Q3 2019 Earnings Call

Being recorded.

For opening remarks, I would like to turn the call over to the Vice President of Investor Relations Jennifer Beugelmans. Please go ahead.

Good morning, and welcome to Groupons third quarter 2019 financial results conference call on the call today, our CEO Rich Williams and interim CFO Melissa Thomas the following discussion and responses to your questions reflect management's views as of today November 5th 2019, only and will include forward looking statements.

Actual results may differ materially from those expressed or implied in our forward looking statements additional information about risks and other factors that could potentially impact our financial results is included in our earnings press release and in our filings with the SEC, including our annual report on Form 10-K for the year ended December 30, Onest 2018.

And subsequent quarterly reports on Form 10-Q , we encourage investors to use our investor Relations website at Investor Day group on Dot com as a way of easily finding information about the company.

Groupon, probably makes available on this website the reports that the company files or furnishes with the SEC corporate governance information, our quarterly stockholder letter and select press releases and social media postings on the call. Today. We will also discuss the following non-GAAP financial measures adjusted EBITDA free cash flow and.

FX neutral results.

In our press release, and our filings with the FCC each of which is posted on our Investor Relations website, you will find additional disclosures regarding the non-GAAP measures, including reconciliations of these measures to the most comparable measures under us GAAP.

All references to SDMA in 2018 exclude the charges for the IB and patent litigation as we discussed the results. During this call note that all comparisons unless otherwise stated referred to year over year growth as reported all gross profit comparisons are FX neutral, including gross profit per customer and with that.

Happy to turn the call over to rich.

Thanks, Jennifer and thanks, everyone for joining the call as we discuss our third quarter results as usual. We also released our quarterly letter to stockholders yesterday, alongside our earnings announcement, which goes into more detail about that things will discuss today.

I encourage you to take the time to read it.

I'm pleased to speak today about our strategic progress in the third quarter, which delivered adjusted EBITDA of $50 million and free cash flow of $126 million on a trailing 12 month basis.

These results underscore the tremendous opportunity Groupon is best positioned to capture.

Local commerce is a vast addressable market in few if any can boast our unique combination of customer and merchant scale.

To fully realize this opportunity we remain focused on for strategic priorities.

Improving the customer experience.

Expanding our open platform.

Investing in our international business and continuing our history of operational rigor.

Im pleased to report that we made progress in all four areas, even as we faced challenges in the form of continued traffic declines as well as an international business dealing with broad macroeconomic issues in Europe , particularly in the UK.

Those factors contributed to lower than expected gross profit in the quarter in spite of some near term challenges. The team also delivered on some key initiatives in the quarter as we continue to scale Groupon select our new membership product and launched important product enhancements, including significant improvements to our mobile web experience focused squarely on reducing friction and improving convey.

Version, we also continue to add high quality partners, which will bring even more great inventory and offers to our site over the last quarter. We've made a concerted effort to meet with many of you and the feedback was clear we can be crisper and describing our vision and in helping you identify the metrics that will matter, most and tracking our progress going forward, particularly where were.

Most differentiated and local.

Expect to hear more from us moving into 2020 as we further refine our communications approach and strategy before I hand, the call over I'd like to introduce Melissa Thomas our interim CFO .

For those of you who have not yet spoken with Melissa She's a veteran finance professional who has been with groupon for three years and that time. She is overseeing our commercial finance teams and currently also serves as our chief accounting officer with that I'll turn the call over to Melissa to walk you through the financial highlights for the third quarter.

Thanks, Rich I'm excited to be in the CFO role. During this important time the coupon during my last few years at the company at the motivated by the opportunity we have in front of us and the incredible team, that's helping us get there.

My time today to walk you through our key financial highlights, including gross profit and adjusted EBITDA provide you with a few insights on unit trends, which we believe is an important metric to measure our success.

Update you on our progress with Groupon select and after that we'll open up the call for questions, let's start with gross profit in the third quarter. We delivered gross profit 278 million, we're making progress against our key strategic priorities, particularly removing friction from the customer experience.

