Good day, everyone, and welcome to Groupon's Third Quarter 2020 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. Today's conference call is being recorded. For opening remarks, I would like to turn the call over to the Chief Communications Officer, Jennifer Beugelmans. Please go ahead.

Good morning, and welcome to Groupon's Third Quarter 2020 Financial Results Conference Call. With me are our Interim CEO, Aaron Cooper; and CFO, Melissa Thomas. The following discussion and responses to your questions reflect management's views as of today, November 06, 2020, only and will include forward-looking statements. Actual results may differ materially from those expressed or implied in our forward-looking statements. Additional information about risks and other factors that could potentially impact our financial results is included in our earnings press release and in our filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2019, and subsequent quarterly reports earnings in Form 10-Q. We encourage investors to use our Investor Relations website at investor.groupon.com as a way of easily finding information about the company. 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. 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 US GAAP. And with that, I'm happy to turn the call over to Aaron.

Thanks, Jennifer, and hello, everyone. We appreciate you joining us today and we hope everyone is staying safe and healthy. As the world continues to be impacted by the COVID-19 pandemic, I'm reminded every day of the positive impact Groupon has on small businesses around the world. Groupon connects millions of customers and local merchants. And we believe that during this crisis, we have a big opportunity to help small businesses navigate through the pandemic and beyond. And this opportunity is large. We estimate our addressable market to be north of $1 trillion and we are already a market leader. In fact, just to give you a sense of our scale. In the third quarter alone, we sold over 12 million local units and our North American customers have spent nearly $20 million on massages, over $15 million on Botox services and tens of millions on leisure activities in their local neighborhoods. Today, I'm excited to give you an update on how we're executing on our strategy to take share in the local market and return Groupon to growth. But first, I want to take a moment to highlight our third quarter results. On our second quarter call, we showed you proof points that demonstrated the durability of our model, even in the midst of COVID and we continued to build on this foundation in the third quarter. Looking at how far we've come since just the first quarter gives us confidence that we can continue to deliver the results we need to drive the business forward. To put this into perspective, we've gone from local units being down approximately 80% and an adjusted EBITDA loss of $22 million to local units recovering meaningfully, delivering $31 million of adjusted EBITDA in the third quarter and in our breakeven cash flow. We posted a 40% sequential improvement in local gross profit versus the second quarter, and are benefiting from our success in rightsizing the costs associated with our goods category. Bottom line, we believe these results provide a glimpse of our future successes in local. While our overall business is still feeling the impact of COVID and there's a lot of work to be done, we are confident in the strength of both our business and financial models. We're executing on a growth strategy focused on driving customer purchase frequency and unlocking our marketplace flywheel, and we believe we can create significant value. Delivering on our core merchant and customer value propositions is at the center of our growth strategy. To do this, we need to move beyond our incumbent high-cost model that requires merchants to offer deeply discounted deals if they want to participate at all in the Groupon marketplace. We need to give the merchants new, more tailored ways of working with Groupon, which will remove the barriers for merchants to use Groupon as an always-on sales channel. And with expanded inventory, we will give customers a reason to visit and purchase from Groupon more frequently than our historical average of approximately 3.5 times per year. As discussed in the last quarter, we have a strategy to build more quality inventory for customers and provide merchants with a business model that creates an economically viable way for them to work with Groupon across their entire inventory of services. We intend to deliver more quality inventory by focusing on three types of inventory: deals with very few restrictions, new lower discount offers and market resupply. Early in the third quarter, we began testing this combination of inventory types in four markets. Within these markets, our goal is to increase beauty and wellness inventory by 