GRPN - Earnings call transcript Q2 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone, and welcome to Groupon's Second Quarter 2019 Financial Results Conference Call. [Operator Instructions] Today's conference call is being recorded.

For opening remarks, I would like to turn the call over to the Vice President of Investor Relations, Heather Davis. Please go ahead.

Heather Davis

Good morning, and welcome to Groupon's second quarter 2019 financial results conference call.

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

and results in Annual about financial our for the including and our investor.groupon.com subsequent encourage finding XXXX reports way filings on year on our impact We risks XX, the the ended our Form easily XX-Q. in information factors quarterly that investors with included Additional Investor Form potentially press Report December XX-K company. of could about information Relations other as use our to website at is release a and SEC,

website or company this governance postings. that Groupon select SEC, letter corporate media available the furnishes our the releases promptly files quarterly stockholder press information, and on the with social reports and makes

discuss under In Investor the you GAAP. we SG&A On patent additional release disclosures each financial results. FX-neutral the our is with also the of measures: today, and SEC, which the posted call regarding our measures of our following filings these on references EBITDA non-GAAP the Relations All website, litigation. charges will exclude measures for to will the in and most comparable measures, XXXX press including to the non-GAAP find reconciliation U.S. adjusted IBM

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

to happy call I'm the that, over with Rich. And turn to

Rich Williams

joining Thanks our Heather. for to And quarterly conference call. thanks everyone

XXXX read has opportunity our Investor our Relations our results to results, discussing your second of and to on we well questions. quarter site. posted to Hopefully, forward our had everyone quarterly taking contains strategic updates It discussion on initiatives. which stockholders, look a as letter yesterday our the our as We

call we'll the additional some color, over to Mike hand and that, then questions. take With I'll for

Michael Randolfi

Thanks Rich.

million second supporting initiatives and quarter, mobile the $XXX while of profit focused EBITDA distribution of experience linking, and strategic our adjusted In on card bookability, $XX we million generated out building platform. gross our

America, North down support $XXX million traffic X% down or XX% down $XX North X%. $X or America our or profit QX year-over-year. shifting $XXX fewer a gross customers, $XX profit million strategic local lower million In was million goods profit America American North impressions QX was million $XX gross was to driven by million gross and initiatives. North

with North QX and segmentation profit which customers XX-month In on toward $XX.XX We’re year net basis X period. North for versus up the trailing seeing improved spend SEO. benefits per traffic email customer generation continued prior for the the QX, and that a long-term America gross ongoing in potential of America of gross marketing declined profit higher optimization including customers headwinds have reflects by million of X%

million or Turning International to million from our international, gross million with consumer profit in home coupled in down in $XX goods cost Europe XX% was local down U.K. continued international $X category. competition resulting or and gross garden was QX $X X%. million up million $X profit was or million gross the profit intensifying $XX X%. a especially $XX

of the profit. value In invest continue driving region near-term proposition in unit response, better gross our to trends at we goods albeit price is in through expense which the

FX-neutral on profit in in was XX-month QX second slightly international gross reported and goods. driven trailing by basis. down gross per on X% quarter. the an customers a was lower decline This X% as increased profit $XX.XX International basis customer

value XX% by million marketing $X America, was X%. expense lower or $X higher basis, lower expense marketing $XX support In we which consolidated second that toward invested by our customers. long-term QX was In the the million In continue year incremental to the segment. for quarter potential or million spend QX international, prior compared an to as on million we marketing to of a $X refine was North as marketing

second $X $XXX year-over-year of million efficiency million the versus improvement result the our comparable was X% quarter for or a of efforts. an period SG&A ongoing as

the million repurchased on X.X quarter, million share $XXX repurchase During authorization. million our second the shares we with quarter $XX for ending remaining

increase quarter, which and cash million our we we revolver. revolver For refinanced in million quarter the on second in terms undrawn to second $XXX than better million our ended with on $XXX capacity $XXX and the prior with

value in Select As program of for we've developed X.XX. search order and fee Initial to XXX,XXX in increased we members have over offers the positive monthly are quickly. quarters Groupon North our Rich value mentioned average his program stockholder on great subscription on-site. higher members the which improved customer last a few scaling America membership letter, and propensity with Today in frequency, very indicators over are for

offers which overall the through sign-up through path, encourage as fees we anticipated for chuckle recover acquisition, an fourth enrollment approximately expected in of This support to million intend promotional leverage quarter, $XX membership which most to of to is To and expect our equates we investment enter member third reduce the quarter. conversion. to we

be trends gross in we QX. customer in quarter of half EBITDA compared profit first third units expect and to XXXX.We while to that than adjusted QX demonstrate metrics With lower the such expect the to as as improved

to continue adjusted of $XXX approximately XXXX anticipate We EBITDA million.

