Summary of Groupon Conference Call - December 08, 2025 Company Overview - **Company**: Groupon (NasdaqGS:GRPN) - **Industry**: Digital Commerce - **Key Metrics**: - Billings: $1.6 billion - Revenue: $500 million - EBITDA: $70 million - Free Cash Flow: $60 million - Active Customers: 60 million - Merchants: 50,000 - Experiences Offered: 150,000 - **Geographic Presence**: Operates in 14 countries, primarily in North America and Western Europe [3][4] Strategic Transformation - **Management Changes**: New management team has been in place for three years, focusing on strategic transformation after a period of declining customer engagement and revenues [5][6] - **Current Focus Areas**: - Quality Orientation: Emphasizing higher quality experiences [6] - Hyper Local Strategy: Tailoring offerings based on geographic and category needs [6] - AI Integration: Leveraging AI for operational improvements and customer engagement [7][21][25] Financial Performance and Outlook - **Recent Performance**: Reported 18% growth in local billings in Q3, excluding Italy [5][6] - **Holiday Season Expectations**: Anticipates strong performance during the holiday season, with significant sales expected from experiences purchased as gifts [10][12][14] - **Customer Acquisition**: Added 300,000 new active customers in Q3 through lower funnel marketing strategies [18] Market Dynamics - **Consumer Behavior**: Experiences are increasingly popular as gifts, with a notable peak in purchases leading up to Christmas [14] - **Merchant Dynamics**: As the economy softens, merchants may seek more volume through platforms like Groupon, leading to increased promotions and brand acquisitions [16][17] AI and Technology Investments - **AI Utilization**: AI is being integrated across various functions, including deal structuring and customer engagement [21][23][25] - **Platform Modernization**: Significant investments in technology infrastructure, including a new customer data platform and cloud migration, are underway [36][38] Growth Opportunities - **Emerging Categories**: Potential for growth in food and drink, hotels, and live events, which currently represent a small percentage of overall billings [29][30][32] - **International Expansion**: Solid growth in key international markets (Spain, France, UK, Germany) with plans to leverage successful strategies from North America [34][35] Investment Priorities - **Capital Allocation**: Focus on long-term growth, technology investments, supply-side enhancements, and marketing [41][42] - **Free Cash Flow Generation**: Maintaining a stable cost base while investing in growth initiatives [43][44] Key Metrics for Investors - **Billings Growth Rate**: Identified as the most critical metric for tracking the company's progress and long-term potential [48][49]

Core Insights - The focus is on companies that prioritize value amidst rising prices and inflation concerns [1] - Observing megatrends can provide insights into societal advancements and investment opportunities [1] - Emphasis on the importance of fundamentals, leadership quality, and product pipelines in investment decisions [1] Group 1: Investment Strategy - Companies should leverage macrotrends and emerging technologies for competitive advantage [1] - The analysis includes a focus on marketing and business strategies for medium-sized companies and startups [1] - Evaluating startups and emerging industries is a key component of the investment approach [1] Group 2: Professional Background - The analyst has experience in international development and non-profit sectors, contributing to a well-rounded perspective [1] - Previous roles included evaluating startups and writing on technology and economic news [1] - The goal is to integrate various experiences to identify investment opportunities effectively [1]

Core Insights - Legendary investor Warren Buffett is stepping back from public engagements and increasing his donations, amounting to approximately $1.3 billion to his family's foundations [1][2] - Buffett will not write the annual letter this year or speak at the annual meeting, marking significant changes for Berkshire Hathaway [2] - He plans to continue writing letters during Thanksgiving to detail his donations [2] Leadership Transition - Buffett has handed over the reins to Greg Abel, who will take on a more prominent role, although Buffett will remain the face of the company as long as he is able [4][5] - Despite the leadership change, Buffett will retain a significant amount of A-shares until shareholders feel comfortable with Abel's leadership [3][4] Company Strategy and Future - The size of Berkshire Hathaway has made it challenging to find sizable acquisitions, with a cash pile now at $382 billion [6][8] - Buffett believes that Berkshire has a lower chance of facing a massive catastrophe compared to other companies, but he acknowledges that the stock may behave unpredictably in the short term [7] - There are still opportunities available, and Buffett continues to review them regularly [8]

