Groupon, Inc. (GRPN)·Q3 2025 Earnings Summary

Executive Summary

• Solid top-line and billings momentum, but GAAP EPS deeply negative due to one-time financing/tax items. Revenue rose 7% YoY to $122.8M and gross billings grew 11% YoY; Adjusted EBITDA improved to $17.5M, while GAAP diluted EPS was $(2.92) driven primarily by a $99.9M loss on debt extinguishment and a $25.4M Italy tax expense .
• Beat on revenue vs S&P Global consensus, but a major EPS miss on GAAP due to non-operating charges; management highlighted healthy Local growth (+18% North America Local billings) and nearly 300K net new active customers as execution of a hyperlocal playbook (Chicago now largest city) and product improvements (deal conversion +13%) continued .
• Free cash flow was negative this quarter (working capital), ending cash at $238.5M; management reiterated marketing ROI discipline (100% payback within 7 days) and plans a brand campaign in 2 weeks, while noting SEO headwinds offset by higher conversion and AI opportunities .
• Capital allocation optionality improving: CFO indicated willingness to be opportunistic on buybacks; Italy tax settlement has advanced and may require ~+$15M payment pending judicial approval, helping reduce a key overhang—potential stock catalyst as resolution finalizes .

What Went Well and What Went Wrong

• What Went Well

  • Local momentum and customer growth: North America Local billings +18% YoY; total active customers reached 16.1M (+2% QoQ, +4% YoY), with net additions of ~300K in Q3 as marketing efficacy remained high .
  • Product and marketplace execution: CEO: “Deal page conversion rates improved 13% year over year in North America,” and Chicago (focus city) is “growing at nearly double the rate of North America local overall” .
  • Category strength: “Things to Do had an exceptional summer season with its seventh consecutive quarter of strong double-digit growth,” and travel saw improved performance via enterprise partnerships .

• What Went Wrong

  • GAAP EPS volatility: Diluted EPS of $(2.92) reflects non-operating items—a $99.9M loss on extinguishment of the 2026/2027 notes tied to new 2030 notes, and tax expense effects—obscuring underlying operating improvement .
  • International softness ex divestiture: International revenue fell 3% YoY (FX-neutral –8%); Local revenue down 1% YoY, with underlying growth only after excluding the Giftcloud divestiture; FX also a headwind .
  • Working capital and cash flow: Operating cash flow of $(20.5)M and free cash flow of $(24.6)M (vs Q2’s positive OCF/FCF) reflect working capital swings despite improving Adjusted EBITDA .

Financial Results

Estimates vs Actual (S&P Global):

• Revenue: $121.99M estimate* vs $122.83M actual — slight beat .
• EPS (Primary): $0.00 estimate* vs $(2.92) GAAP diluted actual .
  Values marked with * retrieved from S&P Global.

Segment and Category Detail

• Regional Revenue and Billings

• Consolidated by Category (Revenue)

Key KPIs and Operating Metrics

Notes:

• GAAP loss drivers: “Other (income) expense, net” includes $99.9M loss on extinguishment of the 2026/2027 notes upon issuance of 2030 notes; tax expense elevated by Italy matter .
• International ex-Giftcloud: International Local revenue down 1% YoY, but up 8% excluding Giftcloud; International Local billings up 0.6% YoY, +15% excluding Giftcloud .

Guidance Changes

Management directed investors to earnings commentary for guidance; no specific numeric updates were disclosed in the Q3 8-K or call .

Earnings Call Themes & Trends

Management Commentary

• Strategic focus: “Global billings grew 11% year over year… Our core local category… grew 18%… We added nearly 300K net new active customers… Things To Do… had an exceptional summer season” .
• Product and engagement: “Deal page conversion rates improved 13% year over year in North America” and Next app users show “10–20% higher engagement,” supporting broader rollout .
• Marketing discipline: “We are not changing our ROI goal of 100% return within the seven-day window for all our performance marketing budget” .
• Capital allocation: “We expect to be opportunistic [on buybacks]… evaluating cash generation, investment priorities, market conditions, and trading prices” .
• Italy tax: Progress toward settlement with remaining owed ≈$15M; judicial approval targeted in December .

Q&A Highlights

• Purchase frequency and CRM/CDP: New cohorts’ 30-day repurchase rates are improving; broader gains gated by legacy tech—CDP rollout (U.K. pilot) to enable personalized journeys and frequency uplift .
• Marketing mix: Performance marketing remains ROI-disciplined; brand campaign begins in two weeks; SEO headwinds noted but conversion is higher; AI expected to unlock further efficiency .
• Hyperlocal execution: Chicago focus proving the playbook; expansion to additional metros underway with expected faster results given learnings .
• Travel recovery: Growth driven by deeper partnerships with large enterprise brands and better room-night inventory aligned to TTD summer demand .
• Capital returns: CFO opened door to opportunistic share repurchases given improved flexibility post-refinancing .
• Italy tax timeline: Multiple approvals received; December court date to seek judicial approval; ~+$15M remaining payment under proposed settlement .

Estimates Context

• S&P Global consensus revenue was $121.99M vs actual $122.83M — slight beat; consensus EPS was $0.00 vs GAAP diluted $(2.92) — a large miss due to non-operating charges (notably $99.9M extinguishment loss and elevated tax expense), which should be considered when calibrating forward EPS models . Values retrieved from S&P Global.
• Implications: Expect sell-side models to (i) maintain/improve revenue and Adjusted EBITDA run-rates given Local/TTD momentum and city playbook, (ii) adjust GAAP EPS for one-time financing/tax items, and (iii) monitor marketing intensity vs payback, app roll-out conversion, and Italy cash outlay timing .

Key Takeaways for Investors

• Underlying operations improved: double-digit billings, Local/TTD strength, better conversion, and higher Adjusted EBITDA despite negative FCF this quarter from working capital .
• GAAP EPS optically weak due to discrete non-operating items; Adjusted EBITDA trajectory and margin resilience matter more for near-term valuation framing .
• Hyperlocal strategy is working (Chicago lead indicator); scaling to more metros can sustain mid-to-high-teens Local billings growth, supporting the path toward >20% billings growth aspiration .
• Marketing ROI discipline intact with brand investments to expand the funnel; watch for conversion and new user engagement as the Next app distribution ramps in Q4/Q1 .
• Italy tax settlement nearing resolution reduces a major overhang; expect ~+$15M cash outflow on final approval, potentially before year-end .
• Capital allocation turning more constructive (opportunistic buybacks), supported by $238.5M cash and recent refinancing; liquidity appears adequate for 12 months plus 2026 notes maturity per 10-Q .
• Near-term trading catalysts: brand campaign launch, app migration KPIs, additional city momentum updates, and final Italy settlement approval; any incremental commentary on buybacks could also be stock-supportive .

Footnote: All company figures cite company filings and transcripts. Consensus values marked with * are retrieved from S&P Global.