Groupon, Inc. Stock

Good morning, everyone, and thank you for joining. I'm Mike Tepeli, Communications at Groupon. Before we begin, today's discussion and management's responses to questions reflects management's views as of today, September 10, 2026, only and may include forward-looking statements. Actual results may differ materially.

Groupon undertakes no obligation to update these statements. Risks and other factors that could potentially impact the company's financial results are described in the company's SEC filings, including its most recent filings, Form 10-K and Form 10-Q.

This is not an earnings call. Management will not provide new financial information or update the guidance issued on August 6, 2026, and comments will be limited to information already made public.

Any non-GAAP financial measures referenced, including adjusted EBITDA and free cash flow are reconciled in our earnings material at investor.groupon.com. This session is open to everyone. It is being recorded, and a replay will be available. With that, I'm going to turn it over to today's host, Nick Nemeth. Nick, go ahead and introduce yourself.

Thank you, Mike. I think you've done a great job, and I'm excited to talk to the CEO and CFO of Groupon today. Dusan and Rana. I'm Nick Nemeth. I write on Mispriced Assets, a Substack where I talk about small-cap stocks, full disclosure for me. I am a Groupon shareholder, and I'm bullish.

I hope to get into the details of the investment thesis and allow Dusan and Rana to talk about the business in a way that's atypical to a typical earnings call or analyst call. So without further ado, if we click on Rana, click on Dusan. Welcome, gentlemen.

Nick, happy to be here. Welcome, everyone.

Out of Croatia and I believe New York, Rana. You need to unmute.

It's actually out of the Czech Republic, not Croatia, but the country, which is the most popular vacation holiday place for Czechs actually.

That's a great entree because just like I got it wrong as a shareholder and analyst, a lot of people don't know who you are at Dusan. Some people, certain circles.

Can you give a little bit of an intro, talk about your career as an entrepreneur, private equity guy and now a CEO of a publicly traded company?

Yes, sure. Actually, the first e-commerce company, which I founded was already on university. I was studying engineering, computer science and math. And within that small company with my peers in the fourth grade of university, we built the first Internet banking platform in Central Europe.

It was a lot of fun, very wild environment. But the real big business where we got a lot of experience was called Xacti, and I founded it with my Swedish partner.

We had like 40 people, but we were able to build dozens of products. We were running the e-mail solution, inbox.com, which at some point was rated as #2 behind Gmail.

We were running Spyware Terminator security application with like 25 million users, ton of games, screen savers, like a product factory setup, which learns me that you don't need a ton of resources to build something unique. We were able to build this profitable without like external investments. So it was a life lesson for me.

And since then, I was like building new companies, typically with no or very little funding with really -- which was forcing us to think very smart, find alternative way how to build stuff so that we can compete with much bigger companies.

How did you switch over to private equity? So I feel like people think of you as a private equity guy. And in public markets, there's a certain understanding of what private equity guys are that intro, people are like, okay, that's -- how do you move over to private equity?

Yes. So I don't really see us as a private equity because the core of Pale Fire, you can see it more like a family office. It's me, my partner, Jan Barta and David Holý and a few other partners.

When we sold our last big business, which we built, which was like insurance marketplace in Europe, which we sold for like 9-digit figure in USD, then we started Pale Fire and we built part of it, which was investing typically majority stakes in e-commerce companies. So that's why some people were labeling us as private equity. But I see us as entrepreneurs and investors, we are building the companies in a way that we can keep them forever. We want to make sure that they are operated well. We are built with very healthy backgrounds and the systems inside.

And then we started investing also on the stock market and Groupon was one of our investments, but like we are very strong investors in many other companies, both in the United States and in Europe.

It's harder to be activists. It's certainly harder to be an operator. Why not just sit back and let your money work for you? What is your personality that says, I need to put my hands on Groupon?

Yes. So actually, when we sold this insurance marketplace, I switched to the model of mainly investor. However, it's not me because all my life, I was entrepreneur, I was building stuff. I'm really -- what I'm telling to my peers is that I am short-term impatient, long-term patient. So I need to see that we are moving every day, every week, we do something new. And when you are in the investor seat and waiting quarters, months to see things happen, it was really just not something which I would enjoy for a long time. So I'm really combining it.

And Groupon for me was an opportunity to jump into something new because like part of PFC DNA is that we want to learn new stuff. We want to see people around developing. So for me, it was a learning experience. At the same time, it was -- and it is a great turnaround story, which we did a few of those in marketplace space in Europe.

So first few years, we were really rebuilding the company, pretty much saving it from bankruptcy because when we joined the company was not in a great shape. And now I see another phase of all this because when AI came, it became another new opportunity, another game, which we can play here, and we are transforming the Groupon.

So I really get a lot of energy and I was talking about my history when I was building companies. Anyone who knows it, you know that you are always waiting on something, typically engineering, but it's in many other areas because it takes time to deliver stuff. And suddenly, with AI, we have at our fingertips, so many resources and we can get outcomes very quickly. So this is extremely exciting time for me and for people around me.

Quite a challenge. There's definitely easier options. Switching over to R. Rana, really quick. How do you think that Dusan is seen in Europe and Czech Slovakia, particularly because he's a little bit humble.

Yes. In the Czech Republic, I think he's considered really a builder, a technocrat and in a lot of ways, a leader of today increasingly Frontier AI. There are not that many companies in Europe that are pushing as aggressively as we are, where we have management and business in both U.S. and Europe.

But for Dusan, I think as an entrepreneur today, I think there's a real opportunity for him. And I see this where like the leadership and the voice around what's happening in AI, there is a little bit of a vacuum in Europe from my standpoint.

Yes, there's a vacuum for technology in Europe. And I think that you're also being humble from what I've heard from Dusan, he's one of the preeminent investors. And I would like to get into your history, Rana, because it overlaps with mine a little bit more from finance. Can you talk about the switch from hedge fund into, okay, I'm going to be a CFO of a turnaround story, and I got a lot of my plate.

Yes. It's certainly been a change, and it was certainly a contrarian move. The business was quite challenging when we showed up. The revenues were declining double digits, free cash flow was negative. The balance sheet was constrained.

And most people I talked to when I told them, I have this idea to jump, they didn't know Groupon existed still, and they were like it was really a head scratcher. But I spent the past decade investing in publicly traded software and Internet companies that have fallen on hard times. And I had built a muscle around analyzing the problems they were facing and the risk reward around whether those problems were fixable and what the benefit would be to shareholders.

And Groupon was one of those that was always like from the outside, it just felt like why isn't this doing better? It's a large and fragmented market, a brand everyone knows and a highly attractive marketplace business model.

The financial results told a different story, and that generally boils down to leadership and execution and there are different levels of challenge, but this is one where it felt like me, you needed a full-scale transformation.

I always thought about this as we're buying a house in AAA location, but it's a complete gut. It is a rebuild from the ground up. And in my experience, looking at businesses that are faced with that situation, it doesn't happen by itself. And that is when I met Dusan.

And I call him the refounder of Groupon. You -- he's spoken a little bit about him and Jan's background from PFC. They're our largest shareholder and their track record, their skin in the game and Dusan's readiness to really change his life to jump into this is what pushed me over the edge and convinced me that this is worth taking the leap.

Dusan, he's one of these singular entrepreneurs. And what I find is he's able to hold an uncompromising high bar on standards for everything that he does while also keeping an extremely high level of intensity and pace. So listen, it's been a wild for years, the company that at one point, we weren't sure was going to survive.

We grew for the first time last year. And making this change, it's been one of the -- getting off the sidelines and into the arena. It's been one of the toughest but also most rewarding decisions of my career.

Speaking to that, we're going from negative 25% billings growth when you guys inherited the company. The difference between that and 2%, low single digits. Some people might look for, okay, it's not growing that much.

And I think people are -- investors are looking at this and looking at the discrepancy. They're like, okay, if Nick Nemeth writes about it on Stack and he talks about the opportunity set, why is it not being captured today? I think that process is an accomplishment.

And I congratulate you guys on that. I'm sure it probably was just as hard or harder than you guys thought. Looking forward to the next 2 years, 3 years, what is the main objective of the company? What are we trying to get to?

I can take it through AI lens first because for me, having the company which is able to run in the pace much faster versus where we are right now is also an answer on how the company should look like and how it will be able to survive and actually thrive in the future world.

So right now, we are pretty much building -- you can think about it like company harness, company operating system, which completely changed how company works because I believe that successful companies in the future needs to be operated in a very different way with access to all the data and people can move very quickly. AI is supporting them.

So this is what we are building right now with our Project Foundry, which is the project I'm talking about quite often. We put all the data on one platform. We are building the knowledge layer on it, which is connecting all information about our merchants, about our businesses, all the meetings, all the communication.

And it provides incredible level of intelligence to Groupon business overall, to our consumer layers, but also to merchant data and information about the merchant life cycle. But obviously, this is not an end game.

This is really for me only a path to build an engine. And actually, Rana is sometimes talking about it in a way that Groupon when we started was definitely not a speed car, race car.

But with the stuff which we are building right now, we want to have a car which is able to compete in Formula 1 Rig, which will be very fast able to speed up, accelerate, accelerate, take sharp turns.

And with that car, we will be able to pretty much cover all the needs of our customers because like when you look at it, we are not constrained by not having demand.

We are operating on the market, which is over $1 trillion opportunity, but we are constrained by our capability to execute. And with what we are building, we should be able actually to execute much more projects to cover unmet needs of our merchants, unmet needs of our customers, cover all new ways of working because AI is right now like epicenter of everything. We don't know what will be future surfaces for AI, how people will be operating.

And our role is to be ready for pretty much everything. We want to have a modern application. We want to have a chatbot, which will be able to answer everything.

But at the same time, if the future world will be working through personal assistance, for example, Groupon needs to be ready to connect to all these personal assistants of the future and simply serve it because I don't think that our customers on the merchant side, small businesses that their goal and motivation is to be AI expert and connect everywhere.

We want to be a gateway, and we want to be sitting on the like intersection of this AI future crazy pace world and the regular small businesses who are fighting every day just to build some service, some product and quite often just even survive.

So let's start from first principles of what Groupon is. It's a 2-sided marketplace. What would you describe the value prop to be?

So every marketplace has 2 sides. On the side of our merchants, we want to be there for them and help them run their businesses better. If it means that they are starting the business and they want to bring new customers, Groupon has a play in this.

If they are already up and running and they have great Fridays, Saturdays, but some days of the week, the utilization is not there, we can help them to cover their needs. In the future, we want to be closer to them. We want to be part of their operating system.

And ideally, it should be pretty much like a slider in our ecosystem where we will tell them, yes, you can increase the price because you are sold out and based on the data which we have in your neighborhood, similar services are sold for more. If they are not there, we will help them also to just fill the empty slots. It should be super easy for them in the future.

And on the other side of the marketplace, we -- our main belief in the company that the best things in life happen offline. So we want to bring beautiful, great, huge selection of what people can do on our platform.

We want to be a trust partner because quite often, this is the main role of the marketplace that you are going to buy something from someone who you don't know, but you trust the platform. Just think about the Costco for experiences.

You know that if you get products in Costco, they are good, they are at great value. And then there will be always this value piece because we want to provide great local experiences at unbeatable price, great value.

The Costco samples is actually a good thing I wouldn't have thought about the experience in the store itself. So we have a value prop where businesses are trying to get customers, customers are trying to get deals. That is the value equation, slightly different on both sides.

The way I see it, I'm not sure if you guys agree with this, is if you want to get new customers as a start-up small business, I know you guys do enterprise stuff, but you're typically trying to develop a strategy on Google, right, or some sort of ad strategy.

The benefit of Groupon is you know the customers coming in the door if you're going to pay. How do you see the competitive dynamic for that value proposition leading into -- you can do it in this question or I can follow up, what is the platform?

How does it maintain itself? Where does it plug into AI and how does it go? But let's just start with the first one of what is the -- for the value prop, it might not be another coupon deal value-related platform, but what are the alternative options? And how is the competitive dynamic today?

Rana, do you want to take it? Or should I?

Yes. I mean I would say a few things here, Nick. On the merchant side, like -- and this is one of the things when we came here, we had some views at the top level. But when you get into the details, like different categories have different unmet needs.

And what we see is that like as we invest in solving some of those unmet needs, they respond well. And so for example, I saw a question in the chat is how do we know North America is getting better.

How I look at it is we have a cross-section of cities and categories that we compete in. And you look at Things to Do, we've been growing Things to Do quite strongly for strong double digits for several quarters now. And the unlock there for us was we needed to really improve the purchase experience and the redemption experience.

