Q3 2022 Groupon Inc Earnings Call
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Good day, everyone and welcome to Groupon third quarter 2022 financial results Conference call. At this time all participants are any different only mode. A question answer session will follow the company's formal remarks. She asked the question press the star followed by the number one on you touched on some again Thats star one to ask a question and just to.
Today's call is being recorded and now at this time for opening remarks, I would like to turn the call over to the Chief Communications Officer, Jennifer Beeman. Please go ahead in the statements.
Hello, and welcome to <unk> third quarter 2022 financial results conference call on the call today are CEO kit or dish Monday, and CFO Damien snacks.
Following discussion and responses to your questions reflect management's views as of today November seven 2022, 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 <unk>.
Financial results is included in our earnings press release and in our filings with the SEC, including our annual report on Form 10-K.
We encourage investors to use our investor relations website at Investor <unk> coupon Dot com as a way of easily finding information about the company.
<unk> promptly makes available on this website the reports that the company files or furnishes with the SEC corporate governance information and select press releases and social media postings.
On the call today, we will also discuss the following non-GAAP financial measures adjusted EBITDA adjusted EBITDA margin free cash flow and FX neutral results.
In our press release, and our filings with the SEC 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 U S. GAAP.
Less otherwise noted all comparisons to 2019 are provided on an FX neutral basis, and with that I'm happy to turn the call over to <unk>.
Hello, and thanks for joining us.
Throughout this past year.
We have talked a lot about the fundamentals of our turnaround strategy.
Reduce our cost structure and at the same time improve our core marketplace experience.
Let's talk about the progress we have made on both fronts.
We are significantly streamlining our cost structure.
And allowing it to where our business is to date.
We are well on the V to achieve our phase one goal to take out $150 million of annual cost.
And expect to hit this run rate by the end of 2023.
We completed the majority of head count actions early in the fourth quarter and expect to begin to realize the benefits about it right savings starting in 2020.
Our new cost structure should provide us with significant operating leverage and ability to sustainably generate positive free cash flow as we execute on our turnaround strategy.
Moving forward, we will continue to look for opportunities to optimize our cost footprint to ensure it remains aligned with current business.
Two giving us room to grow.
And for 2023 rehab a goal to identify an additional $50 million of savings and related cost actions by the end of the year.
We are also executing on initiatives to improve our core marketplace and during third quarter, our local category was stable.
Global local billings that came in at 49% of 2019 levels.
This was in line with our expectations and consistent with our performance levels over the last six months.
We are orienting dollar marketplace around solving every big customer problems and to do this we need to deliver on two strategic priorities.
Improve our customer experience to ensure customer interactions on our marketplace at 11 credible and actionable every time, they want to come to our marketplace and improve inventory density on our marketplace to ensure we had the right breadth and depth.
Up inventory to satisfy customer intent.
I believe that if we get.
Customer experience right and if we get our inventory density right. It will help us meet our customers' needs.
Every time, they come to our marketplace.
Doing this will unlock our customers' willingness to buy local experiences and services from us Florida more frequently.
So going forward improving local purchase frequency is the most important metrics and will be the key major.
Well, we are executing our strategy.
We are going to be relentless in driving this metric higher.
Today, we are seeing customers buy just two or three units of inventory from us for a year and we are only retaining 40% of these customers on average for more than one year.
These matrix.
Pointing given we are a horizontal marketplace.
I believe that this is because we are not creating the reason for customers to engage with us more frequently.
And so we have created a roadmap of excursions and initiatives with the goal of driving purchase frequency higher.
These include improving search and relevance.
It seems to be we worked with our merchant partners, creating new customer incentives and.
Testing, new marketing channels and strategies to drive demand.
So far this year, we made a lot of progress on initiatives aimed at building trust with our customers and we expect this progress to pellet support healthier customer retention going forward.
As a marketplace, we have to create an environment that all but ensures customers will have a positive experience every time they come to groupon.
We made meaningful progress here this year.
First we made sure that when customers come to our marketplace in search of a deal on something they can trust that we offered the best deal.
We put process in place in North America to improve our ability to monitor pricing to make sure customers got wind a better deal anywhere else.
Second customers need to trust that whenever the purchase on Groupon, David would be able to use and that they will have a great experience.
This is non negotiable for us and we implemented a process to remove high the pending merchants for our platform and proactively identify and help those merchants visit degrading the fun trains.
Trust is one of the foundational elements for the Groupon customer experience, we want to deliver.
We are also focused on unleashing the power of <unk>.
