Earnings call transcript Q2 2023

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Operator

Hello and welcome to Groupon's Second Quarter 2023 Financial Results Conference Call.

On the call today are our Interim CEO, Dusan Senkypl; and CFO, Jiří Ponrt. [Operator Instructions] Today’s conference call is being recorded.

Before we begin, Groupon would like to remind listeners that the following discussion and responses to your questions reflect management's views as of today, August 09, 2023 only and will include forward-looking statements.

Actual results may differ materially from those expressed or implied in the company’s forward-looking statements. to information forward-looking or obligation result as no new of future undertakes update statements these a Groupon events.

their results Additional factors information SEC included including financial Form report with that other release in are XX-Q. could potentially their their about impact the the risks filings earnings press and on and quarterly company’s

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

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

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

Dusan Senkypl

Relations call. pleasure investor presentation for which us second and for be an to today's will website. thanks Investor referring you. Hello, joining prepared is to all In on quarter It's XXXX of our with earnings a be remarks, our I posted

top-level encourage Groupon. detail on will I call overview you our start release more I a on X addition, In results. contain review on with slide XX-Q, QX press and to our which today's

unique popular trust Groupon national delightful experiences mission all to from we businesses has reasons to of experiential consumers toolkit renowned extraordinary are ability drive chains and of become to side important to from receives daily the believe destinations exploring a who views place for an local merchants growth and their our Every services. and day, on our local achieve And in an local their is see thousands Groupon of as value Our or marketplace, objectives. discover our Groupon ranging globally to experience millions in service. stakeholders. ultimate destination mission to small the for supply who

As and against serve believe as months. value, by merchants, has trailing XX that the deliver XX% we a shareholder execute consumers significant XX% the our and for margin and to business to both as the contribution opportunity of gross our revenues unlock we percentage profit potential model indicated

as CEO, visibility the the Moving on to company. towards the ahead. slide quarter interim that see work first successful transformation better path into right I how I have is X, waiting same are much after we the completing at time, can of And

changes gaining the positive a the levers our to improving execute. drive while same lower team, and performance our ability there time our outside, large see world-class our costs, attracting SG&A to the may leadership a changes on stacks, experience I to While marketing from revenue, the improvements better at our are indicate From ability product of management perspective, this internally, from signals my financial incremental and results underway. include quarter

of $XX financial our positive versus results to adjusted our million. while return declines that XX% year-over-year, minus revenue we acceptable, to generation pleased I QX quarter modestly second And see XXXX are our not of results EBITDA and XX% of am improved year-over-year, minus

to Groupon, industry rate our employee well not negative continues run benchmarks. attrition signals, new On to while above

this attrition given Some transformation. the expected of be to is

and promotions the new We expect internal rest to hires. by handle

of details Jiří in the will free provide on another as saw we EBITDA drivers addition, this flow cash free quarter cash to our positive adjusted In outflow lacked his return more divergence of our section. generation.

expectations. is marketplace, am streams, financial please. I in revitalizing key eight The presented our of quarter our plan pillars three strengthening transformation rebuilding foundation. grouped can into to last work report my be the X, we and plan organization, our our tracking to pleased Overall, place Slide and

urgently our organization. are transformation We pushing ahead across the and bar with fronts on our all raising

progress we expect to quarter going make I improvements on transformation year-over-year our forward in show every plan, As XXXX.

a in our several say me greater let few Now on words detail pillars. of

Moving X please. to slide

every Strong time happy together worked and leadership has team last constantly and been with. strategically coming go Republic, are believe together action we the the With team in months employees great have taken team the have team and former am best of execution assembled. period the leveraging Over of relatively seek see nine to a win Pale Czech making management hires. the by I while new has team hiring continuing is I with company speed install swift and challenge the quo transformation. embrace Groupon The the I senior personally improvement. efficiency we in Despite and ever our to a teams short month status together best putting it the Fire fresh to brand the improving

X. Slide

is deliver Our really ability the of transformation the to changing execute. company about and

by are the into processes people, and culture, the details organization and systems. structure, changing We step going step

