GRPN - Earnings call transcript Q2 2018

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Operator

Good day, everyone, and welcome to Groupon's Second Quarter 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the company's formal remarks. Today's conference call is being recorded.

For opening remarks, I would like to turn the call over to Vice President of Investor Relations, Heather Davis. go please ready, you’re ahead. When

Heather Davis

welcome Good financial second XXXX Groupon's conference morning call. and results quarter to

On today responses or those Mike August statements. Randolfi. statements. reflect the Actual and forward-looking view implied X, The Williams call management's differ will following in are XXXX, our results only, our discussion include of may expressed and as to and questions Rich your today, CEO, forward-looking CFO, from materially

results on website a and is that information the potentially information financial our of reports Additional media the furnishes XX-K risks impact and We release this use factors and the at company finding files SEC, XX-Q. available releases Relations investors the press easily postings. encourage Form information, with in could that included website way governance in as about other our SEC, and filings corporate press or Form Investor the to today's company. our investor.groupon.com social our about and with select makes Groupon including promptly

each on we call website, disclosures and results U.S. FX-neutral which will non-GAAP following measures: measures financial flow. the discuss the the the regarding posted Relations measures, find will with EBITDA, GAAP. On free with SEC, filings of non-GAAP our is these press adjusted cash our our In release reconciliations Investor and also additional of you today, including

over as unless with otherwise exception gross customer, to Rich. I'm discuss we reported. are refer profit call, the FX-neutral our note the As to stated, are turn that, profit of with results comparisons, during growth And per call happy all and comparisons to as that which year-over-year gross reported, all this

Rich Williams

adjusted be in Groupon the mission EBITDA In core and progress cash daily in free of another our second business. local habit Heather. the strategic flow strong our continued quarter delivered you, improved Thank quarter, in commerce, to

success and the four we are shareholder our long-term opportunity strategic we’ve value. remained in believe As critical we've that initiatives to attacked local, focused on

As initiatives for experience; as are; four and importantly, least, initiatives last potential our in strategic extend rigor. brand these open establishing the unlock realizing not in see We platform our potential local; and Groupon of local essential advantage to enhancing and our true more pieces but business operational this continued a reminder, the the customer true a business. as international

The area, For are cash not deliver to $XX commitments, free We’ll while on and certain, have of for version this idea but these minute way. even and are evolving us undertakings, merchants, of EBITDA no made which and for and million. two way been $XXX deliver by on each on in a means next solid years we our ability the future. of our our bigger, progress we're an adjusted on more help focused our XX on small revolution. past our These employees Groupon done, trailing business underscore shareholders. for the results million consumers, months exciting flow We're better exactly pause building plus paving but

year and in million about generation America disruption of be we clear, International four base broke a gross to brunt wasn't trend company through But restructuring flow-through. multi-year active this cost restructuring battles results, which profit the added products about us of at phase. efforts, scale. of return with the delivered focused phase and phase in the solid merchants pattern In to that America change growth, improved inherent our scaled first consumers. of of next its and middle works began bore customers customers North and X developing rightsizing effort first evolution, economic international of began and ran The end for growth to of a our the the fight This XXXX, sustainable way the right the North parallel of we with declines. actions reductions which in the a on our it XXXX and a all to position Groupon investments in and

reduced exciting by while million, linked believe third I offers over building $XXX to platforms. addition, card In efforts which our are product and a partnership what party SG&A we include our date most

is as hadn't completion grow fourth quarter something straight first now restructuring growth the of gross seen we and started Importantly, profit the in international, in our we that to moved many with we in out phase of again of years efforts, QX business. the

and see second of of scaling Our customer profitable day. and forward the acquisition results where not we ahead have and we're going of still teams next scaling delivering that which of think trend phase to smaller to term gross deserves. to with profit work international core trade-offs in purchase in pleased voucher frequency in maximizing North products We even to toward kind Groupon+ begin experience in work The and headwinds discussed through impressions with phase this order to phase potential. North marketing to a the the kind in profit the as lead willing we’re in willing disruption revolution, get how we’ve us in stronger of making international can we’re in more in continue are deliver local evolution gross enable growth with we’ve disrupt the our some Groupon+ core that phase experience American order quarter customer we entails generation increased we relationships. product. North every part growth, work our voucher profit some of Net, and were This longer we forward. gross about business America, term now, to our begin just merchant of there pushing business are short is line our That's as say potential consumer second in and a America Groupon's we our we’re

through us to it, drive are bottom while Our designed delivering four line results. strong strategic initiatives

