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Groupon, Inc. (GRPN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was a mixed but constructive quarter: billings grew and beat guidance, while revenue declined y/y and lagged billings due to deliberate take-rate compression; Adjusted EBITDA was positive and above guidance, and GAAP profitability improved markedly y/y .
  • North America Local billings accelerated to +11% y/y (first double‑digit growth since 2017 ex‑pandemic), with top 10 U.S. cities growing double digits; International ex‑Italy also improved, though headline International remained down y/y .
  • Management raised FY25 billings growth guidance to 3%–5% (from 2%–4%) and maintained revenue and adjusted EBITDA guidance, effectively raising its core outlook despite divesting Gift Cloud (removing ~$6m revenue and ~$4m Adj. EBITDA for the rest of 2025) .
  • Key narrative catalysts: hyperlocal supply strategy, platform modernization, and improving marketing ROI; near‑term headwind is lower take rates (higher redemptions, lower deal margins) which management frames as strategic to long‑term marketplace health .

What Went Well and What Went Wrong

  • What Went Well

    • “Time to go on offense”: Q1 results exceeded guidance on billings and Adjusted EBITDA; NA Local billings +11% y/y with double‑digit growth in top 10 cities; Things To Do grew for fifth straight quarter .
    • International ex‑Italy: ~5% y/y Local billings growth, with Spain leading and large markets (DE/UK/FR) improving; management confident in playbook scaling .
    • Marketing ROI improving: management targets ~100% ROI in 7 days for new customers; expanding channels (influencers/social) while keeping performance metrics tight .

  • What Went Wrong

    • Revenue growth lagged billings: take-rate compression from higher redemption rates and lower deal margins; this is deliberate but weighs on reported revenue near‑term .
    • International headline softness: International revenue −10% y/y and gross billings −8% y/y given Italy exit; units down 15% y/y .
    • Units and seasonality: consolidated units fell q/q post-holidays and −6% y/y; free cash flow −$3.8m on typical Q1 redemption seasonality .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($mm)$114.479 $130.379 $117.187
Gross Profit ($mm)$102.895 $118.187 $106.298
Net Income (Loss) ($mm)$14.522 $(50.118) $7.556
Diluted EPS ($)$0.33 $(1.20) $0.17
Adjusted EBITDA ($mm)$14.767 $18.661 $15.326
Operating Cash Flow ($mm)$(16.258) $66.963 $(0.022)
Free Cash Flow ($mm)$(19.666) $63.221 $(3.759)

Segment detail and mix

Segment MetricQ3 2024Q4 2024Q1 2025
North America Revenue ($mm)$86.889 $96.691 $91.113
North America Gross Billings ($mm)$275.063 $305.808 $286.519
International Revenue ($mm)$27.590 $33.687 $26.074
International Gross Billings ($mm)$98.329 $124.250 $99.957
NA Local Billings YoY Growth (%)(4.5%) 7.5% 10.6%

KPIs and efficiency

KPIQ3 2024Q4 2024Q1 2025
Total Active Customers (mm)15.5 15.4 15.5
Total Units (mm)8.684 10.270 8.540
Marketing Expense ($mm)$36.258 $42.620 $34.437
Marketing as % of Gross Profit35% 36% 32%

Estimates vs actual (Wall Street/consensus)

Metric (Q1 2025)Consensus#EstActual
Revenue ($mm)$115.5*4*$117.2
EPS (Primary EPS)$(0.143)*4*$0.343*

Values with asterisk (*) retrieved from S&P Global.

Commentary:

  • Revenue modestly beat consensus; EPS delivered a substantial beat on S&P’s “Primary EPS,” while company GAAP diluted EPS was $0.17 . Management attributes revenue/billings divergence to take‑rate compression tied to higher redemptions and lower deal margins, a deliberate tradeoff to strengthen marketplace health .

Non-GAAP and adjustments

  • Adjusted EBITDA remained positive at $15.3m despite lower revenue; the reconciliation highlights lower D&A y/y and a swing to other income (vs prior-year other expense), supporting GAAP profitability .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Billings Growth (y/y)FY 20252%–4% 3%–5% Raised
RevenueFY 2025Maintained (not disclosed) Maintained (not disclosed) Maintained
Adjusted EBITDAFY 2025Maintained (not disclosed) Maintained (not disclosed) Maintained
Core Outlook ImplicationFY 2025—Maintained total company guidance despite divesting Gift Cloud (~$6m revenue, ~$4m Adj. EBITDA removed for rest of year), effectively raising core guidance Effective core raise
Topline cadenceQ2 2025—Expect accelerating y/y growth in both billings and revenue New update

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current (Q1’25)Trend
Hyperlocal GTM / top metrosQ4: Top 5 NA metros grew double digits; building market management and category depth . Q3: NA Local pressured but improving operating discipline .Top 10 NA cities now growing double digits; merchants >$1m TTM billings up 43% y/y; continuing to scale the playbook .Improving
Take rate vs marketplace healthQ3–Q4: Migration headwinds easing; shift to quality supply .Revenue lags billings due to higher redemptions/lower margins; deliberate for long-term health .Near‑term headwind by design
Marketing ROI & channel mixQ3: Marketing 35% of GP . Q4: plan to keep ~30–35% of GP on marketing with ROI discipline .7‑day ~100% ROI target; expanding influencers/social while improving conversion .Improving
International turnaround (ex‑Italy)Q3: Intl Local −13% y/y; ex‑Italy −2% . Q4: ex‑Italy +2% billings; momentum in major markets .ex‑Italy ~+5% billings; Spain leads; DE/UK/FR improving .Improving
Platform modernizationQ4: Completed major migrations; NA mobile app completion targeted .Continued optimization; careful app rollout sequencing to protect performance .Ongoing
AI/technologyQ4: Focus on personalization and merchant tools .Using AI for merchant outreach, deal design analytics, engineering efficiency, and readiness for AI search/agent integrations; early signs: lower traffic but higher conversion via AI snippets .Increasing emphasis
Macro/tariffsQ4: Tariff impact minimal given mix; Goods <5% of revenue .Macro seen as potential supply tailwind (merchants seeking performance channels); cautious outlook remains .Mixed tailwinds

