Earnings call transcript Q4 2022

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Operator

Good day, everyone, and welcome to Groupon's Fourth Quarter 2022 Financial Results Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the Company's formal remarks. [Operator Instructions] And just a reminder, today's conference is being recorded.

And now for opening remarks, I would like to turn the call over to the Chief Communications Officer, Jennifer Beugelmans. ahead. go please Jennifer,

Jennifer Beugelmans

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

today Deshpande; questions CEO Schmitz. the forward-looking XX, are On call will and Kedar as today, discussion include responses XXXX only views The and and to management's your reflect statements. of March following Damien CFO

those Actual from implied our expressed may results materially forward-looking in or differ statements.

the that our Additional information our SEC, included our in earnings financial on release impact our Form filings about risks including with could and report annual results potentially other in press factors and XX-K. is

with use encourage investors information and information Investor We promptly website files investor.groupon.com at releases the as press Company. select furnishes that the way to makes social finding SEC, our easily corporate reports media Relations on postings. this Company the website governance of available and Groupon a the about or

also press we comparisons SG&A, GAAP. margin, following additional otherwise Relations call to of basis. most our find In flow will financial the posted cash with filings which EBITDA free discuss On adjusted is adjusted non-GAAP SEC, reconciliations the U.S. you measures, release our measures the will each and of results. the XXXX to the EBITDA, on regarding provided an on our FX FX-neutral under measures, Investor these today, non-GAAP all non-GAAP website, measures noted, are disclosures comparable including Unless and mutual

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

Kedar Deshpande

$XXX fourth up joining our we In us quarter for the local fourth thanks for with third X% delivered million, earnings and of XXXX quarter, Hello, the compared billings quarter. call.

there is from the it. improvement to no a quarter, sugarcoat drove fourth we sequential While way to third

these significant November, began were category performance headwinds local continued billings results XXXX. discuss, early will and was experiencing better December, our our in Our in us you as Though, in hear for disappointed. business headwinds local

our demand, business but our are business, forward, improving We supply areas, customer doing not and drive promotional to of living on better focused spin our and marketplace. of cost make marketing and improve to meaningfully grow against efficient, profitability, today, leveraging are a a rigor. taking to potential base operational inventory improve much our and three both full steps structure To up our drive marketplace the and we are our backdrop transform side of streamlined we to more

structure. To begin, the year, progress. let's where Last today. made to an our where with base launched is plan start align already a with we is cost have the area This expenses business we and cost reduce notable

to $XXX our We million have by goal reduce substantially cost X base achieved annually. Phase our

the actions Phase were migration towards of Our our sizing the oriented and facilities sales, X to footprint. completion cloud, of our right

X, another the Phase by also $XX end committed of costs announced we we of million out to XXXX. When taking

of this X Given restructuring. business and decided have performance, our recent expand to Phase accelerate we

Our structure plan original cost to our $XXX additional of an size is million by is cost reduce plan. now which the annually, our Xx reduction

of cost costs. achieve reductions will X Phase professional XXXX. Our done of as by to quarter The of end should relate reducing will globally. savings actions, the positions be and majority savings payroll The software, reductions, related eliminating we by approximately which such our these second remaining are technology, services to non-payroll XXX primarily

finished cloud. to our also have migration We the

us the focused ahead the there believe number hosting that in an more years We save will forward, our Moving is cutting in spend cloud we be reducing to in are cloud. potentially on for the of we even half. services opportunity

local are local complete, grow significant us execute to cost Phase structure our This adjusted achieve marketplace should flow sustainably. we transformation marketplace, able should our at And even once forward levels. our through going revenue as be improve our generate flow allow As cash volume actions we current strategy, free positive X should means and we leverage. operating that lower to on EBITDA,

a processes support Now cost creating To and we that in rigor reducing business, we focused the structure. are this reduce the culture have also leadership continue effort, making to to look rewards through right ownership the we future. finally, our have that in taking that sure place the have ways office costs with transformation new process frugality. of Ensuring of processes. out business operating streamlining operating structure performance, while And established and action-oriented we an and strategically accountable for further we costs cost keep is tight, on gone is to

we the business. how stabilizing that's are So

the must customers' And on talk over these to let's that on that all inventory Now been Last on every to quarters, our marketplace local the Groupon relevance. our to marketplace. our we time market number incentives, with We strategy ensure the have focused drive CLO, frequency. about we improving best to come aligning personalized do the test few so single Atlanta last and we talked initiatives this. our test needs we use of quarter, growth a including about initiatives purchase to and changes meet search starts can plan, We which together. you promotion, they