the response Groupon simpler, to we've efforts the year, to on enrollment encouraged around merchants center grown the customer the than and merchants voucher linked by is First drove valuable consumers than to million made experience. less enrollments last the better we’re we’re is in Groupon+ way. in and million progress and and program. every experience Since, more more where original from We new of focused making at we’ve and second cards alone. X and our unveiling X customers Groupon+ quarter the card these

one small for the our larger to card space to with X,XXX discounts overall. locations model encouraging market, of the voucher combines amount add over of in recurring the a leasing they pay the card see We Groupon+ where Also larger, We're have discounts. access now it merchant because usually regional also testing experience quarter more at innovation convenience model seamless customers this lower, the potential, discounts. in fast our value of And program linked mean traffic which them clip, test we and pays a card and has launched customer in and is testing flexible the the for discount earlier value can We linking. the continue the for the see prepaid this opened offers more because as more higher merchant. for up customer redemption upfront, linking in in we a

see into and app increasing With progress to we of with XX% experience the marketplace app this all to offers time, will better merchants our bottom and our and iOS easier browse, and as to best engage a strides team the highest through parity have fast the discover move we vast our our rated of merchandising while year we explore of customers. mobile needs in XXXX, and continue importantly, appropriately, majority and of international make customers supply feature our of to devices in our with make million Groupon the half to speed mobile on catalog sixth in more our and mobile be know And back browse on with overall mobile mobile platform. occurring volume of We revamp clearly transactions better opportunity significant align improvements to in than growing the growing of XXX search continue improve mobile to to top also app. where to and and date. search, our We we’re leader downloads the we increasing it

we've particularly business, the important the aspect progress our Another in of customer fulfillment. Goods made in is experience

declined as to quarter tool. business better optimized see assortment gives us also we as opportunity engagement capitalize gross our for at and of we powerful to While continue a profit, Goods the the goods broaden and buyers customer marketplace. Goods in local our to The that units increasing prices introducing great efficiency

one improved quarter basis margins XXX XX.X%, to ever. our points Goods in best of results the global Importantly, second

customers have power built focused teams, with realize on realize We them massive, Groupon do strategic To the in we're we've to even buy. and the that sourcing with our Groupon appetite engaged our value connect deals, things a to also broader goods is the powerful of fully second great see sales local Our XX marketplace potential, base. from And more extending built customer infrastructure inventory nearly in supply. that that third million priority but on and get additional parties aways the amazing in-house for an platform. significant bringing

and we've in launched Grubhub, Express, far others. So, Major expanded XXXX, our partnerships Baseball, American League CoreSource with

thousands it partners partnerships tens the Viator brought UK of and continue coming platform. second our to to the particularly UK‎, is as We in international add party over strong quarter, we marks the variety Soleil platform. to interest buying And of a first the integration In these Groupon du quarters. of from of use platform to Cirque third see exciting Viator FTD opportunities we expect categories. the

and Nation, event associate things source for understanding, buy there also the for for discounts, early we specturm. inventory across see, cities for with to platform a but our demand ticketed We full the also in they price space rely eat, time great many on It's and is price ideas Live began discount a on launching us offerings, discovery both as world. room that do partner with Groupon and the believe around with while full long on the customers on offers in

our helped Our we initiatives trafficking and as catalog scale platform this deals deepen provide a catalog core opportunity. relevant see in expansion places. have timely searches, to more With more our more and partnership of us and

our is obvious to first phase drag our third our the an in business. international was Our to overall realize potential Prior International on fully evolution, on embarking priority of business. the

and International we've We winning made very As customer investments a healthy, International at bringing beginning X% quarter of we’ve and customer new acquisition saw proven customer success efforts. XX% number in sites as the profit XXX,XXX added North gross customers a similar apps. America quarter. in XX% our in from features, launched with show. per America profitable profit great in improvement in and We the North enhances growth, and a our to The rationalized we grew across made strides results footprint, parity. growing international proven to implemented gross goods in are our product strategies

largest While and work to disruption, GDPR, our are International, that our in important that is impact half. we’re great not note tracking it's any the down seen we've which from around slowing legal our that of effort compliance GDPR was to implementation particularly business, The the in is significant product first technology to of front, on development the credit meaningful news roadmap Arguably, good teams. the on the following teams back fast a International.

to in North and International, local, to We'll party sales in this a in we processes investing while shopping partnerships that ability continue cart in bring tools ahead pricing third been inventory and refine across expect Goods countries offer Looking good successful later America. have the the to year. our

for opportunities with immense. is We much Paris for campaigns acquisition European marketing still also believe expanded cities the see like to opportunity Malan. to major in here we There's and and continue customer in plans International do

we've years. two of established Our over is the fourth operational past area rigor, continuing focus the

