Q2 2024 Groupon Inc Earnings Call
Operator: Hello, and welcome to Groupon's second quarter 2024 financial results conference call. On the call today are CEO Dusan Senkypl, CFO Yiji Ponrt, and SVP of Corporate Development and Investor Relations Rana Kashyap. At this time, all participants are in a listen-only mode.
Hello, and welcome to Groupon second quarter 2024 financial results conference call on the call today are CEO, Sean. Thank you, Paul CFO, usually pop and SVP of corporate development and Investor Relations Roddick a shop.
Speaker Change: At this time all participants are in a listen only mode.
Question and answer session will follow the company's formal remarks today's conference call is being recorded.
Operator: A question-and-answer session will follow the company's formal remarks. This conference call is being recorded. Before we begin, Groupon would like to remind listeners that the following discussion and responses to your questions reflects management's views as of today, July 30, 2024, only, and will include forward-looking statements. However, actual results may differ materially from those expressed or implied in the company's forward-looking statements. Groupon undertakes no obligation to update these forward-looking statements as a result of new information or future events.
Speaker Change: Before we begin groupon would like to remind listeners that the following discussion and responses to your questions reflects management's views as of today July 32024, only and will include forward looking statements.
Speaker Change: Actual results may differ materially from those expressed or implied in the company's forward looking statements.
Speaker Change: <unk> undertakes no obligation to update these forward looking statements as a result of new information or future events.
Operator: Additional information about risks and other factors that could potentially impact the company's financial results is included in its earnings press release and in its filings with the SEC, including its quarterly report on Form 10-Q. We encourage investors to use Groupon's investor relations website at investor.groupon.com as a way of easily finding information about the company. 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 posts.
Speaker Change: Additional information about risks and other factors that could potentially impact the company's financial results are included in its earnings press release and in its filings with the SEC, including its quarterly report on Form 10-Q.
Speaker Change: We encourage investors to use blue bonds Investor Relations website at Investor Doc Groupon Dot com as a way of easily finding information about the company.
Speaker Change: 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.
Operator: On the call today, the company will discuss the following non-GAAP financial measures. Adjusted EBITDA and free cash flow. In Groupon's press release and its filings with the SEC, each of which is posted on the Success to Relationship website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable measures under U.S. GAAP. And with that, I'm happy to turn the call over to Dusan.
Speaker Change: On the call today, the company will discuss the following non-GAAP financial measures adjusted EBITDA and free cash flow.
Speaker Change: And group <unk> press release and their filings with the SEC each of which is posted on this investor relation website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable measures under U S. GAAP.
disarm: And with that I'm happy to turn the call over to disarm.
Speaker Change: Yes.
Dusan Senkypl: Hello, and thanks for joining us for our second quarter 2024 earnings call. It's a pleasure to be with all of you.
disarm: Hello, and thanks for joining us for our second quarter of 2024 earnings call.
disarm: A pleasure to be with all of them today.
Dusan Senkypl: 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 10Q, which contain more detail on our second quarter results. I will start today's call on slide 5 and cover our second quarter numbers.
Speaker Change: Today's prepared remarks are posted on our Investor Relations website, along with an investor presentation, which I've already referred to during my remarks. In addition, I encourage you to review our press release and 10-Q, which contains more detail on our second quarter results.
Speaker Change: I will start todays call on slide five I will cover our second quarter numbers.
Dusan Senkypl: After a weak start to the quarter, where April was significantly impacted related to previously disclosed site performance issues, we finished the quarter with a very good June and ended overall with a decent quarter. Our improving performance continues to be driven by North America Local, where revenues grew year-over-year and active customers grew sequentially, both for the second straight quarter. We generated a fifth straight quarter of positive adjusted EBITDA and a second straight quarter of trailing 12-month adjusted EBITDA of approximately 80 million, cementing our ability to generate strong adjusted EBITDA while investing to inflect the top line to sustain growth. Turning to cash flow, we had positive 11 million in free cash flow, better than we expected. This takes our trailing 12-month free cash flow to positive $30 million.
Speaker Change: After a weak start to the quarter, where April was significantly impacted related to previously disclosed site performance issues. We finished the quarter with a vertical June and ended overall with a decent quarter.
Speaker Change: Our improving performance continues to be driven by North America will go where revenues grew year over year and exited customers grew sequentially both for the second straight quarter.
Speaker Change: We generated our fifth straight quarter of positive adjusted EBITDA and a second straight quarter of trailing 12 months adjusted EBITDA of approximately 80 million cementing our ability to generate strong adjusted EBITDA, while investing to inflect the supply to sustained growth.
Speaker Change: Turning to cash flow, we had positive 11 million in free cash flow better than we expected.
Speaker Change: This takes our trailing 12 months free cash flow positive for a similar answer.
Dusan Senkypl: After enduring a three-year period where the business consistently generated negative free cash flow on a trailing 12-month basis, our return to positive cash flow performance strengthens our financial position, builds a more resilient foundation for future growth, and it's a positive indicator that our transformation plan is working. Overall, our financial results are significantly improved compared to where we were one year ago. Our strong June results demonstrate that when we have the right supply working with properly functioning products and marketing, we can grow the business.
Speaker Change: And during a three year period vendor business consistently generated negative free cash flow on a trailing 12 month basis, our return to positive cash flow performance strengthens our financial position.
Speaker Change: Those are more resilient foundation for future growth and is a positive indicator of our transformation plan is working.
Speaker Change: Overall, our financial results are significantly improved compared to where we were over one year ago.
Speaker Change: Our strong June our resolve to demonstrate that when we have a direct supply working with broker functioning product and marketing he can grow their business.
Dusan Senkypl: Based on our June performance, we were expecting to share today that Q3 would be an inflection point for growth. Unfortunately, our performance in July has been hit heavily again due to unexpected site stability issues mainly related to cloud migration projects. While we are confident that we will handle this temporary issue within the quarter, we do not expect we will be able to resolve the issue quickly enough to avoid impacting our first quarter financial results, which are weighted towards July and August due to the busy things to do season. Therefore, we are revising down our guidance to reflect this lost quarter of performance.
Speaker Change: Based on our June performance Veeva expecting to share today that Q3 would be an inflection point for growth.
Speaker Change: Unfortunately, our performance in July and has been hit heavily again due to unexpected sized stability issues, mainly related to our cloud migration project.
Speaker Change: While we are confident that vivo handled this temporary issue within the quarter. We do not expect we will be able to resolve the issue quickly enough to avoid impacting our first quarter financial results, which is weighted towards July and August due to the business things to do season.
Speaker Change: Therefore, we are revising down our guidance to reflect this last quarter of performance.
Dusan Senkypl: While our transformation is taking longer and is harder than I expected, we remain committed to our transformation plan. I am confident that we can restart the engines of growth and realize our mission to become the ultimate destination for local experiences and services. I will spend my remaining time discussing A, what are the supply drivers for growth in North America local, B, our decision to invest more in marketing, and C, an update on site reliability issues and our projects in product and engineering. Slide six, and Supply Drivers for North America Local
Speaker Change: While our transformation is taking longer and its harder than I expected. We remain committed to our transformation plan I am confident that we can restart the engines of growth and realize our mission to become the ultimate destination for local experiences and services.
Speaker Change: I will spend my remaining time discussing a with other supply drivers for growth in North America local b, our decision to invest more into marketing and see update on site reliability issues and our projects in product and engineering.
Speaker Change: Slide six supply drivers for North America local.
Dusan Senkypl: As we highlighted in our transformation plan back in the first quarter of 2023, everything starts with supply. If we win the right supply, demand will follow. We initially decided to focus our supply transformation efforts in North America locally, given the size of the business.
Speaker Change: As we highlighted in our transformation plan back in the first quarter of 2020 free everything started with supply.
Speaker Change: We win the right supply demand will fall.
Speaker Change: Initially decided to focus our supply transformation efforts in North America local given the size of the business.
Dusan Senkypl: Six quarters later, we can see positive results from our focus. And while there is no one silver bullet to explain our improved performance in North America Local, I want to highlight several drivers on the supply side. First, we are prioritizing the quality of deals over the quantity of deals.
