What happened
Shares of Quotient Technology (QUOT) soared on Wednesday following the release of the company's third-quarter results. The stock was up by 24.7% as of 1:20 p.m. ET, having gained as much as 26.6% earlier in the day.
So what
At first glance, Quotient's results landed somewhere between "terrible" and "not too impressive." Revenue fell 48% year over year to $70.3 million and net losses landed at $0.07 per share, a slight improvement from the year-ago period's loss of $0.08 per share. The results fell short of Wall Street's consensus estimates, which pointed to positive earnings of $0.04 per share on revenue near $74.7 million.
However, Quotient also had some good news for investors. The company raised enough cash to close out a $105 million convertible debt balance through a $55 million term loan and a $50 million revolving credit line. The remaining $100 million of the debt, which was scheduled to expire in December 2022, will be paid down out of Quotient's $208 million cash reserve. This move avoided a potentially devastating dilution of the stock, as the debt notes could have nearly doubled the company's share count if they had been converted into common stock instead.
Also, management highlighted the fact that Quotient's sales increased on a sequential basis, while many peers in the digital marketing sector saw falling ad sales. As a result, it's growing its share of the market for online promotions. Furthermore, the company's recent cost-cutting moves resulted in "near breakeven" cash from operations and $10 million of earnings before interest, taxes, depreciation, and amortization (EBITDA).
Now what
The omnichannel marketing veteran is going all-in on digital ad campaigns and online coupons these days. The strategy shift hasn't been easy, especially since the online marketing industry is going through a challenging period. Ad buyers are less interested in paying a premium for top-shelf ad space during times of high inflation.
That gloomy backdrop makes Quotient's sequential strength more impressive, of course. CEO Matt Krepsik argued that tight consumer belts can be good news for his company's coupon-clipping services.
"As consumers seek more ways to save, and retailers look to take ownership of their retail media networks, we are successfully evolving to a leading consumer promotions network and data-driven retail media platform," Krepsik said on the earnings call. "We strongly believe the future for Quotient lies in our becoming a preeminent platform provider for the digital delivery of promotions."
So Quotient is making some promising moves in this tight economy: shoring up its balance sheet and embracing a radically different business model with better long-term prospects. That being said, the company has much to prove, and its financial platform is still not rock-solid, so I'm happy to watch this risky small-cap stock from the sidelines until further notice.
