Q3 2024 Groupon Inc Earnings Call
[music].
Unknown Executive: Aishan, hi Bobby, we'll get started in just a moment. Go ahead and mute yourselves. and we'll call on you during Q&A.
Hi, Sean Hi, Bobby will get started in just a moment go ahead on mute yourself.
And we will call on you during Q&A.
Hello, and welcome to <unk> third quarter 2024.
Unknown Executive: Hello, and welcome to Groupon's third quarter 2024 financial results conference call. On the call today, our Chief Executive Officer, Dusan Senkypl, Chief Financial Officer, Yiji Ponrt, and Senior Vice President of 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 company's formal remarks. Today's 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, November 12, 2024 only, and will include forward looking statements.
Financial results conference call.
Speaker Change: On the call today are Chief Executive Officer do Sean Thank you Paul.
Chief Financial Officer, usually park, and senior Vice President of corporate development and Investor Relations Roddick shot.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: <unk> and answer session will follow the Companys formal remarks today's conference call is being recorded.
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 November 12, 2024, only and will include forward looking statements actual results may differ materially from those expressed or implied in the company's forward looking statements Groupon undertakes no obligation to update these.
Unknown Executive: 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. 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, included in 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 postings.
Speaker Change: 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 in crude included in its earnings press release and in its filings with the SEC included in quarterly report on Form 10-Q.
Speaker Change: We encourage investors to use your bonds Investor relations website at Investor 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.
Unknown Executive: 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 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 to the most comparable measures under U.S. GAAP.
Speaker Change: On the call today, the company will discuss the following non-GAAP financial measures adjusted EBITDA and free cash flow.
Speaker Change: <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 to the most comparable measures under U S. GAAP.
Dusan Senkypl: And with that, I'm happy to turn the call over to Dusan. Hello, and thanks for joining us for our third quarter 2024 earnings call. 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 thank you, which contain more detail on our third quarter results. I will start today's call on slide five and cover the key highlights of our third quarter. Overall, despite many positives, we had a tough quarter as our North America business was impacted by previously disclosed technical issues related to our various platform migrations.
Speaker Change: And with that I'm happy to turn the call over to <unk>.
Speaker Change: Hello, and thanks for joining us for our first quarter 2024 earnings call.
Speaker Change: It's a pleasure to be with all of you.
Speaker Change: Today's prepared remarks are posted on our Investor Relations website, along with an investor presentation, which I will refer to during my remarks.
Speaker Change: Sean I encourage you to review our press release, and 10-Q, which contains more detail on our first quarter results.
Speaker Change: I will start todays call on slide five and cover the key highlights of our first quarter.
Speaker Change: Overall, despite many positives we had a tough quarter as our North America business was impacted by previously disclosed technical issues.
Speaker Change: The two hour various platform integrations.
Dusan Senkypl: We ended Q3 at the low end of our guidance on revenue, but beat the high end on EBITDA. Let me outline the key highlights and considerations for the quarter and then I will use my remaining time to dive deeper into each point. First, we saw a positive development in international local, where excluding Italy, we delivered revenues minus 2% year-over-year and exited the quarter with stable and improving trends. While international still runs on our old tech stack, we are seeing success implementing our marketplace playbook to reinvigorate our local experiences marketplace in several countries. Just like we saw in North America Local, the positive development in International Local gives us additional confidence we know the steps needed to return this business to growth.
Speaker Change: We ended Q3 at the low end of our guidance on revenue, but be at the higher end on EBITDA.
Speaker Change: Let me outline the key highlights in the consideration for the quarter and then either use my remaining time to dive deeper into each point.
Speaker Change: Forest.
Speaker Change: Saw a positive development in international go we're excluding Italy, we delivered revenues minus 2% year over year and exited the quarter with stable and improving trends.
Speaker Change: While international still around on our old stack spec.
Speaker Change: We are seeing success implementing our marketplace playbook to invigorate, our local experiences marketplace in several countries.
Speaker Change: Just like we saw in North America local the positive development in international local gives us additional confidence we know the steps needed to return this business to grow.
Dusan Senkypl: Second, while our overall North America business faced headwinds, we delivered a strong summer things to do season, highlighted by expanding relationships with several national brands who turned to Groupon to help drive incremental performance during their most important season. As we review our business performance versus the market and competition, we believe that our things to do vertical grew faster this summer than both the market and other online marketplaces focused on this vertical. The strength of our things to do vertical is a positive proof point that when we have the correct value proposition, our platform delivers strongly for both merchants and customers.
Speaker Change: Second while our overall North America business faced headwinds, we delivered a strong summer film Studios Caesar highlights aided by expanding relationships with several national brands will turn into Groupon to help drive incremental performance during their most important season.
Speaker Change: As we review our business performance versus the market and competition.
Speaker Change: The belief that our things to do vertical grew faster this summer than Boston markets and other online marketplaces focus on this vertical.
Speaker Change: The strength of our things to do vertical is the positive proof points that whenever you have the correct value proposition of our platform deliver strongly for both merchants and our customers.
Dusan Senkypl: We reached an important milestone of 100% mobile web and desktop traffic in North America on our new website. Since reaching 100%, we have already seen a material increase in the speed of new feature development, which will be an important driver of our future product roadmap. We are excited to leverage our new front ends to bring expanded gifting experiences and product features like video to our customers during this holiday season. Fourth, we are seeing growth of new customer cohorts in North America. This has helped stabilize overall North America active customer counts, and we are seeing year-over-year growth excluding goods.
Speaker Change: <unk> V.
<unk> reached an important milestone of 100% mobile web and desktop traffic in North America on our new website.
Speaker Change: Since reaching 100% you have already seen a material increase in the speed of new feature development, which will be an important driver of our future product roadmap.
Speaker Change: We are excited to leverage our new front ends to bring expanded gifting experiences and product features like video to our customers. During this holiday season.
Speaker Change: Fourth we are seeing growth of new customer cohorts in North America.
Speaker Change: This has helped to stabilize overall North America active customer accounts, and we are seeing year over year growth excluding books.
Dusan Senkypl: We believe this is a positive signal that our new customer acquisition engine works, an important driver of future growth for our company. Fifth, on the balance sheet, we are pleased to announce an agreement to raise $197 million in new secured convertible debt maturing 2027 with a 6.25% coupon and a $30 strike price. While Jiri will cover more details in his remarks, I believe this new round of financing helps to provide the company with additional financial flexibility to navigate our transformation at attractive terms. Finally, while we fixed many of our platform migration challenges in the third quarter, we did experience a one-time drop in the retention rates of our legacy customers, which we expect will provide a headwind to future financial performance for a period of time.
Speaker Change: We believe this is a positive signal that our new customer acquisition engine works, an important driver of future growth for our competitor.
Fifth.
On the balance sheet, we are pleased to announce an agreement to raise 197 million in new secured convertible debt.
Speaker Change: During 2000 and about the Savannah.
Speaker Change: 625% coupon and a $30 strike price.
Speaker Change: Well, usually we will cover more details in his remarks I believe this new round of financing helps to provide a competitive additional financial flexibility to navigate our transformation at attractive terms.
Speaker Change: Finally.
Speaker Change: While the fixed many of our platform migration challenges in the first quarter.
Speaker Change: Did experience at a onetime drop in the retention rates of our legacy customers, which we expect will provide a headwind to future financial performance for a period of time.
