Hello, and welcome to Groupon's fourth quarter 2024 Financial Results Conference Call. On the call today are Chief Executive Officer, Dushan Sankful, Chief Financial Officer, Yiji Pumph, and Senior Vice President of Corporate Development and Investor Relations, Rana Kishap. At this time, all participants are in a listen-only mode. Today's call will be a question-and-answer session only. The company has posted earnings material, including earnings commentary and earnings slides, on the company's investor relations website at investor.groupon.com. Today's conference call is being recorded. Before we begin, Groupon would like to remind listeners that the following discussion and responses to your questions reflect management's views as of today, March 12, 2025 only, and will include forward-looking statements. Actual results may differ materially from those expressed or implied in the company's forward-looking statements. Groupon undertakes no obligation to update these forward-looking statements as a result of new information or future events. Additional information about risks and other factors that could potentially impact the company's financial results are included in its earnings press release and in its filings with the SEC, including its annual report on Form 10-K. We encourage investors to use Groupon's 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 and furnishes with the SEC, corporate governance information, and select press releases and social media postings. On the call today, the company will also discuss the following non-GAAP financial measures, adjusted EBITDA and free cash flow. In Groupon's press release and their filings with the SEC, each of which is posted on its Investor Relations website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable measures under U.S. GAAP. And with that, I'd like to turn it over to Dušan to make a few opening remarks before we jump into Q&A. Hello, and thanks for joining us

for our fourth quarter and full year 2024 earnings call. It's a pleasure to be with all of you. Yesterday, after the market closed, we released our earnings and posted our earnings commentary and updated slides on our investor relationships website. In addition, I encourage you to review our press release on 10K, which contain more detail on our fourth quarter and full year results. Today, my plan is to make brief opening remarks and then open up the call for questions, both live from our analysts and several that were pre-submitted in advance. I am pleased to share that 2024 was a pivotal year in Groupon's transformation journey and we are entering 2025 with significant momentum. Groupon today is fundamentally different than it was two years ago when I joined the CEO. While our core mission remains unchanged to be the trusted destination for discovering high-quality local experiences at unbeatable value, how we deliver on this mission has evolved significantly. Our transformation is delivering results across three key areas. First, in marketplace health. We have shifted from chasing volume to building quality, evidenced by North America locals' positive 8% billing growth in Q4 after declining 19% in 2022. this improvement stems directly from our focus on curated experiences and strategic merchant partnerships second in our platform modernization we've completed major migrations including our fraud detection platform north america cloud infrastructure new website and erp system these aren't just technical upgrades we are strategic investments that enable us to innovate faster and create more engaging experiences third in our financial strength we generated 69 million in adjusted ebda and 41 million in free cash flow for the full year our first positive free cash flow since exiting the pandemic this improvement flows directly from our more efficient operations and healthier marketplace dynamics. For Q4 specifically, after a challenging Q3 impacted by technical migrations, we rebounded stronger. We are seeing encouraging signs across the business. North America locally returned it to 8% billing growth. International local, excluding Italy, grew billings by 2%, with positive momentum in all four major markets. We saw double-digit growth in key verticals, including things to do, enterprise brands, and gifting and seasonal offerings. Looking ahead to 2025, we are confident this will be the year we return Groupon to sustain growth. Our 2025 strategy focuses on winning in key markets through our proven city-by-city approach, and prioritizing high-impact categories like Sphinx To Do, Beauty and Wellness, and Gifting, enhancing customer retention through improved personalization, boosting merchant success with enhanced tools, and completing our remaining technical migration including our North America mobile app in Q2. With a much better cash position of 229 million versus the previous year and a clear roadmap for growth we are well positioned to create value for all stakeholders as we execute the next chapter in groupons transformation i want to thank the coupon team for their resilience and commitment which have been instrumental in our progress with that let's open the call for

questions thanks to sean our first question comes from sean mcgowan from roth capital So, Don, you can now unmute.

Thank you. Appreciate that. Yeah, can you talk a little bit about what you think was driving that local growth in the U.S.? It seemed like it really turned around. I mean, I think when you gave us an update on the third quarter conference call, it was running down, you know, through October. So what do you think drove that turnaround in the late part of the quarter?