Growing membership in our select program and expanding our open platform. Ultimately we believe success in these areas will help us drive higher purchase frequency.

Version and gross profit growth over the long run.

As we discussed with the last quarter, we expected the safe persistent traffic headwinds customer losses in North America.

Challenging macroeconomic conditions that would impact our European business.

Particularly the UK.

In fact during the third quarter.

The European economy performed even more poorly than we anticipated, causing these challenges to impact the international local category as well as good.

In addition, the competition in our goods category was tougher than we expected.

In North America, gross profit was 192 million down $12 million or 6% year over year.

Q3, North America local gross profit was 155 million down 4 million or 3%.

Q3, North America. Good gross profit was 26 million down 5 million or 15%.

Gross profit per customer on a trailing 12 month basis was $30.56.

6% year over year.

North America net customers declined by 870000. This decline was expected, but it's important to note that active customers is not the only metric to measure our progress.

Those of you close to the group on story no that we're uniquely positioned within local given our scale two sided marketplace with millions of customers and hundreds of thousands of local merchants.

And our strategic initiatives are closely tied to driving this part of our business.

We know that we can improve the customer experience by making our websites and mobile applications more engaging and easier to use launching new products, such as voucher lists offerings and groupon select.

And adding more high quality supply to the marketplace.

As we transition our customer base to higher quality more engaged customers. We believe that unit growth, particularly local will be a leading indicator of improving purchase frequency and conversion.

Naturally billings in gross profit per customer all remain important but we believe unit growth will speak even more broadly to the health of our evolving marketplace.

In Q3 year over year local unit performance for North America improved for the third sequential quarter and our expectation is for this trend to continue into Q4 in fact within a third quarter local unit year over year trend strengthened in each month.

We are encouraged by these trends, which we believe our early indicator that our strategic initiatives are beginning to deliver we're excited about our select membership program and are already seeing encouraging results. Today, we have over 260000 members. Despite a total third quarter investments that came in slightly lower.

The 10 million expectation, it's still early days, but we're seeing member acquisition costs payback within six months payback has been driven by both the recurring revenue from membership fees as well as incremental gross profit generated on membership related transactions.

For modeling purposes, it's important to remember that historically, we routinely offered order discounts.

And some of our merchants participate with us on these discounts.

As a result, the discounts associated with select memberships are not entirely incremental we're really excited about the early impact we're seeing on purchase behavior on average in the first six months post enrollment select members increased purchase frequency by about 60% and average order values by about 20%.

We believe these early positive results illustrate our ability to monetize a member like behavior of our customers and demonstrate the power of our massive local two sided marketplace I.

By making progress on these fronts. We believe we can unlock the potential of our financial model and deliver long term gross profit growth and significant adjusted EBITDA.

Turning to international gross profit was 86 million down $12 million or 12%.

Three international local gross profit was 61 million down 8 million or 11% despite local unit growth.

Local gross profit performance was impacted by higher than expected purchases of lower priced and lower margin deals.

Well it can be difficult to predict consumer shopping behavior, we believe one way to offset the impact of this in the future is to continue focusing on enhancing the quality of our supply.

International goods gross profit was 17 million down 3 million or 16% international gross profit per customer on a trailing 12 month basis was $22.51 down 5%.

While net customers declined slightly in the quarter, excluding the UK net customers would have been up.

Notwithstanding the transitory challenges created by the instability of economies in Western Europe , particularly the UK, we remain confident in our international strategy and believe we are taking the steps necessary to drive long term growth outside of North America.

We view the progress, we're making any Asia Pacific geography, which includes double digit billings growth as a proof point that our international growth strategy remain solid.

Third quarter on a consolidated basis.

Marketing expense was 74 million or 27% of gross profit.

Historically, our marketing expense has trended closer to 30% of gross profit.

We spoken in the past about our focus on driving marketing efficiency and our focus hasn't changed. We're also to play marketing strategies that allow us to leverage data to better segment, our customer base and personalize the overall groupon experience.

Our goal is to drive purchase frequency, particularly within the first 90 days post purchase.

We know that this metric is highly correlated to customer lifetime value and we're looking at opportunities to drive at higher.