Dusan Senkypl: Turning to slide 6, International Local. While we initially focused our supply transformation efforts in North America local, we always believed those same local marketplace principles can also be applied to our international market. In fact, when I first got involved in Groupon in 2022, Spain was the first market to start applying the marketplace playbook and has emerged as a positive story with strong double-digit growth. Spain is a great study for how our marketplace playbook works. 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.
Speaker Change: Turning to slide six international local.
Speaker Change: While we initially focused our supply transformation efforts in North America local B always believes the dose same local marketplace principles can also be applied to our international markets.
Speaker Change: In fact, when I first got involved in good upon in 2020 to Spain was the first markets to start applying the marketplace playbook and has emerged as a positive story with strong double digit growth.
Speaker Change: Spain is a great study for how our marketplace playbook works.
Speaker Change: As we highlighted in our transformation plan back in the first quarter of 2020 free everything starts with supply.
Speaker Change: We've indirect supply demand will follow.
Dusan Senkypl: The first step to filling the right supply is rebuilding ourselves capacity. We are doing this with localized sales teams covering specific cities and implementing a strong performance management culture with effective sales leadership focusing on activity and consistency. As we improve the sales capacity, the next step in our marketplace playbook is to repopulate main categories starting with the foundation of basic inventory selection. Think of the merchandise in a convenient store and the minimum required to be a relevant service in various We have robust historical data that shows us what basic services we need to cover for a particular market.
Speaker Change: The first steps to fitting the right supply is rebuilding our sales capacity.
Speaker Change: We are doing this with localized sales teams covering specific cities.
Speaker Change: I think a strong performance management culture.
Speaker Change: This sales leadership, focusing our activity and consistency.
Speaker Change: As we improved our sales capacity the next step in our marketplace playbook has stood up populate main categories, starting with the foundation of basic inventory selection.
Speaker Change: Think of the merchandise in a convenient store and the minimum required to be irrelevant service and virus Fitbit.
Speaker Change: We have a robust historical data that shows us what basic services, we need to cover for a particular market.
Dusan Senkypl: The key is to have a super restrictive focus that gives very tight guidelines on what kind of inventory we want our sales representatives to target. Once we restock the basic storefront, the next step is to bring customers back to our site and interact with our merchandise. Here, we have found one efficient way to drive traffic is targeting high-volume deals with a focus on national brands. With an efficient sales strategy focused on rebuilding supply in key categories and customer traffic increasing organically with high volume deals, we then can start ramping up marketing spend which adds fuel to our marketplace flywheel.
Speaker Change: The key is to have a super restrictive for crews that it gives very tight guidelines on what kind of inventory vivant, our sales representatives to target.
Speaker Change: One for the rest of the basic storefront. The next step is to bring customers back to our site and interact with our merchandize here. We have found one efficient way to drive traffic is targeting high volume deals with a focus on national brands.
Speaker Change: In fact affect the efficient sales strategy focused on rebuilding supply in key categories and customer traffic, increasing organically with high volume deals.
Speaker Change: Then kind of start ramping up marketing spend which adds fuel to our marketplace flywheel.
Speaker Change: Excluding the exit of Italy, we see positive results in international.
Dusan Senkypl: Excluding the exit of Italy, we see positive results in international. While not all our countries have made as much progress as Spain, we can see several green shoots and we expect overall international local to improve further. Importantly, we have not seen a significant impact to international markets from our platform changes as we largely continue to operate those markets on our legacy tech platform.
Speaker Change: Not all our countries have made as much progress of Spain, we can see several green shoots and we expect overall international local to improve forever.
Speaker Change: Importantly, we have not seen a significant impact to international markets from our platform changes as we largely continue to operate both markets on our legacy platform.
Slide seven.
Dusan Senkypl: Slide 7, Turning to North America Local. It took a big step back in the third quarter compared against our second quarter results, moving from plus 7% to minus 8% year-over-year. a few comments to bridge this 1500 basic point change in performance for us. After commenting for two quarters that we had tailwinds in refunds and variable consideration, this quarter those tailwinds reversed and become headwinds. Second, the second quarter this year benefited from an easier overall compare in revenue growth from paid marketing campaigns, as last year's second quarter was the truth in marketing spend as a percentage of gross profits, as we had to rebuild our performance campaigns and started to ramp up marketing spend in Q3 2021.
Speaker Change: Turning to North America local.
Speaker Change: It took a big step back into first quarter comparator against our second quarter results moving from plus 7% to minus 8% year over year a.
Speaker Change: A few comments to Brexit is 1500 basic point change in performance.
Speaker Change: First.
Speaker Change: After commenting for two quarters that we have tailwind and refunds and variable consideration this quarter of wholesale of instead of virus and become headwinds.
Speaker Change: Second the second quarter of this year benefited from an easier year over year compare in the revenue grow from paid marketing campaigns as last year's second quarter was the truth and marketing spend as a percentage of gross profits as we had to rebuild our performance campaigns and started to ramp up marketing spend in Q3 2023.
Speaker Change: Spirit Lake.
Dusan Senkypl: Sparratt, Legacy Customer Cohort Groupon has many users that made their first purchase over a decade ago and follow a mostly established pattern of usage. While we expect legacy customer cohorts to decline over time, we have multiple initiatives aimed at improving retention of these customers. For example, we saw a strong improvement in legacy customer retention during Q4 last year, setting a strong foundation for year-over-year performance in our legacy cohorts in the first half of 2024. Beginning in July and continuing into August, we observed a decline in retention rates for our legacy customers compared to the same period in prior years.
Speaker Change: I say customer cohorts.
Speaker Change: Groupon as many users that made their first purchase over a decade ago and follow a mostly established pattern of usage.
Speaker Change: While we expect legacy customer cohorts to decline overtime, we have multiple initiatives aimed at improving retention of these customers for.
Speaker Change: For example, we saw a strong improvement in our legacy customer attention. During Q4 last year. So I think a strong foundation for year over year performance in our legacy cohorts in the first half of 2024.
Speaker Change: Beginning in July and continuing into August we observed a decline in retention rates for our legacy customers compared to the same period in prior years.
Dusan Senkypl: While we fixed many of our platform changes and migration challenges and saw our retention curve stabilize in September, we have not yet seen a bounce back in those cohort curves. It's possible that they come back this Q4, but it's also possible that the changes we made created enough friction to lose a certain segment of our audience for good. As previously stated, this one-time drop in the retention rates of our legacy customer cohorts may provide a headwind to future financial performance for a period of time. Despite the setback in performance in Q3, I continue to see massive potential in our North America local business.
Speaker Change: While the fixed many of our platform changes and migration challenges and so our attention could've stabilized in September we have not yet seen a bounce back intervals cohort correct.
Speaker Change: It's possible that they come back in Q4, but it's also possible that the changes we made created enough friction tools, a certain segment of our audience for good.
Speaker Change: As previously stated this onetime drop into retention rates of our oil and gas the customer cohorts may provide a headwind to future financial performance for a period of time.
Speaker Change: Despite the setback in performance in Q3.
Speaker Change: To see massive potential in our North America local business.
Dusan Senkypl: We continue to make progress against our playbook, including ramping up our sales capacity, covering the proper categories and bringing on great volume drivers to get the flywheel going. And we have a lot more room to run. For example, if you look at our top metro areas, we believe we still have significant room to make improvements on our coverage of basic inventory. The way we measure potential is not based on number of merchants, but rather going at a category level and indexing the relative performance of our best-performing divisions, weighted by the size of addressable markets.
