Q3 2023 Groupon Inc Earnings Call

Hello, and welcome to Groupon third quarter 2023 financial results conference call on the call today are interim CEO Duchenne Seneca Po CFO, Uri part and senior Vice President corporate development and Investor Relations Rana Kashyap.

At this time all participants are in a listen only mode. A question and answer session will follow the Companys formal remarks to ask a question. Please press the star key followed by the number one on your Touchtone phone once again that star one to ask a question.

Today's conference call is being recorded before we begin groupon, we'd like to remind listeners that the following discussion and responses to your questions reflect management's views as of today November nine 2023, only and will include forward looking statements.

<unk> results may differ materially from those expressed or implied in the companys forward looking statements Groupon undertakes no obligation to update these forward looking statements as a result of new information or future events additional information about risks and other factors that could potentially impact the company's financial results are included in there.

Earnings press release and in their filings with the SEC, including their quarterly report on Form 10-Q.

We encourage investors to use coupons investor relations website at Investor Duck, Groupon Dot com as a way of easily finding information about the company grew.

Groupon 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. The company will also discuss the following non-GAAP financial measures adjusted EBITA, non-GAAP, SG&A and free cash flow in <unk> press release and their filings with the SEC.

Each of which is posted on the Investor Relations website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures. The most comparable measures under U S. GAAP unless otherwise noted all comparisons are provided on an FX neutral basis.

With that I'm happy to turn the call over to Duchenne.

Hello, and thanks for joining us for our first quarter 2023 earnings call. It's.

It's a pleasure to be with all of you today's prepared remarks are posted on our Investor Relations website, along with an investor presentation, which I will refer to during my remarks.

In addition, I encourage you to review our press release, and 10-Q, which contains more detail on our Q3 results.

I'll start today's call on slide five and cover the key takeaways from the FERC quota.

From my perspective, the positive signals I see in the quarter include.

Another quarter of progress as our first quarter financial results came in line with our baseline expectations to deliver sequential improvements in the rate of year over year revenue decline.

Right.

EBITDA and slow our free cash outflow.

Cool.

<unk> planned to raise approximately 100 million between $80 million fully backstopped equity rights offering and $19 million in noncore asset sales.

Transforming a business like Groupon is not easy this financing plan along with the actions we have taken a year to date to create an efficient cost structure I feel confident that we will be able to provide clarity to all stakeholders from customers Mark Jones employees suppliers and capital market participants.

The Groupon has the liquidity it needs to support our transformation plan.

It is the management goal to have no doubt about our ability to operate as a going concern.

Sorry.

Im pleased to see local billings to return to growth earlier than expected would you.

Helps to drive a significant jump in.

Improvement in the rate of decline for global billings.

Local billings was aided by a strong summer season for our things to do offerings, where we saw several important merchant partners to return to Groupon.

Several seasons and.

In addition, we are on.

Very popular deal in August offered by a large multinational retailer <unk>.

Experiencing slag this confirm my view that <unk> is a supply driven marketplace.

Okay.

Alright assortment on our platform demand will follow.

While the pace of building smarter, you ought to improve our revenue trajectory didn't improve in line with billings improvement.

This is our plan to divert Jones and covered in our trial.

On planet right or we aim to strike a better balance and sharing value on our platform between the consumer merchant partner and Grupo <unk>.

By strengthening our merchant partner value proposition, you can improve our assortment of desired deals, which leads to a better customer experience that improves traffics and couple of Arizona, which helps drive business to merchants and gets to the positive marketplace flywheel going.

While it's hard to predict our revenues as a percentage of gross billings will vary from quarter to quarter.

I do believe that over time.

<unk> derive bonds for groupon to be competitive and we experienced.

Marketplace.

On the negative side it has become clear that several of our more ambitious projects will take longer to deliver the unexpected.

Progress in transformation is not always linear and our ability to deliver on critical projects, but must areola influenza based off of our financial progress and our ability to return our business to grow Ivo return to this topic later in my remarks.

Slide six.

Now I will review, where we stand on our transformation plan and the free key work streams.

