 10 points of the decline with the remainder of the decline in revenue from digital Paperless, which was driven primarily by lower national promotions revenues as supply chain issues led CPG to pullback on Nash.
I will campaign.
Compared to our guidance range of $114 million to $124 million revenues were higher primarily due to the difference in the amount of revenue that was actually recognized under net revenue recognition compared to our forecast our guidance for Q4 'twenty. One revenue included an estimated $20 million reduction related to moving our poor.
Speaker 3: Compared to our guidance range of $114 to $124 million, revenues were higher, primarily due to the difference in the amount of revenue that was actually recognized under net revenue recognition compared to our forecast. Our guidance for Q421 revenue included an estimated $20 million reduction related to moving a portion of our revenues from gross revenue recognition to net revenue recognition as a result of changes we were making to our commercial terms and operations.
<unk> of our revenues from gross revenue recognition to net revenue recognition as a result of changes we were making to our commercial terms and operations.
Speaker 3: These changes took longer to implement than originally expected, which delayed and reduced the impact of the accounting change. The impact of moving from gross to net revenue recognition has no impact on gross margin dollars or adjusted EBITDA.
These changes took longer to implement than originally expected, which delayed and reduce the impact of the accounting change the impact of moving from gross to net revenue recognition has no impact on gross margin dollars or adjusted EBITDA.
Speaker 3: Adjusting for these differences, we exceeded our revenue forecast by approximately $3 million on a like for like faces.
Adjusting for the differences, we exceeded our revenue forecast by approximately $3 million on a like for like basis.
Speaker 3: Gap Gross margin for Q4 was $54.4 million, up 8.5% over the prior year.
GAAP gross margin for Q4 was $54 4 million up eight 5% over the prior year.
Speaker 3: As a percentage of revenue gross margins improved by 210 basis points to 37.2% of revenue.
As a percentage of revenue gross margin improved by 210 basis points to 37, 2% of revenue.
Speaker 3: Gross margin improved primarily due to lower cost. The prior Q4 was negatively impacted by $6.8 million charge taken to resolve a contract related dispute. In addition, the current quarter benefited from lower amortization and intangible. These savings were partially offset by lower gross margins on our media business as well as a higher mix of media revenues compared to the prior year, which carry lower margins from the promotions business.
Gross margin improved primarily due to lower cost. The prior Q4 was negatively impacted by $6 $8 million charge taken to resolve a contract related dispute. In addition, the current quarter benefited from lower amortization of intangible. These savings were partially offset by lower gross margins on our media business as well as a higher mix of media revenues compared to the pre.
Near year, which carry lower margins than the promotions business.
Speaker 3: Non-GAP gross margin was 39.3% down 580 basis points compared to 45.1% in Q4 last year. This decrease was driven primarily by higher distribution fees paid on certain campaigns, as well as a higher share of lower margin media in our total product mix.
non-GAAP gross margin was 39, 3% down 580 basis points compared to 45, 1% in Q4 of last year. This decrease was driven primarily by higher distribution fees paid on certain campaign as well as the higher share of lower margin media and our total product mix.
Gross margins on the promotions business also declined compared to the prior year due to expected lower contributions from higher margin digital print and specialty retail the latter of which we exited as planned during the year.
Speaker 3: Gross margins on the promotion's business also declined compared to the prior year due to expected lower contributions from higher margin digital print and specialty retail, the latter of which we exited this plan during the year.
Speaker 3: We delivered $12.1 million of adjusted EBITDA in the fourth quarter. Down 32% from the prior year, primarily due to low-aggress profit.
We delivered $12 1 million of adjusted EBITDA in the fourth quarter down 32% from the prior year, primarily due to lower gross profit.
As we continue to implement our business model changes and restructure our business terms and relationships, we expect non-GAAP gross margin as a percentage of revenue to improve throughout 2022.
Speaker 3: As we continue to implement our business model changes in restructure our business terms and relationships, we expect non-GAP gross margin as a percentage of revenues to improve throughout 2022.
Speaker 3: We expect the negative impact of higher distribution fees on margins to be more than offset by growth in high-marginational promotions as well as the move of growth revenue recognition to net revenue recognition.
