GRPN - Earnings call transcript Q1 2022

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Operator

Good day, everyone, and welcome to the Groupon's First Quarter 2022 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. [Operator Instructions]. Today's conference call is being recorded.

would Communications turn Officer, I to call remarks, Chief the Jennifer opening like the to over For Beugelmans.

Jennifer Beugelmans

Hello, quarter and XXXX first financial results welcome conference call. to Groupon's

statements. Damien Kedar On results your to may statements. those only management's today, from and the and are of reflect following expressed CEO, differ as in X, call Interim and materially today questions our CFO, or Actual May Schmitz. views responses will The discussion forward-looking forward-looking Deshpande; implied XXXX, include

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

call I the Relations you comparable that, under to most happy to free the FX-neutral reconciliations measures our flow we additional On with will these disclosures the with In find following of discuss regarding of our is SEC, results. GAAP. and press turn Investor Kedar. measures filings cash our website, release over and adjusted measures, am each will to non-GAAP financial on the which including today, the EBITDA, non-GAAP also the measures, posted U.S. call And

Kedar Deshpande

results use data our our my I joining our understand CEO intend for you about Today, offering. by and and a amount inventory time as quarter spent scale, December, successfully significant been we our differentiated starting business, performance reducing translate to have why structure challenges in how talk a engine. to address sustainable cost trying and of we able growth studying more thank will I to first to assets, time and a our everyone, customers substantial into creating Hi, not have us. Since

employees Let The bad our to is shareholders. local to expectations didn't demonstrate first began partners, for fell as wake our come our subside. cases me bad to results last short first be news did the and the and in and that our We see customers, create of saw expected I potential good clear, news. not had have In similar news quarter, value pattern see we quarter of Omicron a what Delta. demand merchant we year to back

on executed So expectation our we demand the not did post initiatives that but this for materialize. reflected demand increasing Omicron

they simply Groupon thought a by much our inflationary discounted headwinds. marketplace the inventory as marketplace. you discounted need With experiences not demand we sell is out need this And been of the leverage services. coming did and As pandemic. And merchants not that in did and to as capacity know, low, offers marketplace Groupon merchants has to would, high worsened

our on saw pressure rates adjusted which levels well EBITDA. contribute inventory we refund addition, driving put availability merchant to higher, In as further as

key the are and to areas for you economic the business quickly have long will merchants to is plan that cycle. about The this improve, to news our more that. Groupon think we we hear we make this that and address While drivers helpful behind to talk grow transient, to we the plans throughout is moving quarter good need shortfalls address the our us a Two term.

to and need structure we intend do fast. this to improve expense First, we our substantially,

starting million this, adjusted and in a deliver believe XX% of we flow in platform minimum a range in processes. We generate our are streamlining year can full cash to the our XXXX. operating technology margin $XXX doing and EBITDA XX% annual we free By

order to explain. we our line, grow I as differentiated in will to offer more Second, need inventory, top

well-rounded needs talk our marketplace and about services ways of great that we X a inventory, to wellness price innovative collections includes at the experiences me experiences. offers to a plan you selection a interaction premium points. curated that beauty give expand and hear and launch Today, customers marketplace inventory that will Our of variety of

So expense tech our about with spend how this done. our We lot let's talk we on Starting get will platform. structure. a

In per our to translates of overall structure technology. devote cost million to about about year. fact, XX% This we $XXX

that We was and the streamline to have Groupon. it built needs in platform we meet need XXXX, a current legacy to of

new services created operating every way arm. services just At platform. behind to Over size. and there handle of we were big the for too start year, and This our our complicated XX the about the needs past years, XXX about is

to cloud really with move highlighted Our the this legacy associated platform. technology the costs

serve per nonessential our any out seen we Our believe don't current need cut generate I my is and cloud to well cost transaction to can platform levels needs services I our be cost above experience. have previous savings if streamline in migrated. that we meaningful

too Next, to of if not require grow are want this And sustainable scalable, company. touch. the is processes our many you human