We enabled that through doing connectivity and bookability. And making those investments allowed us to serve those merchants better, which allowed us to get more of them onto our platform and stay with us longer. And then we were able to offer that selection to the consumer side.

And so like this is where these marketplaces get to be really exciting businesses, but it's tough because for us, like to solve the marketplace, you have to solve it at the level of where it happens, which is the customer and the category and the merchant.

And so like what I see is there's inconsistency. We have some cities doing great. We have some categories doing great.

On the other side, we have some cities and some categories that are struggling. And this is where building the marketplace model that was -- that executes at the level of the neighborhood on what the user and the merchant is trying to transact. This is sort of how I see how we can unlock more of the value proposition. And I think on the AI piece, I'd probably ask Dusan to jump in.

Yes. So let me reframe the question for AI. So the bear case is AI is going to eat software. You're just going to talk to a chatbot. -- chatbots going to know everything is going to be the example.

Groupon as a marketplace today, how does that become the infrastructure for the future of AI where chatbots are certainly going to be used, whether on Groupon or in browser, potentially, there's going to be agentic next level Alexa robots. How does Groupon just wherever AI goes, maintain its value prop and what is the company doing?

Yes. I actually think that this is extremely exciting time because like the development and pace here is insane. And in the end of the day, I believe that it will actually strengthen the demand for experiences and for the deals which we are selling. The Groupon simply wants to be everywhere.

So we will keep building our own application, our interface for the website, desktop touch. We will have and we are already piloting and testing the chatbot, which will be available across the board in our interfaces for people who prefer to talk or to just chat about what they need for Groupon. However, we have several initiatives for the underlying technology because in reality, we are kind of a system of record for these deals. We have unique deals with merchants.

We do the transaction, and we just need to be in places where people will be buying stuff. And I'm not -- and this is not only about AI because like there are employee reward programs where people are going because they have some benefits and Groupon is not there right now. It's AI personal assistance, where simply there are credit card loyalty programs.

And this is all I see as a new opportunity for Groupon. So right now, we are building a platform, which will be completely open.

And in, I don't know, today or tomorrow, for example, we will announce access for like AI builders and for people who want to build smaller local communities, AI-enabled system where you can, with your AI build small websites for your community local club, which will be showing just deals in New York.

It will be affiliate based so that you can make same money. But the same technology allows us also to distribute our deals to other platforms, whatever the future platforms will be and also connect us to future AI personal assistance or whatever the surface for people to place transactions will be.

So if we're looking at the airlines industry, it's pretty consolidated. The deals, especially for small businesses, that value needs to be uploaded somewhere. Is it going to be uploaded to the company website and then AI is going to burn 1 million tokens figuring out what is the best deal for this person?

Or is there going to be a home for it? I think that's the long-run opportunity set. As we look past, like this business is still, in my view, priced like it's dead. And the fact that it's not dead should be acknowledged, but the opportunity set going forward is where I get really excited, right, as an investor, as an analyst, seeing something that is so far off the valuation for what I see as the probabilities going forward. When you're talking about that data infrastructure, -- can you possibly give some color? Do you recognize the same thing that there's got to be some infrastructure for deals and value, whichever way the AI train goes?

Yes, I'm absolutely on the same page. I see it really as a huge opportunity because many other companies, they are just selling same deals or same products as what where suppliers have.

For that piece, I see AI ultimately quite a threat, while Groupon is building different deals, different value proposition for -- especially for smaller businesses.

So we have a very, very unique product. And by opening our system so that we can serve pretty much whoever will be driving demand in the future, it's actually a huge growing opportunity. So...

For 2019 -- I mean, 2020 really killed the business. Obviously, it's going down. But if you go back to 2012, 2010, everyone had to be on Groupon, right? A return to 2019 levels, any investor today would probably be excited about that outcome.

What is the marketing push on the road if it's correctly identified, everyone needs to be on Groupon, everyone needs to check Groupon. And if it's not going on Groupon's website through ChatGPT, which has a Groupon app, I'm assuming, is part of the potentialities as well as just integrating with these model providers.

On the road to that, if we're shifting to marketing, -- what is the new game plan? Anything you've shared publicly on performance and strategies there as Rana opened up and said, everyone knows Groupon. They just think it's dead or whatever they're thinking.

I would caveat one thing I've heard, and I think you guys recognize is there is a trust issue, specifically after 2020. So opening it up to the marketing strategy, what do you see as that strategy? And how is it driving financial performance today?

So Nick, maybe I will do one step back. And before I will be talking about the marketing strategy, I would also like to mention that one of the reasons why we need to build this like Formula One car engine is to have better capability to cover unmet needs.

And we have the products right now on Groupon which are serving well to some merchants in some categories, and we have categories where we still have an opportunity.

One of the nicely growing segments is Things to Do where, for example, what we are quite often doing is that we are connecting our merchants at the best possible price, which we offer, but it's not a unique price typically.

And we just connect to whatever they operate with, then we understand what are their needs really, and we build special products. For example, we find out that they have empty afternoon, so we build something unique on top of their proposition.

This is a muscle and capability which we need to bring across the board because this will give our merchants a reason to be on the Groupon all year long, even in the periods where they simply don't need anything special but they will be part of our inventory.

And then they will have time areas, days of the week or simply they will need some change in the pace of the business. We will be where we can boost the business for them.

So this is still the piece which we are building, and I expect that we will be bringing many new features, options, products for our merchants. On the marketing piece, there are several elements. We were talking about influencers recently. Actually, it was also one of the things which you were coming with to Groupon.

Everyone knows Groupon is true only for people over a certain age. I'm not sure that it applies for people who are 20 or 25. So -- and the reason is very simple because like Groupon was not really growing last few years. that's a huge boost you were talking about was really over 10 years ago.

And the new generation is simply searching and discovering products on the Internet in a different way. So one part of our marketing effort, which we need to do and we are working on is to come back to influencers, build a strategy for TikTok, Instagram and other social networks and show them the product. And even here, it means that we need to be working on the product and improve the product because like young generation doesn't want to pick up a phone and call to do the booking. We need to have much better connectivity, and that's why we are investing into connectivity to our partners to make it very seamless, very simple.

And then in the middle of this is the piece, and you also touched it, and I consider it like super important, and that's trust. It's not like directly marketing, but like our experience is that marketplace works only when there is trust on both parts.

Merchants trust us and consumers trust us. And let's be honest, it was not always the case with Groupon. The motivation was quite often just to generate revenue, get the deals sold, and that's pretty much it.

We are changing it. I was talking on earnings call and in several other communications afterwards about our bet, which we are making on trust and quality.

It's -- from the short-term perspective, it may have like negative financial impact because we are taking down deals from our marketplace. We are actually refunding people more than before when they are not happy with the service. Obviously, we prefer to refund in Groupon Bucks so that they do another purchase.

We are going to merchants and telling them like, well, we need to change something here because this is an issue for your customers. That's why they are not coming back.

But with this, I see -- and like I measure it in very like simplistic way on top of what the team is showing to me, like I'm counting number of e-mails, which I'm getting every week from our customers who are complaining that you did this, you did this, and I don't think it's fair.

Like when I started in Groupon, and I think that number was very similar even last year, it was like 30-plus conversations every week. And Giovanni Lagasio, who is running this bet with us, he was like asking me, is it true that like last week, it was just two.

And yes, it's really tenfold, we increased number or decreased the number of people who feel that they are so desperate that we need to find the contact on the CEO of publicly traded company to just show what we do wrong. So that's part of our bet, part of our mission. And it will take time, but like it will bring this compounding effect that people will see that we are doing good job for them. We are delivering value. And then they will be coming back and it will be helping the purchase frequency and marketplace flywheel.

Nick, I want to make a few additional points here because I think this is an important point that like allows us to communicate a few different things within like the example Dusan just went through.

I think one is you commented about 2019, 2012, right? And I think that the big picture from my standpoint and the seat I'm in is Groupon came around at a time when small businesses were dealing with a shift in the way that consumers went to discover what they wanted to do offline.

And at that time, it was offline print, TV, radio to online and Internet. And they didn't know like it is what Dusan said earlier, typically, the small business or experienced operator, they get into the business because they love that experience. They are -- or they're trained to deliver that or they're hospitality oriented.

They're not digital marketers. And so we played a role for them. Then our business, we got defocused. We got big. We tried to compete in a lot of different playing fields, and we stopped focusing on that customer. And we started making decisions that we're reducing that value proposition.

We didn't evolve with them as the market has evolved. And -- and so like you fast forward, the same thing is happening now, okay? Consumer small businesses everywhere are -- they read -- they're some of the smartest people you will find and they are -- we consider them our partners.

And they're reading, they're like, how are we going to solve this AI thing? They know that traffic is moving, and they want to make sure that they can be discoverable. And so to me, this is -- listen, I don't really look backwards. like this is one of Dusan's gift.

He's always about like let's go forward now and so how do we improve from here. But I think the big picture from what made Groupon great in the past, I think those conditions are on the playing field today. But then it's a question of what are we going to do about it, right?

How are we going to execute? And this is where I would just say 2 small things, okay? On this trust and quality piece, which Dusan is hitting on. It is a great example of how we're deploying the company harness at scale where like every day now, and the team that's running this under Giovanni is one of the most AI native teams we have.

They're not -- like they are able to see every morning, here's all the customer data, here's all the complaints, here's all the feedback. I went to get an oil change and that guy charged me $5 extra and it wasn't in the fine print. And right away, they're able to decision, okay, what do we do about this to solve this for our customer.

And doing that at scale across tens of thousands of small businesses across millions of orders, it's not something that our company has ever been able to do. And it's one of the things that AI and AI native experienced operating teams are able to solve.

The second thing is performance is the marketing funnel. And this is more of the DNA of our company that we're building, which is we want to go step by step here. A different CEO may have come in and said, You know what, we're going to go put $100 million on a big brand campaign. But the way that Dusan has always built businesses is from first principle, step by step, building the foundation. And for him, he wanted to make sure we optimize the people that are lower in the funnel who are already searching for these things so we can make it easier to convert and have a more profitable ROI.

And then as we improve the trust, as we improve the product, then we are, frankly, earning the right to spend investor capital in mid-funnel and upper funnel strategies to unlock the latent potentials we see in this brand. So I think this just gives you some flavors for how -- not just how we're executing on these topics, but just how we think about transformation here bigger picture.

So small businesses spent 15 years learning how to use Google Ads and you're saying that now they're like, oh, -- there's a new paradigm, and it's the same sort of wave. Now to the we, you guys came on 2023.

It was lefty for a while. And -- but it's -- the business -- you're recognizing that you have to own the brand despite if people dropped off thinking about it in 2016. So you're talking about sort of a more full stack approach of thinking about the value for businesses. When it comes to consumers, you mentioned a $1 trillion opportunity, Dusan. Can you just identify what that is? Is that experiences fulfilled online?

This is the third-party data around what the local economy for experience and services is globally.

Okay. Awesome. So on the marketing piece, I want to get into some of the financial stuff. But actually, it's stop. You mentioned Giovanni. What is the talent acquisition be like? Obviously, you've mentioned you're cutting costs, but also -- I'm trying to do the math on the model, right?

And where the cost is going. And you mentioned, but we're using this money to hire new people. And I think specifically, you said talent density. So what does that look like over the past 2 years?

Yes. So when I joined Groupon, we were not able to hire people in the United States because everyone thought this is like a dead horse. So we were hiring people in Europe, mainly based on a Pale Fire reputation, my reputation here, and we were able to build a really decent team who did great job and really saved the company. And it was not Czech Republic only.

We have a really great team in Madrid, in Spain, in Valencia, in other countries in all over Europe, where Groupon has offices. Then when we switched to the new phase with AI focusing us to be AI-native company coming with different stories, it unlocked also the different level of talent across the world, which we were not able to get before.

So suddenly, we are able to hire people who have Uber experience, people who have Klarna experience, people who have DoorDash experience, and it significantly helps. At the same time, it fits into the strategy, Groupon. If you work in Groupon for 1 year, I think you get more experience in any other company in 5 years.

Like internally, what we are talking about is like we want to have speeding tickets, no parking tickets, which means that we are unlocking fast growth to people everywhere. This is ideal environment.

If you are young, hungry, smart person come here in 1 year, you can have 5 different jobs, work in 3 different departments and end up with finding something which will be your passion and you will have their P&L responsibility, which you would never get in traditional corporation.

And I love this part because when I really see someone young who's or new here and I'm coming with some idea and I think, this is a pretty good idea and that person comes and tells me something better, I say, yes, this is what we want to build here that people who are coming with great ideas are learning.

And now how it moves to talent density. I think this company culture, performance culture is and will be attracting more and more people and not only people who are like senior, but really we want to have more with like hungry people who want to grow, be with us, be part of this experience.

