Groupon, Inc. Aktie

Hello, and welcome to Groupon's First Quarter 2026 Financial Results Conference Call. On the call today are Chief Executive Officer, Dusan Senkypl; and Chief Financial Officer, Rana Kashyap. [Operator Instructions] The company has posted earnings material, including earnings commentary on the company's Investor Relations website at investor.groupon.com. 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, May 8, 2026, 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 annual (sic) [ 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 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'd like to turn it over to Dusan to make a few opening remarks before we jump into Q&A.

Hello, and thanks for joining us for our first quarter 2026 earnings call. It's great to be with all of you today. Yesterday, after the market closed, we released our earnings and posted our shareholder letter on our Investor Relations website. Today, I will make 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 shareholder letter, press release and 10-Q.

Let me start with the headline. Q1 fell short of our expectations. Global billings of $383 million declined 1% year-over-year, slightly below our guidance. Revenue of $117 million was flat year-over-year and within our guidance range. Adjusted EBITDA was $12.8 million, slightly below our guidance range. I want to be clear on one item: adjusted EBITDA of $12.8 million includes approximately $2 million of severance reflected in SG&A in the quarter related to the roughly 5% head count reduction we executed in Q1.

The pressures in the quarter concentrated in 3 areas: continued softness in our managed and organic channels, which we flagged on the Q4 call; a deceleration in North America local, where SMB merchant acquisition slowed and enterprise turned negative for the first time in 5 quarters and our first soft quarter in health, beauty and wellness after 4 consecutive quarters of growth. Severe winter weather in January and February added a near-term headwind. Things to Do continue to grow across both North America and international and partly offset these pressures.

April performance has improved, driven by North America local reaccelerated. Managed channels are recovering with email returning to positive year-over-year growth. SEO trajectory turned positive in mid-April. These are early indicators, but they validate the work we have been doing on our customer data platform, and on AI-driven content and they give us confidence in the back half. Importantly, none of the Q1 results yet reflect the operating impact of Project Foundry, which I will speak to next.

Turning to Project Foundry. Foundry is the most consequential operating decision this management team has made since arriving at Groupon 3 years ago. We are rebuilding Groupon as an AI-native company. Foundry is not a product launch. It's a redesign of how the company works. We are embedding AI agents into the core of every function, giving business and product owners direct access to the data, tools and creative leverage they need to act in hours rather than weeks and removing the analytical and engineering layers that previously sat between an idea and its execution.

The operating shift is already visible. We are piloting AI voice agents that conduct outbound outreach to small- and medium-sized merchants. And our objective is for the majority of new merchant meetings to be set by AI voice agents by the end of 2026. Our marketing teams are operating an AI-driven stack across SEM and SEO that continuously evaluates campaign performance, generates creative variants and runs experiments at a pace not previously possible.

Our product teams are starting from AI-built demos rather than written specifications and in some workflows, shipping consumer-facing functionality without traditional engineering involvement. Groupon IQ, our AI deal creation platform is in production. AI-generated review summaries are live across the marketplace. By the end of Q2, we expect every leader at Groupon to be using AI agents in their daily work.

As we rebuild around AI-native execution, we are also restructuring the operating model. We reduced total head count by approximately 5% in Q1. We are evaluating additional restructuring actions in Q2 that we expect will further reduce global head count by approximately an additional 15%, along with other significant cost reduction and automation actions. These plans have not been finalized or approved by the Board, and we will share details on timing, expected costs and anticipated savings once approved. The proposed is straightforward, to enable Groupon to operate at the speed required to win in an AI-native world.

Outside of Foundry, we made meaningful progress on our other strategic bets. Our customer-facing platform rebuild is in the final stretch after a multiyear journey. The new iOS app is fully deployed across North America. The new Android app launched in North America at the end of Q1 to new users. The new international web platform is live in all markets.

These platform upgrades were delivered without material disruption to our financial results, which is itself a meaningful accomplishment given the scope of the work. Our customer data platform is now live in all major markets, and we are using it to drive a fundamentally different approach to managed channels, anchored on customer lifetime value rather than individual transactions. And in SEO and AI search, we are positioning Groupon to continue to drive performance in an organic search landscape restructured by AI-driven search experiences.

On capital allocation, we executed against the buyback authorization. Since our last earnings release on March 10, we repurchased 2.8 million shares for $29.7 million at a weighted average price of $10.58, representing approximately 7% of shares outstanding. As of May 7, approximately $215 million remains available under that program. Going forward, we will continue to be opportunistic, taking into account our cash generation, our investment priorities, market conditions and the trading price of our shares. Our first capital priority remains investing in the organic growth opportunities in front of us. We continue to hold our minority stake in SumUp and any liquidity event there would give us additional capital to deploy.

On guidance, we are affirming our full year. We continue to expect billing growth of 3% to 5%, revenue of $513 million to $523 million, adjusted EBITDA of $70 million to $75 million and free cash flow of at least $60 million. For Q2, we are guiding billings flat to up 2%, revenue of $126 million to $128 million and adjusted EBITDA of $13 million to $15 million.

While April's improvement give us a positive start to the quarter, we have set Q2 guide in the same range as Q1 to factor in a difficult comparison later in the quarter related to several large enterprise campaigns that have different performance expectations this year. We expect the second half to deliver improved results from our strategic bets, better execution in North America for local and additional marketing support.

Stepping back, the long-term opportunity for Groupon remains compelling. The market for online local experiences is significantly underpenetrated relative to categories like hotels and airfare. We believe AI-driven discovery and agentic transactions will accelerate that penetration and Groupon sits at the intersection of consumer intent and local supply, a natural bridge between the AI economy and the millions of local merchants who power Main Street. We remain committed to our long-term ambition for accelerated growth.

Our refreshed mission anchors all of this. We get people offline through quality local experiences at great value. The best things in life happen offline, and as the world becomes increasingly digitized, demand will grow for analog, in-person experiences and for the digital pathways consumers use to identify, discover and book those experiences. That is the company we are building.

I want to thank our team. This transformation is not easy and their dedication, intensity and execution under pressure have made this progress possible. With that, let's open the call for questions.

Our first question comes from Bobby Brooks from Northland Capital.

I just wanted to unpack a little bit more some of the factors that caused some of the headwinds in the small business merchant base in North American local. Is that mostly stemming from kind of the weather -- the kind of severe weather in the first 2 months? Curious to hear there.

So severe weather was definitely a part of that. Also -- and Bobby, thank you for the question. The SEO and managed channel headwinds, which we were talking about on the last call also participated on headwinds. And the third element was also related to enterprise where the AI inventory is very important. At the same time, we are -- we have plenty of bold actions right now with -- for local, and we are very optimistic going forward. The AI will significantly unlock for us an opportunity to acquire more merchants without being restricted to limitations and the size of our core sales team because we plan and we are already piloting the meeting setups for them with AI, which significantly increases the performance and capacity. And we have many other tools which we are deploying right now.

Curious on that outbound -- AI outbound with the merchants, I was just curious like are you seeing good win rates, I guess, is the word I'll use of like merchants getting those calls and setting up that first -- because I also kind of see when I get an AI call, like I usually just kind of ignore it or hear it's AI and hang up. Like is that -- have you guys kind of figured it out where it doesn't seem like AI and those merchants are booking the first meeting?

So there is definitely a small group of people, but it's really minority who don't want to talk to AI yet. I believe personally that this group will be getting smaller and smaller as pretty much every big company, every bank is deploying the AI. And the quality when we are using the frontier models and frontier solutions, I'm personally not able to recognize whether the call is coming from AI or from a human person.

But at the same time, what it opens to us is unlimited capacity at required times because right now, with limited number of salespeople, they are pretty much trying to find out when to call to whom. And based on the AI, suddenly, we have 0 limitations in terms of how many calls we can be doing and when. So we can be doing the calls at times which are fitting much more to merchants. So if we know that in some segments, for example, the owners of small businesses don't have so many customers around noon, so we can be calling them around noon to all of them at the same time. We can be accommodating based on where you are sitting, is it -- East Coast versus West Coast. Right now, majority of our workforce in sales is in Chicago, in Illinois. So we are not really calling in the evening. All this opens up, and it's more than paying off versus that initial loss, which we currently have with people who don't want to talk to AI.

Okay. That's great color. And then kind of continuing on the AI initiatives, with obviously a clear focus of being AI-native company. And I think last quarter, you mentioned how all business unit leaders kind of had to come and propose how they're going to integrate AI into the workflow. And I think today's call, you said that you expect all folks to be using agents later this year. So I was just curious to kind of hear more of a deeper update on like what some of those initiatives -- maybe what some of the more exciting initiatives you heard get proposed by those business leaders? And is it fair to think that the head count reductions is direct relation to, oh, okay, we can use AI for this. And so now we can kind of pull back on our head count in this area.

So first, let me tell you that the motivation for the change and being AI first is not to save cost or have less people working for us. For me, the main motivation is to accelerate how company operates. I personally don't think that companies which will not operate in this mode would survive. And because I'm investing heavily in AI for the last 2 years, and we have plenty of people like this in Groupon and in other companies around me, I see how people who are AI native completely changing the paradigm of how quickly they are moving because they are not waiting on others to prepare reports or data. They can just -- you can imagine it like you have additional 5 or 6 AI people working for you 24/7, you can ask them whatever you want.

