Q1 2025 Groupon Inc Earnings Call
to Sean, be sure to meet yourself.
Speaker Change: Hello, and welcome to Groupon's first quarter, 2025 Financial Results Conference Call. On the call today, our Chief Executive Officer, Dusan Senkypl, Peace Financial Officer.
and Senior Vice President of Finance, Rana Kashyap.
At this time, all participants are in a listen only mode
Speaker Change: Today's call will be a question and answer session only. The company has posted earnings materials including earnings commentary on the company's investor relations website at investor dot group on dot com. 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 reflect management views as of today May 8th, 2025 only, and will include forward-looking statements. Actual results may differ materially from those expressed or implied in the company's forward-looking statements.
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 reports on form 10Q.
Speaker Change: We encourage investors to use Groupon's investor relations website at investor.rupawn.com as a way of easily finding information about the company.
Speaker Change: Groupon promptly makes available on this website through reports that the company files are furnishes with the FCC, corporate governance information, and select press releases and social media postings.
Speaker Change: On the call today, the company will also discuss the following non-GAAP financial measures, adjusted with Yvda and free cash flow.
Speaker Change: In Groupon's press release and their filings with the SEC, each of which is posted on its investor relations website, you will find additional disclosures regarding these non-GAAP measures , including reconciliations of these measures to the most comparable measures under US gap.
Speaker Change: And with that, I'd like to turn it over to Dusan to make a few opening remarks before we jump into Q&A.
Dusan Senkypl: Hello and thanks for joining us for our first quarter 2025 earnings call. It's a pleasure to be with all of you.
Dusan Senkypl: Today, my plan is to make brief opening remarks and then open up the call for questions. Both live from our analysts and several that were presubmitted in advance.
Dusan Senkypl: For more details on our quarterly performance, I encourage you to read our earnings comments [inaudible]
Dusan Senkypl: In addition, I encourage you to review our facilities and thank you which contain more detail on our report, water and fully air is out.
Dusan Senkypl: I am pleased to report a strong start to the year with our Q1 results exceeding guidance on both buildings and adjusted EBITDA with a slight beat on the revenue.
Dusan Senkypl: Global Billings, Group 1.4% year-over-year, marking our continued progress towards sustained growth.
Dusan Senkypl: This performance was powered by North America logo, which accelerated to 11% year over year growth in buildings. The first time we've seen double digit growth in this segment since 2017, excluding the pandemic recovery period.
Dusan Senkypl: Our hyperlocal strategy is delivering strong results with our top 10 cities in North America growing billions by double digits.
Dusan Senkypl: Enterprise clients continue to fly us on our platform, looking at our vertical performance within North America logo, things to do, group buildings, double digits for the fifth straight
Dusan Senkypl: We believe our things to do franchise is significantly outweacing current industry trends and is poised to continue strong absolute and relative performance as we head into the important summer season.
Dusan Senkypl: Our International Local Business, excluding Italy, also showed impressive improvement with approximately 5% year-over-year billings grow.
Dusan Senkypl: As I start my first year as CEO of Groupon, I believe the time has come and the team is ready to start playing offense
Dusan Senkypl: Our mission remains clear to transform from a daily deals platform selling everything to everyone into a trusted destination for quality local experiences at unbeatable value.
Dusan Senkypl: We are seeing success in shifting from chasing volume to building quality, migrating from legacy systems to a modern platform and moving from negative to positive financial performance.
Dusan Senkypl: While our strong Billings growth is encouraging, I want to know that our progress in revenue is currently lagging Billings due to compression of tape rights in North America local.
Dusan Senkypl: This evolution in take rates is deliberate and a natural consequence of our focus on building a sustainable foundation for long-term growth.
Dusan Senkypl: For example, higher redemption rates cost a short-term headwind to revenue, but are a great sign for the long-term health of our market voice.
Dusan Senkypl: Over time, as we make progress on delivering these healthy marketplace fundamentals, we expect buildings and revenue growth rates will converge.
