Quotient Technology Inc.
Q3 2016 Earnings Call Transcript

Published: 2 Nov 2016

[Operator:]

Welcome to the Third Quarter 2016 Quotient Earnings Conference Call. During the call, all participants will be in listen-only mode. After the presentation, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded and 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, everyone, and welcome to our third 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 Ron Fior, our CFO; Mir Aamir, our President and COO is 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 expectations regarding the effects of our strategy which is focused on both investments and operational efficiency, our expectations about the growth of media revenue, projections for our fourth quarter and full year 2016, including our expectations regarding revenue per promotion transaction and our operating expenses, our expectations for our Retailer iQ platform and consumer and CPG patterns, as well as the expected growth of investment in our business generally. Forward-looking statements are based on information available to and as of good faith of our management team as of the time of this call and are subject to known and unknown risks and uncertainties that could cause actual performances 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 our Quarterly Report on Form 10-Q filed with the SEC on August 9, 2016 and company's future quarterly reports on Form 10-Q and other filings at the company makes with the SEC. 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. Reconciliation between GAAP and non-GAAP measures are not available on a forward-looking basis as it require unreasonable efforts due to the high variability and low visibility of certain items used in these calculation. With that, I’ll now turn the call over to Steven.

[Steven Boal:]

Thank you, Stacie, and welcome, everyone. Before I begin, I'd like to take the opportunity to officially welcome Ron, who joined us in early August. Ron brings over 30 years of public company finance and operations leadership experience to Quotient and we've all really enjoyed working with him over the past few months. Now on to the quarter. We had a solid third quarter highlighted by accelerated growth in transaction volume, primarily coming from mobile and increased digital marketing activities by our retailer and CPG partners. I'm also excited to announce that in Q3 we signed another large retailer in the drug channel onto Retailer iQ, together brands and retailers are making a shift to digital at an increasing pace, embracing the power of personalization and mobile to help more efficiently drive sales and shopper loyalty. Revenue in the quarter was $66.5 million. Adjusted EBITDA was a record $8.8 million well ahead of guidance and we ended the quarter with $162 million in cash, up $5.1 million from Q2. We delivered a record number of digital coupon transactions in the quarter, up 69% from a year ago and up 28% sequentially, as marketing efforts by our retailer partners brought in new shoppers and increased overall engagement. Our region scale continues to grow and I'm thrilled to say that as of today, we have delivered approximately 2 billion digital coupons this year, already making 2016 by far our largest volume year ever. Since 2011 we have delivered over 8 billion transactions and as this year illustrates the rate of growth is accelerating. The demand for digital coupon growing rapidly and the retailers who were effectively marketing their programs are also seeing volume grow rapidly. This increased scale expands our opportunity to test alternative pricing strategies, something I've spoken about before. This has the intended effect of accelerating adoption of digital coupon, while lowering the overall revenue per promotion. Ron will give more details in a few minutes, but keep in mind, volume drive scale and that has been our key focus. We now have over 30 million shoppers registered on to programs powered by Retailer iQ, which represent approximately a quarter of all US households. This is a sizable and growing digital base of consumers and with the significant data generated through the program it allows CPG brands and retailers to effectively personalize and target promotions, primarily through mobile. Mobile usage on Retailer iQ remains high at over 70% with greater frequency of use than desktop. As a reminder, we monetized mobile at the same rate as desktop, so mobile actually creates a better monetization opportunity for us with increased frequency. As brands experienced the power of scale and increased ROI, some are reducing budgets for offline paper coupons in the Sunday newspaper known as the FSI in favor of digital coupon. Those that have made the shift are seeing higher ROI. We do not believe it would have been possible without the scale we built over the last year and exciting to be at the forefront of this major industry shift. We're