So that pace which comes with it is really, really amazing. We are changing, and it's not only us, it's pretty much everyone who is on this AI frontier level. The way how corporations are working, it doesn't make sense anymore to have like teams of 5 or 6 people working on something with all that communication overhead around it and meetings. It's really one or two people, we call it speedboats, who are taking decisions immediately moving super fast, shipping products in days or weeks.

And I expect that more and more of this will be coming to Groupon. But when you look how we were talking about SEO less than 3 months ago, for example, without AI, we would not be able to accelerate so significantly. I see same happening on SEM, also [ mobile next. ] Last almost 3 years, we were talking about the project, how we are moving really slowly. But last 3 to 5 months, the progress significantly accelerated. We would not be able to achieve it without AI.

And I see right now that this is happening across all projects. We pretty much don't want to have in the Groupon any project which would not be around AI first because we simply see the outcomes, speed and the results from these projects to be significantly superior to the old way of working.

Our next question comes from Sean McGowan from ROTH Capital Partners.

I want to follow up on Bobby's question a little bit. You were already doing a pretty good job with SG&A spending and a lot of cuts. But how -- I know you just said it's not about cost primarily, but how much lower could the G&A spending get with some of these initiatives?

Sean, thank you for the question. We were in the commentary stating that right now, the 15% restructuring is not approved by the Board, and we are not talking about specific actions. At the same time, we were mentioning that we are looking very closely on the 15%, along with other significant cost reduction and automation actions because we really see this as a paradigm change how to operate the company.

So I will not give you really any numbers. The saving is definitely not a primary motivation because this is probably for the first time in Groupon's history when we are talking about these reductions while we are growing, not when we need to cut something because -- like Groupon has a major problem with the business, the motivation is really to speed up and change the operation mode of the company. I see it as an opportunity and definitely that will be a lower cost related to all these changes, but it gives us opportunities to invest to grow maybe in other areas. So sorry, I can't give you right now any numbers.

I understand. There's sensitivity around that. I appreciate that. Shifting gears, it seems like consistently as you talk about international billings ex-Giftcloud, that the underlying business, excluding Giftcloud has been pretty strong. Is there any reason that we should not expect that ex-Giftcloud business to stay as strong as it's been or much stronger than the overall reported number? Or are there factors that are going to make that comparison tougher?

I see the difference with international versus NA that in the past, we were -- or Groupon was doing much less cuts to the sales force and was cutting mainly outside of the sales team. So I would say, in general, the sales teams in international are slightly stronger also, not only in terms of experience, but also head count.

And because they are serving individual countries, they can be more focused. So you can think about it that we have these like countries runs in a similar way how we are running the Chicago in NA, where we have better results versus the rest of the country, which is driving the pace. And obviously, the team is doing there great job. So I'm optimistic about around international. Right now, we have headwinds with Emirates because of this very complex situation with the war and politics there. But otherwise, I see opportunity for us in all markets.

Okay. I have two quick questions for Rana, if I can. First, what's up with the taxes? What's the weird thing going on in taxes in the quarter? And second, why would you not add back that severance if that's, in fact, something that's boosting the G&A spending? Why would you not add that back for adjusted EBITDA?

Yes. Thanks, Sean. I'll take the second question first, and then I'll go to the first question. We have a pretty established policy on how we define adjusted EBITDA, consistent with guidance from our regulators. And these severance actions were undertaken on sort of ongoing activities. It was not part of a restructuring action that we put in place in Q1 that was Board approved. And so at the same time, we wanted to let investors know that we did have material severance expenses. So this is why we made sure that it was disclosed in our commentary around SG&A.

So this is something that we are -- see in our numbers. We see it is part of the story in Q1 and why we told you. I don't know if that answers your question, Sean. Before I go to the first one...

No, it just seems like you actually didn't miss. Even though the way most investors would look at it. You didn't come in below. But anyway, I get it's a matter of policy, but your adjusted EBITDA is actually better than it looks.

And that's correct. And we are -- our role here, we want to be as transparent as we can be. So we want to make sure you understand the puts and takes of the quarter, and that's why we included that note in the letter. I'm glad you picked up on that.

Listen, in terms of tax, and there was -- there's always quite a bit of movements going around quarter-to-quarter related to how we are planning the business and potential changes that we're making. I'm happy to go in a little more detail with you offline, but there's nothing structurally that's changed with our business, Sean, at this point. We have -- we do expect to see some benefits on the cash tax side related to some of the legislature that was passed last year. And so from a cash tax standpoint, we do expect this year to be more efficient. But structurally, our business, there's nothing very different happening from a tax perspective, absent changes in the regulatory environment.

We'll now pose written questions to the leadership team. [Operator Instructions] Our first question is for Dusan. How are you personally using AI day-to-day? And what's changed for you in the last 6 months?

It's -- thank you for the question. I see major changes happening pretty much every month. If I will be looking backwards how I was using AI 6 months ago, I was experimenting with like Vibe coding and having agents doing some like small engineering tasks to build tools for me to make my life easier. I was using AI as like a chat partner, all my projects, all my brainstormings were run in AI.

Then I would say some 6 to 8 weeks ago, I switched into the agentic mode. I was actually commenting this or posting some articles on LinkedIn about it that I built AI chief of staff, which is like a solution where all my projects live with. It's built on a Claude code, an Anthropic solution. And it's running all the data. It has access to all the data which I need for my work. I'm sharing a lot of content. It sees my emails, reads all the tasks which we are working on. And this is like a primary way of working for me.

I'm really spending time on meetings with people or -- then everything else I am working on through my AI. And I see significant boost of productivity. I was -- and I am sharing this toolkit within Groupon and with my peers. Some of them took it and improved it significantly and much more advanced versus me. But really right now, I see AI with pretty much old models right now because all the major AI companies will be coming with significantly better models in coming weeks and months. But if I provide enough context, the AI is giving me the answers which are same or better versus what I would be able to do, but it provides me these answers in minutes or hours versus me, I would need to be spending hours.

So I can work on 10x more projects. I have visibility in more stuff. And also it changed the way how we are working with leadership and managers in the company. In the past, it was always prepare 2-pager, 1-pager with big picture, don't spend more time. Right now, it's completely different. Just -- let's provide raw data, throw it on AI and AI can do completely research, find out how best-in-class on the market are working and doing the stuff, show 5, 10 different versions for our solutions.

So for me, it's a complete game changer. I feel that I don't have to wait anymore on this stuff because I have it available right now. And I see that the landscape is really developing significantly. The pace is really unbelievable. And what we have right now, in a few months, will be even significantly more capable.

A follow-up question on that. What's your conviction on where AI and local commerce goes over the next 18 to 24 months? And where does Groupon need to be to get -- when it gets there?

So I would like to position Groupon as a company, which will be significantly helping small businesses because it's not easy to run and operate small business, not only in North America, but pretty much anywhere in the world, and you definitely don't have time to educate yourself on what's happening in AI.

So Groupon is investing and will be investing more into the toolkit so that we are providing platform to small businesses, how to operate their business, how to get more clients, advise them. We are sitting on a lot of data. We were talking about the CDP, about the customer data platform for consumers, but we have a ton of data also for merchants. And I would like to build a solution, which will be taking this data and helping merchants to run their businesses better. This is on the merchant side.

On the consumer side, the way how people are searching, browsing is changing. So I want to position Groupon at a place, which is a platform which any AI agents can be using. So we can be connected to pretty much anything in the world, whatever will be popular, best-in-class as a platform, which will be consolidating the links and traffic and deals of small merchants who on their own would not be able to do this. So we would -- with all this, when we put it together, we will be able to provide the power and benefits of AI to small businesses because right now, it's quite limited to bigger organizations, which have much more resources versus small businesses.

Another follow-up on that. What's the right way for investors to track whether the AI-native operating model is actually working beyond the headline P&L?

So the way which we are taking in Groupon is slightly different to the way which some other companies are taking. My strong belief is that if we want to be AI-native company also in terms of AI products for merchants and for partners, for us, we need to be AI first inside. So that's why this like high focus on how we operate to make sure that every single person is running AI because it changes not only the cost and SG&A, which we were discussing here on the call, which is really not so important for me right now, but it changes the mindset. It changes the way how you are thinking about the stuff. It changes the -- you are not simply willing to do anything in a slow way if you know that you can deliver something in hours. And then this translates into products which we are building, which not only that we will be able to ship them and move them fast, but we will be also able to come with products which will be AI first.

If I would be in the shoes of external investor, I would be definitely looking how Groupon is used by AI platforms, whether when you are searching there, whether you can find Groupon deals, which -- any time I'm trying that I'm able to find Groupon deals in OpenAI or in Google, and this is one of our focused strategies. In the future, I expect that this discovery piece will be moving towards whole agentic commerce, and we, inside Groupon have bets and projects to build a platform, which will be like an open connector for pretty much any new standards which will be coming.