Here, $X will seen the improving quarter year-over-year continue we've million progress quarter-over-quarter, IBM, strong million discuss. which with and SG&A excluding second in $XX Mike

customer in and global shared the processes part big a of are service general success centers story improvements service Our and our here. sales

focus, America. every term for. initiatives they’re of levels, the was see we Importantly, in worth the that our to speed X and day and improve technology both the and in service that's to second it we With pressure growth matters XX of Overall, continue believe overall a down that long-term we quarter growth. to strategic as years product four adjusted inputs efficiency. to commitment while progress saw automation increase significant our opportunities doing creates doing EBITDA We're Mike. use solid success road. local key near With deliver what and second time our call and the of let most will over to North all that, roll-outs we're a EBITDA me building and over believe in opportunity delivering and turn massive our evolution a and continued patience Winning adjusted to the initiatives new our phase

Mike Randolfi

Rich. Thanks,

second the $XX.XX, gross line from and profit in $XXX gross EBITDA the a XX earnings expected gross Our last profit EBITDA Groupon+ profit have in prior was gross reduction what basis, $XXX X%. customer are local quarter year-over-year quarter, low and the $XXX trailing second In QX the $XX month digit single which was was profit million marketing increasing flat or of versus $XX or million. over assets, sale Adjusting the lower period. of offset ramp we QX million, from $X for $XX a by for was gross the on and million, down basis largely total, of of results year. certain $XX In experienced with million gross America adjusted North QX on million for up for million, about the percentage was North order profit adjusted gross profit a year Goods America gross down would North call per of profit million with X% America, prior local profit decrease. spend.

a the America, North active believe focus experienced potential segmentation we've value customers become as have we in greater decline marketing customers attracting we for our more retaining efficient anticipated, that As over on of and time. and in our

over and such XXX,XXX couple million or continue benefits our the than business trend refine to selling the we’re We existing the period. $XX focus was for for we about was $X million and for continuing while payback up gross customer continued more International, and were business in term $X expect acquire Groupon+, profit. We've gross our America, several and and the taken QX order reported. customers gross a we’ve expense quarters. down a of profit momentum or International expense quarter, generated North In Goods recognize pleased International discounts we million in the certain $XX excited optimizing America very the XX positive summary, added up consecutive North At net our we short-term, QX the in we've longer similar Goods up $XX roll-out for opportunity to local generating In quarter, X%. retain next QXs targeting have performance with gross within of profit its XX%. rather on be a actions, as created from or this And customer. as QX is $XX.XX, quarter, next segment. International settle has the of disruption quarters. value some million, our actions $X basis or profit support In these this on XX% increases fourth gross over X%. gross materially base and and the customer we was base. In as million $X growing second $XX million, out was North which customers expect short-term the will On million, QX was time, we per long-term up trailing another the assets, $XX couple order grown profit for down same and expect $XXX profit of marketing month on X%. per second new million, consolidated marketing America, of to down continue customers basis, million, million will

exceeded in the significant or of to long-term In second efforts, gross customers the is $XXX both helped as in success drive grow XX%, reflecting efficiency wallet the breadth ongoing marketing or profit SG&A increase the quarter. a opportunity and experienced local which discuss million the those from growth was International of I’ll customers. the million the which there customer per the $X the number customer, we which we quarter our Over excluding up of profit believe enhance impact down International, the expectations. and share $XX million, IBM, QX was we supply X%, experience, of to for our moment increase and of depth gross grow a

the to matter IBM. overturn the seek finding verdict appeal. trial and the through of jury a During in IBM damages returned the willfully million motions and post damages to $XX.X verdict reduce IBM's the company third to awarded patents intend infringed quarter, and We

million, this we've into charge with $XX takes our for Associated one-time verdict of accrual previous case. which taken a account this

free generated year-over-year to our million, continue With basis, be undrawn million Moving the the second America cash Keep flow-through On $XXX gross With $XX Vouchercloud time. North over expect generate to in strong grow with flow, last highlight profit approximately reflects and materially adjusted flow you our to growth addition free as QX. the third year improvement gross in of at potential profit a for dollar over cash the XXst, quarter, anticipated flow on business we million we model. expect our $XXX EBITDA be from potential the change March cash ended revolver. we mind, important from any to million revenue be free $XXX expected million compared cash year-over-year month and to flat look XX IBM. full and the year. of to in $XX we In quarter to when coming the flow cash cash, quarter With $XXX regards between purchase in utilize third which million International. and of balance during the we XXXX, it's million to free that in impact expect with on cash million excluding to a the from $XXX $XXX approximately liquidity, trailing quarter and to from will