Speaker Change: We continue to make progress against our playbook, including ramping up our sales capacity covering the appropriate categories at bringing on great volume drivers to get the flywheel going.
Speaker Change: And we have a lot more room to run for.
Speaker Change: For example, if you look at our top Metro areas. We believe we still have significant room to make improvements on our coverage of basic inventory.
Speaker Change: The way we measure potential is not based on number of merchants.
Speaker Change: We're going at a category level and indexing the relative performance of our best performing divisions why is it weighted by the size of other supermarket.
Speaker Change: Slide eight.
Dusan Senkypl: Slide A While there are still many moving pieces in Groupon's transformation, one positive story emerging is our new customer acquisition engine. When Groupon first launched in 2009, the internet market was a highly fragmented ecosystem of players vying to serve as the front door to the internet. Groupon sought to leverage its position in local commerce, e-commerce, and deals to establish itself as one of these key entry points. Today, the online ecosystem has matured and consolidated to a few very large platforms who act as the front doors to the internet for a very high percentage of consumers.
Speaker Change: While there are still many moving pieces and groupon transformation, one positive story emerging because our new customer acquisition engine.
Speaker Change: On a groupon first launch in 2009, the internet market with a highly fragmented ecosystem of players vying to serve as the forum the door to the Internet.
Speaker Change: Good upon salt to leverage its position in local commerce e-commerce and deals to establish itself as one of these key entry points.
Speaker Change: Today, the online ecosystem is mature and consolidate it to a few very large platforms, who act as the front doors to the internet for a very high percentage of consumers.
Dusan Senkypl: Many growing and established e-commerce or internet marketplace firms have built their customer acquisition engines on top of these platforms. Because of their enormous scale and tapping into this traffic is a huge opportunity for Groupon to drive new customer acquisitions. This insight is at the heart of our pilot last year to reposition our marketing engine and marketing spend towards acquiring new customers in channels where we can build measurable and scalable campaigns with a clear ROI. Our current philosophy is to run our marketing channels with target ROI of 1. It means that if we spend $100, then we expect to earn back $100 in Groupon's commissions over a two-week period.
Speaker Change: Many growing an established eco modest or internet marketplace firms have built their customer acquisition engine on top of these platforms because of our enormous scale and tapping into this traffic is a huge opportunity for groupon to drive new customer acquisition.
Speaker Change: This insight is at the heart of our pilots last year to reposition our marketing engine and our marketing spend towards acquiring new customers and channels, but if we can build measurable and scalable campaigns with a clear ROI.
Speaker Change: Our current philosophy is to run our marketing channels next target ROI of one <unk>.
Speaker Change: It means that if we spend 100 doors than we expect to earn back 100 doors and groupon commissions over a two week period.
Dusan Senkypl: Therefore, as long as we hit our ROI targets, our marketing payback is almost immediate and we profit on any subsequent purchase. When we look at the monthly cohort view, new customer cohorts are spending approximately 1.4 times their initial purchase by the time they reach month 12. This is a good start, but next year we will be prioritizing initiatives to improve the customer lifetime value and the purchase frequency of new customers. In the third quarter, we did not achieve our ROI target as our platform changes resulted in inefficient marketing campaigns. In September and October, we also saw the effectiveness of our campaigns reduce, largely related to what we believe are the impacts to marketing effectiveness during the US presidential election.
Speaker Change: Therefore, as long as we hit our Ottawa targets, our marketing payback is almost immediate and we profit on a subsequent purchase.
Speaker Change: When we look at the monthly cohort view, new customer cohorts are spending approximately one four times their initial purchase by the time they are each month's titles.
Speaker Change: It's a good start but next year, we will be prioritizing initiatives to improve the customer lifetime value and the purchase frequency of new customers.
Speaker Change: In the first quarter, we did not achieve our ROI targets as our platform changes resulted in inefficient marketing campaigns.
September and October we also saw the effectiveness of our campaigns to reduce largely related to what we believe are the impacts to marketing effectiveness during the U S presidential election.
Dusan Senkypl: Since the election, we have observed a significant improvement in our marketing channels efficiency.
Speaker Change: Since the election, we have observed a significant improvement in our marketing channels efficiency.
Dusan Senkypl: Slide nine, moving to product and engineering. Given the progress in international running on our old tech stack, I believe it is reasonable to conclude that had we not made the tech changes in North America, we would likely be reporting that our consolidated business was growing this quarter. But then we would still be working on our old tech platform, which is highly inefficient, unstable and extremely difficult to develop on. This technical depth would serve as a heavy anchor on any future product initiatives and while we would have reported a positive quarter, that result would not be building towards a long-term future of sustained growth.
Speaker Change: Slide nine.
Speaker Change: Moving to product and engineering.
Speaker Change: Given the progress in international are running our old stack snacks like I believe it is reasonable to conclude that had we not made the tax changes in North America, we would likely be reporting that our consolidated business was growing this quarter.
Speaker Change: But then we would still be working on our own tech platform, which is highly inefficient unstable and extremely difficult to develop them.
Speaker Change: This technical depth about surface ahead encore on any future product initiatives and a vial. We've would have reported a positive quarter that the result will not be building towards our long term future of sustained growth.
Dusan Senkypl: In my career, I have been through many platform upgrades, and it was common to see a performance drop at the outset of a change before rapid iterations improved the new platform to the point where performance eclipsed the old platform. I'm also aware of our legacy technology companies who embark on multi-year migrations just to modify one small component of their stack in order to protect performance. At Groupon, given the overall situation, one of my goals was to transform our platform with a neutral impact to performance as quickly as possible. Between the two, for the past several quarters, I was willing to move slower on our projects to protect performance.
Speaker Change: In my career I have been through many platform upgrades and it was common to see a performance drop at the outset of a change before rapid iterations improve the new platform to the point.
Speaker Change: Four months eclipsed the old platform.
Speaker Change: I'm also aware of Admiral Augusta technology companies.
Embark on multiyear migration just to modify one small component of our stock in order to protect performance.
Speaker Change: The groupon given the overall situation one of my goals was to transform our portfolio with a neutral impact to performance as quickly as possible.
Speaker Change: Between the two for the past several quarters I was willing to move slower on our projects to protect performance.
Dusan Senkypl: But now I believe the time has come where we must accept sacrificing some short-term performance for the long-term growth of the business as we modernize our technology. I'm excited to see how we will be able to use a new front-end platform as a flywheel to power the path to sustained revenue growth. Let me give you a few examples of what we are currently working on. platform for performance, our new front end will be able to get us to faster, more stable customer experience. While we are not there, we see strong pace of weekly improvements in this direction and we believe by the end of Q4 the new platform will be superior to legacy, which will also position us better for SCO and SCM, as we should be able to drive more traffic and have higher conversions.
Now I believe the time has come about we must accept sacrificing some short term performance, but the long term growth of the business as we modernize our tech stack.
Speaker Change: Im excited to see how we will be able to use new front end platform as a flywheel to powered a path to sustained revenue growth.
Speaker Change: Let me give you a few examples of what we are currently working.
Speaker Change: But 44 performance, our new front, and we'll be able to get us to faster more stable customer experiences.
Speaker Change: While we are not there you see strong pace of weekly improvements in this direction and we believe by the end of Q4, the new platform will be superior to legacy, which will also position us better for SCO SCM as we should be able to drive more traffic and have higher conversions.
