Groupon, Inc. · NASDAQ:GRPN
Groupon — Q3 2020 Earnings Presentation
38 slides from Groupon's earnings presentation, Nov 5, 2020
Slide 1: GRPN 3Q20 Update
GRPN 3Q20 Update November 5, 2020 1
Slide 2: Forward-looking statements
The statements contained in this presentation that refer to plans and expectations for the next quarter, the full year or the future are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
Slide 3: Where customers discover fun things to do & local businesses thrive
WHERE CUSTOMERS DISCOVER FUN THINGS TO DO & LOCAL BUSINESSES THRIVE 3
Slide 4: Beloved global brand connecting customers and merchants
● Beloved global brand that connects millions of customers and merchants, known for providing unbeatable value ● Leader in the fragmented $1T Local Market, leveraging our scale and focusing on where we are most differentiated ○ ~$2.3B in 2019 billings in Beauty & Wellness, Things To Do and Dining, wi
Slide 5: Our Large Addressable Market Opportunity
Our Large Addressable Market Opportunity 5
Slide 6: Connecting ~34M customers to our global marketplace
Connecting ~34M1 customers to our global marketplace ● Beloved brand known for Deals; opportunity to leverage Local offering and grow brand equity ● Two-sided marketplace with massive global scale ● More than 1.5B Groupons sold across 1M+ merchants to date ● ~50% of our customer base has been shoppin
Slide 7: Our best customer wants a local experiences destination
Our best customer... ● Our best NA customers2 purchased ~58% of total units sold in 2019 and spent ~$2.1B1 has household income of $75K to $100K ● They purchased from us ~7x in 2019 on average vs. customer average of 3-4x per year lives in a city ● In 2019, 1 more purchase from our entire 27M NA cus
Slide 8: Capturing only a fraction of the market opportunity
…yet we are capturing only a fraction of the market opportunity for local experiences where we have a right to win $1T+ addressable market Things to Do Beauty & Wellness Dining $1B+ $900M+ $350M+ < 1% share in 2019 Billings in 2019 Billings in 2019 Billings Concerts Massage Restaurants Sporting Even
Slide 9: Our Strategy for Growth
Our Strategy for Growth 9
Slide 10: Merchant and customer value propositions and targeted strategy
● In mid-2020 we created robust merchant and customer value propositions and a targeted strategy rooted in strengthening our marketplace offering ● We’re rebuilding our marketplace offering with our new customer and merchant value propositions front and center ● To return Groupon to growth we need to
Slide 11: Right Inventory in the Right Markets
Right Inventory in the Right Markets Merchant Self Location and Service Tools Personalization Amazing Amazing Merchant Exp Growth Mobile CX Customer and Traffic New Search, Relevance Scale &, Navigation Features Frictionless Exp; Bookable Inventory 11
Slide 12: Expand Inventory
Expand Inventory 12
Slide 13: Launching inventory products to drive growth
Launching inventory products to drive growth Expanding inventory is our critical path to growth; can unlock customer purchase frequency and drive billings growth Inventory strategy is focused on 3 key inventory initiatives: Deals, Offers, and Market Rate Our goal is provide value to merchants at any
Slide 14: Deals: removing restrictions to drive customer engagement
Deals: removing restrictions to drive customer engagement Groupon is known for great deals, which is part of the core customer value proposition By relaxing restrictions on Deals we expect to drive purchase frequency and billings growth We know our customers want to... ● Purchase the same Deal more
Slide 15: Offers: launching new product to drive purchase frequency
Offers: launching new product to drive purchase frequency Offers will provide customers with a ~15% discount and merchants with a lower cost listing option Why Offers? Not every merchant wants to run a deeply-discounted Deal and even for those who do, a deeply-discounted Deal may not make sense at all
Slide 16: Market rate inventory for broader variety of merchants
Market rate inventory will give customers access to a broader variety of merchants Will help position Groupon as the customer destination for high-quality, local experiences and an “always-on” merchant sales channel Will continue to acquire new Market Rate inventory through partnerships as well as f
Slide 17: Portfolio of complementary inventory listing options
Portfolio of complementary, inventory listing options DEALS Unlock our marketplace flywheel to create value for merchants, customers, OFFERS and Groupon MARKET RATE 17
Slide 18: Goal: scale inventory market by market in key Local categories
Goal: Scale inventory, market by market, in the most important Local categories -- Things To Do and Beauty & Wellness -- focusing on growing across Deals and Offers How the inventory test will work ✓ Clearly define success signals (inventory growth, unit & billings targets) ❏ Conduct a test over the n
Slide 19: We will test and iterate quickly