And one final written question. What has surprised you most about AI inside the company since you launched Project Foundry?

I would say the biggest surprise for me was the quality of AI voice agents. I was covering this on the call because I was testing when -- last year, I'm talking to other people who are using it. Last quarter, during the trip, which I had in my team to San Francisco, we were visiting ElevenLabs and some other frontier companies. And what we saw as a progress in this area was unbelievable. And I think it's a major unlock for us how we will be able to talk to small merchants and really unlock the capacity.

When the AI call is done right, you are simply not able to recognize whether you are talking to human or AI agents. So this changed in last probably 5 months because in the beginning of the year, this was definitely not true. This was the biggest surprise for me.

We have a follow-up from Bobby Brooks from Northland Capital.

Just on the -- obviously, there's been some news bubbling up of SumUp moving towards an IPO. And I think you guys have made it clear to the market that when you get a liquidity window, you'll use it. Just wanted to hear, it would be a nice cash sum for you. Any thoughts on like what that cash would go to use for? Obviously, the balance sheet is really strong. So would it just be -- but a lot of like the growth initiatives seem to be like low capital requirements. So just curious to hear maybe how you're thinking about how you might use that cash windfall, if it were to occur.

Do you want me to take that, Dusan?

Yes. You can take it.

Yes. So thanks, Bobby, for the question. We continue to be -- believe that SumUp is an incredibly valuable asset. And as you've noted, we continue to own a small minority stake in it. They are developing well. Their performance is strong. And as you've noted, there's some public commentary that they're getting ready to be a public company.

Our view on this is they are -- they have the scale, they have the business model, they have the management team, and they have really, I think, the story to be a successful public company. But the timing on that and when that will happen is quite uncertain. So we continue to be a passive shareholder there, and we continue to be supportive of the actions and the direction they're headed.

In terms of -- this is a non-core investment for us, and we don't plan to hold this for the long term. So if there is opportunities for us to monetize that investment, we will look at it opportunistically. And in terms of that -- if that capital does -- if that asset does turn to cash, we will look to allocate this with -- consistent with how we think about our capital allocation policy right now, where we are looking opportunistically at share buybacks. We are looking at what we see in terms of our investment needs, which you've noted, how our business is performing, market conditions and where our stock is trading. So we will be opportunistic, and we will see where things go.

The only other thing I will tell you, Bobby, is we've been following SumUp since we've been here for 3 years. And so they have definitely improved a lot, but I've never gotten the timing right on that one, and I don't think it will be smart for us to try to pick timing now. So what is most important to me is that, that business is doing well and has a great position in their market, and we are rooting for them to continue on that path.

Yes, absolutely. I appreciate that color, Rana. And yes, definitely not looking for -- looking for the crystal ball prediction. It's obviously a passive asset for you, but great to hear that additional color on how you would maybe think about using that cash.

And then maybe one last one for me is just on the different marketing channels. I know that was -- some details were discussed there. But some of the other digital marketplaces I cover, one particular was talking about really good strength and leaning into advertising on Meta and [ Pin ] and more so leaning away from Google. Just curious if you could provide any color on -- a little bit more color on what marketing funnels, channels are working best for you and which ones maybe you're starting to lean away from?

I can take this question. I don't think there are marketing channels where we are starting to lean from. I believe that Groupon should be maintaining the position and try to spend as much as possible with very disciplined ROI on every channel. But you are completely right with Meta, where I see disproportionately bigger opportunity versus Google, where I believe we penetrated most of the surfaces, which are suitable for Groupon, and we can get much better there. But in Meta, especially with video content, we have much more opportunities.

Meta also released in the last -- I think it's 2 weeks or so, much better connectivity for AI. So our team is already working with AI, generating the advertisements and completely AI managing the campaigns. And at the same time, we are experimenting heavily with AI-driven way how to generate quantity of videos based on our local content because currently, AI allows you, if you take just a few pictures, just from those photos, let's say, you can create really beautiful, compelling videos, which will be opening us opportunity to advertise mainly on Meta, but then also on TikTok more.

Very interesting. And then maybe just one follow-up on that AI content. How does it work, the relationship like with the merchant, essentially, if they're signing up to use you as a service or use your platform, do they inherently then give you the ability to kind of create content for them through AI? Like just because I would guess some business owners probably want to be a little bit more protective around that. Just curious to hear how that dynamic works.

We are significantly improving quality of content with AI. So actually, until now, I didn't hear about any single complaint. In several cases, I heard wow, this is unbelievable, when we took, I would say, mediocre pictures from merchant website, for example, and then reprocessed it and improved it with AI. So I actually see it as a positive thing for merchants because it is in their best interest to be represented in the best possible way and the quality of media, which thanks to AI, we can now provide also to small businesses is comparable with the professional outputs, which bigger companies are using.

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

Hello, and welcome to Groupon's Fourth Quarter and Full Year 2025 Financial Results Conference Call. On the call today are Chief Executive Officer, Dusan Senkypl; and Chief Financial Officer, Rana Kashyap.

[Operator Instructions] The company has posted earnings materials, including earnings commentary on the company's Investor Relations website at investor.groupon.com. 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, March 11, 2026, 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 annual report on Form 10-K.

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 report 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 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'd like to turn it over to Dusan to make a few opening remarks before we jump into Q&A.

Hello, and thanks for joining us for our fourth quarter and full year 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 Investor Relations website. Today, I will make opening remarks and then open up the call for your questions. For more details on our quarterly and full year performance, I encourage you to read our full earnings commentary, press release and 10-K.

I want to start with what matters most. 2025 was a milestone year for Groupon. For the first time in a decade, we returned to both billings and revenue growth. Full year global billings grew 7% to approximately $1.67 billion. We delivered a second consecutive year of positive free cash flow and exited the year with approximately $296 million in cash.

These are not incremental improvements. This is a fundamentally different company than the one that existed 3 years ago. Our core local marketplace, which represents approximately 90% of billings, grew double digits for the full year in both North America and international, excluding Giftcloud. Global active customers reached 16.2 million, up more than 5% year-over-year, with North America local active customers growing 12%.

Now let me be direct about Q4. We did not finish the year the way we planned. Global billings grew 4% year-over-year, but came in below our guidance range, as did revenue and adjusted EBITDA. The shortfall was not broadly distributed. It was concentrated in 2 specific areas: Enterprise channel deceleration in North America and underperformance in our organic and owned marketing channels. Both are well understood, both have clear root causes, and both have direct action plans underway which we go into more detail in our earnings commentary that we released last night.

On the product side, our product and engineering organization is shipping more, faster and with better quality than at any point in recent memory. Our platform migration reached a significant milestone with 50% of all iOS North America users now on the new mobile app, and we expect all iOS North America users to be migrated by the end of Q1.

Along with our new website, this is a complete rebuild of our core consumer platform, a multiyear undertaking, and completing this ramp-up is meaningful not just as a technical milestone but the foundation for our next phase of growth. Earlier results showed that the new users on the updated platform are generating stronger monetization per user than on the legacy app.

With the new platform in place, we now have the development velocity to move quickly on the opportunities ahead. In 2026, our product agenda shifts from conversion first to grow first, with a new search and relevance engine, a customer data platform now live in North America to drive personalized customer journeys, and the infrastructure to make our inventory discoverable and transactable by AI agents and platforms.

That last point is central to where we're taking this business. Our #1 strategic priority for 2026 is to shift the business towards an AI-native operating model. We believe the next generation of local experience, discovery and transaction will be driven by autonomous agentic systems that can evaluate options and execute transactions on behalf of customers. The platforms that position early for this shift will capture disproportionate value, and we intend to be one of them. We are building our proprietary AI personalization layer, making our inventory discoverable and transactable by AI agents and targeting technical readiness for AI agent initiating transactions by mid-2026.

To underscore our commitment, today we announced the formation of a dedicated artificial intelligence committee of the Board of Directors, making Groupon one of the first publicly traded consumer marketplaces to establish a Board-level AI committee. We appointed Amit Shah as a new Independent Director to chair the committee. Shah is the founder and CEO of InstaLILY AI and previously served as the President of 1800flowers.com. His experience and the intersection of commerce platforms and emergent technologies is directly relevant to the work ahead.

On 2026 guidance, our full year results delivered our first -- fourth consecutive year of improving revenue growth, and we expect that trend to continue. That said, the pace of growth improvement will be more moderate than the trajectory we were building towards. The headwinds in organic owned and enterprise channels are addressable, and we have clear plans against each, but the fixes will take time to compound.

Our guidance reflects that reality. We are guiding to 3% to 5% billings growth, 3% to 5% revenue growth, $70 million to $75 million in adjusted EBITDA and at least $60 million in free cash flow. We also plan to host an investor event in the second half of 2026 to provide deeper insight into our strategy and our path forward.

Taking a step back, the long-term opportunity here remains enormous. The market for online experiences has significant under-penetration compared to categories like hotels and [ airfreight]. We believe AI-driven discovery and agent transactions will accelerate online penetration and local experiences, and Groupon is well positioned to capture that growth. We remain confident in our long-term targets to accelerate global billings growth to over 20%.

