Groupon Inc (GRPN) 2025 Q3 法說會逐字稿

Hello and welcome to Groupon's 3rd quarter 2025 financial results conference call. On the call today, our Chief Executive Officer, Dusan Senkypl and Chief Financial Officer, Rana Kashyap.

(Operator Instructions)

Before we begin, Groupon would like to remind listeners that the following discussion and responses to questions reflect management's views as of today, November 7, 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. 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 its filings with the SEC, including its quarterly report on Form 10-Q.

We encourage investors to use Groupon's investor relations website at investor.groupon.com as a way of easily finding information about the company.

Groupon promptly makes available on this website the reports that the company files or furnishes with the SEC, corporate governance information, and select press releases and social media postings.

In the call today, the company will also 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 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 GAAP.

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.

Hello and thanks for joining us for our third quarter 2025 earnings call. It's great to be with all of you today.

Yesterday, after the market closed, we released our earnings and posted our earnings commentary on our industrial relations website.

Today, I will make brief opening remarks and then open up the call for your questions.

For more details on our quarterly performance, I encourage you to read our full earnings commentary, press release, and 10-Q.

I'm pleased to report another strong quarter that demonstrates continued momentum in our transformation journey.

Global billings grew 11% year over year, making our second straight quarter of double-digit growth.

Our core local category continues to be the engine driving this growth, with North America Local up 18% and international local excluding gift cloud up 15% year over year. Combined, our core local category now represents 89% of billings and grew 18%, reinforcing the scalability of our hyperlocal marketplace playbook.

We delivered adjusted EBITDA of $18 million ahead of our expectations and our trailing 12 months free cash flow reached $60 million.

This demonstrates our ability to generate strong profitability and cash flow while continuing to invest strategically to accelerate our decline.

On the demand side, you freely reflect the compounding benefits of systematic improvements across our marketing engine.

We drove healthy growth in our paid mark performance channels supported by a modest increase in marketing spend and improving ROI.

We added nearly 300,000 net new active customers quarter over quarter and 1 million plus over the last four quarters excluding Italy, a strong signal for the overall health of our marketplace.

On the supply side, our hyperlocal focus is working.

All 4 major international markets delivered a second consecutive quarter of double-digit growth.

In North America, our focused hyper locality strategy is paying off. Chicago is now our biggest city and growing at nearly double the rate of North America overall.

Things to do had an exceptional summer season with its 7 consecutive quarters of strong double-digit growth.

On the technology front, our platform velocity is accelerating meaningfully. Deal page conversion rates improved 13% year over year in North America, and we are seeing faster development cycles and higher quality releases as our modernization efforts translate into tangible business capabilities.

Looking ahead, our strategic priorities remain clear.

Accelerate supplying growth toward our goal of over 20% billings growth, while generating strong adjusted EBITDA and free cash flow.

The momentum we are seeing across customer growth, category performance, and platform capability gives me confidence that we are building the foundation to become the trusted destination for quality local experiences at unbeatable value.

We are still in the early innings of a large opportunity to build a hyperlocal experience marketplace that combines trust, duration, quality, and unbeatable value with the network effects and unit economics of modern marketplaces.

I would like to thank our team. This is not an easy journey and their continued commitment to our mission and to our transformation has been really great. With that, let's open the call for questions.

Thanks, Dusan.

Bobby Brooks, Northland Capital.

Hey, good morning, guys.

Thank you for taking my question. Something that really caught my attention was the commentary that after allocating the focus sales resources to Chicago at the start of the year, it's now growing double the rate of North American local. So just a few questions on that. But first, is it right for me to then think that Chicago Local Billings was growing in the high 30s and the follow-up. Could you just discuss a bit more in detail what those focused sales resources look like and the notable actions they took?

Yeah, thanks, Gober for the question. I can take it. So our Chicago efforts started already last year where we allocated this proportionately, higher share of our sales resources, and sales team to Chicago. And at the same time as we are developing our, what's how we call it, marketplace understanding, and Deal books and curation for sales, which means that we are more prescriptive in the terms of what we are asking ourselves to come with. Chicago is always the first, in the pipeline. So we are really focusing on it so that we understand the inventory, we understand what's missing, we understand, how our customers are behaving in Chicago. We understand What we are searching on Groupon, and then we are asking ourselves to come specifically and close the GAAP. And obviously, it takes several quarters before the results are visible in the numbers, but with the compounding effect, we need a very strong, we see very strong impact on Chicago results. And obviously, this is a big learning for us, it's not really a surprise result. We were expecting that this will come, so we are expanding, our focus on more cities which we already did, two quarters ago, and we are also expanding our marketplace understanding across the board so that this becomes the new golden standard across the board for all sales processes within Groupon.