That in learned. give that limitations. while much Groupon learn test there is encountered we were purchase XX% were using to me as during improvement. such we we few frequency this we frequency biggest of as said, a insights Atlanta up that by Groupon Let Meaning, that drive challenges purchase you Bucks, can sustaining incentives leverage Bucks as level The into able incentives, what our we stimulate customer small takeaway demand. to

our make back time came Groupon Bucks, purchase use or customers second the on to many time back come many While not fourth did third marketplace. a to a

Why? for. search not to match just they received they consumers to enough Because because The were compel inventory if the have make not did looking did inventory discount, were purchase intent. not the incentives our not we their

work base our must So we experiences inventory delivers the in order an these all time. and drive customers the frequency and to purchase incentives build for that higher, services want

sales our directly strategy. transformation learnings informs and These have results

efforts. power internal this data are leveraging external from We empirical sources and test to our

strategies to Groupon inspiring that further. customer and more such simple. use and inventory, tools drives new we is relevance engages search base Incentives, have cetera inventory a frequency. accelerate progress right we goal and to et our as the the purchase breakthroughs build Once We can Our want

the with fresh, right selection marketplace supply. we offerings, and we for believe new the expand starts success our will Future Groupon supply If of win demand follow.

on While of Groupon acquisition amount a recently strategy by marketplace, our inventory consumer not today our purchased by local driven result, we customers. inventory marketplace has a scaled demand. is as been not considerable And being the have has

critical consumer demand a than marketplace month. is positive experience XXXX, in on fact, and both over fewer In our sold XX our Having to each merchant driving XX% creating deals in right inventory North mission units America of platform. the

leverage XXXX, our force for leveraging value addition in for to is goal self-service So merchants. our more merchants, high new sales to acquiring acquire to

acquiring new consumers acquisition that of Our want, inventory instead quality sake we centered for strategy of will on merchant consumer be know more. higher the acquiring fulfilling by more intent

expect capitals. expand Once in York, Chicago, we our we New we Top other hyper which on approach, merchant In to Washington right we the do the Phoenix. North U.S. local hyper To this approach are the markets, concept, the are local in and right this, first D.C. location right acquisition right and category, implementing have LA, is merchant of our and a structure. deal X merchant step European to of focused proof the prioritizing local the acquiring acquisition approach, America hyper with

platform. each our Our and implemented consumer unfulfilled will to acquire drive responsible top markets. the local intent, number compelling from identify To city each new to priorities this, markets of top by in initiatives in as have merchants merchants, for as market overall our performance be on national optimize engagement management categories each will acquisition, who high-quality are our known deals of in acquisition inventory of be led acquire and well with market. highly we well inventory leading CEO, a To top of a and do

acquisition process are sales and First, we refining are for the after by now responsible acquiring teams reps ensure going merchants. have supply. target specific our are They geographic highest our quality very Sales vertical to location. sales

prospects the freedom are bring bring any and sales reps This quotas. make recommendations to reps deal their providing from merchants structure the our our merchant onto sales sales help deal to structure with is customized We on them still previous new any for also with when our had structure departure platform.

structure the so These special are we far, teams the from color, seen deals attention already we curated compensation of are performance they to of deals have top a marketplace. other copy. In markets. in deals, be these receiving give sales aligning deals that deal ones not of the merchants on to bring sales the based the acquired. words, that Second, on just number the deals compensated of and our are or new outperformance will their merchants deal To launched our the curated from output you the little

acquisition seen customers of are And increases our and velocity solid in new have a conversion as customer first unit deals. on result, handful we responding, and

Additionally, also our we similar deals quality. merchants refined to approach and with retaining on focus a have

plans year Our structures over quality related year. also compensation now retaining to retentions high deal focused merchant on sales are

relevance will reduce our power marketplace. improve search leveraging believe better customer better base enhance in rebound, create we yield service and customer which and As top interactions to inventory, inventory customer and we trust also and and to a demand customer better improve and include to should continuing refunds, recommendations, initiatives experience our

the which trust we with believe see our in marketplace. to beginning emerge improve will are continue We a rates, help positive to trend refund

the significantly base, we going merchants our in successful Over inventory are the forward. past them refund we on have improve in even improved performance we focused reducing North America can were to year. of further and new international, rates year, believe this and we transforming If

new Our than billings and more goal is profit per increase by cross XX%. to merchant

vouchers only per deals more addition, our XX% marketplace sell local in In than of currently month. XX

our just intend we frequency throughout in build Xx Our Once per success with supply increase are ensure sell than year. merchants, new in per we north vouchers consumer opinion. that believe top the of These we goals on we successful gain traction can for we these the more transformation, is of rest onboarding of the goal purchase month. we this to to start, are to XX% XX the bigger our If marketplace. deals are plus deals our

will our We this believe unlock allow that us marketplace to flywheel.