And this environment is also attractive for senior people who are hungry. I don't want to add here just the team of people who have experience from whatever great company. At the same time, they still need to have this like high agility.

They need to be having -- they need to have a mindset that they want to learn something new every day. And I see that these people start coming, and they are coming not only in Europe, but also in the United States. So Giovanni Lagasio, which we were talking about, he's in Europe, but it's Klarna experience, Uber experience.

He brought several people, was able to hire several people, onboarded and find some internal talent in Groupon and what they did with customer support in a few months. It's amazing. They completely reset the expectations, raised the bar and is one of the best-performing AI teams in the company.

On the other hand, we have Adi Rajkumar, who joined Groupon as COO. DoorDash like great experienced guy who is bringing life experience. And at the same time, he is hungry and bringing that piece because he was part of the DoorDash growth.

So very, very relevant, local marketplace, successful company playbook and the person who wants to do something similar or better at the same or bigger scale with us, amazing. And we have more and more examples like this.

And Nick, as from the investor hat, like you may say, okay, like why does this matter? Like why are you guys spending money attracting best-in-class talent? Like to me, this is where I think in order to leverage the full potential of AI, you need best-in-class AI native operators.

What we see here is the speed and, let's say, the standard deviation of team speeds is increasing as people adopt AI. There are some engineering teams. There are some operations teams. There are some marketing teams. The speed they're moving is incredible. And then we have other teams that are, frankly, behind our expectations.

And the single ingredient that unites this is talent. And so like for me, it's great, like I've been really -- like I track our talent cohorts every 6 months, and I see us getting better and better at this.

And what I see is a common thread amongst all the people who are joining is exactly what you say, they see ride-hailing maturing, consolidating, food delivery, maturing, consolidating, hotels maturing and consolidating. They know how to run experience marketplaces at global scale within the complexities of solving it at the local level. And they're looking where can we go take this into the next chapter, like the areas we operate in are still secularly underpenetrated.

There's some third-party research that says for Things to Do, only 1/3 of things to do experiences are still booked online, and that's crazy to imagine.

But that's sort of the ingredients that could allow for secular growth and for us, market share growth because we know that we're not doing our best. And we found that, that resonates with really ambitious people who are talking about, well, I've seen a company grow multiple size times the GMV.

Today, we're not a huge company. We're $1.7 billion of GMV, but the market potential to take that multiple times higher and then the marketplace business model, which has great characteristics, that is like what gets people really excited to come join us on this mission.

And so like I, as a finance guy, I'm very, very much excited about underwriting talent density as one of the key themes for us to build this platform to make us execute and realize the opportunity we see in front of us.

I would slightly double down on what Rana said because like you can read it quite often, but like we really see it, and it's really amazing. In the past, you could use brute force because like your best people were 2x, 3x versus the average population. That's completely gone.

The landscape is different. Now it's really time when you see like 100 Xs and I'm super convinced that successful companies of the future will be around these people. And our motivation is like to create an environment that they will be able to grow we are here as a top management to unlock all the blockers.

Quite often, we have people who are coming from other companies and telling us that they were not allowed to use AI fully. They didn't have access to data. And when they see what we allow to do them, they are just happy in this environment. And this will be one of the key drivers for us going forward.

So the costs have gone down. Headcount has gone down. Average salary has probably gone up. If we're looking at the marketing component of it, that's $40 million in the last quarter. Where have you said publicly that you can say?

Do you see that as a percentage of revenue going? And if you could just describe it and color it in as sort of what -- because I see a mix shift. I see you're cutting SG&A and other costs, but that is growing, albeit down from 3 years ago significantly, but it's starting to grow again.

And what I see on the financial side is like, well, and you see this in start-up companies a lot. You guys are acting and a feeling like a start-up company that's publicly traded with $225 million of cash.

If you are buying growth, it's not necessarily growth. What are investors looking for when it comes to the percent of marketing? And what are you seeing on the ROIs of your paid channels? And how do you expect that to develop over the coming?

Dusan, do you want to take the philosophy, I'll do the numbers? or how you want to do it?

Yes. So start with numbers, and I will give them basically.

Yes. So like, Nick, I think the way I see the business is if you look at it at a customer level, we have approximately 16 million customers that have bought with us in the last year.

When we got here, what we see is that like we have a core base of loyal customers that are -- we call them our champions. We also have regulars. The champions, they're buying, let's say, 5x plus a year, and they really are getting the value from the proposition.

What we observed at the time was like we weren't really doing new customer acquisition. We were -- we had to fix a lot of things, right? This is where you're building the house or the other analogy is fixing the plane mid-flight.

So we'll be going back to first principles, what do we want to solve under our CMO, Josef and Dusan, we have built really in many ways, the best-in-class acquisition machine in the lower funnel. And so over the last couple of years, we have largely solved acquiring customers. Now there's a lot of opportunities for improvement.

Don't get me wrong, but we have shown that we can acquire new customers at really attractive cost of acquisition relative to these champions and regular lifetime values.

Where we have struggled, and we're very open about the struggle is the -- that first purchase converting it to that -- and that new customer, converting it to that second, third, fourth customer purchase. and becoming those regulars. And when you go, okay, well, why can't you just solve that?

It starts to go back to the underlying issues around systems, processes, people and really, what do we need to solve? We need to solve the customer experience, the onboarding experience, make sure that they are able to properly get what they want and not be inundated with noise.

And so this is for us, like when you're asking the question, where are we in marketing spend? Like largely, it's a dial, and we can spend sort of what we want in terms of a sees what we want in the current Pareto curve.

What Dusan and I are most focused on is how do we push out that curve. And the unlock for that is building better life cycle management around that first purchase to that champion.

And for that, like once we get to that, if you think about it, right, like just what you see is the spend as a percent of full revenue, but -- the second and third and fourth purchase, the incremental margin on those is much higher because you're not spending that same acquisition budget. A lot of times they're coming to you directly or through your managed channels.

And so those -- that's the way we get leverage on the marketing. I think it's -- from an investor, it's a great focus area because we have a lot of operating leverage in our business.

The way we unlock this operating leverage and get scale on our marketing dollars is fixing this area. And it's one of our highest priority projects that we're running AI natively.

We have some stuff out there in social around what we're doing around personalization amongst other things. And this is something that we will be updating investors every quarter. I think we have a lot of experiments. I wouldn't call -- I'm not ready to declare victory on it, but I'm very encouraged by the progress, and we will keep you updated on where we go with that. Dusan, do you want to add anything else?

Yes, I would like to. As a part of fixing this acquisition engine, when we started, we were -- we didn't have even visibility into data to really understand like what's the difference between one and second customer about the deals, the engine, which we have right now, we understand which campaign is acquiring what profile of customer, what's their lifetime value, what's their purchase frequency.

So finally, and without AI being able to dig so deep, we would never be able to build it. We have tens of thousands of campaigns.

We understand like whether we should be spending more on this campaign because like the customers have 2x, 3x purchase frequency in a year or 1x, for example. So we optimize it for short-term ROI. I really think that this is, if not best-in-class, one of the best performance acquisition engines. And now we are switching it that this is not just like acquisition engine working with short-term 7-day window.

But this purchase frequency element, which we are talking about everywhere now internally and also externally, we already have it as a part of marketing. And for me, this is extremely important.

I was explaining in the beginning that like when I was building companies, I was not getting external money, it was bootstrapped and all that stuff. I think that I have quite a good feeling when we are ready to invest. I would never invest and do channel/campaign if I don't believe that we have unit economy and we will create a value.

So I will not give you a percentage number. But like when I will see that this acquisition -- purchase frequency engine works, then I would like to invest as much as possible.

Now we need to run it with some hygiene. The number is moving slightly because I really believe that the trend which we have here is good.

But once we will be ready to come also in front of shareholders and actually talk about like a huge increase in spend, it will be for me one of the best moments because like my internal trust that we crack the purchase frequency at that moment will need to be like close to 100%.

That's one of the things I wanted to ask Dusan.. So as an investor thesis, I'm not talking about user growth. I forgot to make the comment that I dated myself saying everyone knows Groupon and now I'm on TikTok. So mess up a little bit there.

But we're talking about 16 million users, just make them go further, right? And in order to do that, redesign you guys are doing, recommendations, recommendations were awful, no offense. Now they're starting to get better. And the friction, the friction to the purchase.

So all of that, solving all of that, simply, you pay $30, $50, whatever the number is, per customer. Yes, the first purchase, maybe you lose money, maybe you break even depending on the channel. But it's really about the second customer because you have 90% gross margins, right? Then we can talk about growing users. We can talk about potential unlocks for businesses being a value CRM of sorts. But can you talk about the operational leverage before we wrap up, Rana?

Talk about sort of when this business grows, not single -- low single digits, but 10%, 15%, what does that mean for financial performance? Do you think we're seeing the operational leverage today? What should investors that are trying to do financial analysis pay attention to?

Yes. I would say 2 things here, Nick. One is that I think you described some of it is that just understanding our business model, we have 90% gross margins. We have around 55% contribution margins, and we have a fixed cost base, which we can leverage.

Now when we got here, we took down those costs. and so we could get the business healthy. And we -- but from there, our kind of view is we still have quite a lot of opportunities on the cost side, but we also see a lot of things we want to invest in to accelerate.

And so for me, like the big picture, how do we create a lot of value here and all of us are on the table, this is our singular focus, is we see that if we can get the engine running and what you're talking about is how we see it, this is a large market opportunity.

This is not a time for optimization. This is the time for driving billings growth in the right way with customers who are onboarding and engaging and repurchasing, that business model has the opportunity to leverage a fixed cost base.

And when you start dropping that incremental purchase at 90% or it's not exactly because we may have some remarketing costs associated, but it will be very accretive.

You will see that EBITDA growth will be faster than revenue or billings growth. And for me, this is where -- but it's tough for investors because it's like, okay, it makes sense. It will show it to me. But it goes back to first principles. You can't just do that until the marketplace is healthy and operating with the right flywheel.

And for us, like we're not ready to guide to 2027 and yet or anything. But our principles, you look at how we've managed the business over the last 3 years, and that gives you a sense for how we will manage it going forward. We are people who will like invest against where we believe they will have conviction around there's a good investment opportunity. We're not always right, but we're also not like spray and pray type management team. And so I think that gives you a little bit sense of the operating model.

Yes. I also think they don't understand how much more EBITDA or free cash flow goes up given 10% billings growth and free cash flow goes up higher than EBITDA.

Well, Nick, like I said, you can look at our past, we talked about the negative growth rate when we joined, you also look at our EBITDA. And so over the last 3 years, we have shown not just improving growth rates, but we've also taken our EBITDA up as well.

And so that's where finding the balance for us is over time, like we're our #1 KPI is really inflecting billings, orders, purchase frequency and over time, active customers, like you said, that's the primary goal for us. And then -- but we're highly confident knowing the underlying business model of how marketplaces work that when you solve that, we can turn this into a cash machine, and it is already generating cash.

Yes. As a percentage of market cap for sure. If the company grows 10%, people should model it out, figure out the probabilities. There's risk in every investment. You're dealing with guys that got into the fire.

I think the financial performance says they righted the ship and the question is, can you execute? And very excited to see this process through you. I really appreciate you guys talking to me. I get some questions from hedge funds like why are they doing this, right?

And I would just point to the Goldman Sachs TMT Conference, and I look at the JPMorgan Healthcare Conference. And the thing is that those sell-side analysts, they write milquetoast vanilla. They don't put their money at stake. And quite frankly, it's usually not worth reading.

I think it's forward-looking for you guys to engage with a Substack author, which some people might pejoratively say, but I'm quite proud of. And I hope that investors, potential investors, other entrepreneurs enjoy this call. I think that it was great. We clearly went way over. I really appreciate it. Thanks.

Nick, thank you for joining us. Listen, I cannot speak badly about my sell-side partners or institutional investors. We enjoy the opportunity to come tell the story. We have really enjoyed the feedback we received from you and other engaged shareholders.

Like Dusan, based on how the Pale Fire business is run, like this is really for us, like we look at this as a partnership between all of our investors. We just happen to be active managers of but we're really shareholders along with you guys. And so we're always open to feedback in any channel and a conversation in any channel.

So we really enjoy that. Anyone who has feedback, please hit me up on Twitter or X, and we'll continue to improve from here. So thank you, guys. And Dusan, anything you want to say in the end?

Nick, really, thank you for inviting us here. It's a great format, and it's great to hear and get feedback from small shareholders, all shareholders actually.

