Engaged Capital’s Glenn Welling has sent a letter to Quotient Technology criticizing the digital media company for delivering “poor” operational and share price performance in recent years.

The activist also took issue with the company’s corporate governance and hinted at a proxy contest to remake the board.

Engaged, a 6.5% shareholder in Quotient, said in an open letter Wednesday that the company’s top echelon has failed to create value for shareholders over the past seven years despite a prosperous period for rivals and the broader market.

In response, the company said it looked forward to working with Engaged Capital to “better understand [its] views.”

Engaged said Quotient has “valuable assets” that other peers and competitors would find “highly attractive” if the company is “unable to drive profitable growth and the board is finally open to other paths for value creation.” Engaged also offered to provide Quotient with capital through a “strategic investment.”

However, a spokesperson for the company said it was taking “decisive action to drive sustainable value creation.”

“Over the last several quarters, we have made meaningful change, and are building upon a strong foundation that is supported by the industry’s shift to digital and executing across our key value drivers,” the statement continued. “In the third quarter of 2021, we delivered strong revenue growth and adjusted Ebitda margin, while making significant progress on scaling our platform and reducing low-margin business to set Quotient up for long-term, profitable growth.”

Quotient was profiled on Activist Insight Vulnerability four months ago as a potential target for an activist demanding operational improvements and higher shareholder payouts to lift the stock. The report highlighted Quotient’s mounting operating losses and high overhead costs relative to rivals, among other issues.

Activist Insight Vulnerability reporters also argued that an activist could push for a sale of the company, given the consolidation wave in the digital media industry.

Engaged noted that Quotient’s current share price sits 53% below the initial public offering in 2014 and close to all-time lows. Quotient’s relative underperformance is “staggering,” underperforming peers by over 500% over a five-year timeframe, the letter reads.

Shares in Quotient, the parent company of coupons.com, were trading down 0.7% at $7.43 as of 10:50 a.m. EST Wednesday, giving it a market value of $700 million. The stock was trading above $17 per share earlier this year in April.

“The magnitude of relative value destruction is evidence that QUOT [Quotient] is suffering from a company-specific problem, not an industry- or market-wide issue,” Welling said, adding that his concerns were heightened earlier this month when Quotient reported its third-quarter results, lowering its guidance and revealing that it had lost a significant client, Albertsons.

“This disastrous performance raises serious questions as to why directors are focused on protecting themselves, rather than closely examining how to change the company’s trajectory,” the activist added.

Welling said Quotient suffers from “abysmal” corporate governance practices. He listed the company’s staggered board, a recent shuffle in director classes, the same person serving as chairman and CEO, and bylaws prohibiting shareholders from calling special meetings or acting by written consent among the issues.

“We find these governance provisions and tactics to be self-serving and an improper use of the company’s corporate machinery to insulate the board,” said the activist investor.

Welling wants Quotient to grant it an exemption to a recently enacted tax benefits preservation plan prohibiting investors from amassing stakes larger than 4.9%. Quotient said this is aimed at protecting its ability to use its net operating losses, but Engaged sees it as an “entrenchment” maneuver.

The activist requested a call with a subset of the independent directors to discuss its concerns.

Quotient “competes in a competitive marketplace and if the company remains oblivious to the issues in need of correction and continues to be managed for profitless growth, every director in this boardroom will be held accountable by stockholders,“ said the activist.

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