Speaker Change: Six quarters later, you can see positive results from our focus and while there is no one silver bullet to explain our improved performance in North America local I want to highlight several drivers on the supply side.
Speaker Change: First we are prioritizing the quality of deals over the quantity of deals our vision is to build a curated marketplace with high quality supply that delivers exceptional value for everyday experiences.
Dusan Senkypl: Our vision is to build a curated marketplace with high-quality supply that delivers exceptional value for everyday experiences. Over the past several quarters, we've taken decisive steps to remove lower quality deals from our site that don't align with this brand promise. While the total number of deals is lower than a year ago, the deals that remain are performing better per unique visitor.
Speaker Change: Over the past several quarters, we've taken decisive steps to remove lower quality deals from our side that don't align with this brand promise.
Speaker Change: The total number of deals is slower than a year ago. The deals that remain are performing better per unique visitor. If also made substantial progress in curating, our deals with enhanced presentation improved deal copay and better images.
Dusan Senkypl: We've also made substantial progress in curating our deals with enhanced presentation, improved deal copy, and better images. Second, we continue to see growth from our large enterprise merchants, both by expanding relationships with existing partners and adding new brands to our platform. In addition, with the arrival of summer, our Busy Things to Do season has kicked off, showing robust growth in family-friendly activities, ranging from trampoline parks and bowling alleys to amusement parks and water parks.
Speaker Change: Second we continue to see growth from our large enterprise merchants, both by expanding relationships with existing partners and other <unk> brands to our platform.
Speaker Change: In addition to the arrival of summer our visiting studio season has kicked off showing Corrobos Grove and family friendly activities, ranging from trampoline parks and bowling alleys to amusement parks and water parks.
We expected to see continued growth in these areas.
Dusan Senkypl: We expect to see continued growth in these areas. First, third, regionalization. We completed our first full quarter under our new regional structure, with dedicated teams focused on driving freshness and account managers committed to maintaining and growing existing business, all guided by expert market managers. While it is still early in our regionalization efforts, we saw improved results in our local market performance in the second quarter. I want to highlight a new initiative that underscores how supply isn't just about the type of merchants but also the kinds of offerings we can promote. In the first quarter, we tested a new flash sale concept with one enterprise merchant, offering an amazing deal for a limited 48-hour period.
Speaker Change: First first regionalization.
Speaker Change: We completed our first full quarter under our new regional structure with dedicated teams focused on driving freshness and account managers committed to maintaining and growing existing business all guided by expert market managers.
Speaker Change: It is still early in our regionalization efforts, we saw improved results in our local market performance in the second quarter.
Speaker Change: Next I want to highlight a new initiative is underscores how supply isn't just about the type of merchants, but also the kinds of offerings. We can promote in.
Speaker Change: In the first quarter, we tested a new fresh cell concept with one enterprise smartphone offering an amazing deal for a limited 48 hour period.
Dusan Senkypl: This led to an impressive jump in performance and engagement. We expanded this program in the second quarter, running over a dozen flash sales with existing merchants to drive incremental performance and enhance freshness and engagement on our side. While this is still a relatively early initiative, similar to gifting, it demonstrates the potential for us to expand our business by developing new products to cross-sell and up-sell into our existing supply chain. And finally, after establishing a strong performance management culture and fine-tuning the ROI of our new business acquisition engine for local, we are ready to ramp up new sales hiring. The current size of our sales force in North America is simply inadequate to properly cover the market opportunity.
Speaker Change: Led to an impressive jump in performance and engagement we.
Speaker Change: Expanded this program in the second quarter running over a dozen flash sales at existing merchants to drive incremental performance and enhanced freshness and engagement on our site.
Speaker Change: While this is still a relatively early initiatives similar to gifting it demonstrates the potential for us to expand our business by developing new products to cross sell and upsell into our existing supply base.
Speaker Change: And finally after establishing a strong performance management culture, and fine tuning the Aro I of our new business acquisition engine for local we are ready to ramp up new sales hiring.
Speaker Change: The current size of our sales force in the North America is simply inadequate to properly cover the market opportunity there.
Dusan Senkypl: The compelling business case and our regional teams in place have greenlighted an investment in sales that I expect will support our growth in local markets in 2025 and beyond. Slide 7, Turning to Marketing and Contribution Profits. Our progress in reallocating and increasing marketing spend to more productive channels is one of the key drivers of our progress on improved top line today. I want to spend a few minutes explaining how we approach marketing spend in the context of ROI and incremental margins.
Speaker Change: As a compelling business case, and our regional teams in place I have greenlighted and investment into sales that I expect will support our growth in local in 2025 and beyond.
Speaker Change: Slide seven turning to marketing and contribution profit.
Speaker Change: Our progress in allocating increasing marketing spend to more productive channels is one of the key drivers of our progress on improved topline today.
Speaker Change: I want to spend a few minutes, explaining how we approach marketing spend in the context of ROI and incremental margins.
Dusan Senkypl: With a fixed cost base that we believe we can leverage and scale over time, one of our financial objectives is to grow our top line at a healthy contribution margin, which will drop to the bottom line, driving faster bottom line growth and improving bottom line margins over time. Looking back to 2019, when we were still in the first party goods business, Groupon had approximately 35% contribution profit as a percentage of revenue.
Speaker Change: With a fixed cost base that we believe we can leverage our scale over time, one of our financial objective is to grow our supply at the healthy contribution margin.
Speaker Change: Richard will drop to the bottom line driving faster bottom line growth and improving bottom line margins overtime.
Richard: Looking back to 2019, when Veeva to sell into first party goods business Groupon had approximately 35% contribution for a profit as a percentage of revenue.
Dusan Senkypl: After exiting first-party goods and with the economy reopening post-COVID, our incremental margins increased into the 60% range as gross profit as a percentage of revenue rose to 83 to 87%, while we allocated about 30 to 33% of gross profit to marketing. However, our business was declining rapidly.
Speaker Change: After exiting first party goods and vivid economic reopening post COVID-19, our incremental margins increased into the 60% range as gross profit as a percentage of revenue rose to <unk>, 83% to 87%.
Speaker Change: Why are we allocated about 30% to 33% of gross profit to marketing.
Speaker Change: However, our business was declining rapidly star.
Dusan Senkypl: Starting in 2023, as a part of our transformation playbook, we pulled back on marketing spend to rebuild our marketing campaigns with a focus on lower funnel performance channels. As a result, marketing as a percentage of gross profit dropped to 20-24% in the first half of last year before ramping back to the 26-28% range over the last several quarters. We have previously discussed our desire to continue ramping marketing spend as long as we can maintain our desired ROI targets, but we faced operational blockers that prevented us from efficiently scaling our marketing efforts forever.
Speaker Change: Starting in 2023 is that part of our transformation playbook, we pulled back on marketing spend to rebuild our marketing campaigns with a focus on lower funnel performance channels.
Our resolve marketing as a percentage of gross profit dropped to 20% to 24% in the first half of the of last year before ramping back to the 26% to 28% range over the last several quarters.
Speaker Change: We have previously discussed our desire to continue ramping marketing spend as long as we can maintain our desired ROI targets.
Speaker Change: Faced operational brokers that prevented us from efficiently scaling our marketing efforts forever.
Dusan Senkypl: In the second quarter, we successfully increased marketing spend to 32% of gross profit while achieving satisfactory ROI targets. Simultaneously, we achieved over 90% gross profit as a percentage of revenue, resulting in 61% contribution profit as a percentage of revenue. Looking ahead, we expect the second quarter to be an indication of what we can expect going forward with approximately 90% gross profit as a percentage of revenue, marketing as a percentage of gross profit in the 30 to 35 percent range, and contribution profit as a percentage of revenue in the 58 to 62 percent range.
Speaker Change: In the second quarter, we successfully increased marketing spend to 42% of gross profit, while achieving satisfactory rois targets.
Speaker Change: Simultaneously, we achieved over 90% gross profit as a percentage of revenue, resulting in a 61% contributing contribution profit as a percentage of revenue.