I would just mention on top of what Rana mentioned, it's a great communication channel also for our team because this is really for the first time that we are getting a ton of direct feedback from you, from so many other shareholders -- our teams internally are trying to show what they are building.

So you actually started with the wave of openness also in Groupon when we are proudly showing what we have. We have a ton of great stuff inside.

We need to do a better job in selling it and presenting it to everyone else in the outer world. And you really ignited that, and thank you and all the people who are participating and who are shareholders of Groupon with this with us. Thank you.

I appreciate it. It's a different shareholder base. It's not so focused on the next prints and what real-time data says. Last question I have for you guys. I've got like a dozen questions about an intern.

We've got to run, Nick. Okay. All right.

Is there an internship policy? I mean, program.

Well, listen, we get ideas every day. We don't have one formal, but we have a new Head of People here, Nick Walker. He is great.

And I'm sure I'm happy to take it offline with him and you and see if we can -- the story for us is clear. We want ambitious people who are super passionate about the mission we want to serve and want to become AI-native best-in-class experience market operators. And if you feel like you fit that mold, like we would love to have a conversation.

Awesome. Thank you, guys.

Thank you.

Welcome, everyone, and thank you for joining Groupon's live investor conversation on X with CEO, Dusan Senkypl; and CFO, Rana Kashyap.

Before we begin, today's discussion and management's responses to questions reflect management's views as of today, August 25, 2026, only and may include forward-looking statements. Actual results may differ materially. Groupon undertakes no obligations to update these statements, risks and other factors that could potentially impact the company's financial results are described in the company's SEC filings, including its most recent Form 10-K and Form 10-Q.

This is not an earnings call. Management will not provide new financial information or update the guidance issued on August 6, 2026, and comments will be limited to information already made public. Any non-GAAP financial measures referenced, including adjusted EBITDA and free cash flow are reconciled in our earnings materials at investor.groupon.com. This session is open to all investors is being recorded, and a replay will be available.

With that, let's open the floor to questions. We will start with written questions we've received over the past week. But if you have questions live, please post them as a reply -- as a reply to our account or raise your hand here to be promoted to a speaker.

Our first question comes from CZ, YOLO trader. How do you plan to attract younger generations beyond the Mystery Deal concept? Dusan?

So first, thank you, everyone, for joining us here. Very happy to have you here. Under Mystery Deal concept, first, let me provide some bigger picture for those who don't know the Mystery Deal concept because it's part of how we are transforming Groupon, how we are bringing new types of products. So mystery vacations right now, but I see the same mystery concept opportunity also for many other products with Groupon, a result of the change how we think about the travel. We are moving from selling just destination to selling experiences. And we are pretty much taking away also from our customers a decision which we have to make where I will travel. So this is very explanatory product where they just buy for $199 to $299 per person a trip, and then without knowing where you are going, you may pick the dates, we call them in 3 days and somebody tells them where to go.

So it's something which was not promoted, which was not on the Groupon in the past. And this is one example of how we are building a completely new product proposition, which is relevant for especially younger generation in this case.

And on the levers, how we plan to attract the younger generation in general, there are 3 dimensions to this. This is reach, this is product and inventory. With reach, we are heavily investing both in our organic channel and paid channels. I'm very happy that we returned to growth with organic channels in Q2, and we see many more opportunities here to continue in the trajectory. And at the same time, we are building and improving our paid and brand partnerships and also influencer capabilities. So with Groupon appears where younger customers typically discover ideas.

On the product side, the answer which I see is that the Groupon can't be the same for everyone visiting the platform. I was talking on the earnings call about the personalization, which helps us shape experience around affinity to category by our customers and the browsing behavior. And I think this will be a very important part how we will be making Groupon more attractive to people in actually not only younger groups, but in different groups. And we will be also bringing in Q3 new onboarding experience, which will help especially younger people who may not know Groupon yet understand what is Groupon about.

On inventory, this new format is very important for us. Tour packages have reached customers who did not respond to other deal formats. And what I see overall is that we have a public evidence that active customers grew 2% to over 16 million and conversion is improving on pretty much every surface which we have. Also, if I would double down on what will work best for young people, my personal bet is that influencer marketing will help us a lot together with better socials because this is how especially younger people are discovering new products, new services. And this is an area which we just recently started. I believe that we have all the right tools, which we need, and you can expect a lot of stuff coming from us in this area.

And especially together with our mission to get people offline, I see it as a great fit. Another dimension where I believe that it will be very specifically helping us, especially with younger generation is AI because I strongly believe that AI is redefining how the distribution opportunity works. And we simply see that younger people are adopting AI trends faster versus rest of the population. And we are building towards that. And by the way, we will be sharing on our X account an example of what we built recently based on the input from Nick Nemeth and our actually small shareholders with AI deal adviser where customers can be talking to Groupon AI and AI is recommending them deals. So we will be investing heavily in this direction.

And the third, but definitely not last is personalization because right now, we need to do better job in recognizing younger people and providing relevant products. We have data and feedback showing that some of them are confused because we have a variety of categories and deals, and we are expecting something else. So this is actually the bread and butter and core of the personalization bet, which we have to take very early signals like the device, you have location, browser, first 1 or 2 clicks and recognize the profile of customer and serve the deal, which makes sense to them.

Thank you, Dusan. And as Dusan just said, if you want to see an example of how AI is a new distribution opportunity for us, we just posted an example as a reply to this space. Our next question also for you, Dusan. Do you plan to expand into new countries and markets?

So right now, our priority is really go deeper where we already operate, not just to expand additional countries or areas where the marketplace would not have significant impact because pretty much every marketplace and especially local ones are about density and about pretty much city-by-city coverage. And we have an evidence from our successful marketplaces that they were really growing not on the country level, but they were conquering every single city category by category by having enough quality supply and then attracting enough customer demand in each location. In international, even we are concentrating supply and marketing investments in major cities, in most countries. And we see that the cities where we have higher density of our marketplace are growing at strong double-digit rates in Q2.

So this is a signal that this is the way how we need to be working. At the same time, we are also resuming operations in Italy. And the reason for that is that we had a large base of merchants where they were still eager to work with us given our recent presence in the market. In the long term, I believe that Groupon business model is very suitable, and we can definitely see opportunities in many other countries. However, right now, our focus is on the markets where we are in. So this is not something which we are actioning right now.

Thank you, Dusan. And a final pre-submitted question from CZ YOLO trader. This one for Rana. If SumUp IPOs, would Groupon sell its stake? If so, how would you use the proceeds?

Thank you for the question. So yes, first, we do own a small minority stake in SumUp. We have been pleased to be shareholders there. We continue to get updates from that management team, and their business continues to do well. It is growing healthily. It is profitable. And how I see this, it has all the features of what should be a successful public company. And I understand that the desire of that management team is to one day be public. We have identified and communicated for several years now that this is a noncore investment for us. And we are -- we will look at opportunistically -- opportunities to monetize that stake, whether it is an IPO or a pre-IPO secondary, this is something that we're very open to.

We -- as long as there is a good commercial opportunity, we don't believe it's in the best interest for shareholders for them to get, let's say, SumUp long-term investment results from investing in Groupon. The core business of Groupon is what we're focused on here. So we do expect at some point to get liquidity there, and it's more of a question of timing, which has been hard to predict with that situation. But the good news is that, that business is doing well and continues to do well. So we can be patient. In terms of using the proceeds, our business generates positive cash flow. It has a healthy amount of adjusted EBITDA. So -- and based on the plans that we have right now, we expect that to continue.

So our core business does not need additional capital. And so to the extent we do sell SumUp, we would be looking at the opportunity to reinvest those proceeds against our capital allocation framework. You saw how we've made comments now for several quarters now that we will be looking the best way to create shareholder value. And really, we'll be quite opportunistic about this. We are significant shareholders here, and we think about how to grow long-term per value share all the time and if we have excess capital, we'll be thinking the best way to deploy that to generate the highest rate of return.

Thank you, Rana. We'll move to a question from RVX CZ. Of the approximately $20 million to $25 million in annualized payroll savings, how much should investors expect to flow through to 2027 EBITDA/FCF versus being reinvested into growth.

I'll take this one. So we haven't issued 2027 guidance, so I'm not going to do that now. What we've said right now is as follows, as you've already noted the restructuring, we expect to realize about $20 million to $25 million in savings. We also noted that about half of that we'll expect to get this year and that we expect to invest about half of that into marketing, AI infrastructure and talent density. And so that's what we've said thus far. As we think about next year, so there will be the other half that we'll be picking up and how we might think about that, I think it's too early to say, we also continue to run our overall foundry program. And as we execute against that and get more visibility on how the business is evolving, we will be coming back to shareholders and updating them on how we're thinking about 2027. And so this is what I can say right now. Happy to take a follow-up on this, if anyone has one, though.

Another question from RVX CZ. What do you see as a sustainable long-term FCF margin for Groupon once the transformation is further along?

Yes. So we don't have a long-term free cash flow margin target, but -- so I'm not going to give one right now. But I do think it's useful to talk about the framework here because I do think free cash flow is something that's not well understood in our business. If you just think about the components of what to get to free cash flow, you have your adjusted EBITDA margin, which is, I think, fairly easy to calculate. You also have some pretty easy to model discrete items like cash taxes, interest expense and CapEx, and we have a pretty CapEx-light business or asset-light business. And so that gets you to -- one subtotal. And then the last remaining piece is working capital.

And in our business, we have a negative working capital cycle. And so if you just think about this, if we are -- our ambition here and the opportunity we see is to accelerate growth against what we see as a pretty big market opportunity. And as we get billings to grow, working capital will be a source of cash. And so if you think about the long-term free cash flow margin potential for the business, you really need to have 2 assumptions that you need to be thinking about is one is where do you think we'll get adjusted EBITDA margins? And two, where do you think we will get sort of durable growth? And there's definitely scenarios I can see in the future if we have billings growing at the levels that we believe are possible, where the free cash flow margin could be higher than our adjusted EBITDA margin, given the negative working capital cycle that we have in our business.

Our next question. How should shareholders think about the convertible notes and potential dilution if the share price moves materially higher?

It's a good question. As you might imagine, we think about dilution a great deal here. Dusan is personally a large shareholder. And through his fund Pale Fire, they're our largest shareholder. I personally have a significant amount of my net worth invested in Groupon. So dilution is something that we do not take lightly. I think the best way to think about this is just look at our track record. We have executed now 2 transactions on our capital structure related to the converts. The first one was when we refinanced our 2026 into 2027. At that time, our business wasn't, let's say, performing as strongly as it is today. And there were many options we had on the table to refinance it. And we decided to choose a fairly complex refinancing, which included higher interest rates, some structured aspects of the note, let's say. And we did that all to get a strike price, which was at the time, I can't exactly recall but I think our stock was in the teens or the low teens, but we went and got a strike price of $30 a share.

And most of our advisers were kind of thought that was quite odd, like regular way convert financings, you do a 20%, 30%, 40%, 50% premium, you call it a day. But we were very clear that we were not interested in any dilution at that time, given the fundamentals and our belief in the business and anywhere near where the sort of standard terms were coming. And that's sort of like, let's say a transaction one. I think the second transaction you can look at is instructive to see how we think is what we did last summer. And last summer, we issued a 2030 note, which has a strike price into the 50s, which would take our EV over $2 billion.

And what we thought about at the time, and there were trade-offs because that refinancing was not costless, and there was some things that we took on. It was, in some ways, quite expensive. But as we thought about the pros and cons overall, again, we chose to really push the dilution potential for our business to a point where now we have most of that in the 50s. And given where the fundamentals of that business were at that time -- of our business at the time, we felt that north of the $2 billion issuing some stock would make sense. And that's sort of how we're going to think about this going forward. I think there is a question later on about just debt. I mean our business is predictable. It generates cash. We do think that it is a business that can have some debt on it.

And so we will be thinking about the best instruments to do that. But clearly, for me, like and Dusan and I think the Board, for us, managing the optimal capital structure, our goal is maximizing long-term shareholder value per share. And to do that, we have to think about both the numerator and the denominator. So it's something that we very much pay attention to. I'm happy with the track record we have thus far. I'm sure we can always do better. But that's the best way to explain to you how we think is looking at our actions.

Thanks, Rana. A question for Dusan. What specifically needs to improve in North American local for you to feel confident that growth there is sustainable?

So I would not answer specifically about North America local, but I would answer how I see Groupon overall. For me, the sustainability means that we see the marketplace engine works. And it's not for one good month. It's really for a longer time period. And it has 3 components. The first, this is a supply-driven marketplace. So the core themes are the same ones which we talk about almost every quarter. We need to adequate supply coverage and sales engine that keeps bringing freshness and new inventory to the site. And you can see that we invested a lot also to the human capital here. Adi Rajkumar and Mark Marge joined Groupon sales organization primarily recently, and we are pretty much rebuilding and improving the capability so that we can drive sales department further.

