Groupon’s Earnings Call Highlights Strong Growth and Challenges

Groupon ((GRPN)) has held its Q3 earnings call. Read on for the main highlights of the call.

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The recent earnings call from Groupon revealed a generally positive sentiment, highlighting strong performance and growth in key areas despite some ongoing challenges. The company reported continued growth in global billings and made significant advancements in technology and market expansion. However, issues such as a decline in SEO traffic and an unresolved Italian tax settlement remain hurdles. Overall, the positive developments in Groupon’s core business areas and strategic initiatives were seen as outweighing these challenges.

Strong Global Billings Growth

Groupon reported an impressive 11% year-over-year growth in global billings, marking the second consecutive quarter of double-digit growth. The North American local category saw an 18% increase, while international local, excluding Giftcloud, grew by 15% year-over-year, showcasing the company’s robust market presence.

Core Local Category Success

The core local category now accounts for 89% of Groupon’s billings and experienced an 18% growth. This success underscores the scalability of Groupon’s hyperlocal marketplace strategy, which continues to drive the company’s growth.

Adjusted EBITDA and Free Cash Flow

Groupon delivered an adjusted EBITDA of $18 million, surpassing expectations, and reported a trailing 12 months free cash flow of $60 million. These financial metrics highlight the company’s strong operational performance and effective cost management.

Customer and Market Expansion

The company added nearly 300,000 net new active customers quarter-over-quarter and over 1 million in the last four quarters, excluding Italy. This growth in the customer base is a testament to Groupon’s expanding market reach and appeal.

Chicago Market Growth

Chicago has emerged as Groupon’s largest city market, growing at nearly double the rate of the North America local overall. This rapid growth in Chicago highlights the effectiveness of Groupon’s localized marketing strategies.

Technology Advancements

Groupon’s platform modernization efforts are paying off, with a 13% year-over-year improvement in deal page conversion rates in North America. This indicates successful advancements in technology and user experience.

SEO Traffic Decline

Despite the positive developments, Groupon is facing a decline in SEO traffic, which poses a challenge for its marketing efforts. This decrease represents a headwind that the company needs to address to maintain its growth momentum.

Italian Tax Settlement Uncertainty

Groupon is dealing with an ongoing issue regarding the Italian tax settlement, with approximately $15 million still owed. This situation remains fluid and presents a financial uncertainty for the company.

Forward-Looking Guidance

During the earnings call, Groupon’s leadership provided forward-looking guidance, emphasizing significant growth metrics and strategic priorities. The company aims to accelerate top-line growth to over 20% in billings while maintaining strong adjusted EBITDA and free cash flow. Groupon is focused on enhancing platform capabilities and leveraging systematic improvements in its marketing engine and strategic investments in technology and AI-driven solutions.

In summary, Groupon’s earnings call highlighted a strong performance with continued growth in global billings and advancements in technology and market expansion. While challenges such as SEO traffic decline and the Italian tax settlement remain, the company’s strategic initiatives and core business successes provide a positive outlook for the future.