Overall, directly XXXX. our drive organic demand, return marketing on XX% than we improve connecting by goal gross less intent reduce is of higher more in and to our consumer driving investment. while our reduce it can marketing we span promotional to and expense profit As to inventory our our

promotions our incremental and and personalized lean allow base. our execution Opportunistically, written at while us return to driving the growth areas a these reduce us channels, into reduced budget We on successful time even sales. the marketing relocate to believe that more adjusted EBITDA allow deliver to and pricing in same to will to higher spend Company promotional positive revenue

opportunity marketplace to business, our immense, potential, our and not to stabilize growth. believe up only remains lived roadmap haven't the for taking are a create steps we right we While we the but

us, Given that the opportunities shareholders. lay we done to positioned work for our have well of we and customers, that are employees, we believe create merchants, ahead value and

you With that, Damien to our I will it results. to through turn over QX walk

Damien Schmitz

who's well today. my you quarter insights financial X details provide the savings and thank as time and to Kedar, Thanks, year our cost on operating use first everyone full actions. to our fourth today Phase results, joining for factors quarter further in XXXX, us into I'll consider to

addition our slides, which results. QX XX-K, you on I and review more remarks, contain In prepared release, detail to to my our encourage press

with into and Taking go performance we a our potential was our of the results, disappointing clearly the quarter Company. step this QX before aligned was not back,

we jump $XX we're of our EBITDA. We revenue, million $XXX drawn fourth in $XX $XXX $XXX discussed, flow $X steps Kedar delivered revolver, quarter negative billings, the of We of million customers so million and and the let's gross quarter the fourth change into to of and quarter including nearly free As this generated $XXX on trajectory, results. $XX consolidated taking profit, million gross worldwide. active adjusted million with in cash, end cash million million had million

XX% million, basis of Turning a compared an FX XXXX to prior local consolidated our year, neutral with category, XX% billings down on were and $XXX local levels.

are saw Within our North show billings the results compared in for down had within quarter. early local customers had million local and million X fourth we XXXX, pullback with to December. in in January markets, the active active fourth X.X in line quarter-over-quarter, quarter, Looking customer we base, with the February the quarter, local X% prior we America X% down customers international our

were billings goods Moving fourth category to our in quarter the $XX million.

to for GAAP we SG&A fourth expenses was the prudent with Turning to quarter, continued as operating $XXX our remain million spending.

of of resulting SG&A, which D&A our non-GAAP be first over we our savings stock-based from the complimented Our XXXX, significantly cost million. in reducing lower cloud $XXX by quarter which January. migration will the completed excludes payroll time, in and expenses remain actions costs and We the to was compensation announced cloud a committed

Xx Phase complete was DuringXXXX, profit. X of XXXX. of related Marketing expense pre-tax incurred savings we for of majority or of have the our to quarter million charges but in as $XX X cost plan, the Phase of XX% actions the million XX gross fourth end

to As our out can of experience, marketplace our we dollars. deliver get fundamental continue believe more to improvements we marketing we

Our our reduce less goal in of to expense is gross than marketing to profit XX% XXXX.

with cash In to in flow, $XX credit we revolving Turning returned generation borrowings we our million on quarter, repaid our cash also of $XX agreement. position. fourth free a the cash million

balance which As of a $XXX $XX million, drawn revolver. on million a result, with we our includes ended the cash year

credit agreement modified our renegotiated successfully our we our quarter, first for the during facility. addition, credit covenants In and

hold in payments held to a stake privately providers SumUp. equity global continues Groupon X.XX%

of As investments approximately reflect our this for well The $XXX as on minority million. a we stake reminder, balance the carrying other investment this sheet. as value value is

no is this this would going this asset there market we to forward. path consider for While arises SumUp an public monetize opportunity Securities time, at

restructuring that, actions, intend announced and our $XXX structure discussed, restructuring of we had a total Phase X executing X our our by cost $XXX reduce plan our reduce our XXXX, we million. And of annual scope million. begun to we of Kedar expanded Between accelerated cost plan to of August as In have timeline. and combined other expense by restructuring we Phase

cost we would an this expect to as million our power idea local give our that able can of While EBITDA. category of how our of actions levels, XXXX to these you guidance new model the at providing generate to structure, of unlock adjusted XX% are not at sustain financial least we I'm with $XXX

with XXXX our SG&A expected through you million. $XXX to me are to your X savings cost be P&L. to $XXX approximately non-GAAP from full from Phase help step which you translate previous We estimate of our walk our let represents significant a To models, million, actions how year down estimate