also seen some brands spend their FSI commitment not by putting coupons on the pages as has been done for decades, but instead by running full page ads two point shoppers where they can find digital coupon. As a reminder, CPG spent about $3 billion in coupons last year, still distributed primarily through off-line channels. This suggests significant opportunity for digital. We believe we also have an exciting opportunity to drive efficiency and trade spend where CPG spend approximately $200 billion a year promoting their product in stores. We continue to hear from chief merchants and retailers and chief sales officer at CPGs that trade spend is the next major area of disruption as they look to digitally engage shoppers to drive more sales with greater efficiency. We design Retailer iQ to address this need. Greater scale also creates opportunities for media as we leverage a larger shopper audience, significantly more shopper data and our expanding distribution network. Media in the third quarter was impacted in part by growing shopper demand for digital coupons. During the quarter, CPG shifted some committed media budget into promotion to fulfill the fast-growing demand for digital paperless coupons. We believe this to be a short-term trend and expect growth in 2017 as CPG promotion budget catch up to the growing coupon demand and as we expect - in our shopper marketing and data driven media business. As we think about our growth strategy there are three key elements we're focused on. One, expanding our distribution network to reach a greater number of shoppers, primarily through mobile, two, serving those shoppers with relevant, personalized digital promotions and media and three, using data on shopper transactions and online behavior to enable brands and retailers to grow sale. This quarter we made progress across all three of these fronts. For example, we announced a partnership with Samsung to extend distribution of CPG coupons through their digital wallet. We're excited to work with Samsung and other partners as they come online. Additionally, in August, we entered into a multi-year agreement with Albertsons company, that further addresses these growth initiatives. This agreement allows us to be their exclusive provider of digital offers and all property media, along with right to use their shopper data for media, measurement and targeting. We've had a strong relationship with both Albertsons and Safeway over the past several years and this renewed agreement with the combined company takes our partnership to the next level. With our expanded network retailer partners and the Quotient insides platform we are excited about further growing our media business. CPGs are estimated to spend approximately $6 billion in digital media in 2016. We believe we are well-positioned to create a digital footprint of shoppers across our network, through mobile, Retailer iQ publisher partners, in-store shopping data and our owned and operated sites to offer targeted media and analytics. This not only make our targeted media offering more robust but highly differentiated by combining both online and in-store data. Together, it also presents additional revenue opportunities for measurement and analytics. With our robust platform and in certain cases, exclusive dataset, we believe we are well-positioned to enter and participate in this exciting areas of known spend. Our digital circulars also enable retailers to offer shoppers a personalized experience that reflect a broad set of saving national and store specific and perhaps most importantly, it automatically matches CPG brand offers with retailer in-store promotion, giving shoppers an easy way to determine maximum savings. Having spent the past several years building and deploying our Retailer iQ platform, we are once again returning focus to our flagship consumer brands. In December, our new mobile app will be released, which takes on a modern, shopper centric perspective and brings together are three industry-leading promotions products, digital print, digital paperless and our new Shopmium receipt scanning capability. In addition to the capabilities I just mentioned, the new app will also have the ability to showcase brands, retailer and deliver dynamic and personalized media, including video that our clients have been asking for. And there are several other exciting features that will be added in Q1. We've been hard at work on this new app and I'm really excited to release it to consumers over the coming weeks. In summary, Q3 was strong quarter, scale is building, volumes arising and we continue to expand our network through new partnerships and were seen brand shift more dollars from offline to online. As shopper adoption continues to build, we believe we have a substantial opportunity to create more value fro brands, retailers and shoppers. Now I'll turn it over to Ron to go over the financials.

[Ron Fior:]