Speaker Change: Looking ahead, we expect the second quarter as an indication of what we can expect going forward with approximately 90% gross profit as a percentage of revenue.
Speaker Change: Marketing as a percentage of gross profit in the first two first the 5% range and contribution profit as a percentage of revenue in the 58% to 62% range.
Dusan Senkypl: Slide 8, Rapidly increasing the velocity of new product innovation is a key pillar of our transformation. In order to execute on this pillar and raise our product experience to modern marketplace standards, we are investing significant resources in making our platform more efficient, stable, and agile. First efficiency was revived 18 months ago, and we had very high spending on product and engineering, but without a satisfactory return on product innovation.
Speaker Change: Slide eight.
Speaker Change: Rapidly increasing development of new product innovation is key pillar of our transformation.
Speaker Change: In order to execute on the spirit and raised our product experience to modern marketplace standards, we are investing significant resources in making our platform more efficient stable and agile.
Speaker Change: First efficiency.
Speaker Change: Divide the 18 months ago, and we had very high spending in product and engineering, but without a satisfactory return of product innovation wildly.
Dusan Senkypl: While we made good progress last year making our platform more efficient, we still have ongoing projects in place to further reduce costs, including our cloud optimization project. In the second quarter, we ramped up one work stream to shift our cloud workloads from a multi-cloud environment to a single cloud provider. Over the last several weeks, we migrated many critical workloads and expect this project to be fully delivered in the second half of this year. The benefits from this project will be lower cloud costs per order, improved latency, and a simple platform to do future development.
Speaker Change: While we made good progress last year of making our platform more efficient you still have ongoing projects in place to further reduce cost, including our cloud cost optimization project.
Speaker Change: In the second quarter, we ramped up landmark stream to shift our cloud workloads from a multi cloud environments to a single cloud provider.
Speaker Change: Over the last several weeks, we migrated many critical workloads and expect this project to be fully delivered in the second half of this year.
The benefits from this project will be lower crowd cost per order in Peru slot, then say and a simple platform to do future development in the meantime. This project is taking up significant bandwidth for the product engineering theme slowing delivery on the rest of our collector roadmap and has impacted our sites the ability to chug along.
Dusan Senkypl: In the meantime, this project is taking up significant bandwidth for the product engineering team, slowing delivery on the rest of our product roadmap, and has impacted our site stability, which I will cover next. Second, Site Stability Our performance issues from April have largely been resolved, although there is still room for further optimization. Based on our June performance, we anticipated an inflection point for growth in Q3.
Speaker Change: <unk>.
Speaker Change: Second sights stability our performance issues from April have largely been resolved, although there is still room for further optimizations.
Speaker Change: Based on our June performance the island anticipated an inflection point for growth in Q3. However.
Dusan Senkypl: However, we encountered another round of site performance issues primarily related to our cloud migration project, which significantly impacted the stability of our site and the performance of both paid and managed channels. Despite our best efforts to protect our top line, we are challenged by a complex legacy platform with accumulated technical debt and executing on multiple projects to modernize our technology foundation. I expect these issues to be resolved within this quarter, but they are impacting our Q3 guidance as we were unable to fully participate in the peak season for things to do.
Speaker Change: However, we encounter another round of site performance issues, primarily related to our cloud migration project, which significantly impacted the ability of our site and the performance of both paid and military channels.
Speaker Change: Despite our best efforts to protect our top line. We are challenged by a complex legacy platform with accumulated technical debt and executing on multiple projects to modernize our technology Foundation.
Speaker Change: I expect these issues to be resolved within this quarter, but it is impacting our Q3 guidance as we were unable to fully participate in the peak season for things to do.
Dusan Senkypl: While we are limiting the number of large projects going forward, we can't entirely disregard the possibility of additional site performance issues in the future. For agility, we have allocated significant resources to building a new front end, which we expect will dramatically increase our ability to roll out new features. Once we launch our new application, we will have a single platform across web and app to further accelerate our product development cycle. In the second quarter, we made progress on our projects to launch a new front-end experience, but not as much as I expected.
Speaker Change: While we are limiting the number of large projects going forward. He can't entirely disregard possibility of additional site performance issues in the future.
Speaker Change: First agility.
Speaker Change: We have allocated significant resources to building a new front end, which we expect will dramatically increase our ability to roll out new features once.
Speaker Change: Once we launch our new application, we will have a single platform across web and App to further accelerate our product development cycle in.
Speaker Change: In the second quarter, we made progress on our projects to launch a new front end experience, but not as much as I expected.
Dusan Senkypl: We now have enough data to share some insights on performance per unique visitor. Over the last 30 days, the new front-end is incremental versus our legacy site on monetization per unique visitor. Digging in a bit further, the positive performance is mainly driven through mobile website sessions, as our new front-end design is more consumer-friendly on smaller form factors versus our legacy design, whereas our legacy design still outperforms our new platform on desktop. We still face a couple of blockers to ramp up our new front end to 100% of North America web traffic, primarily related to how managed channels and performance marketing channels perform, that need fixing to ensure we aren't losing any potential visitors to our site.
Speaker Change: We now have enough data to show some insides on performance per unique visitor.
Speaker Change: Over the last 30 days, the new front end is incremental versus our legacy sites on our monetization per unique visitor.
Speaker Change: Digging in it a bit server the positive performance is mainly driven through mobile websites assurance as our new front end design, a small consumer friendly on smaller form factors versus our own Augusta design.
Speaker Change: As like a Cisco outperforms, our new platform on desktop.
Speaker Change: We still face a couple of brokers to ramp up our new front ends 200% of North America traffic, primarily related to how managed channels in performance marketing channels per forum that needs fixing to ensure bianca, losing any potential visitors to our site.
Dusan Senkypl: Our goal is to have the new front-end fully ramped up on both web and application in North America in time for the Q4 holiday season. Once we have our new front-end deployed, one of the new features that we are most excited about is Videl. We believe Videl is a great medium for presenting experiences online and believe it can drive increased consumer and merchant engagement on our site.
Speaker Change: Our goal is to have the new front end fully ramped on both web and application in North America in time for the Q4 holiday season.
Speaker Change: Once we have our new front of deployed one of the new features which we are most excited about is we know b.
Speaker Change: We believe video is a great medium for presenting experiences online and believe it can drive increased consumer and merchant engagement on our site in the second quarter. We started a few small tests that showed a lot of promise. Our plan is to continue to iterate and test our video product throughout the second half of this year and have.
Dusan Senkypl: In the second quarter, we started a few small tests that showed a lot of promise. Our plan is to continue to iterate and test our video product throughout the second half of this year and have it ready to scale sometime in 2025. Taking a step back, while we have made significant progress on a key pillar of our transformation plan to fix our technology infrastructure, there is still a long road ahead before we reach my objective of a stable, efficient, and agile platform.
Speaker Change: It's ready to scale some time in 2025.
Speaker Change: Taking a step back while we have made significant progress on a key pillar of our transformation plan to fix our technology infrastructure that is still a long road ahead before we reach my objective to have stable efficient and agile popcorn.
Dusan Senkypl: My own estimate is we are probably only at 25% complete on this journey. As I have said before, our ability to infuse our business to sustain growth is in our hands and dependent on the pace of our project. With that, I will turn it over to Jiri.
Speaker Change: My own estimate is we are probably on that 75% complete on this journey.
Speaker Change: As I have said before our ability to inflect our business to sustained growth is in our hands and depend dependent on the pace of our projects.
Speaker Change: With that I will turn it over to Gary.
Jiri Ponrt: Thanks, Dusan, and thank you as well to everyone who is joining us today. I apologize in advance for my voice as I'm a bit under the weather today, but I'm looking forward to our discussion.
Gary: Thank you, Sean and thank you as well wherever it to everyone who is joining us today.
Gary: I apologize in advance for my voice I'm, a bit under the weather today and looking forward to a recession.
