Groupon (NASDAQ:GRPN) reported third-quarter billings growth near the top of its guidance range, but revenue and adjusted EBITDA fell short as customer refunds and marketing spending weighed on results.
Billings rose 6% year over year to $439 million, while revenue increased 2% to $125 million and adjusted EBITDA was $15 million, Chief Executive Officer Dušan Šenkypl said on the company’s November 10 earnings call. Free cash flow was negative $46 million, which he attributed to the company’s seasonal cash flow pattern.
Šenkypl described the quarter as uneven. Growth was led by Things to Do, Travel and International Local, while North America Core Local supply outside Things to Do fell short of expectations. The company expects the effects of rebuilding that supply to begin appearing in results in 2027.
Refunds and Marketing Weigh on Results
Groupon’s investments in trust and quality, including honoring more customer refund requests, reduced reported billings growth by 180 basis points, Šenkypl said. Refunds grew by double digits year over year, with most of the increase issued through Groupon Bucks, the company’s platform currency.
Chief Financial Officer Rana Kashyap said the corresponding impact on revenue was slightly greater than the billings growth impact, though she did not quantify it precisely. Šenkypl said the shift toward Things to Do and Travel, along with the trust investments and other factors, contributed to revenue growing more slowly than billings.
Groupon is also raising marketplace quality standards and can pause deals from merchants with low-quality scores. Šenkypl declined to disclose how many deals were paused or how concentrated refunds were among merchants. Kashyap said quality challenges were more pronounced in beauty and wellness, automotive services, retail and other products than in Things to Do.
Management expects the investments to support retention and repeat purchases over time, but Šenkypl said Groupon has not yet seen the purchase-frequency gains it had expected. He said it may take more than one or two quarters to measure the effect of changes in trust and quality.
Higher marketing spending also contributed to the adjusted EBITDA shortfall because it did not deliver the expected return. Šenkypl said Groupon is shifting its marketing approach from evaluating customers primarily on their seven-day returns to considering their expected behavior over 12 months.
The company had difficulty fine-tuning Google and Meta advertising algorithms for the new approach during the quarter, he said. Groupon is continuing to adjust its campaigns and using tighter spending guardrails in the fourth quarter.
Travel Growth and AI Initiatives
Travel billings grew 36%, while Things to Do grew by double digits in both North America and international markets, Šenkypl said. It was the category’s sixth double-digit growth quarter in the past eight, helped by direct connections to partners’ booking systems.
Groupon also relaunched LivingSocial as an marketplace designed for AI agents. More than 50,000 Groupon local experiences are available through LivingSocial, and an agent can reserve a specific date and time for more than 25,000 of them, with customers completing purchases through Groupon’s checkout.
Šenkypl said the initiative could create a new channel for Groupon and help merchants appear in agent-led searches, but he does not expect it to have a material impact on fourth-quarter results.
Separately, the company introduced FoundryAI, an internal platform intended to centralize data and share AI capabilities across teams. Šenkypl said AI resolved 84% of customer support contacts on its own in the third quarter, up from 42% in January, and passed 90% in early November. He also said engineering output per developer more than doubled in the first half of the year.
Cash Flow and Cost Outlook
Groupon ended the third quarter with $177 million in cash and cash equivalents. Kashyap confirmed an analyst’s calculation that the company expects at least $85 million in fourth-quarter free cash flow.
Since its previous earnings release, Groupon repurchased 677,561 shares for $11.3 million, bringing 2026 repurchases to approximately 3.5 million shares for $43 million. Kashyap confirmed that most of the latest repurchases occurred after the third quarter ended.
Third-quarter selling, general and administrative expenses benefited from lower expected bonus payouts that will not recur, Kashyap said. She described the fourth-quarter expense level as more indicative of a normalized rate. As of October, Groupon had realized approximately 70% of its planned restructuring savings on a run-rate basis, with some remaining savings expected in the first quarter.
Groupon plans to provide 2027 guidance with its fourth-quarter results.
About Groupon (NASDAQ:GRPN)
Groupon, Inc (NASDAQ: GRPN) operates a global e-commerce marketplace that connects consumers with local merchants, service providers and businesses. Through its website and mobile applications, the company offers customers promotions and vouchers for experiences, dining, beauty and wellness services, entertainment, travel and other locally focused activities.
Groupon also provides deals on selected products and merchandise, giving participating businesses a platform to reach new customers and generate demand.