Thank you, Steven. And welcome, everyone. I'm very pleased to be here today on my first earnings call as part of the Quotient team. I thoroughly enjoyed the last three months, gaining a deeper understanding of the overall industry and key business drivers and learning about what's important to our customers, partners and shoppers. I'm excited by the long-term opportunity as we continue to drive the business forward. And I look forward to meeting you all over the next few quarters. Now on to the financial. Q3 was a strong quarter, revenue was $56.5 million in line with our guidance and up 18% over a year ago, reflecting strong performance in digital paperless. Transactions in the quarter were $682 million, up 69% from Q3 of 2015 and up 28% from the last quarter, reflecting our ability to increase scale in the platform. As Steven noted, since 2011 we have had over 8 billion digital coupon transaction for approximately .2 billion in 2016 alone, this is a significant accomplishment. GAAP net loss was $11.3 million, primarily impacted by a one-time charge, that I'll give you more detail about in a moment. Excluding this charge, net loss was $3.9 million. This compares to a net loss of $9.8 million in Q3 of 2015 and a net loss of $3.5 million in Q2 of 2016. Adjusted EBITDA which excludes this one-time charge was a record $8.8 million, up from $2.2 million Q3 of 2015 and $8.1 million in Q2 of 2016, reflecting about approach between revenue growth and investment, while pushing operational efficiencies. We ended the quarter with cash and short-term investment balance of $162, up $5.1 million from Q2. Cash from operations was $4 million. All in all, we were pleased with our performance this quarter. Drilling down into our $66.5 million Q3 revenues, we find digital promotions came in at $51.7 million, a 24% increase over last year and up slightly from Q2. Revenue from media was $14.8 million flat compared to last year and down 10% from Q2. This trend was primarily due to a shift of some Q3 committed CPG media budget to promotion to fulfill the faster than anticipated growth in demand for digital coupon and Retailer iQ, we expect 2017 media revenue to increase as we expanded our distribution and through the Quotient insight platform grow our data-driven media targeting and measurement business. Let's look at transactions. Transactions in the third quarter was $682 million, up 69% from a year ago and up 28% sequentially, primarily due to a strong increase in digital paperless. Year-to-date, transactions are up 48%, as demand increases on the platform and we continue to drive secular shift - have continued to drive the secular shift from off-line coupons to digital. Digital paperless transactions gained share growing 41% sequentially and represented 70% of all transactions in the third quarter. Retailer iQ transactions represented 78% of all paperless transaction. Digital print transactions grew 4% sequentially. Average promotion revenue per transaction in the third quarter was $0.076, a decrease from $0.095 in Q2 and was impacted by a combination of customer mix and new pricing strategies. Rapid volume growth causes lower price [indiscernible] to be reached by certain CPGs and this mix effect put downwards pressure on our revenue per transaction. As volumes continues to climb, its hard to predict exactly where revenue per promotion transactions will fall over the long-term, given the mix of upward and downward pressures on this metric. At this time, we expect it to remain around the $0.075 level for the fourth quarter. Most importantly, we believe that the rapid volume growth can more than offset lower revenue per transaction, resulting in growing promotion revenue dollars as we saw in Q3. During the third quarter, we signed a new large retailer in the drug channel on to the platform. To date, we now have 19 major banners implemented and 13 of those are marketing. We continue to see a long opportunity runway in front of us, as retailers and CPGs ramp their digital marketing activities to grow their sales and customer loyalty. Moving to the P&L. Gross margin in the third quarter was 47.2% impacted by a one-time charge of $7.4 million, as we took a one-time write-down associated with a non-refundable prepay distribution fee arrangement with a retail partner. The one-time charge is included in our cost of good sold and negatively impacted both our GAAP gross margin and GAAP net loss. There are no other prepay distribution fees of significance remaining on our balance sheet. To partner are first to sign up the Retailer iQ has been slower than comparable retailers to adopt required digital marketing activities, resulting in low - significantly lower transaction volume than anticipated. The retailer remains a committed partner, we continue to work together to help them drive additional digital marketing activities, grow their transaction volumes and engage with their shoppers. We are encouraged by their recent programs. Q3 GAAP gross margin was also impacted by a $1 million increase in amortization of acquired intangible asset associated with the strategic partnership we announced in August. The intangible assets reported totaled $39.7 million and will be amortized over a period of approximately 6 to 7.7 years. Our definition of non-GAAP gross margin now excludes the following non-cash items, amortization of acquired intangible asset, the one-time charge associated with a non-refundable prepaid distribution fee arrangement and stock-based compensation expense. Q3 non-GAAP gross margin was 61.7%, slightly up from 61.3% in Q3 of 2015, and down from the 64.5% in the second quarter, primarily due to the revenue mix changes described earlier and the resulting increase to distribution fees. Let's move on to operating expenses. For the third quarter GAAP operating expenses decrease to $43 million compared to $45.4 million in Q2 and flat with Q3 of 2015. Non-GAAP operating expenses, which excludes stock-based compensation and the net change in fair value of escrowed shares and contingent consideration were $36.6 million. This is a reduction of $2.9 million from Q2 of 2016 and essentially flat with Q3 of 2015. In percentage terms, non-GAAP operating cost declined from 59% of revenues in Q2 of 2016 to 55% of revenue in Q3 of 2016. This improvement was driven primarily by operational efficiency and expense management actions. We will continue making investments in new product to grow the business while we focus on operational efficiencies to improve our overall profitability in the long-term. We expect operating expenses in Q4 to be higher due to the typical year end – end of year expenses and continued investments for growth. In the third quarter, adjusted EBITDA was a record $8.8 million, representing a 13% margin, as compared to 4% in Q3 of 2015 and 12% in the second quarter of 2016. This was primarily driven by a reduced non-GAAP operating cost offset by higher distribution fees of the volume increased. As a reminder, adjusted EBITDA excludes the one-time charge recorded in cost of goods sold. Year-to-date, adjusted EBITDA was $21.1 million, almost double that of over the first nine months last year, outpacing revenue growth of 19% year-to-date. This reflects the impact of our platform scaling and progress we have made in managing expenses. Shares outstanding increased by 4 million 87.8 million in the third quarter, driven by the 3 million share issuance associated with the strategic partnership mentioned earlier. Weighted average shares came in at 84.732 million. Let me move on our outlook for Q4 and full year 2016. For the fourth quarter, we expect revenue to be in the range of $68 million to $71 million. We expect adjusted EBITDA to be in the range of $6 million to $7 million. For the full year, these results would lead to revenue in the range of $267.8 million to $270.8 million, reflecting a 13% to 14% increase over 2015. Full-year adjusted EBITDA is expected to be in the range of $27.2 million to $28.2 million. As we look to the opportunities ahead of us, we will continue to balance between driving for growth, while tightly managing expenses towards improving margins. We will now open the call for questions. Operator?