25% to 50% and keep it close. We believe this inventory growth will lead to low single-digit percentage point improvements for units and billings by the end of the six-month test. We don't intend to scale the full scope of our strategy to more markets until we get signal. Along the way, we'll be looking to learn more about what customers and merchants want to engage with Groupon and how we need to continue to shape our marketplace to meet future demands. After only three months, we have learned a lot. We get feedback from our merchants on a weekly basis and then make observations about our customer behavior, and we're quickly integrating these insights into our go-to-market approach. Let me give you a few examples. First, we discovered that we can reduce and remove restrictions from deals more quickly than originally anticipated. In fact, 90% of our new merchants' inventory listings in test markets carry no restrictions. Based on this, we're looking at how we can scale our efforts to remove or reduce restrictions across a wider range of inventory now, beyond just our forecasting efforts. Second, we've learned the importance of leading with the Groupon packaging in our sales pitch. In the past, we've had a far more transactional pitch focused on closing only one or two services at a high discount and high margins that we thought would perform best on Groupon. Our new inventory listing options have now made it feasible for merchants to list their entire menu on Groupon, whether through an unrestricted deal or a low discount offer, which provides them with more options that work for their business objectives. As we talked about last quarter, we knew that ramping up our inventory test during COVID could be challenging. From the start, our focus has been on controlling what we can and trying to mitigate the impact of factors outside our control wherever possible. This focus is evident when you look at how well we're executing in our beauty and wellness vertical. Given the nature of the services these merchants offer, as well as the current COVID-related restrictions, these merchants are best positioned to adopt a full catalog approach, remove restrictions and provide bookable services. And we're doing what we can to position Groupon to benefit from this vertical’s recovery. We are very excited by the results we've seen, which give us confidence that we are headed in the right direction. For example, within our test markets beauty and wellness listings per merchant have grown 40%, and we've been able to meaningfully accelerate booking tool adoption, and roughly one-third of the new beauty and wellness merchants in our test markets have joined the Groupon marketplace with bookable inventory. These early wins are encouraging because we believe our purchase frequency in this vertical is below what it should be given how often the average customer engages in these types of activities. Having the right inventory to deliver on the customer value proposition is important and something we believe we can control. Just the size of the price within beauty and wellness alone, if we can get our 2019 North American beauty and wellness customer base to increase their purchase frequency just one time per year, it would yield hundreds of millions of dollars in annual opportunity. So while it's certainly early, this progress makes us incredibly hopeful. While beauty and wellness have a built-in frequency driver, given how customers naturally interact with these types of services, the dynamic in our things-to-do vertical is a bit different with COVID-19 restrictions having a bigger impact. Despite this challenge, we are tracking well to our goal of increasing inventory in our test markets by 25% to 50% as soon as possible. And to date, we've increased our inventory by about 50% in our test markets first control. So let me provide some context for what's scaling our test could mean as we look ahead to 2021. While early, our merchants are responding to our expanded inventory options, including the introduction of offers. This gives us confidence that we can deliver a fundamentally better customer and merchant value proposition and drive growth. Once we have the right level of signal, we also believe we will be able to scale our strategy relatively quickly and reach an inflection point for growth shortly thereafter. One factor that gives us confidence on this front is the sales momentum we believe we can build by removing restrictions, introducing more inventory options and increasing bookability, which can quickly change the customer experience. To date, approximately 25% of our top beauty and wellness merchants in our test markets have agreed to list their full catalogs without restrictions and make them fully bookable. This is creating a new experience for customers by significantly reducing friction and increasing the likelihood that customers will always