Quotient Technology Inc.
Q1 2016 Earnings Call Transcript

Published: 4 May 2016

[Operator:]

Welcome to the First Quarter 2016 Quotient Earnings Conference Call. During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder this conference call is been recorded and we will be available for replay from the Investor Relations section of Quotient's website following this call. I will now turn the call over to Stacie Clements, Vice President of Investor Relations. Thank you. Ms. Clements you may now begin.

[Stacie Clements:]

Thank you. Hello, and welcome everyone to our first quarter 2016 earnings call. Please note that slides to accompany the remarks on today's call are available on the IR section of our corporate website. On the call and here with me today are Steven Boal, our Founder and CEO; and Jennifer Ceran, our CFO; Mir Aamir, our President and COO is also here and available for Q&A after our prepared remarks. Before we begin, please note that during this call, you will hear forward-looking statements. These forward-looking statements include our projections for our second quarter and full year 2016. Our expectations for our Retailer iQ platform and consumer in CPG patterns as well as the expected growth off and investments in our business generally. Forward-looking statements are based on information available to and the good faith beliefs of our management team as of the time of this call and are subject to know and unknown risks and uncertainties that could cause actual performance or results to differ materially. Additional information about factors that could potentially impact our financial results can be found in today's press release and in the risk factors identified in the quarterly report on Form 10-K filed with the SEC on March 11th, 2016. We disclaim any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise. Please note that with the exception of revenues, financial measures discussed today are on a non-GAAP basis and have been adjusted to exclude certain expenses. A reconciliation between GAAP and non-GAAP measures can be found in the financial results press release issued today and on the slide deck posted on the company's website. With that, I'll now turn the call over to Steven.

[Steven Boal:]