[Operator:]

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

[Mark Mahaney:]

Thanks. Two questions please. One, Ron, could you describe the upward and downward pressures on revenue per transaction going forward, it sounds like you got some volume levels getting hit that would put downward pressure, what would cause the upward pressure and are there any other downward factors? And then probably Steven, the new partner you described in the drug channel, could you just step back and remind us of which channels are the most materially - have been the most material for Quotient to date and where do you think the most interesting growth prospects are going forward, just in terms of channels? Thank you.

[Steven Boal:]

Sure, Mark. It’s Steven. Mir is going to take the second part of your question on channels, and then I'll address that pressure.

[Mir Aamir:]

Hey, Mark. The - on the channels, like we mentioned in the last few quarters we now have representation across all grocery drug, dollar and mass and club and depending on when the retailers came on those channels, some are larger than the others. For example, lot more grocers came on earlier, so that’s a larger channel than others, but in terms of the grocery sales also that’s a larger channel, right. So you can think of it as mimicking sort of what's - what they represent in the market from a market side standpoint.

[Steven Boal:]

On the on the pressures up and down Mark, as we've talked about in the past, the pressure down would be much more volume and we're starting to see the volume growth accelerate here, which is great. And that’s what we hope for and that’s why we built into these agreements lowered pricing at much higher volume tiers [ph] And so, it’s important to note that that doesn't have a margin implication and it really just have a price per transaction implication. Two quarters ago I talked about the fact that revenue per transaction is not going to be the most meaningful ways to manage the business on a modeling basis. And I know it’s hard to get your head around, but at the higher volume the companies that do the most business so that get a lower rate per transaction. But the higher volume across the platform drives the base of the pyramid of pricing up which caused the rising tide effect across the board. That's number one. Number two, now that we're at scale with some of these pricing strategies were deploying, the objective of those strategies would be to drive much higher volume shift from off-line to online and expand margin and you saw significant margin expansion during the quarter, so that both strategies are working. And at scale we get to test those before we role them out at – for much broader use. Upward pressure on pricing would be things like targeting, personalization, optimization, yield management across our platform and as we grow our targeting platform, which we are doing quarter-over-quarter, and again, we saw growth in this quarter of programs targeted then you'll start to see upward pressure on pricing as well. But as long said, given where we are in the year, given the rapid deceleration in volume and the fact that we've been shifting budget with our clients from media promotions to satisfy the you know, the faster than and expected volume growth, we're expecting that the pricing will stay roughly the same for Q4.