find something of interest to purchase. We believe that this coupled with marketing campaigns focused on driving customer awareness will reduce barriers for customers and drive purchase frequency. To that end, we are also launching new marketing campaigns within our core test markets. We are already a well-known brand with millions of customers who love Groupon, but far too many still view us as only an inspiration marketplace. We are testing campaigns that focus on repositioning Groupon as a marketplace that now has more of the inventory customers are looking for. We've also developed unique customer journeys, incentives, and promotions that we believe will be important drivers of our ultimate goal, which is increasing customer purchase frequency. While inventory growth and progress within our inventory test has been our top priority, we've also continued to improve the customer and merchant experiences. On the merchant experience side, we're focusing on positioning Groupon as a trusted partner that merchants can turn to as they’re launching or growing their business. We have a unique opportunity to reset the merchant perspective as they continue to face COVID-related challenges, and better tools are a big part of this. Let me describe a few of the launches that I'm most excited about on the merchant side. First, we launched several engagements to our self-service tool now called campaign builder. This tool allows merchants to manage their inventory listings, including copy images of their services and facility and data-driven intelligent pricing recommendations and insights. One of the most important features of this launch is that a merchant can take a new listing live in less than 24 hours. We are also working on functionality that will make it seamless for merchants to convert deals to offers and vice versa, allowing them to efficiently manage their Groupon inventory and demand. Next, to further improve our booking tool capabilities, we launched Google two-way calendar sync. This integration means that merchants can now seamlessly and automatically manage all of their bookings through their Google Calendar. Whether a customer makes an appointment through Groupon or through another booking tool compatible with Google, they will all be integrated into the merchant’s Google Calendar. We heard from our merchants that they were having a hard time managing multiple booking platforms, which frequently lead to double booking, and this tool eliminates that issue. Lastly, we launched an MVP for sponsored listings product, which will allow merchants to bid for top placements in the Groupon marketplace. If successful, we believe that merchant services like sponsored listings can become a sustainable revenue stream for Groupon over time, and a strong promotion tool for merchants that offers other scaled marketplaces. By wrapping intuitive self-service merchant tools around a healthy and growing marketplace, we believe we can turn Groupon into a must-have, always-on sales channel for local merchants around the world. On the customer experience side, we're reducing friction and making it easier for our customers to find, buy and redeem at Groupon. Our customer value proposition must allow for customers to find inventory they're looking for, transact and do so seamlessly. During the third quarter, we added new features to drive customer engagement, including new search, relevance, and navigation enhancements. We also completed a successful pilot of our future personalization engine. Before I turn the call over to Melissa, I wanted to leave you with a few quick insights on our fourth quarter holiday plan. This year, we're taking a global approach to our marketing and merchandising campaigns. This new single global framework will drive better connectivity across internal teams, marketing channels, and our public-facing brands. And while we expect the goods category to play a role during the upcoming holidays, we plan to use data to drive more cross-category merchandising to keep local top of mind during what has historically been a goods-focused quarter and provide our customers with more interesting gifting solutions. These are just a few insights into our approach for the fourth quarter. It's an important time for Groupon and we're proud of the foundation we’ve built that we believe will allow us to meet the needs of our customers and merchants this season. I hope the updates that I provided you today give you confidence that we remain focused on the most important priorities and that we're making progress. We are successfully managing through the pandemic and positioning ourselves to support local merchants during the recovery. We are executing on our strategy that we firmly believe will put Groupon on the path to growth. Thank you for your time today. And I look forward to taking your questions. With that, let me turn the call over to Melissa.