Overall at this stage the fast transformation is coming to an end and we are now switching from a cost cutting first mindset to a top line first mindset.

Now turning our focus to delivering projects across products engineering sales marketing and revenue management.

We expect it will strengthen our marketplace and position our business to return to growth.

To be clear our goal to create an efficient cost structure is not yet complete and most likely will never be older but.

But we have made significant progress, reducing our SG&A to $320 million annually.

As of the first quarter, a reduction of over $150 million compared to where we stood a year ago.

Our SGA a reduction drove a 2000 basis points improvement in our adjusted EBITDA margin year over year, despite revenues declining 12% during the same time period.

We now have basic visibility on our structural fixed cost footprint and have long term projects in place to further reduce our costs just coast Gulf cost optimization software cost reduction and resizing our facility footprint.

The progress we have made on the cost side combined with our plan to raise approximately $100 million committed to between a fully backstopped equity rights offering and noncore asset sales is a major step forward in strengthening our financial position.

These steps are completed its management's intention to open no doubt about our ability to operate as a going concern.

Now moving to our second key work stream rebuilding our organization.

Leadership team, we put in place last quarter continues to be aligned and motivated it.

Continuing to build relationships between new and old team members and create a culture of performance and meritocracy that goes the ball while earlier in the year, we adopted new tools and processes for coordinating remote work. This quarter, we increased the number of our in person engagements and saw a pick up in August September and.

Additionally, our talent acquisition process was restructured and we are seeing improved throughput and quality from our new hirings engine.

But it is still more work to simplify our business and make it more agile while we made good progress in Aurora galvanizing, our departments and themes. Our attention is shifting to basic infrastructure projects, such as upgrading our ERP and business intelligence applications.

These are major projects, so that it will take time to execute and wouldn't have immediate contributions to our supply and our results in the near term, but they are important to build a strong foundation for future growth.

Last but certainly not least quite a bit so I think our marketplace overall, while we have delivered over 100 small initiatives to improve our marketplace and the teams are pushing changes everywhere.

It has become clear that several of our ambitious projects will take longer to deliver than expected I'm going to spend the remainder of my comments to dig a little deeper on our marketplace performance.

Slide seven.

The Q4 holiday season has started and our leadership team is laser focused on daily execution to ensure we can deliver on this important season.

For example, we are actively reviewing our sales processes to remove any obstacles from closing sales.

That means postponing activity that may decrease sales productivity and prioritizing our list of merchants, who previously Brexit group order for a variety of different reasons, we decided to start working with them.

In addition, our reliability on our logistic support for them has been a major issue for groupon over the long term I believe if we can find a few hundred basis points of growth from just improving our formula reliability.

For example, one area of focus for US is the check out process, where do we see many opportunities to improve the experience for customers who have made it all the way through our funnel and other items were a car in the short term Q4 here, we have shifted our resources to attack estimated bucks an hour an hour on Augusta performance possible.

And ensure intended transactions are completed.

Finally search ambarella announced its a big area of focus for us.

We are actively working on increasing our visibility on how we distribute impressions.

Can more quickly adjust the deals our customers are seeing based on various factors such as seasonality ordeal popularity.

Slide eight.

One project that came of hour hackathon. This past spring was the development of a new consumer frontline <unk>.

New feature development on our legacy platforms takes too long and we can be clear realized a new front end is required if we are going to achieve our transformation goal.

Our product experience.

Modern marketplace funders rebuilt.

We believe that quicker development time and quicker releases can help us provide a much better customer experience over time.

The ability to release New features every week and deliver feature parity in North America and international in quick succession, there will be a major change for groupon.

For example, one feature if you want to provide our costa unless it's a more seamless gifting experience and we believe our new consumer front and we will make it easier to build this new gifting proposition.

Building, a new consumer front and it's a significant undertaking for groupon with approximately 100 people in the company involved.

Initial project timeline expectations that are two years.

After a challenging all our assumptions the team took an ambitious goal of six months to have it ready in time for our Q4 season this year.

Despite the incredible progress by the team and made the difficult decision to delay, 100% rollout until first quarter, Santa Clara with D.

Risk and protect our peak season.