Yeah, so thanks for the question. we had a lot of headwinds during last year with technical migrations and platform projects which were impacting our ability to deliver so it was definitely one of the drivers and as we were either finalizing them or mitigating impact our platform returned to let's say the performance which we are expecting from it but at the same time uh during the last several earnings calls i was talking about our strategy shift shifting to curated marketplace with a sales organization focusing on quality when we don't go by for quantity but we really look what we need on our platform uh we are also spending much more time with our merchants to make sure that uh they have deals which which perform so i would say that this is a combination of all these elements which finally all fit together and they work and they are reflected in the results especially in

the later part of q4 thank you can i ask if you were able to recover any of the lost cohort you know that cohort that fell off of more loyal customers were you able to get any of those guys

back uh it's it's highly related to overall platform uh stability which significantly improved uh we saw improvement uh in that cohort but overall i would say that the team did great job really on uh focusing on what's wrong on what's what are the issues with every individual customer which which we have uh and it reflected in better results not only from this cohort but overall on the platform uh through through higher convergence great thank you very much

our next question will come from bobby brooks from northwind capital bobby you can now unmute

your line hey good morning guys thank you for taking my question uh so i wanted to ask on the top in the slide deck and mention that the top five metro areas in north america saw double digital growth in the fourth quarter could you just discuss what drove that strength and was this and probably more so was this a result of your team specifically targeting those those top five metros first and and if so then is this something that you think you can then roll out and replicate that you know strategy something that you can roll out and replicate to other metros

Yeah, thanks for the question. Actually, we were also talking about international and Spain as a first sign of the result of a strategy shift, which we did some two years ago as a pilot. And actually in Spain, we have some areas and some metros, which are actually hitting 2019 numbers. And during the last 18 months, let's say, we started implementing similar measures also in NA, specifically I was discussing on previous call, explaining that we are building this market management capability within Groupon, which is focusing first on the largest metros, where we are defining what we need, what are the deals which should be on the platform, and actually also deals which should not be on the platform. So this is the reflection of this strategy. We are still in the middle of it. There is plenty of work ahead of us. But the goal is that once this process, this structure, will be optimized for top few metros in NA, we will be scaling to our locations too.

Yeah, so it's something where, yeah, those top five metros were targeted first and going, going and you're still working on figuring out what the optimist or how to optimize it best but it's it's something that you haven't yet rolled out to all different metros yeah we are still

still learning the right way how how to do it uh it's a combination of market management where we we are understanding the market dynamics the specific parameters and behavior of each location and then there is also the category dimension to it where we are digging much deeper and understanding what our category needs because Groupon is not one place fits all but we are developing a strategy for each key vertical which we have on the platform so it's this combination category in one dimension and NGO as a second and once we will feel comfortable that this is scale work process, which we can have everywhere. We will be rolling that out to two more locations.

Got it. And then, so North American active customers, that grew sequentially after, I mean, I have my data back going back to 2018 and there was all sequential declines on active customers in North America. So that was really great to see. And so kind of two questions on that is one, does your guide bake in any continued customer growth? And could you maybe just touch on what you felt drove that? I know you talked about better conversion. If you could just share any more details on that, that would be appreciated.

Yeah, so I will go back again to platform stability because it was a big topic for us last year. And really in Q4, when all these pieces fit together, we saw performance marketing channels to be really stepping up and improving. And we are really driving the acquisition part, which in my opinion, but we still have the potential to do more. We have a plan. We improved and strengthened the team in marketing department. And we know that we can grow further, but at the same time, we are shifting our focus right now on a customer retention where we are bringing some, especially food and drink deals, which we call wow deals, which can help us to improve the frequency because I believe we cracked the customer acquisition and now Opius is customer retention, second, third, fourth transaction.

Got it. And then just kind of convert. So does your guide bake in any customer growth or is that not really a function?

Our plan expects that we will be doing better and better with customer acquisition. uh we don't expect that it will be like several times better obviously but uh but we will be improving uh and we expect in the in the plant slight improvement in retention

got it appreciate it i'll uh return back to the queue thanks guys and congrats on the good quarter

thank you our next question comes from eric sheridan from goldman sachs eric you can now

unmute your line thanks so much for taking the questions maybe two if i could just coming back to the point on purchase frequency, can you go a little bit deeper in what you see as the critical investments to drive more purchase frequency and what you might be seeing in terms of different behavior in terms of purchase frequency when you align it on top of vertical based behavior on the platform to what resonates and what might be some of the key unlocks to drive increased frequency? And then the second question would just be, you talked a lot about how enterprises increasingly are using groupon as a platform to go to market can you all maybe give a few examples about enterprises as a strategy continues to evolve and what that might do to broaden out supply on the platform over the longer term thanks so much okay thank you eric