Thank you Stacie and welcome everyone. We had a great start to the year delivering revenue of $66.1 million and adjusted EBITDA of $4.3 million both ahead of guidance. This quarter, we continue to scale our Retailer iQ digital paperless platform and we saw momentum across the business. We had another five retailer banners launched digital marketing programs in the quarter and we expanded our distribution through new products on the platform. We also made steady progress with Quotient Insights. First, I'll walk through some of the highlights in the quarter starting with Quotient promotions. We delivered 537 million transactions, a record quarter and up 30% from a year ago. As our network rose, CPG's are deploying more promotions reaching millions of shoppers through digital print, digital paperless and cash back receipt scanning and now for the first time, using Retailer iQ through online ordering channels. This quarter, we saw another lift in digital print primarily driven by the continued rollout of our mobile printing experience, which also improves the printing experience for desktop users. Digital paperless transactions also grew as more retailers marketed their digital shopper programs, enabled by Retailer iQ to help grow trips and sales. Shopper adoption continued to build in the first quarter as did the number of transactions per user. Also, mobile usage on Retailer iQ remains high at more than 70%. Remember we monetized mobile at the same rate as desktop, with the added benefit of increased frequency of use. We're very pleased with the growth momentum and are excited about the opportunity as more retailers continue to integrate digital marketing efforts across their business, which we believe will enable CPG's to reach a larger audience and drive incremental sales. As you know marketing is a gradual process and each retailers is at a different stage in their efforts. Marketing program span from emails and in-store signage to more sophisticated efforts that stitched together media on mobile and web, digital circulars, eReceipts delivered in point of sale and even print. Retailers also collaborate with shopper marketing teams at CPG's for additional promotional support and funding of these dramatic events. One example of such an event that we helped facilitate in Q1 was spring cleaning week event. Leveraging our CPG relationships, we help deliver incremental offers and provided best practices and expertise around using Retailer iQ to reach and engage shoppers. We plan to continue helping our retail partners build and expand their marketing programs. For instance, we leverage our coupons.com network through a range of marketing strategies to help retailers and CPG's reach and even larger consumer audience than on their own. This has an incremental effect of growing their engaged shopper base, which could increase the ability for CPG brands and retailers to personalize and target offers and media at scale. As a result, we expect to continue delivering in increasing number of campaigns targeted at specific shopper segments. For this quarter, we also saw growth from Quotient media. As CPG and retailers continue to pair their promotional programs with media to amplify results and increase ROI. Additionally, several retail partners have expanded their use of Retailer iQ to include targeted media on their own website or mobile applications. We believe this is a valuable way to influence shoppers as they're planning their shopping trips. Over the year, we intent to rollout additional features to drive engagement and performance. Also on the product front, we started to expand the distribution of Shopmium which we acquired last fall. As a reminder, Shopmium is the platform we use to deliver to cash back offers that shoppers redeem by scanning store receipts with their mobile phones. We also recently added the capability to the web and mobile experiences of a number of CPG brands. Looking forward, we expect to see the number of offers available for receipt scanning growth. The Shopmium platform also provides us with a mechanism to collect more holistic data on shopper transactions. I'm also excited to announce that we recently expanded Retailer iQ into a retailer's online ordering experience. This quarter, we had our first retailer expand our capabilities delivering the same digital coupon for in-store use directly into their eCommerce channel, a growing area of interest for most of grocery, drug, mass and dollar retailers. Although still in the very early days, we believe that extending our platform into online ordering provides long-term opportunities as retailers look to build omnichannel experiences for their shoppers, whether it's through online ordering for home delivery or for curb side pickup. Retailer iQ is designed to give retailers and CPG's a full view of their shoppers, while giving shoppers choices or how, when and where to shop. I'll now turn to Quotient Insights, our emerging data and analytics business. CPG's and retailers are looking for ways to harness data engage the shoppers and increase sales. As you know, we work with several retail partners to collect and analyze an enormous amount of data, a lot of which is done is real-time, by combining insights from in-store and online purchases in combination with purchase intent data. We can help create a unique view into shopper household behaviour. We can then attribute it to current online and offline advertising and promotions and we can do this with the immediacy necessary to make mid-flight [ph] campaign decisions. For example, if a CPG ran a brand immediate campaign for two weeks. We would be able to provide them a view of the campaigns impact on driving sales, mid-flight [ph] providing an opportunity to change messaging while the campaign is running. Brands spend an estimated 8% of their marketing budgets on analytics for media measurement, which ends up on being based on data that is on average three months old, we plan to change that. This market is projected to grow and we believe, we have a large opportunity in front of us. In summary, we had a great quarter with strong momentum across the business. Promotion transactions reached record levels, as consumers took advantage of the great promotions available across our network. After some unexpected delays last year, we finally saw the majority of retailers on Retailer iQ begin their marketing efforts and our media business continues to help CPG's enhance their promotional campaigns. Our teams are focused on building great experiences for consumers and helping CPG's and retailers engaged with their shoppers across their website, mobile app and our great consumer marketing destination like coupons.com. We believe that the continued digitalization of this industry is inevitable and we're excited about our opportunity ahead. I'll now turn the call over to Jenny.

[Jenny Ceran:]