Dusan Senkypl: On the leadership front, we've strengthened our team with key appointments, including Joseph Burian, our new chief marketing officer, and Alex Drabeck, our new chief technology officer.
Dusan Senkypl: We've also promoted Barbara Rice to Chief Revenue Officer and Philip Popovic to Chief Commercial Officer to lead our supply side commercial strategy and Maria Havelichkova to Chief Product Officer.
Dusan Senkypl: The business exits Q1 with strong momentum and continues to perform well. Looking ahead to Q2, we expect another quarter of accelerating gear over your growth in both bearings and
Dusan Senkypl: For the full year, we raised our guidance for Billings Grove Rates from 2-4% to 3-5% and test our revenue and adjusted EBDA guidance unchanged.
Dusan Senkypl: I want to emphasize that we maintained our revenue and adjusted EBDA guidance despite completing the sale of our wholly owned subsidiary discount in early April .
Dusan Senkypl: which removes approximately 6 million in revenue and 4 million in adjusted EBDA from our consolidated results for the remainder of the 2025.
Dusan Senkypl: It's an exciting time to be at Groupon. We are no longer just stabilizing the business. We see several green shoots of growth across our business and we are building the foundation for long term sustained growth.
Dusan Senkypl: With our platform modernization underway, improving customer experience on both sides of the platform, continued progress in financial performance, and a clear strategic direction, I believe we have both positions for success in 2025 and beyond.
Dusan Senkypl: I would like to thank our team for their dedication and hard work that have made this progress possible This journey has not been easy and very continued commitment to our mission and to our transformation has been really great with that let's open the call for questions
Dusan Senkypl: Thank you, Dusan. Our first question comes from Bobby Brooks from Northland Capital.
Bobby, you can now unmute your wife.
Dusan Senkypl: Hey guys, thank you for taking my question. I guess something that really caught my eye in the prepare to remarks that you put out yesterday was.
Dusan Senkypl: The number of North American merchants doing more than 1 million in buildings was up 43% year over year.
Speaker Change: Could you just discuss what is driving that string? Is it the new go-to-market strategy and focusing on higher quality merchants and providing them with better tools to try to deal performance or something different and more about it?
Speaker Change: So, bye-bye, I can't take it because Sean, thank you for it.
Speaker Change: How I see it in last, I would say over 18 months, we are improving in what we call hypergeo.
Speaker Change: Approach that it means we are looking in more detail in what inventory we need in every single location.
Speaker Change: We are improving our category management in terms of understanding what's the inventory we need and by combination of both and focusing on deals which our customers need in a given location and on the quality of deals.
Speaker Change: We can be a better partner not only to our enterprise partners about the across the board also to local merchants. So I believe this is this is the result of of our more focused switching from number of merchants on the platform to quality of merchants, quality of the quality of service which we are providing to our customers.
Speaker Change: And I would probably also mention that the current macro environment is definitely not helping us. I see it like quite the opposite.
Speaker Change: Got it. And then just like a clarifying piece on that is the greater than one million billions, is that on like a year, like a 12 month trailing basis? I would guess or is it on like an interquarter basis? I was just curious on that like definition.
It's based on a training 12 months basis.
Speaker Change: Some a couple different like professional one professional sports unit I saw specifically you know with selling tickets through Groupon and the checkout process was extremely smooth
Speaker Change: Never having to leave a Groupon website and being able to pick the seat and pay all within the Groupon platform. This seems like something that might be a new integration based off the new platform. It is my assumption, right? And maybe just touch on like that, if that's a new ability, touch on like how that's helping grow the business.
Speaker Change: So Bobby, I was commenting on several calls that this new platform we will be able to iterate in faster pace.
Speaker Change: and this is one of the results and obviously checkout is one of key components of the website so the theme which is maintaining checkout is pretty much everyday looking what we can improve and very still way to go but comparing where Groupon was
Speaker Change: Two years ago, I believe we made a significant process both in terms of how easy the checkout is but also in terms of payment methods which our customers kind of can use.
Fair enough, I'll return back to the Q.