We actions the savings execute to see have we first on quarter of moved to Phase quickly restructuring in will XXXX. X begin and our

annual approximately to our non-GAAP a be be result, will we run able million. As lower SG&A $XXX rate to

We with the from EBITDA. actions, expect $XX in adjusted also our Phase incur in $XX X restructuring half to million of will pretax XXXX which to connection first million out be charges of

our with we EBITDA cash are Given we are environment, an margin targets. previously issued turnaround our uncertain combined in full the macroeconomic midst XXXX of withdrawing strategy, executing year free adjusted flow and

basis. XX% billings on levels are and approximately XXXX of basis. approximately neutral In X% performance. on to light billings of local are of America year-over-year be International be and and estimated are more XXXX FX details be on first year-over-year approximately neutral include, to February this, X% XXXX consolidated levels down we year-on-year. preliminary anticipated XX% billings X% drivers of our of Quarter-to-date through levels North an And local XX% an estimated FX down down providing quarter local to are estimated results

and mentioned, negative EBITDA to some if continue formal look reallocate marketing, spend lower see to for the Depending first attractive quarter invest actions, negative million returns. of opportunities overall $XX expect channels to between we performance proposed adjusted drive $X we will marketing and to to plan we As on we be marketing to million. timing Kedar restructuring some our in

first Finally, outflows quarter, first in performance we'll business see based the of quarter. in the cash upon the the significant

XXXX XX and financial deals increased five or new per all is are more which goals to strategy a than XX% gross increase our aligned share our than goals closely more As month and profit for vouchers this reminder, of markets, new top that around year of merchants, local billings currently for with sell transformation by our for XX%.

finally, roll We merchants, customer goal marketplace. starting to once smaller a we purchase to than proof overall And believe per our we'll is are this but long with of have our merchants. frequency of tail out our the have improve we larger We more vibrancy concept of to times year. here, returning three this crucial

operating on current for market time continue for stakeholders growth create both execute today. up focused sum and we We you can valuation, top our believe our unlocking value our to equity savings. expense stake, our strategy. your transformation we plan our Given Thank line as

With call open that, for we'd the like up to questions.

Operator

this We'll from take question [Operator our Sachs. Eric first afternoon Instructions] of Sheridan Goldman

Eric Sheridan

much so Thanks if I Maybe for taking two, the questions. can.

piece, of hush, strategy the on to you of on to First outcomes second be forward? acquisition strategy would be the the strategy, made scale it how that produce outcomes, merchant should revenue side help the the output new And the that the the two about better supply think one. conversion about of That'd the pieces number and in put investments as what strategy? that would gaining for aiming you're understand you were which thinking investors place an be the implementation outcomes, can yield going us need

public And production, just the about the next targets of the amendment and credit of the EBITDA number to over couple to How to the are back of business come that elements transformation to credit was back of days. XX want or XX agreement how domain two. that be in of in in that I the to thinking minimums some months? the last the thinking should jives the agreement about

Kedar Deshpande

were us really amendment question. I would agreement. like we happy saying to the and call credit the our Thanks appreciate first able by to everyone's thing complete are for successfully to the start flexibility with is, moving we that

the on I question, create I merchant to So that, take Damien the agreement. and say pride the the on now going back to first second is side your one you on will want take answering can what then

it, there is merchant. of are chains, is side, there then board there are are one long if have on we big merchants, merchant. the big either platform or themselves you by enterprise two merchant which force. first using of What which small types retailers, look merchants, at come sales tail on The and One our

the strategy Now, that we to are things expectation sure this particular what merchant inherently has. trying we one to is make of in do understand

we we is when merchants sure big merchants, have at list associated go make price of after. particular look there, so And trying a the that to large to there scale that that actual we of target the an merchant. are And we this with want

saying because is are the of very hey, these we are we this we of merchant merchants. kind deal is the this this to particular trying want vertical this only and after Not structure we go of kind to is presence powerful, the physical kind say, is require

sales to force have trying So targets, I effectiveness is of increase structures, much deal with mentioned very go these will precise sales focused precise after, force, which before. they're that which particular the our

then to take strides and them, self-service can on for for are in the when purposes. we platform scalability more platform our telecom long need on actually self-service comes And merchant they We making and the on on more human. with off a touch and they that don't get -- the merchant, can

