Groupon(GRPN) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Groupon reported gross billings of $460 million and revenue of $153 million for Q2 2022, with a gross profit of $134 million and adjusted EBITDA of $6 million [24] - Local billings were $361 million, up 5% from Q1 2022, but overall performance did not meet expectations [6][24] - The company ended the quarter with $316 million in cash, including $60 million drawn on its revolving credit facility [24] Business Line Data and Key Metrics Changes - Local billings recovery rates were at 52% of 2019 levels, up 3 percentage points from Q1 2022 [25] - Active customers worldwide totaled approximately 21 million, with 10.5 million active local customers in North America, a 1% year-over-year increase, and 5 million active local customers internationally, representing a 22% year-over-year growth [25] - Goods category billings were $61 million, down 15% compared to Q1 2022 [26] Market Data and Key Metrics Changes - The North American local customer base saw a slight increase, while international markets experienced significant growth [25] - The company noted that refund levels decreased sequentially due to proactive outreach to merchants [25] Company Strategy and Development Direction - Groupon's turnaround strategy focuses on reducing costs by $150 million annually and improving the core marketplace experience [9][34] - The company aims to enhance customer retention and purchase frequency by orienting the marketplace around everyday customer problems rather than just discounts [13] - Plans include launching curated inventory collections and a stand-alone marketplace for Beauty & Wellness experiences by the end of 2022 [22][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macro headwinds affecting merchant engagement and customer retention, but expressed optimism about benefiting from a potential economic downturn [6][7] - The company expects to return to cash flow generation in Q4 2022 and aims for a sustained adjusted EBITDA margin of 15% to 20% and at least $100 million in free cash flow for the full year of 2023 [23][33] Other Important Information - The company is exploring further opportunities to reduce costs beyond the initial phase, potentially capturing an additional $50 million in savings over time [33] - Marketing expenses were $29 million in Q2, representing 22% of gross profit, with plans to increase marketing investment to stimulate customer engagement [27][21] Q&A Session Summary Question: What is the gating factor to get the customer flywheel going? - Management indicated that while inventory is sufficient for existing customers, improving everyday selection is crucial for driving repeat engagement [38][39] Question: What is the rationale behind paying down the revolver? - The decision was made to reduce interest payments on unused liquidity and to prepare for a sustainable positive cash flow in the future [43][44] Question: How should the timing of marketplace experience improvements be viewed? - Management stated that initiatives are being executed in parallel, with a focus on improving inventory density starting in Atlanta, with updates expected in Q4 [45][48]