Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Groupon Inc (NASDAQ:GRPN) exceeded the high end of its EBITDA guidance for Q3 2024.
• The international local segment, excluding Italy, showed stable and improving trends with a revenue decline of only 2% year over year.
• The company achieved a milestone of 100% mobile web and desktop traffic in North America on its new website, leading to faster feature development.
• Groupon Inc (NASDAQ:GRPN) announced a new secured convertible debt agreement, raising $197 million, providing financial flexibility.
• The company reported positive adjusted EBITDA for the sixth consecutive quarter, with a trailing 12-month adjusted EBITDA of $78 million.

Negative Points

• North America business faced headwinds due to technical issues related to platform migrations, impacting revenue.
• There was a one-time drop in retention rates of legacy customers, which may affect future financial performance.
• Consolidated billings decreased by approximately 10.9% year over year, with revenue down 9.5%.
• The goods category continues to struggle, with billings down 29.6% year over year, and no near-term change in the negative trend is expected.
• The company revised its full-year 2024 revenue outlook to a decline of 6% to 4%, below prior expectations.

Q & A Highlights

• Warning! GuruFocus has detected 2 Warning Signs with GRPN.

Q: Could you provide more color on why you don't think the legacy retention rates would bounce back in North America? What do you think the impediment is there? A: (CEO) We have multiple activities to reactivate legacy cohorts. Last year, we saw improvement during Q4, showing our value proposition works during peak seasons. However, due to security and technology changes, some users faced friction, such as password resets, which may have deterred them. We are communicating with them to bring them back, but we don't take it for granted that they will return.

Q: Can you give more color on the timing of the tech stack upgrade internationally? When will the majority of those markets see the upgrade? A: (CEO) The plan is to implement the tech stack upgrade in the first half of next year.

Q: What happens to the rest of the 2026 convertible notes that are not part of the 176 million amount? A: (CFO) We still have them, and our plan is to either refinance or pay them back using the 20 million we have or through earnings. It's roughly 54 million that we have today.

Q: Could you talk about what needs to happen for you to hit the 100% ROI within 14 days for marketing payback? A: (CEO) We have periods when we hit this marketing payback. However, during the last quarter, our efficiency was impacted by changes. We aim to be within this range consistently and are exploring additional channels to increase spend and speed up acquisition.

Q: Could you explain why an increase in local voucher redemption rates would be a headwind to revenue, not a benefit? A: (CFO) Higher redemption rates mean we earn our margin on the redeemed vouchers. If vouchers break, we keep 100% of the revenue. However, our business model focuses on repeat customers, so while breakage can boost short-term revenue, redemption supports long-term customer satisfaction and retention.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.