We expect the negative impact of higher distribution fees on margins to be more than offset by growth in high margin national promotions as well as the move of growth revenue recognition to net revenue recognition in particular, we believe strong growth from higher margin National promotion will drive operating leverage and positive mix, while the launch of new distribution partners on our.
Speaker 3: In particular, we believe strong growth from higher margin national promotions will drive operating leverage and positive mix. While the launch of new distribution partners on our platform will drive scale, and as the year progresses, an increasing portion of our Shupper Media and Shupper Promotion Campaign, will be recognizing that a third party media and distribution team.
That form will drive scale and as the year progresses, and increasing portion of our shopper media and separate promotion campaign will be recognized net of third party media and distribution teeth.
Speaker 3: We believe the combination of these factors, along with continued cross-controls, will more than offset the negative mix impact from higher distribution fees, resulting in higher margins overall, and higher adjusted EBITDAF this whole year.
We believe the combination of these factors along with continued cost controls were more than offset the negative mix impact from higher distribution fees, resulting in higher margins overall and higher adjusted EBITDA for the full year.
Speaker 3: Q4 non-gap operating expenses came in at $47.4 million, up $1.9 million from the prior quarter. You primarily to hire professional services, these commissions and travel expenses, offset by lower head count and marketing spend.
Q4, non-GAAP operating expenses came in at $47 4 million up $1 $9 million from the prior quarter due primarily to higher professional services fees.
Commissions and travel expenses offset by lower head count and marketing spend.
Looking at cash we had an operating cash flow usage of $3 $7 million in the quarter down from the prior quarter due primarily to an $8 million payment made to a customer that will be amortized against each of revenue as well as changes in working capital.
Speaker 3: Looking at cash, we had an operating cash flow usage of $3.7 million in the quarter. Down from the prior quarter, due primarily to an $8 million payment, made to a customer that will be amortized against future revenue, as well as changes in working capital. We ended the fourth quarter with a price of late $237.4 million in cash and cash equivalent. $14.7 million from Q4 2020.
We ended the fourth quarter with approximately $237 $4 million in cash and cash equivalents up $14 7 million from Q4 2020.
Now turning to guidance.
Speaker 3: We believe the changes we have made throughout business in 2021 provide a strong foundation from which to grow profitably in 2022.
We believe the changes we have made to our business in 2021 provide a strong foundation from which to grow profitably in 2022.
Speaker 3: While the loss of a large retailer partner reduces our revenues by approximately 27%, and it's expected to result in difficult comparison over year, we are successfully executing on our new strategy, signing up exciting new network partners and making positive changes to our existing partner relationships that in our view show strong promise for the year ahead.
While the loss of a large retailer partner reduces our revenues by approximately 27% and is expected to result in difficult compares year over year. We are successfully executing on our new strategy signing up exciting new network partners and making positive changes to our existing partner relationships that in our view show strong promise.
The year ahead.
Speaker 3: In particular, we believe recently signed network partnerships combined with growth in high margin national promotions revenues will lead to incremental scale and an operating leverage as year progresses.
In particular, we believe recently signed network partnerships combined with growth in high margin National promotions revenues will lead to incremental scale and operating leverage as the year progresses.
Further at most of our shopper promotions and shopper media revenue shift to revenue recognition net of third party costs margins will improve although the change in accounting treatment will have no impact on reported gross margin dollars or adjusted EBITDA.
Speaker 3: Further, as most of our shopper promotions and shopper media revenue shift to revenue recognition, net if third party costs, margins will improve, although the change in accounting treatment will have no impact on reported gross margin dollars or just a EBITDA.
Speaker 3: As a result, we expect to grow quarterly non-GAP growth margin as a percentage of revenue from 40% in Q1 to over 60% for the fourth quarter. And we expected to deliver a full year adjusted EBITDA of $35 to $45 million roughly in line with the prior year at the midpoint despite losing one of our large retail parts.
As a result, we expect to grow quarterly non-GAAP gross margin as a percentage of revenue from 40% in Q1 to over 60% for the fourth quarter and we expect it to deliver full year, adjusted EBITDA up 35% to $45 million.
Roughly in line with the prior year at the midpoint, despite losing one of our large retail partner now turning to the outlook for the first quarter of 2022, we expect revenue to be in the range of $69 million to $79 million non.