Thank you, Steven and welcome everyone. We had a strong first quarter and start to the year. Revenue was $66.1 million up 19% over a year ago reflecting healthy performance across the business and paperless print and media. Transactions were 537 million up 15% versus last quarter and 30% versus a year ago. Driven by strength and digital paperless and improvement in digital print. Adjusted EBITDA came in at $4.3 million reflecting higher revenue while we continued to make important investments. We ended the quarter with a cash and short-term investment balance of $149 million, which includes $10.9 million used to acquire 1.7 million shares under our repurchase program. All in all, we were very pleased with the start to the year as Retailer iQ our digital platform used to engage consumers with their favorite grocery, drug, mass and dollar retailers grew strong paperless growth through retailer marketing efforts and shopper demand. Let me now provide more details on the quarter. As I just mentioned, total revenue for the quarter was up 19% versus a year ago. Breaking it down even further, revenue from digital promotions were $51 million, a 20% increase over last year and revenue from media was $15.1 million, a 15% increase over last year. Excluding the acquisition of Shopmium which occurred in the fourth quarter of 2015 total revenue growth would have been 1 percentage point lower. Moving to transactions, as Steven mentioned we had another record quarter for transactions driven by improvement and digital prints on acceleration and digital paperless. Compared to the fourth quarter of 2015, digital print transactions were up 11% helped by the continued adoption of our mobile printing solution and digital paperless transactions were up 17%. Retailer iQ transactions a growing subset of digital paperless were up 47% sequentially, as retailers continue to ramp their marketing effort. Looking at transactions year-over-year digital paperless grew 50% and digital print grew 10%. Finally, average promotion revenue per transaction in the first quarter was about $9.5 which was relatively in line with our historical range but on the lower end. As we've mentioned before, this metric will fluctuate as its dependent upon the mix of transactions and customers. And as we experiment with new pricing models and offer volume discounts, we expect this to remain in the $0.09 to $0.10 over the course of this year. Moving onto Retailer iQ, during the first quarter we implemented one new retailer banner bringing the total to 16 banners implemented. We also had an additional five banners and start marketing. Bringing the total number of banners marketing to 12. And as of today, we now have 17 retailer banners live and 12 marketing. While we now have many retailers who've launched marketing efforts as Steven mentioned. They're in varying stages of activity. A few are leveraging the full spectrum of marketing capabilities, well others are in earlier stages. We are working with retailers based on their timelines to help them execute on their marketing plans. Moving down to P&L, non-GAAP gross margins which excludes stock-based compensation expense was 62.6% in the first quarter, up 110 basis points compared to a year ago. Primarily, due to higher revenue and expense management partially offset by a higher proportion of distribution fees from the growth and Retailer iQ. Compared to the fourth quarter, the sequential decline was attributable to seasonally lower revenue partially offset by the benefit of expense management. Let's move to the next slide, for the first quarter non-GAAP operating expenses were $42.2 million compared to $34 million in the first quarter of last year. This quarter, we saw an increase in sales and marketing expense driven primarily by increased media and advertising spend as well as headcount related costs. Research and development expense declined 1 percentage point as we continue to grow engineering headcount in lower cost locations. Finally, general and administrative expenses were up 2 percentage points compared to a year ago driven by increased fixed expenses associated with being a public company and headcount growth from a few key IT and finance hires. We're making investments today to make it easier to scale on the future and we expect our operating cost as a percentage of revenue to improve overtime. Let's move on to the profitability. In the first quarter, adjusted EBITDA was $4.3 million representing a 7% margin compared to $4 million a year ago, due to higher revenue offset by increased distribution fees, media cost and other operating expenses. Let me move onto to our outlook for Q2 and full year 2016. For the second quarter, we expect revenue to be in the range of $62 million to $64 million. We expect adjusted EBITDA to be in the range of $3 million to $4 million. For the full year, we are raising guidance to reflect the Q1, outperformance. We now expect revenue to be in the range of $257 million to $265 million reflecting 8% to 12% growth over 2015. We've also taken up the low end of our guidance for adjusted EBITDA. We now expect adjusted EBITDA to be in the range of $23 million to $25 million inclusive of ongoing investments to build out robust analytical capabilities around Quotient Insights and improve our infrastructure. In summary, we had a great start to the year driven by strength across our business as our network scaled. Retailer iQ marketing efforts are building, as retailers adopt digital marketing best practices to help drive shopper adoption. We'll continue to make investment around future opportunities while focused on margin improvements. We're pleased with the momentum, we saw in the first quarter and look forward to continuing to drive the transformation to digital promotions. With that, we'll now open up the call for questions. Operator?

[Operator:]

[Operator Instructions] your first question comes from the line of Mark Mahaney from RBC Capital Markets. Your line is open.

[Mark Mahaney:]

Thanks, two questions please. First, Steven could you talk about the investment areas whether the balance of the year, where do you think the best returns are in terms of marketing product development etc. and then Jenny and you talked about uses of cash going forward. I know you bought back some stock. Can you talk about it in the press release, how you think about uses of cash and specifically share repurchases of this level through the balance of the year? Thank you.