Core Insights - Groupon (GRPN) reported a loss of $2.92 per share for Q3 2025, missing the Zacks Consensus Estimate of earnings of $0.01 per share, compared to earnings of $0.33 per share in the same quarter last year [1][9] - Revenues reached $122.8 million, exceeding the consensus estimate by 0.77% and reflecting a year-over-year growth of 7.3% [1][9] Revenue Breakdown - North America revenues were $96 million, surpassing the consensus mark by 4% and growing 11% year-over-year [2] - International revenues totaled $26.8 million, falling short of the consensus by 2.89% and decreasing 2.8% year-over-year [2] - Gross billings amounted to $416.1 million, marking an 11% increase year-over-year [2] Segment Performance - Local revenues were $114.7 million, beating the Zacks Consensus Estimate by 3.71% and rising 9.3% year-over-year [3] - Consolidated Travel revenues were $4.7 million, missing the consensus by 2.26% but increasing 8.8% year-over-year [4] - Goods revenues were $3.4 million, missing the consensus by 28.14% and declining 34.9% year-over-year [5] Customer Metrics - Groupon had approximately 16.1 million active customers, a 4% increase from the previous year, exceeding the consensus estimate by 4.34% [6] - North America accounted for about 11 million active customers, beating the consensus by 7% [6] - International active customers were 5.1 million, slightly missing the consensus by 0.97% [6] Operating Performance - Consolidated gross profit grew 8.7% year-over-year to $111.8 million, with North America gross profit increasing 12.8% [7] - Consolidated gross margin expanded to 91%, consistent with the previous quarter [7] - Selling, general and administrative expenses decreased by 4.3% year-over-year to $68.3 million, while marketing expenses rose 14.3% to $41.4 million [8] Financial Position - Groupon ended the quarter with cash and cash equivalents of $238.5 million, down from $262.6 million at the end of Q2 2025 [10] - Cash used in operating activities was $20.5 million, compared to $16.3 million in the same quarter last year [10] - Free cash flow was negative $24.6 million, slightly improved from negative $25.2 million in the previous quarter [10] Guidance - For Q4 2025, Groupon expects revenues between $135 million and $137 million, indicating 4-6% year-over-year growth [11] - The company anticipates adjusted EBITDA of $21 million to $23 million for Q4 [11] - For the full year 2025, expected revenues are between $500 million and $505 million, reflecting 2-3% year-over-year growth [12]

Financial Data and Key Metrics Changes - Global billings grew 11% year over year, marking the second consecutive quarter of double-digit growth [3][4] - Adjusted EBITDA reached $18 million, exceeding expectations, while trailing 12 months free cash flow reached $60 million [4] - Marketing spend increased by 14% year over year, accounting for 37% of gross profit [46] Business Line Data and Key Metrics Changes - The core local category, which represents 89% of billings, grew 18% year over year, with North America local up 18% and international local (excluding Giftcloud) up 15% [4][5] - The "Things to do" segment experienced its seventh consecutive quarter of strong double-digit growth [5] Market Data and Key Metrics Changes - All four major international markets delivered a second consecutive quarter of double-digit growth [5] - Chicago has become the largest city for Groupon, growing at nearly double the rate of North America local overall [5] Company Strategy and Development Direction - The company aims to accelerate supply and growth towards a goal of over 20% billings growth while generating strong adjusted EBITDA and free cash flow [5][6] - There is a focus on building a hyperlocal experience marketplace that combines trust, curation, quality, and unbeatable value [6][7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the foundation being built for becoming a trusted destination for quality local experiences [6] - The company is optimistic about the impact of AI on sales processes and customer interactions, expecting to enhance lead generation and customer service [39][42] Other Important Information - The company is implementing a Customer Data Platform (CDP) to improve personalization and customer journey optimization [24][51] - Progress is being made on the Italian tax settlement, with a proposed settlement receiving several approvals [63] Q&A Session Summary Question: Growth in Chicago - Management confirmed that Chicago local billings are growing in the high 30s due to focused sales resources and a better understanding of the market [9][10] Question: Purchase Frequency Among New Cohorts - Management noted improvements in repurchase rates among new customers compared to previous cohorts, attributing this to ongoing technology enhancements [22][23] Question: Marketing Strategy Balance - The company plans to balance direct response marketing with brand advertising, with a focus on measuring ROI and adjusting budgets based on performance [26][27] Question: Impact of AI Initiatives - Management discussed the integration of AI in sales processes and customer service, expecting it to enhance conversion rates and customer interactions [39][42] Question: Travel Business Performance - The travel segment has seen growth due to partnerships with large enterprise brands and better offerings aligned with customer needs [55] Question: Italian Tax Settlement Update - The company is making progress on the Italian tax settlement, with a remaining amount owed of approximately $15 million [63]