Speaker 3: Now turning to the outlook. For the first quarter of 2022, we expect revenue to be in the range of $69 to $79 million. Non-GAP first margin to be in the range of $28 million to $32 million.
non-GAAP gross margin to be in the range of 28 million to $32 million.
Speaker 3: Adjust to the EBITDA to be in the range of a negative 8 million to negative 4 million dollars. An operating cash flow is expected to be in the range of negative 3 million to positive 3 million dollars. For the full year 2022, we expect revenues to be in the range of 330 million to 345 million dollars.
Adjusted EBITDA to be in the range of a negative $8 million to negative $4 million.
Operating cash flow is expected to be in the range of negative 3 million to positive $3 million.
For the full year 2022, we expect revenue to be in the range of 330 million to $345 million.
Speaker 3: Non-GAP gross margin to be in the range of $180 to $190 million.
non-GAAP gross margin to be in the range of $180 million to $190 million.
Speaker 3: Adjusted EBITDA is expected to be in the range of $35 to $45 million and operating cash flows to be in the range of $15 to $25 million.
Adjusted EBITDA is expected to be in the range of $35 million to $45 million in operating cash flows to be in the range of $15 million to $25 million.
Speaker 3: We expect weighted average basic shares outstanding for 2022 to be approximately 96.3 million. Always predicting the mix of revenue between promotion and media as well as the timing of accounting changes from gross to net is difficult, which could lead to variations in our gross margin. With that, we'll now take your questions. Operator.
We expect weighted average basic shares outstanding for 2022 to be approximately $96 3 million.
As always predicting the mix of revenue between promotion and media as well as the timing of accounting changes from gross to net is difficult, which could lead to variations in our gross margin with that we'll now take your questions operator.
Thank you and if you would like to ask a question. Please press star followed by one in a telephone keypad and if you change your mind. Please press star followed by chain.
Speaker 4: Thank you and if you would like to ask a question, please press star for a bow one in a telephone keypad. And if you change your mind, please press star for a bow two.
Our first question today comes from Steven Frankel of quality of Securities. Steven Your line is open. Please go ahead with your question.
Speaker 4: Our first question today comes from Steven Frankle of Collier's Securities. Steven, your line is open. Please go ahead with your question.
Good afternoon, a lot to digest here, but one of the consistent messages for the last couple of quarters was.
Speaker 5: Good afternoon a lot to digest here, but one of the consistent messages for the last couple of quarters was...
All of these changes we're going to lead to a material reduction in opex.
Speaker 5: All these changes we're going to lead to a material reduction in hot baths.
Speaker 5: So we didn't see that in queue for Pan maybe you could give us
So we didn't see that in Q4, and maybe you could give us.
Some thoughts around what the Opex run rate looks like.
Speaker 5: and thoughts around what the OptX run rate looks like. Key one and then how that changes when all these.
In Q1, and then how that changes when all of these.
Transitions get behind you by the end of the first quarter.
Speaker 5: Transitions get behind you by the end of the first quarter.
Speaker 3: Yeah, so we have been very focused on doing a full review of our operations and reducing costs where we can. You know, we said about mid-year that we were going to do a couple, well, we said in our last earnings call, we have did a couple of risks. We did one in Q3 where we reduced costs as a result of automating a process. And we did another one in Q4 as a result of the expectation of the loss of the Alpertune business.
Yeah. So.
We have been very focused on doing a full review of our operations and reducing costs, where we can.
We said about mid year that we were going to do a couple well we said in our last earnings call. We ended a couple of risks we did one in Q3, where we reduce costs.
As a result of automating a process.
And we did another one in Q4 as a result of the expectation of the loss of Albertsons business.
Speaker 3: The guidance we had given was that we had expected our OPEX to drop by about 5 million from the high point at Q2 by the end of the year. We took about 2 million out in Q3, Q4. We were going to take out more the delay in the transition of Albertsons, causes that not cut as much in Q4 as we originally hoped. So those original cost cuts will come in 2022.
The guidance, we had given was that we had expected our our opex to drop by about $5 million from the high point in Q2.
By the end of the year, we took about $2 million out in Q3 Q4, we were going to take out more the delay in the transition of Albertsons.
Not quite as much in Q4 as we originally hope so those original cost cuts will come.