[Mir Amir:]

Mark, its Mir. I'll take the first one. Investment to the balance of the year, expect sort of the same strategy that we've been following. So our branding campaign more for today which we talked about a couple quarters ago, we launched it back in August if you recall. We're continuing to flights of that, it's working well we believe and so we should expect to continue that in the same weights in the rest of the year and so that's on awareness building and trail and marketing for coupons.com in our owned and operated properties. On product side, the investments that Steven alluded to in his prepared remarks would have to do with certain, two buckets really. One is product enhancements on Retailer iQ core platform. For example digital circular personalized emails, media on Retailer iQ those enhancements in products are in the market as we've talked about in the last few quarters. We continue to build and enhance, actually you can expect us to do more on that and then secondly, our continued development work on Quotient Insights, the new data analytics platform like we mentioned in our last quarter call. This is the year for build for that and we expect to for that to be in market and revenue generating in 2017.

[Jenny Ceran:]

Yes and with respect to uses of cash for the year. So we bought that $10.9 million worth of stock in Q1 of that $3 million approximately with under our new program. We look at buyback as opportunistic and so we have a 10b5-1 in place that kind of sets amounts based on stock price. So we'll buyback depending on opportunities out there and then I would say, the other thing is, is we're really focused on improving free cash flow and looking for opportunities to drive greater return in that area.

[Mark Mahaney:]

Thank you, Jenny. Thank you, Mir. Congratulations, Steve.

[Steven Boal:]

Thanks, Mark.

[Operator:]

Your next question comes from the line of Nat Schindler from Bank of America. Your line is open.

[Nat Schindler:]

Yes, hi guys. One you saw, two things have stood out. Digital printed home, paper coupons have been decelerating and it looked like people are transitioning into digital quickly, but this quarter there was significant reacceleration. One, what's driving paper to come back and secondly, on the ARPU you're getting per coupon. I know you get more promotions style couponing in Q4 for Christmas holiday, but is there anything else that is driving that number a little lower than it has been in the past and will that continue?

[Steven Boal:]

Nat, Steven. Thanks for asking, let me take the first part here. So if you recall we talked about the growth in mobile traffic particularly to mobile web and that we, for the better part of last year worked on a mobile optimized printing solution, which also benefits desktop users. So we started rolling that out inQ4. We continued to rollout through Q1, we still got a little bit more to go, but that's certainly having the impact on the turnaround for digital print. Also just on a macro basis, there are about 40 million households in the US that engage with the printed free standing. I'm sorry, they do not digitally. There is still 40 million households in the US that are predisposed to taking a scissor and cutting a piece of paper and taking that into the store with the physicality, a piece of paper in their hand remind them of the discount, reminding to buy the product. So those two things together I think, are demonstrating the fact that there are still some opportunity for digital print. Now, that have been said most of about 80% of our clients work on a unified budget with us, which means that they give us a budget and our system decides how to deploy whether it be digital print or digital paperless and going forward, receipt scanning will be a part of that as well and so, as our digital paperless grows. We'll start to see cannibalization of the print business at our own hands. So as we drive more of the volume through the paperless side of the business then it will just create less of a budget from digital print which is not growing as fast. So you will see those two things kind of conflicting with each other, but primarily the growth in mobile and the mobile optimized printing solution that really amounts to most of the turnaround that you're seeing.

[Mir Amir:]

Nat, it's Mir. So on your second question on promotion revenue per transaction. You're right, as we mentioned in the past. These variations and they're kind of small variations, but they occur mostly because of mix and quarter four is a bigger mix because of holiday sales and some of it is speciality higher and holiday sales, even though it's overall small portion of our business. Quarter four always, if you looked at last few years quarter four has always been higher that way from the mix season. This quarter, the reason it was lower than the average in hand [ph] was also mixed reason and the reason being that, we saw a lot of our CPG's. We've talked about how volume growth results in some price brackets that are volume discount driven and whenever that gets hit. The proportion of that, the mix of that impacts the promotion revenue per transaction and then because we had some significant transaction growth as you saw, this quarter that resulted in that mix effect.