Core Insights - Groupon reported revenue of $122.83 million for Q3 2025, a year-over-year increase of 7.3%, but an EPS of -$2.92 compared to $0.33 a year ago, indicating significant losses [1] - The revenue exceeded the Zacks Consensus Estimate of $121.88 million by 0.77%, while the EPS fell short of the consensus estimate of $0.01 by 29300% [1] Financial Performance - The company’s stock has returned -7.5% over the past month, contrasting with the Zacks S&P 500 composite's +1.3% change, and currently holds a Zacks Rank 3 (Hold) [3] - North America revenue was $96.01 million, surpassing the two-analyst average estimate of $92.32 million, reflecting a year-over-year change of +10.5% [4] - International revenue was $26.82 million, slightly below the two-analyst average estimate of $27.62 million, showing a year-over-year decline of -2.8% [4] Geographic Revenue Breakdown - North America Local revenue reached $91.56 million, exceeding the average estimate of $87.82 million, with a year-over-year increase of +12.4% [4] - International Goods revenue was $2.18 million, below the average estimate of $2.84 million, marking a year-over-year decrease of -20.5% [4] - North America Goods revenue fell to $1.22 million, significantly lower than the estimated $1.63 million, representing a -50.9% change year over year [4] - International Local revenue was $23.18 million, slightly above the average estimate of $23.15 million, with a year-over-year change of -1.2% [4] - International Travel revenue was $1.46 million, below the average estimate of $1.63 million, but showing a year-over-year increase of +5.6% [4] - North America Travel revenue increased to $3.22 million, surpassing the estimated $2.87 million, reflecting a +10.4% change year over year [4]

Financial Performance - Global revenue for Q3 2025 was $122.8 million, up 7% year-over-year[5] - Global billings reached $416.1 million, an increase of 11% year-over-year[6] - North America revenue was $96.0 million, up 11% year-over-year, with Local revenue at $91.6 million, up 12%[10] - Adjusted EBITDA for Q3 2025 was $17.5 million, compared to $14.8 million in the prior year[10] - Revenue for Q3 2025 was $122.825 million, a 7.3% increase from $114.479 million in Q3 2024[36] - Gross profit for Q3 2025 reached $111.836 million, compared to $102.895 million in Q3 2024, reflecting an increase of 8.9%[36] - Operating expenses totaled $109.642 million in Q3 2025, slightly up from $108.481 million in Q3 2024[36] - Total gross billings for Q3 2025 reached $319,107 million, reflecting a year-over-year growth of 16.0%[1] - Contribution profit for Q3 2025 was $55,962 million, showing a year-over-year growth of 14.0%[1] - Total gross profit for Q3 2025 was $87,708 million, which is a 12.8% increase from the same quarter last year[1] Customer Metrics - Active customers increased to 16.1 million, up 4% year-over-year, with 300,000 net new active customers added in the quarter[2][6] - Active customers increased to 16.1 million in Q3 2025, up from 15.8 million in Q2 2025[2] - Total consolidated units sold in Q3 2025 were 9,136, a slight increase from 9,117 in Q2 2025[2] - The total headcount decreased to 1,739 in Q3 2025, down from 1,814 in Q2 2025[2] Loss and Expenses - Net loss from continuing operations was $117.8 million, a significant decline from a net income of $14.5 million in the prior year[6] - The net loss attributable to Groupon, Inc. for Q3 2025 was $118.373 million, compared to a net income of $13.928 million in Q3 2024[36] - Basic net loss per share for continuing operations was $2.92 in Q3 2025, compared to earnings of $0.35 per share in Q3 2024[36] - The company reported a loss from continuing operations before income taxes of $96.534 million for Q3 2025, compared to income of $16.843 million in Q3 2024[36] - Marketing expenses were $41.4 million, representing 37% of gross profit, compared to 35% in the prior year[6] - The company incurred restructuring and related charges of $896 million in Q3 2024[46] Cash Flow and Assets - Operating cash flow from continuing operations was negative $20.5 million, and free cash flow was negative $24.6 million[10] - Free cash flow for Q3 2025 was $(24,588) million, indicating a 25.0% improvement compared to the previous quarter[1] - Total current assets as of September 30, 2025, were $314.219 million, a slight decrease from $315.361 million at the end of 2024[34] - Total liabilities increased to $667.564 million as of September 30, 2025, up from $571.639 million at the end of 2024[34] - Cash and cash equivalents stood at $238.451 million as of September 30, 2025, compared to $228.843 million at the end of 2024[34] - The company reported a net cash used in financing activities of $(3,275) thousand for the three months ended September 30, 2025, compared to $(691) thousand for the same period in 2024[38] - The total cash decrease for the three months ended September 30, 2025, was $(28,888) thousand, compared to a decrease of $(18,238) thousand for the same period in 2024[39] International Performance - International revenue was $26.8 million, down 3% year-over-year, primarily due to the divestiture of Giftcloud[10] - International segment total gross billings decreased by 1.3% year-over-year to $97,005 million in Q3 2025[1] Depreciation and Other Expenses - The company reported a depreciation and amortization expense of $3,940 thousand for the three months ended September 30, 2025, down from $6,492 thousand in the same period of 2024[38] - The company reported a depreciation and amortization expense of $6,895 million in Q3 2024[46] - Stock-based compensation for the three months ended September 30, 2025, was $11,109 thousand, an increase from $8,890 thousand in the same period of 2024[38] - Other income (expense), net included a loss on extinguishment of debt totaling $99.9 million for the three months ended September 30, 2025[48]