efficiency expect in in would by the SG&A investment expect measures, compared our expect now in we acquisition. $XX ongoing QX high lower expenses success given International QX in we adjusted customer to On driven We range. QX. as total, In increase versus to of the QX million EBITDA QX marketing

are out year guidance to profit year full in gross $XXX In improvements me enhancing we continued With continued a platform, operational a to flow XXXX progresses adjusted believe million EBITDA rigor expectation adjusted back the million, potential to free and date, reflects over the we which on are growth. continue unlocking investments with are Groupon path for and International’s that, $XXX our building the multi-year on experience, operational call Rich. let as making around to reiterating efficiencies, results we our customer we the trends XXXX, Moving cash the for efficiency. summary, EBITDA turn of and the and

Rich Williams

Mike. Thanks,

of The second the an International we’re long-term our across strength and success, amazing platform, customer excellence, strong and and continued demonstrated our progress toward our making immediately, encouraging the will on in believe experience, second quarter focus continued focusing over half our extending investments returns effectiveness XXXX. deliver we of with on progress the more operational continuing time

thanks commitment Of always take forward? their continue course our as to drive Now the Groupon mission, questions. and local to us some to I customers, to which do communities, for let’s our merchants with team the the

Operator

from [Operator comes line Instructions] UBS. Eric Sheridan with a question of first Our

line open. is Your

Eric Sheridan

we gross or think XX fair spent XX on bit dollar long-term? about of about? even talked certain Thanks so of much. marketing, user much on for bit time sort how taking that on a side, profit past learned growth to that to as you’ve marketing And so just to XX dollar we the as the the you stay on growth look question. months either against what deemphasized how feeding Maybe should a and going payback months, into you've tracking you’re reemphasized wanted XX Thanks channels slide maybe back marketing, little to

Mike Randolfi

Sure, sure.

continued XX the marketing, a overall years, thought at that targeting around as and and expect viewpoint we know we be our to margin it that's our should would pay of forward. continues you going marketing the XX last So, our be and for look I has been thought on that that couple thought to to months and months think back be about we

is ensure you efficiency that deployed. dollars, of one the we're to the do analytics, our with the have always each improve that dollar know So, much granularity marketing around that we the getting such we’re of out marketing aiming improve as to ability things of investing

of So, what which deeper pockets be particularly over last able we’ve do identify has ability in develop was marketing, to granularity to just pockets to as giving efficiency as the continued us our of well the year inefficiency.

inefficiency make marginal to a customer. acquire where trade-off or we’ll either not investing so that a actively And of there's pockets dollar retain of

net So, gross the America an of run helps profit the in some customer short margin. way in early a per in what there that believe overall about valuable that we of that's us the a from obviously deeply resulting so pay that over be -- Internationally, is is within into to mix to is but in and the is it customer mix long we're more run, terms in North I deeply, modest counts, and so think on standpoint continue XX that we're going International in months to kind months days is XX back would highlight the market underpenetrated. reduction

would expect So, is see that customer to of customers, highlight pace. I also us North really goal and grow to International, the base, the that here; to continue goals our is value at into America both one healthy time. other I a have and just would but you two over acquire between we grow obviously acquisition acquiring customer What leading base

marketing, the adding time see byproducts But all gross to efficiently. over the think up over the to be customers end end So, base and additional emphasis supply; your over as at increase But -- the other up up with valuable greater GP more the the increasing And from with is it's on and more potential byproduct of long both elements, margin the customers Eric, have it time. run that is you we profit ability actually one, service it’d supply our actions if one or we're of acquire you you whether a opens and of ultimately a base. of International. more America we are base North and those what what of the focus with think look, generation taking, enhance on value continuing to to we which focus product also I is

as I you'll see of in at see next similar I similar some America some in the So, the and long International. trends I What customer over look discussed the would say run. couple of I quarters as think North specifically trends of acquisition think you'll what over just say the would I is

I North think and I a there's lot in International, opportunity think the to both customer America still base. grow of

Rich Williams

generate that retaining be reasons in and in to long-term identify the within that going or if for a potential we're Rich, Yeah, going and just don't to what point add this a potential clear described and to just Eric, what our be going continue to that time this ability over in to We're quality over in that don't invest to the to point high is of to this meaningful as fine refine thresholds. for customer profit dollars marketing last thing customers do gross we to invest just gross the grow is our that dollars on doesn’t and is on do not that's is drive time invest programs right some anything either our improved us. that couple returns we've things, count, customer, quarters them marketing profit the requiring for that's and invest the disproportionately want I going the we reasonable as at Mike we're it's it to marketing see we in biggest to means

Eric Sheridan

for much color. the Thanks so

Rich Williams

Thanks.