To complement these efforts were also in the process of adapting our brand strategy to support our evolving marketplace.

As part of this process, we're pragmatically evaluating our spend across the marketing funnel.

SGN a for the third quarter was 198 million and improvement of 2 million or 1% year over year, driven by our ongoing efficiency efforts.

We delivered adjusted EBITDA of 50 million during the third quarter.

We purchased a little more than 5 million shares for $15 million in the third quarter on a trailing 12 month basis share repurchases represented over 44% of our free cash flow.

And to date, we've returned more than 900 million to shareholders through repurchases. We have a strong balance sheet and ended the third quarter was 567 million of cash and 400 million available on our Undrawn revolver. This strength provides us with important financial flexibility to support a balanced.

Approach to capital allocation.

That includes our track record of share buybacks strategic investments in product launches like coupon select and opportunistic M&A that can accelerate our core strategy.

As we move into the fourth quarter, a very important time for US we expect positive contribution from our conversion initiatives, which include our recent guest checkout and universal card product launches.

In addition, we expect marketing leverage to increase modestly from what we delivered in Q3.

These factors along with a continued momentum in North America, local including improved performance in units.

Give us confidence that we can drive sequential improvement in year over year gross profit trends and deliver approximately 270 million in adjusted EBITDA for full year 2019. Thank you for your time today. We appreciate the support of our investors and look forward to chatting with you about our progress with.

That let's open up the call for questions.

Thank you, ladies and gentlemen at this time I'd like to remind everyone knows that in order to ask a question. Please press star followed by the number one on your Touchtone phone, we'll pause for just a moment to compile the Q and a roster.

And your first question comes from the line of Elliott Alper with D.A. Davidson. Your line is open.

Great. Thank you.

I Wonder if you could expand more on the deceleration of active customers, particularly in the us.

Maybe the puts and takes that you're seeing in the marketplace.

And your marketing planned spending for the holiday season.

Thanks.

Thanks for that Ali I'll start on just given an overview of where we are on the marketing side, and then I'll hand, it over to Melissa even a little bit of color on on active customers, but it's probably just helpful going into holiday season in particular to have just at a broad view of how we're thinking of our marketing strategy.

Well as I mentioned in prepared remarks, you were we are being thoughtful as were as we're starting to think more.

Deeply about about our brand path in particular as we scale the marketplace that we factored the product and improve the customer experience overall as you probably know we have a new CMO and conducting an overall strategic review of of the brand and you're seeing that play itself out in our marketing allocations.

And I think it's important narrative that to lock in on that allocations point, because if you think about Q3.

The way, we think about it from operating point of view, you'll see our total marketing investment, which includes our working span traditional marketing and order discounts.

Actually changed very little.

And so you're seeing more of a reallocation and a reallocation of dollars in the funnel to improve efficiency overall and to make sure. We're spending in areas that are aligned with our strategy going forward.

What I would expect to see if doing as we move into Q4 to be more thoughtful about the application and allocation there and align that to where we are and and how we're viewing the brand and the opportunities to get a recast the branded better align with the product in the marketplace. We're building.

And so you can see that in general play itself out over the course of next couple of months in the and frankly the quarters the path.

All right add on on a decline we saw in active customers in North America, but this was something that we expected.

If you think about the drivers the key areas, there's traffic headwinds, which those are ongoing traffic headwinds that impact customer accounts with American particular, as well as the marketing efficiencies that rich mentioned those are really the two large drivers a decline in October active customer count up what I would men.

And is in our prepared remarks, we did.

Let folks know that well customer active customer accounts are an important metric for us.

Right now, where we're really focused unit and purchase frequency ultimately we believe that that's really the OCC.

In the leverage in our model and will position us to drive at long term sustainable gross profit growth.

That's where it really going forward, you'll see us focus and as we mentioned what we're seeing in North America. In particular is some improving year over year sequential trends in local unit performance, we're definitely encouraged by that.

Great appreciate it.

Thanks Kelly.

Your next question comes from the line of Tom Champion with Cowen Your line is open.

Hi, good morning.

Looks like.