The second, when we have the right inventory, we need to have capability to properly merchandise it to our customers so that they buy it. And what's most important is so that they build a trust about the quality and products which we are selling because with this trust and quality, we can then talk about the third piece, which is purchase frequency. Here, in this trust and quality piece, I see huge progress which we are making over the last, I would say, even months, and this is one of the AI analogs which we have because in the past, the number of deals which we have in Groupon, it was like super complicated to go through it and analyze what's working, what's not working for customers, what's the friction.

Right now, we are able to pretty much on a daily basis to review all the customer communication, all the signals which we are getting from a redemption, from customer reviews, from customer support communication and identify what we need to change on deals. Sometimes it means turn off the deal. Sometimes it means talk to merchant and change the deal. Sometimes we just see the way how either merchant or our team describes the deal on the website is not easy to -- it's not understandable for the customer. So we are changing the layout, making more prominent features, which are important for customer decisions. So I see really huge progress on this piece.

And then the third part of the product flywheel is improving the experience on both sides of the marketplace. But I would focus here more on the customer part where we want to make whole process very smooth. It starts with the content, with the deal quality, but then it continues also with the bookability, with the customer experience during the redemption. We actually introduced recently also the Apple and Android wallets where our coupons can be -- for some deals, not all deals can be simply moved to the Apple wallet, which we just present and makes all the experience during the redemption much better and easier.

And all this together should be reflected in the purchase frequency, which is ultimate driver and mark for me that the marketplace engine works. And we need to see improvements in purchase frequency, which is the core priority of the whole company right now. And when I'm looking on what specifically in numbers based on what we actually published in -- for Q2, clearly, the small business merchant base was slightly lower year-over-year because the new merchant acquisition was not as strong as we were expecting.

I still see health, beauty and wellness soft, and this is one of the focus areas for us to restart the category and bring there, especially more freshness similar to what we did with like Mystery Deals. On the other hand, things to do grew double digits. So this is a very strong signal for us and one of key categories, which Groupon is betting on. We are also reaccelerating new merchant acquisition. We pretty much want to double the new merchant productivity to approximately 10% of North America local supply and with that return health, beauty and wellness to growth.

Great. Thank you, Dusan. We're going to turn now to a live question we received. [Operator Instructions] This question came in from Nick Nemeth. Rana has talked about excess cash. What do you feel is a sufficient cash buffer considering the negative working cash model?

Yes. Thanks for the question, Nick. So we've got answered -- we've had this question a few times. We never issued a formal guidance. This is the level of cash that we can operate on. How I've answered is, I've given people a couple of data points for them to sort of make their own conclusions. The first is in our history, we have operated in much tighter cash conditions several years ago when our business was let's say, more challenged. And at that time, we never really had, I would say, significant challenges in operating the business. We paid our vendors on time. We paid our merchants on time. And so one way to look at what's the right level of cash is just look at where we've operated in the past.

When you do that, you do need to remember that our business is somewhat seasonal and cash does fluctuate quarter-to-quarter. And so what I've also told people is our high point of cash or high point from a working capital standpoint is end of the year. And our low points are really September and April. And so if April, we don't report, March is -- or closest but March is not -- April, we see sort of the unwind of the, let's say, spring break season. So I would really look at September as sort of one point. But then you need to remember that there is -- that's the low point from also a working capital standpoint.

And then the last thing I would just say on this topic is -- when I think about excess cash, I also think about kind of what we need to handle in terms of upcoming liabilities. At one point, we had an unknown liability related to Italy. We were pleased to settle that dispute in the end of Q4 and remove that uncertainty. And now we -- as Dusan mentioned earlier in the call, we are reentering Italy so that was good. We also paid off our '26 notes when they came to maturity. We have a small stub on the '27 notes that are coming for maturity in the fall -- in the spring. So those are the other things I think about -- so if you're trying to work through the calculation of what is excess cash, I would sort of think through a few of those assumptions I just laid out, and that's the most that we've been able to give to investors at this point.

Thanks, Rana. A follow-up for you. If free cash flow continues to improve, how do you think about the priority between debt reduction, reinvestment and potential buybacks?

I think I've already answered some of this, so I'll try to go fast. Our first priority is organic growth. At the same time, we feel that we are sufficiently allocating the capital through our P&L to fund our organic growth. So I think that will always be our first priority. We know we need a healthy sustaining, growing business with good cash flow, which will produce excess cash and which that we can then do other things with. But it only contingent on doing the first thing and doing the first thing well. And so that will always be our first priority.

In terms of debt and buyback, as I commented earlier, I think our business can have some debt. We don't have a clear leverage target. But we like the instrument we have in our balance sheet. It's long maturity, it's unsecured, very limited covenants. Yes, there's potential dilution. But as we covered before, we've navigated that in the past, and we will be opportunistic at how we will manage it go forward. So we're not trying to be a highly levered company that's not really where we think the value is for shareholders substantially. There's a lot of operating leverage in our business. So we think that executing on our playbook to unlock value here is primarily going to be driven by operational leverage and some modest financial leverage will be something that we think is reasonable.

And so really, that sort of frames how we think about debt reduction. And with respect to buybacks, we've said consistently now, I would say, now for 4 quarters, that we're going to be very opportunistic. And we will look to allocate capital to buybacks in a way that we believe will create best long-term shareholder value.

Thank you, Rana. Our next question is from Martin Novak. How do you consider the biggest competitor now? Who do you consider the biggest competitor now? And in the next 3 years, how do you see your competitive advantage as well as a disadvantage?

So I don't really see one biggest competitor for Groupon because we are operating in several categories. And when you think about to how local experiences are discovered and sold today, it's very fragmented. There are travel and experience marketplaces, which are focused on travelers, which is definitely not Groupon. Our bread and butter are local customers who are just discovering what to do in their neighborhood, with their friends, with their families. There are plenty of direct merchant relationships, where search and social platforms and specialized marketplaces, which are focusing just on one category. So it's very hard to name just one competitor.

However, what I consider very important, and it's not just as a competitor, but it's a changing landscape because I strongly believe that AI will change how people decide what to do offline. So we need to be there. And I believe that we are positioned very well. There will be a competition who will be the trusted local intent and structured local supply provider. And I believe that our advantage is that we already sit between consumer demand with our millions of local customers and transactions. And often our merchants, they are not technologically advanced, and we can help them with our platform, with our AI focused to be a gateway how they can get their businesses into online world of the future, and make overall local commerce much easier for them to understand.

But at the same time, this is a potential threat and disadvantage. The experience is not consistent enough because we have so many categories with so many different product flows. The supply is fragmented. And most importantly, and I mentioned it as a focus the purchase frequency declined year-over-year in Q2. And yes, we are positioned very well with the new tooling and the replatforming, which we were doing recently that we can really unlock the focus and just work on the improvement. But at the same time, right now, I still see it as a disadvantage which we are focusing on solving. So this is why our strategy talks and centers on personalization, reach, trust and quality. In the end of the day, it means the focus on purchase frequency. And I -- with all this, if we execute well, Groupon can really become a natural bridge between AI-driven discovery where we have all the tools for connection and then the Main Street and merchants who have trouble actually to understand technology and get there.

Thank you, Dusan. [Operator Instructions]

Our next question also for Dusan. Improvement of offering is a constant focus for more than 2 years. Why do you think the result in increased volumes is not yet visible? LTM units decreased since 2026 after slight recovery between 2024 and 2025. What else do you plan to do to attract more merchants, except more capacity to reach out, thanks to voice AI and any changes in structure of the deals for merchants?

So there are like 2 contradicting trends, I would say. We see active customers grew 2% to over 16 million. At the same time, units declined 7%. So it clearly signals that customers are buying higher value local inventory. On the other hand, it's pushing back our purchase frequency and it went down. In North America local, the small businesses base was slightly lower year-over-year because new merchant acquisition was not as good as we were expecting. On the other hand, existing merchant supply grew. So it means or how I read it is that individual offers have not yet been enough to overcome the supply and frequency gaps of the marketplace. And yes, I was talking in the past about voice AI. It's just one tool, but it's definitely not all the plan.

Right now, again, with improvements with AI, we have visibility into all communication, which is happening between the merchant and Groupon, being it customer support or merchant support in this case or being it sales team, and we are building like a multitouch acquisition engine, which will understand every merchant history, all the communication, which will be using not only voice AI, but also e-mails, SMS, it will be assigning merchants to the best suited sales representatives to help them and handle them. And also, it will be auto launching paid campaigns based on good supply in which neighborhood we need. So this level of granularity was not possible in the past.

At the same time, I was talking in one of previous questions that we are investing into the talent here, which is an important part of this. And last but not least, is all that curation, quality, improving deal content, deal clarity, having much better integrations with our suppliers, as you can see with tours and attractions, for example, and overall strengthening the whole marketplace. And the target which we are talking about is same. We want to pretty much double the new merchant productivity. So that 10% of our North America sales in local are from new merchants.

Great. Another question for you, Dusan. What are the top 3 business initiatives that you consider will bring the most value to shareholders over the next 3 years and why?

So for me, it's not 1, 2 or 3 specific initiatives because Groupon, I don't see simply a silver bullet here, which we would go after, it will solve everything and grow. If I look out over the next 3 years, it's mainly about the capabilities, which we need to have as a company. First, I would start with the platform. I want to have best-in-class AI native operating team for experience marketplaces. It's a complete change of mindset, it's a complete change of how we are working because I believe that with the best team, the best setup, we can then achieve pretty much anything. And we started with this as a part of Project Foundry early this year.

And the pace, which I see right now in many parts of the company, and there is still a lot of work ahead of us is really incredible. We are able to release much more features and improvement versus what we were able to do in the past. We have much better understanding of data of customers, the level which would be impossible just 12, 18 months ago is now possible. So this is for me a must have to build a successful company. The company, which will perform not one quarter or two quarters, but which will perform over the long time period.

Then second, this obviously, AI mindset will be translated into AI-native modern marketplace also from the product standpoint. And this is actually on both sides. It's on a merchant side and it's on the consumer side. I was talking a lot about the personalizations and similar features, which we are developing on the consumer part. But on the merchants, I want to have pretty much the same.

We have a lot of data, which can help merchants. We know the price sensitivity of customers. We understand what's the pricing in their areas for different quality of services. So we can really help them drive their business, and we will be developing and investing into the interface, which they use to interact with Groupon to provide them much more than just set up a deal and run it on Groupon. We're really going to be a partner for merchants who will help them drive their business.

And bigger picture is if we can really succeed in building best-in-class operating model for experience marketplaces that is the way we will drive most shareholder value over the long term from my perspective.

Great. A follow-up for you, Dusan. Historically, Groupon's value proposition attracted more deep discount seeking customers. The current strategy emphasizes more higher-quality, higher-value deals. Can you describe how the customer base is evolving between these 2 cohorts? Are you seeing meaningful migration of existing customers towards higher-value inventory? Or is growth dependent on acquiring an entirely different customer profile? What does the typical Groupon customer look like now versus 2 years ago?

So I don't see the way that one customer cohort is just replacing another one. I was talking that we grew customers that we declined with the units, which means that average order value increase as customers are buying higher-value local inventory and the negative impact on purchase frequency.

So from my perspective, the opportunity is not only to attract a different customer, it's to give existing and new customers more reasons to return. And this is through the quality. This is through the innovative product offering.

And maybe just to dig a little bit deeper in numbers. Our most loyal customers are approximately 25% of the active base, but they generate 45% of the revenue. So this is obviously a group where we are focusing a lot on deepening the relationship, on building the features, on reengaging customers when we see a risk of lapsing from this core group on improving conversion from the first purchase to second purchase. With this loyal customer group, we have a lot of data. So we understand what they are buying, what they are reacting to. So for example, when we were launching the personalization, all tests in the initial phase were running on loyal customers because these are the ones which have very high purchase frequency, and it's very simple to see how the personalization is improving the trend.

This was the group, for example, when we discovered very different behavior during the weekends versus the weekdays, simply because the intent of the customer is different. And then I was talking about onboarding experience for new ones where I believe that we can do much better job and we will be releasing new features this quarter to make it much easier. And I would continue also to the products. We were touching mystery deals in the beginning of this conversation. But I believe that we can come with many more innovative products. Until now, we didn't have capacity and the resources. But right now, I feel that we have the team and we have an opportunity not only to look backwards, what was working on Groupon in the past, but also start following the trends.