[Mark Mahaney:]

Okay. Thank you, Steven. Thank you, Mir.

[Steven Boal:]

Thanks, Mark.

[Operator:]

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

[Nat Schindler:]

Hey, guys, nice quarter. Just a couple of things, I guess, and so I dropped off for a second, so Mark might have asked this. But you know you have $375 billion under contract with [indiscernible] retailers now, like how much is left to the market, is there anybody left that could really like move that needle, a large amount by you signing them on? And then a second question is of the retailers that aren't marketing, you know what needs to happen there for those guys to start moving into the market - marketing phase?

[Steven Boal:]

Sure. So let's talk about the markets scope, with $350 billion, over $350 million are the contract, if you remember the way we talked about the market, there are roughly $600 billion a year of grocery sales annually, of that $400 billion in the middle that we talked about, there is really one, maybe two last now. And so from a field covered perspective I think we've pretty much accomplished what we are looking for. What was the second part of question?

[Nat Schindler:]

I was…

[Steven Boal:]

I just want to clarify, I think you said was 19, that’s 19 live, that’s not 19 signed, there more then that signed.

[Nat Schindler:]

Okay. And probably, yes, and just one, I think you have 13, you said are marketing right now, the remainders aren’t marketing, what kind of needs to happen for those guys to start marketing. So I think you had 13 marketing in the last quarter two, is that right?

[Mir Aamir:]

Yes. So the next this and the next quarter we should start seeing several of them start marketing. So like I mentioned before there is a time gap lap between live and marketing and then depending on which time of the year it is retailers prefer to start marketing at a later time or not, holidays figured into that, seasonality figures into that and so on. This and the next quarter we should see a number of those starting to market.

[Nat Schindler:]

Okay. And just one quick, one more real quickly. You really had an acceleration in transactions, how much of that was kind of driven by you know, CPG shifting some of their spend to better quality coupons in 3Q – sorry, back-to-school versus just kind of natural growth as more people on the platform?

[Mir Aamir:]

You know, I think it’s a bit of both, there is definitely growing demand that we are seeing and we are creating it, right, with Retailer iQ, with our retail partners, marketing and driving and so on. So there is growing demand from consumers for digital and the adoption is great. You said just great, retailers are seeing results in incremental sales and so on. And CPGs as we have talked before, they plan in annual cycles so for them to react very quickly is not always easy. But what we saw is CPG is trying to fulfill the demand as much as possibly and you saw the effects of that coming in and back-to-school was a key factor of that too, just to make sure that brands want to be present when consumers are, that’s in digital, that’s in mobile to make sure that they drive sales with that.

[Steven Boal:]

Let me just add one thing, its Steven. So you know, remember last year wasn't terrific year from predictability perspective, but we did enter last year expecting to see this kind of volume growth. And so heading into this year we were a lot more conservative because we didn't have the ability to pinpoint exactly when retailers would come on board and then when CPGs without a budget, and what you saw in Q3 is what we expected to happen last year and new would happen over time. So what hit us last year on the downside of predictability is just getting up in Q3 and the outside of predictability. We know the volumes there, we know shoppers engaged, we see it on a retailer by retailer basis and we're starting to see the compounding effect now more retailers coming on board.

[Nat Schindler:]

Great. Thanks, guys.

[Steven Boal:]

Thank you.

[Operator:]

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

[Ralph Schackart:]

Good afternoon. Steve, just a question for you on that average revenue per transaction metric given that moved around so much. Just curious can you give us some more color on if there's fixed fee agreements here and did you sort of hit some caps maybe in the quarter and maybe a little bit more, you know, to extent you can quantify what percentage of these deals maybe fixed fee? And then a second, how much of that - I know it's a follow-up metric the average revenue per transaction. But how much of that was sort of driven by design, by the company to drive volume growth in the quarter?