In 2022.
More.
Speaker 3: We've got our assistance on our platform until February . Yeah, we've got our platform until February . So we need to transition out of that business and then we've got the support cost that we can work on pulling out of business.
We've got all of those things on our platform and so yeah, we've got Albertsons on our platform until February so.
So we need to transition out of that business and then we've got the support costs that we can we can work on pulling out of the business.
Speaker 5: And then just a big picture back at the envelope question. Kind of what's the go-forward, base business, ex-all these changes? What was it in 2021?
Okay, and then just a big picture back of the envelope question.
What's the.
Go forward base business X. All these changes what was it in 2021.
Speaker 5: And what do you think the growth rate of that, quote unquote, good business is in 22? Given there's a couple of pieces, but maybe what's implied in your...
And what do you think the growth rate of that quote unquote. Good business is in 'twenty. Two you have given us a couple of pieces that maybe what's implied in your guide.
Speaker 5: in terms of a growth rate for the go forward business.
In terms of a growth rate for the go forward business.
Speaker 3: Yeah, the growth rate that's implied if you work with the massive of Albertsons coming out about 27%. We're projecting growth in the baseline in roughly the mid-30s.
Yes, the growth rate Thats implied if you worked with amount of.
Albertsons coming out about 27%, we're projecting growth in the baseline in roughly the mid thirties.
Speaker 5: And what's your visibility on that? You guys talked a lot. You used that word a lot in 2021. So what's your visibility around that mid 30?
Okay, and what's your visibility on that you guys talked a lot I use that word a lot in 2021 so.
Whats your visibility around that mid 30% growth.
Speaker 3: It's a pretty good disability. We've got a lot of good bookings information and bookings are strong. I think one of the big changes that is happening in the business right now is a shift and a focus on new network partnership.
We have pretty good visibility.
We've got a lot of good bookings information and bookings are strong.
I think one of the big changes that is happening in the business right now is a shift and a focus on new network partnerships. So we're expecting we've got some big exciting new partners that we've announced today, we've got some new partnerships that we're expecting and these partners are technology savvy partners. They can.
Speaker 3: So we're expecting, you know, we've got some big, exciting new partners that we've announced. Today we've got some new partnerships that we're expecting. And these partners are technology savvy partners. They can get onto our platform quickly with APIs and they can start being productive very quickly.
Get onto our platform quickly with API and they can start being productive very quickly.
Speaker 3: You know, contrast that to a grocery retail partner which generally takes a little bit more time to see revenues.
Contrast that to.
Our grocery retail partner, which generally takes a little bit more time to see revenues, yes, Steve Let me just add that the new the new way, we are selling national promotions is done on a on a date basis.
Speaker 2: Yes, Steve, let me just add that the new way we're selling national promotions is done on a date basis. We've talked a lot about this. And so that actually gives us more predictability and more visibility as well.
We've talked a lot about this and so that actually gives us more predictability and more visibility as well and so historically, we didn't have as good visibility into those programs, but at this point already 75% of national promotions programs are booked on the new model and that gives us certainty around dates.
Speaker 2: And so historically, we didn't have as good visibility into those programs, but at this point already, 75% of national promotions programs are booked on the new model, and that gives us certainty around dates.
Speaker 5: Just a couple more questions. You mentioned Amazon. Maybe you could.
Okay, just a couple more questions.
You mentioned, Amazon, maybe you could kind of.
Speaker 5: tell us what that relationship looks like at least initially and maybe some hands on where it goes over time.
Tell us what that relationship looks like at least initially and maybe some headphones where it goes over time.
Speaker 2: Yeah, we're not going to drop in. What we'll say is that, you know, what we said already is that Amazon is the latest partner of scale to join our national promotions network. And we're going to wait until Amazon's ready to, you know, to sort of announce what they're up to.
Yes, we're not going to drop and so what we'll say is that what we said already is that Amazon is the latest partner of scale to join our national promotions network.
And we're going to wait until Amazon's ready too.
Two sort of announced that theyre up to.
Speaker 5: Okay, then the last big picture question. The world's changed a lot in the last year with tracking cookies going away and Apple making its changes along those lines. So what does that mean about the value of your data and how do you make sure that customers understand?
Okay. Then the last Big picture question, you know the world's changed a lot in the law.