We cost. are looking at all our processes to reduce

human give let example. to do touch. We scale me a can more allow features to our automation our quick join So marketplace merchants and self-service you without

should to done listings number onboarding. But go a job onboard opportunities and the partners. just our of our related have self-service. merchants many we other that have good to merchant lower serving This beyond costs We through increasing of

moving streamline we other automation. now other many need under from This organization. conversation There our this I processes. are aggressively to And way. infrastructure doing across to entire want work are associated towards away But is what you take we examples. is, also are We this

productivity to this expect reduce both our We and cost. increase

we model nimble allow we and automation, that flows. also a as has cost lower more can ebbs base. towards financial march a fixed we demand us believe build As be will to This

are a we marketplace What are that become our to for find trust in into can to price marketplace do easy line These not means interesting always and I today and new they one We all occasions. place drive they it's looking to experiences local top to this? by services This all need where sensitive. shoppers Next, marketplace a need and a want, where browse. transact mean for growth customers era.

So a for differentiated. always to value. In but this solution, searching will great deeply to are a order deep, our discounted be not highly marketplace they want they needs be inventory

our In we experience on So inventory ways, wellness and cases, expanding important a beauty work curated and to for unique goal standalone inventory that going are is collection in X to experiences. our deliver our marketplace uniquely both premium deal always But curation This customers can't find to elsewhere. compelling on We core inventory our to enough consumers. where marketplace. a into broad play. be spectrum is of not comes is Groupon already differentiated have offering

to value collections rainy value the We offer that one while a inventory create that will a has have when out deep destination listing, give a experiences for that of experiences to and is we packages. a do that will nights, And kids' customers. more of wow inventory inventory making experience the unique as of believe will discounted for they package can groups. is existing will wide discovery there This any inventory. ways. a might destination searching new that restaurant believe can bowling a great packaged is Groupon, demographic day breadth combine Whether will We not, across which to park, our I packaged unique that create customers these deeply given variety things are passes and for from for this approach could discount night. include is or in transactable a partners unique date by Italian day dinner Groupon and night meeting that us to only services the span Groupon customers sold being example. to on new listings or bring trampoline a or a at unique together alike museum fantastic intent that just and inventory range a merchant These and appeal

So and only our be But leverage will important part curation inventory growth. opportunity. that X curation drive is will engagement inventory an of customer to tool

our of have even something more in by and a value X-sided we that for both I we With my tremendous our have, believe we done set wellness of launching similar can stimulate the assets stakeholders career. sides will marketplace. create app beauty

take to to minutes needed premium you attract brands. give variety but example. an stable was popular So able of Zappos let few brands a a to of me bolster its

This constraining customers Groupon not local some because intent deeply to when acquire many is attract customers destination local of The high have great discount. ability our discounted the our lack requirement deep experiences services of to expect in high brands a to could this experience for to premium want. to selection those selection is created grow. intent, live able core is are built intent our a they on marketplace inventory sent that attract we our new were of Zappos ability a a advantage inhibiting service But planning experience. that at To ability premium customers discounts. where we the with all and opportunity, providing be launch focused those we offer and are our we and core typically our we dedicated to discount the Groupon, not side-by-side take Today, So brands looking website and experience on could new to premium a to listing. marketplace broad customers. marketplace new

this by is goal marketplace the Our of year. to introduce end this

will Trust Consumers the with from Groupon We of deliver and their offering. be experiences marketplace premium know this services be merchants will process experiences. to cornerstone they to and and that will purchase will beauty redemption that seamless. new can trust start wellness quality

experience technology with we new paint price And of will to best-in-class picture we receive customer We and at cutting to service, the platform. and To leveraging content new standalone will functionality transparency. by improved edge our marketplace curated this do expect offer experience intend what this consumers infrastructure offer, branding.

high-end cosmetic to as options for services offer We financing also such plan explore to surgery.