But to where in of trying using both us, as the I into enough bring tail we have might say, as that way. equation resulted we platform getting quality our we and skewed And wanted more to more that were on lots well self-service particular head force basically sales but platforms. not merchant, to of for merchants versus this on think the balance was are get going we're

kind gives then head So more that and us scale and flexibility self-service to tail our supply. precise of and our being bring on being on that more merchant with focused

Damien Schmitz

flexibility we the we're in our improving Sure. EBITDA agreements question, on adjusted a And improving to with talked really liquidity to we yourpart minimums, various actions the and focused renegotiated of or And liquidity respect the and restructuring we that transformation today. our maintaining then, provide credit targets, about as navigate and revolver Eric, your two for position.

that business. give overall agreement The remove to actions actions $XXX did that these the cost And number for we've of are larger a back us credit costs amended add program the of taken. part million from of restructuring restructuring

lower forward, costs significant and EBITDA adjusted to meaningful the taken levels. we've our So, a see profile second billings going going quarter, starting out in even in at you're improvement

question. hope answers So that your

Operator

We Thank Young next to now go Barclays. of you. Trevor

Alex Hughes

Hughes Alex two, questions is the Trevor. for This Thanks I on for if can.

First January, expect Or flow flow XQ return that and was guidance? can trends savings, you of then be the free you're is can positive Phase drivers cash year to cash if dig you cost Do you it while through deeper in on one touched as the free but the similar commentary. the And seeing X March? full cash you before, implement positive? question in for flow and into bigger February, Thanks. withdrawing kind on trends second, of you saw

Damien Schmitz

going is generation performance can here. the Kedar on on question business Sure. Damian and I'll take first This forward, flow the take the question cash trends.

think, the of quarter. of by So head X Phase the the be going getting are the today, you what I completion actions, there second majority you're to end the heard in them nail right of completed upon

be going a of We're to adjusted year. generating meaningfully EBITDA cash the balance flow the for way and

of we're quarter, business while well so, we that's And this and sequential pullback. normal a this cash to in the reflective as of part as of flow business going pattern see file seasonal first

year, that ability organic for Cost any rest position are and the going financial the to an we're to guidance improve on going our we're giving flow stabilize the our on cash not year. profile, for full actions forward really flow of generate cash basis and taking

our way meaningfully lower our about profile to the cost adjusted our our moving have that's which taking tech capital, primarily which mostly cash of centers billings in much think net to lowered data is on-premise CapEx, And flow our and volumes. our finally, by generation going organization, reflective to local also our be and EBITDA cloud, the from is, we to working of

trends. business the And Kedar for

Kedar Deshpande

trends, and is the pullback, January it's of core the what seen but environment for we it, have February on mix us. at in business Yes, a

hiccups cloud which with two at are some there example, incidences. transformation, last -- year, effective. at are are are had back around that same time, levels are with some similar months in some some particularly of our we for first verticals, but Combined particular not which coming verticals, there So the there as

have don't But a have so as overall, will say, what one in two you verticals, within I complexity, it's first would all. local business we it's well, I months, fits can So, not we in tell our that example, think sub-reflection given seen I for in our March.

So strong business is But up at level down for. for sometimes example, particular health really in our to beauty things level also and do, coming goes some par back and trend it's or cases. below this

the better performance and said, which in do mentioned we for the are bring that merchant That March get we is response basically a see which trying ones that focused factor actually the on, new bring are where on merchants, have exact we our point we sales strategy to the is response. when on to that's you the

And so very are bringing the -- well merchants. as trying seen we terms have retention of of better focused in merchants much targeted to on much, far reduce is the what we attrition when as sorry, our

we you watches least can And if have, more to what we that's And year to grown the month, dramatically we simple, seen at if that very is force. are using that, criteria particular have closed of up. we or factor statement, just merchant has XX our, complete compared what sell our merchants that to is per particular last our sales want kind going

Operator

questions no afternoon. Instructions] this it ladies Thank appears and And you. have further [Operator we gentlemen,

much great a to like fourth Goodbye. all thank wish conference evening. all would So, so we financial to results call. quarter for We'd XXXX joining Groupon's you like you

Groupon (GRPN) 16 Mar 232022 Q4 Earnings call transcript