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Edited Transcript of QUOT earnings conference call or presentation 6-Nov-19 9:30pm GMT

Q3 2019 Quotient Technology Inc Earnings Call Mountain View Nov 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Quotient Technology Inc earnings conference call or presentation Wednesday, November 6, 2019 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Ronald J. Fior Quotient Technology Inc. - Executive Officer * Stacie Clements Quotient Technology Inc. - VP of IR * Steven Robert Boal Quotient Technology Inc. - Founder, Executive Chairman & CEO ================================================================================ Conference Call Participants ================================================================================ * Chad Michael Bennett Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst * Ralph Edward Schackart William Blair & Company L.L.C., Research Division - Partner & Technology Analyst * Shweta R. Khajuria RBC Capital Markets, Research Division - Assistant VP * Thomas Ferris Forte D.A. Davidson & Co., Research Division - MD & Senior Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Welcome to the Third Quarter 2019 Quotient Earnings Conference Call. (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'll now turn the call over to Stacie Clements, Vice President of Investor Relations. Thank you. Ms. Clements, you may now begin. -------------------------------------------------------------------------------- Stacie Clements, Quotient Technology Inc. - VP of IR [2] -------------------------------------------------------------------------------- Thank you. Hello, everyone, and welcome to our third quarter 2019 earnings call. On the call with me today are our CEO, Steven Boal; and Ron Fior, our CFO. Today, our call will follow a slightly different format. Full prepared remarks have been posted on the IR section of our corporate website, investors.quotient.com, alongside our press release and earnings presentation. In the interest of time, we have summarized this posted remarks for today's call and look forward to jumping into Q&A a little quicker than usual. Before we begin, please note that during this call, you will hear forward-looking statements. These forward-looking statements include projections for fourth quarter and full year 2019, our expectations for our solutions, partnership, product launches, acquisition of Ubimo and plans -- and CPGs' plans to exit FSI as well as the expected growth of and investments in our business generally. Forward-looking statements are based on information available to you and the good faith beliefs of our management team as at 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, 2019. 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, operating expenses, gross margins and net loss, 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 Robert Boal, Quotient Technology Inc. - Founder, Executive Chairman & CEO [3] -------------------------------------------------------------------------------- Thank you, Stacie, and welcome, everyone, to our Q3 earnings call. Q3 results came in above the high ends of both our revenue and adjusted EBITA guidance recognizing that these targets were lower after last quarter's release. We delivered $114.8 million in revenue, $13.6 million in adjusted EBITDA and strong cash flow from operations of $6.2 million. As Stacie mentioned, all of our prepared remarks and accompanying slides were already posted on our website. We are not planning on reading those remarks verbatim and rather we'll take the time to provide additional color on some of our exciting strategic initiatives as well as some of my observations having been back as CEO for a full quarter. Before we get started, today we announced that Ron Fior, our Chief Financial Officer, will be retiring by the end of the year. I have enjoyed working with Ron and I'd like to take a moment to thank him for his contributions and wish him well in his retirement. I'd also like to welcome Pam Strayer to the team. Pam brings rock solid finance and public company leadership experience to Quotient, and we're thrilled to have her join us as we head into 2020 and what we believe will be our most exciting year yet. Pam takes over as CFO on November 11 and Ron will continue until the end of the year to help with the transition. We also announced today that we've signed a definitive agreement to acquire Ubimo, a leading data and media activation company. Ubimo brings best-in-class technology to further strengthen Quotient's digital media solutions, which we believe will improve campaign performance and cost efficiencies and accelerate the development of Quotient's self-service platform. Ubimo has worked closely with us for the past 5 years, and we're excited to have them join the Quotient family. When fully integrated onto our existing Quotient platforms, we expect Ubimo to help drive even better results and efficiencies in campaign deployments and have a positive effect on our gross margin in 2020. On the topic of gross margin. We have already begun the work to be able to automate several parts of our business and expect this to have a positive effect on gross margin in 2020. Given the promotion growth we're anticipating and assuming Q4 2019's media and promotion mix remains consistent into next year, we expect roughly 5 to 6 points of gross margin improvement sometime in 2020 from increased automation, process improvement and Ubimo. We're also starting to see positive signs from the large 3 CPGs who had reduced their spending on national promotions