[Nat Schindler:]

Mir, to follow-up on that, you usually see on the same idea, you see lower prices on your very larger CPG's as you would expect because they're high volume. As they more likely to be moving towards digital only or mobile couponing or kind of newer products then some small CPG who you were getting higher prices from causing the future mix shift.

[Mir Amir:]

No, it's not the adoption of them of newer products really that's causing this, it's really volume driven. And yes, you're right the bigger CPG's drive so much more volume and continue to drive more and more volume that, they hit volume discount and price rigs that results in this mix effect. And frankly, we mentioned it before we're actually with that because in the end the more transaction we get into these platforms the less goes out of the Sunday newspaper, it's a rising tide effect. These big brands and when they show up on our properties or retailer properties have a rising tide effect of across the board, right. So that's really primarily the driver for this.

[Nat Schindler:]

Great, thanks.

[Steven Boal:]

Thank you.

[Operator:]

Your next question comes from the line of Ralph Schackart from William Blair. Your line is open.

[Ralph Schackart:]

Good afternoon, two questions. First just curious on the phasing of the marketing programs, when did they go live in Q1, were they sort of evenly spread or was there sort of waiting towards sort of beginning or in the quarter?

[Mir Amir:]

It was around the middle to the end.

[Ralph Schackart:]

Okay and then maybe Mir, maybe I could just ask Nat's question a different way. The price per unit or the promotion revenue per transaction. I think you had mentioned, it's not product driven but it's mainly volume driven and taking a leap faith that Retailer iQ continue to scale and you see robust growth and as more transaction occur there, should we expect more volume to be sort of within this growing product category and the sort of nine and half cent [ph] roughly a promotion rev per transaction to be sort of the more the norm.

[Mir Amir:]

Well let me clarify, it's not product driven, its mix driven. That's a little bit of difference there in terms of the largest CPG or hitting larger volume breaks. I think, we're - there are trends that would make this be nine and half cent there were trend that would make this be higher than nine and half cents, right like we've talked about in the past. So if more and more, if we get volume larger than what we had predicted and it comes from certain CPG's. You start to have this effect, right and then you can think about nine and half cents for the next few quarters but at the same time the counter effect of this which we also start to see, although it's a small scale right now in terms of mix is targeted offers which command a premium and as that grows that starts to have an increasing effect on average revenue per transaction. So it really depends on the mix of volume in terms of CPG's and in terms of sort of the, which type of offer is it national or is it targeted?

[Jenny Ceran:]

This is Jenny. Just wanted to say that in terms of planning purposes on our guidance, we're forecasting between $0.09 and $0.10.

[Ralph Schackart:]

Okay, that's helpful Jenny. One more if I could, just in terms of the retailers outside of the banners that are implemented but yet aren't marketing just any sort of perspective thoughts in terms of when you think they'll move to the marketing phase.

[Mir Amir:]

Those are typically the ones that have gone live more recently. So it's like we talked about they take two to four months on average, X number of months from live to marketing just because everything has to work and it has - feel comfortable to do that and so on from a planning cycle. So we should expect in the next quarter or two quarters for the ones that have gone live in the last one or two quarters to start marketing. There isn't any indication yet from any of those that, they wouldn't want to do that.

[Ralph Schackart:]

Okay, thank you.

[Steven Boal:]

Thank you.

[Operator:]

Your next question comes from the line of Mitch Bartlett from Craig-Hallum. Your line is open.

[Mitch Bartlett:]

You've talked throughout the script about two initiatives that aren't really yielding a whole lot at this point, Shopmium and Insights and kind of dangling them out there, maybe you could just talk a little bit further about like for Shopmium how that is planned to go forward is there a marketing campaign, how do you get it out into the market, when does it really load up with a whole bunch of offers and then on Insight's. Is this kind of if we built it, they will come or is there direct interest perhaps even any some contracts associated with Insights? And then my second question is, of the 12 retailers that are now marketing on Retailer iQ, how would you asses that their effort at this point, their commitment whether they're really pushing into it at this point or not?