Dusan Senkypl: increased customer value, new features like improved personalization and search relevance, merchant pages, and AI driven FAQs inspire customer interactions and increase retention, while optimized targeting and personalized content improve visit frequency. Global reach and flexibility. Our new front-end's expanded language capabilities mean we can reach and engage diverse customers and merchants, mainly Spanish-speaking population in the U.S. with relevant offerings. Positive early results for us. With the new app in beta showing solid performance in NA, we are focusing on fine-tuning for a full rollout early in 2025, as we don't want to risk holiday season and we have sufficient functionality with gifting support in legacy apps.
Speaker Change: Increased customer value.
Speaker Change: New features like improved personalization and search relevance merchant pages, and AI, driven faqs inspire customer interactions and incurring startup and charl, well optimized targeting and personalized content improved visit frequency.
Speaker Change: Global reach and flexibility, our new front and expanded language capabilities, meaning if he can reach and engage diverse customers and merchants.
Speaker Change: Mainly Spanish speaking population in the U S with relevant offerings.
Speaker Change: Positive early results for up.
Speaker Change: The new App in the best are showing solid performance M&A, we are focusing on fine tuning for a full rollout early in 2025 as we don't want to raise the holiday season, and we have sufficient functionality with distinct support and legacy.
Dusan Senkypl: We expect to migrate international markets during the first half of 2025. platform for future. We have high expectations in terms of agility and development speed. You can see significantly faster development times and ability to bring new features to the market versus legacy. Giftank As we enter into Q4 holiday season, we are excited to roll out another new set of gifting features and customer journeys to make gifting and receiving experiences more exciting for everyone. Video. We've started to add video content into merchant pages and have positive early results. It's still very early and there will be significant improvements in the coming months, but video is just one example of feature that our legacy platform would have struggled to launch.
Speaker Change: They expect to migrate international markets during the first half of 2025.
Speaker Change: But for the future.
Speaker Change: We have high expectations in terms of agility and development speed.
Speaker Change: You can see significantly faster development times, and our ability to bring new features to the market versus legacy.
Speaker Change: Gift Inc.
Speaker Change: As we enter into Q4 holiday season, we are excited to roll out another new set of gifting features our customer journeys to make gifting and receiving experiences more exciting for everyone.
Speaker Change: Vidal.
Speaker Change: We have started to add video content into merchant pages and have positive early results. It's still very early and but it will be significant improvements in the coming months, but video is just one example of featured at our legacy platform would have struggled to launch.
Speaker Change: Merchant pages, and merchandize stages with a new front end in place we will be moving from our legacy focus on a deal page as the main sort of face the customers interact with us to also build out merchant pages and category pages.
Dusan Senkypl: Merchant pages and merchandise pages. With the new front end in place, we will be moving from our legacy focus on a deal page as the main surface that customers interact with to also build out merchant pages and category pages. This will allow us to target consumers at different points in their journey and bring them to Groupon to help find the right offering for them.
Speaker Change: This will allow us to target consumers at different points in a very journey and bring them to groupon to help find the right offering for them.
Dusan Senkypl: Before I turn the call to Jiri, let me make a few closing remarks. In conclusion, despite some challenges, I'm optimistic about our future. The progress we have made in transforming our platform and enhancing our customer experience is laying the groundwork for sustainable growth. Our international local business is showing promising signs and the positive response to our new features like gifting and video content reinforces our belief that we are on the right path. We've seen significant progress in marketplace understanding and in how we operate our sales channels. We are committed to continuous improvement and innovation. And I believe the best is yet to come for our company.
Speaker Change: Before I turn the call too easy, but we make a few closing remarks.
In conclusion, despite some challenges I'm optimistic about our future.
Speaker Change: As we have made in transforming our platform and enhancing our customer experience is laying the groundwork for sustainable growth.
Speaker Change: Our international local business is showing promising signs and the positive response to our new features like gifting and video content reinforces our belief that via on the right path.
Speaker Change: We've seen significant progress in marketplace understanding and in how we operate our sales channels.
Speaker Change: We are committed to continuous improvement and innovation and I believe the best is yet to come for our company.
Dusan Senkypl: I want to express my sincere gratitude to our teams worldwide for their hard work and to our investors and partners for their unwavering support. Thank you for joining us on this journey.
Speaker Change: I want to express my sincere gratitude to our teams worldwide for their hard work and to our investors and partners for their.
Speaker Change: Our unwavering support.
Speaker Change: Thank you for joining us on this journey.
Jiri Ponrt: With that, I will turn it over to you. Thank you, Sean. And thank you as well to everyone who is joining us today. I will use my time today to provide further insights into our third quarter financial results. Progress on our cost savings actions. update on the other business items and our updated outlook.
Speaker Change: With that I will turn it over to you.
Speaker Change: Thank you, Sean and thank you as well to everyone who is joining us today.
Speaker Change: I believe my time today to provide further insights into our third quarter financial results.
And our cost savings actions.
Speaker Change: Update on the other business items.
Speaker Change: And our updated outlook.
Jiri Ponrt: Turning to slide 14. So let's jump on our third quarter summary financial results. In the third quarter, we delivered global billings of $373 million, a decrease of approximately 10.9% year-over-year. Revenue was $114 million, decrease 9.5% year-over-year. at the low end of our guide. Revenue as percentage of girls billings was 31%. An increase of 0.5% year-over-year, the percentage remained relatively stable from the period prior year and continues to stay within the range of our expectations. Moving on. Our gross profit as a percentage of revenue was 90%, consistent with the prior quarter and continues to stay within the range of our expectations.
Speaker Change: Turning to slide 14.
Speaker Change: So let's jump on our third quarter summary financial results.
Speaker Change: In the third quarter, we delivered global billings of 373 million.
Speaker Change: A decrease of approximately 10, 9% year over year.
Speaker Change: Revenue was $114 million decrease nine and half percent year over year.
Speaker Change: At the low end of our guidance.
I mean U S. P S.
Speaker Change: <unk> girls Billings will certainly one person.
Speaker Change: An increase of 0.5% year over year.
Speaker Change: And did you remained relatively stable from the period the prior year and continues to stay within the range of our expectations.
Speaker Change: Moving on.
Our gross profit as a percentage of revenue was 90% consistent with the prior quarter and continues to stay within the range of our expectations.
Speaker Change: Marketing expense for the third quarter, both surface six Milan Ooh certified when do person both gross profit.
Jiri Ponrt: Marketing expense for the third quarter was 36 million or 35.2% of gross profit. This is consistent with our expected range of 30 to 35% for marketing as a percentage of gross profit. As he commented in the second quarter earnings, and as Dusan just mentioned, Our marketing span was quarter. This quarter was not as efficient as expected related to our tech migration issues. Going forward, we expect marketing as a percentage of gross profits to stay within our expected range of 30 to 35%. Adjusted EBITDA was positive $15 million, as we recorded a sixth straight quarter of positive adjusted EBITDA.
Speaker Change: This is consistent with our expected range of 30% to 35% for marketing as a percentage of gross profit.
Speaker Change: As he commented in the second quarter earnings and as do Sean just mentioned, our marketing spend both quarter. This quarter was not as efficient as expected.
Speaker Change: Weighted to our migration issues.
Speaker Change: Going forward, we expect.
Speaker Change: Marketing as a percentage of gross profit to stay within our expected range of 30% to 35%.
Speaker Change: Adjusted EBITDA was positive 15 million.
Speaker Change: As we recorded our sixth straight quarter of positive adjusted EBITDA.