Speaker Change: Thank you Bobby. Our next question comes from Eric Sheridan from Goldman Sachs. Eric, you can now meet your life.
Eric Sheridan: Great. Thank you so much for taking the questions. I did want to follow up on the macro commentary in the prepared remarks. Maybe we could just go a little bit deeper in your own view about how the macro environment could act as a tailwind in the business and then more specifically, it sounds like the implication is that the merchant pipeline could be increasing as certain brands and merchants want to go deeper on the platform given the current environment. I want to know if we get as much detail as we could there about the way you're thinking about the pipeline on the supply side
Speaker Change: as an output of the macro environment, and then maybe after that I just have one quick follow-up.
Speaker Change: Thank you, Eric, for the question. You know, very well the macro environment is extremely volatile and it has impact on consumer spending and unfortunately it's also very difficult to predict, predict how customers
Bill Bielin, Bakar
Speaker Change: What we see in general, we see it as a tailwind for our business and we see it specifically on supply side.
Speaker Change: where we see signs of weakening traffic trends from some of our clients and because Groupon is a great performance-based platform, I believe.
Speaker Change: In this time, it's simply a great opportunity to work together and we are just trying to figure out what are the best products for client, how we can help them, how we can together with merchant partners create products for our clients. So we see in general in enterprise segment, but actually same applies in local that we are really deepening cooperation with our existing clients. And we see also like faster [inaudible]
in the flow of new brands coming to Groupon.
Speaker Change: But at the same time, I would like to mention that these are kind of early science and
Speaker Change: The overall situation in Makarovat also in our marketplace in this term is quite fluid so we need to follow very close levels going on in Makarovat and a main level of the Western Europe is very similar and just adapt.
Eric Sheridan: Great. Thank you. And maybe just one quick follow up. Um, you had a number of comments in the prepared remarks around marketing investments in the ROI. You're achieving on those marketing investments. Can you talk a little bit about your own attempts internally to optimize dollars?
Again, share your return goals for deploying those dollars.
Eric Sheridan: and or how the overall marketing environment and pricing and auction density might have helped or acted as different sorts of headwinds to the ROI in the quarter. Just want to understand a little bit the external versus the internal dynamic on marketing ROI. Thanks.
So, uh...
In general last last two years our strategy
Eric Sheridan: is to be able to acquire our new customers with ROI 100% in seven-day windows, which pretty much means that the profit margin which we have on the first order is cost of our acquisition.
Eric Sheridan: I was commenting in the script and I see performance of our marketing channels Improving which is allowing us
Eric Sheridan: to increase volumes, because in marketing, in general, if you want to increase volume, very every incremental dollar and click or traffic, or eyeball which you are buying is more expensive.
Eric Sheridan: We are claiming that we are growing and increasing marketing with the same ROI, it means that in general we are improving conversion rates in our marketing and we actually
Eric Sheridan: see some additional opportunities how to continue in this track going forward. So I believe that performance marketing for us will be a tail vent in near future.
Eric Sheridan: At the same time as the team is strengthening, I was mentioning that the new CMO started. We are also exploring new channels in the mid and upper part.
of the panel, which is mainly social media influencers.
and we already have several files in place.
Eric Sheridan: where we can present Groupon to really millions of people on social media and on platforms where Groupon was not active in the past, so this is another opportunity which I am extremely happy about and I'm looking forward to the results.
Thank you, Eric.
Speaker Change: Our next question is from Sean McGowan from Ross Capital Partners. Sean, you can now meet your line.
Sean McGowan: Thank you appreciate that couple of questions. Could you give us a little bit more color on the international you're talking the past about?
Sean McGowan: Spain, you know, being one of the markets where you initiated some of these fixes earlier and it was really paying off quite well. Could just give us an update on some of those markets that have been in that turnaround process longer.
Speaker Change: Okay, thank you Sean for the question. In general, I would say that the trends across all major markets in an international continue to improve and we are and I'm personally very happy with performance of international
Speaker Change: The leading market in terms of a growth is still spain, which simply has a...