Operator

Our Cowen. comes Champion first from from line Tom [Operator the of question Instructions]

is Your line open.

Tom Champion

a just North to? talk just looks drivers a driver goods margins, bit a in little I’m the you else curious if about fairly but point have substantial anything could pullback Mike, more like American you gross could might been

North thoughts and also towards you. year. customer by America updated that trajectory stability Thank in maybe the end any of just trends getting on then And

Michael Randolfi

Sure.

improvement it's things. few there. and noted elements to margin local North yes, on continue So the we’ll mean, gross margin side there's in On really as America gross you’ve and I entirely see in two nice

the the believe to interesting that reflected but most are naturally most on overall we algorithms and refined First, in and we to continuing GP time over the our that also - and so earn customers to them, margin. in appealing overall which continue the that increasingly get to going surface is which gets we’re

second continue we we've health and the towards see to beauty health space. shift in an particularly year higher The and mix end increased as beauty in last is and seen the thing

So well us. demographic and categories things on tend on like with high-end site, procedures, really think areas build to are well where cosmetic supply about Lasik be so really to procedures, supply higher continue performs - for and done really those our we our our and they've dental, nice margin those out that

drivers to are those regard the with So two margin.

would about last few I quarters. talked over this On the customer we’ve is side, the what say

talked we that how Our customers we is to, become much you see expectation this trends seeing we trends month And and year in payback. continue year. to we’re through granular increasingly you're segmented ensure to getting as market how the XX regards to market we've the to will this to, to spend with we continue about, through XX and who be a

And so second fourth quarter in the would seeing, the quarter. the expect I or ones the you're in trends third or

what go in our that's of coupled what are customers look cycled value that value to our customers consistent customers, is are as Now and you're last the we provided and customer targeted will of in XXXX, trends some with lot as moderate looked now which our expectation to that is we amongst commentary of calls. XXXX the seeing out into continue higher those at how we've we at drive talked and with we a that as the the been trends initiatives about the of we've have engagement lower also couple

Operator

Arounian Wedbush of The next question Securities. from comes Ygal the from the line

Your open. line is

YgalArounian

question. follow Thanks ask up. taking for and one I'll a

So was total down down I volume a XX% the and U.S. to seek through wanted parsing and clarify international to bit. XX%, little The is that slight.

driving disparity what’s the first, So there?

everyday in as volume obviously as card for are in of now success goods going we’re looks willing local local so then more details trying share, what’s like customers break maybe am right declining the I And much of understand declining to to you faster. out to understand discovery to versus platform, initiatives linked in volume becoming bachelor's how in are an the

So through of and just the there? kind help puts us think takes

Michael Randolfi

Sure.

So going discussing units. out

talk there separately. would America and So that there’s North I’ll and international few things a I about highlight just

the On good the the versus is in international what goods local is that international Billings break international and pretty side. side don't some the offset from offset last we would but proxy declines say is by, I on a growing units out what goods typically in local international on you actually that partially side, by could tell were quarter,

confidence last see - the what There's continue we that the on with a quarters, indications time of the to lower coupled year. particularly is it's lowest softer essentially highly side was category is, trended on home the couple international the particularly goods years lot fragmented And consumer. consumer and is over in what competition see the five a that been and increased market, is which the we U.K. popular this in in garden actually on

declines international, on continue goods. So local, what see some we driving that’s of strategic international Where view were most supposed we on is what’s focus to the growth.

goods you if unit down be at North side. impact our that unit local is could good could down on similarly and as Billings America, billings using to America America a you look North On X%, North greatest the see the breakout proxy, XX%.You going see

fact utilizing specifically year. half Keep select year in goods is have we attributable towards from to About that of a than for fewer support into specifically the a XX%, and quarter this me that targeted the you. let break strategic the just lean it is out to And little to bit almost our of that impression, customers last program. is attributable mind of us initiatives

and So site such enrollment program. as our into we've encourage been or select our impressions impression on email to using space

be of we've primarily prior talked to going quarter in as in The it other SCO, to quarters. declines and is free due

I on experience it way that linking, sold this. units card initiatives think bookability, mobile we’re the over to our increasing so, we’ve time all are what expanding about our supply focused be those improve the expect are of we know, would talked All and and our remarks. that You consistent the talked is with trends about targeted time prepared towards over customer, the in we frequency and whether