Core Insights - Groupon reported a 7% increase in global revenue and an 11% increase in billings for Q3 2025 [1] - North America local revenue grew by 12%, with local billings increasing by 18% [1] Financial Performance - The company added nearly 300,000 net new active customers during the quarter [2] - The "Things To Do" vertical outperformed industry growth during the summer season [2] Strategic Outlook - CEO Dusan Senkypl emphasized the ongoing transformation of the marketplace and expressed confidence in becoming a trusted destination for local experiences [2]

Financial Performance - Gross billings for North America increased by $44.0 million (16.0%) to $319.1 million for the three months ended September 30, 2025, compared to the same period in 2024 [202]. - Revenue for the three months ended September 30, 2025, was $122.8 million, up from $114.5 million in 2024, representing a growth of 7.9% [194]. - Gross profit for the same period increased to $111.8 million, compared to $102.9 million in 2024, reflecting a growth of 8.6% [194]. - Contribution profit for the three months ended September 30, 2025, was $70.4 million, a 5.3% increase from $66.6 million in 2024 [194]. - Adjusted EBITDA for the three months ended September 30, 2025, was $17.5 million, compared to $14.8 million in 2024, marking a growth of 18.9% [194]. - Contribution profit for North America increased by $6.9 million (14.0%) to $55,962 thousand for the three months ended September 30, 2025 [208]. - Total gross profit for North America increased by $10.0 million (12.8%) to $87,708 thousand for the three months ended September 30, 2025 [206]. - Total gross profit for North America increased by $11.3 million (4.5%) to $262,012 thousand for the nine months ended September 30, 2025 [207]. - Revenue for the nine months ended September 30, 2025, was $365.7 million, with an increase of $1.9 million attributed to exchange rate changes [238]. - The company reported a gross profit of $332.6 million for the nine months ended September 30, 2025, which is an increase of $1.7 million from the previous year [238]. Customer Metrics - Active customers in North America grew by 8.3% to 10.999 million for the trailing twelve months ended September 30, 2025 [202]. - International TTM active customers decreased by 170 thousand (3.2%) to 5,127 thousand for the trailing twelve months ended September 30, 2025 [211]. Segment Performance - North America segment revenue increased by $9.1 million (10.5%) to $96,007 thousand for the three months ended September 30, 2025, compared to the prior year [206]. - International segment revenue decreased by $0.8 million (2.8%) to $26,818 thousand for the three months ended September 30, 2025 [215]. - International revenue decreased by $4.2 million (5.1%) to $78,598 thousand for the nine months ended September 30, 2025 [216]. - The Local category gross billings increased by 18.1% to $293.8 million for the three months ended September 30, 2025 [202]. - The Goods category experienced a decline of 31.9% in gross billings, dropping to $7.6 million for the three months ended September 30, 2025 [202]. Expenses and Cash Flow - Free cash flow for the three months ended September 30, 2025, was $(24.6) million, compared to $(19.7) million in 2024 [194]. - North America marketing expense increased by $3.1 million (10.8%) to $31,746 thousand for the three months ended September 30, 2025 [208]. - International marketing expense increased by 27.3% to $9,696,000 for the three months ended September 30, 2025, compared to $7,615,000 in 2024 [217]. - Total operating expenses for the three months ended September 30, 2025 were $109,642,000, a slight increase of 1.1% from $108,481,000 in 2024 [222]. - Selling, general and administrative (SG&A) expenses decreased by 4.3% to $68,264,000 for the three months ended September 30, 2025, compared to $71,327,000 in 2024 [222]. Tax and Other Financial Matters - Provision for income taxes for the three months ended September 30, 2025 was $2,321,000, compared to $21,248,000 in 2024, reflecting a significant change in effective tax rate [227]. - The company expects future effective