As global solve we marketplace of include, department a one for for address enabling our solutions changes we focused on of sides needs become realign in started We Squads of organization duration limited company currently small new opportunity. have service inefficiency are example, in cross-functional Squads. to where external bringing our created issue specific Examples start An the are to to both help expanded better initiative XX our our and teams or company the our running. to are teams and customers to problems. more the of and simplify the understand we our process building

copywriting creation process. our organization the enabled Adaption improve the across deals us of of and to has deals AI

and also changes engineering enterprise accounts to combined growth. to assurance Improvements with and in quality value organization are help process on product our sales helping projects proposition leveraging our recommendation, year-over-year enterprise in AI deal improve return We are areas. among to changes our

promotional progress our heavily several in invested This amount spend paid the spent positive top we our to and reliance of second spend resulting we on promotions health Slide between our marketplace. promotional offer demand spend of Reducing deal at and almost key in discount the marketing. on made the two side proposition. improving drive XXXX In last marketplace. many initial improving spend on times quarter merchant promotional our merchants on spend the XX business is paid please. the mix value promotional years hurts marketing towards on and conversion in of In is the the step a our

quarter In a took personalized began new an enabling launch important key our of We be gradually shifting the reducing of promotions. expect linear. here will with be on reliance approach. step personalization to projects progress prices A product. on process will the our not I do our second purple we the project

great our made our search marketing rebuilding top stacks Turning and progress to our in engine performance marketing display channels deals. and campaigns paid between including connection we marketing the and also marketing, improved

a year-over-year profits of the increasing from the our return in growth we performance spend marketing marketing benefit With foundation in saw our to paid stronger started June. gross quarter and

conversions and scaling our ramp performance gradually marketing channels reduce offset we marketing are to up increased efficiently lower traffic our our headwinds site promotional believe believe channels looking to and we drive QX. We ready spend. By we as any potential can from to in investment performance receive further our additional are

managed and is are term and site we paid our notifications. email in marketing channels. still over direct managed into direct see only effect experiencing and side to such declines small one expect In we a marketing increase Paid only and as the of channels our we as demand push channels our spill short to

is on execute overall return through we long-term by goal revive marketplace our paid supply As and through acquired channels. our plan who direct managed become channels purchasers will customers product are changes and repeat our to and

product fixing to ambitious technology and building hackathon under of merchants, things launched helping Slide consumers, moving several new are of employees. development at we product in that Groupon, product. our our from After XX improve new please. projects the and an things we limited features In fairly head experience our are QX our organization launched new

and are to development deliver consumer side, simplify enable consumer a faster our the and changes. us On application new which building will infrastructure we web mobile

holiday are also new which be a time developing in We expect for proposition season. we will the gifting launched

across but the no build, in As we across our done silos longer projects are company. the connected

streams will ensure supply, in more for also supply and marketing which gifts, changes gifting work campaigns. to premium sales is to have paid and is attracting better Our project SEO our

our development seamlessly requirement voucher, load merchant new eliminating side, merchant redemption which merchants. for on prior On changes this quarter center are a a product merchants manually improving enables convenience a the our into to redemptions. the and voucher redeem example the log to of focused API, is One

businesses many can technology product As we to And AI merchants is goal generative experience, than as into how a portal. like discount Groupon product continue improve long-term ourselves our to constantly by are seen be our marketing merchant our all rather platform a we asking roadmaps. incorporate development today,

new launched better deal business has AI in potential features. deal for quarter, a version our a second AI-driven one be merchants product click. a the structure a most In game content in new the of would deal which create involved and creation and changer tool of with deal to all allow we new to is our being

our of the changes, of our strides year. to our reducing by since number platform, team to make further simplify beginning addition engineering In X% to continues the product great microservices the

team proud improve journey product projects work to While of the costs I'm world-class product our ambitious to days cut experience. on engineering at our on is taking doing it's time same to still the early build on down while product a and the experience,

been is organization new the be excited am in significant changes. you underway the not The quarters team to engineering has how sharing our grateful easy handling ahead. excitement is more the updates I There and transformation I'm in and with product technology

please. Slide XX

back-to-fundamentals a running supply side, are the sales. we On to taking approach