Onto the marketplace by experimenting with pricing and promotions to encourage our customers to make more purchases across more of our verticals more frequently.
We are testing and learning and a number of areas.
Really gave us insights into how we can improve retention of both our existing customers and new customers.
Let me walk you through two of these experiments.
Last quarter I told you about a significant test you got running to encourage cross vertical purchases.
The goal of the test once to get customers to browse.
Specific set of inventory in our catalog instead of coming to our marketplace or one specific deal.
We believe that best surpassing new specific inventory.
What are they called to our existing customer, making their marketplace experienced more interesting we can improve customer retention.
So that tends to offer incentives to customers, who have purchased inventory from our dining vertical to make a subsequent purchase within our beauty and wellness vertical and vice versa.
During the test we increase the cross vertical purchasers hung.
150% versus the control group.
Based on this success, we began scaling this inject <unk> two our global marketplace in the third quarter. This initiative is currently scale in 11 countries and we expect to ramp it up fully not to make a before the end of the year.
We are also testing ways to leverage groupon incentives as a means to get us to get new customers to browse and engage without.
Full catalog of inventory.
In our initial test we are keeping groupon bucks to customers when they purchase our full priced market rate inventory.
Our hypothesis is that by providing this additional value white box.
Box it will incentivize customers to purchase our full price inventory and give them back to Groupon later to use the G box and make the purchase.
Our initial test results have been promising.
We have seen anywhere from 6% to 22% lift in conversion it depends.
Depending on the test.
We are also seeing repeat purchases.
Haven't seen.
It's still very early.
And we are only testing in our Atlanta market.
But we are excited about the potential of this initiative to improve conversion and purchase frequency.
We will continue testing learning and tracking our existing test cohorts before scaling in North America and international markets.
Another way to incentivize customers is to meet customers where they are.
By making it easier for them to purchase and book their services and experiences.
Merchants, they know and love.
We had a great win here.
Recently with a large theme park.
<unk> Studios Hollywood.
Our team was able to create a bespoke integrations that transition this merchant from physical voucher based expedient to an online bookable experience that provides customers with a deep based pricing and convenient streamlines ticketing experience.
This update means that we can now provide our customers with a more seamless such as buckets and redemption journey.
In addition to improving trust and driving.
And unleashing the power of our horizontal marketplace.
Other marketplaces out there.
We are continuously looking at ways to improve search and relevance.
We recently began testing a new ranking algorithm in some of our international markets and have seen early.
But promising results.
In our deaths.
We are adding an auto complete function that features specific deal offerings in the such dropdown menu.
So for example, when a customer begins typing in sushi instead of providing matching recommended such storms like two shoemaking Clos our sushi buffet.
The search bar will populate with local and delivered sushi Denise heavily on our marketplace.
This allows them to click directly onto a D page skipping the search landing page quality together.
With the goal of driving higher conversion.
We are also testing ways to optimize our search algorithms and Peter showcase personalized did recommendations through the customer journey.
For example, we are testing the impact of including personalized T at the bottom of page and during checkout.
While we just started testing in October in the four countries, where we are testing. These combined improvements we are seeing 10% higher revenue per customer.
We plan to expand these days to not to make up in fourth quarter.
Now, let's get into how we are improving our inventory density.
Need to have inventory that is engaging and meets the needs of customers every single time, they come to our marketplace.
This is critical to our success.
This is how we satisfy in debt.
This is how we create more reasons for customers to buy from Groupon again and again.
To do this we are working on few priorities.
At the highest level, we are working to make sure we have the right breadth and depth of local experiences and services.
Inventory in any given geography.
Delivering on this goal all the time will tell customers that they can come to Groupon first.
When they're looking for locally.
They can trust.
We will have what they need.
So how long are we working on this study in two weeks.
We have restructured our north American sales force to better align with our inventory density calls.
We are relying on resources like mulch and marketing self service and card linked offers to help us scale.
Regarding our sales force, we now have a smaller.
More focused team.
We are doing are basically job of using our deep treasure trove of data to inform our supply acquisition efforts and identifying inventory that will create a better customer experience.
Our supply acquisition strategy is now focused on acquiring and retaining inventory in geographies and verticals that we believe will drive incremental consumer demand.
This is the first and most important criteria.
What does this mean in practice.
This means that our sales team is incentivized to acquire merchants inventory that customers want to buy in target geographies, where we do not have adequate coverage.
Instead of eight massage in any given geography, let's see.
Would direct our team to bring on the first or second nail salon.