Jiri Ponrt: I will use my time today to provide further insights into our second quarter financial results, progress in our cost savings actions, updates on other business items, and our updated outlook. Turning to slides. Let's jump into the second quarter summary financial. In the second quarter, we delivered global billings of $374 million, a decrease of approximately 5% year-over-year. Revenue was $125 million, a decrease of 3% year-over-year, above the high end of Crimea.
Gary: And really use my time today to provide further insights into our second quarter furniture results.
Gary: Workers in our cost savings actions are based on the order of business items and our updated outlook.
Gary: Turning to slide 10.
Jiri Ponrt: Revenue as a percentage of gross billings was 33%, an increase of 1% year-over-year, as we benefited from favorable variable consideration trends, while other factors were relatively stable. Moving to our gross profit as a percentage of revenue, it was 90%, consistent with the prior quote. Going forward, we expect gross profit as a percent of revenue to remain in the 88 to 90 percent range. Marketing expense for the second quarter was $37 million, or 32% of gross profit. Discovered by Dusan, this is higher than our previously communicated range.
Gary: Let's jump into the cycle into our second quarter summary friend the truth.
Gary: In the second quarter, we delivered global billings of $874 million, a decrease of <unk>, 5% year over year.
Gary: Revenue was 120 very familiar a decrease sleep person year over year above.
Gary: Above the high end.
Gary: Guidance.
Speaker Change: And you expect some tangible gross billings bolstered this April.
Speaker Change: An increase of 1% year over year as we benefited from favorable variable consideration plans, while other sectors that are relatively stable.
Speaker Change: Moving to our gross profit as a percentage of revenue gross 90 person.
Speaker Change: Consistent with the prior quarter going forward.
Speaker Change: Expect girls appropriate accident with revenue to remain in the 80% to 90% range.
Speaker Change: Marketing expense for the second quarter will start to ship 1 million Boe.
Speaker Change: For two person gross profit.
Speaker Change: Yeah.
Speaker Change: Discovered by Duchenne.
Speaker Change: This is higher than our previously communicated branch and giving effect to the programs.
Speaker Change: Our focus on accelerating top line growth, we now expect marketing as a percent of gross profit.
Speaker Change: In this new range of 30 to 35.
Jiri Ponrt: And given the attractive returns and our focus on accelerating top line growth, we now expect marketing asset percent of gross profit to stay in this new range of 30-35%. Adjusted EBITDA was positive $16 million as we recorded the fifth straight quarter of positive adjusted EBITDA. Our periling 12-month adjusted EBITDA is $81 million. Turning to cashflow, second quarter operating cash flow was positive $15 million, and free cash flow was positive $11 million, a strong improvement versus last year when we reported free cash flow of negative $45 million.
Speaker Change: Adjusted EBITDA was positive $16 million.
Speaker Change: We recorded third quarter adjusted.
Speaker Change: Adjusted EBITDA.
Speaker Change: Our trailing 12 months adjusted EBITDA is $81 million.
Speaker Change: Turning to cash flow.
Speaker Change: Second quarter operating cash flow was positive 15 million and freakish rubles positive 11 million.
Speaker Change: The strong improvement versus last year, when we reported free cash flow negative 45 minutes.
Jiri Ponrt: As Dusan noted, this takes our trailing 12-month fake cash flow to positive $30M, a nice milestone for our business. We ended the quarter with $178 million in cash and cash pay equivalent. Please note that our cash position excludes $28 million of cash, which primarily relates to collateral posted against our outstanding letters of credit, and I put it on our balance sheet in prepaid expenses and as a guarantee. Slide 11.
Speaker Change: Additional data.
Speaker Change: Takes out trailing 12 months' free cash flow positive second Milan nice milestone for our business to date.
Speaker Change: We ended the quarter with $107 million to $8 million in cash and cash equivalents.
Speaker Change: Please note that.
Speaker Change: Our cash position excludes the 8 million of restricted cash, which primarily relates to core apparel posted against our own spending critics of credit.
Speaker Change: And I put it in our balance sheet in prepaid expenses and answer current losses.
Speaker Change: Slide 11.
Jiri Ponrt: We have approximately 16 million active consumers worldwide as a co-operand, down 0.3 million from the prior quarter. In North America, our active customer count went flat sequentially, and when you exclude our goods category, our North America active customers grew sequentially for the second quarter in a row. Donate to our local.
Speaker Change: Approximately 16 million consumers boardwalk quicker now.
Speaker Change: Down zero point seamless from the prior quarter.
Speaker Change: Within North America.
Speaker Change: Congo's flat sequentially and when you exclude our goods category.
Speaker Change: In North America active customers grew sequentially for the second quarter in neuro.
Speaker Change: Turning to our local Coca group.
Jiri Ponrt: Consolidated local billings were $317 million, down 1% compared with the prior year. It's an awesome number. He delivered local billings of $244 million, up 5% compared with the prior year. North America local buildings benefited from favorable refund rates and an increase in demand. International local billings took a step back, down 17% year over year, as we took a decision to pause sales of local vouchers in Italy in mid-April due to a previously discussed issue. Excluding Italy, international local billings would have declined 9%. Moving to our table, the table.
Speaker Change: Consolidated local billings less $317 million down 1% compared with the prior year.
Speaker Change: It's in North America.
Speaker Change: The deliberate local billings of 244 million up 5% compared with the prior year.
Speaker Change: North America local billings benefited from favorable air France grades and increase in demand.
Speaker Change: International local billings took a step back down 17% year over a year as.
Speaker Change: As we took a decision to both sales of local ultras in Italy in mid April.
Speaker Change: Due to a previously disclosed.
Speaker Change: Excluding Italy.
Speaker Change: The international local billings would have declined 9%.
Speaker Change: Moving to old Cabled Bourbon category.
Jiri Ponrt: In the second quarter, Consolidated Table Billings was $29 million, down 8% year-over-year. It's in North America that we deliver travel billings growth of 1% year-over-year. It's in international, travel still has more work to do with billings down 27% year-over-year. Moving to our goods category, Consolidated Goods Billings was $28 million, down 34% year-over-year
Speaker Change: In the second quarter consolidated table billings, both of them benign Milan down 8% year over year.
Speaker Change: It's in North America, we delivered billings growth.
Speaker Change: Person to year over year is in international.
Speaker Change: Still have more work to do good billings Duncan disciplined person.
Speaker Change: Moving to our goods category.
Speaker Change: Consolidated goods billings will send to $8 million down 34% year over year.
Jiri Ponrt: Our current goods business is stagnant, and we do not see any near-term change in the negative trend. At 4% of second quarter revenues and declining capital, goods are becoming a smaller and smaller part of our world. Slide 12.
Speaker Change: Current goods business described resin.
Speaker Change: We do not see any near term change in the negative.
Speaker Change: The 12% of second quarter revenues and the anticline encrypted goods is becoming smaller and smaller part of her business.
Speaker Change: Slide 12.
Speaker Change: That makes sense.
Speaker Change: Operating expenses second quarter, SG&A will somewhat discipline down 2% year over year, and <unk> 6 million in stock based compensation.
Jiri Ponrt: Second quarter SG&A was $77 million, down 20% year-over-year, and it includes $6 million in stock-based compensation and $4 million in depreciation and amortization. Quarter over quarter, our HGNA was up almost $3 million, or 4%, driven entirely by an increase in stock-based compensation related to expenses of previously disclosed performance documents, including stock-based compensation and depreciation and amortization. Our SG&A was flat quarter
Speaker Change: For Milan, and depreciation and amortization.
Speaker Change: Quarter over quarter, our SG&A was up almost 3 million or four person.
David: David entirely by increases in stock based compensation related to expenses previously disclosed performance.
Speaker Change: Including stock based compensation, and depreciation and amortization SG&A was flat quarter over quarter.
Jiri Ponrt: Given the timing of our cloud migration project and our decision to ramp up investment in new sales hires, we no longer expect to realize additional savings in our SG&A in the second half of this year. Excluding space compensation and depreciation amortization, we now expect SG&A in the third quarter to be similar to our first and second quarters. Depending on the progress of our investment in sales, our fourth quarter might increase.
Speaker Change: Given the timing of our cloud migration project and our decision to ramp up investment in new sales hires.
