Groupon, Inc.Common Stock 2026 Q2 Earnings Call

Hello, 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 10-K. 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 four 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 six 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-generating 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. 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 % up strong double digits. 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. AI now resolves the large majority of customer support contacts on its own, roughly three 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. This week, we strengthened our leadership team.

Adi Rajkumar joined Groupon as Chief Operating Officer, Mark March 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, we are excited to see the impact Adi and Mark will drive there. Turning to guidance. For the third quarter, we expect billings growth of 4%-6%, revenue of $228 million-$130 million, adjusted EBITDA of $19 million-$21 million, negative free cash flow in the quarter. For the full year, we are maintaining our outlook. Billings growth of 3%-5%, revenue of $513 million-$523 million, adjusted EBITDA of $75 million-$80 million, 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, increasing contribution from our strategic bets. The acceleration of our outlook requires runs ahead of our current pace, 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 three compounding capabilities. AI-native experience marketplace builders, a technology stack built for AI speed, data that makes local commerce legible. 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 accompanied by effort, I want to thank every Groupon employee for the ambition and energy they are bringing to it. With that, let's open the call for questions.

Okay. Bobby, thank you for the questions. I will talk about two pieces here. For right now, already several years, we are talking about ramping up a new MobileNext platform. 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 effort to improve the user experience because this new platform unlocks ton of new opportunities and the pace of development which we have on a new platform is completely different versus what we had on the old platform.