Jiri Ponrt: Our trailing 12-month adjusted EBITDA is positive 78 million.
Speaker Change: Our trailing 12 months adjusted EBITDA is positive seven to 8 million.
Jiri Ponrt: Turning to cash flow. Third quarter operating cash flow was negative 16 million and free cash flow was negative 20 million. Slight decline versus last year and in line with our expectations. We ended the quarter with $160 million in cash and cash equivalents. Please note that our cash position excludes $29 million of restricted cash, which primarily relates to collateral posted against our outstanding clutters of credit.
Speaker Change: Turning to cash flow.
Speaker Change: Third quarter operating cash flow Boston, They got the $16 million and free cash flow Wilson, they've got this Wednesday Mellon.
Speaker Change: Slight decline versus last year and in line with our expectations.
Speaker Change: We ended the quarter with 160 million in cash and cash equivalents lease.
Speaker Change: Please note that our cash position excludes 29 million of restricted cash.
Speaker Change: Each brand Maria relates to co, Ontario boosted against our outstanding quicker with credit.
Jiri Ponrt: and reported on our balance sheet in prepaid expenses and other current Slide 15. We have approximately 15 million active customers worldwide as of quarter end, down 0.3 million from the prior quarter. Within North America, our active customer count was sled sequentially, and when you exclude our goods category, our North America active customers grew sequentially for the third quarter. in a row and grew year over year for the second quarter in a row.
Speaker Change: And paper did on our bond sheet and prepaid expenses and other current assets.
Speaker Change: Slide 15.
Speaker Change: We have approximately 15 million active customers boardwalk as of quarter end down zero carbon seamless from the prior quarter.
Speaker Change: Within North America, our active customer count will slip sequentially and when you exclude our goods category are most active.
Speaker Change: Active customers grew sequentially for the third quarter.
Speaker Change: In a row and grew year over year for the second quarter in a row.
Jiri Ponrt: Turning to our local category. Consolidated local billings were $326 million, down 8.1% compared with the prior year. Within North America, we deliver local billings of $249 million, down 4.5% compared with the prior year. North America local buildings had a positive impact in the prior year period from phasing out our COVID-19 refund practices. It's no comparable activity during the current period, which primarily contributed to the decrease in our local category during the current period. International local billings were down 18% year over year. as we took the difficult decision to exit the local business in Italy due to a previously disclosed tax method.
Speaker Change: Turning to our local category consolidated local billings last 326 million down eight 1% compared with the prior year.
Speaker Change: This is in North America, we deliver Luca billings of 249 million down four and half person compared with the prior year.
Speaker Change: North America local billings had a positive impact in the prior year period from phasing out our COVID-19 refund practices.
Speaker Change: There is no comparable activity during the current period, which brand merely contributed to the decrease in our walk of category during the current period.
Speaker Change: International local billings were down 18% year over year.
Speaker Change: This beat to the difficult decision to exit the local business in Italy due to a previously disclosed the connector.
Jiri Ponrt: As Dusan commented in his remarks. Our international local business, excluding Italy, is growing nicely, and we are seeing positive green shoots in many international countries.
Speaker Change: As <unk> commented in his remark.
Speaker Change: Our international local business, excluding Italy.
Speaker Change: I think nicely and we are seeing positive green shoots in many international companies.
Speaker Change: Moving to our favorite category in the third quarter consolidated total billings was 23 million down 21, 9% year over year.
Jiri Ponrt: Moving to our travel category, in the third quarter, consolidated travel billings was $23 million, down 21.9% year-over-year. Table category performance has been uneven this year, and we expect this trend to continue going forward.
<unk> got the great performance has been uneven this year and we expect this trend to continue going Cooper.
Jiri Ponrt: Moving to our goods category. Consolidated goods billings was $25 million, down 29.6% year-over-year. Our current goods business is struggling, and we don't see any near-term change in the negative. At 5% of third quarter revenues and declining rapidly, goods is becoming a smaller and smaller part of our business.
Speaker Change: Moving to our goods category.
Speaker Change: Consolidated goods billings was $25 million down 29, 6% year over year.
Speaker Change: Our current goods business recycling and we don't see any near term change in the negative trend.
Speaker Change: At 5% of third quarter performance and declining group, Italy good.
Speaker Change: <unk> is becoming a smaller and smaller part of our business.
Speaker Change: Slide 16.
Jiri Ponrt: Slide 16. Turning to operating expenses, third quarter SG&A was $71 million, down 10.9% year-over-year and includes $9 million in stock-based compensation and $4 million in depreciation and amortization. Quarter over quarter. Our SG&A was down almost 6 million or 8% driven primarily by a decrease in cloud costs. lower than expected ramp in our sales hiring and lower variable compensation at the business performed below our expectations in the third quarter. Going forward, we expect SG&A to increase quarter over quarter to a number closer to where we were in the second quarter as we continue to hire new sales resources and additional savings from our cloud migration efforts will take several quarters to realize.
Speaker Change: Turning to operating expenses.
Speaker Change: Third quarter SG&A was 71 million.
Speaker Change: Down four 9% year over year.
Speaker Change: <unk> includes 9 million and stock based compensation, and 4 million and depreciation and amortization.
Speaker Change: Quarter over quarter, our SG&A was down almost 6 million or eight person, Dave and Brian merely by a decrease in cloud costs.
Speaker Change: Our floor.
And then expect it around in our sales hiring.
Speaker Change: And lower.
Speaker Change: Variable compensation as the business performed below our expectations in the third quarter.
Speaker Change: Going forward, we expect SG&A to increase quarter over quarter to a number closer to maybe that in the second quarter.
Speaker Change: We continue to hire new sales resources.
Speaker Change: And additional savings from our cloud migration efforts will take several quarters to airlines.
Speaker Change: Slide 17.
Jiri Ponrt: Slide 17. Turning to free GISHPO. In the third quarter, we generated negative $70 million of free cash flow, similar to last year and in line with our expectations. relative to the second quarter, we saw an expected negative development change in our networking capacity. This is due to the third quarter ending in September, a month where we have large merchant payments from our customer or from our summer thanks to the new season, but billings from our holiday push has not picked up. Imperfectly. Our year-to-date free cash flow is negative 23 million, a major improvement versus last year, when the nine-month free cash flow was negative 148 million.
Speaker Change: Turning to free cash flow.
Speaker Change: And the third quarter, we generated negative <unk> million free cash flow similar to last year and in line with our expectations.
Speaker Change: Relative to the second quarter, we saw an expected negative development change in our net working capital.
Speaker Change: This is due to the third quarter ending in September our minds, maybe you have large mentioned merchant payments from our customer from our summer things to season, but billings from our holiday push has not picked up yet.
Speaker Change: Importantly.
Speaker Change: Our year to date free cash flow isn't they've got this plant is in Milan, a major improvement versus last year.
Wilson: With nine months free cash flow Wilson, they've got this 148 million.
Jiri Ponrt: This position as well to return the positive free cash flow for the full year. 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 trailing 12-month basis. We are pleased to report our trailing 12-month free cash flow at positive $28 million, which is positive for the second straight quarter after a long period of negative cash outflow.
Wilson: This position also.
Wilson: Well tore at times of positive free cash flow for the full year.
Wilson: Given the quarter took both are variable, but the in change in net working capital due to timing, we believe that it's more useful for investors to judge our freakish flow on trailing 12 months basis.
Wilson: The Abbott Easter at birth outbreak league, both moms freakish flow positive 28 million.