over the past 3 quarters. As you know, declines from these 3 have represented significant headwinds and have impacted our overall CPG growth trends. We are in strategic discussions now with these CPGs as they look to take full advantage of the breadth of our platform including targeted digital offers, Quotient Audiences and retailer performance media and expect to see a return to a year-on-year growth for all 3 starting the first half of 2020. Additionally, Albertsons companies has rolled out In-Lane targeted coupons in over 2,000 stores. In-Lane enables retailers to merge their digital and physical promotions platforms so they can make maximum effective use of data to engage with and deliver to shoppers the right offers both digitally and in the store. This is an industry-first where brands and retailers can use the same data from the same platform to target shoppers across online and off-line touch points at scale and offers a far superior solution than what was available before. We're in discussions with additional retailers about adding In-Lane to their stores to replace their stand-alone legacy checkout coupon printing service. Our audience business continues to scale with 2 strategic partners already integrated. The first, Nielsen, leverages our data with their measurement solutions. This partnership also allows our audience segments to integrate with their Nielsen marketing cloud, connecting us to key DSPs that serve our CPG brands and agencies. Additionally, in Q3, we were named the Facebook marketing partner, bringing our data and industry-leading capabilities to the Facebook platform. These partnerships validate the strength of our solutions, our data, scale and market leadership and give us greater access to marketing dollars as we head into the annual planning processes with our clients for calendar year 2020. Over the past 8 weeks, I've visited many of our clients and partners and the level of engagement and receptivity I have witnessed to Quotient's products and services has never been this high. I've also had the opportunity to visit with most of our offices and teams. What stood up the most to me was the level of expertise and thought leadership within Quotient. We have several new engagements underway with existing and exciting new partnerships, and I look forward to sharing more about some of these in the coming weeks and months. With regard to our product portfolio, during my first few weeks back, I made the decision to terminate an initiative that had been under development for the past year and had just recently gone live. The product was not something I considered on strategy and additionally, it was having a negative effect on morale as many of our team members had been pulled off of their products to help get this initiative to market. Given the size of the market we're going after, it is important that we stay focused on strategy. Teams are now reenergized, and we're seeing meaningful innovation and delivery in our core product portfolio. The final point I would like to make is about the change taking place in the annual client and budgeting processes between CPGs and retailers. The digital-first approach that we have been talking about is becoming reality. Over the past quarter, we have seen retailers and CPGs collaboratively plan to shift meaningful dollars onto digital engagement. In some cases, Quotient RPM retailers are requiring CPGs to commit up to 1.5% of their gross sales to be spent on digital marketing and merchandising. Let me contextualize this, as this is a big change that's happening in the industry right now. If a CPG sells $1 billion worth of products in a specific retailer, they would then spend up to $15 million in digital marketing on the Quotient platform that powers that retailer. We believe Quotient sits in prime position to help shift those digital marketing dollars. Our measurements and analytics have been a core business driver for this change and serve as a catalyst to expand beyond the 1.5% with retailers and brands. This is both a shift in dollars from off-line to online and the redirecting of marketing dollars to be placed where shoppers are with the highest return on ad spend. When we started the company in 1998, our thesis was that like all other industries that would ultimately be disrupted by technology, the paper coupon most commonly distributed in the free-standing insert, or FSI, would ultimately be replaced by a more efficient digital solution. While I took much longer than we had originally expected, over the past quarter, we have been told by top CPGs making up over 20% of all FSI coupon distribution that they are planning to exit the FSI entirely during the course of 2020. The implications of moves like this are wide reaching. For CPGs, that enables them to have more dollars deployed to more effective vehicles, and for retailers, it will allow them to provide more value and better experiences to their shoppers via their digital platforms. There are also other significant nonworking dollars connected to the distribution of paper coupons in the FSI like legacy paper clearing that CPGs and retailers can find additional savings to redeploy. CPGs eliminating the FSI are now engaged in meaningful planning around how to further capitalize on a scale of digital, and I could not be more excited to see how this unfolds over the next several months. In summary, I'm feeling confident about our business and the focused direction we're headed in. Our teams are working together and meeting regularly with greater collaboration. After meeting with our clients and visiting our offices