Last year with.
Tracking cookies going away and in Apple, making it.
Changes along those lines.
So what does that mean.
The value of your data and how do you make sure that customers.
Understand that value equation.
Okay.
Sure the way customers understand the value equation is when we put audience estimates and delivery estimates in front of them and remember we are primarily a first party and second party data company and so I know that there have been some large companies that have announced significant impact from things like <unk>.
Speaker 2: So the way customers understand a value equation is when we put audience estimates and delivery estimates in front of them. And remember, we are primarily a first party and second party data company. And so I know that there have been some large companies that have announced significant impact from things like IDFA, but that's not the space that quotient operates in. We've got a leading location-based DSP.
Office space that quotient operates and we've got our leading location based DSP.
Speaker 2: That contributes an awful lot of actual first and second party data to our platform.
That contributed an awful lot of actual first and second second party data to our platform.
Speaker 2: Almost all of the users that are engaged with our services need to be in a logged in state in order to take advantage of value delivery. And so we just don't see the impact that other companies do that are purely ad delivery to match the audience type of businesses from IDFA and third party cookies and all the other sort of technology things that are going on. So that continues to be the case when we don't see any change there.
Almost all of the users that are engaged with our services need to be in a logged in state in order to take advantage of value delivery and so we just don't see the impact that other companies do that are purely.
AD delivery to matched audience type of businesses from <unk> and third party cookies and all the other sort of technology things that are going on so that continues to be the case, we don't see any change there.
Okay, great I'll jump back into the queue.
Alright, thank you.
Speaker 4: Our next question on the line comes from Chad Bennett of Craig Hallam. Please go ahead with your question, Chad. Your line is open.
Our next question on line comes from Chad Bennett of Craig Hallum. Please go ahead with your question Chad Your line is open.
Yeah.
Speaker 6: Great, thanks for taking my question. So maybe Pam just...
Great. Thanks for taking my question so.
Maybe Pam just.
Speaker 6: Make sure I understand this correctly on the Albertzins impact. So on the third quarter call.
Make sure I understand this correctly on the Albertsons impact so third quarter call.
Speaker 6: talked about a 15 to 28% coming off the network from Albert. And then I think you just indicated 27% impact so at the high end of that range.
You talked about.
15, 15% to 28% coming off the network from from Albertsons, and then I think you just indicated 27% impacts or at the high end of that range.
Speaker 6: But if I look at the guide, your reps are down mid-30s. You're over a year.
But if I look at the guide your revs are down mid thirty's year over year.
Speaker 6: And I think Albert Zins is probably staying on longer, so maybe a benefit. So to speak, for the first couple of months of the year, then maybe you originally expected on the Q3 call. Can you help me understand the delta there?
And I think albertsons is probably staying on longer so.
Maybe a benefit so to speak for the first couple of months of the year than maybe originally expected on the Q3 call can you help me understand the delta there.
Speaker 3: Yeah, let me just talk about big moves annually first. It's just so we level set and then I can talk about 2-1 in particular. But if you take a look at what we actually reported for our full year 2021 in revenues of 521 million.
Yeah, Let me let me just talk about big moves annually first.
Just so we level set and then I can talk about Q1 in particular, but.
If you take a look at what we actually reported for our full year 2021 and revenues.
$521 million.
Speaker 3: You know, if you take 27% and back that out...
If you would take 27% and back that out.
Speaker 3: You get to about 381, but the other thing that's going on is the growth and net changes. And what we've shared in our materials is that we're forecasting about $130 million of revenue to switch to net next year. So that's a direct reduction from the as reported guidance that we're giving you. So the 330 to 345 to compare that on kind of a like for like base, so see that back $130 million.
You get to about 381, but the other thing that's going on is the gross to net changes and what we've shared in our materials is that we're forecasting.
About $130 million of revenue to switch to net next year.
So that's a direct reduction from the as reported guidance that we're giving you. So the $3 30 to $3 45 to compare that on kind of a like for like basis, you'd add back $130 million.
Speaker 3: So the impacting Q1 that you're seeing there is not only the, you know, there is some reduction from the Albertans business. We're supporting them through February . So we do have some revenues in there but March is a big quarter generally. And so there is a negative impact there.