you of industry and growing to positioned market, believe wellness is many this. much share with know, well large market we and are capture greater beauty a and we As the

unique attractive experience and high-intent to to to our be customers. We truly expect this be

with intend will of million X compelling. this I this rocky, but move to path unique as that stakes properties rewards be success very be the forward be would to that customers website knew took intent month, experience. dictates. core nearly visitor would when First high, between Groupon role, would complementary I for all, XXX we be per our sessions our And the the

my and far, met about have business my our I with and with seen seen coupled some journey unique a that in assets, before. many that the something talked the attractive: I But more to were expectations. Last So customer Groupon untapped line didn't have things preform things I position quarter, business skilled discovered base have approach expectations. I us to a my some inventory actionable about has that everything grow I is leveraging large data. make platform, these innovative believe for our so opportunities global assets to years come. expect I

strong If cost you reduce structure includes potential summer. in add growth investment a this that our balance sheet and to

I with cover we financial as forward work think create that you performance. will With is progress sell. our the stakeholders turn create agree positioned well shareholder you to our that, call to value. to will value sharing over We with to look to to the Groupon I me Damien

Damien Schmitz

who's outlook full thoughts and Kedar, our as the quarter well long-term for everyone financial to time and our financial first as use insights joining model. potential us on my of Thanks, financial further provide XXXX second today. our some quarter today I'll operating into to the year thanks results

to negative my outlook. global of review QX release on to you consolidated slides, prepared our Starting delivered rebound encourage first once $XXX drawn expected quarter, profit, million $XXX ended We and did EBITDA. XX-Q, adjusted addition abated. the million our and results more variant $XXX not $X quarter with $XXX business gross We on remarks, in of billings, results. In the In detail million $XXX our our the with Omicron million contain million I the of which revolver. million of including press quarter revenue, cash, first as

and curation areas: premium are building remarks, X fixing differentiated cost new as offering beauty more Kedar his mentioned prepared focused we structure on laser However, and a inventory our marketplace. dedicated and wellness a through in

walk quarter drivers our first me our local category. let through business you trends. Starting So and with results,

to performance first As our case by were when at anticipated significantly in near months Omicron we the discussed counts last the call, impacted highs. all-time COVID quarter or local on earnings we had X of be

mandates refunds. of XX decline. see expected to in stall late case experienced the beginning into rebound the begin billings We In and This and XX% versus ended March, customers in saw mentioned, levels, North be had were QX international, XXXX we had the recovery to we as customers waves. what base, similar with worldwide. customer to prior to XX slightly to as active however, Kedar quarter, and counts COVID prior America, active We Instead, XXXX were the quarter rates a of with decline elevated in were also local would XX% mass Within local quarter America points we February points down out March in versus and to local of the And in million category approximately a first the listed quarter. performance XX North local our restrictions down were X prior pattern levels. began XXXX. at billings million sequential compared

versus X.X year-over-year. grew active sequentially our quarter. are goods in In in active customers the metrics quarter. offset a in-period the metrics. trailing XX-month our purchasers. markets, active growth our first within local we As partially prior decline our quarter local And XX% customers a local customers reminder, and observed customer result, X% we as customers local the in decline quarter, a This during in the had million And first the international lower-value

Moving levels, level XXXX achieve. XX% expected was to category. which the were we In at the first to goods to quarter, XX% our billings recovery below

a model goods recognize we net transition the goods international on to we marketplace revenue basis. third-party completed a which the XXXX, reminder, quarter fourth As a means in

operating migration Marketing fully expense quarter the profit, cloud. gross inflation was which to XX% first remained than versus is to $XX our our prior flat the averages. with prior Turning prudent quarter and we in was wage incremental anticipated. and expenses. and of able $XXX with line were during with in spend to quarter, million, both year the expenses our million associated the lower the in or investment offset and SG&A We historical

marketing opportunities expect our marketing for of to we the to to spend over we time, advantage of our accelerate take to While intend XXXX. leverage rest growth reduce

$XX our we normal Turning lower by local typically payment to corresponding a in saw more position. in muted impacted was of sales capital quarter recovery. million. Net the outflow also to experienced our cash inflows net cash working our due cash volume In first outflows the working first given state quarter, the seasonality merchant capital and We cycles. of

Our impacts with cash We ended in million position and withstand with long-term liquidity of coded solid us a which and includes invest million financial the have balance sheet a to that $XXX balance to opportunities $XXX remains quarter the the the we growth. drawn drive provides of on flexibility the revolver.