It's a trust our North America sales team alone cannot help us scale, our inventory strategy. So we must do a better job of leveraging scalable resources to take us the rest of debate and B R V.
We are leaning into three of those resources today merchant marketing self service and CLO.
But we are stepping up our efforts to leverage merchant marketing to help acquire and deepened relationships with merchant partners.
Merchant marketing will support our supply acquisition strategy in <unk>, one by using marketing resources to target specific inventory verticals and geographies.
Where we have gaps.
Second by helping to improve the perception of Groupon brand before our sales team reaches out.
And third managing leads more effectively and channeling merchants to sales.
Service, depending on their needs and potential.
After merchant partners join other marketplace.
Marketing will focus on deepening relationships with our model changed by driving self service awareness as a means of quickly and effectively managing campaigns and cross selling into new data types of products.
That said service not America continues to leverage our improved platform to help our merchant partners launch and is their deals and also to bring new monitoring partner store marketplace.
In fact September over 75% of all new inventory Onboarding through self service.
These two resources.
Allowing us to figure it out new better ways to supplement the reach of our sales team as they focus on acquiring and retaining right merchant partners, helping them grow on groupon marketplace.
Rounding out the trio of scalable resources is card linked offers our CLO.
As a reminder, clo's are digital cashback rewards that consumers automatically receive when the arb to link their debit cards credit cards to groupon.
Our hypothesis is that we can seamlessly and quickly bring on these specific types of inventory through partnership and technology to help.
Key to fill inventory gaps b to showcase inventory like dining options that consumers are using more frequently.
Having more of this type of inventory on our platform should drive traffic engagement and purchase frequency.
We recently completed our CLO integration.
Which more than tripled.
Our North America dining inventory.
Since the beginning of the launch in September we have already seen signs of success.
Dining inventory such conversion increased by more than 15% since we launched CLO and we hit our target redemption rate.
This means that more customers are searching for and discovering great quality local dining merchants clay.
Claiming CLO outputs and redeeming them by making purchases at local merchants.
While these early results are promising we still have more work to do to really move the needle.
First we need to make this inventory easier for customers to find by improving our search and relevance.
Second we need to improve the user experience. So it is easier for customers to engage with this type of inventory.
And if we get this right I believe this initiative can be an important driver to improving customer engagement and purchase frequency.
We have launched a number of initiatives in Atlanta.
Which we are using as a test case to see how we can supercharge results and get customers to buy more frequently.
Ultimately our goal in Atlanta is to keep customers engaged on our platform.
And improve our customer purchase frequency by 20%.
In early results.
We have seen Atlanta customers come back more frequently in the last 45 days compared with customers in other U S cities.
In terms of what is working and we have seen a coupon box customer incentive initiatives do a lift in repeat purchase rates, but again, it's still early and we have some more work to do to optimize other initiatives in Atlanta.
As how we set up as our CLO inventory to customers.
We expect to make further progress here as we continue to test and iterate and I look forward to updating you on our progress.
As we continue to make progress improving our core business marketing will play a key role in retaining and bringing new customers to our platform.
During the third quarter, we significantly increased our investment in STM display marketing and we are confident that these were sound investments that will deliver incremental ROI over time.
That said, we have not yet optimized our strategy to use mid funnel marketing investment to maximize our pediatric tons in our performance marketing channels.
So in the fourth quarter, we are reallocating some of performance marketing dollars into mid funnel marketing campaigns to see if we can optimize our marketing spend.
We started testing.
In October with the launch of second annual Groupon day event, which feature big savings on local experiences and services and one of a kind deals.
The goal of this campaign was to grab customers addition, and get in early on holiday purchasing patterns.
So what did we learn from this campaign we learn.
That we can drive more consumers to our site and improved billings.
When we did not quite reach the goal we set for the campaign, we did drive traffic up nearly 5% and conversion nearly seven basis points.
During the ADP.
Also we have signed the seeds with future customers.
You were able to drive increased app downloads email subscribers and subscribers.
I'm excited about the progress we have made so far but we still have more work to do.
The next few quarters, we are continuing to test learn and recalibrate, our marketing investment so that we can improve our brand perception.
<unk> in the consideration set for both customers and merchants and make our investment in performance marketing deliver better returns.
Finally on the inventory front, we are on track to launch a standalone beauty experience platform to better serve high intent customers looking to explore and find truck.
<unk> provided us for high end minimally invasive beauty treatments.
Test of this concept is planned for launch before the end of 2022 in the Charleston market.