Our three right three, sales the two, higher inventory Getting and priorities and evaluating on into retention, our are is critical. sales acquisition supply performance efficiency our and quality marketplace network. one, investments top

understand XX% deals This the of what we top top drives is XXX and doesn't our what that majority business. supply value and proposition. can works past our less to we our Our do merchant quarter the accounts studied improve of what to than

work hard deal been deal merchant together define have that other a the quality deal. and categories, features at amongst structure, make correct value proposition ranking We to up

other focus from markets at the geofocus America with outperforming we quarter, top level very seeing are in expand third top quality by in North expect North our focus deals America the markets the XX double targeting in our markets five to paying that is digits. the still five top North America our In our While on to we off early, markets.

to converting efficiency, a profitability take align our up the to pipeline new standardization continue improve to performance including steps lead it of are our to improve programs operations. sales and company's our sales sales steps allocation goals and changes better of continue sales incentive globalization tool, the pipeline The we and force to the We foundation. further force setting deals strong is and a our taking with

into to As the we have including investments number we the exit increasing started evaluate second network, potentially sales our of sales quarter, representatives. higher

While the it's with I'm sharing you still days, to excited be quarters more ahead. updates in early

please. XX, Slide

financial some Before provide to it give provide over outlook, insights concluding me our few Jiří on update I let turn comments. on to our and an a performance

quarter, financial you updated underscores to and faces last significant I a As business the indicated results urgent implement our our transformation. need and serious challenges

monetization, considering are asset approaches flexibility succeed success. more our enhance of or We foundation transformation feel will haven't take we will have I we these the and us to position. for confident I will financing the to that lot enable And will that am although still our initiatives results than long-term do and work same ever and confident of time. we and financial our combination to a lay liquidity all time, At and some in finalized

will turn some performance. our I it insights Jiří provide that, With to on to over financial

Jiří Ponrt

progress I the factors as Thanks, into speaking well my further today. of insight for pleasure increase Dusan, remainder today and time progress to use a who thank joining today you. everyone be is will quarter and on results, to our you financial It's cost here actions, second us to provide year. to our with the our our on flexibility, financial consider to savings plans

processes are few quarter well one after simplification to The I still opportunities There to would Before the full the looking is in make CFO. roles. professionals, which begin, I we of are a automation. team certain a of appreciate observations this, as in fill lot. I like as as Despite

XX. slide to Turning

revenue, into $XX jump key results. delivered contribution financial So profit, of let's adjusted of $XXX we In the EBITDA. quarter, second of second million $XX million our quarter million and

the Second outflow revolver. $XX in we quarter cash on $XX with and flow quarter ended was $XXX million cash, drawn the million including million

slight our a improvement second line SG&A. in year-over-year top quarter adjusted in EBITDA from Our benefited terms and realized first generation savings cost actions the our results from results quarter on are versus our

$XX the million quarter for was XX% of second gross expense Marketing or profit.

marketing marketing in we of to the we second efficiency improvements channel, As spend to deliver continue performance end towards quarter. started our the of the increase our

our As increase going marketing our maintain continue positive are flow EBITDA transformation generation later remarks. adjusted our another able investment outflow of cash to more adequate forward as to long to a flow on returns, experienced and as to quarter our return of to free as we key driver will expect paid divergence to say cash cash free We EBITDA. lacked significant we my plan. of in into the I return adjusted our have

of worldwide delivered We end. $XXX of Slide had gross million as Slide customers XX XX. billings and over active million quarter XX.

customers XX, year-over-year international, as billings with down were XX% X% and prior million, X.X active year-over-year. both and year. million sequentially we X.X consolidated had X% North of million America, and of down Turning June had XX% $XXX local the local $XXX XXXX, local to local year-over-year sequentially billings customers, down down million, Within million down X% of local Within active we compared our $XX local year-over-year. XX% and billings category, delivered delivered

and to In $XX Moving our were XX $XX billings down billings the and quarter, year-over-year. consolidated second million, goods year-over-year goods XX% travel down were million, categories. travel consolidated

Slide XX.