So the impact in Q1 that Youre seeing there is not only the there is some reduction from the Albertsons business.
We're supporting them through February so.
So we do have some revenues in there, but margins have been quarter generally and so.
There is a negative impact there.
So that's that.
Speaker 3: So that brings on Q1 and then we've got some other growth to net adjustments that are impacting that number.
That brings on Q1 and then we've got another gross to net adjustments that are impacting that number so.
Speaker 3: That brings us down to a defined year over year of about above 36%. Yep.
That brings us down to.
The year over year of about of over 36%.
Wouldn't the albertsons going away in growth when those be.
Speaker 6: going away and gross to what one dose be duplicative.
Duplicative.
Speaker 6: was Albert Sins largely on a growth basis, I mean, are we?
Meaning was it.
Albertsons largely on a gross basis I mean are we.
Speaker 6: Are we, are those items? I assume Albert, it's recognizing revenue on, you guys are recognizing revenue on a cross basis for the vast majority of Albert.
Are we are though.
Adams I assume Alberta, recognizing revenue on or you guys are recognizing revenue on a gross basis for the vast majority of albertsons.
Speaker 3: Yeah, so historically our business has been recognizing revenue on a growth basis. There's been some small streams that we've switched to net, but the vast majority of our business is all recognized on a growth basis. And that includes vast majority of the...
Yeah. So historically our business has been recognizing revenue on a gross basis. There has been some small streams that we've switched to net.
But the vast majority of our business is all recognized on a gross basis and that includes.
The vast majority of the Albertsons business.
Speaker 3: So, yeah, when you look at their share of our revenues, it's 27% of the synced from additional gross net changes that we're going to make in our business.
So yes, when you look at their share of our revenues, it's 27% it's distinct from additional growth.
Net changes that we're going to make in our business.
Speaker 2: Hey Chad, just to add, you know, the fact that we're supporting Albertson students to the end of Feb doesn't mean that we're supporting them at the same revenue level that they would have had, let's say last year or had we, you know, had we continued on for the remainder of the year with them. But yet we still have a bunch of the support and infrastructure required to support them. So it's not quite as beneficial on the revenue line as you might think it was.
Chad just to add the fact that we're supporting Alberta to students through the end of fab.
Doesn't mean that we're supporting them at the same revenue level that they would have had let's say last year or had we had we continued on for the remainder of the year with them, but yet we still have a bunch of the support infrastructure required to support them. So it's not it's not quite as beneficial on the revenue line as you might think it was.
Got it.
Speaker 6: No, understand. And then maybe just in terms of your guide and how you're looking at the outlook, or even in maybe for the fourth quarter, other than Albertsons, did we lose any other retail partners?
Understand and then and then maybe just in terms of your guide and how Youre looking at the outlook.
Or even maybe for the fourth quarter.
Other than Albertsons did we lose any other retail partners.
No.
Okay, and then just in terms of the promotions business just remind me again I know you talked about.
Speaker 6: And then just in terms of the promotion's business, just remind me again, I know you talked about.
Speaker 6: the growth of the national promo business.
I think it was Pam again talking about the growth of your expected kind of like for like growth of the national promo business.
Mind me again.
Speaker 6: How do you think about that this year in terms of percentage of overall promo revenue and what do you expect from the other parts of the promo revenue from a growth rate stamp?
How you think about that this year in terms of percentage of overall promo revenue and what you expect from the other parts of the promote revenue from a growth rate standpoint.
Speaker 2: sure so we don't we don't break out the we haven't historically and we say broken out national promo from the other components of it however what we have said just to be clear is that we've now exited special key retail that was in the promo business
Sure. So we don't we don't break out the <unk>.
Haven't historically, let me say a broken out national promo from the other components of it. However, what we have said just to be clear is that we've now exited specialty retail that was in the promo business.
Speaker 2: and the print coupons part of our business.
And the print coupons part of our business is really sort of rounding down to almost nothing at this point, we're watching that won't trickle down as well and thats by design because digital is a more effective mechanism. So what does that leave in the promotions business that leaves our national promotions and you know this but for the benefit of everybody.
