Groupon, Inc.

Good day, everyone, and welcome to the Groupon's first quarter 2021 financial results conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the company's formal remarks. To ask a question, press the star key, followed by the number 1 on your touchtone phone. Once again, press star 1 to ask a question. Today's conference call is being recorded. For opening remarks... I would like to turn the call over to the Chief Communications Officer, Jennifer Beigelmans. Please go ahead.

Good morning, and welcome to Groupon's first quarter 2021 financial results conference call. On the call today are Interim CEO, Aaron Cooper, and CFO, Melissa Thomas. The following discussion and responses to your questions reflect management's views as of today, May 7, 2021 only, and will include forward-looking statements. and a number of others. 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, we will also discuss the following non-GAAP financial measures. Adjusted EBITDA, Free Cash Flow, and FX Neutral Results. In our press release and our filings with the SEC, each of which is posted on our investor relations website, you will find additional disclosures regarding the non-GAAP measures, including reconciliations of these measures to the most comparable measures under U.S. GAAP. And with that, I'm happy to turn the call over to Aaron.

Good morning, everyone, and thank you for joining us to talk about our first quarter results. We've made a lot of progress over the past year, from demonstrating the resilience of our business model to launching a new growth strategy, and we continue this momentum into the first quarter. We're excited to highlight our strong first quarter results and to provide you with more insight into our plan to become the destination for local. In 2020, we significantly reduced our cost structure and expect to deliver substantial additional savings this year as well. These fixed cost reductions are allowing us to achieve greater flow through to adjusted EBITDA as our top line recovers, giving us an opportunity to deliver $250 million of adjusted EBITDA in 2022 if we can drive the business to just 80% of our 2019 gross profit levels. Based on this, we believe that we are well positioned to deliver value to all of our stakeholders over the coming quarters and continue to benefit from the macro recovery. Our first quarter results demonstrate this potential. We generated $30 million of adjusted EBITDA and took additional steps to further strengthen our balance sheet. From an operational point of view, we saw acceleration in North America local in March, underscoring the role Groupon is playing in connecting customers with local merchants. All of this hard work and results are foundational to our ability to execute our growth strategy. In international, Both supply and demand remain constrained as restrictions on human interaction and business policies are still stringent. Based on this, we expect a longer recovery cycle in international than North America. In addition to recovery, as we've discussed over the past few quarters, we have a plan for growth and we're executing on two strategic priorities, expanding our inventory and modernizing our marketplace. These two goals are highly intertwined, and successful execution should allow us to fundamentally improve our customer and merchant's value propositions. In doing so, we can unlock our marketplace flywheel, drive billings growth and purchase frequency over time, and take share in our trillion-dollar addressable market. Our recent focus has been on launching a new customer experience in North America that we believe will drive greater sell-through of our expanding inventory. So let's start with an update on the progress we've made in this area. As you recall, last quarter we outlined plans to leverage a new CX to drive sell-through of our expanding inventory base, grow purchase frequency over time, and begin to bend the perception of Groupon as a destination for local experiences. In order to become the destination for local, we believe we need to update our customers' perceptions about how to use the Groupon marketplace. So we're evolving our brand positioning to reflect our expanded value proposition. While we'll continue to inspire customers to try experiences available on the Groupon marketplace, we want them to think about us more than episodically, and we need to educate them on how Groupon can play a role in the 80-plus Grouponable moments happening every year. The first step in this process is to make sure we have a user experience that supports this goal. and we are excited to announce that in April we started to roll out a new customer experience to millions of our North American app and mobile web users. So what does this actually mean for our customers? Let me take you through a simple journey. Our homepage is an important first impression of our brand. And now when our customer opens the homepage, the look and feel is different. It reflects the content that more closely matches our preferences and includes curation of seasonally relevant inventory. The homepage also allows for fast access to favorite categories, such as nail salons and things to do with her kids and friends, so she can quickly access her favorite experiences. And by bringing category browse front and center on the homepage, we begin to bend her perception of Groupon. She begins to know and understand Groupon as a destination to explore the vast selection of local experiences in her area. Next, she starts to search. She's looking for a massage in her area and she quickly is introduced to massages near her location that match her search intent and she chooses a service to purchase. After she redeems, the app intelligently starts to include buy it again buttons in strategic areas of the app, reminding her that she should book her next massage. While a simple example, this illustrates including the new homepage, improved search, and new repeat purchase flows come together to support the main goal of the launch. We're delivering an experience that is familiar with modern consumer marketplaces, one that is uniquely Groupon, and one that we see changing from inspiration to needs-based purchases, more frequent purchases, allowing us to attract more customers over time. and to get there, we're moving faster than we have on CX in Groupon's recent history, going from concept to delivery in six months. Next, I'll