GRPN - NASDAQ

Hello and welcome to Groupon's Third Quarter 2023 Financial Results Conference Call. On the call today are our Interim CEO, Dusan Senkypl; and CFO, Jiří Ponrt; and Senior Vice President 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. [Operator Instructions] 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 reflect management's views as of today, November 9, 2023 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 their earnings press release and in their filings with the SEC including their 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. On the call today, the company will also discuss the following non-GAAP financial measures, adjusted EBITDA, non-GAAP, SG&A, and free cash flow in Groupon’s press release and their filings with the SEC, each of which is posted on their 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. Unless otherwise noted, all comparisons are provided on an FX-neutral basis. And with that, I'm happy to turn the call over to Dusan.

Thank you. [Operator Instructions] Your first question comes from the line of Trevor Young with Barclays. Your line is open.

Yes. That's fair. I can appreciate that. Dusan, in your prepared remarks, you mentioned some constraints on dialing up marketing spend in the quarter. Can you actually elaborate on what those constraints were? Will it add unit pricing on certain social platforms or something totally unrelated? And then as we look at the 4Q holiday season, that's typically when impressions get even greater demand from other advertisers. So, should we expect that spend to actually decline Q-on-Q as you focus on those ROI thresholds?

Actually, I don't think that we hit a long-term limit, let's say, for our advertising. We are, in my opinion, hitting the limit, which we can do right now with the platform and technology which we have available. The business intelligence infrastructure project, for example, should unlock us other opportunities to be smarter in performance advertising, same with the new platform, which should provide us more insight on our conversion tracking and this is extremely important, especially in international. And in Q4, I believe that our performance -- not performance revenue management team is looking carefully into seasonality trends when different types of products are starting their own season. So, although I expect that the percentage-wise, we will be on the same level, the overall spend, it depends how successful we will be, and it's very possible that it will be higher in the dollars amount, but the percentage-wise, I don't think that it will be higher.

Okay. That makes sense. Just last one for me. I had this inbound from a few new investors to the name. Just what steps are you taking to drive retention between a merchant and consumer? The illustrative scenario being a customer buys a Groupon for some activity and now has a direct relationship to that merchant. Why would the customer come back through Groupon for that service? And by sort of so why wouldn't the merchant just go direct back to that consumer kind of cutting Groupon out of the process altogether? Just any thoughts on how you address that structural challenge would be appreciated.

We have several potential ways how to approach it going forward, and we will be [Indiscernible] most likely all of that. However, what I would like to mention is not in V1 of our new merchant platform, which we will be -- we are building now, but we will be launching it early next year. I would like to have an option to have different pricing conditions, including our take rate for first-time customers and repeated customers. So, the cost for merchants for the second and follow purchases is different versus what they are paying right now for the first time customers. So, this is one very simple are obvious solution, which we will for sure offer to our merchants.

Got it. We look forward to seeing the new interface next year.

Thank you, Trevor.

Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.

Thanks so much for taking the question. Maybe two, if I could. We talked last quarter about getting the right mix of merchants and having a density of not just a number of deals, but the right top deals by

Okay. And I can take the merchant acquisition question. So, this is the area where I would like to see faster delivery than what we have. As I mentioned during my call, we are seeing year-over-year growth trend in terms of productivity of our salespeople. And I was talking on our last call that we will be adding the city managers, city CEOs who will be able to help us to manage the traffic. But -- we had to change the priorities internally and we were rebuilding other parts of sales organization and processes and tools, so that we have better control in how we are selling, what we are selling and the focus on the deal assortment, the quality of deals is something which we are working now and we'll be focusing on in Q1. So, no changes in the plan. As a side effect of this, we have several automation projects, which should help us to increase the productivity of the sales force significantly. But this is one part, although we have confirmed that it works. And in our top areas, we see year-over-year growth, the implementation of that is slightly delayed.

Okay. Thank you.

You're welcome.