Thanks, Aaron, and thanks to everyone for listening in today. As Aaron noted, we appreciate your time and I'm excited to provide you with a few updates on our financial and operating progress, including a review of our third quarter results, business drivers and current trends, the status of our restructuring plan and lastly, insights on our expectations for the fourth quarter. Starting with our third quarter results. As Aaron mentioned, we continue to demonstrate the durability of our business model and that we have the right foundation for growth. We delivered $597 million of gross billings, $304 million of revenue, $160 million of gross profit, and $31 million of adjusted EBITDA. We were pleased with the strong sequential improvements we saw in local versus the second quarter and the progress we made against our restructuring plan. At the same time, we posted nearly breakeven cash flow and exited the quarter with a solid balance sheet and approximately $780 million in cash, including $200 million of outstanding revolver borrowing. Our results came in above our expectations and we're very proud of our team's efforts. While there’s still a lot of work to be done and our local category only recovered to roughly 56% of pre-COVID gross profit levels in the quarter, we are making progress and believe we have the financial stability we need to execute on our growth strategy. Turning to a review of our core operating metrics. We ended the quarter with 34 million active customers. Since active customers is a trailing 12 months metric, similar to our commentary last quarter, we would expect this number to decline as it continues to reflect the impact of COVID-19. During the third quarter, we sold a total of 21 million units. Global local units were 12 million and included triple-digit sequential growth in both beauty and wellness and things to do. Global goods units were 9 million. Now let me dive a bit deeper into the drivers of our financial results. Starting with what we saw in local. Consolidated local revenues and gross profit improved 35% and 40% respectively in the third quarter compared to the second quarter. We were able to successfully leverage a diverse local inventory and surface relevant listings, particularly in our beauty and wellness experiences. In fact, by the end of the quarter, beauty and wellness was already 70% recovered. This gives us even more confidence in our opportunity to ultimately win in local. That said, while we were encouraged that our recovery trends have been a bit more stable than we originally anticipated, we did see local recovery begin to plateau in the quarter. Let me provide you with an update on our group performance, our transition to a third-party marketplace and the related financial impact. First, we are delivering on our plan to simplify our goods operation, reduce fixed costs and run it at a more profitable level. In the third quarter, however, as we steered impressions towards our recovering local category, we saw a pullback in our goods performance compared with the second quarter. This performance was also impacted by the reintroduction of strong competition in paid marketing channels and lower COVID-related PPE demand. We made progress during the quarter on our transition to a third-party marketplace and exited the third quarter with roughly 65% of our North America goods gross billing transitioned to third parties. During the third quarter, we became aware that as inventory has migrated, we need more time to allow our internal algorithms to adjust so that we would not disrupt our business. As a result, the transition has moved more slowly than originally anticipated. We are on track to migrate substantially all of our North America goods marketplace to third parties by year-end, but our number one priority on this front is to ensure a seamless transition. As a reminder, in the third-party model, we recognize goods revenue on a net basis. Moving down the P&L, SG&A was $124 million, which reflects the impact of the planned restructuring actions we took in the third quarter. SG&A came in better than our expectations due to lower variable compensation and favorability in non-payroll spending as we continued to actively manage our expenses during the pandemic. Marketing expense was $31 million. We remain disciplined in our approach to marketing, making targeted investments to engage local purchasers. Now for an update on our restructuring plan. As you know, we've been executing against an aggressive plan to reduce our fixed cost base. Last quarter, we provided some insight into the power of our financial model in light of the cost takeouts alone, noting that based on our $225 million in targeted cost savings, we believe we can generate approximately $250 million in adjusted EBITDA by 2022 if we recover to just 80% of our pre-COVID gross profit level. As our results show, we are well on our way to reaching our 2022 cost savings goal. And in the third quarter, we initiated the second phase of our restructuring plan. We are on track to achieve $140 million of savings in 2020 from the combination of our restructuring actions and furloughs. This substantially reduced fixed cost structure provides us with the financial flexibility to continue to navigate the pandemic and is a foundation for our long-term success as a leaner, more agile and focused organization. Before I turn it over for questions, I want to give you some perspective about the fourth quarter. Broadly speaking, as I mentioned earlier, in the third quarter we saw global local recovery begin to plateau. And while October performance in North America local was stable with units down 40% year-over-year, it is not clear that this trend will continue into November and December, given the resurgence of COVID cases and heightened restrictions here in the United States. In international, we've already seen a pullback in October, which included worsening trends throughout the month and units being down 59% year-over-year. In fact, as we have seen some governments in Europe mandate new lockdown rules, local performance in some countries has sharply declined as much as 80% year-over-year. So we have reason to believe this situation may worsen throughout the rest of fourth quarter. Clearly, there is a lot of uncertainty driven by the pandemic and other macro factors. This makes it difficult to predict our performance in the fourth quarter. Given the work we've done to take costs out of the business, we believe we remain well-positioned to sustain the impacts of COVID. In closing, we feel well prepared to meet the needs of our merchants and customers as we finish out the year. We built a new operating culture that is allowing us to pivot quickly to navigate challenges related to the pandemic while executing on our growth strategy. We are collaborating more effectively to drive productivity and move faster and smarter. We have proven that our business is resilient, and we believe Groupon can play a bigger role in the success of small businesses around the world as we emerge from COVID. We are energized about the future and we look forward to updating you on our progress. With that, we'll open up the call for questions.