Speaker Change: We no longer expect to realize additional savings in our SG&A in the second half of this year.
Speaker Change: Excluding based compensation and depreciation and amortization, we now expect G&A in the third quarter to be similar to our first and second quarter.
Speaker Change: Depending on the progress on our investment into sales our fourth quarter it might increase slightly.
Speaker Change: Finally.
Jiri Ponrt: We expect stock-based compensation expenses to increase going forward this year, given our new performance tokens. Slide 13, Turning to Fragrance. In the second quarter, we generated positive $11 million of free cash flow, a $55 million improvement compared to the free cash flow in the second quarter of last year. The main driver of our improved performance was a better change in net working capital related to more favorable changes in our accounts payable and accrued expenses and other current liabilities.
Speaker Change: We expect stock based compensation expenses to increase going forward this year, given our new performance to peers.
Speaker Change: Slide 13, turning to free cash flow.
Speaker Change: In the second quarter, we generated positive $11 million of free cash flow.
Speaker Change: 55 million improvement compared to the free cash flow.
Speaker Change: In the second quarter last year.
Speaker Change: The main driver of our improved a few months old but the change in net working capital related to more favorable changes in our accounts payable.
Speaker Change: Accrued expenses and other current liabilities.
Jiri Ponrt: Last year, our working capital cycle was heavily impacted by both unfavorable supplier terms related to our growing concern issues and the leveraging of our cost base. This takes our year-to-date free cash flow to negative 3 million, a major improvement versus last year. In the first half, free cash flow was negative $130 million. Slide 14.
Speaker Change: Last year, our working capital cycle was heavily impacted by both unfavorable supplier terms related to our going concern issue.
Speaker Change: And deleveraging of our cost base.
Speaker Change: This takes our year to date free cash flow to negative 3 million major improvement versus last year.
Speaker Change: When first half free cash flow was negative 110 for 10 million.
Speaker Change: Slide 14.
Jiri Ponrt: Given the quarter-to-quarter variability in change in net working capital due to timing, we believe that it's more useful for investors to judge our free cash flow on a trailing 12-month basis. We are pleased to see our trailing 12-month fake-ish full return to positive health territory earlier than expected. This ends a three-year period where the business consistently generated negative free cash flow on a trailing 12-month basis and is a positive indicator that our transformation plan is working. Slide 15.
Speaker Change: Given the quarter to corporate buyer, but the.
Speaker Change: Change in net working capital due to timing.
Speaker Change: We believe.
Speaker Change: That it's more useful for investors to judge our free cash flow and trailing 12 months basis.
Speaker Change: We are pleased to see our trailing 12 months free cash flow return to positive territory earlier than expected.
Speaker Change: A three year period, where the business consistently generated negative free cash flow on a trailing 12 months basis.
Speaker Change: And is it positive indicators the total transformation plan is working.
Speaker Change: Slide 15.
Jiri Ponrt: Now turning to guidance, as of July 30th, 2024, management is issuing guidance for the third quarter of 2024 as follows. Revenues between $114 million and $120 million, or a decline year-over-year between minus 10% and minus 5%. Adjusted EBITDA between $6 million and $11 million. Negative. Freakish. Management would also like to update its full year 2024 outlook that was first issued on November 23, 2017. Year-over-year revenue change at minus four to zero percent is low and slightly better from our prior.
Speaker Change: Now turning to guidance.
Speaker Change: As of July 32012 before Manley.
Speaker Change: Management is issuing guidance, what the FERC <unk> quarter of 2020 for school.
Speaker Change: Revenues in.
Speaker Change: In $114 million and $120 million.
Speaker Change: A decline year over year between minus 10 and minus five person.
Speaker Change: Positive adjusted EBITDA beat.
Speaker Change: Between 6 million and 11 million.
Speaker Change: The negative free cash flow.
Speaker Change: Management would also like to update its full year 2024 outlook. So it was first issued in November its industry.
Speaker Change: Year over year revenue change at minus four zero person.
Speaker Change: It's a low end like the better.
Speaker Change: From our prior outlook.
Jiri Ponrt: While our first half-year performance was better than expected, the slow start to QC related to side performance issues is causing us to take a cautious stance for the remainder of the year. Adjusted EBITDA between $65 and $80 million, down from $80 million to $100 million, due to lower Q3 outlook and our expectation to increase spending on marketing and ramping up the sales organization. Very positive, very wishful for the full year.
Speaker Change: Our first half.
Speaker Change: First half year performance was better than expected.
Speaker Change: Low stocks to QC related to site performance issues is causing us to take a cautious stance for the remainder of the year.
Speaker Change: Was it adjusted EBITDA between $65 million down from 80 million to 100 million due to Lubbock peacefully outlook and our expectation to increase spending in marketing and ramping up the sales organization.
Speaker Change: Free cash flow for the full year.
Jiri Ponrt: Finally, I would like to provide some additional commentary to assist you with your motivation. We expect consolidated revenue as a percentage of gross millings to stay within the range we have reported over the last five quarters. While we still expect revenues to inflate to sustain a positive growth trajectory, we now expect the timing to be more back-end, loaded towards the fourth quarter. The final trajectory of the year will depend on a variety of factors, including the delivery of certain projects, such as our new consumer company. We continue to explore potential changes with our payment method.
Speaker Change: Finally, I would like to provide some additional commentary to assist you with your models.
Speaker Change: We expect consolidated the urban as a percentage of gross billings staying within the range, we have reported over the last five quarters.
Speaker Change: While we still expect revenues to inflect for sustained positive growth trajectory.
Speaker Change: Now expect the timing to be more backend.
Speaker Change: Loaded their roads.
Speaker Change: The first quarter.
Speaker Change: The final Patrick three of the year will depend on a variety of factors, including the delivery of certain projects.
Speaker Change: Such as our new consumers.
Speaker Change: We continue to explore potential changes with our payment methods.
Jiri Ponrt: Now that our growing concern issue is behind us, it's possible that we will rebalance some of the payment methods which we deprioritized last year. Before closing, let me make a few comments on other business updates. First, In addition to the completed transactions, including the sales of non-core intangible assets completed on April 24, management continues to evaluate the monetization of certain non-core assets, including the company's remaining stake in Sama. But there can be no assurances as to whether or when a sale of these non-core assets will be consummated. However, management currently believes that a sale of these non-core assets could generate proceeds of approximately $90 million.
Speaker Change: Now that our going concern issue is behind us.
Speaker Change: It's possible that vivo area bonds some of the payment methods, which would you be deprioritize last year.
Speaker Change: Before closing, let me make a few comments on other business updates.
Speaker Change: First in.
Speaker Change: In addition to the competed transactions, including the sales of noncore intangible assets completed in April 24.
Speaker Change: Management continues to evaluate the monetization of certain noncore assets, including the company remaining stake and somewhat in before.
Speaker Change: But there can be no assurances as to whether or when the cells of these noncore assets will be consummated.
Speaker Change: Management currently believes these noncore assets sales could generate for us.
Speaker Change: Seeds of approximately $90 million.
Jiri Ponrt: Second, Moving to the topic of Italy, as previously discussed, we received a negative ruling related to the tax assessment of 4BAN by our Italian subsidiaries, Groupon and SRL. In April 24, Groupon SRL paused the sale of local vouchers in Italy, and the company has been evaluating its options regarding operations. After a careful review of all, on July 24, we decided to exit the local business. We expect to incur total paytax risk factoring challenges of up to $7 million in connection with the restructuring actions.
Speaker Change: Second.
Speaker Change: Moving to the topic of Italy.
Speaker Change: As previously disclosed.
Speaker Change: They've got this ruling related to fix assessment of where one of our subsidiaries Groupon SRO.
Speaker Change: In April 'twenty for Groupon, a thorough post the sale of local ultras in Italy, and the company has been evaluating its options regarding corporations can stomach.
Speaker Change: After a careful review of options.
Speaker Change: In July 24.
Speaker Change: Decided to exit the local business.
Speaker Change: We expect to incur.