As trends year. a the to third half into first start to we of to go unit would we on expect the the basis year-over-year quarter, relative improve

YgalArounian

to I Select. wanted then And Groupon ask

going to check push that’s conversion. made I First, going reduce in think comment that the you you to on are it

to So and understood I way? correctly, that why dynamic works the sure make that

flip kind tries just a a services, there's free then incentives think time about feels of XX% whether local of of of a if lot certain overall lot get you philosophically subscription discount. $X five kind that month, purchase through and how And months not like of of your back feedback and decent $X or four monthly a purchase get types you can month almost can even you to through shipping your

talk term just it this you So seeing are can a it if consumer frequency on subscribing you least how about scales you negative out. you have can in if are at good the revenue think short about a growth try and through scale you to it value it impact, margin initiative and

thoughts Just on be few helpful. that Thanks. would

Michael Randolfi

and add First additional sure part will commentary I’m this. on Rich

path, the was over get first just So would last talk but is early of early I pushing why been conversion the started and say days. still year the is on this we it's last one quarter reasons I let this that before something about that testing we've into two me or

the purchase We're based ups really step on and search, our we're that. a value average step to would in order seen about propensity we've and behavior positive. frequency, enrolls the indicators so really pleased greater I when what really, seeing excited ups really, in someone so far, meaningful also is say meaningful that select But and consumer

is and - proposition about It great with you the and think And right. design. if that's consumer the a that's economics by the way the that, intent you're

per Select, are somewhere If gross a you math get profit Groupon fee in of the of we per $XX-$XX month, so think customer charging a we about will year. XXX essentially between

As transaction. that a part meaningful transaction. you're program, of into on on Select that discount the There's take discounts we per account provide two given right to things

cases at below discounts current all take below is rate. the First, almost the is - still in or

of say current at already we transactions are so an XX%, still is to local, XX%, with look individual order the and order regard take many discount discounts. at you other providing thing you For XX%, XX%, the keep transaction look have the we mind, example, in on money discounts if rate would our where today of I is our the earning we’re

and per But incremental provide a today. least incremental, the true at So would $XX should that profit basis, XX% which customer is average XX% gross us an always generate order the I gross of per double a to is think discount, the that to we profit discount select we the own consumers it what select way $XX relative about get a customer almost if is customers on at today. more, not the

lean affects come could with as enrollment the highlight to it to them that it. affects to the we need Select we option. Why we it into they So will is, we through continue - as an conversion purchase encourage why and people additional through generate offered savings path

so to double it. because why to have enrolling them we getting instance, add every the any in encourage customer sense this potential our reducing you friction customer lean ready per really try up as and to that conversion a we Anytime that makes increases In we then step purchase. enroll of GP customer you're path And into some as degree. it a earn to think end the do that's and to we the purchase average process degree time you you

Rich Williams

think right. that’s I Yes,

to whether about now, about way subsidize about. is the bit a we're are really how on that’s you thinking philosophy growth to It's we thinking we’re really, not a little where Just speak it asked frequency.

member what think way is in historically been base. I to looking we’re our like for customer ultimately behavior a monetize

model behavior So years but monetization haven't for with that to member a member we've had we like go it. had along like

more an is I and really Groupon a is out a to and think “subsidy really we hopefully is and there's today. more philosophy as really to the the and and double make ” could, over to making in Mike do now is down platform thinking build gate to drive I and even that think you time, value pushing walk mentioned Groupon We of - what saw the that for set as as through goal way - about something so program compelling to our we to incredibly you've of so the there’s program, economics a frequency than and opportunity it engagement than heard commitment which it to growth the there prop this not see just on more the compelling forward it now, compelling to

support have get and we in, partners why, think new but we as more territory membership ultimately the features more bring no-brainer we a in unique territory, time we to higher that as would experiences more But the into program fees. in starts can over

many build in share customers program, as is program, economics our experience, focus into them possibly the so traction the our to healthier today in can relationships gain But that entirely can, the we Select the gain trial over and as continue get time. this of we value, add with

Operator

next from Barclays. Our Deepak comes from question the of Mathivanan line

open. Your line is

Deepak Mathivanan

Two questions.

is a like say stable or Rich, are a good terms Select long you the on years will rate? penetration the seems program, on is can three in XQ first, more it allocated days, XQ the impressions to after the run where reach to program it the do and impact know once a Select, next like of on think of process this you kind more So adoption pretty sort moderate in again, concerned two the early it from you that for of

Rich Williams

and is overall. to much way early Thanks, at point upper over think at be tell but look Deepak. as Groupon the think hard this next can days what same in couple about them we the we we years, It the an bounds it's

send etcetera. the to really addressable we every that tactics trial, the by is constrained audience don't the program, to single program big I need of refine services marketing core I we’re or our the I consumers to a by think think spend refine here, can and most domain have on mean, continue but we savings so that's and on day,

I have look the scale knowledge think to really next we couple and what a for continue quarters to the better builds but needed will next over few feel of years that quarters. some of coming the get do will to base over like, invest start we to

perspective on Mike impressions, have you impacts as and far a As that.

