| Price | 7.96 | EPS | -0 | |
| Shares | 92 | P/E | -23 | |
| MCap | 731 | P/FCF | 24 | |
| Net Debt | -238 | EBIT | -18 | |
| TEV | 493 | TEV/EBIT | -28 | TTM 2019-09-30, in MM, except price, ratios |
| 10-Q | 2020-03-31 | Filed 2020-05-06 |
| 10-K | 2019-12-31 | Filed 2020-03-02 |
| 10-Q | 2019-09-30 | Filed 2019-11-08 |
| 10-Q | 2019-06-30 | Filed 2019-08-09 |
| 10-Q | 2019-03-31 | Filed 2019-05-10 |
| 10-K | 2018-12-31 | Filed 2019-02-27 |
| 10-Q | 2018-09-30 | Filed 2018-11-09 |
| 10-Q | 2018-06-30 | Filed 2018-08-03 |
| 10-Q | 2018-03-31 | Filed 2018-05-04 |
| 10-K | 2017-12-31 | Filed 2018-02-16 |
| 10-Q | 2017-09-30 | Filed 2017-11-03 |
| 10-Q | 2017-06-30 | Filed 2017-08-04 |
| 10-Q | 2017-03-31 | Filed 2017-05-05 |
| 10-K | 2016-12-31 | Filed 2017-02-16 |
| 10-Q | 2016-09-30 | Filed 2016-11-08 |
| 10-Q | 2016-06-30 | Filed 2016-08-09 |
| 10-Q | 2016-03-31 | Filed 2016-05-06 |
| 10-K | 2015-12-31 | Filed 2016-03-11 |
| 10-Q | 2015-09-30 | Filed 2015-11-12 |
| 10-Q | 2015-06-30 | Filed 2015-08-13 |
| 10-Q | 2015-03-31 | Filed 2015-05-14 |
| 10-K | 2014-12-31 | Filed 2015-03-19 |
| 10-Q | 2014-09-30 | Filed 2014-11-06 |
| 10-Q | 2014-06-30 | Filed 2014-08-07 |
| 10-Q | 2014-03-31 | Filed 2014-05-08 |
| 8-K | 2020-05-05 | Earnings, Exhibits |
| 8-K | 2020-03-18 | Officers |
| 8-K | 2020-02-12 | Earnings, Exhibits |
| 8-K | 2019-10-31 | Earnings, Officers, Exhibits |
| 8-K | 2019-08-09 | Other Events, Exhibits |
| 8-K | 2019-08-02 | Earnings, Officers, Exhibits |
| 8-K | 2019-06-03 | Shareholder Vote |
| 8-K | 2019-05-07 | Earnings, Exhibits |
| 8-K | 2019-02-12 | Earnings, Exhibits |
| 8-K | 2019-01-22 | Earnings, Exhibits |
| 8-K | 2018-11-19 | Officers, Other Events, Exhibits |
| 8-K | 2018-11-07 | Earnings, Regulation FD, Exhibits |
| 8-K | 2018-07-31 | Earnings, Regulation FD, Exhibits |
| 8-K | 2018-07-24 | Officers, Exhibits |
| 8-K | 2018-06-05 | Shareholder Vote |
| 8-K | 2018-05-01 | Earnings, Regulation FD, Other Events, Exhibits |
| 8-K | 2018-02-13 | Earnings, Regulation FD, Exhibits |
| Part I - Financial Information |
| Item 1. Financial Statements. |
| Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk. |
| Item 4. Controls and Procedures. |
| Part II - Other Information |
| Item 1. Legal Proceedings. |
| Item 1A. Risk Factors. |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. |
| Item 3. Defaults Upon Senior Securities. |
| Item 4. Mine Safety Disclosures. |
| Item 5. Other Information. |
| Item 6. Exhibits. |
| EX-31.1 | quot-ex311_9.htm |
| EX-31.2 | quot-ex312_7.htm |
| EX-32.1 | quot-ex321_6.htm |
| EX-32.2 | quot-ex322_8.htm |
| Balance Sheet | Income Statement | Cash Flow |
|---|---|---|
|
Assets, Equity
|
Rev, G Profit, Net Income
|
Ops, Inv, Fin
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter)
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(Registrant’s Telephone Number, Including Area Code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer |
| ☒ |
| Accelerated filer |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 1, 2020, the registrant had
QUOTIENT TECHNOLOGY INC.