Got it. That's super helpful color. And then, so it seems like this is a play that playbook that you're already in the process of expanding to other metros. I guess just for like context, you mentioned how it, the, you initially put those.

Sales, increase sales resources in Chicago last year was, so is it like maybe, was that like 4 quarters ago, 5 quarters ago? I'm just trying to get a sense of then, maybe when we see the impact of those other metros that now you're using that playbook with start to kind of flow through results cause I get that it's a lag effect.

Yeah, we were iterating the process, but you can think about it that we started approximately 4 quarters ago, with all new metros, we would like to see results faster because we have learnings and it was, also a process where we were, improving pretty much every quarter and changing the, and fine tuning the approach. So it should be faster with, our metros.

Got it. That makes sense. And then, one more for me is just, clearly got the sense of you guys' focus of making the customer journey, kind of match the customer in the prepared marks last night if you guys use the example of someone wanting to take their kids to a water park is going to be different than someone looking for an oil change. And so I'm just curious, like, how do, how do you plan on having Groupon kind of provide a different customer journey? And I'm just curious kind of what that. Different customer journey would look like.

So, we have, I would split it into two parts. One is a mindset shift which was happening in the Groupon. In the last 6 to 12 months because in the past, we were looking on the marketplace as one product, running plenty of tests across the board, and then, quite often being surprised that we don't see results. Now, especially in the product department with new leadership, we changed the approach and we are looking really on the results and tests, per category. So for example, we have our new map feature, but simply the map is relevant only some categories and Completely irrelevant in some other categories. In the past, if we would release a new app, we would say, it's not bringing the results as expected. So let's forget it and let's jump to something else because the overall impact would be probably 0 or around 0. Now we can see that for example, when you are looking for oil exchange, then the map is very relevant and we can show it and there are some other categories where actually we should not be showing the map. So we have this very Category-specific approach in product development, which is changing the customer journeys across the board. And then there is a second, very important technological enablement project for us. This is CDP or let's say CRM for customers. We are building and we already have a live pilot in the UK, a new technology which will be able to customize the messaging because the old Groupon tech stack is very limiting. In terms of how we can target customers, how we can do personalization.

So this is something which we are changing and we want to be pretty much optimizing based on the behavior of every single customer on the website and every user journey will be pretty much, fitting the profile of that user. When we were doing some internal demos and showing it should end up with Groupon looking completely different for each customer simply based on the, on the profile.

Super helpful color, and great quarter, I'll return to the cue.

Thank you, Bobby.

Eric Sheridan, Goldman Sachs.

Thanks so much for, the questions, maybe two if I could. Building on, parts of the last answer, when do you think about purchase frequency, which you call out, the difference of behavior between newer cohorts versus older cohorts? Can you go a little bit deeper in some of the initiatives aimed at improving frequency among the newer cohorts against the type of user growth you've seen over the last 12 months, that'd be number 1. And then number 2, when do you think about the next 12 to 18 months and the intensity around marketing, how do you think about striking a balance between More direct response, marketing aimed at either user acquisition or behavior against scaling some of the brand advertising you talked about in the shareholder materials, just so we better understand the combined effort on marketing intensity over the next 12 to 18 months. Thanks so much.

Thank you very much for both questions, Eric. We're kind of interconnected, and I will start with purchase frequency and we'll be building on the last answer. We were talking about purchase frequency as a focus for the company, probably the last 3 or 4 quarters. Yet we are reporting that we don't see material improvements. Internally, we see improvements in the repurchase rate of the cohort of new customers. When we compare, customers, which we were acquiring last year versus customers which we acquire right now and look at which per what percentage of them is doing the second purchase, typically within 30 days from the first one, we see improvement. So we know that the activities and plans which we have are Directionally right. What's holding us back is really the back limitation of our platform and that's why I was talking about the CDP project implementation which we have up and up and running in in the UK and we will be expanding it. Very soon to the, mainly to North America, but pretty much the rest of the Groupon, which would really allow us to design the specific journeys based on what customer did because we see that, we are simply category specific rules, our customers are buying. The stuff which can be predicted, meaning that if you buy all exchange now we know that most likely you will need it in like next 9 months and similar. Right now, we don't have the targeting, capabilities. So this technology enabler is, I would say last major big, missing piece in the marketing stack which we have so that we can accelerate on a purchase frequency. And the second part on the brand advertising, in general, it's very hard to predict, how exactly we will be running it, but we simply have based on our experience, We know that that brand is part of the marketing mix and especially nowadays when the world is moving towards like social media influencers, this is a channel which is, which can drive business significantly. We were piloting and we have some great influencers, promoting Groupon, I would say last 4 or 5 quarters, and we are successfully growing it, but now we are adding into it like the video advertising, YouTube and other channels where we will be pushing brand. It's very hard to say how it will be impacting ROIs overall. We don't plan to change the, our strategy that we want to grow contribution of profit, in the company at the same time, If we see that the brand is delivering more than we were expecting, we were, we would be adjusting the budgets between performance and brand advertising, but we will come back with more data, in the next earnings call because our brand campaign starts in 2 weeks.

