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| Statement |
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| As Dusan mentioned in his prepared remarks, our local category benefitted in the third quarter from the strong performance of a large enterprise deal that ran on Groupon during the month of August and also benefited from better performance in our Things To Do vertical, which saw several important merchant partners return to our platform for the summer season |
| And adjusted EBITDA was $18 million, as we recorded a second straight quarter of positive adjusted EBITDA generation as the company benefited from realized savings from our cost actions on SG&A |
| Three, I am pleased to see local billings return to growth earlier than expected, which helped to drive a significant improvement in the rate of decline for global billings |
| We will be working methodically to optimize every stage of our selling process and we see a significant growth opportunity from improving the efficiency of our sales investments |
| At this stage of our transformation, my view is our deals can be a great marketing tool to drive traffic to our site and improve conversions |
| By strengthening our merchant partner value proposition, we can improve our assortment of desired deals, which leads to a better customer experience that improves traffic and conversion, which helps drive business to merchants and gets the positive marketplace flywheel going |
| Improving our managed channels performance is a focus for our marketing teams going forward |
| We are turning our focus to delivering projects across product, engineering, sales, marketing, and revenue management that we expect will strengthen our marketplace and position our business to return to growth |
| We also expect Q4 will be positive in our cash flow -- free cash flow |
| Our SG&A reduction drove a 2,000 basis point improvement in our adjusted EBITDA margin year-over-year despite revenues declining 12% during that same time period |
| As we updated investors in our last two earning calls, reducing our reliance on promotional spend and improving the mix between paid marketing and promotional spend is a key step towards improving the health of our marketplace |
| The progress we have made on the cost side combined with our plan to raise approximately $100 million in liquidity between a fully-backstopped equity rights offering and non-core asset sales is a major step forward to strengthening our financial position |
| Local billings in Q3 was helped by strong things to do our season and a popular deal of multinational retailer |
| Given our current equity market valuation plus our operating plan focused on unlocking both topline growth and expense savings plus the value of our non-core assets, we believe we can create value for all of our stakeholders as we continue to execute our transformation strategy |
| Year-over-year revenue change at minus 5% to 0%, adjusted EBITDA between $80 million and $100 million, positive free cash flow for the entire year |
| In addition, our talent acquisition process was restructured and we are seeing improved throughput and quality from our new hiring engine |
| This is the first time we have reported local billings growth since the start of the pandemic and a nice positive signal for our business |
| If we are successful in unlocking gifting, I expect that Groupon will generate much stronger performance in the Q4 holiday season than we are used to seeing |
| I am happy to see the continued progress the company has made to create an efficient cost structure and improve the trajectory of the topline performance in the business |
| As we have discussed in prior quarters, we see an opportunity to improve the productivity of our salesforce and in the third quarter, we continued to see an increase in year-over-year sales representative productivity |
| Over the long-term, I believe we can find a few hundred basis points of growth from just improving our platform reliability |
| From my perspective, the positive signals I see in the quarter include; one, another quarter of progress as our third quarter financial results came in line with our baseline expectations to deliver sequential improvements in the rate of year-over-year revenue decline, generate positive adjusted EBITDA, and slow our free cash outflow |
| We continue to see opportunities to improve Groupon’s ability to execute more efficiently and in turn further reduce costs in 2024 |
| We believe that quicker development time and quicker releases can help us provide a much better customer experience over time |
| Local billings was aided by a strong summer season for our things to do offerings, where we saw several important merchant partners return to Groupon after a several season hiatus |
| With this financing plan along with the actions we have taken year-to-date to create an efficient cost structure, I feel confident that we will be able to provide clarity to all stakeholders, from customers, merchants, employees, suppliers, and capital market participants, that Groupon has the liquidity it needs to support our transformation plan |
| These are major projects that will take time to execute and won’t have immediate contributions to our topline results in the near term, but they are important to build a strong foundation for future growth |
| At the same time, as indicated by my commitment to the backstop rights offering, I’m confident that we will succeed in our transformation and we will lay the foundation for our long-term success |
| For example, one area of focus for us is the checkout process, where we see many opportunities to improve the experience for customers who have made it all the way through our funnel and added items to their cart |
| As a side effect of this, we have several automation projects, which should help us to increase the productivity of the sales force significantly |
| Statement |
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| In addition, reliability on our legacy platform has been a major issue for Groupon |
| In the third quarter, consolidated goods billings was $36 million, down 34% year-over-year and consolidated travel billings was $29 million, down 16% year-over-year |
| On the negative side, it has become clear that several of our more ambitious projects will take longer to deliver than expected |
| Within international, we delivered local billings of $94 million, down 3% year-over-year |
| And -- but Q1 due to the natural merchant cycle will be negative because it's quarter after gifting season |
| Offsetting this strength was our Health, Beauty & Wellness and Food & Drink verticals, where we continued to experience headwinds |
| While there are several factors impacting this divergence between our revenue and gross billing growth rate, the primary driver is a reduction in our deal margin |
| We did observe some constraints in our ability to further increase our performance marketing spend, while maintaining an attractive return on investment, so we made a decision not to increase our marketing spend further |
| And while we expect to generate positive free cash flow over the full year of 2024, we would expect our first quarter free cash flow will be negative, given the seasonality of our accrued merchant payables as we exit the Q4 holiday season |
| While this is an improvement versus last quarter and last year, it was still negative as our return to free cash flow generation lagged our return to positive adjusted EBITDA |
| As a result, revenue as a % of gross billings was 30%, a reduction of over 300 basis points year-over-year |
| And in our top areas, we see year-over-year growth, the implementation of that is slightly delayed |
| While we made some good progress in the third quarter, I am not happy with the delivery of our projects and progress is taking longer than I expected |
| While we are making progress to drive traffic growth through our paid marketing channels, traffic from our direct and managed channels is still declining, with traffic from managed channels decreasing at a faster rate than our direct to site traffic |
| Revenue declined at a faster pace than billings |
| As of November 9th, 2023, management is issuing guidance for the fourth quarter of 2023 as follows; revenues between $127.5 million to $137.5 million, or a decline year-over-year between minus 14% and minus 7% |
| For 2024, we currently expect revenues in the first half of 2024 to decline year-over-year and revenues in the second half of 2024 to grow year-over-year |
| Dusan, in your prepared remarks, you mentioned some constraints on dialing up marketing spend in the quarter |
| While we returned to year-over-year growth in local billings earlier than expected, we continue to expect progress will not always be linear and we would not be surprised if local billings growth turned back negative in the fourth quarter |
| Despite incredible progress by the team, I made the difficult decision to delay 100% roll-out until 1Q 2024 to de-risk and protect our peak season |
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