I would like to thank the team for their tireless efforts.

I'm excited to see what we can do with our platform bumped the move from Middle East.

In addition to the new front and our product and engineering team is busy with several projects across our platform, including a new deal creation tool or design of our merchant sensor based on the new from architecture changes to our marketplace support ecosystem and launching a redemption API to make our voucher redemption.

So it's more efficient for our merchants.

More to come here in the new year.

Slide nine.

From my perspective, as you review the performance of our business in prior seasons Groupon has not benefited from the uplift with other marketplaces and retailers typically experience during bigger gifting seasons.

I see that the deposition and groupon to play a bigger role in gifting is a key strategic growth opportunity for our business and the project with I'm allocating resources towards it.

If we are successful in unlocking gifting I expect the groupon will generate much stronger performance in the Q4 holiday season.

I used to see.

In the first quarter, we launched initiatives across the company to make groupon mortgage stable.

Starting with supply the identified over 25000, giftable deals and over 4000, <unk> deals and focused on Onboarding, new merchants with selected against the book categories.

We also worked with existing merchants to improve their deals and other premium giftable options on.

On the product side with the decision to delay the full rollout of our new consumer from and we will be doing our best to adapt our legacy platform to make groupon mortgage stable. The legacy platform does have constraints, but do we expect to have a gifting options on all the important places from homepage to check out in time for the Q4.

Holiday season.

We have made customized and easy to get vouchers and also created themed groupon gift cards using groupon box.

With the introduction of gift vouchers cluster most of it will be able to give a majority of our offering.

We are also updating our sourcing and ranking algorithms to generate giftable deal seats, and we'll be launching special holiday themed gift pages.

These are just a few examples of the initiatives underway to make groupon mortgage table.

Giftable experiences.

Large untapped markets for Groupon, and we are excited to build a great gifting offering not just for the traditional Q4 holiday season up but.

But the adoption of that consumers concern to all year round for a special occasions.

While it's too early to say that our gifting will materially help our results in this Q4 season.

Over time, I believe that gifting can become a big business for us and Groupon can become a leading destination for giftable experiences.

Turning to slide Diana <unk>.

I want to cover a RBC things from a revenue management perspective.

As we updated investors in our last two earnings calls, reducing our reliance on promotional spend and improving the mix between paid marketing and promotional spend is a key step towards improving the health of our marketplace.

In the first quarter, we continued to shift our spend on the demand side of our marketplace from promotions to marketing.

On the promotion side, we continue to make progress to cut our inefficient promotional spending and our.

<unk> spend decreased at a faster rate than gross billings.

We are making progress shifting our promotional tools to a more personalized approach, where we provide a discount to specific customers who needed to drive conversion.

I do think our reliance on promotional spend is an ongoing effort and I do not expect progress will billionaire.

Now turning to marketing marketing as a percent of gross profit increased from 20% in the second quarter to 26% in the first quarter as we successfully ramped up our performance marketing spend while maintaining our internal benchmarks for return on investment.

We did observe some constraints in our ability to further increase our performance marketing spend while maintaining an attractive return on investment. So we made the decision not to increase our marketing spend forever.

Geographically, we have fallen to more success in scaling our performance marketing campaigns in North America versus international.

We are experiencing lower conversion rates and lower return on investments.

International is an area of focus for the marketing theme going forward.

Our ability to further ramp up our marketing spend is not static and it will be influenced by a variety of factors, including continued improvements in our marketing campaigns, our honor and improvements in our product and supply.

While we are making progress to drive traffic grow through our paid marketing channels traffic from our direct channels is still declining with traffic from managed channels decreasing at a faster rate than our direct to site traffic improving our managed channels performance. It's a focus for our marketing teams going forward.

Overall, a key focus for our revenue management is pushing top performing deals across our channels.

At this stage of our transformation. My view is our deals can be a great marketing tool to drive traffic to our site and improve conversions.

We have made changes in our processes. So that our marketing teams are cooperating more closely with our supply teams and revenue management.

In addition, our revenue management team is actively managing our search and the relevance process to more efficiently distribute our impressions.

Slide 11, turning to supply.