[Mir Amir:]

Sure, Mitch. Let me take the first one. Shopmium. So relatively new for us in the US. Shopmium is been on France for some time now and now we're expanding in Europe outstand of France for Shopmium and you will hear more of that over the coming months. In the US, relatively new in terms of its ownership by us. If you go to the app right now, you already see that the content is lot more that it was before, which is good but, we do expect like Steven mentioned more and more content to come into that application and we do expect to grow it. And I would underscore one more point underneath that is that, Shopmium also provides us a capability, which you can expect us to use beyond the Shopmium app and it's one of those capabilities that allows us to be able to provide digital paperless offer primarily mobile across a wider spectrum of where consumers want to shop and how they want to leverage in get those offers in discount and it provides CPG brand and its ability to reach a much wider set of audience wanting to engage in a variety of different ways, whether it's digital print, whether it's paperless download to account at a retailer or it's through receipt scan, cash back. So those are the plans for Shopmium.

[Steven Boal:]

Mitch, it’s Steven. Why don't I touch on insight [indiscernible]. So just to contextualize this a little bit. If you recall, CPG spent approximately $34 billion a year on advertising and in 2015 [indiscernible] company spent the equivalent of about 8% of that or 8% of their marketing budget on analytics and that's projected to grow to over 10% over the next three years and so if you think, you know if you ask the question if we build it they will come or whether or not there is a marketplace and a demand, there's a certainly a marketplace demand. The big difference here is that, there is an immediacy in what we're building. So we're building things to be very actionable in short period of time rather than on three months plus of latent data that's typical on the industry, that's number one. And number two we're building it to be able to measure the effect of online and offline together and that's relatively unique as well. And so, hand wise you know you can use the equivalent of the ad spend is around $34 billion and about 8% to 11% or over 10% over the next three years of equivalent spend on marketing analytics specifically and that marketing analytics is really what this segment for us is all about, but recall it's not 2016 revenue. It's a 2016 build and planned for 2017 revenue.

[Mir Amir:]

And Mitch your last question on the marketing retailers, the effort and commitment. Overall very good, obviously different retailers have taken different flavors in the process and the marketing plan depending on the channel what type of retailer it is and so on. The consistent response there, their results there is what we see and really excited about is whenever there is marketing, there is shopper adoption and there is volume, that's very consistent across the retailers and they see the results as well, that's also consistent which is very good for this platform.

[Mitch Bartlett:]

Great, thank you.

[Operator:]

Your next question comes from the line of Blake Harper from Topeka Capital Markets. Your line is open.

[Blake Harper:]

Thanks. Wanted to ask about some of the comments you made in your prepared remarks about the online ordering for the CPG's, just wondering kind of what that is industry-wide or if that's just related to specific customer and kind of how you see that, the demand for that across your customer base?

[Steven Boal:]

Sure, Blake. It's Steven. I'm sure Mir will jump in here a little bit as well. Today, online ordering or eCommerce ordering of grocery related product is quite small in the low single digits, but that's certainly expected to grow, how big will that grow over what period of time is anybody's guess. But I think it's safe to say that just about every retailers grocery, drug, mass and dollar are thinking about eCommerce integration and either home delivery or curb side pickup. Now these experiments are going on industry for a while but it seems to be gaining some momentum and we've already seen as you've heard us say earlier in our prepared remarks that one retailer has done integration publicly available to allow consumers access to the same digital coupon for home delivery as they do for in-store shopping, we do expect that to continue and we are spending some time in the marketplace working with our retailer partners and others around what kind of holistic uniform delivery might look like that the industry can use to make sure the shopping experience is the same for consumers whether they want to shop online, be it home for delivery or swing by the store and pick it up at curb side.