Your first question comes from the line of Eric Sheridan from UBS. Your line is open.

I hope everyone on the team is safe and well. Maybe sticking with the comments during your prepared remarks on the supply and the inventory side. Can you drill down a little bit and give us a sense of when you are doing what's within your control and sort of investing in supply and broadening out the supply in the marketplace? What we should think that might mean for either conversion of traffic or efficiency of marketing dollars, or return on customer spend when you think holistically about what the platform might evolve into over the next couple of years? Thanks so much.

Let me tell you a little bit about the inventory test and exactly how we see that flowing through. So as we discussed, we're seeing results in the scorecard we shared. And we know that winning for Groupon is on the other side of winning in local, which is this $1 trillion TAM that we've been talking about. And winning in local requires building the inventory exactly as you mentioned. So that's why we're building a suite of inventory products that give merchants the flexibility to be able to put more on the platform, which is exactly what our customers want. And we're seeing the results on the merchant side with inventory growth being more than 50% in our test markets than in our control markets. Let me give you a couple of examples as to how the inventory is built, and I'll give you an example of a woman I talked to who manages a spa. So what she did is she had historically been running three deals with us, and she's a very good merchant on our platform. With the new offering, she went from three deals to 72 items. Now not every item is created equal but three deals to 72 items, fully unrestricted, that was our full catalog, fully unrestricted and added bookability, so the full trifecta of what we wanted to accomplish here. When I talk to her, which is a couple of weeks after she launched her new offering, we looked at the results and about a third of the transactions she was seeing was on inventory she never would have been able to add before; we changed the value proposition. So we look at what we're seeing on a merchant-by-merchant level. We look at the progress we've made on our scorecard. And we see just a ton of potential with the direction we're heading. I'll punctuate real quick just because we mentioned it before, but beauty and wellness alone, just one additional purchase from our HBW customers that we had in 2019 is already hundreds of millions in bookings.

And Eric, where I'd chime in there on your question is absolutely, we believe the strategy is key to ultimately unlocking purchase frequency, which will drive that marketplace flywheel. So as you think about over the long term, certainly would expect there to be efficiency marketing over time.

Your next question comes from the line of Deepak Mathivanan from Barclays.

I wanted to ask about the goods business. It seems like the business model transition is tracking pretty well. But as you go into the holiday shopping period, how do you think about the selection and the inventory levels on the platform now? And what are you doing to kind of get it the right place for the next couple of months? And then related to that, is it fair to assume that during COVID times in markets where there is a bigger hit, like say, particularly in Europe, you have opportunities to merchandise goods better and achieve better conversion in some of the high converting areas on the website?

So anytime we talk about goods, I'm going to reiterate that winning for Groupon is on the other side of winning in local. That's the key. And the role goods plays as part of our ecosystem is similar to that of our broad, diverse supply base. The goal is to engage and support local buyers. So with goods in particular, a couple of things. As you noted, we're making good progress on our ability to simplify the business and run it in a lightweight way. So really good work by the team in order to get us here. As it relates to the way we think about goods in our overall assortment, here's just some math that I think is helpful. With goods and with our assortment overall, we're not just targeting any customer. We're targeting local buyers who live near strong local supply, such that if we bring them in on a lower-margin item, say a good, we can capture the share of wallet on our differentiated local offering, which comes with significantly higher margins. So we expect this type of cross-category promotion to be something that we can more and more of, including in the holiday season. Now specifically to your point about Europe, to the extent that they're on more significant lockdowns. Yes, as demonstrated in Q2, we now have all of the experience we need that on a market-by-market, on vertical-by-vertical and even on a customer-by-customer basis, we can adjust our assortment. I'll drive home a point on that last one. Just because restrictions are at a certain level in different geographies, different individuals have different comfort levels in what they want to experience. And of course, they built with their behavior, we pick up on that behavior and we could market accordingly. So across the board, the marketing team is teed up to be able to support our merchants and also deliver for our customers over the holidays.