Operator

Cowen. comes question the from of next Champion Our line Tom with

is open. line Your

Tom Champion

about deterioration Hi, talk could American guys. good the just profit if more I'm in morning XQ. curious North bit and a gross the little you growth

trend quarter order maybe to up Groupon+ improve is how of local. else lapping X the based improving think just through Is going on was year? trend? in potentially should up and think address something balance we in growth the there I it Thank in underlying order or Maybe you. last up just it about the particularly

Mike Randolfi

of you that would to realize that back we we the We point in third the commentary, talk we but And has the would commentary, prepared the were talked the first highlight and where short-term America which it's potential quarter, we year a disruption just gave the to going would fourth I year, better Goods the North indicate Groupon+ up having that, to we'll focusing on that part short-term short-term the potential we to is growing highlight in and on thing the we you up, space, our to I what we would several first we create where that disruption, short-term. this be some the of headwind higher And where we half about I and knew And the our as into think I’d if in benefit that's fully that on to degree is with that create profit strategic because lap we very some optimizing roughly of think much of third the quarter. higher that get gross disruption fourth in had quarter. highlight to to things in our scale even profit. be we a until player the – longer believe were some we back the to get around third and more emphasizing Goods right quarter. really we Groupon+ there see about really quarter. order no Sure. do call expect the we gross units margins and we don't is don't although order business think partnering start quarter trade-off focusing for And flat you year-over-year of into

beginning quarter of see a a So, just is in the basis. sequential the improvement I year-over-year third think what you on

Operator

line the comes of Our question Jefferies. from Fitzgerald next Brian with

is line open. Your

Brian Fitzgerald

how of I G+ are dynamics about on rates think last. linked is And locations, guys. think it do there? markets? of expanding quarter you Thanks. million What Can X.X good. the remind are TAM us G+ the card that's that? Thanks credit X.X in Groupon there, credit penetrated cards the you into how what's members adoption was type seeing then it we added X.X G+ is you this cards

Rich Williams

our TAM around date, Great. portion that, last From markets in to were cardholders guess, in we're in obviously, so markets the we're working perspective, we’re something significant are you to cardholders only of saw. to the it I in address to we’re the or a really number really about for have total the if largest XX going I of but a think Thanks so markets just million access is But to U.S., U.S. a that, Brian. TAM. XXX

countries our You and start to expand to has that where term international opportunity. G+ longer

cardholder’s millions of hundreds of total. about talking You're

currently with we're would I really where the base. think And customer very the I our of even the cards but with what like a wouldn't is to it that's you addressable in early million we're even in consumers in the range customer to existing within I has U.S., market overall the just call we for limit place base, know started see in because the potential X existing So, enrolled somewhere XX% our game penetrated XX% product the U.S. Groupon into

we've of to So, there. got I go lot a think room

sure what increasingly be of adding And that for we've we're and last north in I is actually think velocity throughout mentioned, is in adding of Groupon+ funnel. cards been and QX been experience needs program. of enrolled X overall quarters general with couple what solid the really on, making in cards the million the where you and to over really line focusing As QX has disproportionately in is us the overall to it

the we getting started into very on cards we the on penetration merchant obviously were initial focused program, focused when So, in enrolled getting program. very

and those a have moving healthier real Now have as play some scale zone, with we learn to actually into much from. we

redemption. down working from enrollment way the and be more the We’re going all and more deploy across to to funnel

the not it it's going acutely country like on But the quarters that operate total start potential they us we’re think to scale you to in much their be do three in not and and TAM. way universe know Europe last or over continue we're have then just much as look be that think for major So, product, deeply as using countries more at frequently the singular the making we enroll have it's there. up in to in four is it about U.S. the been a to to in cards sure people we enrollments, from the cardholder engage real the to to just the really to I and really getting and going focused a tuned more

Brian Fitzgerald

Thanks Rich. Great.

Rich Williams

Thanks, Brian.