Wilson: Which is positive for the second straight quarter. After a long period of makeup it's Michelle Poole.
Wilson: Slide 18.
Jiri Ponrt: Slide 18. Now turning to guidance. As of November 12, 2024, management is issuing guidance. for the fourth quarter of 2024 as follows. revenues between 124 million and 131 million or a decline year over year between minus 10 and minus 5%. Positive Adjusted EBITDA between $14 million and $19 million. Positive Fragrance. Management would also like to update its outlook for full year 2025. year-over-year revenue change at minus six to minus four percent below our prior outlook. Positive adjusted EBITDA between $65 million and $70 million, down from $65 million to $80 million as we narrow the range due to our lower Q4 outlook.
Speaker Change: Now turning to guidance.
Speaker Change: As of November 12, 2024.
Speaker Change: Management is issuing guidance.
Speaker Change: For the fourth quarter of 2020 before as follows.
Speaker Change: Our revenues between 124 million and 141 million or a decline.
Speaker Change: Year over year between minus 10 and minus 5%.
Speaker Change: Positive adjusted EBITDA between $14 million and 19 million Boes.
Speaker Change: Positive free cash flow.
Speaker Change: Management would also like to update its outlook for full year 2024.
Speaker Change: Year over year revenue change at minus six to minus 4% below our prior outlook.
Speaker Change: Positive adjusted EBITDA between 65 million and 70 million.
Speaker Change: Down from 65 million to 80 million as we narrowed the range due to our lower Q4 outlook.
Jiri Ponrt: Positive free cash flow for the full year.
Speaker Change: Positive free cash flow for the full year.
Speaker Change: Okay.
Jiri Ponrt: Finally, I would like to provide some additional commentary to assist you with your model. We continue to explore potential changes with our payment method. After running a test in September and October in the U.S., we recently made the decision to offer PayPal to all U.S. customers as a payment method. Similarly, we return PayPal to several international countries, and we are looking for additional payment options as we try to find the most optimal mix of payment methods for our customers. We expect consolidated revenues as a percentage of gross billing staying within the range we have reported over the last six quarters.
Speaker Change: Finally, I would like to provide some additional commentary to assist you with your models.
Speaker Change: We continue to explore potential changes with our payment methods.
Speaker Change: After running a test in September and October in the U S.
The recently made the decision to offer Paypal to all U S customers dissipate amendment.
Speaker Change: Similarly, the European Paypal to several international countries and we are looking for additional payment options as they try to find the most optimal mix of payment methods for our.
Speaker Change: For all customers.
Speaker Change: We expect consolidated revenues as a percentage of girls billings staying within the range, we have reported over the last six quarters.
Speaker Change: While we still expect to having to inflect to sustain positive girls Sunday, Patrick III, given the exit of Italy locum.
Jiri Ponrt: While we still expect revenue to inflect to sustain positive growth trajectory, given the exit of Italy local and the hit of North America legacy customer retention rates from tech migrations. We no longer expect to inflect the growth in Q4 2024, and the timing of our inflection to growth may be delayed by several quarters until we address these headwinds.
Speaker Change: The hit North America legacy customer retention rates from migrations.
Speaker Change: No longer expect to inflect the growth in Q4 2010 before.
Speaker Change: And the timing of our inflection two girls may be delayed by several quarters until we address these headwinds.
Speaker Change: While we are not providing guidance for 2025.
Jiri Ponrt: While we are not providing guidance for 2025. We currently expect 2025 revenues compared to 2024 to be flat, or up to low single-digit growth. with the first half here down and second half here up. EBITDA to be similar or better than 2024 and fake cash flow to be positive.
Speaker Change: We currently expect 2020 finally for revenues compared to 2024 to be flat or up to low single digit the girls.
Speaker Change: But as far as the half year down and second half year up.
Speaker Change: EBITDA to be similar or better than 2024, and freakish flow to be positive.
Speaker Change: Before I close let me share a few updates on our balance sheet and other metrics.
Jiri Ponrt: Before I close, let me share a few updates on our balance sheets and other methods. First, Today, the company announced it has raised $197 million in privately negotiated agreements with certain holders of our existing convertible nodes due in March 2026 by one, exchanging $176 million of 2026 nodes on a one-to-one basis for newly issued secured convertible nodes due in March 2027, and two, issuing $21 million in new 2027 nodes. The new 2027 notes will be due in March 2027. bear interest at a rate of 6.25% per year. and will have a strike price of $30 per share, a premium approximately 184% over the 20-day trailing volume weighted average price ending on November 11, 2024.
Speaker Change: First.
Speaker Change: Today, the company announced it has raised $197 million in privately negotiated agreements with certain holders of our existing convertible note due in March 2026 by one.
Speaker Change: Exchanging $176 million of 2026 nodes on a one to one basis for newly issued secured convertible notes due in March 2027 and two.
Speaker Change: Issuing 21 million new 2027 notes.
Speaker Change: The new 2027 nodes there'll be you in March 2027.
Speaker Change: Interest at a rate of 625% per year.
Speaker Change: And we will have a strike price of $30 per share.
Speaker Change: Premium FERC. Similarly, 184 person, who wears a 20 day trailing volume weighted average price and link on November 11 2024.
Jiri Ponrt: The new 2027 nodes will be guaranteed by a certain subsidiaries of Groupon, which meet certain threshold requirements. The new 2027 notes will be secured by a first priority security interest in substantially all of the assets of the company and the guarantors, subject to certain exceptions and permitted liens. Management expects that this new financing provides additional flexibility as we continue to execute on our transformation plan to return our consolidated business to sustainable growth.
Speaker Change: The new 2027 nodes will be guaranteed by a circumstance of dairies of groupon, which meet certain threshold requirements.
Speaker Change: The new 2027 nodes will be secured by first bird the secret to embarrassed in.
Speaker Change: And substantially all of the assets of the company and the Grand Paris subject to certain exceptions and permitted liens.
Speaker Change: Management expects that this new financing provides additional flexibility as we continue to execute on our transformation plan.
Speaker Change: And then our consolidated business with sustainable groups.
Jiri Ponrt: Second, an update on Italy. As previously disclosed, one of our subsidiaries, Groupon SRO, has been litigated a negative tax assessment in the Italian courts since 2018. As we also previously disclosed, we began the process in Q2 of exiting the local market. In October, we reached separation agreements with all employees and exited hourly. The total amount of restructuring is expected to be up to 3 million USD versus previously estimated 7 million USD. In the litigation, a second-level appeals court indicated it will rule against Groupon SRL and in favor of the tax authorities at the level of the appeal.
Speaker Change: Second an update on Italy.
Speaker Change: As previously disclosed one of our subsidiaries Groupon asarco.
Speaker Change: Has been litigated and negative fixed assessment.
Speaker Change: It'll earn cards since 2018.
Speaker Change: As we also previously disclosed the begins a purpose in Q2 exit things a local market.
Speaker Change: In October we are each separation agreements.
Speaker Change: And with all employee with all employees and exited rod's.
Speaker Change: The total amount of restructuring is expected to be up to 3 million USD versus previously estimated $7 million of USD.
Speaker Change: Enzo litigation second level appeal skirt indicated it will rule against groupon necessary.
And in favor of the <unk> Oh, sorry, these at the level.
Speaker Change: The appeal.