[Blake Harper:]

Got it, thanks and then just another question on the Retailer iQ. I know you talked about this, but one more other way to ask it, is have you been able to shorten the length of time from say sign ups to live to marketing, with some of these newer customers that have come on board just given the lesson that you learned and the history you've had with the product now and if that's the case, I mean what are some of those things there that, you know you could possibly drive some of kind of to move those customers faster down that, they'll funnel to marketing.

[Mir Amir:]

Sure. We have been sharing best practices at retailer desk something we see [indiscernible] back with them. The overall timeline to implement is about the same for retailer to go live. Last year the delays that we saw was, the retailer delays had to do with them slotting other point of sale projects before even starting the implementation process, but once the implementation process starts. It's relatively within a certain band of time and that's approximately the same. We obviously have and our product have repeatable process that we bring at speed at somewhat, but some of the timeline is related to what the retailer needs to do and it's not, and it's not like we have mentioned before. It's not a very long build on average it's like a two, three months implementation timeline with some being less than that and some being more than that. The time to market also from live to marketing is about the same it has been before. It's just last year, there were a lot of delays in retailers going live that has a trickled down effect and everything else.

[Blake Harper:]

Got it, thanks.

[Steven Boal:]

Thank you.

[Operator:]

Your next question comes from the line of Aaron Turner from Wedbush Securities. Your line is open.

[Aaron Turner:]

Hi, thanks for taking my question and congrats on the quarter. Just wondering if you could give us a little color on some of the usage patterns you're seeing on some of the Retailer iQ users that maybe you activated last year versus this year. Are those users, is there a usage of the Retailer iQ platform stable or is it growing and then related to that, is some of your growth coming from those users versus the ones that maybe you activated this year.

[Mir Amir:]

Sure, I can't get into specific numbers obviously due to confidentiality but overall the usage patterns are quite good. Now of course there is a funnel. You have to register the user in time that don't repeat but all the repeat users and because of the marketing campaign and the maintaining marketing let's say the emails. We see a steady retention of shoppers in the programs and a steady growth in those and the growth really comes from a frequency of use but also from the number of digital offers engaged in any particular use. So it comes in both the variable and then of course there is the whole notion of getting acquiring more and more shoppers by the retailer in to the program, which still is a bigger piece of the growth as you would expect in the early stages of [indiscernible].

[Aaron Turner:]

Got it and then as a follow-up in your prepared remarks, it sounds like your CPG partners are pleased with the Retailer iQ progress, have you had discussions with them about maybe increasing your wallet share or your share of their promotional wallet spend, at the expense of maybe paper based solutions.

[Mir Amir:]

Sure, those are the discussions we have all the time and that's for the customers obviously of digitizing what we're doing here. Look I think the theme is consistent with past quarter is no different, is that the long-term desire to move out of for them to move out of inefficient paper based non-data driven marketing vehicles like the Sunday newspaper coupon is still there and motivation and intent is still there and very high and growing and even out of trade promotions that we've talked about the $200 billion expense that sort of on shelf discount that is subsidizing existing purchases reducing margins for them is inefficient, so the desire to move out of that is there and we've also talked about as quickly as we can generate demand for digital on our platform and our retailers platform that provides them the opportunity to shift more out of offline into online today. So we continue to have that those dialogues, what you see here in our results are it's a reflection of them committing more and more budgets to go through these vehicles and the paper vehicles and there is still a lot of room to go but you can see from the numbers of the market size of what goes out from offline into online and then we likely mentioned earlier. We do engage with them [indiscernible] planning and that really helps in terms of getting some plan and some cascade going in these campaigns versus the offline campaigns.

[Aaron Turner:]

Got it, thank you.

[Operator:]

I'll now turn the call over to Steven Boal for closing remarks.

[Steven Boal:]

Thank you. Thank you all for joining us today. I'd like to take a moment to thank our entire team for delivering another great quarter and a great first quarter to the year. I'm excited about our opportunities here, as we continue to deliver more value to CPG's retailers and shoppers. Thank you all again.

[Operator:]

This concludes today's conference call, you may now disconnect.