in recent continue quarter the finances. operating actions XX% our reflected $XX down see to down as quarter-over-quarter X% year-over-year million, Turning and our second cost-saving of expenses, was SG&A benefits we to

the $X.X reduce in our cost launched have pillar stock-based and depreciation our across compensation cost efficient Creating includes and million $X.X an structure fixed of plan is and in a company SG&A million key amortization. structure. transformation multiple to we projects

execute in to continue opportunities costs. We efficiently turn, and, further Groupon's ability reduce see to more improve to

in order EBITDA the XXXX, EBITDA bridge help experienced to prepared first we've business following In Turning five drivers, cash quarter in producing second significant cash bridge flow, adjusted that each. and better to will $XX provide positive flow, outflows. commentary understand of EBITDA I million the XX, positive adjusted the $XX half Slide investors between for million of and the cash free and despite free identifies of adjusted the large our a

payable secondarily Change CapEx is driven process labor. accounts primarily our driven as declines, we Change in payable for our by improve our is billings, approval streamline merchant in trade changes by is in or impacted driven order payables and payable our purchase by merchant cycle process capitalized growth, cycle. to vendors. accounts payment by the

other termination one-time SG&A with resize Change first expenses by included in our with will obligations driven be And footprint Change and other our expirations deleveraging. needs. real facility our and SG&A facility. is of the our our driven expense Chicago estate the half lease and our we leases payment in operating associated accrued lease current by in of

private to, are are several position. to not currently we but cost-saving liquidity both options limited under or issuance Giftcloud, include, our our financing securities multi-phase assets, the ownership equity options debt our through plan, Slide property. in portfolio of additional monetization XX, including additional and evaluating and intellectual non-core from potential pursuing of seeking enhance of These markets and public certain different of our actions stake the SumUp,

provider Groupon equity X.XX% the hold to privately stake held payment a global SumUp. continues in

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

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

covered our increased our gives in confidence than in future which in remarks, his better performed expected Dushan us output. As business QX,

seek our asset plans pursue we to and have made and financing that several some we addition, received have sales, under consideration. progress currently proposals are on In

are management our are obligations While and conditions the intends other through control. final to market meet plans improve our liquidity not plans described our and those subject and above, to not within

plans not U.S. in credit have our XX with and about months, including General over facility May As accordance next financial to growing a scenarios doubt various the that a alleviate concern. continue we as we result, the our Accounting these Principles in maturing do Acceptance evaluate ability concluded obligations substantial XXXX, as our consider

Slide XX.

the better I our more have and with now are we outlook. comfortable company into knowledge Dushan role, and about As are confirming one prior the quarter

we pleased progress be always the will see At this are and to improvements time, going We transformation made still with quarter, linear. quarter every XXXX. and is in very expect progress early, we year-over-year the same not forward it

not outlook. providing at guidance time, this to updated share our are I While you we with would formal like

the expectations, declines see in quarter year-over-year For of improvements revenue our fourth third each we rate expect and slight to quarter.

hold, strategy trajectory year-over-year early the As strategy. increase trends local so of our billings the see categories our billing depending from takes may trends other diverge transformation our on growth and in expect our our to XXXX, of revenue an local we by total timing transformation

believe to as our we mentioned, our approximately channels SG&A profit. expect On are be previously to spend cost percentage $XXX As gross marketing million. full receive and profile, investments XXXX of our performance expect increase incremental our non-GAAP ready marketing will year we

XXXX, be it's outlook annual formal of do early million. for to our our while will we give non-GAAP expect for too Beyond $XXX a prior XXXX, below SG&A XXXX outlook

are in which into some As investments our network, XXXX. in evaluating also expected remarks, may Dushan his sales mentioned savings higher of offset we our

We be call. earnings at provide expect to to more able next details our

generate to on positive cycle positive the other depend positive cash expenses. Turning to flow EBITDA flow, cash and the we to ability will of EBITDA profitability, free timing adjusted capital our the to On of convert remainder to working adjusted expect our year. cash free

be still negative. our For we cash our will quarter, flow third expect

be in However, second the expect quarter. we than less the outflow will

flow. expect quarter, to generate fourth we positive cash our For

both plus top-line valuation, you Thank stakeholders transformation current strategy. operating create non-core our expense unlocking today. market plan as for of focused assets, continue value our of to we the and can for equity growth our savings, time believe we our our on value all plus Given execute we your