We are pleased to share that we release, our first ESG report this October which outlines how we are working to create value for an uplift all our stakeholders, including our employees our customers our merchant partners and the communities where we operate.
This report helps us paint the picture of the foundation, we have established for ESG at Groupon.
What we have accomplished to date and where we can call you.
You can find the report on our corporate website and I encourage you to read when you have a chance.
Before I turn it over to Damien.
I want to congratulate him on being named permanent CFO .
I have been impressed with damien's extensive experience and leadership since joining groupon and I'm excited for him to continue to lead our finance and accounting organization.
With that.
I will turn it over to Damian to walk you through our Q3 results.
Thanks, Kate are I'm really pleased to step into this role on a permanent basis. Thank you as well to everyone who is joining us today.
I'll use my time today to provide further insights into our third quarter operating financial results and factors to consider for the fourth quarter.
In addition to my prepared remarks, I encourage you to review our slides press release, and 10-Q, which contains more detail on our Q3 results.
Taking a step back before we go into our third quarter financial results.
Performance this quarter underscores the stability, we are seeing what's in our core local category.
While we haven't seen the impact yet from the initiatives, we've launched to support our strategic priorities. We are taking steps to drive engagement on the platform and unlock growth.
So let's jump into our consolidated third quarter results.
We delivered $434 million of gross billings of $144 million of revenue.
126 million of gross profit negative $9 million of adjusted EBITDA, We ended the quarter with $308 million in cash, including $110 million drawn on the revolver.
And we had approximately 20 million active customers worldwide.
Turning to our local category consolidated local billings were at 49% of 2019 levels.
This compares with 52% of 2019 during the second quarter.
In October we began to pick up some momentum and have seen North America local billings recovered to 52% of 2019 levels.
Within our North American customer base, we had $9 9 million active local customers in the third quarter down 9% year over year.
And within our international markets, we had 5 million active local customers in the third quarter, which represent a growth of 22% year over year.
Moving to our goods category in the third quarter Billings were 54 million and in line with our expectations.
As a reminder, we completed the international goods transitioned to a third party marketplace model in the fourth quarter of 2021, which means we recognize goods revenue on a net basis.
Turning to operating expenses.
SG&A was $119 million and included higher than expected expenses related to our migration to the cloud.
We still expect to reduce SG&A by at least $10 million in second half of 2022 versus the first half of 2022, despite higher cloud costs and the timing of benefits related to our cost actions.
We are committed to substantially reducing our cloud costs over time.
Which will be complemented by lower payroll expenses, resulting from the cost actions. We took this year to.
To date, we incurred $6 million in onetime pretax charges related to the cost actions, we announced last quarter.
Marketing expense for the third quarter was $38 million or 30% of gross profit as we continue to deliver improvements to our fundamental marketplace experience.
Expect to continue calibrating, our marketing investment to drive customer engagement and purchase frequency.
As I mentioned earlier, we ended the quarter with a cash balance of $308 million, which includes $110 million drawn on our revolver.
During the quarter, we successfully amended our revolving credit facility, giving us full access to $150 million borrowing capacity.
We also remain on track to take $150 million in cost out of our business.
Groupon continues to hold the 2.29% equity stake in the privately held global payments provider sum up.
As a reminder, we reflect the value of the stake as well as other minority investments on our balance sheet.
Carrying value for this investment is approximately $120 million, while there is no public market for sum up securities at this time, if an opportunity arises to monetize this asset we would consider this path forward.
Given our current equity market valuation are some upstate and our operating plan focused on unlocking both topline growth and expense savings, we do not believe that our public valuation reflects our business opportunity.
Between our assets and a lean cost structure, we're creating we believe we have the resources, we need to execute our turnaround strategy and deliver free cash flow consistently.
To help with your models. We've included a slide in our earnings presentation to show all savings from our cost program are expected to translate to our P&L over the next several quarters.
Highlights haven't changed from what we disclosed in the second quarter.
In addition specific to the fourth quarter here are some key factors to consider.
So far in Q4, our trends are improving are holding steady.
October North America local billings are estimated to be approximately 52% of 2019 levels of roughly 300 basis points above three Q.
International local billings in October are estimated to be in line with <unk> levels are approximately 50% of 2019 on an FX neutral basis.
And consolidated local billings for the month are estimated to be 51% of 2019 levels on an FX neutral basis.
As Kate mentioned, we plan to reallocate some marketing spend and mid funnel channels and we'll look to continue to invest in marketing overall, if we see opportunities to drive attractive returns.