As we have discussed in prior quarters, we see an opportunity to improve the productivity of our sales force and in the first quarter. We continued to see an increase in year over year sales set a precedent that the productivity.

We rolled out a new pipeline management and reporting process, which is helping us monitor progress set expectations prioritize actively manage and hold perhaps accountable.

We are working on projects to add automation tools to help increase our sales efficiency such as annuities management tool.

We will be working methodically to operate optimize every stage of our selling process.

And we see a significant growth opportunity from improving the efficiency of our sales investments.

One area in supply we are behind on our Geo focused in a shopping.

Last quarter, we mentioned that we expected to expand our focus from the top five markets in North America to the top 23 markets worldwide.

This rollout is still planned bottom that's moving as fast as expected.

Next I would like to touch on our existing merchant base.

Like many established marketplaces, the vast majority of our business in any given quarter comes from existing merchants.

In 2022, all existing accounts were moved to port services, the develop ordinary exiting two merchant inbounds and many merchants are not actively managed.

In the first quarter, we rolled out a new customer success organization focused on actively managing our top 80% of billings.

This full lifecycle sales team is responsible for the revenue and retention of our highest value accounts.

Overtime, we expect that this team will help our existing merchant partners drive more business with Groupon.

Finally last quarter I mentioned, we were evaluating higher investments into our sales network, including potentially increasing the number of sales representatives.

In the first quarter, we started ramping up the new hires and also testing alternative more performance based remuneration and faster training processes.

Slide 12.

Before I turn it over to you for you to provide some insights on our financial performance and provide an update on our outlook and our activities to position, let me give a few concluding comments.

Updated you last quarter, our financial results indicate the serious challenges our business phases and underscores the needs to implement a significant and urgent transformation.

While we made some good progress in the first quarter I am not happy with the delivery of our projects and progress is taking longer than I expected.

Delivery of projects is our main priority sector tend to grow depends on it at the same time as indicated by my commitment to the backstop rights offering I am confident that we will succeed in our transformation and we will lay the foundation for our long term success.

And lastly, I want to update shareholders that Eric lets koepcke hasn't made a decision to resign from the board of directors. So that he can focus on is our commitments.

Over 15 years ago, Eric Cofounded, Groupon and helped build the company into what has been recognized as one of the fastest growing internet companies of all time.

Throughout the Companys journey <unk> has served in different role at Groupon, including Chairman and CEO.

Helped lead the company through several challenging periods, including but not limited to its response to the COVID-19 pandemic.

On a personal note I would like to thank Erik for the partnership approach he took of NPL.

<unk> invested in Groupon and his support of my interim CEO candidacy.

As Groupon second largest shareholder ARINC has assured us that he is not going far and I look forward to our continued engagement in the quarters.

Uh huh.

With that I will turn it over to you.

Hello.

Thank you Sharon and thank you all.

Oh, who is joining us today.

Pleasure to be here today speaking with you.

I believe my time today to provide further insight into our third quarter financial results.

Progress on our cost savings actions.

Based on our liquidity position.

Our updated outlook.

Before I begin I would like to make an announcement.

Colin Leslie will be moving from her position as interim Chief accounting officer to becoming our permanent Chief accounting officer.

I've been pleased with cost management of the accounting team and her contributions to the success of.

Please join me in congratulating thing Kyle and we had the very best in her new role.

Slide 13 please.

So let's jump into our search both our summary financial results.

In the third quarter, we delivered global billings were 419 million a day.

Greece, FERC ultimately three person.

And a significant improvement from the second quarter.

Billings declined approximately 14%.

I will cover more details and opens the drivers of our third quarter Billings later in my remarks alright.

Revenue was $126 million and declined the most person year over year a.

A slight improvement in year over year trends versus our second quarter results and in line with our outlook to show a sequential improvement.

However, you will decline at a faster pace than billings.

Well as the risk factors impacting the divergence between our revenue and the gross billing growth rate.

The primary driver is the reduction in Aro deal margin.

As a result.

Our revenue as a percentage of gross billings will start that person a reduction of over 300 basis points year over year.

Given that the many variables that impacts our urban you as a percentage of gross billings from quarter to quarter, including mix.