and spending time with our teams, I believe we have a tremendous opportunity to deliver great products and services with continued discipline and focus in a market that is ready to, what we believe, make a large leap forward into digital in 2020. I hope to see you all next week at our first Investor Day in New York. For those of you who can't make it, a webcast will be available on our website, and we'll also be at the RBC conference on November 20. I'll now turn the call over to Ron and look forward to taking your questions when he wraps up. Ron? -------------------------------------------------------------------------------- Ronald J. Fior, Quotient Technology Inc. - Executive Officer [4] -------------------------------------------------------------------------------- Thanks, Steven, and welcome, everyone. In Q3, we continued to grow revenue, gain operating efficiencies and generate cash. Total revenue was up 11% over last year and reflected growth in digital paperless, RPM and Ahalogy. Additionally, the 3 CPGs that have been a headwind over the last 3 quarters are starting to show positive signs for a return to year-over-year growth as they start to think about their 2020 budgeting. In the third quarter, 1 CPG was essentially flat and another delivered growth. Total digital promotions declined 2% over Q3 last year, primarily related to the 3 CPGs I just mentioned, and an expected 34% decline in specialty retail. Revenue from digital paperless grew 12% year-over-year and digital print declined 27% over last year. Media revenues were up 31% year-on-year for Q3. Gross margin. On both a GAAP and a non-GAAP basis, gross margin in the third quarter was slightly down from Q2 and down from Q3 of 2018, as media revenue continues to grow and has a lower gross margin than promotions. Looking at Q4, we expect gross margin to be relatively flat quarter-on-quarter as some of our margin improvement initiatives take hold. These initiatives include increased automation, process improvement and utilization of Ubimo technology. We continue to actively manage our costs and invest where appropriate while leveraging operating expenses. Q3 operating expenses were up from Q2 and essentially flat with Q3 of 2018. Non-GAAP operating expenses in Q3 were up approximately $1.1 million compared to a year ago. As a percentage of revenues, non-GAAP operating expenses continue to show leverage, declining from 36% of revenues in Q3 last year to 33% of revenues in Q3 of 2019. Non-GAAP operating expenses exclude stock-based compensation, the net change in fair value of escrowed shares and contingent consideration, amortization of acquired intangible assets, certain acquisition-related costs and restructuring charges. Adjusted EBITDA. Adjusted EBITDA was $13.6 million, representing a 12% EBITDA margin. On a year-over-year basis, it was impacted by the product mix decline in gross margin, offset by continued leverage in operating expenses. Adjusted EBITDA excludes interest expense, income taxes, depreciation and amortization, the net change in fair value of escrowed shares and contingent consideration, stock-based compensation, restructuring charges, other income expense and certain acquisition-related costs. Stock buyback. In the third quarter, we bought back 1.3 million shares for approximately $14.6 million and completed our May 2019 stock buyback program. In August, the board approved a new $50 million buyback program. Moving to cash. We ended the quarter with $238.1 million in cash, down $15.4 million from the end of Q2 2019, primarily related to the $17.2 million used on our stock repurchase program. Guidance. As noted earlier, we're pleased to announce the signing of a definitive agreement to acquire Ubimo for $15 million upfront and an earn out of up to $25 million over 2 years based on attainment of certain targets. Ubimo's engineering team is based in Tel Aviv while their sales team is out of New York. We expect the acquisition to close by the end of the month with minimal revenue contribution for Q4 and 2020. We expect this acquisition to have a positive impact on gross margin and be accretive to EBITDA in 2020. For the full year 2019, we expect revenue in the range of $425 million to $429 million or approximately 10% growth versus last year at the midpoint. This translates into a fourth quarter revenue range of $107.4 million to $111.4 million. Adjusted EBITDA for the full year 2019 is expected to be in the range of $43 million to $45 million or approximately 10% of revenue at the midpoint. This translates into a fourth quarter EBITDA range of $9.3 million to $11.3 million. Finally, after working 42 years straight, I'm looking forward to retiring at the end of this year. I would like to thank Steven and all the great people I have worked with here at Quotient for the past 3 years as well as all of you on this call. I welcome Pam to this great company, and I will be around for the next couple of months to help with the transition. Thank you. Operator, please open the call for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And your first question comes from the line of Shweta Khajuria with RBC Capital Markets. -------------------------------------------------------------------------------- Shweta R. Khajuria, RBC Capital Markets, Research Division - Assistant VP [2] -------------------------------------------------------------------------------- Two questions, please. One, the targeted promotions product that is now live and in across 2,000 stores within Albertsons. Can you -- Steven, can you please talk a little bit about how -- what you have