Michael Randolfi

Sure.

think identify purchase we continue the the some in in in to expect it coming negative from purchase impact will would as the probably be the what I impact, path say to things. path, I purchase while will how continue path. the we refine two being have and that over months reducing always is to included represented that first, we've there’s you'd negative

The just month,$XXX quickly you path could conversion enrolled. we quarter people which second just quickly a if $X of thing paying about generate, people from you quickly fourth benefit not can - members fees, a your math, is initial that and into if think or the drive overcome you you getting hit can fee detriment that the ramping how any quickly that small see by number very the you mitigate have month see a

see - be terms get of revenue what we what’s will the to going fourth we better in to the going quarter, quarter. is but up to expect So from presented purchase ramping importantly, we the we to from continue fourth path third fee continue program the in to quarter more expect

Rich Williams

Deepak thing add our satisfied to process, the as the we be else is consumer friction. and earlier, you And with to that one that an online here like that space, everybody to we’re something mentioned the other going anytime friction, add step that Mike I’ll years checkout checkout we’re process not new, refining extra especially reacts spent in

of This early optimization us is that for conversion an and program making part efforts. its Selecta

conversion not be going there. and satisfied to friction let We’re back with just - some sit

fees we couple and be seamless even as refining quarters, more forward. of makes it some as mitigate testing the headwind as can big checkout and next the compounding smooth possible hopefully a we part effective that go that make will the to membership of conversion that Over of of pipeline our powerful consumers for

sole elements. those we the quarters real to on is really work pushing over and a team there next few have we whose have focus So do

Deepak Mathivanan

can How ask I into do program if it And renegotiate one the on or get and member the merchant the - work merchant to that's something purely need side, just your go enrolled Okay. discretion? does under that you follow-up. and is

Rich Williams

It’s for experience It’s the point for merchant. as for for incredible we are things have you seeing possible best but because our so actually purely want are Select is experiences base customers a merchants an exclusive, approaching to exclusive includes Select the for of a this which Deepak. question that the experience one, Groupon, the in we at members, in thanks at discretion great program of one a

merchants there both about and value really So merchant incremental those program increasingly with but that conversations customer but having in to if driving the the we’re overall, make sense. for the participate not

Operator

[Operator from the Davidson. comes D.A. from Instructions] Forte Our next of line question Thomas

is line Your open.

Thomas Forte

you one it. the the accelerated good investors market an the job, flow generate think business how and I free ask - private about effort not cash wanted running to really a free Rich and cash really possibilities then two So pardon the potentially cash Thanks. credit repurchase clearly good your two me flow generation, job should growing giving given given did generation? again so doing you’re to for stock

Rich Williams

thing before a run with generating a flow. and and for are to think we’re to to generates as and seen to building here job this not say is to business, good it’s we said that I in adjusted satisfied space great have doing free us solid good a business not where of running the general cash flow, big we’re company the on we we’re I in The company but we a do just your free and EBITDA nice you running - stay cash the focused going point job need great if opportunities

is much, that growth part business and to see We the merchants potential a life. the can a everyday of bigger consumers that business create be much

allocation we and plays four be capital about last which how I we repurchased have over strategy feel $XXX you over stock both or doing into So, really we know, think as five we of the And million years. that. to our think

there and return value to So shareholders. we've done to lot a

things shareholders whether voucherless like value to a the that to and repurchases are in business to investing balancing with ways efforts transforming that that organic or always select. We’re other our return critical

generate as we we ways well be we efforts around forward, very Our accelerate about which been we've public especially as the more clear very it because strategy, about and see with see to as booking M&A card-linked more value. as ways to to aggressive and expect that going

long-term And running and on so ultimately adjusted sustainability how foremost works us platform. the and core for cash us this total transform great but being the company building long-term in growth of those the consumers. that's of that bakes free we’re in business and And a first while pieces, about product constantly that balancing great the a EBITDA focused flow into we potential focused on

Operator

today's we queue. [Operator And conference in will This Instructions] questions call. conclude have further no

You disconnect. may now

Groupon (GRPN) 31 Jul 192019 Q2 Earnings call transcript