Management Commentary

  • “After a strong start to 2025, it is time to go on offense… North America Local Billings accelerating to double‑digit growth… we are building momentum and expect to continue to accelerate our growth.” — CEO Dusan Senkypl .
  • “Our progress in revenue is currently lagging billings due to compression of take rates in North America local… a natural consequence of our focus on building a sustainable foundation.” — CEO Dusan Senkypl .
  • “Looking ahead to Q2, we expect another quarter of accelerating y/y growth in both billings and revenue. For the full year, we raised our guidance for billings growth rate from 2% to 4% to 3% to 5% and kept our revenue and adjusted EBITDA guidance unchanged… effectively raising our guidance for the core business.” — CEO Dusan Senkypl .
  • “Performance marketing… improving, allowing us to increase volumes with the same ROI… we’re exploring new channels in the mid and upper funnel (social/influencers).” — CEO Dusan Senkypl .
  • “AI… will help in sales outreach, deal analytics/design, and engineering efficiency… we are making sure our website/platform is ready for AI‑driven search.” — CEO Dusan Senkypl .

Q&A Highlights

  • Hyperlocal & quality supply: Strategy combines geo market management and vertical category expertise; shifting from deepest discounts to quality/value offers (e.g., premium massages) to drive customer satisfaction and merchant economics .
  • Marketing ROI & retention: Targeting ~100% 7‑day ROI for new customers; expanding influencer/social pilots; retention is top 2025 priority, including “WOW deal” pilots (food & drink) that saw >25% take rates in tests .
  • International ex‑Italy: Spain up strongly; DE/UK/FR improving; same playbook as NA; Italy exit creates cleaner comps from Q2 onward .
  • Guidance & portfolio: FY25 billings growth guidance raised to 3%–5%; revenue/Adj. EBITDA maintained despite Gift Cloud sale (discontinued ops treatment; outside EBITDA), implying a core raise .
  • Macro: Management views current macro as a potential supply tailwind as brands seek performance‑based channels; still monitoring volatility .

Estimates Context

  • Q1 2025 revenue modestly beat consensus, while EPS delivered a large beat versus S&P “Primary EPS” consensus; company GAAP diluted EPS was $0.17 .
Q1 2025Consensus#EstActual (Company)
Revenue ($mm)$115.5*4*$117.187
EPS (Primary EPS)$(0.143)*4*$0.343*

Values with asterisk (*) retrieved from S&P Global.

Implications: Street likely raises near‑term revenue/EBITDA trajectories for core operations given billings momentum and maintained full‑year targets post‑divestiture; ongoing take‑rate compression may cap near‑term revenue upside versus billings without mix/take improvements .

Key Takeaways for Investors

  • Billings momentum is the core story: NA Local billings +11% y/y, top 10 metros double‑digit; as marketplace fundamentals strengthen, management expects billings and revenue growth to converge over time .
  • Deliberate take‑rate compression is a near‑term drag on revenue but is intended to boost long‑term marketplace health via higher redemptions and better merchant/customer retention .
  • FY25 outlook improved at the core: billings growth raised to 3%–5%; revenue and Adj. EBITDA maintained despite divesting Gift Cloud, implying higher underlying run‑rate expectations .
  • Marketing efficiency improving with expansion into influencers/social; retention initiatives (“WOW deals”) showed strong initial engagement and may drive purchase frequency and LTV .
  • Liquidity and leverage: Cash $226.8m at 3/31/25; convert structure includes 2027 notes with collateral/pledge requirements; current portion of converts $53.4m due within 12 months — monitor covenant/pledge milestones and refinancing path .
  • Near‑term trading: Positive skew to billings/revenue cadence into Q2 (management expects accelerating y/y growth), but revenue mix/take rate dynamics remain a watch‑item for translation into GAAP revenue .
  • Medium term: Success depends on scaling hyperlocal/category playbook, continued platform modernization, and retention gains; AI integration could enhance efficiency and discovery over 12–24 months .

Additional Data Points and Cross-References

  • Consolidated Q1 2025: Revenue $117.2m (−5% y/y), gross billings $386.5m (+1% y/y), gross profit $106.3m (−4% y/y), net income $7.6m vs $(11.5)m y/y, Adjusted EBITDA $15.3m vs $19.5m y/y; cash $226.8m; OCF ≈ flat; FCF $(3.8)m .
  • North America Q1 2025: Revenue $91.1m (−3% y/y), Local billings +11% y/y; NA active customers 10.5m (+3% y/y) .
  • International Q1 2025: Revenue $26.1m (−10% y/y); ex‑Italy Local revenue +4% y/y; units −15% y/y .
  • Marketing quarter cadence: Marketing $34.4m (32% of GP) vs $42.6m (36%) in Q4 and $36.3m (35%) in Q3 .