seen so far? How it is tracking? And the -- sort of time line in 2020 without giving much specifics in terms of partnerships with other potential new retailers? And then second is on guidance for the full year. What kind of the -- what kind of impact are you expecting from the 3 CPGs based on what you've seen so far? -------------------------------------------------------------------------------- Steven Robert Boal, Quotient Technology Inc. - Founder, Executive Chairman & CEO [3] -------------------------------------------------------------------------------- Sure. Thanks for the questions. So with regard to the first question on In-Lane, we're just rolled out and so it's too early to really have a scope on what the performance looks like other than to say that it's meeting expectations. With regard to 2020 and additional -- can you hear me? -------------------------------------------------------------------------------- Shweta R. Khajuria, RBC Capital Markets, Research Division - Assistant VP [4] -------------------------------------------------------------------------------- Yes. I can hear you. -------------------------------------------------------------------------------- Steven Robert Boal, Quotient Technology Inc. - Founder, Executive Chairman & CEO [5] -------------------------------------------------------------------------------- I think -- sorry, about that. It went red. I thought we we're on mute. Okay. Here we go. You see, I am rusty everybody. Here we go. With regard to 2020 and additional retailers, as I said, we're in discussions with other retailers now about implementing In-Lane. That would apply to both current RiQ, Retailer iQ, and RPM customers and also some potential new ones. But with any specificity, I probably couldn't -- I couldn't drill into that. And then on -- what was the question? The 3 CPGs. Just that we're now anticipating them returning to year-on-year growth in 2020, which as we've been talking about, we expected that that would happen, it was just hard for us to pin down exactly when we'd see that. But we are now seeing that. So that's pretty exciting for us. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- Your next question comes from the line of Ralph Schackart with William Blair. -------------------------------------------------------------------------------- Ralph Edward Schackart, William Blair & Company L.L.C., Research Division - Partner & Technology Analyst [7] -------------------------------------------------------------------------------- Steven, just kind of wanted to get your perspective on the 2020 outlook kind of strategic overview you gave that contemplates a change or, I guess, added shift for digital marketing for brands, was that comment more industry specific or -- and/or was it related to sort of the 3 large CPGs that I think have kind of struggled to grow budget or actually decreased budget over the last 3 quarters? And just kind of want to get your perspective, how do you square those comments with what you've seen over the last 3 quarters? And then, just from a product standpoint, obviously, you made another acquisition, sounds like looked under the hood, shut down another product -- or shut down a product when you came in, do you feel like you've had the portfolio in place today or are there any sort of meaningful gaps that you would explore potentially for further acquisitions down the road? -------------------------------------------------------------------------------- Steven Robert Boal, Quotient Technology Inc. - Founder, Executive Chairman & CEO [8] -------------------------------------------------------------------------------- Sure. I'll be going reverse order. So I think we made comprehensive and quick work of reviewing the product portfolio, and I do believe now, with the addition of Ubimo, that our product portfolio is the right -- has the right set of balance and is the right product portfolio going forward. So I feel very good about that. We're innovating on that product portfolio and that's very exciting. But the core product portfolio, I think, is intact for the foreseeable future. On the brands, there are 2 pieces to that. So let me just address both of those. One is on the most recent discussions around exiting the FSI and then the other piece is on Quotient retailers that are on Retail Performance Media and shifting dollars and that was the reference to up to 1.5% of gross sales. Let me just explain both of those. On the FSI -- look, in 1998, we started the company, the expectation was that the FSI would go the way of many other industries that are disrupted by digital. It took 22 years. It didn't take the 5 years that I thought it was going to take. But hearing clients now tell us that they are exiting the FSI entirely in 2020 -- during the course of the year 2020, that's pretty earth-shattering news. And so we're trying to unpack exactly what that means, but from a forecasting perspective, stay tuned, right? In our next quarterly release, we will have a better view of what next year looks like, but it's pretty exciting. On the retailer side, look, brands spend money merchandising with retailers and a lot of that gets done in the form of in-store media, endcap displays, discounting in stores, the physical circulars, and now that the platforms that we've partnered with retailers to build are at real scale, they now can actually shift dollars into these vehicles and there is a higher return on ad spend. We've already proven that digital shoppers, people who are digitally engaged with retailers, frequent the stores more often and buy more products. And