this, XXXX. to to our a Now, for what full I'll million outlook the In as slightly billings $XXX and we expect of line the take XXXX, year second you quarter. Based in through trending million been adjusted of to or we of the quarter, million and better for million on $X first deliver have local percentage $XXX $XX second quarter reported revenue than EBITDA. April

$XX of adjusted million For revenue and XXXX, the $XXX to $XXX $XX deliver to EBITDA. expect of full million to year million we million

guidance Keep year the in of high guidance of what the more guidance muted our year-to-date. are we've mind are reflects our of in does the we of current for end include with the our rates second more At recovery the growth recovery back line financial assuming XXXX. recovery we low any initiatives. half versus end we benefit the of our and guidance improved in recovery local local year prior half rates a back levels. observed modestly half that At new from the range, not assuming our the given updated year, than outlook Our in and range,

Turning to expenses.

SG&A to to be related versus of we intend SG&A XX% hold to as in GP expect marketing flat to inflation migrating We And manage the despite percent the expect costs down low expenses continue and cloud, increased to closely the XXXX. to wage range. a we slightly to

For our your approximately with million cloud expect to we expenses to the models, in migrating be XXXX. $XX associated

flow. few Finally, on I insights with to a you cash provide wanted

cash and our cash begin the and for momentum return said, for XXXX. to the quarter, no we we longer cash quarter. expect picks initiatives second Given to to generation up our operating in first outflow recovery drive expect quarter impact, the in expectations to as generate calendar year the the That fourth

to turn and deliver that can some thoughts significant on I a provide value over key creation. to believe believe Kedar, step assets to we shareholders We we stakeholders. drive target leverage long-term I take back it undervalued can Before want which number back financial our a of value have to our other and model, we

me a you key Let remind of points. few

First, let's look big at picture. the

that in billion marketplace billings built have local with XXXX. X-sided than $X.X more generated global tremendous scale in We a

and extends prudent nearly of $XXX active taken that consumers local P&L expenses as customers. we also and believe streamline have We we and recognition today, of million were have control record out brand efficiencies And than tech business. world, track across million to And we more cost have unlock with have reductions many XX of where strong outlined second, the around compared we automate drive we cost further processes our our in XXXX. to the and infrastructure can Kedar a has

these a drivers, million XX% deliver next in margin believe free range we of the financial generate EBITDA can starting year. to in flow year cash we With annual sustainably $XXX adjusted minimum XX% and full

back for Net-net, our of includes for final new assets, all balance that, with believe well we believe our we comments. all positioned we turn our few investment unlocking. combined value with the I'll prepared their we sheet And value create we over Kedar cap reflects these current strategy, it believe a are of our at in are stakeholders. to to Looking that don't SumUp market

Kedar Deshpande

confident lot rapid but progress. the a work we have we have I'm right to resources Thanks, make Damien. To of be that to clear, do

improving for to and focused in curated through position of will growth, new differentiated organization allow your inventory questions. EBITDA and as X beauty premium financial expense more on will a Our will grow and in inventory believe to work, I success margin our our a goals a to future and operator cycles. it strong marketplace and deliver and our flow are over important turn reducing that, structure and entire free us cash vertical the Groupon wellness these adjusted areas be investing we most offering marketplace economic With in growing variety We experience. achieve to for collection

Operator

comes question first [Operator Instructions] of Barclays. Trevor Young Your from

Trevor Young

be this some Kedar, wellness experience right some year. getting and and a and Great. work this to new user in of the beauty improvements breadth a feels done, of reset, like bit depth marketplace inventory experience

of would the get a indicate opposed bit which out company additional those components in All from cost out some to take to goal of $XXX is after here feels taken already right. seem rate the spend upwards of run million further to That has needing required to savings.

to help us cost tooling of balancing about on just spend indicating? you're So needing reduction thinking some how understand versus the that the you're

Kedar Deshpande

the Trevor. thanks evening, asking for And Good question.