North American local billings grew quarter over quarter, and there were some constructive comments around around unit and I'm. Just curious rich if you could provide any any more thoughts on on the driver there it sounds encouraging and whether its.

Select or inventory or me, maybe new features like.

Yes checkout.

Maybe just.

Any comments there would be would be really helpful. And you know maybe just one more if I could add the letter talks about fighting traffic headwinds with purchase frequency and product enhancements can you just talked about what what you're doing to ramp product development and speed up implementation and just.

I guess lastly, any any thoughts on.

The traffic headwinds and weather.

That might moderate over the next couple of quarters. Thank you.

Awesome. Thanks, Thanks for that Tom I'll, I'll start and Melissa add color.

As it worked through here, but I think it's actually similar similar answer both questions, Tom and a bunch of ways. There is.

Well, we're excited about what we're seeing that's really encouraging as molding is most dimension.

Is.

Is that you're starting to see our strategy around the product and the investments that we've been making and it gets a better customer experience starts and play its way through the local consumer and I think that place you're seeing things like gastric out like universal card start to make an impact.

And we talked about before you know those those arent those aren't with bag knows our E. Commerce standards that people are well familiar with and accustomed to seeing and check out that they hadn't seen on groupon, it's making that that experience easier higher converting and just generally better and the same goes for.

The other things that we're doing on the convenient side and so they get our mobile web experience. It's just a better experience. If you if you not use it I'd recommend to try it you will give you a window into where we're headed with things like personalization. The the in more intelligent use of data and really harnessing all that we know about customers. So you're you're starting to see some of those pieces.

Really work their way through that local customer experience and we're seeing the impacts of.

Select as well is it in their your Melissa mentioned.

60% increase in purchase frequency is pretty significant especially over the course of of the first six months of membership.

So that's a that's a piece that absolutely helping.

As we as we grow that customer bases as small as it is today. So you are really starting to see those pieces through and and as a team. What were most focuses on your point is how do we go faster how do we do more how do we start to ramp up the productivity productivity in production.

Of our software development pipeline and really get more software and more great enhancements in front of customers and a big piece of what we're doing there. One is it had been team we've made investments in team and leadership on that side. We're really pleased with how that team is has come up to speed under the leadership of our chief product Officer, Sarah Butterfat, She's doing a great job.

In a lot of the work that she's doing is is kind of just good old fashioned agile development and really adding ownership decision, making rights and agility to the team and just bringing them up to do great work. So that's going to be a real key piece of what we do alongside some of the infrastructure investments that we're making due in August two enabled.

That rent more rapid development, a rapid deployment of software. So there's a lot of work happening on our and our technology teams did you have to enable that.

Ross speed.

Because we already have a lot of quality in our production processes. It's really we've been lacking I think that core speed and you're starting to see the acceleration of that over the last couple of months are you seeing big pieces of enhancement moved into the market unless you have other things you want to yeah, I'm just a traffic headwinds I'm I think you you had asked whether that would moderate.

Over the next few quarters. So let me just give you a little bit of context on the traffic headwinds. So what we saw in terms of the third quarter. So North America.

Really in line with our expectation.

Whoever internationally from an international standpoint traffic did worsening given that transitory macroeconomic conditions in Europe that we mentioned, particularly in the UK. When you think about the go forward well look to provide more color on our 2020 outlook in our key.

Work, all but traffic headwinds, we do expect 2%.

Okay. Thank you about.

Thanks, Tom.

Your next question comes from the line of Michael <unk> with Goldman Sachs. Your line is open.

Hi, Good morning. Thanks for the question I just have to the first is just on.

The guidance could you just talk about some of the key drivers of the I guess implied EBITDA inflection in the fourth quarter and as a follow up to that how much was the EBITDA contribution or I guess headwind from Groupon select and three Q and what's your expectation for how groupon slight effects for Q. Thank you very much.

Sure I'll start off with your question on guidance. So if you think about the key drivers for our full year I I'll point to really.

Key items, so first starting with.

As rich mentioned Weve.

Then accelerating our progress on the product and we have recently.