We expect fourth quarter SG&A to be relatively in line with the third quarter.
And we expect to generate free cash flow in the fourth quarter.
With that I'll turn it back over to Kate for a few final prepared comments.
Thanks Damian.
Our team has been hard at work executing on our cost action plan and on initiatives to improve our marketplace.
I know what the past few months, we have taken important steps borrowings.
We are executing on a multi phased cost saving plan and expect to achieve 150 million in run rate savings by the end of 2023.
We made progress.
Reorienting, our marketplace around solving everyday customer problems, we have a number of initiatives in flight aimed at delivering a better customer experience and improving our inventory density. So that we can better satisfy customer and Denton and drive logistics Dizzy.
Hi, there.
We have a plan to launch of a new beauty experience platform in Charleston market.
By the end of the year.
And now with our improved marketplace.
We have begun testing into marketing to help us drive customer engagement and participate currency.
While this progress is not yet reflected in our financial results. This quarter, we have begun to see green shoots of progress and I am confident that data.
Later this fall.
For Groupon.
Based on this we are reiterating our 2023 goals to generate 100 million in annual free cash flow and deliver a 15% to 20% adjusted EBITDA margin.
All of this work should position us to begin capturing new growth opportunities as we exit 2022.
To do so profitably.
Economic cycles.
With that I will turn it over to the operator for your questions.
Thank you Mr define day, ladies and gentlemen at this time do you have any questions or comments simply press star one and if you do find that your question has already been addressed you can't remove yourself from the queue by pressing star one again and we will take our first question. This afternoon from Trevor young of Barclays.
Great. Thanks first off Damien congrats on the permanent CFO appointment.
First question on the 23 guide of the 15% to 20% EBITDA margin in the 100 million free cash flow. It looks like the underlying assumption is now local billings to be around 60% of 2019 levels.
That assumes a pretty healthy ramp versus as you pointed out could are kind of treading water around that 50 ish percent level can you help us understand what's embedded in your framework there in terms of like macro recovery versus inventory ramp for versus stabilizing or even growing the local customer count versus the current run rate versus purchase frequency.
US understand some of the puts and takes that inform that view of getting to that 60% threshold.
Thank you Trevor it's Damien here.
You're right.
In our 2023 number said, assuming a higher local billings around 60% of 2019 levels. So you heard from <unk> remarks today around how we've improved a number of the fundamentals of our marketplace and are seeing some some degree of stability.
A lot of the initiatives he touched on really in the early stages and added fully manifest into the P&L to enhance the core marketplace experience, whether that's adding inventory improvement with CX search relevance coupon incentives and calibrating, our marketing investment and so when you think about where we're at today to where we need to go.
It's really around driving purchase frequency and we can get to those numbers that we cited on our existing customer base with just a little bit more purchase frequency. So that that's really what's underlying the 2023 number set.
That's really helpful and then just.
By extension.
Funding around the 50% level versus 2019, and I think you commented that in North America here in October were ticking up a little bit.
Can you talk through what the cadence was one throughout <unk> and then two what's kind of informing that uptick here so far in <unk>.
So Damien here again, let me unpack and reconcile a little bit around the third quarter for you. So.
We did say that we see we're seeing stability in the category in both North American and international for some more a little additional color really when looking at all the various puts and takes within the quarter operationally there were a few smaller headwinds, namely a timing shift for one of our major retailers hurricane in at the end of the quarter and some other miscellaneous.
Miscellaneous items, so net net.
Normalized trends are relatively steady so and that's why we are encouraged give the October number for North America, as well and those few points of tick back up a really broad based it's not one vertical versus the other we're really kind of seeing that step.
Lift across the board.
Got it so it sounds a little bit more broad based but that makes sense.
That's fair last one Kid are just on the new beauty marketplace.
Sure it a little bit of color there on timing by year end any details you can share on branding and then I think you mentioned trying it out in Charleston, first any color on why that market versus other potential geographic markets. And then lastly is there any embedded contribution in that 60% of 2019 level threshold for next year.
Thanks for the question, Kurt I think the geographical market.
We're trying to do.
With.
Clearly in the beauty Charleston area represents one of those ideal demographics for us in terms of the customer composition that they use. These particular services, we have seen that particular behavior in the past, but stepping back this particular.
Beauty offering is mostly to make sure that the customer starts with customer problems and trust first as opposed to starting with the price and I think that's one of the reasons we across starting.
To make sure that we get the first and foremost customer problems right.