Speaker Change: Great. Thanks, Chris structuring charges.
Speaker Change: Up to $7 million in connection with the exit.
Speaker Change: Very strict infections.
Speaker Change: Strictly to include an over a reduction of approximately 33 positions.
Jiri Ponrt: The majority of these reductions and payments are expected to occur by the end of 2020. The company does not expect an incremental financial exposure that exceeds the assets of Groupon, Acero, as of December 31st, 2023. Groupon SIO has assets of approximately 48 million euros, made up largely of intercompany receivables and includes approximately 1 million euros in cash and cash equivalents.
Speaker Change: It's the majority of these reductions in payments expected to occur by the end of 2024.
Speaker Change: The company does not expect impairment proof financial exposure that exceeds the assets of coupon of Sir.
Speaker Change: As of December 31st 2023.
Speaker Change: Groupon is arrow has assets of approximately 48 million Europe.
Speaker Change: Made up largely of intercompany receivables and includes approximately $1 million of Europe.
Speaker Change: And the cash equivalents.
Jiri Ponrt: Overall, I'm frustrated by the slow start to the third quarter. We are in a strong position to weather this minor setback. While progress in transformation is not always a straight path, I am confident that our transformation plan, which focuses on driving profitable top-line growth, can generate attractive returns for our shareholders over the long term.
Speaker Change: Overall.
Speaker Change: I'm frustrated by the slow start to the third quarter beer in a strong position to weather this minor setback.
Speaker Change: While our burgers and transformation is not always a straight path.
Speaker Change: Im confident that our transformation plan focused on driving profitable top line growth can generate attractive returns.
Speaker Change: For our shareholders over the long term.
Doug: Hey, Doug.
Doug: He would like to open the call for questions operator.
Doug: Thank you Eugene.
Operator: Our first question comes from Sean McGowan from Roth Capital. Sean, you can now unmute your line.
Speaker Change: Our first question comes from Sean Mcgowan from Roth Capital, Dan You can now on mute your line.
Speaker Change: Okay.
Sean Patrick McGowan: There we go. Okay, thank you. I appreciate it.
Sean Patrick McGowan: Okay. Thank you appreciate it.
Sean Patrick McGowan: Your first question is about the guidance at the high end kind of staying the same, you know, given the setback in July and the commentary on the third quarter, which suggests that business really did accelerate. You know, so I guess the question is, how are you able to keep that guidance at the high end, you know, unchanged given the setback in the third quarter? Are you, you know, obviously kind of expecting a lot more in the fourth quarter, and do you think that momentum will continue?
Speaker Change: Your first question is about the guidance at the high end kind of staying the same you know given the setback in July and the commentary on the third quarter suggested that the business really did accelerate.
Sean Patrick McGowan: So I guess the question is how are you able to keep that guidance at the high end unchanged given the setback in the third what are you, you're obviously kind of expecting a lot more in the fourth quarter and do you think that momentum will continue.
Jiri Ponrt: Yes, it's true. On the other hand, our first quarter was more positive, so we are building on that. And we are also strengthening our self-organization, mainly in North America.
Speaker Change: If it's through on the other side, our first quarter will have a more.
Speaker Change: More positive. So we are building on that and also we are strengthening our sales organization, mainly in North America.
Sean Patrick McGowan: Okay, can you comment on kind of what the timing was of this disruption and what your exit rate of business was at the end, you know, before that disruption started to affect the business? Like, what was it at the end of June?
Speaker Change: Okay and can you comment on.
Speaker Change: Kind of what the timing was of this disruption and what your exit rate of business was at the end. There you know before that disruption started to affect the business like what was it at the end of June.
Jiri Ponrt: I don't know if I will answer, so I will start and maybe Dusan will chime in. We had, as described by Dusan, part of the comments. We were very good, and we believe we were close to an inflection point in June. We are not discussing monthly numbers.
Speaker Change: I didn't know if I will offer so I will start there maybe additional will chime in.
Speaker Change: We had described.
Speaker Change: Describe ambition on part of the comment.
Speaker Change: Very good and we believe we are very close to inflection point in June.
Speaker Change: Uh huh.
Speaker Change: Are we on the disclosing monthly monster numbers.
Speaker Change: Yes.
Dusan Senkypl: Yeah, so Sean, thanks for the question. We were very happy with the development post-fixing the original issue. We can't disclose the exact number. But as we mentioned in the script, we were expecting, based on June results, that we would be talking about the inflection point. So this is the guidance I can provide you right now.
Yeah. So.
Speaker Change: Hi, Sean Thanks for the question Vivien.
Speaker Change: These are very happy with the visited Europe and post the fixing the original issue we can't disclose the excellent exact number but as we mentioned in the script. We were expecting based on June the results that we will be talking about the inflection point. So this is the best guidance I can provide you right now.
Sean Patrick McGowan: Okay, that's helpful. Last question: the increase that you saw in June was because you had already started to expand the, you know, marketing spending? And you know what? What is it that's driving you to expand the marketing spending at this point? Is it because you're getting good results, or do you feel like you need to work harder to get those results?
Speaker Change: Okay. That's helpful.
Speaker Change: The last question is.
Speaker Change: The increase that you saw in June.
Was that had you already started to expand the marketing spending and what is it that's driving you to expand the marketing spending at this point is it is it because you are getting good results or do you feel like you need to work harder to get those results.
Dusan Senkypl: In general, we were very happy with our ability to bring traffic at a reasonable cost, and we were very happy with the performance of our supply. So that was behind it. If, [inaudible] Okay, thank you.
Speaker Change: Like in General we were very happy with our ability to bring traffic.
Speaker Change: The reasonable cost and we were very happy with the performance of our supply so.
Speaker Change: That was that was behind it.
Speaker Change: If.
Speaker Change: Actually if and as we were guiding.
Speaker Change: The expectations going forward.
Speaker Change: If we would have at the site and platform performing the same level as of June we would continue in this trend long term.
Speaker Change: Okay. Thank you.
Operator: All right, our next question comes from Bobby Brooks from Northwind Capital. Bobby, you are free to unmute your microphone.
Speaker Change: Alright. Our next question comes from Bobby Brooks from Northland Capital, Bobby you are free to your microphone.
Speaker Change: Okay.
Bobby Brooks: Hey guys, thanks for taking my question. I guess the first thing I kind of want to jump back on or go back to the June quarter. So, you know, obviously, you talked about June being really strong and leading you to believe that the third quarter would be an inflection point, right? So could you maybe discuss what exactly you saw in June that led you to believe that? Was it a better conversion? Was it not? The same type of conversion that you saw in April and May, but more web or just more foot traffic to the site. And prior to the site stability issues that came up in July, you know, what were you thinking that third quarter guidance would have looked like?
Bobby Brooks: Hey, guys. Thanks for taking my question.
Bobby Brooks: I guess, the first thing I kind of wanted to jump back or go back to the June quarter. So obviously, you talked about June being really strong and leading you to believe that third quarter would be an inflection point right. So could you maybe discuss what exactly you saw in June that led you to believe Bob was it better conversion.
Bob: When was it.
Bob: The same type of conversion that you saw in April and May, but more web or just more foot traffic to the site and prior to the site's stability issues that came up in July.
Speaker Change: What were you thinking that what were you thinking.
Speaker Change: Third quarter guidance would have looked like.
Dusan Senkypl: I can comment on the first part. Thank you, Bobby, for the question, like you know we were we were fixing the conversion during the April or the issues which we had were reflected in the lower conversion of the website which means that also buying external traffic spending on marketing is less efficient so our output in May what we were able to fix allowed us to to generate higher performance from from the website with pretty much same level of marketing we were scaling up marketing in the in the first half of of Q2 so I just considered that level sustainable we still so I mentioned it in the script we still believe that there is a room to go and we were running most of the quarter on legacy that platform and as we mentioned we see and at some point we were at very high numbers in terms of ramp-up of mobile next new platform we saw that it's incremental so it would be another driver of growth going forward
Speaker Change: So I can comment on the on the first part thank you Robert for the question.