Speaker 2: at this point, we're watching that one trickle down as well. And that's by design because digital is a more effective mechanism. So what does that leave? In the promotions business, at least our national promotions. And you know this, but for the benefit of everybody, that just means it's not retailer-specific. It can be regional, it can be targeted, but they're available to anybody who fits that criteria. The other component to that is shopper or retailer promotions. And those are largely moved to a net-based recognition at this point. And so from what I'm going to make of the two, although we haven't broken out specifically, moving to net recognition on the shopper piece and having really great growth on the national promotion side, which is, that's our core competency as a business. We've been doing it for the longest, we are the market leader here. That would lead you to expect that that part of the promotions business is a bigger part. Again, on a gross margin, it's a massive basis.
That just means it's not retailer specific it can be regional it can be targeted but theyre available to anybody who fits that criteria. The other component to that is shopper or retailer promotions and those are largely moved to a net based recognition at this point.
So from a from a mix of the two although we.
Haven't broken out specifically moving to net recognition on the shopper piece and having really great growth on the national promotion side, which is that's our core competency as a business we've been doing it for the longest we are the market leader here that would lead you to expect that that part of the promotions business is the bigger part.
Speaker 2: Again, on a gross margin basis, with shopper promo being on a net basis, the gross margin is nearly 100%. But on the...
On a gross margin basis.
<unk>.
With sharper promo being on a net basis, the gross margin is nearly 100% but.
But on the on the.
Speaker 2: National side, it's an extremely high gross margin business and we expect that to grow a lot faster because of the partners we're bringing on and because of the business model change we set we made to sell.
National side, it's an extremely high gross margin business and we expect that to grow a lot faster because of the partners, we're bringing on and because of the business model change. We set we've made to sell the other thing I'll say is that we've been talking about large cpg's, who lead the industry in the next <unk>.
Speaker 2: The other thing I'll say is that we've been talking about large CPGs who lead the industry in the next-
Speaker 2: you know, next sizes and next sizes down. We've already talked about some large CPGs that have told folks in the industry they're coming out of the FSI. Well, another one is doing the same thing. And so, you know, another very, very large top CPGs coming out of printed coupons.
The next size is down we've already talked about some large cpg's that have told folks in the industry. They are coming out of the <unk> well and another one is doing the same thing and so another very very large top CPG is coming out of printed coupons.
Speaker 2: in a relatively near future. And so that just continues to happen, and that drives even more opportunity for us to grow national. And that's why over the past year plus.
In the relatively near future and so that just continues to happen and that drives even more opportunity for us to grow national and Thats why over the past year, plus myself and Matt Kreps that goes in the room with US since he has joined has put a very sharp focus on growing our network outside of just retail and Thats why you heard today.
Speaker 2: myself and Matt Krepp, who's in the room with us since he's joined, has put a very sharp focus on growing our network outside of just retail. And that's why you heard today in addition to Microsoft and others. We've added Amazon to the platform and they're more coming and they're coming in short order. So I think you'll see the pathway there to that growth line.
In addition to Microsoft and others, we've added Amazon to the platform and they are more coming in they're coming in short order. So I.
I think youll see the pathway there to that growth line.
And then maybe last one for me.
And this is just kind of your view Stephen I mean the.
Speaker 6: kind of your view, Stephen. I mean, the, of the, the just whole recap performance media space in the industry. Obviously, you and Albert, since they're parting ways, but you have added other auto zone and whatnot in the past. You know, and Albert, since can kind of do its own thing, what's your view, you know, of the next...
This whole retail performance media space in the industry, obviously, you and Albertsons are parting ways, but you have added other autozone and whatnot in the past.
And Albertsons can it do its own thing.
Whats your view.
The next <unk>.
Speaker 6: 12 to 24 months. Is it, you know, as big of an opportunity as you thought it was, once was, or has something changed where, you know, retailers are more in-housing that capability now, or maybe it's just not as an attractive of a margin business, maybe you thought it was before. Any commentary there?
One months to 24 months is it.
No.
<unk> as big of an opportunity as you thought it was once was or has something changed where.
Retailers are more in housing that that capability now or maybe it's just not as an attractive margin business as maybe you thought it was before any any commentary there.
Speaker 2: Sure, I actually think the opportunity is a bit larger. And some of this has been shaped since Matt Krebsick joined the team.
Sure I actually think the opportunity is a bit larger.