Operator

comes Our Scott next with Davidson. McConnell question A. D. from

is open. line Your

Scott McConnell

thanks. Hi,

So, for will first know of case; effects go forward and you on if pay, the stands basis? things going decision what a on licensing have fee to ongoing what forward IBM be Groupon it the the

Rich Williams

infringe our there verdict continue patents that's and to we issue appeal, on we Yeah, just fight so through and view. at to post-trial damages the we – we and didn't overturn so, and what intend and would is the fully reduce don't motions I highlight believe, it the

that I know XX-Q. You to you our that beyond wouldn't refer comment would just I

Scott McConnell

great. Okay,

recently place Google be on would a algorithm changed question Second to their mobile. greater emphasis

algorithm So, to efforts? strong you’ve the SEO a in long had product, change mobile what your has done

Rich Williams

right. long-term, efforts We’ve the toward point Thanks your for we that focus is development that our strong we strong a exactly product presence, Scott, mobile mobile we these I’d to in that's anything continue a days. have had presence place only say and really general like mobile, biases

material so point. again not in there’s with think we So, long-term share business, I much the you that a haven't benefits I us confidence seen our on just optimization that I that we recent at with mobile our the day-to-day improvement our just of and continued can footprint our ongoing besides see Google side, in changes difference think this outside any in

Scott McConnell

Thanks. Great.

Rich Williams

Scott. Thanks,

Operator

with the from Justin comes line James. of Patterson Raymond question next Our

Your line is open.

Justin Patterson

on investing Thanks that are and some very your there full Is question Thanks tease those well sales – so distributed Live something for the velocity that's doing price like there, your just that things full wondering value-added wanted Rich, experience related the What's search how hypothesis billing size of and how much. of audience, LV Nation and and to should in this that, is since. touch rate of earlier and investment. Great. focused you're increasing I price investors conversion elsewhere. around there. is duration sides especially new about with much. customer a data and would inventory where love find over of that base? not really then And common mobile think is your time? with with thoughts effect I out you’re Actually about a to your think comments on how your this I so on discovery to

Rich Williams

and iOS Justin, a and highest so been experience the development overall mobile mobile Thanks, that. was question start I rated it of and and I experience so mentioned all the sixth I’ll Groupon just we've adaptive great app about think with time. I thinking really we’re in think how And think as I

making to So, we’re app. at and creating, mobile apps good easy and use rewarding really very engaging an

increasingly is generation rewarding that what high I based really But efforts refinement sort that of been of it's think and app majority things really of as deal is, remained of experience product the a our customer first making app in a daily vast feed deals the that as and that easier been product of list Groupon designing sort have experience our really feedback, filter intact. I’d largely that taking and our around to and and it on though good of stuff. view all the have fundamentals quality around say and

our would deployed can that market employ. think way and to scale even customer millions hundreds built as it. a for hypothesis other or he experience built hundreds offers of thousands of and scale experiences not rapid of enables of for that hundreds add that a that and places catalogs be large being in to isn’t types offers is continue and catalog It's hundreds I we

high he other And intent major much so marketplaces and scaled more towards the just search can discovery find look and of behavior. you at geared or any they're

we dealt data longer as our and effectively number be relevant those taking have he that shopping machine being have huge think and And really corpus in we UI opportunity better best – the searches in – and effectively there’s through to just sheer a we to towards the lot app lot there. of really do of the have Ours the window monthly of that they our possible for use service traffic ecommerce cases very to and applying than that high some need intent type instead number. is as can and standards a to core opportunity big just ecommerce, offer bring that of conversion very, and that’s it's There's enabling we worn and a many really believe find know and on well catalog customers data things impulse served tail are biased we that don't a And front. of both of them more and in us basis, see in in it we of believe of use traffic. learning have we this that a we been lot you changes how well that also algorithms And just our use improvements advantage But to the discount. space, intent some and the best in we our possible and search experience. a

means need leveraging aligns of more use really our product. just of to how, a version a what with opportunity the app big core that of different to do folks people tens and do experience is on the a to basis people. on unlock closely piece So, their get we of Groupon Obviously, millions literally for of different, there that monthly a to Groupon

that I brand is brand is things example. the we as Groupon only, as misunderstanding seen an value synonymous savings. in market the talk eyes think Groupon to we investors a in that one with is is where of there investors’ our a when brand see many of the brand, The

brand our with one discovery synonymous equity the the true of local. that's highest we're the brand have in U.S. for savings, one levels of of and While – is we

what what to weekend, that’s they’re I do do think on to experience help don't restaurants brand our DNA. their them to bored the and new a kids, is help to we to job, try we've to that with to core So, what good million core and it. when done just for enough that's absolutely do our or what brand customers, supply XX figure our delivering unlock out

offers So, that. a in full part price play

redemption people intent that great in consumers. ticketed we does and we mobile a a point. a at Our to seamlessness fully us to high we high in play catalog destinations when no where relationship we a aren’t distribution else or can't a point then invest see of integrations, that, third platform, trust in Especially in trusted. purchasing so deliver gain virtually enable take this way as the scale differentially make you digitized lot do experience, a a our in that thinking do. ideas And way that a distribution you're seamless is trust party they that other in have about for ticketing high to what of other And there's part landscape, where methods one experiences. increasingly And trust lot and way do us we

the opportunity to think, to I So, we're really accelerates way build in that. experience a that product path a really that’s that better of more spectrum of discounts and just front-end a the the our out on enables flat is and provide across trusted,

Justin Patterson

Rich. Thank Great. you,

Rich Williams

Justin. Thanks,

Operator

line is the from Mathivanan comes question next Our Deepak with Barclays.