think, we costs are when I add-on at Are moment, look my it, of overall, we actually Those at what some look are these current I these at at to the costs, these I customer perspective, from all experience? particular internally platform? have these external to are it the not hey, our When required. of equations. built our look run when particular well-put-it is some necessary costs costs

large this and need actually no. need to technological to this that taking serving be is to continue we fit? platform to both is look So answer we at to say, our The is that platform that's our where a this are going

of new taken is And those building And we these pretty so going be each going into particular are equations. particular out focused are back of costs reinvesting through to on. marketplaces where that some we

Trevor Young

if XX% the and to relatedly, in free lines that of XX% margin? you, XXXX can may. for around I the $XXX bogey? confidence like in And the terms you walk us goals, moving in XX% of those OpEx rate, margin through one gross bridge margin you Damien, just some EBITDA to XX% to cash million pieces flow to What gives the And take key

Damien Schmitz

profitability is question Yes. really in Sure all is to we're net thinking question. Providing of for Kedar those generating really operate company. profit this there investments line going tech intend the answer how this bottom target how aim -- thing, financial to to of and framework of your and the G&A. forward, kind around sales, for And about first in we model thanks long-term Trevor, framework marketing, around

we more our closer with we'll nominal get can I to profile you on type at this a in line financial with specific change just time But we revenue. the XXXX, items. what can this that is provide definitely P&L As confident share of achieve details we're

And see that of opportunities we wanted in we that see to because recurring we is that cost cloud do of XXXX. our those and investment don't in why some the disclose

Trevor Young

carrying of Damien. think any Thanks And for one. just XX-Q, think value detailed I housekeeping SumUp that's I usually yet. the the quarter? out stake that, last in there that's Great. just in in one but the Was change the don't

Damien Schmitz

Yes. No change there, Trevor.

Operator

Your Sachs. the from next Mike of line Ng Goldman question comes of

Michael Ng

talk next? stabilization just given expect just level recovery, whether was And customer And assuming any into confidence wondering not or recovery a XXXX? or could continued year are second thoughts a any you this if just offer around I about little you is pacing. count you and was half in April wondering I the could you how if bit your

Kedar Deshpande

confidence address will our -- regarding April I one the the Mike, progressing. how first is

that on. the out we This out. scenario-based we So we or year, is recoveries of for was we what year, recovery some number. the in I were where that that's what we recovery okay, what than COVID there for is seen the smooth is coming spiky where have rest in back scenario the sort I the and would what more, of the it's April and will basically actually And more Based spikes our think say, there expect expect is were out based a seen don't up year, had March. ways in equation and we went because general, a better half of that, number are scenarios on year, stabilized in putting have where we last line

we differentiated the this We will traction our with collections continue have get customer response if customers, from But should as say, well as a are QX accounts launch to much QX." as believe in QX see and Now will can in much we we the better on concerned, bigger value, QX. customer we as deliver "Hey, starting targeting XXXX. that are particularly to back that in far interaction, go

Operator

[Operator [indiscernible]. Instructions] Your line Ronan] question next comes of from [Ida of the

Unidentified Analyst

Can I in just on the just start better. trends to little I understand recovery? bit the a want

like So you noted rebounding expected. you March

demand low was You availability. surprised by last as mentioned the That high and It year sounds like that. guys you you well. saw were something

So demand the that right our a any way well, -- and why Can year you the if we get it Does to through now, then presumably factors? and labor that work walk as through is more? bit availability puts those expectations stronger. the case that, as get around just better? expect continues us better and Is gets takes little

Kedar Deshpande

the for Thanks question.

the demand, to want Groupon say, as fast. come merchant or to X year, come is to back into the to So were the look before had bring we last got quarter, as to last code had inputs, right? Delta months well think we things inputs then whenever see hit both that, back. later, platform, We of demand we X we started "Oh, want back to we really what I customer And delta.