for the for the question uh so i will start with verticals yes we see different behavior in different verticals on the on the platform there are verticals like uh online retail where uh customers are not buying really the local services and experiences where it's quite open one-op and it will depend on our marketing performance and on our marketing systems to be typically in google on facebook when we are looking for some solutions so if uh if you are buying some stuff which is kind of commodity and it's still in groupon then uh uh it's very different behavior but when we move to uh categories which are more local then that behavior is different and uh we see a huge potential to increase purchase frequency uh both uh we are and we started already late late q q4 is are doing is we are adding something which we call wow deals which are typically food and drinks really great offer with top brands on the market uh and our uh main intention is to offer walls asap after the first purchase in the past we quite often focused after the purchase just to deliver uh the voucher then do nothing for next few days and then come back again to customer right now we are improving and shortening that period of time when we communicate with customer and based on our tests we see very positive reactions from customers so we believe that these what i call wow deals will be one of important elements to drive purchase frequency higher in terms of enterprise partners like you see overall market that many companies are really looking for for consumer demand and some of them are are struggling so groupon is a great platform for them when you are advertising on google on facebook you are typically paying for clicks and yes you are optimizing for performance but groupon is really the only i would say big platform where you can make campaigns which are pure performance based so they make a lot of sense and then if we dig into categories when typically these these businesses have fixed costs or they are selling memberships and suddenly the economics these deals work great for them and groupon is really a top platform for them which they really want to scale and i would say most limitations which are there are still on the technical integration part which is our focus to be more open to more accessible to these enterprises which may have they have their own issues with their own quite often legacy platforms and we need to be able to to connect them but in general when i'm meeting with with these partners on every meeting i have a feeling that we can do much much bigger business with them versus what

we do right now all right we'll now pose written questions to management that came in through our investor relations press line our first written question is for dushan can you share what the the December Christmas period looked like from a growth perspective? North America Local was running in the low single digits positive during Black Friday, Cyber Monday, and was likely down negative high single digits to negative low double digits in October, based on your commentary at that time around guidance framing. So would this imply the business was running up positive double digits in December Christmas based on reported North American local growth of plus 8% year over

year so uh december was uh very good however what we have to take into account is that uh year over year compare was impacted by timing of black friday and cyber monday so it's not really apples to apples uh but even said that on a life for life basis comparing holiday 2024 to holiday 2023 we believe we had a very successful year in a local including some great numbers in the lead up to christmas and period between christmas and new year and what's important in the past we have mentioned that we have observed that our platform tends to perform better during the key buying seasons and q4 was really no exception to that for our q1 outlook as mentioned in earnings commentary we lost some of the excitement from the q4 season as we started q1 but we have been pleased with the momentum in north america local and see continued growth in in billings and while we commented that our first quarter outlook assumes better performance in local versus q4 at this time we don't believe it will be double digit growth in in billings we have a few more

questions from our analysts on the call it looks like bobby you had your hand up first hey thanks

guys thanks for taking the question again um so bringing higher quality supply onto the platform is a strategy you've you've talked about a lot since deshawn you took over and specifically on this call so i was just interested on on really how how you are getting these higher quality merchants onto the groupon platform you know maybe some examples of wins but but what is the typically the selling point that wins these guys over is it is it the improved tracking you can provide merchants on the deals progress or is it something different well actually it starts with us and with

our sales force and the consultative approach which we were talking about in the past and let me uh let me give you one example uh when we started and we were reviewing what we call deal books internally which is like uh let's say a document which describes what deals we should be getting for the platform for massage the most preferred massage type of deal was like with 50 plus discount and 40 doors per hour but when we are doing the analytics we see that really the massages which we sell most are actually something completely else we are quite often above 100 it's a couple massage with with nice merchants so we have to convince ourselves salesforce first that we don't go by the deepest discount we go for something which is a value for customers because groupon is always a place where we will not be selling the most expensive stuff uh we will be selling high quality stuff which will be a good deal for for customer so now we don't go to the lowest quality merchants we go to good quality and high quality merchants we don't go there with like 40 dollars per hour massage but we go there with a massage which makes them more money uh which makes also more money uh to group on and actually customers love it uh love it more and it's actually combined with the gifting strategy which uh uh works works very well these are the types of deals which you can buy and give us a gift because you see the quality immediately so so this is the main strategy uh really starting on our side deciding what are the good deals which which we need identify right right merchants and negotiate a deal which makes sense for merchant