Speaker Change: 18 months had started in terms when we started the transformation and the process and the framework which we use for transformation in Spain is simply working great.
We have very strong double digit growth in Spain.
Speaker Change: All other big markets, meaning Germany, UK, France are also performing very well and we see the trend is still improving. You know, the comp is a little bit different going forward in Q2 because last year we lost Italy as a market, so this life.
Speaker Change: The overall overall we were slightly negative, the last quarter it will change because we will not be comparing again against Italy, but then I'm looking really on performance of every single
Speaker Change: Country, it's going in the right direction and the playbook and the stuff which we do where it's pretty similar to what we do in the United States, on every market we want to have very strong leaders, strong owners, who owns all business, we go hyper-local meaning we are focusing on the large cities in international, typically the capital city as the first one and then, typically, second or third largest city in the end of country.
and making sure that we are adding both-
Speaker Change: High Quality Localions, but similar to United States, we see high importance of Earth.
Speaker Change: a high-quality enterprise deals because these other deals which are driving traffic to the Groupon and that traffic is converting not only on these enterprise deals but also converting
Speaker Change: Great. Thanks for that color. And then if you can just give us a quick update on the international website and mobile app updates, you know, I think those are things we're expecting in the first half, what where are we on those.
Speaker Change: So on last earnings call, we mentioned that this year we will be taking very cautious approach and we quite frankly have slow progress during the quarter. We have very good visibility into each set in the conversion funnel of our mobile next application versus legacy application. We see there in that conversion funnel both good and bad guys, meaning that in certain steps.
Speaker Change: We see that the legacy customers are used to something slightly different than what we have in a in a mobilelex application. So our approach is to make it more similar and closer to the legacy because we simply don't want to help.
We don't want to hurt performance [inaudible]
Speaker Change: But at the same time, we see in the conversion process several good guys, meaning in certain steps.
Speaker Change: In the long run, we are committed to the project. We believe that it will bring an upside opportunity for Groupon, not only in the website where we already implemented but also in the application.
Speaker Change: Don't have any issues and the performance of the whole company, the financial performance.
Speaker Change: is simply a deliver. That's the priority number one. All right, thank you. I'll get back to you as well.
Thank you.
Speaker Change: Thank you, Sean. We'll now pose written questions to management that came in through our investor relations press line.
Speaker Change: Investors on the line, please relay your hands if you have follow-up questions. Our first written question you identified product velocity as a key focus area. What specific metrics are you using to measure improvement in this area? What are your targets for increasing the pace of innovation?
Speaker Change: So, internally we are looking on the velocity of delivery for engineering and product teams from the outside, I would say higher level perspective, it's simply looking on the our ability to deliver.
Speaker Change: Very, very multiple improvements. We were touching in previous question today, for example, the checkout, but there are many other parts of the website where we released improvements being it, marching pages being it.
Location, or Serge.
Speaker Change: and we will simply continue and I believe as we will be moving more and more technology to mobile next we will see improvements in the taste and from Sherholder and user customer perspective, both on the side of merchant and consumer.
Speaker Change: Simply, we want to make sure that we see that Groupon is changing and we will be seeing more and more features in the future.
Speaker Change: We are working, for example, also on new maps, because that's the functionality that we believe that we can provide much more value to our customers. And very, very few more interesting projects, one more of which I can actually mention is search.
Speaker Change: Thank you, Dusan. Looks like we have a follow-up question from Fowdy Brooks from Northland Capital. Fowdy, you can now unmute your life.
Bobby Brooks: Hey guys, thanks for taking the following question. So in 4Q, you know, kind of a key point was
Bobby Brooks: How the top five, the top five metros in North America were off double digits on billing. Now in the first quarter that's expanded to the top 10 metros of double digits.
Bobby Brooks: I saw as curious was this an expansion of the number, was this expansion of the number of cities seeing double digit growth?
Speaker Change: a result of you expanding that grow, go to market strategy to the new cities, or is it maybe something where it was already happening in the other cities that the new growth market, but now it's just starting to kind of keep hold, right?