Great, thank you.

Bobby Brooks, Northland Capital.

Hey, thanks. I just, wanted to circle back on, it was great to hear the shift in tone on how you're kind of looking at the buyback comparative, from the prepared remarks last night, comparatively from the second quarter call. So, I was just curious if you could maybe give us a look or a bit more color on the factors you guys will be considering when, of making the decision of when to be stepping in the buyback or just any more general color on how to be thinking about it or modeling it going forward.

Thank you.

Yeah, Bobby, hey, this is Rana. I can take this. So, I think you rightfully noticed, our commentary in the script, which, I think you commented on was a little was different than what we said in the past was fairly noncommittal and I think this, what we've said here is we expect to be opportunistic, and so we are evaluating, and the factors to consider here you asked about, we are looking at our cash generation, our investment priorities, what the market conditions are like, and of course the trading prices of our shares.

So we will be opportunistic on the buyback, and those are the factors that that we'll be considering in evaluating how to allocate our capital with respect to this channel.

Got it. That's helpful. And then I just want to follow-up, to Sean. I think with the customer frequency of the new cohort, I just want to make sure I understood it right. You mentioned that the new cohorts added in 2024, or I should say the new cohorts added in 2025, their purchase frequency is.

Higher than the cohorts added in 2024, I'll be at that 2025 new customers are still below the legacy customers. Am I understanding that correctly?

Probably on the operational level so that we can drive these projects in a very agile way. We are pretty much, following the, theory purchase rate in the next 30 days, meaning when a new customer makes an order, we are looking what percentage of these customers is doing the second order within the 30-day interval because it's a leading indicator for the purchase frequency. And we can see based on the changes and projects which we started already in Q4 last year that there is improvement in this group. So this makes me strongly convinced that like the projects which we have in place are the right ones that they will be working. It's by adding right inventory, we were talking about the deals, but it's also about the communication at the right moment, right time, which is typically when the customer is redeeming and using the service, which typically means very good experience with Groupon. We are more open to next purchase, so this is confirmed.

To ramp it up and so it's converted in the overall user base, we simply need to also step up with better technology so that we can target and personalize in a more advanced way.

Got it. I'll return to the queue.

Thank you.

Thank you.

Thanks, Bobby.

Sean McGowan, ROTH Capital Partners.

Thank you. Kind of following up on some of the things you've talked about there. Have you, you've been now doing for quite a while, the, reminding consumers of, expiring Groupon's and, encouraging them to redeem them. Can you talk a little bit about what impact you've noticed on their purchase patterns, how likely they are to, purchase an additional Groupon?

I've, thank you, Sean, for the question. I am not able to share the exact numbers, but our analysis are showing that when the customer re deems, we simply have a much higher rate of the, of the second purchase. And one, this is a project which we were talking about since last year.

It takes a little bit more time versus what we were expecting because of the way how some Groupon's are redeemed because with some merchants, we don't even have a redemption signal, so we have to do plenty of background work to improve the system and collect. More inputs and signals from our merchant partners. But, this is one of the, like the priority projects. We will be also improving and expanding our review section which is very highly related to the overall topic, and we will expect that it will translate into repurchase rate overall for all Groupon customers.

Okay, thank you. And Rana, a quick, kind of housekeeping questions. You, I think you mentioned in the prepared remarks That ex gift cloud international billings were up 15%. Can you translate that into what the revenue growth would have been at ex Gift crown?

So, ex gift crown, our revenue growth in Italy, ex gift Crown and ex Italy, our revenue growth in Q2, was up 7.6%, so I think about 8%.

Okay.