and group awesome that's that's terrific column that makes a lot of sense and this is the last one for me so obviously you guys give a lot of value to the consumers like you're just like you you just mentioned, there's obviously, you know, some pressure on the consumers here with, you know, more macro, more, more macro related stuff. So I was just curious if you could just maybe talk about high level, like, would you guys actually see like a counter, you know, kind of counter cyclical tailwinds if the consumer sees more pressure, or I, I should say, would you expect that? I mean, that's kind of historically, I think has been the case, but is that something that you think will continue to be the case going forward if if we start to see pressure on the

consumer you do you want to take this one yeah uh thank you bobby um i think this will be uh headwinds and televins uh definitely uh on uh we will be uh the business which will be uh interesting for merchants in terms of uh heavy if they will have empty capacity they will be looking for the options how they can bring the customers in and i think the group one is great place for that for sure there will be also televins because the people might have uh uh a little bit deeper pockets so it might have impacted the categories like terrible or goods or uh high value but i believe the customers will be looking for the value and i think that the group one is a good

placed on that really appreciate the call guys i'll turn back to the queue thank you

thanks bobby we'll move back to sean mcgowan from roth capital sean please unmute your line

yeah thank you um just i was wondering if you could give any metrics around the improvement in gifting this seems to have been a big priority of the company uh and you know you've set some goals of of improving that as a percentage of total business

so can you can you give us some sense of that progress we didn't disclose any specific numbers yet but i can share uh some like top top level view i mentioned that gifting is gaining importance and uh what i can share with you is that during the peak holiday season uh the gifting was uh in double digits share of our orders very low double digits obviously but it's significant improvement versus versus last year we see very strong trend and strong growth there and especially in some categories because some categories are simply more suitable for gifting than than others it's all interconnected we it will take us time to get and i believe in the past we were mentioning that uh the benchmark uh which which we had was uh 50 uh for for holiday season we are very far from that uh but for that we need to improve inventory uh i was answering the previous question with like the muscle like more luxurious let's say massage deals we need to have enough deals like this because these are the deals which uh are bought as gifts more more often uh i would also stress out what we mentioned several times that groupon is performing very well as a platform during season and there are many seasonal occasions where gifting will be helping us because people can be self-gifting gifting to others so this is all big project which will take us time but like i see that we are on the very very good path in delivering it thank you thank you sean we'll move

back to some written questions another one for you dushan can you talk about the drivers of growth within international excluding italy which geographies are you seeing strength in addition

to spain running up to 2019 levels uh i was actually mentioning in previous answer that we have some cities in spain which are already uh near 2019 levels which is extremely encouraging we see uh very positive signals and trends in all our big countries which is uh spain uk france and germany uh these four make you know approximately 80 percent of our international local uh in in spain as i mentioned we started two years ago by strengthening the sales force by uh focusing more on market management on really deciding what's what's needed on the platform and we are following same steps in in our countries it starts with a strong leadership so uh we are strengthening and we did strengthen teams uh in every single country which which i mentioned uh we are holistically looking on performance of the country what deals we should be bringing but then also uh rebuilding the cooperation with marketing to make sure that we are promoting price right stuff and although we did not migrate those countries to new platform yet uh just by by optimizing optimizing supply and marketing we were able to get them to grow and we are very optimistic going forward another written question for you dujon there appears to

be a lot of employee turnover assuming this is just potentially to make sure the go-to-market is top-notch how are you keeping your top sales people around and how variable is their comp structure is sales productivity improving so i have very good feeling about strengthening our

management team in sales in general i think we are on very very good path uh there uh and yes in in sales varies and there will be always uh much much higher turnover we pretty much went back to original way how groupon but also many other companies i i was working with in the past we're working we are hiring a lot of junior people quite often it's their first job or second job uh after after college they go through training and some of them realize this is not for them this type of job some of them fell in love and become great sales people so so this is the simply the way how we are working and where will be high turnover especially during the initial stage of of hiring uh and in terms of remuneration we are highly performance motivated uh uh company and comp structure i would say uh and our top sales people are uh making money which we simply deserve for what we are bringing and i believe that with the remuneration system thanks joshan