As we move into our growth phase, we are anchoring the company around a clear mission. We get people off-line through quality local experiences at great value. In a market where every platform competes for more screen time, Groupon exists to drive real-world commerce, connecting consumers to local businesses, and generating measurable food traffic and spend. As AI shifts from assistive tool to autonomous agents that can discover, evaluate and transact, Groupon's position at the intersection of consumer intent and local supply makes us natural bridge between the AI economy and the millions of businesses that power local communities.

We are still in the early innings of a massive opportunity to become the trusted destination for discovering high-quality local services and experiences at unbeatable value. We have the cash, the technology and the strategy to win. Our work is far from finished, but the foundation we have built gives me real confidence in what comes next.

I want to thank our team. This transformation is not easy. And their dedication, intensity and execution excellence have made this progress possible.

With that, let's open the call for questions.

Thank you, Dusan. Our first question comes from Bobby Brooks from Northland Capital Markets.

So it was excellent to hear how -- the commentary of how conversion rates across every portal and geo improved in the fourth quarter. I just wanted to hear more on what you believe drove that. And do you feel like there's more room to go on improving this further? Or maybe is that a level you'd like to maintain? Just curious to hear more there.

Thank you, Bobby, for the question. I believe that the conversion results which we have are a result of several different aspects. The first I would like to mention is the platform development, because when you compare what we are running and operating in Groupon versus what we had 2 years ago, the consumer interface is much more consumer-friendly, we are improving the search and relevance experience, just trying to present our customers the products which are relevant.

The second dimension of that is also related to our offer because we are not just trying to get as many merchants on the platform as possible, but we are really discussing the quality of merchants, quality of offerings. And this has also translated to conversion.

And at the same time, in our marketing channels, we are trying to buy as relevant traffic as possible, not just widely get users who may not be really interested in our deals on the platform, but we are trying to improve the marketing. So we are buying in the paid channels the traffic which has the highest possible conversion.

This comes also with the fact that we are buying slightly less eyeballs in general, but improving the conversion significantly. I expect that this trend will continue because also part of the like a decision-making funnel is moving towards like AI surfaces and interfaces which are informing customers on what's possible. But we will continue with our conversion improvements through the better inventory and better products. So I expect that this trend will continue.

Got it. And then shifting gears, you mentioned how a weak pipeline of new brand adds and some one-off issues with existing enterprise merchants kind of drove that weakness in that segment. But I wanted to get a little bit more in-depth there. Why do you think the pipeline is weak just generally? And it felt like -- because it felt like we turned a corner and winning new merchants, as you could kind of go to them with a lot more data supporting, hey, why doing vouchers on Groupon is beneficial. Did something change there? Maybe that was more specific to SMBs? Just wanted to hear more on how that pipeline for enterprise weakened.

So last year, we made a bet on a partner to be our channel to acquire new customer acquisition, and simply that deal is going below our expectations. So we were expecting to get more traction and more new partners on our platform through that partnership, which actually we announced last year publicly.

At the same time, we see that the market is slightly changing with our -- we need to work on our products to have better product market fit, because traditionally, we have the coupons or the deal type of product. What we see is that the market is moving towards a closed-loop transactions. When the product price, for example, is not visible directly on the website, you need to register or the offer is up only. Because it's so easy now to find out what's the pricing and the big brands don't want to see different pricing on Groupon's publicly -- on Groupon publicly versus what, for example, on their website. So in this area, we are iterating our product with improvements on the disclosed loop proposition so that we can serve more brands in this direction.

And then maybe I would mention the reason why we are talking about the fact that it will take some time to compound the results. Enterprise is a long cycle. So when we start talking to the potential partner, the deal is not closed in a few weeks. It's -- you should think about it more as a negotiation process which takes several months to close, sometimes even quarters because sometimes they need to include it in their annual planning.

Got it. That's helpful. And just that was something I wanted to double-click on too, is the closed loop part. So if I'm understanding it correctly, it's essentially kind of not having the -- like the price of the deal listed just blankly, but you would have to like kind of create a Groupon account to then see the deal. Just want to make sure I'm...

Yes.

Okay. So that's...

Yes. This is it. There will be several levels of the closed loop because there are different requirements of brands on the market. We already have some experiments up and running in travel and in some other categories. There will be cases where the offer will be visible on the website, but you have to first register, which is pretty much one click right now using the single sign-on technologies. In some cases, we will just have an information on the website. But in order to access the price for this deal, you need to install the application and you can get the deal in the application.

Got it. And then just last one for me before going back to the queue, sticking with this enterprise stuff. You mentioned how you kind of reorganized that enterprise channel to align with vertical-focused category structure. Just wanted to get some color on how was the team structured previously? And is this new vertical focused category structure, is that the same structure that has led to strong success in key cities like Chicago?

It's similar structure. I would not say that it's same structure. But what we see across the board in Groupon, when we look on the -- any segment or category as one product, Groupon product, it typically doesn't work because there is a lot of color for each category. The go-to-market and Things To Do in local experience is different than go to market, for example, in health and beauty categories.

So we are doing exactly same stuff. We have further category GMs who have the industry knowledge, typically also know the people within the industry and then we are guiding the sales team how we should be approaching the product for a very specific category.

In the local segment, we were incorporating this geography specific know-how, which is not necessarily an enterprise, but the core idea behind it is exactly the same. We simply need to have very targeted, focused go-to-market for each category where we operate. The people who will be talking to our enterprise partners are people who understand the value proposition of Groupon in this specific category, not just some generic one.

Our next question comes from Sean McGowan from ROTH Capital Partners.

Maybe this is related to what you're talking about, but I'm interested in some color on what happened in travel. That seemed to be -- I mean, I know it's not a big category, but it seemed to be developing some positive momentum that was negative in the fourth quarter. Is that related to these enterprise comments you've been making?

I would say that in travel, we have partnerships with very few brands which are making a big share of the travel revenue, which we generate. And travel for us right now is not the top priority and focus. So we still believe that Groupon has a position and play in this category, yet right now it's kind of not a central focus for new product features, new product developments. So this is related.

Okay. Can you comment on what you're seeing in those European markets that you've referenced in previous calls that were kind of early in the adoption of some of the acceleration initiatives you've adopted, that you were seeing very good success in those markets? Can you comment on how those markets did in the fourth quarter?

So we have very good performance across the board in international. On our international markets, we were implementing all the changes, and sometimes we were even on frontiers in this, how to run the sales organization, how to be very diligent in the quality of the deal, going to the city level to find out what should be the next deal we sign in any given metro.

In terms of technology, actually, the U.K. was the first country where we implemented our CDP as a pilot project. And in Q1, we were able to migrate to new web interface, the new [ Mobile Max ] platform, which we are operating in United States, in most countries, either fully or with like a high percentage of traffic.

So from the perspective of sales organization, the international is running on the same level, in some areas and countries even better than North America. In terms of technology, we don't have the application international yet. This will be Q2 and Q3 of this year. But we already migrated most countries to the new web interface.

Okay. Last question is, for me for now, is on modeling. Is there anything in the SG&A figure in the fourth quarter that was kind of unusually low? Or is this a level we should expect? I thought it might be higher, which is good, but should we expect it to be at about this level?

Yes, Sean, I'll take this. This is Rana. Yes, SG&A did come in lower than we were expecting in Q4, and I do think there were some onetime benefits in SG&A there. And so I do not expect that would be, let's say, the new level. How we're thinking about SG&A right now, if you take a step back and look at where it was on excluding D&A and excluding stock-based compensation, we're really looking for SG&A to be flattish year-over-year. And so we would encourage you to take more of the full year view as you think about SG&A for 2026.

Our next question comes from Eric Sheridan from Goldman Sachs.

Great. Maybe 2, if I can. The first, a big picture one. With this new committee of the Board that's aimed broadly at AI as a theme. Could you talk a little bit about how the management team, this committee and the broader Board will sort of work together in terms of formulating strategy, and then more importantly, implementing and investing against AI strategy looking out over the next couple of years? That would be the big picture one.

And then the more model oriented one would be, you talked about some of the headwinds you saw in Q4 persisting into the front half of the year. Is there any way you can give us a sense of a bit of the pace and cadence of the headwinds dissipating as we get deeper into the year and how to think about some of the sequential dynamics as we progress through 2026?

Thank you, Eric, for the question. On the AI piece or AI committee question, AI is right now number one topic for me personally as a CEO in Groupon. I see it as a huge opportunity for us on all possible surfaces and areas. We need to start internally with the team and then translate this also to our product and how we operate on the market.

So I am personally very heavily invested in AI. I am meeting multiple people, and we formed a partnership with Amit, which is very close, in terms -- let's say, in the depth how we are cooperating. So Amit will be participating in discussions with management, sharing his vision, but also providing feedback on what we are creating. He will be providing feedback also on the level of management team AI fluency, and he will be participating on building the future AI-driven products and revenue streams for Groupon.

So this is not just like a formal AI committee which is a meeting once a quarter, but this is like a heavy focus, deep integration with Groupon management team.