INDEX
REPORT ON
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2020
2
PART I - FINANCIAL INFORMATION
| Item 1. | Financial Statements. |
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
|
|
| March 31, 2020 |
|
| December 31, 2019 |
| ||
|
|
| (unaudited) |
|
|
|
|
| |
| Assets |
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|
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|
|
| Current assets: |
|
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|
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|
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| Cash and cash equivalents |
| $ | |
|
| $ | |
|
| Accounts receivable, net of allowance for credit losses of $ March 31, 2020 and December 31, 2019, respectively |
|
| |
|
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| |
|
| Prepaid expenses and other current assets |
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| |
|
| Total current assets |
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|
| Property and equipment, net |
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|
| Intangible assets, net |
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|
| Goodwill |
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|
| Other assets |
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|
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| |
|
| Total assets |
| $ | |
|
| $ | |
|
| Liabilities and Stockholders’ Equity |
|
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|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable |
| $ | |
|
| $ | |
|
| Accrued compensation and benefits |
|
| |
|
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|
| Other current liabilities |
|
| |
|
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| Deferred revenues |
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| |
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| |
|
| Contingent consideration related to acquisitions |
|
| — |
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|
| |
|
| Total current liabilities |
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| Other non-current liabilities |
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| Contingent consideration related to acquisitions |
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| Convertible senior notes, net |
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| Deferred tax liabilities |
|
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|
| Total liabilities |
|
| |
|
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| |
|
| Commitments and contingencies (Note 14) |
|
| |
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| |
|
| Stockholders’ equity: |
|
|
|
|
|
|
|
|
| Preferred stock, $ issued or outstanding at March 31, 2020 and December 31, 2019 |
|
| |
|
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| |
|
| Common stock, $ and December 31, 2019, respectively |
|
| |
|
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|
| Additional paid-in capital |
|
| |
|
|
| |
|
| Accumulated other comprehensive loss |
|
| ( | ) |
|
| ( | ) |
| Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
| Total stockholders’ equity |
|
| |
|
|
| |
|
| Total liabilities and stockholders’ equity |
| $ | |
|
| $ | |
|
See Accompanying Notes to Condensed Consolidated Financial Statements
3
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
|
|
| Three Months Ended March 31, |
| |||||
|
|
| 2020 |
|
| 2019 |
| ||
| Revenues |
| $ | |
|
| $ | |
|
| Costs and expenses: |
|
|
|
|
|
|
|
|
| Cost of revenues |
|
| |
|
|
| |
|
| Sales and marketing |
|
| |
|
|
| |
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| Research and development |
|
| |
|
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| |
|
| General and administrative |
|
| |
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| Change in fair value of contingent consideration |
|
| |
|
|
| |
|
| Total costs and expenses |
|
| |
|
|
| |
|
| Loss from operations |
|
| ( | ) |
|
| ( | ) |
| Interest expense |
|
| ( | ) |
|
| ( | ) |
| Other income (expense), net |
|
| |
|
|
| |
|
| Loss before income taxes |
|
| ( | ) |
|
| ( | ) |
| Provision for income taxes |
|
| |
|
|
| |
|
| Net loss |
| $ | ( | ) |
| $ | ( | ) |
| Net loss per share, basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
| Weighted-average number of common shares used in computing net loss per share, basic and diluted |
|
| |
|
|
| |
|
See Accompanying Notes to Condensed Consolidated Financial Statements
4
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
|
|
| Three Months Ended March 31, |
| |||||
|
|
| 2020 |
|
| 2019 |
| ||
| Net loss |
| $ | ( | ) |
| $ | ( | ) |
| Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
| Foreign currency translation adjustments |
|
| ( | ) |
|
| |
|
| Comprehensive loss |
| $ | ( | ) |
| $ | ( | ) |
See Accompanying Notes to Condensed Consolidated Financial Statements
5
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
|
|
| Three Months Ended March 31, |
| |||||
|
|
| 2020 |
|
| 2019 |
| ||
| Total stockholders' equity, beginning balances |
| $ | |
|
| $ | |
|
|
|
|
|
|
|
|
|
|
|
| Common stock and additional paid-in capital: |
|
|
|
|
|
|
|
|
| Beginning balances |
| $ | |
|
| $ | |
|
| Stock-based compensation |