tax rates to differ significantly from the U.S. federal income tax rate due to valuation allowances in jurisdictions with losses [227]. - The company expects to pay approximately $15.2 million in cash for tax assessments in Italy, significantly reduced from initial claims of $170 million [242]. - Other income (expense), net for the three months ended September 30, 2025 was $(98,728,000), a significant decrease from $22,429,000 in 2024, primarily due to a loss on extinguishment of debt [225]. Cash and Liquidity - As of September 30, 2025, the company had a cash balance of $238.5 million, with sufficient liquidity to meet operational needs for the next 12 months [240]. - Net cash provided by operating activities for the nine months ended September 30, 2025, was $7.9 million, compared to a net cash used of $11.1 million in the prior period [248]. - Net cash provided by investing activities for the nine months ended September 30, 2025, was $4.0 million, an increase from a net cash used of $3.1 million in the prior period [249]. - The company used $6.4 million in financing activities for the nine months ended September 30, 2025, a decrease from $32.9 million provided in the prior period [250]. - As of September 30, 2025, the company held $67.0 million in cash in international subsidiaries, primarily in various foreign currencies [260]. Foreign Currency and Debt - The company is exposed to inflationary pressures that could negatively impact operating costs and financial performance [270]. - The company assesses foreign currency exchange risk using a sensitivity analysis based on a hypothetical 10% change in currency rates [267]. - The net working capital deficit from subsidiaries subject to foreign currency translation risk was $29.8 million as of September 30, 2025 [268]. - A hypothetical 10% adverse change in foreign currency exchange rates could increase the working capital deficit by $3.0 million [268]. - The company has fixed-rate debt with aggregate principal amounts of $33.7 million, $47.3 million, and $244.1 million for the 2026, 2027, and 2030 Notes, respectively [269]. - Changes in market interest rates affect the fair value of the company's fixed-rate notes and other financial variables [269]. - The company’s cash balance as of September 30, 2025, consists of bank deposits, limiting exposure to interest rate changes [269]. - As of September 30, 2025, the U.S. dollar index decreased by 9.6% compared to December 31, 2024 [266]. - Approximately 21.8% and 21.5% of the company's revenue for the three and nine months ended September 30, 2025, respectively, was derived from the International segment [266].

Core Insights - November is historically a strong month for stocks, prompting a focus on companies with steady earnings growth and earnings acceleration, which significantly impacts stock prices [1][9] Earnings Acceleration - Earnings acceleration refers to the incremental growth in a company's earnings per share (EPS), indicating an increase in quarter-over-quarter earnings growth rates [3] - Companies with earnings acceleration are often undervalued, leading to potential stock price rallies as investors take notice [4] Screening Parameters - The screening criteria for identifying stocks with earnings acceleration include: - Last two quarter-over-quarter EPS growth rates must exceed previous periods' growth rates [6] - Projected EPS growth rates for the upcoming quarter should exceed those of prior periods [6][7] - Additional criteria include a current price of at least $5 and an average 20-day volume of at least 50,000 [8] Identified Stocks - The screening process narrowed down to four stocks, with the top three being: - **Groupon, Inc. (GRPN)**: Expected earnings growth rate of 153% for the current year, operating a marketplace linking consumers to merchants [10] - **BriaCell Therapeutics Corp. (BCTX)**: Expected earnings growth rate of 81.6% for the current year, focused on developing immunotherapies for cancer [11] - **InnovAge Holding Corp. (INNV)**: Expected earnings growth rate of 209.1% for the current year, providing services to help seniors live independently [12]