We will test and iterate quickly These targets refer only to the test markets and represent a starting point for growth Goal: 25-50% increase in key Inventory zip codes & verticals continued growth continued growth Update1: ~50% increase low single-digit percentage low double-digit percentage Units
Slide 20: Beauty & Wellness merchants are earliest adopters
Beauty & Wellness merchants are the earliest adopters of full catalog, restrictionless inventory and bookability ● Given COVID and nature of Beauty & Wellness services, these merchants are best positioned to respond to our new inventory strategy ● Early inventory test results1 are encouraging ○ Beau
Slide 21: Improve the Merchant & Customer Experiences
Improve the Merchant & Customer Experiences 21
Slide 22: Partner with our merchants to help them grow
Partner with our merchants to help them grow their businesses Roadmap focused on self-service tools that allow merchants to build, grow and scale their businesses on the Groupon marketplace Position Groupon as a unique, valuable always-on sales channel Shift Groupon from high-touch, costly model to
Slide 23: Merchant self-service tools
● Merchants can join Groupon via self-service ● Phone interaction required to join the marketplace ● Launching a deal? Do it in less than 24 hours via self-service Campaign Builder ● Launching a deal? Another labor intensive interaction required ● Just want to change content? Do this via self-servic
Slide 24: Sponsored Listings MVP launched in the third quarter
Launched MVP in the third quarter Vision: Marketing tool that helps merchants acquire more customers and add velocity to the Groupon marketplace In early test phase now Next Steps: Get signal in Merchant ROI and Groupon ROI Further develop product: ● Extend merchant self-service capabilities ● More
Slide 25: Improve customer journey from discovery to redemption
Improve customer journey from discovery to purchase to redemption Product roadmap prioritizes bookability, search, inspiration, and curation to increase customer purchase frequency Leverage machine learning to produce rapid insights that power curation, search relevance and other UX improvements Pos
Slide 26: Steady cadence of new features
Leveraging data to launch innovative products Steady cadence of new features will improve the customer and merchant experiences Customer Experience Merchant Experience Customer Experience ✔ Map-based search ✔ COVID-19 safety program •Personalization of content ✔ Curated Results ✔ Self-service offer c
Slide 27: Continued Focus on Reducing our Cost Structure
Continued Focus on Reducing our Cost Structure 27
Slide 28: Committed to operational rigor: lower costs, improve speed and leverage
Committed to operational rigor: lower costs, improve speed and leverage Initiated phase one of our restructuring plan in April and implemented other cost savings and liquidity preservation measures Began executing phase two of our restructuring plan in August, which includes additional layoffs and ex
Slide 29: Third Quarter Results
Third Quarter Results 29
Slide 30: Third quarter key metrics
34M 21M $597M $304M $160M $31M $779M3 (1) Third quarter purchasers declined at a faster rate y/y than active customers; purchasers down 43% & 36% in NA and Int’l, respectively (2) Adjusted EBITDA (AEBITDA) is a non-GAAP financial measure. See the appendix for a reconciliation to the most comparable U
Slide 31: Sold 21+ million units in the third quarter
Sold 21+ million units in the third quarter, demonstrating our scale and durability in the midst of a global pandemic Local performance led our results: revenue improved 35% sequentially and gross profit improved 40% sequentially Goods performance pulled back in the third quarter vs. second quarter,
Slide 32: Fourth Quarter Perspective
Fourth Quarter Perspective 32
Slide 33: October Trends and Fourth Quarter Factors to Consider
October Trends ● NA Local units down 40% y/y; trends are relatively stable to date ● Int’l Local units down 59% y/y; worsening trends throughout the month; Local performance in some countries has sharply declined, as much as 80% year-over-year ● Given rising COVID cases and increasing restrictions,
Slide 34: First party vs third party Goods
First Party Goods Third Party Goods Billings don’t change; this is what our customer pays to Billings $100 $100 Groupon In 3P model, Groupon revenue is the commission from Revenue $100 $17 the sale (net of merchant payment) Gross Profit $15 $15 Gross Profit dollars are not impacted ● Int’l Goods will
Slide 35: Durable business model and strong balance sheet provide foundation for growth
● Durable business model and strong balance sheet provide a foundation for growth ● We are executing a targeted growth strategy rooted in strengthening our marketplace offering and the disconnect between our large market opportunity and our business performance ● We intend to execute exceptionally we
Slide 36: Appendix
Appendix 36
Slide 37: Adjusted EBITDA - Quarterly
Adjusted EBITDA - Quarterly (in thousands) 37 *See Q3 2020 earnings release press release posted on our Investor Relations website for additional information regarding non-GAAP financial measures.
Slide 38: Free Cash Flow
Free Cash Flow (in thousands) 38