No, I think that covers it.

Your next question comes from the line of Tom Forte from D.A. Davidson.

So one of my questions is similar to something that's been asked, but I wanted to ask it a little differently. So to the extent that you had lockdowns in place in the US and Europe earlier this year, it seems like your strategy was to lean into goods, lean into delivery. So to what extent do you think you can apply that playbook if we go back into lockdown? And then I'll ask my second question after you answer that one.

We have the playbook and the playbook is ready to go, and the team is already beginning to execute on it across the markets in Europe. What I'll say, and I think it's an important detail, we learned a lot from Q2. No one would have necessarily expected the way that different local segments would have responded even in the darkest times. So for example, auto services, which is a big part of our local business. Auto services are something that people are more comfortable with. Specific health, beauty, and wellness services are things that people continue to be comfortable with. And even in some of the more restricted US cities, they're continuing to be allowed at a reduced level, and people are comfortable with them as well. So you see that across the spectrum all the way down the spectrum to live events, where live events obviously across the world are doing far less business. So we've learned a lot from Q2. We have the ability to apply all of that insight and execution on muscle to what we ever comes with us going forward.

And as my second question, there's a concern across e-commerce in the fourth quarter about inventories and logistics. So what gives you confidence on your goods business that you'll have giftable products in inventory and that the consumer will be able to get them in a timely manner from a logistics standpoint?

So we work with, in our new third-party model, we work with a main list of distributors that we have very good relationships. We know where they are. We know where their distribution centers are. We have the SKU-level information and rather robust reporting. So if, for example, there was a problem with any one distributor, we can quickly switch to another or change product lines that we promote. One thing that's really special about Groupon as it relates to both goods and local, and this applies to your other question as well, is we suggest to our customers what they should be interested in, whereas other marketplaces, be it goods or any other business, local or something else, they're reactive. We suggest that power of inspiration allows us to suggest to customers different things they would be interested in. So if different lines of local were more restricted for a period of time, we could suggest something else, and when those lines of local open up, we can suggest that in accordance with merchants' and customers' comfort levels. The same thing applies to individual goods items as well and on a distributor by distributor and SKU by SKU level; we have the ability to steer that demand.

Your next question comes from the line of Doug Anmuth from JPMorgan.

You talked about launching a marketing campaign in the test markets. So hoping you could just elaborate on the strategy and timing there, just given this kind of demand environment. And then also just curious, as you're going into the holidays here, how you anticipate kind of emphasizing local more relative to goods over these next couple of months. Thanks.

Again, this is where we're heads down focused. We have demonstrated the durability of this business from Q2 to Q3 and we've seen what that recovery looks like, so that just gives us so much more confidence in the model overall. And so we are focused on both. And so as we look at the success we've already built on the supply side, which is significant with the degree of inventory build, with the degree of unrestricted deals coming on and bookability as well, we can now start to say yes to customers more. So that is they want to buy something and we have the inventory and we're saying yes, whereas for years, we couldn't repeat it a restriction or we didn't have the inventory and we said no. So as we look at the customer side, this is where we just draw a lot of energy. What we're going to apply here is the same exact product discovery tactics that we took on the supply side. That's lean discovery. This is what's helping us test, iterate and change the throughput on our learnings to make sure that we achieve the milestones on our scorecard. So let me give you an example of just what we're seeing, and I'll talk a little bit more about what we're doing because it's early stages in what we're doing after we've now built the supply. The second half of this now six-month period is to generate the demand and touch a lot of marketing campaigns. But the early adopter behavior is really encouraging. So one example, as we look at different customers and profile them, is a woman who bought a salt cave. And when I looked at her profile, she bought the salt cave in the middle of the summer. And right after the salt cave is added full catalog and unrestricted offering that was bookable, she went ahead and she returned for multiple other services in addition to another salt cave, something that we previously may have restricted before. So she added microdermabrasion, lymphatic facials, another type of facial. And so it's really taking advantage of our full catalog behavior. And so just by looking at customer behavior and early adoptions helps influence our marketing campaigns, because our job is now to get a greater share of wallet from our customers for our merchants. So we're testing campaigns that reposition Groupon as a marketplace for these individual customers and early adopters first and then for more people in these key cities, so that they can understand the full breadth of our offering, that they can buy more and that they can buy again. This manifests itself in unique customer journeys, incentives and promotions and we're really excited about it. Go ahead. You had a second question as well?