|
| |
|
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| |
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| Exercise of employee stock options |
|
| |
|
|
| |
|
| Payments for taxes related to net share settlement of equity awards |
|
| ( | ) |
|
| ( | ) |
| Retirement of treasury stock |
|
| — |
|
|
| ( | ) |
| Ending balance |
| $ | |
|
| $ | |
|
|
|
|
|
|
|
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| Treasury stock: |
|
|
|
|
|
|
|
|
| Beginning balances |
| $ | — |
|
| $ | — |
|
| Repurchase of common stock |
|
| — |
|
|
| ( | ) |
| Retirement of treasury stock |
|
| — |
|
|
| |
|
| Ending balance |
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
| Accumulated other comprehensive loss: |
|
|
|
|
|
|
|
|
| Beginning balances |
| $ | ( | ) |
| $ | ( | ) |
| Other comprehensive income (loss) |
|
| ( | ) |
|
| |
|
| Ending balance |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
| Accumulated deficit: |
|
|
|
|
|
|
|
|
| Beginning balances |
| $ | ( | ) |
| $ | ( | ) |
| Retirement of treasury stock |
|
| — |
|
|
| ( | ) |
| Net loss |
|
| ( | ) |
|
| ( | ) |
| Ending balance |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
| Total stockholders' equity, ending balances |
| $ | |
|
| $ | |
|
See Accompanying Notes to Condensed Consolidated Financial Statements
6
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
| Three Months Ended March 31, |
| |||||
|
|
| 2020 |
|
| 2019 |
| ||
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
| Net loss |
| $ | ( | ) |
| $ | ( | ) |
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
| |
|
|
| |
|
| Stock-based compensation |
|
| |
|
|
| |
|
| Amortization of debt discount and issuance cost |
|
| |
|
|
| |
|
| Allowance for credit losses |
|
| |
|
|
| |
|
| Deferred income taxes |
|
| |
|
|
| |
|
| Change in fair value of contingent consideration |
|
| |
|
|
| |
|
| Other non-cash expenses |
|
| |
|
|
| |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
| |
|
|
| |
|
| Prepaid expenses and other current assets |
|
| ( | ) |
|
| ( | ) |
| Accounts payable and other current liabilities |
|
| ( | ) |
|
| |
|
| Payments for contingent consideration and bonuses |
|
| ( | ) |
|
| — |
|
| Accrued compensation and benefits |
|
| ( | ) |
|
| ( | ) |
| Deferred revenues |
|
| |
|
|
| |
|
| Net cash (used in) provided by operating activities |
|
| ( | ) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| Purchases of property and equipment |
|
| ( | ) |
|
| ( | ) |
| Purchase of intangible assets |
|
| — |
|
|
| ( | ) |
| Proceeds from maturities of short-term investment |
|
| — |
|
|
| |
|
| Net cash (used in) provided by investing activities |
|
| ( | ) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| Proceeds from issuances of common stock under stock plans |
|
| |
|
|
| |
|
| Payments for taxes related to net share settlement of equity awards |
|
| ( | ) |
|
| ( | ) |
| Repurchases and retirement of common stock under share repurchase program |
|
| — |
|
|
| ( | ) |
| Principal payments on promissory note and capital lease obligations |
|
| ( | ) |
|
| ( | ) |
| Payments for contingent consideration |
|
| ( | ) |
|
| — |
|
| Net cash used in financing activities |
|
| ( | ) |
|
| ( | ) |
| Effect of exchange rates on cash and cash equivalents |
|
| ( | ) |
|
| ( | ) |
| Net decrease in cash and cash equivalents |
|
| ( | ) |
|
| ( | ) |
| Cash and cash equivalents at beginning of period |
|
| |
|
|
| |
|
| Cash and cash equivalents at end of period |
| $ | |
|
| $ | |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
| Cash paid for income taxes |
| $ | |
|
| $ | |
|
| Cash paid for interest |
| $ | |
|
| $ | |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosures of noncash investing and financing activities: |
|
|
|
|
|
|
|
|
| Fixed asset purchases not yet paid |
| $ | |
|
| $ | |
|
| Intangible asset acquisitions not yet paid |
| $ | |
|
| $ | — |
|
| Repurchase of common stock not settled |
| $ | — |
|
| $ | |
|
See Accompanying Notes to Condensed Consolidated Financial Statements
7
QUOTIENT TECHNOLOGY INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Description of Business
Quotient Technology Inc. (together with its subsidiaries, the “Company”), is an industry leading digital marketing platform, providing technology and services that power integrated digital promotions and media programs for consumer packaged goods (“CPG”s) brands and retailers. These programs are delivered across the Company’s network, including its flagship consumer brand Coupons.com and retail partners. This network provides the Company with proprietary and licensed data, including online behaviors, purchase intent, and retailers’ in-store point-of-sale (“POS”) shopper data, to target shoppers with the most relevant digital coupons and ads. The Company also delivers digital promotions and media programs to third party publishing properties outside of its network. Customers and partners use the Company to influence shoppers via digital channels, integrate marketing and merchandising programs, and leverage shopper data and insights to drive measurable sales results.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The Company’s condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2020 or for any other period.