[Steven Boal:]

All driven by design, it’s very easy to answer to, all driven by design. Like I just said, we knew volumes would spike at some point, we just kind of modeling of looking at retailers coming on board at their own pace. But the compounding effect of having them start layer really pushes the whole - the whole platform up and so that happened. And in anticipation of that we designed pricing agreements with our largest partners to allow them to start to ship much more volume when the volume is available, and so all by design, and as anticipated.

[Ralph Schackart:]

And then on the fixed fee question?

[Steven Boal:]

Clarify what you mean by fixed fee.

[Ralph Schackart:]

Sure. I was just looking under the slide deck on - that you provided for the earnings call, and there is footnote talking about transactions as it relates to some of fixed fee cap, and just anymore color you could add on that?

[Steven Boal:]

Hang on a second, someone is sending me a picture of the slide.

[Ralph Schackart:]

I guess, just a broader question without having to look at the details, are there new fixed fee agreement that came in the quarter or have been there previously that maybe just triggered because of the explosive growth you saw is on volume?

[Steven Boal:]

There are no fixed fee agreements that came in the quarter or triggered. Are you talking about the footnote that talked about a transactions defined as any action that’s ones is the long one?

[Ralph Schackart:]

That’s correct.

[Steven Boal:]

Oh, yes. Okay. I see that here, including items per transaction fees revenue sharing, setup fees and volume based fixed fees, that’s 5 tier, so that’s 5 tier, so as you hit new tiers those tiers last for a period of time add volume and the rate per transaction is fixed in that tier and so hit the next tier.

[Ralph Schackart:]

Okay, so it’s like a rate card almost.

[Steven Boal:]

Like a rate card. There is no look back, correct.

[Ralph Schackart:]

Okay. And then maybe just moving on to media and advertising, just to understand that a little bit more. So my understanding was there were some promotion budget that was pulled out of that during the quarter, would you anticipate that to move back in Q4, or was that a little bit more about 2017 commentary in terms of that sort of revenue line item going back to historic levels?

[Mir Aamir:]

Sure. Ralph, this is Mir. I'll give some color on that. So some of our campaigns as we mentioned in the past, media and promotion – those are media and promotion campaigns together, this quarter, quarter three the demand for digital coupons grew much faster than anticipated and CPGs budgets couldn't catch up from a promotion standpoint. That some of the joint campaign you had the promotion – the coupon budgets running out much sooner than the media was supposed to run for. So media running for longer than coupon wouldn’t make sense from that campaign standpoint. So that shifted then into getting the coupon and the media to last a little bit longer than the coupon would have lasted, but little bit shorter than the media would have lasted. So we believe this is a short-term trend, as CPG budgets catch up on the coupon, digital coupon, paperless demand and from a media standpoint we are excited about the potential and growth in 2017. On that based on a number of factors that Ron and Steven mentioned in their scripts. Specifically, having to do with data-driven, media measurement targeting and then shopper media programs.

[Ralph Schackart:]

Okay. Thanks for the clarification.

[Steven Boal:]

Thank you.

[Operator:]

Your next question comes from line of Tom Forte with Maxim Group. Your line is open.

[Tom Forte:]

Great. Thanks for taking my questions. So three things I wan to touch upon, can you – where is the insights effort as far as the rollout and when should we anticipate that will start hitting the revenue line? And then as it pertains to online, I think you talked before about having one customer or one retailer that was using [indiscernible] online efforts in addition to the offline. Can you talk about how that's affecting your result? And then third and final, Amazon is starting to become a little more aggressive on rolling out their first grocery offering, to what extent does that present an opportunity for Quotient? Thank you.

[Mir Aamir:]

Thanks, Tom, This is Mir. I'll take the first one, Steven here will take the next few. So on Quotient Insight is going well. The bill continues and we expect revenues in 2017 like to talked about in the next earnings call we should be in a position to give you a bit more color in terms of timing and thought.