And for example, when I was touching HBW which we need to return to growth, I believe that we will be able to achieve it by bringing first new way how we market the product on the social networks and influencers. And second, start following trends so that people and especially younger generation can find on Groupon, the deals, which Groupon was not selling 12 months ago, 6 months ago.

And Mike, just maybe I'll add one thing on this question of deep discount versus higher quality, higher value. It is management's belief that what we're really trying to solve is best value. And you can't -- you guys are all investors, you're also consumers. Price is what you get, but -- price is what you pay, but value is what you get. And just showing a deep discount without really understanding the quality of that offering, it doesn't complete the equation, right? And so while management is talking more and more about value and quality to build trust, we're not going away from the fact that we are -- we want to be the destination for where people know they will get the best value, right?

And so this is more of a slight, let's say, shift, not a -- and we believe it will fit for our customer group because customers are -- maybe there's a very small segment of people who are buying something because it's 70% off, I can't believe that, but how many of those are coming back, if that turns out to be a bad experience.

And so the real -- the way I think about this is, this is less about bargain basement, buyer beware type shopping experience and more about we want to be known as the destination for the best value when seeking experiences off-line. And we believe there's a real opportunity to deliver on that proposition. And when we look at our customers and we look at those who reengage with us, it's exactly those customers who come back again and again ones that are buying kind of the -- sometimes you call them -- they will come back, and there's a reason for that. They didn't have a good experience. So that's what's really promoting the shift, just so to kind of put it in different context.

That's a great add, Rana. Our next question, I think, is for both of you. Marketing costs rose in the last quarter, about 4.5% year-over-year, while the total revenue declined about 1%, reducing contribution margin to 56% from 58%. What is the current marketing ROI? And are you still targeting 1x marketing ROI? What incremental gross profit customer LTV and acquisition costs are you expecting from the added marketplace spend? Why should we expect the upper funnel investments to improve North American local growth? And what KPIs should improve first, traffic, conversion, purchase frequency or customer retention?

So in paid marketing, which is the majority -- the vast majority really of our spend, we were able to maintain our returns, and we are running it with pretty much same ROI plus/minus, but more often, we have better ROI versus what we had in the past. And we have much better granularity and visibility into how we are running it. And this is actually standing also behind the higher spend. Part of the increase in marketing is also investment in the platform itself. We are also investing into brand. We are investing in platform improvements, which are enablers for other parts, which I will be talking in a few seconds about, and we are investing more into influencer marketing where I would say still in the learning phase, and it's also standing behind the higher expenses.

Obviously, the long-term goal for us is to grow the portion of the traffic where we have full control of the customer. And one part of it is a SEO and organic traffic where we see growth after a few period quarters where we were heavily investing and we were able to completely change the trend. But we were talking also about several platform changes and I would say, technology changes which are enabler for us to grow the part of the traffic share where we can say we own the customer.

We were implementing new CDP platform, which we are right now ramping up and building new onboarding experience and significantly decreasing the number of messages which we are sending to customers while maintaining and switching to the growth of the revenue from these channels. We are also implementing there are a lot of features from this personalization but which I was mentioning multiple times to make it highly personal and increase the conversion.

Then another super important aspect for us is application because the customers who are using the application are the customers, which we don't have to acquire through paid channel, and this is one of our big focus areas right now. So I see it as a sequence as a funnel that on the web side, the customer is doing the first transaction, then the redemption is done through the application. So we have a very nice and huge installed base of the application and through the better onboarding and through the better features and more targeted features towards that customer, we will be and we are improving the purchase frequency and moving the second, third, fourth purchase into the application.

And like maybe last but not least, one extremely important fundamental project for us, which we were talking about for the last over 2 years was the migration to new platform. And on the last earnings call, we announced that we will be on every surface which we have on the new platform. And this is a huge unlock because we are able to ship significantly more features. And like the pace of improvements, which you can see now on the new platform is incomparable with the old legacy platform.

Thanks, Dusan. We're going to try to speed up. We have a lot of questions left in our queue. We want to make sure we get to as many as possible. [Operator Instructions] Our next question, what is the take rate and contribution margin profile of mystery packages and tours versus legacy travel? It looks like we might have lost Rana. Give us one second folks. Rana, can you hear us?

Yes, I'm here. Can you hear me? All right. So -- listen, on travel and tour, the tour operator business is a lower margin. We're not going to disclose the exact margin. It's still, we think, very attractive business. The tour segment, and this is not just mystery deal, this tour segment overall is quite, let's say, is a lower margin than just booking a hotel. And so the way we think about, though, just taking this sort of further overall margin at our business, really, we have to make a proposition that makes sense for everybody, including us. And what we're looking for is deals that can serve the right place on the shelf, right? And so you may see deals that are higher purchase frequency, which drive engagement and they may come at lower take rates.

You may see deals that drive freshness, which drives acquisition, which may come in at lower take rates. And then you may also see deals that are higher AOV, higher margin that are less purchase frequency that drives margin. I think the Groupon in the past had a kind of view of like every product is one -- is the same SKU and it all has to carry the same weight, but that's just not how our marketplace works, and we're moving to a business model where we believe that if we solve the customer and merchant need and make it a very healthy, sustainable business, we can find a place for that on our shelf and build the ecosystem on driving long-term lifetime value of both consumers and merchants. That's all I have Michael on that question.

We just have a live question from Apple BPO solutions. Go ahead and ask your question.

All right, Mike. Let's keep moving.

All right. You are presenting AI as a source of labor leverage following the restructuring. Can you confirm the merchants are willing to engage with an AI voice agent as with the human representative and that the full cost of the operating system, including tokens, telephony vendors, engineering, AI, QA, compliance and escalation remains structurally below the saved employee cost on a cost per activated merchant basis?

So publicly, we shared that our voice AI agents can call merchants. They are able to explain the Groupon's value proposition and book a meeting for a human sales colleague. And the objective, which we have is that the majority of new merchant meetings for our core local business will be set by AI agent or AI workflow by year-end. In terms of results and cost and experience, yes, there are customers who are not willing to talk to AI and they hang up immediately. However, overall efficiency, including the cost is much higher versus if we do the cold calling with a human agents.

And I personally expect by seeing how the AI models are improving every month, which is visible, and you can hear it on the quality of our voice AI agent calls that first, because of this quality, the gap will be lower and lower and these like people who are not willing to talk to AI. And on the other hand, I expect that we are kind of early adopters here and there will be many other companies starting with banks and their customer support, which will be driving their customer support with AI. So it will be much more common in the future.

In terms of cost, actually, I see this as a tool, which will allow us to scale sales much more because the cost efficiency even at current AI levels, and I don't expect that the cost would go up with the competition in the AI voice is very competitive.

And last, but not least, actually, it is helping our human colleagues because like what no one in sales likes are cold calls. And if we are able to outsource cold calls to AI and then have them talking to merchants who are interested in our value proposition, it will improve their own performance and their own satisfaction with the work.

Great. What is Groupon's expected revenue growth in 2027 and beyond?

I can take that. We haven't given guidance to '27 or our longer-term growth target. So we have -- what we've said in the past, and this management team still stands behind it is that we see an opportunity to drive north of 20% billings growth in this business. When you think about the markets we serve, both on a category level and a geographic level, we have significant opportunities to drive faster growth.

There is -- give you a couple of examples, right? Like if you think about the experience marketplace from a sort of online penetration standpoint, it's actually one of the least penetrated categories for flights, hotels, rideshare, food delivery, obviously, e-commerce and physical products. These are all very well penetrated categories. And if you look based on some data we've seen from third-party research, the experience marketplace is really around, let's say, 35% penetrated. And so there is a secular tailwind of that we believe if we can put our product and our marketplace in the right position, we should at least grow at that level. And then there's the additional growth that we should be able to achieve based on solving customers' problems better than others. And I think we see examples of this across our business.

Now we've been saying for many quarters, Things To Do has been growing strong double digits. We believe that our Things To Do business is growing faster than the market for Things To Do experiences and faster than the market for online bookings for those experiences.

What we observe though is that growth in our business is still uneven. And we have some cities that are growing very healthily. And we have other cities that are not growing that healthily. We have some categories that are growing very healthily. We have some categories that are not. And that's about getting this -- going back to kind of the core capabilities we're trying to build here as Dusan commented, that's about, for us, getting a best-in-class management team, which can execute against the scale of the opportunity and really unlock the growth that we see. The blockers here are really internal is my view, and I know it has been Dusan's view for some time. We've made significant progress. And if you look over our track record, what the growth rate of this business was when we took over 3 years ago and where we are now, you can see the basis point improvement in the year-over-year growth rate. And we expect to continue to improve that growth rate going forward. And so that's the most I can tell you. We, at this point, are not issuing a formal long-term guide number or medium term or a 2027 guide.

Thanks, Rana. I know we're running out of time here, but another follow-up live from Nick Nemeth, I see the 2023 Q3 being the cash low point of the past decade at $86 million with the business where it is today, is that what you're referring to? Would you be comfortable running cash down to there in Q3 consistently?

Yes. So that is the data point I was thinking about. I just would give you 2 things to think about, okay? The first is what I described was operationally kind of what we found ourselves at that time, and that was a constrained time for our business. And I'm just -- I was describing how we operate at that point. But the other data point to consider is we are a public company and as part of being a public company, you need to look out over the next 12 months to look at what liquidity you have across a wide range of sources. And that -- what ultimate leads is you concluding that you may operate the business with a higher level of cash than you may -- otherwise, if you were a private company. And so I think there's the operational realities, which I was pointing to, but I think there's another aspect that you may -- that you also want to look at because, listen, our business many years ago, we had a going concern warning and it made the business more difficult to operate.

And so that's another data point that we will look at. We are not interested to go back to there. We are a growing business. We're a profitable business. We have a healthy balance sheet, and we have no reasons to take on that additional burden at this point. And so I think it's not -- and that's not something you can easily discern from our financials, but where you pointed out as a starting point and then you just need to sensitize that a little bit given the additional commentary I've given you.

Great. Thanks, Rana. We are actually well over time, guys. Is there any other live question? Does anyone want to raise their hand, put something in the queue? If not, I'm going to turn it over to Dusan and Rana for closing remarks.

Yes. I'll just say 2 comments and then Dusan, I'll hand it to you. I really want to thank all of you guys for spending part of your lunch hour with us. I see many of you are already dropping off. But like this was something we did in response to shareholder inquiries to engage in more discussions. I would like this to be a discussion. We really learned from our investors. We're running this company for our shareholders, and we consider all of you guys our partners. So please send us your feedback. This was the first time we were doing something like this. We'd be happy to change the format, iterate so we get better at this. And what we're really looking here is to have a discussion. And so please keep the questions coming and look forward to speaking with all of you soon. Dusan, anything from you?

I will just underline, Rana, what you said, we made as a company a huge progress because really in 2024, we were not so far from almost being bankrupt and we made huge progress, and we are pushing a lot, 2025 was the first year when we were growing, and I believe that we can accelerate from that. And having the community of shareholders, which Nick Nemeth actually started, and I would like to specifically thank to Nick is actually extremely encouraging, and it's helping us to move forward. You came with so many great product ideas. It's actually internally discussed a lot within our teams.

You see that we are actually reacting and showing the features which were built based on what you brought so huge thanks to all the community, huge thanks for having been with us on this call, and we would definitely double down to make this communication open, the top management team, and I'm trying to change this across the board and the company is communicating much more on LinkedIn, on social networks about what we are building and we would be very happy if we can get as much feedback as we are getting in the last few months from you. Thanks, everyone.

Thanks, everyone. For additional information, head to investor.groupon.com, and keep our Twitter handle on your feed. Have a great day.

Thank you. Hello and welcome to Groupon's Second 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 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 the questions reflect management's views as of today, August 7, 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 including 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 its 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 would like to turn it over to CEO, Dusan Senkypl, to make a few opening remarks before we jump into Q&A.

Hello and thanks for joining us for our second 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 Form 10-Q.

We believe the best things in life happen offline. As the world becomes increasingly digitized, we believe demand will grow for analog, in-person experiences and for the digital pathways consumers use to identify, discover, and book those experiences. Groupon sits at that intersection of consumer intent and local supply, a natural bridge between the AI economy and the millions of local merchants who power Main Street.

Q2 fell slightly short on the top line with Billings and Revenue each down 1% year over year, while adjusted EBITDA finished at the high end of our guidance range and free cash flow was strong at a positive $15 million. The top-line shortfall was concentrated in North America Local, which continued to see pressure in Q2 and came in below our expectations. Looking ahead, we enter Q3 with momentum, with our business accelerating to mid-single-digit growth in July, a positive signal for the trajectory of our marketplace in the second half.