Speaker Change: So, Boba, this is something which is mainly about the timing because when we were deciding where and how.
Speaker Change: We will focus our sales capacity which are unfortunately not unlimited.
Speaker Change: We were simply deciding what percentage of our workforce will be focusing on top five, what percentage will be focusing on top 10 and because on top five we simply had more capacity. We were able to see the growth faster and the growth in other ten cities.
Speaker Change: Simply came later, but in general we are not limiting new deals and our sales just to be stopped and cities we simply target all big cities in the United States but unfortunately do the lack of capacity it simply takes longer with some cities at the same time we are with our one of key projects which we are running in sales. [inaudible]
Speaker Change: We are doubling down mainly on the biggest, biggest locations because there is that compounding effect when you have enough customers and at the same time, good density of high quality deals.
Speaker Change: The pace of improvement is accelerating so I don't expect that we would be kind of
Covering Top 50 Cities in United States with the
Speaker Change: Let's say similar per capita sales force I still expect that we will be pushing these top locations and I would say top time is a good number more than the rest of the country but we expect and we see performance improvement in all big cities Thank you.
being ahead of performance in smaller cities and smaller locations.
Speaker Change: Got it and then just like kind of piggybacking on that, I think it's clear that you're taking
Speaker Change: You're switching from, you know, kind of a defense to offense.
on the last call you.
Speaker Change: It was mentioned that like, hey, like we're still kind of tweaking the go to market strategy. So like taking those two things into account, it seems like you've kind of
Speaker Change: figured out the, you kind of unlocked the right go-to-market strategy and kind of those, you've responded the last time, is it right for me to think now, just like in film? I was mentioning in opening remarks also some organizational changes which we did.
Speaker Change: and mainly in this regard, this is about barbarized being promoted and political coverage being promoted, and
This Dove will create
Speaker Change: Very powerful team where Philip is bringing category management and very deep and high analytical scales.
Speaker Change: helping our Hypergeo approach to add also not only where we need the deals but what exactly are the deals, what should be the profit margin structure, what should be the pricing structure. So yeah, we are doubling down on this. I believe that the approach we took since early last year is the right one, but we are improving every quarter, and right now the structure we have is...
Speaker Change: Combination of local understanding or hypergeo understanding, with also understanding and people who understand categories because
Speaker Change: Like the massage is performing differently versus Botox or some other product and now we have people who understand what are the issues for merchants in this category so that we can prepare a better product which is a vein for both Groupon and the merchants.
Yeah, it's so, so, it's fair to say like
Speaker Change: Pedal to the metal. Now it's it's not kind of just focusing on a couple of different cities. Obviously the bigger cities are the more focused, but it's [inaudible]
Taking this road to markets strategy everywhere Groupon Inc. now.
Speaker Change: That's that's true at the same time there is still plenty of work ahead of us who we are definitely not in the finish line but I believe that we are progressing very well in the project or which which we are on is really good one.
Speaker Change: We agree with that and congrats on the great quarter and looking forward to continuing progress so I'll return to the queue. Thanks, guys. Thank you very much.
Speaker Change: Thank you, Bobby. We'll go back to another written question. Many companies are integrating AI into their operations and product offerings. I was Groupon leveraging AI and what impact do you expect to have on your business over the next 12 to 24 months?
Speaker Change: Going forward I believe that at least the initial communication with our merchant partners can be done by AI VR heavily investing also into the AI tool which is analyzing which deals are working in certain environments and the output of this which would be coming [inaudible]
Speaker Change: Google and our search engines using the way called AI Smithads and we are making sure that our website and platform is already so when customers will be searching on whatever location it will be in the future, Groupon will be able to provide information compatible with AI driven search.
Speaker Change: So, what they can directly go to Groupon and finalize the transaction or in the future, most likely it will be possible that agents will finalize the transaction.
Speaker Change: Even in this we see very interesting trends where in some areas AI is really picking up very quickly and we see some drop in traffic but on the other hand we are we see dramatic improvement in convergence, meaning that customers are using AI and who see this AI snippets.