provide an update on our inventory initiatives. In the first quarter, we focused on removing restrictions on deals and launching offers for beauty and wellness merchants in North America. We're on track to achieve our year-end goal of removing restrictions on approximately 80% of deals in our North American marketplace. In addition, we have successfully incorporated offers as an inventory option into our pitch for new beauty and wellness merchants, which means that all existing beauty and wellness merchants now have access to offers. For this initiative, we first prioritized our top merchants in our top markets, which allows us to scale more quickly. This progress demonstrates that our merchant value proposition is resonating. We're hearing from merchants that our new Offers product makes it possible to run more listings on Groupon because they now have the flexibility to choose the margin structure that works for their business. And it's a very low-risk option for them as they never incur any costs unless Groupon delivers a customer to their door. Offers has even allowed us to re-engage with merchants who previously left our platform because our Offers product can address previously unmet needs. and for customers, they have access to more purchasable inventory and the success of our test markets demonstrates the positive impact this can have on demand. We believe the work we're doing on the inventory front is providing value for our entire marketplace, from merchants to customers and positioning Groupon as the destination marketplace. Next, I'll provide insights into the continued progress we're making to modernize our merchant experience. This quarter, we launch new features and improvements to self-service deal recommendations in our merchant center. Tools like this provide merchants with more actionable insights created from Groupon's wealth of marketplace data and demand dynamics, and allow Groupon to be a more effective partner. Bigger picture, I'd like to put a finer point on the power of self-service overall. We're building a new way for all merchants to interact with Groupon, and we think the potential to leverage self-service to drive productivity and growth is considerable. Ultimately, by offering a sophisticated merchant interface, we can become a better partner to our merchants and use our internal resources far more effectively and strategically. We know that merchants want to have the power to quickly and efficiently self-manage routine updates to their listings. And by facilitating this, we can free up our sales team to focus on higher value interactions. We are freeing up bandwidth for our sales team to educate, pitch, and sign merchants up for more and more Groupon products and services. In addition to self-service, we're also looking at opportunities to help merchants do more in the Groupon marketplace. One key opportunity we're helping merchants leverage is the power of advertising. As we've discussed over the past few quarters, we've been piloting our first paid merchant advertising product, Sponsored Listings. We're excited to see the interest in this product grow as we build capabilities to offer it to even more merchants later this year. And the most exciting part of Sponsored Listings is the success we're beginning to drive for our merchants in the form of positive return on ad spend. Thank you for joining us. Thank you for joining us today. At the highest level, we want to improve the ease with which merchants can interact with the Groupon marketplace, extend their reach to new and existing customers, and give them the monetization levels they need to achieve healthy unit economics. Likewise, for customers, we intend to expand our wallet share with them by giving them the value, selection, and convenience they want. For merchants, this means modernizing their experience with self-service, A portfolio of inventory listing options and advertising products like sponsored listings that will allow them to do even more with Groupon. For customers, this means giving them a more compelling inventory and reimagined CX that makes the customer journey more intuitive and fun. We're confident that success across these focus areas will allow us to achieve our goal of becoming the destination for local. Lastly, I want to provide you with some insights on our marketing plans. As we've mentioned in the past, we are prepared to lean back into marketing spend when the time is right, essentially when we begin to see the green shoots of recovery take hold. During the first quarter, we saw opportunity in North America to do just that, and in March, we began to lean into both our lower funnel transaction channels as well as mid-funnel spend. Throughout the rest of the year, we intend to increasingly lean into recovery with marketing spend and gradually move up the funnel with a focus on reshaping our brand perception as the destination mobile push to drive engagement, new customer acquisition, and purchase frequency. One great example of how our marketing strategy is coming to life is our So We've Been Ready campaign that we launched in April. The idea behind this campaign is simple. We're tapping into the raw emotions and pent-up demand for activities and services we've all been missing. We're just still in the frustrations, the missed experiences, and the collective joy we are feeling as parts of the world reemerge from the loneliness of the pandemic and we all begin to find our new normal. and there is no better destination for customers and merchants to reconnect than Groupon. This is just one example of how we're leveraging Groupon's unique position to help reconnect millions of consumers who are ready to get back to enjoying local experiences with all the local small businesses who are ready to serve them. Before I turn the call over to Melissa, I want to take a moment and reflect on the strong progress we've made since the onset of the pandemic. Over the past few quarters, we've seen that as restrictions lift and supply returns, consumer demand is returning. We believe that we are well on our way to improving our customer and merchant value propositions. As we continue to make progress towards recovering to pre-COVID levels, we are executing on a strategy that we believe will put Groupon on a path to long-term profitable growth. With that, I'll turn the call over to Melissa to provide insights on our financial performance.