And some of this has been shaped since Matt kreps they joined the team.
Speaker 2: You know, when you think about the largest pure grocers in the US, and you think about their share of market or all commodity volume, it's single digits, right? Largest pure grocer in the US has got less than 10% share. The next tiered down of retailers together as a network represents much larger segment of the market than any of the individual larger retailers.
When you think about the largest pure grocers in the U S. And you think about their share of market are all commodity volume at single digits right largest pure grocer in the U S has got less than 10% share.
The next tier down of retailers together as a network represents much larger segment of the market than any of the individual larger retailers.
Cpg's are starting to get a little frustrated having to load up media campaigns on an individual retailer basis and this is I mean this is all publicly available lots of articles in fact, an article came out this week I think it was business inside of that talks specifically.
Speaker 2: CPGs are starting to get a little frustrated having to load up media campaigns on an individual retailer basis.
Speaker 2: and this is, I mean, this is all publicly available. Lots of articles, in fact, an article came out this week. I think it was business insider that talks specifically about this topic. And so the natural place for quotient continues to be the demand aggregator for retailers, call it tier two or retailers below the top four across the industry for media.
Typically about this topic.
So the natural place for quotient continues to be the demand aggregator for retailers call. It tier two retailers below the top four across the industry for media and Thats, what our <unk> platform is designed for its multi multi region multi retailer.
Speaker 2: And that's what our QMP platform is designed for. It's multi-retailer, add, ordering, and distribution targeting and measurement. And really quotient is a leader in the industry for promotions for all retailers. It's not limited to below the top four or five retailers.
<unk> ordering and distribution targeting and measurement and really quotient is the leader in the industry for promotions for all retailers, it's not limited to below the top four or five retailers. So I think actually the opportunity is quite a bit larger now that we've implemented a multi retailer.
Speaker 2: So I think actually the opportunity is quite a bit larger. Now that we've implemented a multi-recaler platform in our...
That form an R R.
Speaker 2: in our application world. So I don't think anything's changed there at all. And we've been saying for a long time that the top one, two, three, four retailers are gonna try and go off and do their own things.
In our application World. So I don't think anything has changed there at all and we've been saying for a long time that the top 1234 retailers are going to try and go off and do their own things. They have the resources to go out and try and do it.
Speaker 2: They have the resources to go out and try and do it. But it's an evolving business, and we've seen some of those retailers reach out to other partners to try and...
But it's an evolving business and we've seen some of those retailers reach out to other partners to try and.
Speaker 2: extend the, you know, the length of their network off property. So, like I said, it's an evolving industry. I actually think the opportunity is quite a bit bigger. And our sweet spot is really being the demand aggregator for retail performance media for the next tier retailers down, which together represent a larger opportunity than any of the individual larger ones. Got it.
And the length of their network off property. So like I said, it's an evolving industry actually I think the opportunity is quite a bit bigger and our sweet spot is really being the demand aggregator for retail performance media for the next tier retailers down, which together represent a larger opportunity than any of the individual large ones.
Got it I appreciate the color. Thank you.
Sure. Thank you.
Yeah.
Speaker 4: As a reminder, if you would like to ask a question, please press star fuller by one in a telephone keypad.
As a reminder, if you would like to ask a question. Please press star followed by one entertainment. Thank you Pat.
Speaker 4: We have no further questions, register on the line, so I'll hand back to the management team.
We have no further questions registered on the line, so I'll hand back to the management team.
Speaker 2: Thank you, operator. As you all heard today, we've made tremendous progress transforming our business over the past two plus years. And after all the heavy lifting we've done, we believe quotient is now well positioned to profitably grow and capture and capitalize on the opportunities in front of us. We look forward to speaking with many of you over the coming days. And like to thank you all again for participating. Thank you, operator.
Thank you operator as you've all heard today, we've made tremendous progress transforming our business over the past two plus years and after all the heavy lifting we've done we believe quotient is now well positioned to profitably grow and capture and capitalize on the opportunities in front of us.
We look forward to speaking with many of you over the coming days and like to thank you all again for participating thank you operator.
Speaker 4: Thank you very much and that concludes today's call. You may now disconnect for lines. Thank you.
Thank you very much.
That concludes today's call.
May now disconnect your lines. Thank you.
Okay.