Just on local during the holidays, just how you plan on kind of shifting the focus.

So again within local, this is going to be a week by week. We have to watch things week by week, and we poke them also to do that. But specifically, again, we've seen certain local verticals continue to maintain, even within COVID, to different degrees. And so on a customer-by-customer, merchant-by-merchant level, we have the ability to flex our inventory. I can tell you that in a typical holiday season, local is something that is heavily gifted along with goods. And in particular, one of the categories that's the most gifted, it might not surprise you but is beauty and wellness. There's just some exciting things in there like massages that people like to give as gifts and are big purchases at that time of the year. So we have the ability to flex accordingly to customer comfort and level of restrictions and feel pretty confident in our approach.

Your next question comes from the line of Michael Ng from Goldman Sachs.

There are a lot of moving parts as we think about modeling the top line for the rest of the year. I was just wondering if you might be able to help a little bit in terms of translating the unit trends that we're seeing in October to date into what we should expect for bookings and revenue, appreciating that there's going to be some noise around the goods transition as well. Thanks.

In terms of what we're seeing and how we're thinking about the fourth quarter. So as I mentioned in my prepared remarks, North America local performance was stable in October. There’s a lot of macro noise right now, particularly with the US election this week, as well as rising COVID cases, so we're watching that very closely. On the international front, so there the dynamics are very fluid. We saw worsening trends in local throughout the month of October so as governments implemented new COVID-related restrictions. And even as recently as this week, additional international countries, including the UK and Germany had restrictions go into effect. So the trends by market are what you would expect. So in the countries and cities with the largest lockdowns, that's where we're seeing greater pullbacks in local performance. As Aaron mentioned earlier, we are going to be using our diverse set of supply and making sure that we're surfacing relevant offerings to customers.

And I guess as it relates to modeling bookings, should we assume that they're down in line with units or is there another…

Yes, that's a fair assumption.

Your next question comes from Ygal Arounian from Wedbush.

I want to explore more about the test markets and the increased inventory, and you provided a specific example. Additionally, can you provide more detailed information regarding the merchant perspective and their observations? Is there broader evidence indicating an increase in frequency in these test markets as we continue to develop this? Is it straightforward to analyze the impact of COVID to accurately understand your early observations during this process?

And again, we are just starting the marketing now so the information I'm giving you from the early adopters is just that. With any new product launch, I think you're going to look at the early adopter behavior first and build your insights and marketing campaigns based on what you understand. And so yes, we have the early adopter information. We know that we've changed our value prop. We know that we can see behavior change. And so now the job is marketing. It's exactly what you said, it's to educate. We haven't launched the marketing campaign to any level of scale yet and so that's the work that needs to be done. I will say that even though COVID certainly made things harder, we have clear momentum on the merchant side. The merchants are engaged. They're saying yes, to bringing the customers back and back repeatedly and that we know that more inventory is what our customers want, so that we know that we're on the critical path to growth. And additionally, as we are seeing new merchants come on at highly restricted rates, 90%, we will also believe that simultaneously, even within COVID, we can roll that out as well even beyond our test markets. So from insights that we can get from our customers, from launching the marketing campaigns, the insights we’ll get from those, and from being able to continue momentum on the supply side, including extending our learnings to value beyond the test markets, even within COVID, there's still a lot of energy that we have in driving this business forward, which of course, is built on the fact that we feel comfortable with the durability of our business as we've seen customers come back from Q2 to Q3. So we feel pretty good overall about both the test and the overall energy or what we're focused on.