Your open. line is

Deepak Mathivanan

early, EBITDA. about I provide in to level Should it's framework to look we marketing Hey you current the as similar year. next a gross we know growth to guys, high and it be trends think FY spend question. but can levels thanks expect profit for XXXX taking into

cost Thank you for at of structure, sort gains see do more Looking you. in models. efficiency the opportunities operating your

Mike Randolfi

only we through haven’t – Deepak. guidance end Yeah, we’ve this the year, obviously so provided of

say investments term, is cash longer to what from standpoint, growing say investments. there's SG&A we some going and International. time, I is, gross think where So, that's think I see. to growth. as path I talk multi-year flow we And those have is, while as I And longer just in about America we're at same will the North I those of and free be I think on investments time that pay make adjusted term are trends profit would believe an good we expect just over we EBITDA of the will comprised what we a off would One on what that

a drive have be to mindset last we've over of looking to We couple developed the for continually efficiency. that strong years

cash flow-through $XXX grows highlight the of around year would think million guidance that what free highlights to of flow that I free of commentary -- to What more we today and of we potential a flow to over $XXX cash much But And But investments come for those expect highlighted impact bit reiterated any to this in potential the just grow. $XXX is years flow ex for this cash So, to from also potential time. million of generation. offset provided as we business million. free IBM. flow-through we’ll we the around would our little generate I work

Deepak Mathivanan

Right, that's you. Thank helpful.

Mike Randolfi

Deepak. Thanks,

Operator

comes from Gabelli the Matthew Company. question line next with Trusz of Our and

Your open. is line

Matthew Trusz

taking for thanks and morning question. my Good

feel for about that off? customer the how you in of today? you the you value characterize of expecting health customer turn you're can gross wouldn't about just would base you profit How possible? as much lower is they seeing Thanks. level do your attrition, discuss talk As turn off, that rise Just mind

Mike Randolfi

a to It's Yeah, retain we to relative pretty what acquire you so gross think much, way the it's I’ll start and you know, so spend mathematical. the it, pretty about profit. customer or do downstream

long-term now continuing we supply. the I you the we've overall despite North investing what fully we've just have supply sure, has on So, know party our obviously and you flat to implement going that also trailing some flat on we're incremental return brand getting incremental at dollar. refinements benefit in starting third benefits say been that's as to look That's think forward add of before the year. I per would Groupon+ was one, if is, America, and But that make that's XX are been you been all we partnerships month I -- some flat and gross that if basis, the dollar, before In profit we just of look trade-offs think, roughly to to us. at flat want customer continued we're year-over-year making

gross over the to per in customer profit America. So, North potential increase I time think of have all those

both at trends will couple I the think and the about to year just of build American that last continue if expectation we overall the you as commentary progresses. for calls, talked look of kind have throughout a North International

International profit in benefit marketing highlight expect would Over I to International. that gross trailing lot have also we of increase so, a profit by that see year-over-year And customer just continue on month XX% per still product, gross basis, opportunity, not we and and XX to increase has you per analytics. saw customer. I’d a and but applying we're potential whether the gross customer, customer elements North only both, be playbook, of that also think We the on to profit significantly materially supply where years for it’d grow come America per base.

Rich Williams

where that made thing where add [indiscernible], only once and business there, strategic seen we've is headwinds talked I’d we've the in general where Yeah, Matt, on and decisions about we’ve to some impose we've growth of them where on we're on and of rolling out potential customer new seen indicators trajectory the really products scale the that and to we platform. change believe the

headwinds those near So, that trade-offs, has are the we and voucher inherently some like sales. Groupon+ trade-off the as with some term associated things

per total basis, within think a about that's point, that – you total total On a GP year-over-year. see customer to up the count is customer’s – million I even our and my growing customer, overall. So,

some these I over make products So, product of we’re with pretty opportunity and solid see significant over to believe new doing as effects kick the rollout especially of better it we start we we're a to rollout, what spot in think time, in is time.