Speaker Change: Like you know Veeva, we were fixing the conversion during the April order issues, which we had were reflected in the lower conversion of diverse side, which means that also buying external traffic spending on marketing is less efficient so our output in may what we.
Speaker Change: We were able to fix.
Speaker Change: I would ask to generate higher performance from from the <unk> side of it but it's a much same level of marketing, we must get our scaling up marketing in the in the <unk>.
Speaker Change: First half of Q2, so I just consider that level sustainable or are we still as I mentioned it in the script, we still believe the very start on to go and.
Speaker Change: The <unk> are running most of the quarter on a legacy platform and as we mentioned we see at some point, we've got very high numbers in terms of ramp up of mobile next nufarm.
Speaker Change: We saw that it's incremental so it would be another driver of growth going forward.
Bobby Brooks: You got it, I understand. Cool.
Speaker Change: Got it understood.
Speaker Change: Yep.
Bobby Brooks: And so, kind of going back to conversion rate, obviously, that's a major piece of the return to growth story here, right? And while I see how conversion could improve with the better, better checkout system with far fewer clicks and easier payment options, I don't think it's been discussed too much about just the rate of improvement that you guys have seen in terms of conversion. So I was just curious if you could talk, you know, broadly about how conversion has trended.
Speaker Change: And so then.
Speaker Change: Going back to conversion rate, obviously, that's a major piece of the return to growth story here right and while I see how conversion could improve as the better better checkout system with far less clicks and easier payment options.
Speaker Change: I think it's I don't think it's been discussed too much about just the rate of improvement that you guys have seen in terms of conversion. So I was just curious.
Speaker Change: So if you could talk in a bit.
Rodley on how conversion has trended and obviously probably stepped down a little bit in July but in.
Bobby Brooks: And obviously, it probably stepped down a little bit in July. But, you know, maybe if conversion was a two out of a two out of 10, when you guys took over, is it now, you know, maybe five out of 10 with a healthy amount of room to run in terms of conversion? How much? How much more do you think it can prove to improve? And how much has it already improved?
Rodley: Maybe conversion was a two or two at a time when you guys took over.
Speaker Change: And now I'll, maybe five out of town with a healthy amount of room to run in terms of conversion how much how much more do you think it can prove them improve and how much has it already improved.
Dusan Senkypl: So like my personal rating is that we are at three out of ten and while the reason for that number is while we did some like very positive changes in terms of conversion at the same time last quarter I was talking about some legacy pieces of the platform which we still need to replace which were kind of degrading in performance. So partially some of our optimizations were offset by lower performance of parts which we are replacing in the platform. So there is still still way to go. We see plenty of opportunities for further improvement in growth in conversion specifically on the
Speaker Change: So like my personal right thing is that we are at free out of China and while the reason for that number is while we did some like very positive changes in terms of conversion at the same time last quarter I was talking about some legacy pieces of the platform, which we still need to replace which were kind of degrade.
Speaker Change: And in performance or partially some our optimizations were offset by a lower performance of pods, which biotic, placing in the platform. So but it's still it's still way to go we see plenty of opportunities for further improvement in growth and conversion specifically on the checkout.
Bobby Brooks: Got it. And then I just wanted to make sure, you know, as I understand this clearly, you mentioned in the prepared remarks about the new website and the new website and application rollout and mentioned how in North America you wanted to get that rolled out before the fourth quarter holiday season. Is it still the thought that you want to get that rolled out internationally as well before the fourth quarter holiday season and in, or is it, you know, maybe just focusing on getting North America rolled out first and then, you know, 2025 rolled out globally?
Speaker Change: Got it and then I just wanted to make sure I understand this clearly you've mentioned in the prepared remarks about.
Speaker Change: The new new web and the new website and application rollout.
Speaker Change: You mentioned, how in North America, you wanted to get that rolled out before the fourth quarter holiday season is it still the thought that you want to get that rolled out internationally as well before fourth quarter holiday season, and or is it maybe just focusing on getting North America rolled out first and then.
Speaker Change: 2025 rollout roll it out globally.
Dusan Senkypl: So you know that we've been talking about the rollout of a new mobile platform for a long time, so right now, we are very, let's say, very slow in North America. At the same time, we are at like one percent of traffic in pretty much every country or in every country which we have with Groupon, so it's not that we didn't progress in international business, but given the business size and opportunity, the ramp up in North America is clear focus number one.
Speaker Change: So you know that we are talking about the rollout of our new mobile platform for a long time so.
Speaker Change: Right now we are.
Speaker Change: Barry.
Speaker Change: Okay.
Speaker Change: Mental in North America at the same time be at like 1% of traffic in pretty much every country or every company, which we have been groupon. So it's not that we didn't progress also in international, but giving the business size and opportunity.
Speaker Change: The ramp up in North America is clear focus number one for us.
Dusan Senkypl: So we will try to be in as many countries as possible as we see a major upside from the new platform. But if we are in North America, it will still be a huge win for us in Q4.
Speaker Change: So we on a legal right to be in as many countries as possible as we see a major upside from from new platform, but if we will be in North America.
Speaker Change: It will still be a huge win for us for Q4.
Bobby Brooks: Cool. And then, you know, just maybe one, last question for me before going back to the queue is just on the new. You mentioned some, you know, exciting new enterprise merchant setups, or signups, and, you know, the revamped merchant revamp Salesforce to target North American local businesses, right? And so I was just kind of curious about what's the kind of go-to-market strategy in terms of bringing in new business, bringing in new merchants into the fold? And specifically, maybe if that's different between our local trampoline shop versus, you know, a nationwide oil change shop, does that change?
Speaker Change: Cool and then.
Speaker Change: Just maybe one one last question for me before going back to the queue is just.
Speaker Change: Yeah.
Speaker Change: Newer.
Speaker Change: You mentioned about some exciting new enterprise merchant setup.
Speaker Change: Our sign ups and the revamped merchant revamped sales force to target North American local business right.
And so I was just kind of curious about how do you what's what's kind of the go to market strategy in terms of bringing in new business, bringing in new merchants into the fold and specifically maybe if that's different between our local trampoline shop versus our nationwide oil chain shop does that change and just.
Bobby Brooks: And just any color and insights you could provide there. And maybe just a little curious about just the video aspect that you mentioned. I think that could be interesting. Would that be something where you guys are spending money creating your own video or something where you ask the merchant to, you know, provide a video summarizing their business themselves?
Speaker Change: Any color and insights you can provide there and maybe just a little curious on just the video aspect that you mentioned I think that could be interesting would that be something where you guys serve.
Speaker Change: Spending money on creating your own video or would be something where you asked the merchant.
Speaker Change: Provide video.
Speaker Change: Summarizing their business themselves.
Dusan Senkypl: Okay, so I can start with the video part. With videos, we currently have several dozens of videos from merchants in one big location which we selected for a test, and we are trying different methods from obtaining or creating videos with our own resources or resources which we hire. At the same time, we are using micro-influencers, so we are looking for the best way so that we can scale it up.
Speaker Change: So I can start with the video part.
Speaker Change: Vis a vis videos. We currently have several doses of <unk> from merchants and one big location, which we selected for AR and.
Speaker Change: And we are trying.
Speaker Change: Current methods from obtaining creating vidal with our own resources, our resources would you be higher at the same time via using micro Influencers. So we are looking for the best way. So that we can we can scale it up obviously.
Dusan Senkypl: Obviously, in the first wave, it will be mainly an initiative driven by us, by Groupon, but based on the numbers which we see, we expect that it will help us to improve the conversions, and we will expect that the merchants will be interested in doing their own videos just because they will be able to get better positioning on the platform. On the first part of your question, in terms of supply, we have the department split into local business and enterprise business, so these are two very different product cycles.
Speaker Change: Sort of indifferent as the way it will be mainly initiatives driven by us by by Groupon, but.
Speaker Change: Based on the numbers, which we see we expect that it will help us to improve the conversions and we will expect that the merchants there'll be interested to do.
Speaker Change: <unk>, because we will be able to get better positioning on the on the platform.
Speaker Change: On the on the first part of your question in terms of supply we have.