To teach conversion driving initiatives, including guest check out and Universal card, we are expecting meaningful contribution from these in the fourth quarter.

And I can tell you that early result, particularly with guest check that are very encouraging we're definitely pleased with what what we're seeing.

Both of these but as we continue to improve customer experience, we certainly see that manifest itself in a more meaningful way in the fourth quarter.

In addition to that I would point to the continued improvement that we've been seeing in sequential year over year, North America locals and.

That we do expect that momentum.

The carry forward into Q4 see continued sequential improvement there and also the next point that I would make its really on the marketing side.

We do expect as I mentioned in my prepared remarks.

To have a marketing leverage that is modestly up versus what we saw in Q3 into fourth quarter. The one thing that I would point out here is not yet.

Related to the efficiencies that rich mentioned earlier on the call. But is also the result of that makes you think about how conversion initiatives manifest itself and in the P., an apple as we see improving year over year sequential trends in GP and the corridor that does improve.

Marketing leverage so those are really that key drivers that I point out there.

And then on your question, so lack and the headwinds that we thought.

In Q3, and what we expect to see in Q4, and I'd say, there's where we've been really pleased with that trajectory in terms that our ability to improve member count and what we're seeing on the customer aside from that frequency standpoint. It was ever average order value is improving I'm not going to get.

The big impact on Q3, but just to give you a flavor for for Q4, what we're expecting to see we.

Expecting to continue to invest in acquiring members within the program, but we expect overall the programs to be net neutral impact on GP in Q4.

Great. Thank you very much that's very helpful.

Your next question comes from the line of Deepak Mathivanan with Barclays. Your line is open.

Hey, guys. Thanks for taking the question Yeah, I just wanted to ask a little bit more about that you know slightly a big picture question in terms of how do you think about customer services gross profit with all these product initiatives, that's going on and also some of the way you're optimizing the marketing investments clearly there is some.

Dragon tops.

Customers, but as we fast forward say two to three us down the land, where do you think our pockets of customers. You know that you can capture incrementally from here specifically if you look at U.S. as a proxy market are there any other categories, where you think you know your customers are still not in the platform any color there would be helpful. And then from a growth.

Gross profit for a customer standpoint, you know it clearly, though it's being held by a number of product weeks recently, but it's from a unit economic standpoint, as you think about these these customers that are coming in is there enough runway to kind of sustain that over the next few years as you think about it. Thank you very much.

[noise], thanks for that feedback I'll start and Melissa please add color as well.

You point out.

Taking them important important piece here, the POC and itself.

We we of course care and pay a lot of attention to our active customer counts, but as we've mentioned you know I think we're right now were and we continue to be focused on driving purchase frequency unit growth in unit volume and total demand on the platform and and the reason that we're focused there is really a simple one if you think about.

But in a really simple way with our roughly 45 million customers.

I'm better purchasing call it three and a half times a year.

One incremental purchase is it [laughter] is massive right you're talking about.

You know 45 million X three unit every year. It would take an additional 10 million active customers were more almost 11 or 12 million active customers buying at the same rate as our average customer to replace our year to compensate for that one extra unit now and again, we're not talking about taking someone or an average customer.

Three and a half the 10 units were not going to going from three and a half the board a house. So that unlock is really really significant.

And you know, adding 10 or 12 million customers is that is a big is a is a big is a big get but I think the biggest opportunity for us is really getting going from three and a half the four and a half units and from borne out the six and 810 and so on so that's where you'll see you'll see us continue to focus less so where do we and the next incremental customer, but more so how do we.

Deepen our relationships with our customers how do we give more value to our customers through our improvement in our customer journey by removing friction launching new products like booking and moving to a bounce released environment continuing to enhance the basics of how we work with things like guest check on universal card that enrichment and getting wallet share.

Here with our existing customer is the biggest opportunity for us at this point, which also then unlock additional capacity to go acquire more and again is the area that we work and where were the biggest which is really in dining and health and beauty and activities and things to do we are a very small percentage of a very big Mark.

