Groupon(US:GRPN)2024-11-12 23:19Financial Data and Key Metrics Changes - In Q3 2024, Groupon reported Global Billings of $373 million, a decrease of approximately 10.9% year-over-year, and revenue of $114 million, down 9.5% year-over-year, at the low end of guidance [45] - Adjusted EBITDA was positive $15 million, marking the sixth consecutive quarter of positive adjusted EBITDA, with trailing 12 months adjusted EBITDA at positive $78 million [47] - Operating cash flow was negative $16 million, and free cash flow was negative $20 million, slightly declining versus last year but in line with expectations [48] Business Line Data and Key Metrics Changes - Consolidated Local Billings were $326 million, down 8.1% year-over-year, with North America local billings at $249 million, down 4.5% year-over-year [50] - International Local Billings decreased by 18.0% year-over-year, primarily due to exiting the local business in Italy, but excluding Italy, the international local business showed recovery signs [51] - The Travel category saw consolidated billings of $23 million, down 21.9% year-over-year, while Goods category billings were $25 million, down 29.6% year-over-year, indicating struggles in both segments [52][53] Market Data and Key Metrics Changes - Active customers worldwide totaled approximately 15 million, down 0.3 million from the prior quarter, with North America active customer count remaining flat sequentially [49] - Excluding the Goods category, North America active customers grew sequentially for the third quarter in a row and year-over-year for the second quarter in a row [49] Company Strategy and Development Direction - The company is focused on transforming its platform and enhancing customer experience to lay the groundwork for sustainable growth, with a strong emphasis on rebuilding sales capacity and improving inventory selection [16][25] - Groupon is implementing a marketplace playbook to reinvigorate local experiences in several countries, with Spain showing strong double-digit growth as a case study [15] - The company plans to continue hiring sales resources and expects SG&A to increase quarter-over-quarter as it ramps up hiring [55] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in North America due to technical issues related to platform migrations, impacting retention rates of legacy customers [7][14] - Despite the setbacks, management remains optimistic about the potential for growth in North America Local and the positive trends in International Local [24][42] - The company expects Q4 2024 revenues to decline year-over-year between 10% and 5%, with positive adjusted EBITDA and free cash flow anticipated [59] Other Important Information - Groupon announced an agreement to raise $197 million in new secured convertible debt, providing additional financial flexibility for its transformation [13][64] - The company is exploring changes to payment methods, including offering PayPal to all US customers and returning it to several international markets [61] - Management continues to evaluate the monetization of noncore assets, potentially generating proceeds of approximately $90 million [69] Q&A Session Summary Question: Why don't you think the legacy retention rates would bounce back in North America? - Management indicated that multiple activities are in place to reactivate legacy cohorts, but they do not take it for granted this year due to previous technical changes causing friction for customers [71][72] Question: What is the timing for the tech stack upgrade internationally? - The plan is to implement the tech stack upgrade in the first half of the next year [73] Question: What needs to happen for you to hit the marketing payback? - Management noted that while there were periods of inefficiency in marketing systems, they are close to achieving their target ROI and do not foresee major blockers [75] Question: Why would an increase in local voucher redemption rates be a headwind to revenue? - Management explained that higher redemptions can impact revenue due to the relationship with variable consideration, where good deals lead to higher redemptions affecting breakage [78] Question: Can you provide an update on the SumUp stake? - Management reiterated that they are considering selling their stake in SumUp, but any sale would require coordination with SumUp and depend on market demand [81] Question: What progress has been made in rebuilding the sales force in North America? - Management confirmed that hiring has paused for efficiency reasons but ramped up significantly prior, with plans to continue hiring in January, focusing on major population centers [84]