Now, let's see.

Several other factors, we will not provide forward looking commentary on how we expect.

As a percentage of gross billings to evolve in the quarters ahead.

That's it.

As previously outlined in our shareholder letter published in our first quarter earnings.

Reviving our merchant partner and believe our position is an important pillar.

Our transformation and we believe we need to strike a better bombs and sharing value on our buffer between the customer.

Merchant partners and coupon.

Moving on our gross profit as a percentage of revenues remained stable around eight to eight person.

Marketing expense for the third quarter was $29 million.

The six persons gross perfect.

As we updated you last quarter.

We're able to performance marketing campaigns that are ready to receive increased investment in the first quarter, and we increased our marketing spend 30% quarter over quarter.

As we deliver additional improvements.

<unk> of our performance marketing channels.

We will continue to review our marketing spend.

To ensure we stags are right bonds between maintaining adequate returns on each dollar spent and driving better to find herself.

Don't aviation perfect for the third quarter was $82 million or 65% of revenues.

And adjusted EBITDA was $18 million as they are incurred at our second straight quarter.

Adjusted EBITDA generation.

The company benefited from realized savings from our cost actions on SG&A.

Turning to cash flow.

Third quarter free cash outflow of $18 million.

Well this is an improvement versus last quarter and last year.

It was still negative.

To free cash flow generation elect a return to positive adjusted EBITDA.

I will have more to say on the divergence of adjusted EBITDA and free cash flow later in my remarks.

We ended the quarter with $86 million in cash and cash equivalents incur.

Including $47 million drawn on the revolver.

Please note that our cash position excludes 15 million of restricted cash, which is posted a third quarter against our outstanding letters of credit.

And I reported on our balance sheet in prepaid expenses and other current assets.

Slide 14.

We hit approximately 17 million active customers worldwide.

As of quarter end down 500000 from the prior quarter.

Turning to our local category.

Consolidated Luca billings, that's for $854 million.

Yep.

Two person compared with the prior year.

This is the first time, we have for our Burton local billings growth since the start of bundling.

And a nice positive signal for our business.

Within North America, we deliver local billings of $260 million up 5% year over year.

Within international we deliver local billings of $94 million.

Down 3% year over year.

As Jason mentioned in his prepared remarks, our local category benefited.

In the third quarter from the strong performance of our large enterprise deal the Paragon on Groupon during the month of August.

And also benefited from better performance on our things to do very well.

So several important merchant partners to our buffer for the summer season.

I'll start things these things was our health beauty and wellness and food and drink verticals, which we continue to experience headwinds.

Moving to our <unk> and favorable categories in the third quarter.

Consolidated gross billings will start this $6 million.

Down 34% year over year.

And consolidated favorable Inc was $29 million.

Down 16% year over year.

Slide 15.

Turning to operating expenses.

Third quarter SG&A was $80 million.

Down 33% year over year.

And down 17%, 17% quarter over quarter as we continue to see the benefits of our recent cost savings actions are reflected in our financials.

SG&A includes <unk> 8 million in stock based compensation, and $6 4 million and depreciation and amortization.

Creating an efficient cost structure is a key pillar of our transformation plan.

And we have launched multi per projects across the company to reduce our fixed cost structure.

We continue to seek opportunities to improve group one's ability to execute more efficiently and in turn father.

<unk> cost in 2024.

For the fourth quarter as Sean mentioned in his prepared remarks.

Several of our projects fiber or is he used cost will take time.

You get delivered and as a result.

Do not expect to see a material change in SG&A from the current levels in the fourth quarter.

Slide 16.

Turning to free cash flow.

Despite producing positive $18 million of adjusted EBITDA and to start bolstered our business experienced another quarter of cash outflows.

In order to better help investors understand the divergence between adjusted EBITDA and free cash flow.

Great.

Marriage that reconciles adjusted EBITDA to free cash flow.

Specifically.

I would like to point to point to I would like to point attention to five drivers of the divergence.

Number one.

Capex is primarily driven by capitalized labor.

Number two.