On the second question, the timing of those headwinds, we were talking on this call about the enterprise segment where the sales cycle is long. So it may take up to several quarters to get us to the same speed as we were in the past. At the same time, I would like to mention that when we are looking on the comps, it's mainly Q1 and Q2 where we have very challenging comps in enterprise segment, and then we don't have such a tough comps in the second half of the year.

On the -- in other areas of the headwind which we have which are owned channels, SEO and the managed channels, we implemented already the new CDP, which will help us fundamentally change the way how we are talking to our customers. And I expect that the benefits will start coming very soon.

In SEO, it's a question on the timing because Google is under a lot of pressure from AI-generated content. So we are doing plenty of changes. I believe that long-term Groupon is positioned very well because we are one of very few players who own user-generated content because we have so many customers who are coming back to Groupon providing feedback about local merchants, about their experiences. So the content which we are collecting, but not yet fully using it, is very valuable, it will be very variable content for AI future because all this is extremely relevant for AI-generated answers on AI agents. But the timing is very hard to comment.

We have a follow-up question from Bobby Brooks.

So you guys have done a really good job of winning new customers, and that's been a trend over the last 4 quarters or so. And I understand that these new customers initially won't have -- don't have the same purchase frequency as legacy ones. But what I was curious to hear on is those cohorts of new customers that you won, say, in the first half '25, have you seen those purchase frequencies start to tick up? Or you've kind of found a way through kind of managed marketing to spur those purchase frequencies higher? Just curious to hear more on there.

Yes. So my goal during this year is to improve the way how we are talking and communicating about the customers, cohorts and purchase frequency to our shareholders. We were mentioning in the script that we will have investors conference. And I believe that at that moment, we will be able to present much more simple and easier to understand the model for Groupon marketplace, including the consumer segments.

But going back to your questions, the purchase frequency is not related only to new and active customers and the structure of our portfolio, but it's also related to the category where the customer is buying. So for example, historically, the goods were quite a big and important channel for Groupon and the purchase frequency in this category is much higher versus purchase frequency in other categories. And as the goods, for example, is still declining, it's in a negative way, let's say, impacting our purchase frequency.

We internally see some cohorts of customers, of loyal customers, who -- where we see the improved performance, we see in some segments improved conversion from first to second purchase. And this is internally one of the top priority areas for us. And with new CDP, we are finally having the tools to really target small individual segments and deliver them the deals and offers which are highly relevant for them.

But like more consistent and more detailed communication on numbers and structure, my goal is to bring it to you in -- during this year.

Got it. And then kind of piggybacking around that, the CDP and the retargeting managements that you're taking, could you maybe give -- provide a couple of examples of what that might look like? And secondly, I think some might hear the commentary on this and think it's something that has kind of occurred as the headwinds popped up in the fourth quarter. But this is something that you've just kind of been under -- that you guys have been working on for a couple of quarters, right? Like this is -- it's not just a response to the drop-off in organic traffic in the fourth quarter, right?

No. The CDP is one of the foundational projects which we have in Groupon. And we were not really talking about it a lot. However, I see it one of the -- as one of the most important projects because it allows us a completely different level of flexibility. Groupon originally had the platform, which was in-house developed, it was 10-plus years old. And if our team decided we want to test some campaign, like, for example, if you buy, I don't know, spa in your area, that we will send you a push notification 2 weeks, 3 weeks after offering you something relevant as an upsell, let's say. It took weeks to implement it to our engineering team and everything was done really very manually.

With the new platform, it's all user interface. We can -- it's a drag and drop, we can decide what to do. And we could be running like 10-plus different campaigns every week or new campaigns and new experiments. And we can go much more granular and really user stories, what's relevant in which situation, meaning based on how you behaved on the website. If you visited the deal several times and didn't decide to buy it, then we can provide some specific better offer for the customer in terms of cases.

It will also help us improve our paid marketing channels, because with new CDP, we know whether the consumer, for example, is reading our messaging. At that moment, we don't have a reason to spend money on Google, Meta and other paid channels to get that customer back and we can really target our retargeting campaigns only to customers where we see the customer is not communicating through our channel.

So it really opens a lot of opportunities for us. And definitely, this is not a project which is just a reflection of what's happening in Q4.

And SEO, it's a similar story. That area is highly dynamic because with such a high availability of AI-generated content, there are many, many, many websites and projects which are just generating content and then trying to be presented on Google and visible on Google. Google obviously doesn't want it. So we are changing the rules. And all other websites which have highly relevant content, including Groupon, we just need to react to new rules and change the behavior.

And what's the very important for me, that underlying trend that Google is putting more and more focus on user-generated content on the original content. That's why the Reddit is, for example, ranking very well in SEO, and that's why we are doubling down on our reviews, which were kind of hidden in the past on Groupon, but now we are producing user-generated content for AI reviews, meaning like the AI summaries for reviews. We are generating FAQs and additional information, which is based on what our real customers told us about the merchants, which means this is the content which no one else has.

That's super helpful color, Dusan. And maybe just the last 1 for me is on the kind of headwinds in the managed and organic channels. Is it -- it seems like it's more kind of macro driven, like stuff -- it's not like you were trying things and they didn't work. It's the SEO algorithms of changing, and then when you go to Google, instead of seeing 2 ads, you're seeing 8, right? Am I thinking about that more? Or are there some -- was there something internally that you felt you could have done better with that piece?

Yes. So I think we always can do our better, and you can ask me about any area, and I will have exactly same answer everywhere. However, this is driven originally by the macro situation and the change in this landscape, which is happening for everyone. And I just consider Groupon to be lucky that we have an answer which fits into AI world with this user-generated content.

Congrats on the Entrepreneur of the Year from EY.

We'll now post written questions to management that came in through the company's Investor Relations press line. Analysts who are live on the call, we will continue to move back to you.

Our first written question, you talked about setting a new baseline for agentic AI-first leadership across the company. Can you talk about what that means concretely for how your teams are working today? And what kind of productivity gains are you seeing specifically in engineering?

Okay. So I'm very closely following and having meetings with people who I consider AI frontiers in terms what AI enables across the board. And I see a major shift happening last few months where originally most of us, including me, were using AI as a chatting tool and I was discussing all my projects, I was asking for feedback. However, I see that this is changing fundamentally. And we right now are seeing much more use cases in the agentic-based approach, which is driven by Claude Code and similar solutions.

And I am personally very heavy involved in this. I have my own genic setup, which is reading all my data, which is doing all the preparations for the meeting. When I'm -- new topic, it's like really deeply analyzing the market opportunities, coming with solutions, and all that using the all the data which we have available. So I think it's a complete mindset shift. And this is what we are trying to -- or not trying. This is what we are doing right now and implementing in Groupon.

I want to have all the teams here to be AI first. In engineering, for example, my goal is that we have 100% of the code written by AI by the end of the year. I want to make Groupon a company where all our employees are managers because they will be managing AI agents or orchestrating them, deciding how and where we will improve.

So it's a big change. I see that it can bring, obviously, higher efficiency, but it will allow us to do much more in the product and engineering and sales, provide completely new tools and interfaces to merchants. So I'm extremely excited about this. This is really the project #1 for me right now in Groupon.

And what we see when I take the best AI frontiers who are working in Groupon and look on workflows, it's really completely different world. I think the world where people were specialists in some area is really over, or maybe not over realistically because it's still the case. But people who are frontiers don't operate at this mode. We are more like generalists and they start with understanding the customer, then the definition of the product, building the demo version of the product, so that other people can look at it, but they continue also with engineering.

So in the future, I don't expect that we will have product team. And then the engineering team, I expect that we will have like builders. And all people in this structure will be able to start from design and with delivery of the product, which would allow us to really 10x and maybe even more delivery of product features, improvements to our customers.

And I see that with individuals, this is what right now we are implementing in whole management team. We have very high expectation here because it's such a great pleasure to work with people who switched into this AI-first mode in terms of productivity, how great ideas they have and that they don't have to do the, let's say, the boring part of the work.

We'll go back to Sean McGowan from ROTH Capital.

A couple of follow-ups. Could you comment on what you're seeing what trends you're seeing in the redemption rates? You made that effort last year to kind of remind people when they had Groupons expiring, and that had an effect on the redemption rate. What are you seeing currently year-over-year, and what do you expect?

So I don't right now have the exact specific numbers in mind, but the overall trend in the redemption was continuing in the same pace. So the -- this is one of the numbers where the product teams are making sure that the deals have good redemption rate, that customers really get the experience. We are trying not only to send these reminders, which we were talking about, but now we are much more actively also asking for feedback, so where we can improve the deals or even provide the feedback to merchants. So it's part of the core marketplace proposition. We don't see any like significant changes there. It's just going in the right direction.

And Sean, this is Rana. Just to echo what Dusan said, we see trends very stable-ish. And so like in terms of how it was impacting take rates in 2025, we expect the impact to take rates from higher redemption rates to be very modest. It's mostly through our numbers now.

Okay. That's what I thought. And then on marketing plans, I think you had talked last year about leaning in a bit more to marketing Groupon as a brand. So can you talk about your expectations for marketing spending as a percentage of revenue or as a percentage of whatever metric you want?