I would to the like that, call Operator? your questions. With open for

Operator

from Thank from first Trevor you. Young comes Our question go Please ahead. [Operator Instructions] Barclays.

open. is line Your

Trevor Young

Great. Thanks.

gross profit XH be would combined incremental the on And you're full just big That's for this puts $XXX than way the on couple much cost maybe SG&A, help which in million here of the some to million the would still reinvestment my implies is for one half. walk question. EBITDA. XH EBITDA for million first higher size guide First contemplating through the XH. materially back and the any with up quarter, EBITDA potentially versus takes EBITDA $XX guide year in back a imply us quarters $XXX Help line XH half. reduction trying in in the next marketing? to Just how SG&A

Dusan Senkypl

Jiří, for asking please. if take you, Thank can Trevor, the you question. it,

Jiří Ponrt

which of to Hello, adjusted to EBITDA this Trevor. Thank brings positive half, first second with are we yes, we still And EBITDA EBITDA, in this that year. you quarter to year positive, going year, will on for half expect question. quarter and continue and for positive and we deliver turn have positive second EBITDA. it Actually, we we overall be down overall on it first us EBITDA adjusted negative the

Trevor Young

non-core that breakout question you're on business, on evaluating. Okay. the then And helpful second assets of some Giftcloud those

investment of to Just asset large specifically, is sheet up? the that sheet line balance the for business. in is balance EBITDA entirely value as of the on is it as contribution, what revenue trying though that carry on Giftcloud or today or size that Just sum terms how seems

Jiří Ponrt

as we company, numbers. and disclosure are sorry, providing of separate not but of bigger It's IDL, out really part we shooting Giftcloud are the I'm any Yes, it's such. on part not the

Trevor Young

Okay, no Thank problem. you.

Jiří Ponrt

you. Thank

Operator

from Sachs. question [Operator Eric Sheridan Instructions] from ahead. next Goldman Please Our go comes

line Your open. is

Eric Sheridan

term? the for I just front over operating in take Two of much of structural of for first key do against so taking of realigning if sort terms biggest you're the number longer to be see most Thanks That would of the play as as could, one. business, in what in you business you likely to terms are what opportunities and learnings execute longer questions. the the that taken you've you feel some will challenges excited the out that

sort time the and think And then XX. of We'd you supply where supply you scale talked merchants love to about slides on XX over of need to get you to to use sense merchant think get side the and and much. Thanks of of, so to offering supply the to drive change you might the supply words, fix of your need sort marketplace growth. how

Dusan Senkypl

the, Thanks. remember so questions. A I Okay. all I of parts for Thanks lot them on hope that. of

First of hanging my fruits we internal is the in hanging low of low low about that one all, colleagues mentioned and fellow our discussion berries. like hanging case fruits had

which really company or I two we three big one So flying. just change and items can the be or don't like see will

every pretty inside much We pretty much are of touching every part organization, the the process organization.

saw in really big have member managing. part organization As and built of the every team fairly the like rebuilding single is presentation, management you the are senior we team they where

that's So that on part.

and internet. we In on of we it marketplace, need more is see new which the cards, the are onboard with projects let's which comparable easier proposition making with our, fee forward, experimenting the going of it what quarter how like to Groupon, to our make this say, change, terms started structure value available on rate much we one

sell more the services in future, be we down how the we will a continuing as on deals, will promotional terms we of will simply we deals going decreasing different viable spend, to forward believe like price, be So case will slightly part of in the for our whole higher will structure much business list be merchants. And make compared able promotion increasing to more that quality road. with discount be major which and that's which website and the deals,

mean will than will have quality proposition deals, now. for not much, the better also value be it much my opinion, be we customers actually or what same And in right it having that the will same

Eric Sheridan

Thank you.

Operator

to in Dushan back questions no for further to have call any remarks. We I'd over queue. like the closing turn

Dusan Senkypl

thank Okay, you.

any you We you investor in feel joining. always, our future free And update our Have if as to you relations look questions, go to have to forward conversations. continuing good thank team. evening. a everyone to So for

Operator

for conference This call. you your concludes participation. today's Thank

disconnect. now may You

Groupon (GRPN) 9 Aug 232023 Q2 Earnings call transcript