Be able to establish the trust and then from there.
Leave that we have solve the customer problems of hey, how do I find the trusted provider because it's not five star reviews at historic views are it's not some text reviews, you actually want to go through the problem in somebody.
Actually verifying that for you how do you think to this particular process.
Different I E that video or imaging format. That's what we are trying to test. It out that's what we are trying to launch it out in the Charleston market as part of the 2020. Please confirm we have not considering the Dakota percentages as part of this particular initiative is not going out.
Materially impact that 60% recovery.
Yes.
Great. Thank you both.
Thank you.
Thank you and just a reminder, ladies and gentlemen star one piece for any questions at this time.
And we'll take our next question now from Eric Sheridan of Goldman Sachs.
Thanks, so much for taking the questions maybe two if I can can you give us a little bit of color, what you're continuing to monitor with respect to the Atlanta test of how elements of that might fit into growth versus rationalizing for costs looking forward to next year. Thanks.
Thanks, Ed.
So Atlanta test, what we are trying to do in Atlanta.
It's specifically focused on.
Two aspects, we are trying to make sure that we can sell the inventory.
Where customers come to Groupon platform and they are like.
As you see in some of our phone numbers you have seen us talk about what customers are coming in.
Copa specific Dean and then they don't come back to the Groupon platform asset.
This is a specific problem. We have this incentive by G box, which is launched where we give them an incentive to customers they come back.
Mouser catalog understand better understanding of what Groupon ask of our quarter and then in parallel to that we're also trying to make sure that we have the better our search expedia unless we have the data.
Overall inventory experienced by having the everyday inventory for them in terms of CLO. These particular inventory compositions give us the confidence that customers are finding our platform much more useful than they have seen in the past and so we are monitoring Atlanta cohort of the car.
With our what we call the control cohort or south of Dallas, and Houston and few other cities to make sure that the written.
<unk> on this particular cohort is actually a growing retention and we have seen that particular trend, it's not up to the level that we would like it to be but it's much bigger than our control cohorts.
And so just to summarize what we are doing here and what we are monitoring better inventory density with a better incentive structure that.
Alliance with customers coming back and improving our purchase frequency.
In that specific market. That's what we are very focused on the Atlanta.
And Mr. Sheridan did you have anything further.
If I can take an opportunity I'd love to ask maybe just one you talked a little bit about realigning marketing towards the middle of the funnel how should we be thinking about that in terms of both.
The piece of marketing dollars into next year and some of what you need to do to realign those dollars to where you wanted to be on the purchasing funnel. Thanks.
Yeah, So I'm gonna.
Alright, I'm going to use this opportunity to give you my thoughts which are having actually.
Trying to get across in our presentation.
Again <unk> trading some of this particular project so look at the beginning of the when I started as CEO one of the things. We did is we step.
We reduced our marketing spend performance marketing spend and the reason we reduced our marketing spend was because of the customer experience was not so great, but there are a lot of them.
These filings there are a lot of customer.
<unk> challenges and so by reducing we focused in Q2 on improving those operational elements in Q T. We lean into performance marketing.
We believe that once we fixed all of these particular challenges which is now all we have.
Systematically Mccann is important funds, we have reduced some of the merchants out of the platform.
Actually made the behavior data by informing and working with a lot of merchants partners and so we have now.
Much better customer experience. So we leaned into Q3 and performance marketing some of that performance marketing spend is coming back.
Later down the line, but as we are launching this particular extra demand to increase the purchase frequency.
We are trying to make sure that we have this inventory density where could it be the inventory in terms of dining or whether it's inventory that is.
And the beauty marketplace, we are creating this particular.
<unk> customers can now engage with groupon much better with the box in all of these incentives. So marketing is just a part of that experiment, where we're trying to say mid funnel span, we are trying to optimize that but as the core it shouldnt improves we will be able to spend more and more.
On the specific part of the marketing, which is acquiring the customers more as opposed to trying to get them to retain and that's why we are trying to make sure that the marketing spend is much more focus through all these optimization as opposed to only in the performance marketing.
Thanks for the color.
Thank you Mr. Sheridan again, ladies and gentlemen, just a final reminder, this afternoon star one please for any further questions.
And it appears we have no further questions. This afternoon, so that will conclude our call ladies and gentlemen, I'd like to thank you. All so much for joining group on third quarter 2022 financial results call again. Thank you so much for joining us and we wish you all a great remainder of your day Goodbye.
Please wait the conference will begin shortly.
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Yes.
And.
Yes.
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