Dusan, do you want to talk about the brand and I can talk about the number?

Yes, you can start with numbers and then I can follow up with brand.

Yes. So in terms of numbers, Sean, we have -- we are -- our expectation is that marketing will grow year-over-year, call it, in the high single-digit range. So we are expecting marketing to -- we do want to support the business with marketing spend, and we are expecting that marketing spend growth will be a little faster than revenue growth. However, this -- the relationship between our marketing spend growth and our revenue growth, that relationship will improve versus what we had in '25.

Our focus here over time is to grow contribution profit dollars. And this year, we expect to make progress against that. So in terms of your model, I would expect that marketing will grow high single digits year-over-year.

And I would follow up in terms of our brand campaign, which we started in the second half of Q4 last year. The main motto is Turn Your Life On, which is like highly relevant to the mission which we have as Groupon to get people [indiscernible]. And we see some really interesting results, which are different based on the location when we were running the campaign because we were making sure that we will be able to collect the data on the geo levels.

So we still run the campaign in -- not in huge numbers, but we are still running the brand campaign in Q1, and I expect that we will continue. But we are processing and improving our density commercial model to understand the behavior of customers in individual locations. Because in some cities, we saw some incredible response on the brand campaign versus, in some cities, we got pretty much the -- what is the baseline on the baseline expectation of the marketing campaign on the market. So we want to double down and understand better where and how to spend the brand marketing dollars or where and what is the driver of that behavior so that we can replicate the offers and inventory, which we have in cities where the response to the Groupon brand campaign looks like super positive.

Another written question that came in. Can you talk about the new mobile app migration? You're now at 50% of iOS in North America for users on the new platform with stronger monetization. What should we expect as you complete that rollout?

So right now, the migration and a new platform takes a lot of resources within the product and engineering team. And as we are very close to finalizing this migration, all that capacity will be focused on improved user experience, focused on improving purchase frequency for our customers. And this will be delivered through new functionality.

We were, however, talking here on this call that we have the bets around search and relevance, about personalization. The team is really digging deep into behavior of customers, splitting the customers into multiple groups based on how they behave in the app and on the website. And we will be building the features which will be specifically targeting these customer groups, so where we provide better offers, better, easier interface. So I'm really looking forward to this space, some demos and prototypes, which I saw are really incredible, and I believe that it will improve significantly customer experience and this will be one of the drivers for improved purchase frequency for us.

Another written question that came in. You've made a number of leadership additions recently, including a new Chief People Officer and an SVP of Operations and Consumer AI. Any commentary on the additions? And how are you thinking about the team and talent you need for the next phase of growth?

So when I joined Groupon, one of our main problems and issues which we had, excluding the internal financial situation, was that we were not able to attract new talent. And I'm very happy right now to state that I see that we are able to hire, that we are able to attract really talented people from great companies. I see that we are really raising the bar not only within the management team, but overall, within the Groupon organization, on what's expected. And it's -- I was talking about the AI expectations a few minutes ago, but this is across the board.

And this is thanks to the new joiners who are really challenging us, like asking us to try different ways, move faster, move with higher quality at the same time. So overall, I see great progress and I really see Groupon in a very different situation versus just a few years ago -- even just 12 months ago.

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

Hello, and welcome to Groupon's Third Quarter 2025 Financial Results Conference Call. On the call today are Chief Executive Officer, Dusan Senkypl; and Chief Financial Officer, Rana Kashyap. [Operator Instructions] Today's call will be a question-and-answer session only. The company has posted earnings materials, including earnings commentary on the company's Investor Relations website at investor.groupon.com.

Today's conference call is being recorded.

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 U.S. 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 Investor 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 and International Local excluding Giftcloud 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 top line.

On the demand side, Q3 reflects the compounding benefits of systematic improvements across our marketing engine. We drove healthy growth in our paid marketing 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 4 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 hyperlocal city strategy is paying off. Chicago is now our biggest city and growing at nearly double the rate of North America local overall. Things To Do had an exceptional summer season with its 7th 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 topline growth towards 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, curation, 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 grade. With that, let's open the call for questions.

Our first question comes from Bobby Brooks from Northland Capital.

Something that really caught my attention was the commentary that after allocating the focused 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 a follow-up, could you just discuss a bit more in detail what those focused sales resources look like and the notable actions they took?

Yes. Thanks, Bobby, for the question. I can take it. So our Chicago efforts started already last year, where we reallocated this proportionally higher share of our sales resources and sales team to Chicago. And at the same time, as we are developing our, let'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 our sales 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 they are searching on Groupon. And then we are asking ourselves to come specifically and close the gap.

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 2 quarters ago, and we are also expanding our marketplace understanding across the board. So with this comes 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 playbook that you're already in the process of expanding to other metros. I guess just for like context, you mentioned how you initially put those sales -- increased sales resources in Chicago last year. 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 because I get that it's a lag effect?

Yes. 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 other metros.

Got it. That makes sense. And then 1 more for me is just clearly got the sense of you guys' focus of making a customer journey kind of match the customer. In the prepared remarks last night, you guys used the example if someone wanted to take their kids to a water park is going to be different than someone looking for an oil change. And so I was just curious, like 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 2 parts. One is a mindset shift, which was happening in Groupon in the last 6 to 12 months because, in the past, we were looking on the marketplace as 1 product running plenty of tests across the board and then quite often being surprised that we don't see result. 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 in some categories and completely irrelevant in some other categories. In the past, if we would release 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 U.K., 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, it should end up with Groupon looking completely different for each customer simply based on the profile.

Our next question comes from Eric Sheridan from Goldman Sachs.

Maybe 2, if I could. Building on parts of the last answer, when you think about purchase frequency, which you call out the difference in 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 would be number one. And then number two, when 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 from 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?

Thank you very much for both questions, Eric. We are kind of interconnected. And I will start with purchase frequency and will 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 and, which -- 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 tech limitation of our platform. And that is why I was talking about the CDP project implementation, which has up and running in the U.K., 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 were or 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 the next 9 months and similar. Right now, we don't have the targeting capabilities.

So this technology enabler 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 recently, and based on our experience we know that the 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 [indiscernible] 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 would be adjusting the budgets between performance and brand advertising. But we will come back with more data next earnings call because our brand campaign starts in 2 weeks.

Our next question comes from Bobby Brooks from Northland Capital Partners.

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 compared 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?

Yes, Bobby, 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. What we said in the past was fairly noncommittal -- and I think this -- what we said here is we expect to be opportunistic. And so we are evaluating and the factors to consider here you asked about, we were 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 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, Dusan, 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 -- or I should say, the new cohorts added in 2025, their purchase frequency is higher than the cohorts added in 2024, albeit that 2025 new customers is still below the legacy customers. And 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 let's say repurchase 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 with vendor for today in [indiscernible] because it's a leading indicator for the purchase frequency. And we can see, based on the changes in 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 advance that they will be working. It's by adding right inventory. We were talking about the [ wow ] 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 a very good experience with Groupon. They are more open to a next purchase. So this is confirmed to ramp it up. And so it's converted into overall user base, we simply need to also step up with better technology so that we can target and personalize in more advanced way.

Our next question comes from Sean McGowan from ROTH Capital Partners.

Kind of following up on some of the things you've talked about there. You've been now doing for quite a while, the reminding consumers of expiring Groupons 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?

Thank you, Sean, for the question. I am not able to share the exact numbers, but our analyses are showing that the vendor customer lens, we simply have a much higher rate of the second purchase. And this is a project which we were talking about since last year. It takes a little bit more time versus what ever expecting because of the way how some Groupon are redeemed because 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 will expect that it will translate into repurchase rate overall for all Groupon customers.

Okay. And Rana, a quick kind of housekeeping question. I think you mentioned in the prepared remarks that the ex-Giftcloud International billings were up 15%. Can you translate that into what the revenue growth would have been ex-Giftcloud?

So ex-Giftcloud, our revenue growth in Italy -- ex-Giftcloud revenue growth in Q2 was up 7.6%. So I think about 8%.

Then back to you, Dusan. 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, SG&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 in this 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 poor leads in general which we had in the past.

We have AI included in the, I call it, warmup 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 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 use in supply monitoring where AI is doing 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 conversions. 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 or the customer service of Groupon was more really like service. But going forward, we want to look at customer service as 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 customers 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, have will be change in behavior, how customers are looking for services. So we are closely monitoring and working with partners and with our teams how to be already for AI apps, how to have the website easy to read and communicate with AI engines, whether they can find it via analyzing both other really key works which are driving the AI traffic where we can provide better results.

Like going forward, and again, it will be slower than everyone expects. We believe that people will change the way how they are looking for staff, and it will be more conversational and Groupon 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 were 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 want to be intimate with the platform, which we'll be bringing all long-term merchants and small businesses to AI world.

We'll now pose written questions to management that came in through our Investor Relations press line. [Operator Instructions] 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?