[Steven Boal:]

Sure. On the e-commerce integration, so I going to talk specifically about individual retailers, but the question on e-commerce integration, as well physical commerce integration ties directly into your second or your third question on Amazon, as it right now e-commerce integration isn’t going to have a material effect on our numbers. If you look at the overall industry, aside from the all the discussion about electronic-commerce delivery or e-ordering of packaged good product, the grocery product, it really amounts about 3% of the total marketplace. And so any e-commerce integrations we do are really future facing and won't have a material impact on our numbers. Now stepping forward to Amazon, specifically on Amazon, again, remember 3% of the market is e-commerce and so even if the e-commerce marketplace tripled over the next two or three year, given the fact that we're only about 10% penetrated into the offline business, just a secular shift alone of 90% to go is – its going to outweigh any potential impact from e-commerce perspective. That having been said, our platform is built for e-commerce. We build the entire platform for multi-currency, multi-vertical, multi-lingual and also e-commerce and you are starting to see that, we've already rolled out one e-commerce integration and you'll certainly see more e-commerce integration going thus forward. As I sit here today, I can't think of any reason why any retailer at all, regardless of whether their physical store, physical store stepping into e-commerce or solely e-commerce can't work with our platform. And so from those perspectives, I don't see anything. And then just lastly, the more Amazon does, the more every other retailer does as well, I can't see any downside to them, trying to enter the business here at scale.

[Tom Forte:]

Great. Thank you.

[Steven Boal:]

Thank you.

[Operator:]

Your next question comes from line of [indiscernible] Your line is open.

[Unidentified Analyst:]

All right. Thank you for taking the question. Since you saw this really big surge in transaction volumes, can you help quantify which proportion came from, for example the retailers that were actively marketing as of last year around this time? So I think there were – you had about seven at the time, just to give us an order of magnitude of where the growth can go. And second question is where the international at this point figure in your priorities?

[Mir Aamir:]

Sure, Morali. I'll take that. This is Mir. So there is a higher proportion of that surge coming from the retailers marketing and one of the slides in Steven's presentation, you could see what happens in Utech [ph] Those two lines are retailers that are roughly comparable in their size of CPG sales, so you can see what happens in the market and because the market potential is so high, marketing by them gets user adoption and volume, and so on. So that's the general statement I made, as opposed to when they went live because we've seen some retailers that went live seven months ago, started marketing in quarter three and something very nice very nice surge in volume.

[Steven Boal:]

And then on international, you know, we've said that international is important for the business. We've had a presence there for quite a long time. It's a very small part of our overall business today, but it also provides us an opportunity to work with some CPGs who take a global perspective and also allows us to test their certain features and functionality that we bring to the US before we scale them up. And if you recall the Shopmium platform was the number one receipt scanning promotions out in France, we bought back company, we very quickly released the version in the UK which has gone very well, now receipt scanning is going to be featured a major part of our new app release in December. So international is very tightly tied into our overall plan and strategy. But today represent a small part of our revenues in the business.

[Unidentified Analyst:]

Thank you.

[Steven Boal:]

Thank you.

[Operator:]

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

[Blake Harper:]

Thanks. I wanted just ask you about rollout in coupon.com and Shopmium [ph] with the focus moving there, will there will be some type of healthy sales that you would sell that would include marketing on both the Retailer iQ and in your own platforms or would you see some of that incremental spend or their budgeting did more separate. And just going to ask if you could provide any update on any metrics or anything that you have on the either Coupons.com path or the Shopmium?

[Steven Boal:]

Sure, thanks, Blake. It’s a good question. So just to make a note on that. So the new app will rollout under the Coupons.com brand and so any current users of our existing app will get a new one. And then ultimately the rest of our US apps will fold into a single user experience under the Coupons.com brand. And then to the first part of your question yes, there will be many opportunities for our clients and partners to run promotions across all of the touch points, Retailer iQ, mobile apps, third-party properties, owned and operated and our own Coupons.com mobile app. And so many of those things can be a bundled together and they can also certainly be decoupled, it really depends on where the specific audience is that each partner is trying to reach.

[Blake Harper:]

Great. Thanks.

[Steven Boal:]

Great. Thank you, everyone for joining us today. As you can see from our Q3 results, and particularly from the transformation in transaction volume growth we've seen, the shift from offline to digital is starting to accelerate and we believe Quotient is well-positioned to lead the change. We look forward to seeing you on the road starting with the RBC Tech Conference next week in New York City. Thank you again.

[Operator:]

This concludes today's conference call. You may now disconnect.