There have been no significant changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K that have had a material impact on its condensed consolidated financial statements and related notes.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the Company’s condensed consolidated financial statements and accompanying notes. Such management estimates include, but are not limited to, revenue recognition, collectability of accounts receivable, coupon code sales return reserve, valuation of assets acquired and liabilities assumed in a business combination, useful lives of intangible assets, estimates related to recovery of long-lived assets and goodwill, measurement of contingent consideration, restructuring accruals, debt discounts, stock-based compensation, deferred income tax assets and associated valuation allowances and distribution fee commitments. These estimates generally require judgments, may involve the analysis of historical and prediction of future trends, and are subject to change from period to period. Actual results may differ from the Company’s estimates, and such differences may be material to the accompanying condensed consolidated financial statements.
The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns or shutdowns, depress demand for the Company’s advertising business, and adversely impact the Company’s results of operations. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic. The Company’s estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
Accounting Pronouncements Adopted
Credit Losses
Topic 326: In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-13 (ASU 2016-13) "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which requires the measurement and recognition of expected credit losses for financial assets
8
held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of a broader range of information to estimate credit losses.
The Company adopted ASU 2016-13 on January 1, 2020 and the impact of the adoption was not material to the Company’s condensed consolidated financial statements and related disclosures.
Revenue Recognition
The Company primarily generates revenue by providing digital promotions and media solutions to its customers and partners. Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
|
| • | Identification of the contract, or contracts, with a customer |
|
| • | Identification of the performance obligations in the contract |
|
| • | Determination of the transaction price |
|
| • | Allocation of the transaction price to the performance obligations in the contract |
|
| • | Recognition of revenue when, or as, we satisfy a performance obligation |
The Company provides digital promotions, including digital coupons, and/or media programs to its customers which consists of CPG customers, retail partners and advertising agencies whereby it uses its proprietary technology platforms to create, target, and deliver these programs. The Company typically generates revenue from its customers through the use of these programs on a cost-per-click, cost-per-impression, or cost-per-acquisition basis. Programs usually include a limit on the number of clicks and/or impressions and are billed monthly.
The pricing of digital promotions programs typically includes both promotion setup fees and promotion campaign fees. Promotion setup fees are related to the creation of digital promotions and set up of the underlying campaign on Quotient’s proprietary platform for tracking of the related clicks. The Company recognizes revenues related to promotion setup fees over time, proportionally, on a per click basis, using the number of authorized clicks, per insertion order, commencing on the date of the first click. A click refers to the consumers action of activating a digital promotion through the Company’s proprietary technology platform by either saving it to a retailer’s loyalty account for automatic digital redemption, or printing it for physical redemption at a retailer. Promotion campaign fees are usually determined on a per click basis. The Company typically recognizes revenues for digital promotion campaign fees as clicks occur.
The Company’s media programs enable CPGs and retailers to distribute digital media to promote their brands and products on its retailers’ websites, and mobile apps, and through a network of affiliate publishers and non-publisher third parties that display its media offerings on their websites or mobile apps. Pricing for media campaigns is usually determined on a cost-per-impression, cost-per-click or cost-per-acquisition basis. The Company recognizes revenue each time a digital media ad is displayed or each time a user clicks on the media ad displayed on the Company’s websites, mobile apps or on third-party websites.
Digital promotion programs also include the Company’s Specialty Retail business, in which specialty stores including clothing, electronics, home improvement and others, and coupon codes offers. Each time a consumer makes a purchase using a coupon code, a fee is typically paid to the Company. The Company usually generates revenues when a consumer makes a purchase using a coupon code from its platform and completion of the order is reported to the Company. In the same period that the Company recognizes revenues for the delivery of coupon codes, it also estimates and records a reserve, based upon historical experience, to provide for end-user cancelations or product returns which may not be reported until a subsequent date.
9
Gross Versus Net Revenue Reporting
In the normal course of business and through its distribution network, the Company delivers digital promotions and media on retailers’ websites through retailers’ loyalty programs, and on the websites of digital publishers. In these situations, the Company evaluates whether it is the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). Generally, the Company reports digital promotion and media advertising revenues for campaigns placed on third-party owned properties on a gross basis, that is, the amounts billed to its customers are recorded as revenues, and distribution fees paid to retailers or digital publishers are recorded as cost of revenues. The Company is the principal because it controls the digital promotion and media advertising inventory before it is transferred to its customers. The Company’s control is evidenced by its sole ability to monetize the digital coupon and media advertising inventory, being primarily responsible to its customers, having discretion in establishing pricing for the delivery of the digital promotions and media, or a combination of these.