So I can take that question. So first, brand campaign 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 deeper looking on how other companies were running brand campaigns to take the learnings. 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 -- 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 7-day window for all our performance marketing budget. And with this setup, although based on the results, which Google and Meta ARPU stick, you see that they are able to monetize better [indiscernible] traffic. We are still able to grow and improve the marketing the exactly same ROI, which I consider as a great 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 on 1 additional comment on this. At the same time, we see a shift of behavior of customers. We see that the AI PCs, mainly by Google are simply decreasing traffic coming from SEO. At the same time, we see higher conversion. So SEO overall for everyone, 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 would balance 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 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 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 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 outperformance 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 push notifications and up messages, which will be more relevant and we see this as an opportunity for us for next year.

We have a follow-up question from Sean from ROTH Capital.

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 it?

Yes, I can take it. So Sean, you correctly noted, our trombusiness has been done doing well. Our business is still relatively small relative to the market opportunity and our business. We have had success this summer working with several large enterprise brands in 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 understand what our customer needs are and introducing more room nights, better deals. And that's been really successful.

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.

And another follow-up from Bobby from Northland.

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 -- as folks are checking out the website and looking for deals in the coming months, are any of these kind of AI initiatives going to be be able to be directly seeing, one, browsing inventory on the website or maybe through the half, whether it's the legacy of the new rollout one? Just curious to get that color.

So one interim project, which we are running in this area is also really updated version of search and the relevant platform for whole Groupon, which would allow us to unlock better opportunities, more personalization in general, in line with what I was talking about 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 functional activities not like pure AI, but which is like helping customers when we are typing the search query that we are adding the better suggestions, we are adding the related stuff based on the previous result. This is what we are already piloting on that new technology, but we expect much more than we will have it. And at the same time, we 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 of still the organic language, help me find the Groupon deals in the New York is, for example, the query, which is quite open in open AI, or find me the deals or, 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 already also for the upward you'll see some better numbers coming. We have projects which are covering it so that we are ready. But from like 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.

We have 1 final written question. Can you give an update on the Italian tax [indiscernible]?

Yes, I can take that one. And there are more details on this in our Q, 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 are 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 will continue to update you as we get more information.

And maybe as a reminder, the rating amount that would be owed under the terms of the agreement is approximately $15 million, 1-5. So that's the latest update we have in 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.

Hello, and welcome to Groupon's Second Quarter 2025 Financial Results Conference Call. On the call today are Chief Executive Officer, Dusan Senkypl; Chief Financial Officer, Jiri Ponrt; and Senior Vice President of Finance Rana Kashyap. [Operator Instructions] Today's call will be a question-and-answer session only. The company has posted earnings materials, including earnings commentary on the company's Investor Relations website. at investor.groupon.com.

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, August 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 in its filings with the SEC, including its quarterly reports 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 and free cash flow. In Groupon's press release in 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'd like to turn it over to Dusan to make a few opening remarks before we jump into Q&A.

Hello, and thanks for joining us for our second quarter 2025 earnings call. It's a pleasure to be with all of you. Yesterday, after the market closed, we released our earnings and posted our earnings commentary on our Investor Relationships website. Today, my plan is to make brief opening remarks and then open up the call for questions, both live from our analysts and several that were pre-submitted in advance. For more details on our quarterly performance, I encourage you to read our earnings commentary.

In addition, I encourage you to review our press release and 10-Q, which contain more detail on our fourth quarter and full year results.

I'm pleased to report another strong quarter of accelerating growth. Global Billings grew 12% year-over-year, marking, continued acceleration in our growth trajectory. This was driven by strong performance in our core local category with North America Local Billings up 20% year-over-year and International Local Billings, excluding Italy and Giftcloud, up 15% year-over-year.

Combined, our core local category, excluding Italy and Giftcloud, grew 19% and now represents nearly 90% of our billings. This validates the scalability of our marketplace transformation playbook and keeps us on track toward our target of accelerating global billings growth to over 20% by 2027. We generated strong positive free cash flow of $25 million, demonstrating our ability to drive profitable growth while investing in our platform and team. We also announced a proactive refinancing that meaningfully simplifies our capital structure and eliminates constraints, putting Groupon in a position to play offense.

Our hyperlocal strategy continues to deliver strong results. Our North America enterprise brands had an exceptionally strong quarter with 26 brands generating over $1 million in quarterly billings, representing 53% year-over-year growth. North America Things To Do delivered strong double-digit growth for the sixth consecutive quarter, demonstrating market leadership during the crucial summer season with particular strength in amusement parks, parks, water parks and multi-attraction tour passes.

On the leadership front, I'm excited to announce that effective September 1, Jiri Ponrt will assume the role of Chief Operating Officer, and Rana Kashyap will become our next Chief Financial Officer. Both have been instrumental in our transformation since joining in early 2023, and these changes reflect our commitment to developing leaders from within as we build toward our next chapter of growth. Looking ahead, we are raising our full year billings guidance from 3% to 5% to 7% to 9% growth, reflecting the strong momentum we are seeing across our business.

We see multiple levers driving accelerating growth and remain confident we are building the foundation for sustained long-term value creation. We are still in the early innings of a large opportunity to build a hyperlocal experience marketplace that combines trust, curation, quality and unbeatable value with the network effects and unit economics of modern marketplaces. I would like to thank our team for their dedication and hard work that have made this progress possible. This journey has not been easy and their continued commitment to our mission and to our transformation has been really great.

With that, let's open the call for questions.

Our first question is from Sean McGowan from ROTH Capital Partners.

Can you hear me, okay?

Yes, we can.

Great. You mentioned in the commentary that you issued yesterday that you're seeing AI-generated traffic or searches. Can you just elaborate a little bit more on that? Is that incremental -- you think you're getting incremental traffic and business from that? And what is it that makes that more valuable?

Thank you, Sean, for the question. Based on how we currently review, we believe that the traffic coming from AI is more as an incremental. And I really see AI traffic as a tailwind to us. We are spending a lot of resources on building the platform in a way that we are a great partner for AI-driven companies. I'm big believer that the traffic is moving and people are changing behavior, and they will be using AI more and more. And I actually see Groupon positioned very well in this because we have a very unique offer, and we can be a gateway for many merchants to be part of this AI economy as to call it.

And yes, we are growing with pretty much 0 base last year because this is extremely developing. But overall, we see it as a positive trend with really very, very strong double-digit growth every month. At the same time, this is a new field, which is not always easy to measure and there are no like standards in general. So we see on the market various numbers from different types of companies. So I would like to emphasize that still it's a small part of our traffic, but it's the type of traffic, which we believe will grow significantly and will grow also in terms of impact on overall Groupon performance.

Do I have a chance to ask another question at this point? Yes, okay. If you can talk a little more generally about the efforts that you've been making over the last couple of years to get merchants more engaged and to see more repeat business. Can you talk a little bit about progress there?

Yes. So we are talking about the merchant relationship and the way how we are doing the sales pretty much since I joined the Groupon, and we have different views and different angles how we are looking at it. But in general, I consider Groupon like an amazing platform for merchants in general because we are performance-based platform. So which means that we are getting paid only when merchants are getting paid, and this is very important when you are advertising on our platforms, typically, you have to pay for traffic and then you hope that you will be able to optimize.

So in general, our long-term positioning is very strong with merchants. We are still in the process of transformation of our sales force to be partners to merchants. We are now looking on Groupon not as a one marketplace when one size fits all. But internally, we are talking about like triple-digit number of micro categories on Groupon. We want to understand one by one, understand how the economy for merchants works and then be their partners and helping them to create campaigns, which will make sense both for merchants, but also for marketplace.

And this applies actually across the board. We were in our commentary talking about very strong performance in the national enterprise segment. And what I was describing works both with small businesses, but at the same time, it works with large national enterprise partners where sometimes the discussion is even easier and faster because they really understand performance. They understand how much they are paying with other marketplaces or advertising platforms, which they are using. And when we understand their needs, then we can be a great partner for them.

Also, I would say that in the last 12 months, we made a huge progress on understanding what's going on, on the platform. So right now, and we are starting with these like large partners, we can come to them and explain and show them what the data are showing about the incrementality of the business, like whether customers coming from Groupon would come to where either websites or properties without Groupon or not show them, and the behavior, how they were making the decision process. And these data are actually very positive for -- in the way how we are presenting and showing Groupon value, and then it helps us grow the business with merchants more.

Our next question comes from Bobby Brooks from Northland Capital.

And first, I just want to congratulate Rana on moving to the CFO role and Jiri taking over the COO role. So kind of piggybacking on the AI question, it was really interesting to hear that the AI-powered search is showing strong signs of growth, albeit off a small base. But 2-part question. First, of that notable growth that you've seen so far, is that mostly just these AI search engines sort of organically picking up your deals? Or have you made intentional enhancements to your listings to try to pick up this traffic? And then second, just wanted to hear how you plan internally to further accelerate that traffic coming from this channel.

Yes. So internally, we are looking on AI together with SEO because as you know, Google is significantly changing the behavior of the search result pages. How we are looking and put in more and more content and keeping the people much more on their website versus sending them to us. So what we see in SEO that -- is that we have pretty much a steady performance, which actually is a great win because there are plenty of companies which are really facing headwinds right now because the traffic goes down. What we see is that we have declining traffic. However, people are making and spending a little bit more time in decision-making on Google, for example, and then coming to Groupon and they have simply higher conversion. So in SEO part, which also partially includes AI through its AI snippets, we are holding steady, which I consider great results. And then we see the part where people are starting their search in AI engines, being it Perplexity, OpenAI and others.

