Why Quotient Technology Stock Soared Over 25% Today

What happened

Shares of Quotient Technology (NYSE: QUOT) soared on Wednesday following the release of the company’s third quarter results. The stock was up 24.7% at 1:20 p.m. ET, after gaining as much as 26.6% earlier in the day.

So what

At first glance, Quotient’s results fall somewhere between “terrible” and “not too impressive.” Revenue fell 48% year over year to $70.3 million and net loss was $0.07 per share, a slight improvement from the loss of $0.08 per share of the previous year. The results were below consensus estimates on Wall Street, which pointed to positive earnings of $0.04 per share on revenue close to $74.7 million.

However, Quotient also brought some good news to investors. The company has raised enough funds to close a $105 million deal convertible debt balance through a $55 million term loan and a $50 million revolving line of credit. The remaining $100 million of debt, which was set to expire in December 2022, will be repaid from Quotient’s $208 million cash reserve. The move avoided potentially devastating stock dilution, as the debt notes could have nearly doubled the company’s stock count if converted to common stock instead.

Additionally, management pointed to the fact that Quotient’s sales increased sequentially, while many peers in the digital marketing industry saw ad sales fall. As a result, it is increasing its share of the online promotions market. In addition, the company’s recent cost-cutting measures generated “near break even” operating cash and $10 million of earnings before interest, taxes, depreciation and amortization (EBITDA).

Now what

The omnichannel marketing veteran these days is branching out into digital ad campaigns and online coupons. The change in strategy was not easy, especially since the online marketing industry is going through a tough time. Ad buyers are less interested in paying a premium for premium ad space during times of high inflation.

This dark 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-cutting services.

“As consumers look for more ways to save and retailers look to take ownership of their retail media networks, we are successfully evolving into a consumer promotions network and retail media platform. data-driven retail,” Krepsik said on the earnings call. “We believe that the future of Quotient lies in our ability to become a preeminent platform provider for the digital delivery of promotions.”

Quotient is therefore taking promising steps in this strained economy: strengthening its balance sheet and adopting a radically different business model with better long-term prospects. That being said, the company has a lot to prove, and its financial platform is still not solid, so I’m happy to watch that. risky small cap stocks aside until further notice.

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Anders Bylund has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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