Arrangements with Multiple Performance Obligations
The Company’s contracts with customers may include multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines its best estimate of its standalone selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts and characteristics of targeted customers.
Accounts Receivables, Net of Allowance for Credit Losses
Trade and other receivables are included in accounts receivables and primarily comprised of trade receivables that are recorded at invoiced amounts, net of an allowance for credit losses and do not bear interest. Other receivables included unbilled receivables related to digital promotions and media advertising contracts with customers. The Company generally does not require collateral and performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. The Company maintains an allowance for credit losses based upon the expected collectability of its accounts receivable. The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company reviewed credit profiles of its customers, contractual terms and conditions, current economic trends, reasonable and supportable forecasts of future economic conditions, and historical payment experience.
For the three months ended March 31, 2020, the Company’s assessment considered business and market disruptions caused by COVID-19 and estimates of expected emerging credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict causing variability and volatility that may have a material impact on our allowance for credit losses in future periods.
Deferred Revenues
Deferred revenues consist of promotion setup fees, promotion campaign fees and digital media fees that are expected to be recognized upon click, or delivery of media impressions, which generally occur within the next twelve months. The Company records deferred revenues, including amounts which are refundable, when cash payments are received or become due in advance of the Company satisfying its performance obligations. The increase in the deferred revenue balance for the three months ended March 31, 2020 is primarily driven by cash payments received or due in advance of satisfying the Company’s performance obligations of $
The Company’s payment terms vary by the type and size of its customers. For certain products or services and customer types, we require payment before the products or services are delivered to the customer.
10
Disaggregated Revenue
The following table presents the Company’s revenues disaggregated by type of services (in thousands, unaudited). The majority of the Company’s revenue is generated from sales in the United States.
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| Three Months Ended March 31, |
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| 2020 |
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| 2019 |
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| Promotion |
| $ | |
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| $ | |
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| Media |
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| Total Revenue |
| $ | |
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| $ | |
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Practical Expedients and Exemptions
The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which it recognizes revenue for an amount where it has the right to invoice for services performed.
Sales Commissions
The Company generally incurs and expenses sales commissions upon recognition of revenue for related goods and services, which typically occurs within one year or less. Sales commissions earned related to revenues for initial contracts are commensurate with sales commissions related to renewal contracts. These costs are recorded within sales and marketing expenses on the condensed consolidated statements of operations.
3. Fair Value Measurements
The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.
11
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis are as follows (in thousands):
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| March 31, 2020 |
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| Level 1 |
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| Assets: |
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| Cash equivalents: |
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| Money market funds |
| $ | |
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| — |
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| — |
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| $ | |
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| U.S. Treasury Bills |
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| — |
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| — |
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| Total |
| $ | |
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| $ | — |
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| $ | — |
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| $ | |
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| Liabilities: |
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| Contingent consideration related to acquisitions |
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| — |
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| — |
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| Total |
| $ | — |
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| $ | — |
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| $ | |
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| $ | |
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| December 31, 2019 |
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| Level 1 |
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| Level 2 |
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| Level 3 |
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| Total |
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| Assets: |
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| Cash equivalents: |
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| Money market funds |
| $ | |
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| — |
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| — |
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| $ | |
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| U.S. Treasury Bills |
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| — |
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| — |
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| Total |
| $ | |
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| $ | — |
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| $ | — |
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| $ | |
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| Liabilities: |
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| Contingent consideration related to acquisitions |
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| Total |
| $ | — |
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| $ | — |
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| $ | |
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| $ | |
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The valuation technique used to measure the fair value of money market funds and U.S. Treasury Bills includes using quoted prices in active markets. The money market funds have a fixed net asset value (NAV) of $
The contingent consideration relates to the acquisitions of MLW Squared Inc. (“Ahalogy”), Elevaate Ltd. (“Elevaate”) and Ubimo Ltd. (“Ubimo”). The fair values of contingent consideration are based on the expected achievement of certain revenue targets as defined under the acquisition agreements and were estimated using an option pricing method with significant inputs that are not observable in the market, thus classified as a Level 3 instrument. The inputs included the expected achievement of certain financial metrics over the contingent consideration period, volatility and discount rate. The fair-value of the contingent consideration is classified as a liability and is re-measured each reporting period. Refer to Note 6 for further details related to the acquisitions.
The following table represents the change in the contingent consideration (in thousands):
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| Three Months Ended March 31, 2020 |
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| Ubimo |
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| Elevaate |
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| Ahalogy |
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| Level 3 |
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| Level 3 |
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