And we are investing into our platform so that Groupon is providing proper results so that they can directly link us as a source through the recommendation and you would be discussing what I can do with my kids over the weekend that Groupon is included, and this part is growing, and I see this trend of moving people towards AI search is very strong, and it just accelerates. And how we look at it from the midterm and long-term perspective, yes, we are investing into our platform so that our platform is a good citizen and partner in this AI world. We plan to be part of the pilot program, for example, with OpenAI so that -- as they will be developing their product, it will be even possible to book Groupon experiences and deals directly through AI agent.

And this is, in my opinion, the direction where AI is heading. It will take some time, but I expect that it will be really like an executive assistant for people where they will be using voice, talking, discussing with AI, what to do and e-commerce players who want to be really playing important part in this ecosystem need to support it so that it's easy for AI platform to do the booking, do the orders and find all the relevant information. And this is one of the internal focuses of Groupon to play really well.

And maybe last remark on this. I believe that we are positioned very well also from the perspective that we have unique inventory. There are many companies which pretty much have commodity inventory, which you can buy on other places, but Groupon has unique deals, which are not available anywhere else, typically on the Internet. And in this point, it's a major, major advantage for us to be even, I would say, preferred partner for AI companies in certain segments.

Appreciate that detail. And just to confirm, so it seems like the uptick in traffic that you've seen so far is sort of a mix of just organic and enhancements that you've made to the platform?

I would say that in SEO, we have -- we can, let's say, maintain our numbers because of new platform which we have, which is able to provide better and better results from Google. And then there is the part focusing on what you can get internally in ChatGPT and others, which is, I would say, additional technological development, which our platform is capable of providing right now. And that part is the growth which we were talking about in our commentary. This part, although starting with very low and small base, it's growing 50% month-over-month.

Got it. And then the next one for me is you guys talked about how you mentioned. Over 200 micro categories within the North American local segment where you feel you can execute your go-to-market strategy. Could you just provide some context on that? Like maybe what would be helpful is how many micro categories did you feel you successfully pursued within second quarter, that resulted in -- that were reflected in second quarter results?

So we are trying to improve across the board. However, it will be a long-term process, and we were mentioning that we are really in the beginning in many areas that we see that if we do a deep dive, we have a category manager in some segment and we really understand the merchants. We understand their economy. We understand really in depth what customers are asking for, then it allows us to accelerate. So we have several categories, and I believe we were mentioning, for example, the airport parking, we were mentioning categories which maybe you would not expect on Groupon like oil exchange, for example, where we work very closely to have proper supply on one side. But at the same time, we are in the product and again, thanks to the better platform, which we have now available. We can start customizing the user interface, so that it includes features which are important for decision-making process.

To give you a very simple example, there are categories where image is not important at all when you are, for example, deciding on the oil exchange, the picture is very small part of the decision-making process, while there are categories where simply you need to know how the place where you will go looks like, how it will be the feelings, emotions. So we are able to go on that level, both with merchants, but right now, also with the consumer to customize the user experience.

And it will be -- this will be pretty much never-ending process like there are many marketplaces which really focus on one category, and it's much easier for them. We have, as I said, right now internally, our structure shows 200 categories. This is by far not the final number. We may end up with less or more, but it will take time really to go deeper and deeper. We have several categories which we preselected and focus on them to prove the concept, which -- where we have very good results. But then we will probably improve pretty much each of them to a certain level and do iterations.

Awesome. That's super helpful. And then just one last one for me. With the refinancing that you guys did intra-quarter, that obviously allows you to step back into your buyback. Just curious to hear any thoughts on when that might make sense for you guys to do it or just maybe triggers that you would be looking for to then step into -- start to repurchase shares?

So like the -- maybe I can take this one, is that I look at this through the lenses of value creation. So we are here -- and our main responsibility is to grow value for our shareholders. I believe that we are in a very good position, and we want to maintain going forward, optimal and resilient balance sheet. And right now, I see two areas which we are looking into it.

First, as you mentioned, is share repurchases. Right now, we have an existing share buyback authorization in place, which has $245 million available for repurchases. And while buybacks will always remain an important consideration. We will deploy capital here only when it represents really highly attractive use of funds. The second part to the story are M&A opportunities. During my career, I lead like dozens of acquisitions, and I understand both the opportunity and the risk associated with inorganic strategies.

And while we will remain open to strategically aligned acquisitions that enhance our market position and capabilities, we will do it only with discipline to make sure that it brings value. So these are both share repurchases and M&A opportunities are something which we are looking into very, very deeply, and we want to make right decisions here.

Thank you, Bobby. It looks like we have a follow-up question from Sean.

I appreciate that. Any update on the progress you've made in kind of reengaging the cohort that you felt like you lost late last year in the tech conversion?

My answer would be very similar to what we were answering last earnings. We don't publish any specific numbers. But based on the overall results of the company, you can see that we were able to achieve some meaningful improvements here. Overall, we are very happy both with the acquisition of new customers and growth of new customers, but also the cohort of existing customers is performing well.

Okay. If I can ask a couple of questions about Italy. Does this settlement with Italy put, in your opinion, a final end to that whole thing? Are there any other countries kind of looming in the wings there that might have something to say? And would you rule out restarting the business, the local business in Italy now that this tax thing is settled?

I will answer that. So first of all, the settlement is -- agreement is now only verbal agreement. It's not binding. It has to go through various approvals through various statutory bodies in Italy. But if it's approved, then yes, it is -- it means that our troubles in Italy about these 2 cases, tax cases from 2012 and 2017 are over. And then to your second question, [indiscernible] will be thinking about reopening Italy. Generally, what we see, we see that we are doing very well in international business, which was not the case in a couple of quarters ago. And so certainly, we will think all options, including reopening Italy.

We will now move to written questions. A question for Dusan. You may have answered a bit of this already. Which initiatives are spurring most growth?

I don't see it as one single initiative. Like I know that there are many people who love this question, and I'm like answering it in the same time -- in the same way for the last 2 years, plenty of smaller initiatives, which simply add up together, and this is done by the complexity of Groupon a number of verticals, which I was talking about today in questions regarding the micro categories where simply we need to take it one by one. And I think in the past, when the company tried to have like one-size-fits-all approach, I don't think it was the right strategy.

But I can simplify it into the three parts of which are pretty much most important for each marketplace. On demand side, we have new platform mobile next powering plenty of our traffic. We were able to improve the platform so that it's running and supporting our marketing activities. So new platform and marketing engine behind it is a big enabler of what we are doing and the results which we are achieving right now.

And that marketing engine, it's not just the performance marketing, but pretty much all channels. We were discussing today SEO and AI, which are a tailwind for us versus headwind for many other companies. But at the same time, we are able to do huge progress in marketing, in display -- display marketing. We are growing and doing plenty of not only experiments because we have very significant traffic already coming from resources with influencer marketing.

So we are moving here, thanks to the platform and the marketing engine up in the funnel, and that's why we were talking about the plan to run in Q4 and Q1 next year, the small brand campaign. Then on the supply side, there were several questions to this. I see it the way that every quarter, we are getting better and better in smaller steps in managing supply side. And I'm answering it in a very wide open way by talking about managing supply side means understanding who are the merchants which we need to get on the platform. How the deals which we need on the platform should look like. What is the value which we should be providing as a Groupon. And there are multiple strategies. It's like micro category approach to understand risk businesses and profitability.

However, also last several earnings calls, I was talking about this hyperlocalization strategy where the teams are focused on smaller areas. We understand it. So this is a mix on the supply side of both these approaches. And then for last year, we were fighting with multiple headwinds from our platform migrations, and it was a huge lesson for me, for the whole company, I believe. And this year, we do much better, and we focus on mitigating impact and making sure that whatever we do, it takes longer than what I would love to see. But at the same time, the platform is not causing headwinds, which we were fighting last year.

It looks like we have a follow-up question from Bobby Brooks from Northland.

Just a quick one. And I just feel like it might be helpful to remind the investment community of the dynamic between billings growth and revenue growth and how you see those two starting to converge here over the next few quarters. Could you just remind us on that dynamic?

Yes, Bobby. So what you see is that we are growing, especially in local business billings much faster versus revenue. This gap is very similar to what we described in the previous quarters. Roughly half of that is related to our take rate and -- sorry, to our redemption, which influence take rate, which is our people are really enjoying our deals, and we are proposing and pushing them to do it because we believe that -- and we see it on our data, if the customer is using and redeeming our voucher, it's increasing their lifetime value because they are coming back to our platform, buying new deals and thus becoming our loyal customers.

So this is one part. Second part is a mix of take rates due to our increased enterprise deals. And also, you know that we had very good things to do season, which is generally the line of business, which doesn't have such high take rates as, for example, health and beauty or other categories. So those 2 factors, higher redemption and mix of categories and mix of enterprise versus core local is what's contributing to the difference between our billings and revenues.

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