serving as in because what happening that don't particular have the case. the need merchants Now their this will ability their goals prices to is to discount meet much time And that is but to raise particular very they in can That meet lower, their serve recoveries. customers it customers. coverage goals was these number is of different earlier from happened goal, lower to capacity by financial

have availability. sort hey, looking platform merchants, make instead this to to churns, which we then that these also but our expecting Groupon about trying which need of looking instead back more we and see the to I've merchants, ways Both particular pay along X get as particular of some that curated that pay. as these have the we they availability for are at way the differentiated back going is is their to differentiated merchants we those -- we X trying are merchants, say, back are it us these okay bring expectation what the or kind of part particular need are quality, in on the go build X density one. ready hey, specific What for more experiences sort with need this because on get platform can these we difficult just of we March. this are the one, they very what just amount on platform? merchants that can Go not that or of I'm see are is customers to are say, recovery our can collections, talked to platform combinations we to I'm you looking platform, of for, things second through have X I to of made for of get also The be discount. on -- focused particular see of we such to on looking just inventory to focused have that on it's set to forward, need to on And sure that

just that's be as x So input opposed merchants say part of back need our number of to on platform. to the

are We gives while QX, the back end-to-end just considered that sure supply. QX. that's making And better we be going quality is end-to-end bring customer that quality quality, quality, confidence -- merchant me in it's not to also the what

Unidentified Analyst

Okay.

details. it marketplace still the be What if on Maybe to Can bundling more of how And just to you Is that? through to does are require? experience. a get then around going talk share of the some curated of kind in different and could going maybe terms on, It completely like And a Groupon? sounds the just new different you it's inventory more offerings. the new bundled let's brand? about how XX Is just that you on So maybe kind it X color you talk the process, involve? like app, it then what does are that.

Kedar Deshpande

Yes, definitely.

trying or are are are can do the experience is particular things manually those I in-house starts what think that experienced we then looking to is are creating collections the here bundle so geographies. you things the together? And are essentially, together That's we first these up saying, by different the one. are by what works scaling it what in what process is the starting one, and the at pattern collected

right have we will the customers. sense to for we together experiences So now the these along. particular as that combine they such are traction building our actually capability we is make And go

As I said, time. the QX is

differentiated actually million will have the from brand This with given collections we with of then advantage are this discounted to frankly some particular new brand trust. will set that completes actually taking with brand can that the right be convenience with for. customers. the the differently. looking The to will can starting most onboard the experience. customers. discounted have to actually different merchants, the always you we I merchant a have that transparency something in customers the be local price And trying discounted. hey, get we reason set not will the have they of inventory, a of with, particular and this brand themselves discounts completely with is brand, make will right different of you powering us different it And be whole a we brand for have much brand. will know That not start expectations it particular and new of up anything. XX Groupon in transparency, X have only terms scale gamut of think inventory because to this things the cannot a cases premium have of set brand powered discounts. because you and it's The good you starts are completely gives the is what expectation from this current whenever That's brand, marketplace, is the different going set something different be second, stand in start brand this premium brand stuck have disassociate this start new The first -- customers These all, the we very are it content means -- will partners you richer we brand new versus will is this on the and do important of now, completely and And

are only logo. local of local. to we on all This So us gives serve instead ability discounted focused the

Unidentified Analyst

in if certainly flow mentioned believing positive one shares like that not sounds are out. not cash I mean, the quickly, Damien, but you're calling you I negative, undervalued, maybe could squeeze And more year as this --

to expecting flow a of return next good year. You're cash a amount

think maybe Just allocation about those how X buybacks, things you do capital and together? given

Damien Schmitz

to to XXXX. opportunity in us as of playing forward year the also question. on important laser-focused say this on flow us, some basis. Thanks the Yes. core our way a the as part key keep quarter, stabilizing of allocation cash in once some then our think that as front all in this in the remarks, these forward and generation on cash us us a flow really fourth scenario the type shift looking realizing that out well capital for We're I out free reminder delivering indicated for that platform of sustainable sustainable later for and on into the out I'd investment, be about of for is need cash prepared we an be growth but generation. capital unlocking to allocation address calling fixing That's going mentioned, basis to SumUp returning a reason also can monetize to my going We we're of vectors that free for putting and too. our forward.

Operator

today's are that, concludes questions. call. further conference [Operator this with participating. for Instructions] Thank you There no And

disconnect. now may You

Groupon (GRPN) 9 May 222022 Q1 Earnings call transcript