And a follow-up, I have kind of two-part question on the merchant side. And so this full catalog concept is, I think, quite different than how Groupon has kind of operated before or been viewed by merchants. Can you talk about the initial reaction, the sell-through process? Is there any pushback from merchants and kind of feeling like maybe they're giving up too much ownership by putting everything on to Groupon? Or are they generally kind of excited about the opportunity to do that? And then it's early but maybe too early to get a good read, but anything positive you're seeing from sponsored listings and self-serve in driving some of the merchant adoption?

I mean, what you're asking about like core elements of the value proposition; this is exactly where we're focused. On the merchant side, we know merchants want more. And so your question is, is there any pushback from the merchants? The answer is that we have seen really surprising uptick. Now the uptick with our new merchants is extraordinarily high, but even the uptick with our old merchants who then have to be trained on a new model is significant. Let me give you a data point and this is a significant data point. Of the beauty and wellness merchants in these four markets, we look at the top merchants specifically. That's the 80-20, the merchants that make up 80-20 to sales. And very quickly, as we rolled out and perfected our sales pitch, over a quarter of them signed up not just for one of these things but the full trifecta, full catalog, unrestricted and bookable, and obviously, some of the ones outside that quarter signed up for more of these services, which is how we built the overall inventory growth and density. But you're not seeing an early product launch with like single-digit percentage uptick. You're seeing like our first go with this and putting this out there; you're seeing significant uptick among the merchants that make up the lion's share of our overall business, and that's on the full trifecta, let alone some merchants maybe not wanting to add booking but adding their full menu in an unrestricted way. So we're seeing really encouraging results on the supply side, and hopefully, that gives you a little bit more color as to how that is working. On the merchant experience elements, this is really important and we haven't talked a lot about this, but now we just released a lot of information related to all the progress we're making. So yes, inventory is the top priority, which means that we're addressing the gaps in our merchant value proposition, our customer value proposition. And here's the exact way I think about it. From what a merchant wants is they want things easy, they want a lot of customers and they want to make really good unit economics. From our inventory plan, we're talking about the unit economics and we're addressing that head on and we've given you the results of what we're seeing. From an easy standpoint, now we're talking about things like Campaign Builder. This is self-service tools. For years, Groupon had no self-service tools. If you wanted to make a change, something as easy as an image or a couple of words, you had to call your rep, go back and forth over the period of days and eventually your change will get made. Now with Campaign Builder, merchants can make changes on their own, like they're used to doing on other advertising platforms and marketplaces. And so it gives leverage to merchants and it gives leverage to our sales team. You can think about how much time we're going to save from a sales standpoint with greater and greater adoption here so that the sales team can focus on far more value-added components of their jobs. So we're really excited about Campaign Builder and what it does for the ease portion of our value prop. As well, Google two-way Calendar sync, it's making it easier for merchants to bring their existing calendar booking tool and have it worked seamlessly with Groupon. And what that allows is allows merchants, if they have a calendar tool that's integrated with Google, I think Square may be among the largest but there's many of those. Then all of a sudden, they now have the ability to manage bookings directly using what they already have their staff trained on and seamlessly to the Groupon marketplace. And the last portion of that is sponsored listings. So this goes after the reach component of the value proposition. What our merchants have told us is they want more. And when our best merchants say they want more for years, we've said we have no ability to do that. Now with sponsored listings, we're saying yes, just like every other marketplace. If you want to spend a little bit more of it because you run a business better than your neighbor, then you can now do that. And so that's what this MVP starts to do. It's early. We've launched it in a way just like our commitment to lean operations where we can start to get signals and then scale it accordingly to understand the customer response and understand the right pitch to merchants and the way that integrates with self-service tools. But this is something you've seen across all the marketplaces and advertising platforms out there, so we have a ton of confidence in our ability to scale it in an appropriate way for the Groupon marketplace, and we're pretty energized about all these things you just asked about.

There are no further questions at this time. And with that, I would like to thank everyone today for joining the Groupon Incorporated Q3 2020 earnings conference call. You may now disconnect.