Speaker Change: presenting the deal features price, if they come to Groupon, it's much highly likely that they will finalize the transaction.
and maybe just one last touch, over the next...
12 to 24 months.
Speaker Change: We just want to make sure that the Groupon will be compatible with all major AI platforms. It will be possible to have some kind of MCP Connect curse or something like that. Whatever technology will be or standard will be in the future. So it will be easy for AI engines to connect to Groupon and provide Groupon Inventory to customers who are using AI.
Thank you Dusan
Speaker Change: Let's go back to our queue. We have a follow-up from Sean McGowan. Sean, you can now unmute your line.
Sean McGowan: Should we expect a one-time gain? Was it significantly higher than the...
Sean McGowan: Cross-Bases, and then related to that sale, in terms of the recent convert offering restrict what you can do with those proceeds, or was that restriction limited to sum up?
Yeah, I'm going to take the first part of the debate.
Jiri, if you can take the second part, okay?
Speaker Change: And on the first part, when we were first doing like estimations of how much we can make or
Speaker Change: Our estimation was in line, actually, with what we got from this cloud but at the same time I would like to mention that what we got was
Speaker Change: on the very high end of the range which we had for the sale soap.
Speaker Change: Stating that I am very happy with the deal itself. I think it's a great deal for this cloud and gift cloud employees and I think it's a great deal also for Groupon because the gift cloud is simply completely different business to what Groupon is doing and it will allow part of the management to focus on our growth opportunities.
Speaker Change: So if I will, if I will comment about our seats versus our 2027 bonds.
Speaker Change: We are allowed to use up to 20 million of proceeds from a non-core asset sale, so it means those money will thanks and out position of the cash position and of Q2.
Speaker Change: Okay, great, and would there be a one-time gain then booked in the second quarter?
it's
Speaker Change: Yeah, it's it's it's it's it's this continued operation, so it will not be a bit if you are asking for this good discussion. No, I was wondering if there would be, you know, in the event I add back, would there be a one time gain, you know, like a couple of million bucks or whatever, I don't know what the cost basis was.
Speaker Change: So I'm just trying to, you know, anticipate what to make. The transaction happens in Q2. So people are still under consideration and we will report it in Q2. It's Q2, I'm sorry.
All right. Thank you. Yeah.
Thank you, Sean. We'll go back to written questions.
Speaker Change: You've highlighted a shift in marketing focus from acquisition to lifetime value. And you've discussed this shift more in what early results are you seeing from initiatives like your wild-deal pilot.
Yeah, so...
Speaker Change: My view of very standard Groupon is that we are extremely successful in terms of customer acquisition, which is actually...
Speaker Change: a month ahead, if we want to build a very market place, which is sustainable and growing in the long run. At the same time, we are simply not happy with purchase frequency, today, as we see for customers on Groupon, and that's why.
Our
Speaker Change: internal priority for the whole company, number one priority is retention. It's a retention also in merchant side to make a cooperation with Groupon sustainable, but it's definitely retention also for customers, meaning we want to...
Speaker Change: Find the way how to deliver more value to them and have more offers and one of projects which we are running in under this strategy.
Speaker Change: Umbrella is a real pilot where we took a very popular food and drink brand and we were promoting gift cards for this food and drink brand.
to several customer segments within Groupon.
Speaker Change: And in some cases, we saw, even over 25% take rate of that offer, which was extremely encouraging but at the same time it makes complete sense because
Speaker Change: Set a couple of these like wow top grade deals which we will be operating to our customers.
Speaker Change: to just create a habit that they will do to our pre-transsection on Groupon and they will simply start coming to Groupon for certain types.
Speaker Change: of services. So it will be an initiative which will take a long time but the early results which we are seeing and especially the initial first pilot is extremely encouraging for me. The results are above what at least I was personally expecting.
Dusan Senkypl: Thank you, Dusan. There are no other questions. This concludes our call for today. Thank you everyone for joining for additional information. Please go to investor dot group on dot com.