Jiri Ponrt: We still do not have the formal decision from the. Groupon SRL will be able to launch an appeal to the Italian Supreme Court and eventually challenge the Italian tax authority determination in an international mutual arbitration proceeding. The company continues to believe that the assessment lacks the merit and is vigorously defending the case. The company does not expect financial exposure that exceeds the assets of Groupon SRM.
Speaker Change: We still do not have a firm decision from Zip code.
Speaker Change: Groupon SNL will be able to launch an appeal.
Speaker Change: Land Supreme curved and eventually Chileans Atlantic's illustrated determination and an international mutual arbitration proceeding.
Speaker Change: The company continues to believe that the assessment the married and is vigorously defending the case.
Speaker Change: The company does not expect financial exposure that exceeds the assets or groupon through <unk>.
Jiri Ponrt: More information about this matter can be found in the company forum.
Speaker Change: More information about this metric can be found in the company for them.
Jiri Ponrt: Thank you. Finally. Nuncor acepto. Management continues to evaluate the monetization of certain non-core assets, including the company's remaining stake in SumUp and Gifted. While there can be no assurances as to whether or when sales of these non-core assets will be consummated, management currently believes These future non-core asset sales could generate proceeds of approximately $90 million.
Speaker Change: Q.
Speaker Change: Finally.
Speaker Change: Noncore asset sales.
Speaker Change: Management continues to evaluate the monetization of certain noncore assets, including the company's remaining stake and sum up and with gold.
Manny: Now there can be new issuances as to whether or when cells of these noncore assets there'll be consummated Manny.
Manny: Management currently believes.
Manny: These future noncore asset sales could generate proceeds of approximately 90 million.
Unknown Executive: With that, we would like to open the call up for your questions.
Speaker Change: We did.
Speaker Change: We would like to open the call up for your questions operator.
Unknown Executive: Operator. Thank you, Yiji. Our first call, our first question comes from Sean McGowan from Roth Capital. Sean, you can now unmute your line. Thank you. Can you hear me okay? Yes, we can. Great. Thanks.
Speaker Change: Thank you our first call or first question comes from Sean Mcgowan from Roth Capital Dan You can now on mute your line.
Sean McGowan: Thank you can you hear me okay.
Speaker Change: Yes, we can.
Sean McGowan: Could you provide a little bit more color on why you don't think the legacy retention rates would would bounce back in North America? You know, what do you think the impediment is there?
Speaker Change: Could you provide a little bit more color on.
Speaker Change: Why you don't think the legacy retention rates would bounce back in North America, what do you think the impediment is there.
Dusan Senkypl: Hi Sean, thank you for the question. So, we have multiple activities to reactivate those legacy cohorts. Last year we saw big improvement in their activity during Q4, which shows that our value proposition of Groupon, which is great for gifting when there is some peak season, it works, but we don't take it as granted for this year. These customers were typically buying our health and beauty segments, and it's simply possible that some of them will not log in again. We are communicating with them, we are trying to get them on the platform, and this is still our intent, but the comments here is because we don't see it as granted.
Speaker Change: Hi, Sean. Thank you for the question. So the we have multiple activities to reactivate those legacy cohorts.
Speaker Change: Last year, we saw big improvement in where activity during Q4, which shows that our value proposition of Groupon, which is great for gifting wella, whereas summer peak season.
Speaker Change: It works, but we don't take it as granted for this year. So this is still our plan to reactivate them.
Speaker Change: Maybe I can comment also on a what happened in some cases to veeva doing from securities on a technology change is doing for example possible reserves or logging some users out of the application and other simpler into the friction of east customers worth typically buying our health.
Speaker Change: Health and beauty segments and as simple as possible.
Speaker Change: Some of them they'll not Logan again, we are communicating with them we are trying to get them on the on the platform.
Speaker Change: This is still our intent, but the the comments here is because we don't see it as a granted.
Speaker Change: Okay.
Dusan Senkypl: Okay. And can you give a little bit more color on what you think the timing will be internationally of the tech stack upgrade there? When do you think the majority of those markets will see that upgrade? The plan is to do it in the first half of the next year.
Speaker Change: Can you give a little bit more color on what you think the timing will be internationally of the tech stack upgrade there.
Speaker Change: Do you think the majority of those markets will see.
Speaker Change: That upgrade.
Speaker Change: The plan is to do it in the first half of the Nextera.
Speaker Change: Okay. Thank you and then one quick question for here is what happens to the rest of the 2026 converts that are not in that 176 amount be still had them.
Unknown Executive: Okay, thank you.
Jiri Ponrt: And then one quick question for Jiri. What happens to the rest of the 2026 converts that are not in that 176 amount? We still have them. And it's our plan to either refinancing use maybe those 20 million which we have or earn money and pay them back. So we still have it, it's roughly 54 million which we have today. Would they be offered the opportunity to take the same notes as the rest of the group? No, at this moment, we are not thinking and I think we will be thinking that a little bit later what we will do with the remaining part.
Speaker Change: It's our plan.
Speaker Change: To.
Speaker Change: To either refinancing use may be those 20 million of which we have or are.
Speaker Change: Our money Oh and paid them back so we still have it it's roughly 54 million, which would be up there.
Speaker Change: Would they be offered the opportunity to take the same notes as the rest of the group.
Speaker Change: No at this moment to be or not thinking and I think we will be.
Thinking that little bit later and would be able to do with the remaining par. Okay. Alright. Thank you very much appreciate it.
Unknown Executive: Okay. All right.
Unknown Executive: Thank you very much. Appreciate it. Yeah.
Speaker Change: Our next question comes from Bobby Brooks from Northland Capital, Bobby you can now on mute your line.
Bobby Brooks: Our next question comes from Bobby Brooks from Northland Capital. Bobby, you can now unmute your line. Any good afternoon, guys. I wanted to touch a little bit on the ROI, like the 100% ROI within 14 days. Could you just talk about what needs to happen for you to hit that marketing payback? So we had and have periods when we are hitting this marketing payback, we were just commenting that during the last quarter, we had the period where our efficiency of marketing systems was impacted by changes. So we were not always there. But in general, we are very close to this range and our target is to be there.
Bobby Brooks: Hey, good afternoon guys.
Bobby Brooks: I wanted to touch a little bit on the <unk> like the 100% of Mirai within 14 days could you just talk about what needs to happen for you to hit that marketing payback.
Speaker Change: So we had and have periods when avere hitting this marketing payback. We were just a common thing that during the last quarter, we had the periods with our efficiency of our fleet.
Speaker Change: Marketing systems are also impacted by <unk> <unk>. So we are not always there but in general we are very close to this range and our target is to be there. So.
Dusan Senkypl: So I don't see any major blockers. We also noticed the period before the presidential elections where overall the spend on these campaigns was really enormous and it was impacting the cost of advertising that we were not reaching same levels. But in general, I don't see a huge risk not to be able to run the marketing campaigns at 100%.
Speaker Change: I don't see any major broker us we also noticed the period before the presidential elections of our overall the spend on these campaigns are Australia normals and it was impacting the cost of advertising that we were not reaching same same levels, but in general I don't see a huge.
Speaker Change: It's not to be able to run the marketing campaigns.
Speaker Change: At 100% and our goal would be obviously to try additional channels to just increase that spend in brain.
Bobby Brooks: And our goal would be obviously to try additional channels to just increase that spend and bring and speed up that acquisition flywheel. Okay, got it. And then, you know, I was trying to read through the press release, but it obviously kind of came shortly before the call. But what I think I read that is attributed to one of the attributes, one of the things that was attributed to the earlier decrease in North American local revenues was an increase in local voucher redemption rates. But I would have thought an increase in voucher redemption rates would be a benefit to revenues, not a headwind.