So, positioned I continue well grow. we're to think to

size in the and the customer as refinement is of the metric metric specific and really can can that and scaled -- drive a on more the given business. I and the think doesn't though TAM tapping push not an really opportunity we're per the side. focus getting core the what we're way, message we're than driving here and on is GP measured focused we demonstrating, trajectory products thoughtful optical count, about fast that just as as customer into we It's the

Matthew Trusz

Thanks. Great.

the position a Is company. recent sale? the speculation interest comment potential anything your you Is quick was your can there media company Just about Thanks. far selling follow-up, strategically? for as on as in there

Rich Williams

growth a really I exciting partnerships the think on flow really and in tell think delivering cash – look free and the and you our pace guide a expanding We're is where is Matt, adjusted cash growth some XX% is, our we’re of encouraging. what and free XXX% commentary. north at that really, if I’ll things for in front we're that solid year-over-year top-end at you – company flow our doing guide So, we’re our my I look of on adjusted year-on-year something EBITDA space that’s

interest some really it's seriously, our we takes on. from very, time-to-time So, And have outside in that, comment not received of that to that but anything always as past. surprising don't side expressions very that we’ve we the on have of board

Matthew Trusz

Great. so much. Thanks

Rich Williams

Thanks, Matt.

Operator

line Our Goldman with of next Merwin from the question comes Chris Sachs.

open. is line Your

Chris Merwin

Thank Okay. you.

couple questions. a Just of

as average a of there Groupon+ as And you're is so, size for the a a as guess, I are same the seeing caused material seeing for frequency did, you Groupon+ compared today has when related Groupon+. towards transition the customers navigate initially were testing First, the question, if that difference you some the increases that Thanks. Groupon? in you product? that headwinds ticket traditional to you

Rich Williams

merchants it Chris, and free. of but I’ll a start vouchers, color, look G+ on only really an Mike, have first. of But Thanks types size for as ticket for feel in decision and versus via only our you as you -- Groupon+ aggregate that output an bring at in there to different is difference if when

product ticket product voucher fine much average casual So, toward, just higher geared to and prices. as when cetera, breakfast, the dining ticket voucher scaled traditional we’ve dining, continue inventory price merchants. have the you been example, more But the where -- Groupon we point lower a when put a Groupon+ on a and finer to to rolled we to lunch, more make we that it, made hasn’t we addressable as roll-out bring the is choice to et so started coffee choice to on

So, have is disproportionately and platform this stage. of in happening a headwind piece nearly inherently on that frequency, look that lower ticket some high bring to dynamic as the you're to merchant we of at going that price

Groupon and to to food that use, money to every product use well high more really now ticket again Now of engraining make save Groupon+ really building on decided habitual the behavior point day. the price we've the for works we're merchants, but single for higher frequency focal because

haven't a a don't merchant to So, do see do you but strategic when have product, when a material observed voucher it's this we price. ticket in do total have Groupon+ class same been we point, at the difference material that, and we really at decision difference a the running

Mike Randolfi

as I also even have quarter. enrollments last the only would what bit see But would while on use you have doing third earned months where you're The purchase, at encourage you add that that, of six off encouraging in creates been and you have over and there Essentially unit a you you're would claim what is, the terms thing site a a a assets is little app we have GP that and as using ultimately is our then trading assets, encourage voucher in going traditional claims, would and been and generated and headwind the site what enrollment, redemptions. doing encouraging encouraging an would moment.

progresses expect the will is year we as what to – and redemptions you the get support necessarily and don't as that used of impression more you Groupon+. start benefit we is, happens ramp what So, have that the up to

and first would along year of the time. we've the you'll over generation the this half in commentary terms the in is about GP see generation of disruption customer we'll will that it's the have and we -- expected that benefits in and Groupon+ continue going start of our to the our build that our overall per GP to half seeing things one in all So, we talked year expect of back of and

Rich Williams

that of part those we these same in see your behavior frequency in of question. do Groupon+ and this is that from stage, to we big recent we're continue do of getting kind your later more as piece answer Yeah, the and beginning. second a in did adopters We Chris repeat build purchase the period to

on your our traditional So, and redemption net voucher when much rate a continues you high purchase Groupon+ Groupon+ frequency redeem business. higher and start at very to than frequency

Chris Merwin

Okay. Thank you.

Rich Williams

Chris. Thanks,

Operator

Our FBR. next comes question from with Sameet the B. Riley [Operator Sinha Instructions]

will program Sameet conference. Sinha, conclude Thank Due open. is disconnect. all a does at Everyone for call. session. response showing not and your question-and-answer Ladies is any open. This may to further now this I'm time. and today's Your have conclude the no questions in participating today's gentleman, now does you we you great this conclude the line line day.

Groupon (GRPN) 3 Aug 182018 Q2 Earnings call transcript