Get there. So we have a lot of room, just again wallet share and we have a lot of room to continue to address that market in pull new customers in but in the immediate term and as you see us move through our strategy to improve the total experience on the platform into open it up you're going to see us focusing intently on unlocking that purchase frequency.

Pony really that's a really big growth driver for us over time.

And on almost the if you have any thoughts on GP per customer I think I tell you didn't exactly to what rich that I mean really when you think about the runway to improve gross profit per customer.

Lockup purchase frequency, that's really what gets that number to continue.

To grow yeah, not only one thing I'll add the pocket makes me think of it is.

When you think about runway outside of just the basics of what we do which tends to be at least the history of Groupon right. We tend to be the platform that helps you discover something new and find that that plays that we hope you'll love and most of our customers end up repeat visiting where we've historically sat out and not not participate.

Paid it is on one of our big opportunities and we think about frequency and its participating in that repeat visits and you. There's already pieces of our products that GE that you're seeing going in the market. We have a cash back loyalty reward for those repeat visits were starting to participate in that it in that part of the relationship between the customer and merchant Pacific.

Jordan early valuable for the Merck inside of our marketplace to do that so in terms of runway, we have really significant runway to improve our connectivity between consumers and merchants in that space now the unit economics of those at full price versus discounted and promoted versus not those will play themselves out over time, but we.

See really just from a pure addressability perspective, the runway is significant.

Your next question comes from the line of Eric Sheridan with you'd be S. Your line is open.

Hi, Thanks, so much for taking my question, maybe two if I cannot international although we used to provide some examples are the country by country basis of where you either see supply dynamics or traffic dynamics or market dynamics to drive velocity of shopping of what you're trying to fall for some of the individual country levels and then.

Along the stabilized other headwinds you called out for with Tropic basis are those more pronounced overseas, where those more pronounced domestically on the traffic side, but you should give us a little bit granularity on the SKU between back. Thank you.

Sure I'll start and.

We don't provide detail on a country basis in international but what we have provided is I think you get a little bit of color on on how our businesses are performing in international and that's where there really is a a tale of two cities happening here and arguably maybe three that you have the UK you have your up and then you have Asia and Brooks our fastest growing busy.

This is our actually in our international markets in there in Asia, and they're growing in double digits. So.

There's there's a lot happening in those markets that that is really just the fundamentals of running a good groupon business that which is focused on great supply great merchant relationships high quality national brands.

And then good efficient marketing to support it to acquire customers and and also to some product enhancements and different different ways of engaging our customers, which are starting to make their way into some of our other larger markets as well we've done a lot of re factoring of our E mail programs in our international market, we've done a lot of.

The factoring over Onboarding for new customers et cetera. So we're using a lot of those markets in our footprint as an advantage to learn and to experiment in ways that doesn't require you know really having to the entirety of the you exposed to something.

Do we have more agility that way so we're learning and those markets, we're seeing that the fundamental drive good solid results in performance.

You are seeing the you know the differentiation between those markets and some of the those markets, specifically, where we don't see those macroeconomic issues or where things like Brexit and uncertainty around the euro zone Havent really crept in today to our a pack market. So I said I think that probably the best color I can give you on on how we're our.

Roche and that will be about other thoughts on headwind.

I think that covered that I think that the only thing cloud is and you can tell that from a prepared remarks. The UK. It's certainly a standout and is a meaningful portion of our international business that we do see that but you know it varies across Europe sector.

Thanks, everyone for the color.

Thanks, Eric.

[noise], ladies and gentlemen, again, if you'd like to ask a question. Please press Star then the number one on your Touchtone phone.

Your next question comes from the line of you go a Runion with Wedbush Securities. Your line is open.

Hey, good morning.

A couple of questions ill start with marketing and you know.

<unk> I guess I'll, just ask why not step into marketing a little bit more in the near term. Your your initiatives to drive frequency are starting to work there.

All of them or are are pretty new you know you've got to life and universal checkout and at Universal card and got Checkouts. So you know I get that you know frequency should we get marketing leverage over time, but if you've got these things that are starting to work and are driving the thing that as you know ultimately the the difference maker, which is.