Change in merchants and supplier payables is primarily driven by overall change in billings and secondarily impacted by our merchant payables cycle.

Please note that our quarter ending bonds with the merchant payables can be impacted by seasonality for example.

Along with the January February and April September is a bomb.

Our seasonally lowest moms as we transition from our busiest summer things to do season into our Q4 holiday season.

Sure free Chi.

Change in trade accounts payable is primarily driven by one.

How much non barrel SG&A and marketing spending.

And.

Two.

Any changes in our accounts payable cycle year to date.

Our accounts payable cycle has started use significantly and we do not have further compression we do not expect further compression sorry.

Or number four.

Change in accrued SG&A and other current liabilities is primarily driven by our SG&A and other expenses as the euro use our overall spend.

We'll be accruing question number five.

Cash outflow from change in net price increases is driven by our remaining increase payment obligations on our empowered pleases.

In Q1, 'twenty three out.

Outflows, including included the onetime payment associated with the early lease termination of our Chicago facility.

<unk>, our real estate footprint to our current needs.

It assumes the exploration of our current leases or negotiating early lease exits.

We expect the working capital outflow from this item those plans that were at zero.

Going forward our.

Our ability to convert positive adjusted EBITDA generation to positive free cash flow will depend on the timing of our working capital cycle and other cash expenses.

Slide 17.

Additional color in his prepared remarks.

Strengthening of our financial position is one of the main pillars of our transformation plan.

I'm happy to see the continued progress the company has made the crate.

An efficient cost structure and improve.

Three of the top line performance in the business.

Our financial results indicated the serious challenges our business faces and improved business performance is an important factor to our financial position.

As we updated investors in the.

The last two quarters.

Management has been developing several different options to.

To enhance.

Our liquidity, including potential monetization of certain noncore assets and.

And seeking additional financing from both public and private markets.

New issuance of equity.

Debt Securities.

After reviewing a variety of debt and equity financing options. The board has approved an $80 million pool backstop alright offering.

Alright.

Alright, so Frank is expected to be made through distribution of non transferable subscription rights to purchase shares of group will come on stocks at the.

Scripture price of $11 70, our share.

The rights offering is fully backstopped by both market business with currently Grupo <unk> largest shareholder and its isolated duchamp's syncopal, our interim CEO and a member of the board.

<unk> also a member of the board.

Both our capital signed a binding agreement to subscribe to there.

Our out our subscription.

Alright and to repurchase any and all unsubscribed shares.

In the rights offering.

Alright.

To be distributed to common stockholders of <unk>.

Hey, Kurt as of November 20 <unk>.

Saar is offering currently is expected to commence currently after November 20 <unk>.

And expire on January 17th 2010 before.

Additional details relating to the rights offering will be available in the.

The firm of 8-K.

The company will file within four business days relating to the rights offering.

And the backstop agreement as well.

In the prospectus supplement that the company expects to file promptly.

After the record date.

Our monetization of certain noncore assets.

<unk>, we have entered into two separate agreements to sell partial stakes of our investment and some of them.

<unk>.

As previously disclosed in October.

We signed an agreement to sell a partial stake for approximately $9 million.

Subsequently the receipt of the cash and the transaction closed.

And today, we signed a second agreement to sell approximately 10 million USD on the same economic terms.

As the first agreement and expect the transaction to be completed later in Q4.

We expect to generate net proceeds from these sales of approximately $19 million.

Approximately $100 million raise from fully backstop rights offering along with proceeds from sign noncore asset sales is expected to provide the company has a liquidity it needs to support our transformation plan.

And management's intention is to have no doubt.

About our ability to operate as going concern.

In addition to the <unk>.

<unk> transactions.

Management continues to evaluate the monetization of certain noncore assets, including the remaining stake in sum up.

Gift card and its portfolio of intellectual property.

Bob there can be no assurances as to better or ban the sale of these noncore assets will be consummated.

Management currently believes it could generate net proceeds of approximately $100 million from potential future noncore asset sales.

To be clear.

This 100 million would be in addition to the $100 million.

Glenn the announced today consisting of the rights offering.

And two tranches of some upsell slide.

Slide 18.

Now turning to guidance.