Speaker Change: The department's split into local business and enterprise business. So these are two very different.
Dusan Senkypl: The Enterprise business is targeting our enterprise merchants, and this is the part which we were focusing in the first place when we started the transformation, and we see very positive results growing year over year. The local part, where we are investing more in the sales force, it was regionalized in the last quarter, in Q1 actually, and We have what we call the position market managers. Market managers are pretty much specialized in one location, one region.
Speaker Change: Cycles enterprise business is targeting our enterprise smart terms and this is the part of which we were focusing in the first place. When we started the transformation and we see very positive results growing year over year.
Speaker Change: The local bar, where we are investing more into salesforce at Wassa regionalized in the in the last quarter or.
Speaker Change: Q1 actually.
Speaker Change: And.
Speaker Change: We have we called a position market managers market managers are pretty much specialized on one location one region and we are trying to create a guide or creating a guide how the ideal curated groupon marketplace should look like and then they are asking salespeople go out and bring the trampoline Park.
Dusan Senkypl: And we are trying to create a guide or creating a guide to what the ideal curated Groupon marketplace should look like. And then we are asking salespeople to go and bring this trampoline park or go and bring the spa or massages because we know that there will be the biggest benefit for merchants, for us, for Groupon if we bring those types.
Speaker Change: So and bring the spa or massages, because we know that but it will be but the biggest benefit for merchants for us or group or if we bring more stope ore types of abuse.
Bobby Brooks: Awesome. I really appreciate the call and congrats on the progress. I'll return to the queue. Thank you.
Speaker Change: Awesome really appreciate the color and congrats on the progress I'll return to the queue.
Speaker Change: Thank you.
Operator: Thank you, Bobby. Our next question comes from Pierre Riojo from Goldman Sachs. Pierre, go ahead and unmute your line.
Pierre <unk>: Thank you Bobby our next question comes from Pierre <unk> from Goldman Sachs Go ahead and on mute your line.
Pierre Riojo: Hi, everyone, and thank you for taking the question. This is Pierre on behalf of Eric Sheridan, a Goldman. Maybe just following up on the question on supply, we just wanted to dive deeper into your capital allocation philosophy and just key factors that help you build confidence in accelerating those salesforce investments, how you were ultimately able to remove the blockers that limited investment prior, and how investors shouldn't ultimately think about your priorities looking ahead and balancing reinvestment and profitability, as you look to position the local business for durable growth as you look into the next.
Peter: Hi, everyone and thank you for taking the question. This is Peter on for Eric Sheridan Goldman maybe.
Peter: Maybe just following up on the question on supply we just wanted to dive deeper on your capital allocation philosophy and just the key factors that help you build confidence in accelerating does salesforce investments. How you were ultimately able to remove the blockers that limited investment prior and how investor Shouldnt.
Speaker Change: We think about your priorities looking ahead and balancing reinvestment in profitability as you look at position to local business for durable growth as you look into next year and beyond thank you.
Jiri Ponrt: Okay, so Jiri, do you want to take the question or should I take it? No, I will start, and you can probably add. So, certainly, our position has improved significantly. We are in positive adjusted EBITDA. We don't have any growing concern.
Peter: Great.
Speaker Change: Okay. So you really do want to take the question or should I take it over I will start then you can very bad. So it was certainly a position improved significantly behind positive adjusted EBITDA. We don't have a going concern and we were able to create the next in Lhasa freight brokers output for OFC cordless tools.
Jiri Ponrt: We were able to create in the last three quarters, and out of those three quarters, two of them were cash positive. So we can also now a little bit think about the growth, yeah? Financially stable, we decrease our SG&A cost. So it allows us to not only spend money on marketing but also build or start building a long-term future in North America, which is our biggest market. And therefore, we are now investing in a new additional business development structure in North America in the key cities and regions where we are operating.
Speaker Change: And they're cash positive.
Speaker Change: So we can also now little bit to think about the growth there.
Speaker Change: Sure.
Speaker Change: Financially stable or decrease our SG&A cost. So it allows us to not only spend more money on marketing, but also building.
Speaker Change: Oh, starting building long term.
Speaker Change: Future in North America, which is our biggest market and therefore, we are now investing to a new a new additional.
Speaker Change: Business development structure in North America in the key cities and regions Baby operating because we believe there is a high potential.
Speaker Change: <unk>, which can be utilized with its a positive ROI.
Jiri Ponrt: Because we believe there is high potential which can be utilized with positive ROI. And maybe to add a little bit more picture PR, we are very cautious and go really step by step. So just don't expect or don't see this as a project with like, eight-digit numbers like investments into the sales force. We have some models behind it, some basic models. We will be adding a lot of salespeople in Q4, but it will not be a major expense for Groupon.
Speaker Change: And maybe to a little bit more picture.
Speaker Change: Very cautious Englewood, even step by step. So we just don't expect or don't see this as a project with flight.
Speaker Change: Eight digit numbers like investments into into the sales force.
Speaker Change: We have a model behind it some basic model will be like adding a lot of salespeople into Q4, but it will not be a major expense for groupon and once we validate our numbers, we will be able also to share with our shareholders the financial model for expansion.
Jiri Ponrt: And once we validate our numbers, we will also be able to share with our shareholders the financial model for expansion. If we see that we should accelerate, this will be something that we will be talking about both with Hugo and with our shareholders.
Speaker Change: We see that we should accelerate this will be something that you'd be going to be talking about more with you one of its shareholders.
Jiri Ponrt: Got it, extremely helpful. And maybe just one follow-up from us, in terms of your mention of your ability to remove blockers behind your marketing investment and now having an ability to step that up again and maintain ROIs. Can you just talk about the drivers of what's enabling you to invest deeper into that performance marketing curve, whether that's just the supply position improving some of the conversion dynamics you talked about, or how we should think about those new levels of investment?
Speaker Change: Got it extremely helpful and maybe just one follow up from us.
Speaker Change: In terms of your mention of your ability to remove blockers.
Blockers behind your marketing investment and now having an ability to step that up again in maintaining rois can you just talk about the drivers of what's enabling you to invest deeper into our performance marketing curve, whether that's just the supply position improving some of the conversion dynamics you talked about or how we should think about dosing levels.
Speaker Change: Some investments.
Jiri Ponrt: It's a complete mix. We need to start with supply because I really see Groupon in a very different position. We had the courage, let's say, to remove a lot of low-performing deals, which overall helps the performance of the website. We are curating the deals, which at the end of the day significantly helps the conversion of deals. If you have better images, if you have a better deal structure, or if you are simply selling the deal better,
Speaker Change: It's a complete mix of you need to start with supply because I really see groupon.
Speaker Change: In very different position, we had courage, let's say two to remove out of low performing deals, which overall helps performance of the <unk> side, we are curating to deals which in the end of today's significantly helps the conversion of deals if you have better images.
Speaker Change: Better deal structure, if you opt simply selling the deal better. So it was a month half of which we had to do before we got ramping up investment as the conversion.
Jiri Ponrt: So it was a must-have, which we had to do before we ramped up investment, and as the conversion is improving. We are able to spend more because simply Google, Facebook, and other marketing providers or partners for us are able to bring more traffic for the ROI, which we are targeting. And I mentioned in terms of when Bobby was asking about the potential, there is still a way to go. We were talking about videos or something which can also help us with conversion. So we expect that this trend will continue.
Speaker Change: It's improving.
Speaker Change: We're able to spend more because simply Google Facebook and other marketing providers or partners for us are able for the ROI of which we are targeting and bring more traffic to us.
Speaker Change: And I mentioned in terms of on one.
Bobby Brooks: Bobby was asking about the potential that is still a very to go we were talking about the video is something which is which can also.
Bobby Brooks: Help us with with conversion out of so we expect that this trend will continue.
Operator: There are no other questions. This concludes our call for today. Thank you everyone for joining us. For additional information, please go to investor.groupon.com.
Speaker Change #100: There are no other questions. This concludes our call for today.
Speaker Change #101: You everyone for joining for additional information. Please go to Investor Doc Groupon Dot com.