Project Foundry, introduced last quarter, remains our most consequential initiative as we redesign how Groupon works to be an AI-native company. Our approach is first principles and company-wide. We are rethinking how the entire organization runs across every function with AI at the center of how work gets done. Our ambition is that AI handles all repetitive work at Groupon, so our employees spend their time either managing AI agents or talking to customers and merchants.

The overarching goal is increasing our execution velocity, collapsing the time between recognizing a customer or merchant unmet need and shipping the solution. We believe operating at AI speed is critical to succeeding in an AI-first world. Just over 4 months in, we are extremely pleased with the progress we have made and the momentum we are building. We are starting to see outcomes delivered faster for our customers and strategic bets moving at an accelerated pace.

AI now builds and optimizes tens of thousands of hyperlocal marketing campaigns, a scale no human team could run, and engineering output per developer has more than doubled in the past 6 months. This progress and the green shoots we see, while not yet uniform across the entire company, give us confidence we are on the right path. We are doubling down to accelerate this transformation and expect that our organization will be AI-fluent by default by the end of 2026.

Turning to our Strategic Bets. The organic search landscape is being rebuilt around AI-generated answers and our search foundation work is paying off. Revenue from our organic channels returned to growth in Q2, and accelerated to double-digit growth in July. We are using AI to produce and structure quality local content at a scale that was not previously possible, making our platform more relevant to both traditional search engines and AI systems.

Organic is an inherently volatile channel and there is still work ahead, but together with our high-performing paid marketing engine, our improving organic channels are strengthening our reach. Our second focus is making the Groupon experience more personal and more relevant, so that the customers we bring in engage more deeply and purchase more often. Managed channels continued their improving trajectory in Q2 on the customer data platform we scaled last quarter, sending fewer, more effective messages, with revenue per send up strong double digits. And rather than one experience for everyone, we are building a customized one where different customers see a different Groupon experience.

Some customers prefer to explore a map, others browse carousels, others a swipe-based interface. Customer signals that arrive in the morning can now become shipped features the same day, a cycle that previously took months. Trust and quality is our newest bet. We are building a curated experience marketplace where every deal earns its place and no one has to second guess a purchase. We are raising the bar on what appears on Groupon and have remediated or removed hundreds of deals that did not meet it.

And AI now resolves the large majority of customer support contacts on its own, actually 3 times faster than at the start of the year. In the second half, we are adding verification before a deal publishes, a redesigned redemption experience including wallet support, and a pilot of a Groupon AI concierge that helps customers answer questions and book experiences.

We also continue to rebuild Groupon's technology stack, and we now expect every surface in every geography to be fully migrated to our new platform by the end of Q3. And this week, we strengthened our leadership team. Adi Rajkumar joined Groupon as Chief Operating Officer, and Mark Marge joined as Vice President of Marketplace Strategy and Operations, both with operating experience from some of the most successful local marketplaces. Our North America local supply engine has been running behind our expectations and we are excited to see the impact Adi and Mark will drive there.

Turning to Guidance. For the third quarter, we expect billing growth of 4% to 6%. Revenue of $128 million to $130 million, adjusted EBITDA of $19 million to $21 million and negative free cash flow in the quarter. For the full year, we are maintaining our outlook. Billings growth of 3% to 5%, revenue of $513 million to $523 million, adjusted EBITDA of $75 million to $80 million, and free cash flow of at least $60 million.

Our outlook implies second half revenue growth of approximately 6% at the low end and approximately 10% at the high end. We expect the pace of growth to accelerate through the balance of the year, supported by easier year-over-year comparisons, additional marketing investment, and increasing contribution from our strategic bets. The acceleration of our outlook requires -- runs ahead of our current pace, and a slower ramp across these drivers would affect our ability to reach it. We are confident in achieving our fourth consecutive year of improving revenue growth.

Taking a step back, we are building a platform on 3 compounding capabilities: AI-native experienced marketplace builders, a technology stack built for AI speed, and data that makes local commerce legible. As these capabilities compound, so does our ability to deliver on our mission to get people offline through quality local experiences at great value. This is a company-wide effort, and I want to thank every Groupon employee for the ambition and energy we are bringing to it. With that, let's open the call for questions.

Our first question comes from Bobby Brooks from Northland Capital Markets.

I wanted to get a better understanding of the new UI rollout and the phasing of that. Because just when I check out the website, I still get the classic UI. So just was curious to kind of hear more on that on a granular level.

Okay. Bobby, thank you for the question. I will talk about 2 pieces here. For right now, over the several years, we are talking about ramping up new [ Mobile Next ] platform. And just a few minutes ago, I was talking about our plan to finish the full migration in Q3. This new interface is right now powering all our countries, all our surfaces, and we are really in the last phases of migration and updating the users who are -- some of them are still on the old version mainly of the application.

We are cleaning up the last and least used parts of the interface. This is one critical piece of our efforts to improve the user experience because this new platform unlocks a ton of new opportunities and the pace of development, which we have on a new platform is completely different versus what we have on the old platform.

Second part of that question is about the user experience, which we are improving on this new [ Mobile Next ] platform. We were talking about personalization that I was sharing and part of our management team, multiple posts on LinkedIn or X, where we were showing examples of the interface. And we are running multiple tests, and we already developed multiple features, which we are testing and piloting. And we are identifying user groups who best interact with these features.

And I see and expect that during the first quarter, it's pretty much every week when we introduced something new to improve the user experience in terms of personalization. And last but not least, I was also talking about the quality bet. And here, we were talking about it mainly in terms of how we are improving deal quality and making sure that the deals have proper pricing, great customer experience.

However, there is also a second very important part of this bet and this is customer experience. You can see on tens of thousands of deals on Groupon across several countries already much improved customer experience in terms of showing the most important parts of the deal and parameters, for example, next to the options. So it's very clear when you are buying this option of the deal, this is what you are getting.

We are also taking most important parts of the fine print from the deals and showing it in a very visible way to customers so that they are very clear on what they are getting and there is no confusion after the purchase. So this is a combined effort on multiple fronts, because for me, my goal is to build a marketplace which brings trust to customers. Customers will be buying on Groupon, they need to build the trust and know that we are -- if I buy something on Groupon, I will get what I was promised to, I will get a quality deal at a great price.

For sure. I really can appreciate that on the -- building the customer trust and to piggyback on that. It is really encouraging to hear that emphasis today on building the trust and quality. So I just wanted to hear what might be some of the KPIs you will be -- you and the team will be watching to track your progress there?

So ultimate metric, which we are all watching here is purchase frequency, obviously. This is the key metric which will drive value also for shareholders. But internally, this is the metric which more and more teams which are participating on activities, which I'm talking about is looking at. And internally, we are going a little bit deeper, and we are really right now with the platform which we built and migrated over the last several years, we cut our customer base into multiple segments.

So we are really looking on performance of new customers. We are looking on performance of what we call champions, for example, on the platform. And pretty much every week and every month, we are looking on what features we delivered, how they are impacting behavior of these customers. So one example of a very important metric, which we are following is conversion to second purchase. If we have a new customer on the Groupon, how many of those customers within, for example, next 7 or 30 days after that first purchase, they will do the second purchase.

I would make a slightly jump to the topic, which is partially related to it. Initially, when we were rebuilding Groupon and marketing, we were very transactional. We were looking really only on that first transaction. But now with all the capabilities which we have, we start moving in the direction of looking on lifetime value.

So we are optimizing campaigns not only based on what they bring in 7 days, but we are looking on the type of customers they are acquiring, and we spend money differently if we see that the profile of customers is this is one and only -- one and done type of customer, or whether this is a customer who purchased the product, which is typically purchased 2 to 3 times a year. And we are reallocating our resources more towards the campaigns, which are bringing the customers with better purchase frequency in general.

That's terrific to hear. And then it was also just exciting to see during the quarter, the marketing partnership you did with the McDonald's loyalty app. And so, I just wanted to ask how you thought that played out. Could we maybe expect similar shorter duration partnerships like that in the future? And maybe just generally, what do you think that should show to investors about -- because it does feel like it's -- you probably wouldn't have been able to do that maybe 2 years ago or even 18 months ago. So I just wanted to give you the floor there.

Yes, it was our first partnership of this type with McDonald's. But last few months, internally, we are talking a lot and figuring out ways how to expand this. Again, when you think about how the transformation was evolving, originally, we were really focused just on, I would call it, like transaction management marketing, which brings revenue immediately because this is what we had to fix.

Now when our marketing engine is on this bottom part of the funnel, it's really working very well, scaling, understands what type of customers we are purchasing. We are expanding the marketing, we started already brand campaign in Q4 last year and we continue with brand activities during this year. We are getting knowledge and experience in the influencer marketing where we will need to double down, and this will be one area where we will be visible and investing more and more in coming months and quarters.

And McDonald's is a type of partnership which we will be bringing more and more with like recognized brands. And it's definitely not just McDonald's, you can see many other great top companies on the platform. But internally, right now, we have an initiative to bring them more because it simply brings Groupon visibility. It brings huge amounts of customers exposed to Groupon brand going forward. So my plan is to show more of these.

Our next question comes from Eric Sheridan from Goldman Sachs.

I'll just give you 2. First, can you go a little bit deeper in what you're seeing in June and July that increasingly gives you some confidence around the way you're framing the back part of the year versus the front part of the year? And is there a way to tease out sort of maybe macroeconomic relative to some of the things inside your control and structural on the product development side?

And then the second question would just be, when you think about aligning your strategy over the medium term, how do you think about the strategy evolving towards more frequency of behavior among buyers? So you're not only seeing the buyer growth, but you're also seeing some of the elements of frequency. Really appreciate it.

Thank you, Eric, for your questions. June and July, first of all, for the rest of the year, I expect that -- not expect, we know that the comparisons will ease it from here, really. July wasn't an easy month for us in terms of compare. So we are happy with where we are standing right now. And then a few drivers, which are very important for the further acceleration in the rest of the year. We finished majority of the platform rollout, which was a huge drag and huge project for us last few years really.

The last outstanding pieces will be finished in Q3, but really vast majority of Groupon customers is now using new platform. So, it gives us the speed. We progressed significantly also with organic revenue, which is especially in SEO growing double digits, and we are in a much better position with managed channels, which are responsible for sending push notification emails to our customers. So we should be improving our customer life cycle.

The personalization capabilities, which we developed and which we are testing and we have multiple of them in production are giving us tools which we will need to accelerate the growth and also this piece is very important for purchase frequency because by delivering what customers are expecting, not the generic offer of the deals on the website, but based on the signals which we get about the customer previous behavior about what they are looking at, what they are clicking at, what device they are working with, we can improve purchase frequency.

And then we will also allocate more marketing to the second half, and we see improving returns of marketing. And last but not least, we were going through and still going through quite complex transformation to Foundry, making the company AI native. And while it's very painful for us and people on one side -- on the other side, I can already see results and I see acceleration of delivery of bets where teams, which are AI-native, the pace, how they are able to develop and come with features is really incomparable to anything that I saw in the past year.

And on the macro piece of this question, in general, demand for local experiences remains resilient. Yes, I fully agree and see that there is a pressure on wallets and it's probably increasing. But at the same time, it also increases the appeal of value, which is our core consumer proposition. And what we see, and when I'm talking to our sales team, it increases merchants' need for demand, which is our supply proposition.

So we are not counting on macro in direction, let's say, all our numbers, everything is execution driven, but I don't see macro as a headwind to us. And then on the frequency part, it's mainly about that enablement, which we got with new platform and with AI development in terms of features. We are releasing so many new features for customers where we measure how they appeal and how they change their behavior. I was talking here about the personalization. I can give you another example how we are doing the personalization.

We now have much better understanding what people are searching and expecting on Groupon every single day of the week. And we see very different behavior, for example, during the weekdays and even within weekdays versus on the weekends. And we are customizing the whole engine and the whole platform so that it's simply serving the need of the customer at that moment by analyzing previous behavior, previous data, supply structure.

So all this will be helping us to improve the purchase frequency, which is one of our top priorities. And then I would mention once more the changes which we announced just recently on the supply side, which was a little bit dragging us last quarter with new leadership from Adi and Mark joining, we have very high expectations and very high ambitions on improving significantly also this part of the marketplace.

Thank you, Dusan, and thank you, Eric. We'll continue to take questions from the investors on the line, but the company would like to now take written questions that they've received via X and Reddit from their retail investor community. The first written question comes from [ LoneWolfV ] on Reddit.

A reoccurring perception is that buying a Groupon can be a gamble because the quality of the merchant or redemption experience is inconsistent. What is management doing to raise merchant quality and rebuild trust in the marketplace? And which metrics would demonstrate the customer experience is actually improving? Also, to Dusan directly, you mentioned ElevenLabs on the last call. Is there any supply-side agentic initiative?

