Hello and welcome to Groupon's Third Quarter 2024 Financial Results Conference Call. On the call today are Chief Executive Officer, Dusan Senkypl; Chief Financial Officer, Jiri 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 12th, 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 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, 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. 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 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 U.S. GAAP. 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 10-Q, which contain more detail on our third quarter results. I will start today’s call on Slide 5 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. 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 consideration 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. Second, while our overall North American 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…

Thanks, Dusan, and thank you as well to everyone who is joining us today. I’ll 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. Turning to slide 14. So let’s jump into 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 guidance. Revenue as a percentage of Gross Billings was 31%, an increase of 0.5% year-over-year. The percentage remained relatively stable from the 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. 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 we commented in the second quarter earnings and as Dusan just mentioned, our marketing spend this quarter was not as efficient as expected related to our tech migration issues. Going forward, we expect marketing as a percentage of gross profit 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. Our trailing 12 months adjusted EBITDA is positive $78 million. Turning to cash flow. Third quarter operating cash flow was negative $16 million and free cash flow was negative $20 million, a slight decline versus last year and in line with our expectations. We ended the quarter with $160…

Thank you, Jiri. 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.

Could you provide a little bit more color on why you don't think the legacy retention rates would bounce back in North America? What do you think the impediment is there?

Hi Sean. Thank you for the question. So we have multiple activities to reactivate those legacy cohorts. Last year, we saw a 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. So this is still our plan to reactivate them. Maybe I can comment also on what happened in some cases we were doing from securities and technology changes during the, for example, password resets or logging some users out of the application and it added simply into the friction. These customers weren’t typically buying our health and beauty segment, and it's simply possible that some of them, they 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 a granted.

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.

Okay. Thank you. 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 which -- maybe the $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.

Would they be offered the opportunity to take the same notes as the rest of the group?

No, at this moment, we not thinking, and I think we will be thinking that little bit later, what we will do with the remaining part.

Okay, all right. Thank you very much. Appreciate it.

Our next question comes from Bobby Brooks from Northland Capital. Bobby, you can now unmute your line.

Hi, good morning 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 a 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. So I don't see any major blockers. We also noticed the period before the presidential elections were 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%. 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 I was trying to read through the press release, but it obviously came shortly before the call. But I think I read that its attributed -- one of the attributes, 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 an increase in voucher redemption rates would be a benefit to revenues, not a headwind? What am I missing there?

I think it's a little bit linked to variable consideration because what we saw in summer was that -- there were very good deals. People really enjoyed. So, we saw higher redemptions. So, we have revenues and we have also, at the same moment, people take them. So, we have a lot of our breakage -- that would be part of the revenue.

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, how would that be a negative headwind to revenue, not a positive?

It's already in -- we are having our margin of Groupon. If it happens at its break, we have 100% of that. But certainly, we are looking for people to redeem because our business is to have a repeated customer, satisfied customers who are with us for a long period.

All right. And then I guess, just reading kind of between the lines, -- it's you mentioned in the press release, it talks about $25.8 million remeasurement of the SumUp 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 SumUp ownership. Is that a piggy-bank you'd like to tap if the opportunity opens up? And maybe explain why that -- the valuation is still kind of much lower than what that -- writers article that I mentioned.

Well, you know that last year, we sold two tranches of SumUp, which is always a combination of demand and supply. We are reiterating there for many quarters that we are considering to sell it -- this is private component. 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.

Our next question comes from Pierre Rope from Goldman Sachs. Pierre, you can now unmute your line.

Hey thanks so much for taking the 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 hire into the rest of the year? Maybe we had 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.

So, in the last six weeks of this year, the hiring is paused because it's not very efficient in terms of training, but we were significantly ramping up the hiring during pretty much a 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 salespeople so that they can be much more -- in the office as we see this extremely efficient, especially for the further sales force. And they are serving the whole United States. We just have allocation to a certain region of the United States. And in terms of efficiency, we see the better numbers overall in the largest population centers of 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 quickly into more customers buying the services.

Thank you.

There are no other questions. So this concludes our call for today. Thank you, everyone, joining. For additional information, please go to investor.groupon.com. Thank you so much.