Management has made a decision to end state form of guidance.

There can be no assurances.

The company will continue to practice of <unk>.

Giving formal guidance in the future quarters.

We want to furnish our shareholders with additional information.

They consider a potential subscription.

Our rights offering.

As of November nine 2010 to see management is issuing guidance for the fourth quarter of 2023 U S foods.

Revenue between 127 and half million to 147 and half a million.

<unk> declined year over year between minus 14% and minus 7%.

Adjusted EBITDA between 18 million.

And $25 million.

Or is it is free cash flow.

Management would also like to share a preliminary outlook for 2024.

Year over year revenue change at minus five person to zero percent.

Adjusted EBITDA between $80 million and 100 million.

Positive free cash flow for the entire year.

Finally, I would like to provide some additional commentary to us is the <unk> module.

While near term two year over year growth in local billings earlier than expected.

We continue to expect progress.

We will not always be leaner and.

And we would not be surprised.

If local billings growth.

Can they got this in full in the fourth quarter.

We continue to expect we continue to expect our revenue growth trends.

My diverge.

Our local billings plans, depending on the composition of our local billings the timing of our transformation strategy and the trajectory of our other categories.

For our fourth quarter guidance as <unk> covered.

We made a decision to delay the rollout of our new consumer front end.

So the next year and we are working to adapt our new gifting proposition into our legacy portfolio.

The low end of our guidance contemplates a scenario, where our business industrial material benefit.

From gifting the Q4 holiday season.

High end of our guidance contemplates a scenario when gifting on our legacy platform moderately successful during the Q4 holiday season.

For 2024.

We currently expect revenues in the first half of 2024 to decline year over year and revenues in the second half of 2007 before grew over a year.

Grow year over year.

The trajectory.

The year will depend on a variety of factors, including firstly <unk>.

We ended up on a year over year basis exiting Q4 and secondly.

The timing of launching certain projects, including our new consumer firm then.

And while we expect to generate positive free cash flow over the full year 2024.

You would expect.

Our first quarter free cash flow will be negative.

Given the seasonality of the <unk> merchant payables as we exit.

Q4.

Excuse me.

Given our current equity market valuation plus our operating plan.

Focus on unlocking both top line growth and expense savings.

The value of our noncore assets.

We believe we can create value.

For all of our stakeholders as we continue to execute our transformation strategy.

Thank you for your time today.

We would like to open the call.

For your questions operator.

Thank you if you have a question. It is star one on your telephone keypad to withdraw your question. Please press star one again.

Your first question comes from the line of Trevor Young with Barclays. Your line is open.

Great. Thanks, clearly a lot of detail here, so I have a <unk>.

Several questions. So just bear with me first one just on North America local billings returning to growth can you talk about the cadence of growth there throughout the quarter did it peak in August around that popular deal and then fade into September and then any color on how billings are trending so far in four Q. Yuri I think you mentioned that you wouldn't be surprised.

Total local billings turned negative in <unk>. So just curious if thats actually what youre seeing so far or you are just taking a more cautious stance on the quarter.

Thank you for ever.

Frankly.

We don't comment on monthly trends local billings in Q3 was helped by a strong <unk> to do a season and a popular on deal of.

Move to national retailer.

If I take step back yet our current marketplace assortment has some mix of always on deals and time limited deals.

That also different seasons that certain types of experiences.

Better in certain seasons for example seems to do in summer months.

Versus Q4 gifting season.

For our time limited the use of.

The marathon might choose to timeline.

Time limited deal once a year.

In our minds here not necessarily the same calendar months not even the same time ambition demands.

So.

Next year could be different time so.

Therefore, we are not.

Providing details on the monthly data.

So it's very difficult for us to extrapolate how our business is peripheral named by taking one months and comparing versus prior moms. So prior year and so on and so.

So we will really focus on how overall quarter platform.

And long term brands, which we believe investors should also focus.

All right.

Sure.

Yeah, that's fair I can appreciate that.

John in your prepared remarks, you mentioned some constraints on dialing up the marketing spend in the quarter can you actually elaborate on what those constraints were when that AD unit pricing on certain social platforms or something totally unrelated and then as we look at the <unk> holiday season, that's typically when impressions get even greater.