Speaker Change: Speed up that are that the acquisition flywheel.
Speaker Change: Okay got it and then.
Speaker Change: I was trying to read through the press release, but it obviously kind of king shortly before the call, but what I think I read that is attributed to a one on one of the attribute of one of the things that was attributed to the year over year decrease in North American local revenues was an increase in local voucher redemption rates, but I would have thought and incur.
Speaker Change: Greece, and voucher redemption rates would be a benefit to revenues not ahead in blended at what am I missing there.
Dusan Senkypl: And what am I missing there? I think it's a little bit linked to variable consideration. Because what we saw in in summer was that there were very good deals, people really enjoy it. So we saw higher redemption. So we have revenues and we have also at the same moment, people, people take them. So we have a lot of breakage. that will be part of the revenue. So I guess I'm still kind of not fully understanding that. I get how, like, when someone redeems something, right, that turns into revenue. But why would it then be if people are redeeming vouchers at a higher pace?
I think it's a little bit oh linked to variable consideration because what we saw in AR and summer was that there are very good deals people really enjoy it. So we saw higher redemptions or b have revenues and we have also at the same moment.
Speaker Change: People people take them, so we have a love or breakage.
Speaker Change: Which would be part of Germany.
Speaker Change: So I guess I'm still kind of not fully to understand that I get how like when someone redeems something right that turns into revenue but.
Speaker Change: Why would it then be if people are redeeming vouchers at a higher pace Lyme, how would that be a negative headwind to revenue not a positive.
Dusan Senkypl: Why? How would that be a negative headwind to revenue, not a positive? is already made, we are having our margin of Groupon If it happens that it breaks, we have 100% of that. But certainly we are looking for people to redeem because our business is to have repeated customers, satisfied customers who are with us for a long period.
Speaker Change: Is that already meaning we are having.
Speaker Change: Our margin.
Speaker Change: On Groupon.
Speaker Change: If it happens that it's break.
Speaker Change: We have 100% of that.
Speaker Change: But certainly we are looking for people to redeem because our business is to have repeated customer satisfied customer who are who are with us for a long period.
Bobby Brooks: All right. And then I guess just, you know, reading kind of between the lines, it's, you mentioned in the press release, it talks about, you know, 25.8 million remeasurement of the sum up stake. There obviously has been news that SumUp is looking to do a new round. Could you just, and I know you can't really talk about timing because it's not in your control, but could you just remind us all how you look at that sum up ownership? Is that a piggy bank you'd like to tap? Is the opportunity opens up and maybe explain why that the valuation is still kind of much lower than what that Reuters article that mentioned?
Speaker Change: Alright.
Speaker Change: And then I guess just reading between the lines you mentioned in the press release talks about <unk>.
Speaker Change: $25 8 million re measurement of the sum up stake there obviously, there's been news that some of US looking to do new round could you just I know you can't really talk about timing because it's not in your control, but could you just remind us all.
Speaker Change: How you look at that sum up ownership is at a piggy bank he'd like to tap into the opportunity opens up and and maybe explain why that the valuation is still kind of much lower than what.
Speaker Change: Matt.
Speaker Change: This article that mentioned.
Dusan Senkypl: Well, uh, you know, that last year we sold two branches of SumUp, which is always a combination of, of demand and supply. We are reiterating therefore many quarters that we are considering to sell it. But as this is a private company, there is no market for that. So there has to be There has to be demand for that, and it has to be done together with SUMUP, so it's not only that Groupon could go for some private agreement, it has to be always with coordination with SUMUP.
Speaker Change: Well you know that last year, we sold two tranches of of some up.
Speaker Change: Which is always a combination of of demand and supply.
Speaker Change: Beyond our eight three things there for many quarters that we are considering to sell late but this is as a private company. There is no no market for that so is there has to be.
Speaker Change:
Speaker Change: There has to be demand for that.
Speaker Change: It has to be done together with our with some up also.
Speaker Change: It's not only that groupon to go for some prior with the agreement it has to be always with score ordination with with tomorrow.
Speaker Change: Our next question comes from Pierre <unk> from Goldman Sachs. Here, you can now on mute your line.
Pierre Riopel: Our next question comes from Pierre Riopel from Goldman Sachs. Pierre, you can now unmute your line. Hey, thank you so much for taking the question.
Speaker Change: Hey, Thank you so much for taking our question. We just wanted to ask about your growth investments and whether there was anything more to share around the progress of the sales force in North America, specifically as you continue to scale and higher into the rest of the year, maybe with a focus on any verticals or regions where.
Dusan Senkypl: We just wanted to ask about your growth investments, and whether there was anything more to share around the progress of the sales force in North America, specifically, as you continue to scale and hire into the rest of the year, maybe with a focus on any verticals or regions where you've seen the most progress in rebuilding the supply side of the platform, and whether you can point to any benefits you're seeing from the better marketplace balance in those areas as we head deeper into Q4. Thank you.
Speaker Change: <unk> seen the most progress in rebuilding the supply side of the platform and whether you can point to any benefits you're seeing from the matter the better market plays balance in those areas as we head deeper into Q4. Thank you.
Dusan Senkypl: So in the last six weeks of this year, the hiring is paused because it's it's not very efficient in terms of trainings, but we were significantly ramping up the hiring during pretty much the whole quarter until now and we plan to continue again from January with the same speed. Right now we are focusing on hiring people in Chicago because we are doing the trainings in the office and we are actually also expanding the office space there so that we can accommodate the sales people so that they can be much more in the office as we see this is extremely efficient, especially for the sales force.
Speaker Change: So in the last.
Speaker Change: Six weeks of this year.
Speaker Change: The hiring as fast because it's it's not very efficient in terms of <unk>, but veeva cigna.
Speaker Change: Significantly ramping up the hiring.
Speaker Change: During pretty much a whole quarter until now and we plan to continue again from January with vivid the same speed, but right now we are focusing on hiring people in Chicago, because we are doing the trainings.
Speaker Change: And in the office and we are actually also expanding the office space that is so that we can accommodate that our salespeople. So they can be much more in a.
Speaker Change: In the office as we see this us extremely efficient, especially for the further.
Dusan Senkypl: And they are serving the whole United States. We just have allocation to the certain region of the United States. And in terms of efficiency, we see the better numbers overall in the largest population centers of the United States. And we see a very similar trend developing in Europe, because like higher coverage of deals, higher number of deals at the same time with higher quality, it translates very, very quickly into more customers buying the services. Thank you.
So salesforce.
Speaker Change: And they are sort of NGO whole United States, we just have our allocation to the certain region of the United States.
Speaker Change: Terms of efficiency.
Speaker Change: We see better numbers overall in the largest population centers of United States, and we see very similar trends developing in Europe, because like higher coverage of deals a higher.
Speaker Change: Number of deals at the same time with higher quality.
Speaker Change: This translates to very very quickly into into more customers buying the.
Speaker Change: Buying the services.
Speaker Change: Thank you.
Speaker Change: There are no other questions. So this concludes our call for today. Thank you everyone for joining for additional information. Please go to Investor Doc Groupon Dot com. Thank you so much.
Unknown Executive: There are no other questions.
Unknown Executive: So this concludes our call for today. Thank you everyone for joining.
Unknown Executive: For additional information, please go to investor.groupon.com. Thank you so much.