Thank you very much. And then back to you just on the, quite a bit in the prepared remarks about AI, can you give a little bit more color on what some of the benefits you're expecting to see from greater use of AI?

So there will be and there are benefits both on the, like how we are running the company, but at the same time, we see opportunities with customers. So I can start with, like let's call it a G&A opportunities. AI is, and will be increasingly more One of the factors which will be improving conversion of our sales team. We are doubling down and expanding our lead generation capabilities. We have the system now which is connected with our, I talk about it as marketplace understanding so that we are feeding our legion engine with information. Which businesses, which deals we need in what areas. So, we will be sending to our sales team better quality leads which when will be converted will generate higher revenue versus just some code leads in general. Which we had, in the past. We have AI included in the, I call it warm-up communication with merchants to present, the Groupon and overall, we are adding AI tools to the whole sales process. For example, we were talking about that AI deal creation where we see that when we can present merchants during the sales call. How the deal will be looking on Groupon. It's not only speeds up the whole process, but it's also increasing conversion. We already have AI used in supply monitoring where AI is giving, deal insights and like guiding salespeople, what should be changed on the deal to improve it and generate more for the merchant and more sales, for Groupon. And for customers. Obviously, engineering, it's pretty much everywhere, higher efficiency, higher quality of outputs, finance also higher efficiency, and marketing scale and convergence like going forward, I expect that we will be able to drive growth of performance marketing and social and influencer marketing, the same, or smaller team. And, recently also we, introduced, the chatbot, for our customer service where we expect that, until now the chatbot was, or the customer service of Groupon was more really like a service, but, going forward, we want to look at customer service as a, advertising marketing channel because it's a touch point with customers and we already have AI-driven chatbot which is handling the initial part of the communication and then Advanced system where our agents are pretty much, guiding AI how we should treat, the conversation with customer and taking over just part of the communication with heavy help of AI. So this is on SG&A side and then on the, customer side, I expect that, and it will be slower than everyone probably predicts now, like always with new technologies that there will be a change in behavior, how customers are looking for services. So we closely, monitoring and working with partners, and with our teams how to be ready for AI apps, how to have the website easy to read and communicate with AI engines so that they can find it. We are analyzing what are the really keywords which are driving the AI traffic so that we can provide better results, like going forward and again it will be slower than everyone expect we believe that people will change.

The way how we are looking for stuff and it will be more conversational and Groupon will be part of it. Ultimately, I see Groupon also as a kind of gateway for small businesses because it's very hard to expect that all small businesses will Quite often tough time just to run the business. We'll be ready to have the solution already working with all the key players. We will be ultimately the platform which will be bringing all local merchants and the small businesses to AI world.

Thank you, very helpful.

Okay.

Thanks, Sean. We'll now pose written questions to management that came in through our investor relations press line. Investors who are live on the line, if you have follow-ups, please raise your hand and we'll head back to you.

Our first written question is in regards to marketing efficiency.

Marketing spend rose 14% year over year to 37% of gross profit as you leaned into acquisition. How are you measuring marketing ROI across channels, and what early learnings are emerging from your new brand campaign in key markets like New York and Chicago?

I can't take that question. So first, brand campaign is starting in the next 2 weeks, so we don't have a lot of learnings from our own. Obviously, we were doing the homework and we were looking on how our companies were running brand campaigns to take the learning. So we have positive expectations of, the outcome and In terms of performance of our marketing channels, based on the numbers which we were reporting, you can see that our marketing channels, and paid marketing channels are performing, very well. We have very good ROI. We are not changing our ROI goal of like 100% return within the seven-day window for all our performance marketing, budget, and we, with this setup, although based on the results which, Google and Meta are posting, you see that they are able to monetize better their traffic. We are still able to grow and improve the marketing, with the exactly same ROI which I consider as a. Result and based on the additional AI opportunities, I believe we still have a way to go. We still can grow the video part, the social part of the marketing. So, I believe that part of our future growth will be coming from this area.

And maybe, one additional comment on this. At the same time, we see a shift of behavior of customers. We see that, the AIPCs, mainly by Google are simply, decreasing the traffic, coming from SEO at the same time. We see higher conversion. So, SEO overall for everyone, not, it's not just a Groupon specific topic, it's definitely kind of, headwind, but, at the same time we see that there are opportunities with conversion and opportunities with AI which advance it.

Thank you, Dusan.

Our next written question is in regards to platform modernization.

Your new app remains at roughly 3% of traffic, with plans for a full North American cutover by early Q1 2026. What KPIs are you watching to gauge readiness for the full migration, and what incremental uplift in conversion or engagement have you seen from early adopters?