Demand from other advertisers so should we expect that spend to actually decline Q on Q as you focus on those ROI thresholds.

Actually I don't think that we hit our long term.

Limit, let's say for our advertising we are in my opinion are hitting their limits, which we can do right now with the platform and technology would you be available the business intelligence infrastructure projects. For example should unlock us other opportunities to be smarter and performance advertising same dividend new path.

And which should provide us more insights on our on our conversion tracking and this is extremely important especially in the international.

In Q4, I believe that our performance.

Nonperformance revenue management theme is looking carefully.

Seasonality trends run different types of products are starting their own she's done so although.

The percentage wise, we will be on the same level.

The overall spend it depends on how successful we will be.

It's very possible it will be higher in the doors amount, but the percentage wise I don't think that it will be higher.

Okay that makes sense just last one for me had this inbound from a few new investors to the name.

What steps are you taking to drive retention between the merchant and consumer the illustrative scenario being a customer buys a groupon from for some activity and now has a direct relationship to that merchant.

Why would the customer come back through Groupon for that service and vice versa why wouldn't the merchant just go direct back to that consumer kind of cutting groupon out of the process altogether, just any thoughts on how you address that structural challenge would be appreciated.

I guess several potential base.

Approach it going forward and we will be sustained most likely all of them. However, both I would like to mention is not N V. One of our new merchant platform, which we will be or we are building <unk> early next year.

I would like to have an option to have different price income conditions, including our take rate for the first time customers and repeat customers slip there.

The cost for <unk> for the second and follow up on <unk>.

Brand versus what they are.

Paying right now for the first time customers. So this is one very simple very of this solution would you be though for sure.

Our merchants.

Got it we look forward to seeing the new interface next year.

Thank you Laura.

Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.

Thanks, so much for taking the questions maybe two if I could we talked last quarter about getting the right mix of merchants and having a density of not just number of deals, but the right top deals by ZIP code and geography, how far along in the merchant acquisition and alignment process are you.

In terms of getting the right array of merchant deals on a market by market basis, and how should we think about some of the work that still needs to be done there looking out into next year and then maybe I don't know if it's the one part of a two parter on the rights offering so post the rights offering what is your working assumption of the cash position.

The company post the rights offering how dilutive will that be and which how should we think about that in terms of sort of runway of cash going into 2020 for it. Thank you.

If you do want to take the second question first and I will then take that.

Yes.

Thank you for the question. So as we sit there we are going to raise 100 million 20 million.

From these two countries of somehow and 80 milligram rights offerings.

We also expect Q4 will be positive.

In our cash flow free cash flow.

But Q1 due.

Due to the.

Due to the.

Material March on cycle will be negative because it's a quarter after after gifting season.

And the following quarters.

<unk> expect so you have positive positive cash flow.

So I don't were not.

Here, but this is about the trends, which we see there.

In which we <unk>.

And we're able to add to that.

It's a little bit.

Information, which is known.

Is that a.

It's also.

Our first for David you, we have currently open.

Mentioned this fall to supplement mill in their own.

So till May 2024.

And I can take the merchant acquisition question. So this is the area, where I would like to see faster delivery than what we have.

As I mentioned during my call, we are seeing year over year oil growth trends in terms of productivity of our salespeople and.

I will stocking on our last call that we will be adding.

Adjusted the Ceos, who are going to be able to help us to manage the traffic.

We have to change the priorities internally and we've already building other parts of sales organization and processes and tools. So that we have better control and how we are selling homes, we are selling and the focus on the deal as sort of the quality of deals something which we are working now and will be focused.

Inc.

Q1.

So no changes in the plan.

Side effect of this will be a similar like automation projects.

To help us to increase the productivity of the sales force significantly.

The <unk>, although we have confirmed that it works.

Our top areas, we see <unk> grow.

The implementation of the slight literally.

Okay. Thank you.

Youre welcome.

There are no further questions at this time this will conclude today's conference call. We thank you for joining you may now disconnect your lines.

Yeah.

Yeah.

Okay.