so those dollars work harder for CPGs and in a slim-margin industry that we're in, working dollars are very important. And so now that that's the case, at least for brands and retailers that are on our platform, retailers are asking brands to spend up to 1.5% of their total sales in digital marketing. And -- yes, that's a pretty big change that's taking place in the industry, and it's brand-new for 2020. So obviously, we're very excited about that. -------------------------------------------------------------------------------- Ralph Edward Schackart, William Blair & Company L.L.C., Research Division - Partner & Technology Analyst [9] -------------------------------------------------------------------------------- Great. One more if I could. The 5 to 6 points of gross margin improvement that you talked about for some time in 2020, how should we think about that just in terms of linearity through 2020? Would that sort of just ramp through the year and perhaps you would be exiting the year at that 5 or 6 points of gross margin improvement? How should we think about that? -------------------------------------------------------------------------------- Steven Robert Boal, Quotient Technology Inc. - Founder, Executive Chairman & CEO [10] -------------------------------------------------------------------------------- I would say exiting the year that -- at that is probably the right way to think about it. I don't know that it will be a straight linear change because we've got to work some of the automation process improvement into the system, but you should definitely think about exiting the year there. Yes. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- Your next question comes from the line of Chad Bennett with Craig-Hallum. -------------------------------------------------------------------------------- Chad Michael Bennett, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [12] -------------------------------------------------------------------------------- So it looks like the media business decelerated meaningfully in the quarter growth-wise. My guess is you -- that's because you analyzed -- annualized on Ahalogy and due to the fact that you haven't seen gross margin improvement this quarter and aren't expecting any next quarter. My guess is your expectations for either Audience Cloud to do anything meaningfully this quarter or next are low, and then In-Land promotions expectations seem very low, and then my guess is sponsored search, which we didn't hear anything about or at least I didn't catch with Albertsons is yet to gain real traction. Can you address all that? -------------------------------------------------------------------------------- Steven Robert Boal, Quotient Technology Inc. - Founder, Executive Chairman & CEO [13] -------------------------------------------------------------------------------- Yes. I think that's probably the wrong set of conclusions. Media is typically much higher in Q4. And so we would expect that the media business would actually be accelerating in Q4. And so I think that kind of balances out the question about all the other items as well. Those will be growing, but we do expect the media business to accelerate in Q4 and that's historically how the media businesses operate. -------------------------------------------------------------------------------- Chad Michael Bennett, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [14] -------------------------------------------------------------------------------- So you expect the promotion business to be weaker in Q4 and seasonally when it typically ticks up, it's going to be even weaker than expected? -------------------------------------------------------------------------------- Steven Robert Boal, Quotient Technology Inc. - Founder, Executive Chairman & CEO [15] -------------------------------------------------------------------------------- No, it's the opposite. We expect the promotion business to be stronger in Q4 and the media business to be even stronger. So that's the impact that you would see on margin, is that we expect the promotion business to be... -------------------------------------------------------------------------------- Chad Michael Bennett, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [16] -------------------------------------------------------------------------------- Your revenues are forecasted to go down sequentially, right? -------------------------------------------------------------------------------- Steven Robert Boal, Quotient Technology Inc. - Founder, Executive Chairman & CEO [17] -------------------------------------------------------------------------------- We took our estimates for the year and we came in higher than we had -- we forecasted for Q3 and because, as we have said for many quarters now, we're better at predicting the years because of the budgets with our clients than the quarters that they shift them in. In order to make sure that we didn't see shifting budget from Q4 to Q3 causing the beat, we're maintaining our guidance for the year. So that's why you are looking at those numbers. That was the guide that we set out last quarter, and just to make sure that we didn't see budget move from Q4 to Q3, we're not going to take our numbers up based on the beat and get ahead of ourselves again. -------------------------------------------------------------------------------- Chad Michael Bennett, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [18] -------------------------------------------------------------------------------- Okay. One last question. If you did not acquire Ubimo, how would that gross margin improvement that you talk about for next year? What would that look like without them? -------------------------------------------------------------------------------- Steven Robert Boal, Quotient Technology Inc. - Founder, Executive Chairman & CEO [19] -------------------------------------------------------------------------------- Ubimo is going to be a much smaller component to the 5 to 6 points. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- (Operator Instructions) Your next question comes from the line of Sean Henderson with D.A. Davidson. -------------------------------------------------------------------------------- Thomas Ferris Forte, D.A. Davidson & Co., Research Division - MD & Senior Research Analyst [21] -------------------------------------------------------------------------------- Yes, it's Tom Forte. So first off, Ron, it's a pleasure working with you, enjoy your retirement, and then Pam, welcome to Quotient. So the question I had for you, Steven, is the question I'm getting asked most often from investors, which is how should we think about the new privacy laws, including in California, and the potential impact on your business? -------------------------------------------------------------------------------- Steven Robert Boal, Quotient Technology Inc. - Founder, Executive Chairman & CEO [22] -------------------------------------------------------------------------------- Sure. Thanks, Tom. That's obviously a big topic across the industry, much like GDPR and if we all recall the impact that GDPR had. The privacy laws are continuing to evolve. Most recently, obviously, as you referenced, the CCPA law in California. Look, there is an opportunity in all of this. We're working closely with our clients on how to implement the new regulations. As of now, we don't expect to see a material impact to our business as a result of these laws. Now on a go forward basis, there are going to be laws in other states and, ultimately, our thesis is that there will be some kind of federally mandated privacy laws to try and make some sort of order to all the independent states coming up with their own sets of privacy laws. But as it sits right now, we just don't expect a material impact to our business. -------------------------------------------------------------------------------- Thomas Ferris Forte, D.A. Davidson & Co., Research Division - MD & Senior Research Analyst [23] -------------------------------------------------------------------------------- Great. And then one quick follow-up. So this is something, Steven, you talked about historically and provided excellent context. So wanted to know what your thoughts were, Amazon drilling out free shipping on groceries, what impact do you think that will have on your retail partners and then what impact, if any, do you think it will have on Quotient? -------------------------------------------------------------------------------- Steven Robert Boal, Quotient Technology Inc. - Founder, Executive Chairman & CEO [24] -------------------------------------------------------------------------------- Sure. So -- look, it's a great question. You have to, of course, ask yourselves, why are they doing that, right? So if you step back a second and say why have they rolled that out, that's obviously at cost to them. And it must be because their grocery delivery program isn't growing the way they have expected it to be and particularly in a marketplace now where traditional brick-and-mortar retailers that have got the relationship with shoppers are starting to roll out their own e-commerce initiatives. So Amazon was operating in a competition-free environment for a long time and now that's not the case. And so what we'll develop from here, at least it's our thesis, is that the retailers with the most physical store locations closest to their shoppers in their towns are going to win in this market. E-commerce is still 3-ish percent of total grocery and so the impact of Amazon rolling out free delivery is going to be marginal at best. And again, we have seen some really exciting development from retailers who are traditionally thought of as brick-and-mortar retailers and their customers reacting very well to their initiatives because they've got the opportunities to do things like delivery, fresh, pick up at curb, pick up in store, have a shopping experience in the store even though most of the groceries that the shopper has selected have been pre-bagged for them, and overall that's just going to be a much better shopper experience and a winning proposition. So I wish Amazon luck in this, but it's clearly a reason why they are taking cost on to try and be competitive. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- There are no further questions at this time, and I would now like to turn the call back over to CEO, Steven Boal. -------------------------------------------------------------------------------- Steven Robert Boal, Quotient Technology Inc. - Founder, Executive Chairman & CEO [26] -------------------------------------------------------------------------------- Thank you, everyone, for joining us today. As you can hopefully tell, I'm thrilled to be back, and given the changes now taking place in the industry, it's both personally and professionally gratifying to be playing a leading role in the digital transformation of the CPG in retail industries. We hope to see you all next week at our Analyst Day in New York. Thanks, again. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- This concludes today's conference call. You may now disconnect.