So I'm happy to report that in recent weeks, we see quite major improvements and that's why we are more optimistic, with the rollout of the platform.

The biggest learning and takeaway which we have from the app is that new mobile next app users have 10 to 20% higher engagement, which means that because the app is easy to use, we are simply coming back to the application. Relaunching it, looking what's available on Groupon, more than, customers using the legacy application. At the same time, it's not converted yet into conversion. The monetization is pretty much on par. That's why, the We are just decided that we will be ramping up the distribution for new users already now in Q4 and then we will really accelerate it in early Q1 because we feel much more confident about the up performance, right now.

And the second part to this question is related again to the CDP or CRM platform, which would allow us to deliver personalized messaging because this is a tool, how to improve experience for customers, deliver them the push notifications and in-app messages which will be more relevant and we see this as a, opportunity for us for next year.

Thanks you, Dusan.

Sean McGowan, ROTH Capital Partners.

Thank you. Yeah, I noticed that, the last quarter and this quarter as well, travel seems to be doing better. So can you talk about some of the things that you're doing in travel that seem to be working?

Rana, do you want to take that question, or should I?

Yeah, I can take it.

So, Sean, you correctly noted our travel business has been done, been doing well, our travel port business in is still relatively small relative to the market opportunity, and our business. We have had success this summer working with several large enterprise brands and travel, that really, fit with our proposition, and so what we've been doing there, these are actually existing customers that we're growing faster with. And what we've been working closely with them to understand their needs and designing, and understanding what our customer needs are and introducing more room nights, better deals, and that's been, really successful, the, these properties. Also overlaid with many of the outdoor activities for the summer. And so that also, let's say, lines up well with our platform offering things to do experiences, and so that's really what drove, travel this summer.

Great. Thanks, Rana.

Bobby Brooks, Northland Capital.

Hey, one more for me. So obviously a lot of discussion on the AI initiatives and kind of where you see the opportunity there. But I guess I was just curious like from the customer-facing perspective, is there anything like, as folks are checking out the website and looking for deals in the coming months, is, are any of these kind of AI initiatives going to be able to be directly seen, one browsing. Inventory on the website or maybe through the app, whether it's the legacy or the new rollout one, just curious to hear that color.

So one internal project which we are running in this area is also really updated version of Search and the relevance platform for whole Groupon, which would allow us to unlock, better opportunities, more personalization in general, in line with what I was talking about with the CRM, project also, and the plan is, that when we will have this platform released, we will be adding the AI search also on the Groupon platform.

Until then we release the functionality which is not like pure AI but which is like helping customers when they are typing the search query that we are, adding the better suggestions, we are adding the related stuff based on the previous results. This is what we are already piloting on that new technology, but we expect much more. When we will have it. And at the same time, we have a very heavy stream when we are making sure that our website is able to talk with all AI platforms because like our observation right now is that not many customers are really using the apps, from in OpenAI and other platforms. It's more still the organic language. Help me find the Groupon deals in New York, for example, the query, which is quite often used in OpenAI or find me the deals for, I don't know, for the bowling during the weekend, and we want to make sure that our website is providing the feeds for AI agents so that It's very easy to incorporate our results in that, natural language flow there, but obviously we are and will be ready also, for the upper world when it will, we will see, some better numbers coming. We have projects which are covering it so that we are ready, but from like impact perspective, I believe that, the bigger value right now is about the compatibility of the website to talk with AI engines so that it's easy for them to show our results.

Makes a lot of sense. Appreciate the color.

Thanks, Bobby.

We have one final written question. Can you give an update on the Italian tax settlement?

Yeah, I can take that one, and there are more details on this in our queue, but the headline is we continue to see progress there. Our Italian entity received an update that the proposed settlement we had has received several approvals, so that's good progress, and now it's waiting to get a revised assessment that reflects the terms of the agreement. We also have an upcoming court date in December, and we're expecting to jointly seek judicial approval. So this is progress. We're hoping to resolve this ongoing matter and put it behind us, at the same time it's been a fluid situation and so, we, we'll continue to update you as we get more information. Yeah, and maybe as a reminder, the remaining amount that would be owed under the terms of this agreement is approximately $15 million, so that's the latest update we have on Italy.

Thank you.

Thank you, Rana.

Thank you, Dusan. There are no further live or written questions, so this concludes our call for today.

Thank you everyone for joining. For additional information, please go to investor.groupon.com.