a written question for you usually what do you believe if any will be the impact on groupon

of recent us tariffs yeah um as we understand the current discussions about uh tariff policies um they are targeted uh mostly to the goods or consumer products uh if i look on a group on business most of our business is local experience meaning local merchants local products and impact from types is minimal mostly where we will see some impact to our business would be goods but let's be clear this line of business is uh was less than five percent of our revenues in 2024 and we do not expect the growth in 2025 so it will be smaller and smaller part of our marketplace and therefore i would say that impact or potential impact of uh tariffs implications would be uh minimal uh and uh would not be material to our 2025 outlook thank you we have one more question

it looks like from sean mcgowan don't go ahead and unmute your line

Thanks. I wanted to circle back on something. I think in your prepared remarks, you talked about user engagement, maybe something that could see some improvement, and yet you got the 8% increase in North American local. So can you give us a little bit more color on the relationship between user engagement and that growth?

So we have, in general, better conversion on the platform, which is helping us. We are also, in our comments, we mentioned that our marketing platform is really working very well, the acquisition marketing platform. So this is primary source of this growth. So we are able to approach customers in NA, but I would say internationally it's a very similar story. We are able to present them appealing offering. we see increased conversion in the sales process, which is something which we were expecting when we were talking about the new platform which we are releasing, but also just coming together with higher quality supply. It's driving also higher AOV, not only gifting, but in general, higher quality deals. Now what needs to be coming and what's our focus is retention, meaning we need to increase the number of transactions our customers are doing with Groupon.

Okay, I think we've talked in the past that, you know, each incremental or each, you know, turn of user engagement adds, you know, tremendously to incremental EBITDA, like 100 million for each turn or something like that. Is that still your expectation? And when do you think we start to reflect to that? What do you expect over the next couple of years?

So I'm not able to be exactly specific about the numbers, but just to give you an idea, when we are talking internally about strategy 2025, the first line, the North Star for whole company is customer and merchant retention. So as you see, it's becoming the priority number one for Groupon in general. We are already experimenting with plenty of not only deals, but different approaches, how to tackle it. And I'm optimistic that we will be able to improve it, but we are not ready yet to share specific numbers. I expect improvements this year, and then it will gradually continue in next years.

Thank you.

Thank you, Sean. We have one more written question for Yezhi. Yezhi, can you comment on the trends underpinning the guide?

Yes, for sure. So the trends on that is we left Q4 in definitely better positions than we entered Q4 after a very turmoil, Q3. uh so we are continuing in q1 we expect in q1 uh still a negative uh slightly negative trend in billings this is what we put there we continue and we will see uh the lover take rates uh it means uh year over year it means that our revenues impact will be more negative uh versus trends of the billings uh but we believe we will be uh as we were uh last year positive and adjusted ebda about the cash flow this is these uh things which we have to take into account our business is seasonal in terms of we have strong holiday season in q4 which is redemption redempted uh by uh by our customers in q1 which resulted naturally in negative cash flow uh in uh uh in q1 so this is uh about q q1 for full year we actually expect that we will be uh growing billings uh we expect will be growing revenues uh we will be adjusted ebda and free cash flow definitely better than we were in 2024 what is probably good to mention here and we expect some forex impact roughly 100 basis points it's maybe good to mention that last year we left italy uh beginning of q2 uh and i meaning not full it a little local market so this is all the things which we should probably mention we also believe and i think it was mentioned here already today that we continue and we will continue to invest in our marketing and in our salesforce we expect that our hgna will be flattish uh year over year it might be a little bit different each quarter but we see some pockets where we can still have uh savings in our sgna on the other hand we are hiring we are hiring especially to our salesforce and this is a place where uh look like we would like to uh take our savings which we will uh deliver in uh during this 25 uh during the year 2025 and bringing back to the business and uh uh definitely strengths and our uh our capacities in Salesforce about uh about uh marketing we expect and it was also said here we expect to be uh stable uh spending roughly 30 35 percent of our gross profit on marketing assuming and uh being conditioned that we are positive in ROI if will be positive ROI, we would be able to spend even more, which will certainly will impact our decline positively.

Thank you, Yuzi. There are no other questions. This concludes our call for today. Thank you for everyone for joining. For additional information, please go to investor.groupon.com.