Greetings and whatnot, especially the fourth quarters push push on it a little bit more but that's the first question. Then second just you know maybe looking for a little bit more more details and in select and how to think about why it's gross profit neutral on through the end of the year.

Or I guess in fourth quarter, you know if you think about.

So the amount of subscribers that have joined that kind of basic just doing the basic math of the five $6 a month and how that flows through to gross profit is offset there just continued continued investment or their churn elements that we should be thinking about maybe just a little bit more detail there. Thanks.

Sure. Thanks for that I'll start on the marketing side, yeah. So it's a great question unfair question, one I'm not accustomed to hearing all that much.

[laughter] frankly of why not spend more on marketing, but but you know look I think that I get to go back to what I said earlier on it is important remember we havent made really significant changes to our total marketing investments that we're making your just you've seen some significant shifting and how we're allocating to improve performance and efficacy.

But we're still I think we're still investing at a pretty aggressive level now I think that however, the biggest gating factor on that on that side is really where we are in terms of it rethinking our brand proposition and how we go to market on some of these pieces and while we sort those we're we're reallocating a lot of our.

Our investment to drive adoption and on promotional calendar and get people in some of these new experiences at a higher rate and because I think again, that's that's where we're going to get the biggest total leverage is is getting our more of our existing buyers those existing three and a half or four time of year buyer in these new experiences enjoying a new version of group on that is.

Far more a far more rewarding as a customer so you're going to see a do some of that while we're working on the total brand piece and and and thinking about how we go to market with these new product in a much broader way.

I think that's really the beginning factor is is on the on really making sure and feeling strongly about our our refreshed brand proposition and how thats going to play through the funnel and how we use that strategically as we move forward.

And then that's select side there just to give you a little bit of color on why essentially select is we expected to be net neutral in the fourth quarter. There's a few element.

Laid out in my my prepared remarks that Ah you need to take into consideration when we think about select so we are making investment intellect and those do show up in in terms of GP, whether it be opportunity cost et cetera over those are offset by that.

Corruption fees that we are collecting and then the important parts remember that we are also earning incremental G.P. on the transaction and we're seeing a purchase frequency left that 60% higher.

In that 180 days post enrollment in the program and the third piece I'd call out at that the entire discount is not incremental so when you take into account what we're earning on the overall program on for that never actually I've been at birth versus the Cacs, which I mentioned on the call or on my prepared remarks as level or <unk>.

Nibble, Yeah, we don't see it as being a meaningful headwind.

Right I think within that you'll you're seeing us.

Yes, not net neutrality.

Looking good for continued investment while we're harvesting the benefits that we see where we're not going to stop investing in the quarter. We're going to continue it we're going to we're gonna we see opportunity to increase enrollment participation in the program. We like what we see in its early stage of development with with purchase frequency and that just engagement behavior overall.

We're going to continue to lead into that but it's not at any cost because we're as I mentioned before and.

We mentioned a couple of times as we still have some investments to make their on his core infrastructure and when I say that it's really integrating it into the core of the Groupon experience. It's important to remember select was was an experiment with a trial that we that we've reiterated on and we've continued to develop over time and we're excited by it but were.

Cited about it in a way that that we're feeling it needs to be part of Groupon. It can't you can't just be this side the side for a group of people it really needs to be need the permeate the group on customer experience, which are starting to see you're starting to see if you go to the desktop and as example, you are seeing select pricing.

In the center as a promotional item and as a reminder to offer to our members that they got a unique benefit you need to be deeper in onboarding process. These needs to be much more integrated in our merchandising and easy much more targeted and so it really needs to start to leverage the core of our infrastructure and systems and really be a deeper part of what we do so you're seeing.

Balance our investment in scaling on that side and both ways. Both in terms of the number of folks we're bringing in as well as the amount that we're investing in product development. It really make it a core part of what we do moving forward.

Great. That's helpful. Thank you.

Thanks again.

[noise] and there are no further questions at this time I turn the call back over to our presenters for any closing remarks.

Thanks, everyone for making time on the call them. We appreciate it we'll look forward to speaking with many of you soon.

Ladies and gentlemen. This concludes today's conference call you may now disconnect.