So, these are 2 questions. I will take them one by one. On the first one, on the trust question, we were internally talking about customers and merchants and quality and trust a lot. However, we didn't have tools ready to make some impact. But this has changed. And this is the reason why we launched this trust and quality bet inside the company. This is one of our top priority bets inside. We are building curated marketplace where every deal earns its place. We are raising the bar on what appears on Groupon and we are removing deals that do not meet this criteria.

With AI, we are building also capability to be pricing expert. We are analyzing the pricing of the merchant, we are analyzing what are the prices in the neighborhood of that merchant so that we can become really a place where customers can come and rely that they will get great quality deals at an amazing value. Our AI is daily going through all the feedbacks and customer conversations. So we can immediately on the fly, improving the deals on the platform.

And it may happen that merchants may do some edit or change the content of the deal, which makes it not so easy to understand for customers what they get. When we get first 1 or 2 complaints from customers, our AI is able to detect it and just resolve it or escalate it so that our sales team can go and discuss with merchant how to make it better for the customers. We are changing the user experience. When you go to the website on most of the deals, you will see for each option, what is included, what is not included. In the past, this was not very clear.

We had fine print, which was not easy to read. Now on plenty of deals already, and it will be on 100% of deals in near future. Most important elements, which are impacting customers are visible and presented, which will increase the customer satisfaction. Obviously, it's a trade-off with slightly lower, but typically -- statistically not significant lower conversion, but then much better customer experience with much lower refunds versus previous status, and then with increased purchase frequency.

We are bringing also visibility of merchants availability. We are looking into their booking systems, even if they are not integrated on Groupon. We already have quite a lot of deals where we are showing the visibility, which otherwise customers had to go to merchant website, click on their booking system and find it. So it's all increasing the trust and it's all increasing customer experience. And the main metric, and we have like 10 metrics behind this internally, the main metric is repeat purchase. Because this is the most important metric for all of us and for our shareholders and one of our biggest focuses right now.

The second part of the question about the supply piece. The AI voice agent program for merchant outreach continues, and our objective stands the majority of new merchant meetings set by AI agents by the end of this year, with our sales team really focused on qualified conversations. And we are expanding actually this voice pilot, which was originally just AI SDR, calling to merchants, try to book a meeting to very broad integrated AI-driven acquisition engine, which starts with better understanding of the opportunity for each category and neighborhood.

Meaning like in this neighborhood, we need a deal like this and the AI orchestrating all the channels at once, meaning yes, we will send email, we will launch a paid campaign in that area to acquire a merchant, we will launch also AI call based on the results, we will define what's the next best approach. I really believe that supply will benefit from this fact because with AI and with access to all information which we are collecting about merchant communication, it can make whole go-to-market and sales process much more efficient, but also much better experience for merchants. And last but not least, you can see that we are doubling down with announcing Adi and Mark joining Groupon.

Thank you, Dusan. We'll move back to investors on the line. Our next question comes from Sean McGowan from ROTH Capital Partners.

A couple of questions. On that trust and quality issue, how are you communicating that shift and that goal to the consumer? You've talked in the past about doing brand marketing for Groupon. But other than the consumer having a good experience and being maybe positively surprised or whatever, or pleased, how are you communicating that this is an important strategy or goal for the company?

So, Sean, thanks for the question. Similar to many other areas, we are trying to do the work first, and then we want to let the results speak for ourselves. I don't think that if we would start communicating this, as long as we can't stand for 100% of deals on Groupon and 100% of experience that it would do us good in the long run.

So we -- this is internal focus right now, which is running already for several months. You can see the change in the user interface on the website. And when we will ramp this up to 100% of deals, and we will be internally happy, then we should be expanding this into like more marketing and more promotional communication, which we can do through some types of guarantees, which Groupon can be providing to customers.

Yes, that's helpful. Shifting gears. So you talked about July seeing, I think, a return to mid-single-digit. I assume that's across the whole company. So can you parse that out a bit more? Like, what are the implications for North American Local, international local? What are you seeing on a more detailed level?

Rana, do you want to take this question?

Sure. Sean, great to hear from you. Thanks so much for the question. You know, we are seeing, I would say, broad-based strength across the platform. So if you look at it, North America and international, we saw strength in July. We are also seeing a strong presence in our Things To Do business and our Beauty and Wellness business. It is the season for things to do right now.

And our Things To Do portfolio is really doing very strongly, and we're quite pleased specifically in the tours and attractions space, but also in the local activity space. We've got great assortment. We're executing well in the season, and our customers are really responding. So we are seeing strength. North America has picked up. But really, the comment we made was for the whole company.

And then my last question is, you've got so many initiatives that you've talked about over the last couple of years and Foundry being very important, but very recent one. So are you able to identify any of the improvement that you've seen so far? And I know it's early days, but is there anything you can point to in this uptick that you're seeing recently that you would say is directly attributable to Foundry or is it still too early to start to see any benefit from that in those numbers?

So the way how we were talking externally about Foundry, but this is also how we do it internally, is the sequencing that the operating engine needs to be changed first. And we are really not trying to build some shiny stuff visible from outside. I just want to make sure that we operate internally with AI pace, that we have all the data, all the harnesses. When a new person comes, the AI support, which they will immediately get, will help them understand all pieces of Groupon and I see significant results here internally.

Even when I -- when Mark was joining and providing me feedback on what he got, it was super positive feedback and the way how the data are available for all teams, how we share scales, how we have the data packages for everyone who wants to understand some segment, how it's pre-configured so that they can talk to AI about all the data. We can already see it. And this is behind the internal acceleration of the bets and seeing how teams are speeding up.

Also the Foundry and the way how we are really based on first principles, rebuilding the company, it goes towards the way that teams are smaller. We call them speedboats, much less people, 2, 3 people working on fairly big initiative, means much less meetings. So internally, we already see that pace. We would not be able to have all the personalization features implemented if we would not be able do it in AI.

The financial impact, it's coming after that and we believe that it will be coming through better features, reaching customers faster, seeing better results from marketing, building, identifying needs of customers and same day we're delivering and solving them. But I will -- I'm not able right now to share the expected numbers. Internally, I'm really pleased because this initiative started at the end of March, and this is by far the biggest impact of what I saw in the last 3 years on Groupon, how we operate, and most importantly, how we are able to deliver results.

Thank you, Sean. We'll take 1 more written question from X from [ Evan Loesel ]. What is the plan to get a generation that has never really used Groupon to try it for the first time? And what early evidence would you point to that it's working? Specifically, are you seeing changes in first time purchases, customer age mix, acquisition costs, or repeat purchase rates among newer cohorts?

So I would cover this from 3 different perspectives. First is the reach. We are rebuilding the organic part of our traffic acquisition and at the same time paid marketing engine. We will be doubling down also on influencer marketing. We see improving returns. We see more traffic actually on the website because we have unique content, which is and will be valuable in the future. We have much better granularity in understanding what is the traffic and what are the customers coming.

So within these groups, with the personalization project, I was talking about here multiple times, we will be able to provide a different Groupon experience for younger generation, show the product which are more appealing to them. That product piece is very important. It's new app experience, different onboarding, and this is built for people who never used Groupon. And I expect that we will see very different onboarding experience rolled out completely in Q3. So it will make easier for new joiners to understand what Groupon can bring, what is the product proposition.

And then on inventory side, we have new formats. We are really thinking like what can be appealing to younger generation. For example, I can mention our tourist packages found viral organic traction, who reach customers who never responded to the classic deal format. And you can see that active customers grew again this quarter and our conversion on new surfaces, which we released recently is improving.

We have a follow-up from Bobby Brooks on the line.

On the onboarding high-quality merchants, obviously, that's been a key goal during this whole transformation in the marketplace. And I just wanted to ask on your approach to win these new merchants. And it's kind of shifted the last couple of quarters. And last quarter, I think you specifically called out using some AI voice agents to make those broader base calls and just -- and with the goal of just setting up that first follow up with one of your actual sales agents. So just wanted to hear how that has progressed and what you've seen there?.

Thank you for the question. There is an overlap of what I was talking about with the question coming from X. We have internal pilots on AI voice agent who is able to call to merchant and discuss with them the Groupon value proposition and set up a meeting with our agents. Right now, we see the future of this segment really to be like multi-touch AI engine, which will be customized to understand what we need where and then run the complete communication and marketing channels to approach right merchants in the right location and AI piece is part of it.

I still believe that by the end of this year, a majority of these like cold calls to small merchants and the marketing approaches, emails, SMS messages, paid campaigns will be done by AI with AI really understanding what's happening on each channel and deciding what's the next best action to bring that merchant on board. So this is like go to market from technical point of view, how to get merchants.

Then second, in how we are running sales and what I see as new initiatives, we are already running internal sales brain, which is digesting all information which we have about merchants, about our communication with them, about performance of deals, about performance of other deals in that neighborhood. And that AI-driven engine is building recommendation what are the next actions which we should take on our product portfolio. And the impact is that if you are a salesperson, you get amazing support by this engine because like every day it tells you like your next action, which you should do is to call to this merchant because if that merchant adds a gifting option to the deal, they can expect that we will do 50% more, for example.

Or they -- based on this quality that I was talking about, the same engine can come and say, "Please call to this merchant." And if you fix this, this, this on this deal, we can expect that the refund rate would go from whatever -- from 10% to 2%, for example. So really it will be understanding and it already understands the value delivered by each action, which will make whole supply engine more efficient.

That's super helpful color. And then just maybe another follow up for Rana. Is just, it seems like -- so the inflect -- the rebound in July, it would seem like North American Local is at least high single digits. Is that accurate? Is that a fair logic? And could you maybe quantify it with -- it's -- I was under the impression that it was still kind of -- it was still a pretty tough comp for you guys in July. Just any color there.

Yes. So we're not going to start getting into the exact numbers for more of our business reached beyond what we've said. I will give more color, though. North America local did improve versus Q2. We did also see a strength in North America Travel. We've -- Dusan mentioned it, it's also in the script. We've had some really interesting progress with the new format that we've been developing on tour packages.

Obviously, this is very small. But just from a year-over-year basis point standpoint, it also does help a little bit because that we're seeing some strong strength there. And in terms of international. International, if you look at it, let's say it maintained the level that we were saying. So yes, the strength is coming from a pickup in North America local, North America travel. But, I don't think we will go into more specifics than that.

We have another question from the company's retail investor community. From Outlier Capital on X. Management has highlighted the importance of increasing customer lifetime value, session frequency, and platform stickiness as a part of the shift to an AI-native operating model. Have you evaluated or considered launching a subscription product that could deliver exclusive deals, enhance personalization, priority access, or other benefits in exchange for a reoccurring fee?

Yes, we did and we are. And my answer here will be very similar to the question I got regarding the quality and how we communicate it to our customers. We obviously evaluate models that deepen the customer relationship and membership economics are very well understood in our space. And I fully agree that there is a huge potential there. At the same time, the sequencing, how I see it. First, we have to make the marketplace model relevant, build this quality and trust piece that people who are using Groupon, will trust Groupon and will be coming back more often.

At that moment, we should be introducing more stuff, the stuff I was talking about, maybe some guarantees, but at the same time, it will be a right moment also to introduce again membership, because that membership would be worth paying for. The capabilities which we are building, personalization, the platform which we have for managed channels, the trust and quality that are all the pieces and assets which would unlock us the future membership product in the future. But at this moment, we have really nothing to announce.

Thank you, Dusan. One more question from [indiscernible] on X. I would love to have management address if they are working to implement the UGC marketing that you have mentioned you should start doing. I think it's an amazing idea. So many influencers who document local activities should be making more Groupon UGC. Seems like a no-brainer and would love to hear management's thoughts on this.

So, I fully agree. I was mentioning earlier on the call that we started rebuilding the -- really bottom of the funnel marketing initially, and now we are really moving up in the food chain here, I would say, towards the upper funnel marketing. And UGC is an area where, yes, we are already running some experiments. We have some influencers who are generating really like tens of millions of impressions for us. But I think that the opportunity is much, much, much bigger versus what we do right now.

We are still in the phase that we are building internal toolings for this with all the AI development and unlock through Foundry, this is now possible and we want to be ready to really be like a place where influencers can come, they can select their deals, we would even provide an interface where they can ask AI to build them their own like influencer mini website with their selection.

We will even build a functionality, which would allow anyone who is, for example, running some local community to have their set of deals there, run just for their community, even under their own name and promote it. With this functionality, we will be approaching mainly the micro and small influencers, local influencers. But I would like to expand this also to local communities because we can share the portion of the revenue and make it as a part of even like self-funding of small local communities.

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

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.