Groupon, Inc. · NASDAQ:GRPN
Groupon — Q3 2022 Earnings Presentation
41 slides from Groupon's earnings presentation, Nov 7, 2022
Slide 1: GRPN Investor Presentation 3Q22
GRPN Investor Presentation 3Q22 November 7, 2022
Slide 2: Forward-looking statements and other information
Forward-looking statements and other information 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 Sectio
Slide 3: Trusted Local Marketplace
Trusted Local Marketplace. Where customers go to buy services and experiences that make life less boring and deliver boundless value. 3
Slide 4: Global, scaled, two-sided marketplace with undervalued assets and big potential
Scaled local marketplace with room to grow ● Leading player in the large and growing addressable market for local services and experiences ● Two-sided marketplace with massive global scale ● Delivered $1.6B+ in Local Billings in 2021 ● Beloved brand: ~1.5B Groupons sold to date1 Valuable, underutili
Slide 5: A scaled local marketplace with room to grow
1 Million+ Merchant partners worked with to date ● Large and growing addressable market in local A scaled local 1.5 Billion+ ● Groupon’s two-sided Groupons sold to date marketplace with marketplace has massive global scale room to grow ● Beloved brand Connecting millions of $35 Billion+ local custom
Slide 6: Our Turnaround Strategy to Unlock Growth and Profitability
Our Turnaround Strategy to Unlock Growth and Profitability
Slide 7: Executing Turnaround Strategy
Executing Turnaround Strategy Transforming Groupon into the go-to destination for local experiences and services Reducing Cost Structure Fundamentally Improving our Marketplace Experience Executing a multi-phased cost savings plan to align our Ensure that we meet our customers needs every single tim
Slide 8: Potential to unlock marketplace flywheel and significant shareholder value
Right Inventory Location and Merchant Partner to Fulfill Intent Self-Service Tools Personalization Potential to unlock marketplace flywheel and significant shareholder value Amazing Merchant Amazing Customer Partner Experience Local Marketplace for Experience All Occasions & Economic Cycles Scaled Gl
Slide 9: Reducing our Cost Structure
Reducing our Cost Structure
Slide 10: Streamlining our Cost Base & Improving Productivity
Executing a multi-phase cost savings plan to better align with where our business is today… Redesign expected to reduce cost structure by $150 million by end of 2023 ● Aggressively right-sizing our tech org to align with our current and future business needs, on both the payroll and non-payroll side
Slide 11: Unlocking a Sustainable Financial Model
Unlocking a Sustainable Financial Model Expect improved financial results in Full Year 2023 2023 AND BEYOND Assumes Local Billings Are 60% of 2019 Billings for FY 2023 15-20% Sustainable Annual Adjusted $100M Annual Free Cash Flow* EBITDA margins* Creating a business model that can consistently gener
Slide 12: Fundamentally Improving our Marketplace Experience
Fundamentally Improving our Marketplace Experience
Slide 13: Fundamentally Improving Our Marketplace Experience
Fundamentally Improving Our Marketplace Experience Meet our customers needs every single time they come to our marketplace to drive purchase frequency and improve customer retention Purchase Frequency + = Create a better Test into customer experience marketing Customer Retention Improve inventory Di
Slide 14: Creating a Better Customer Experience: Pricing & Trust
Creating a Better Customer Experience: Pricing & Trust Made meaningful progress towards improving customer trust this year Pricing: ● When customers come to our marketplace in search of a deal on something, they have to be able to trust that we offer the best deal ● Reviewed pricing in North America
Slide 15: Create a Better Customer Experience: Cross-Promotion & Personalized Promotion
Create a Better Customer Experience: Cross-Promotion & Personalized Promotion [] Scaling experiment to unlock power of our horizontal marketplace and increase cross-vertical purchases ● Launched experiment in North America to figure out how to better leverage power of our horizontal marketplace ● Use
Slide 16: Create a Better Customer Experience: Groupon Incentives
Create a Better Customer Experience: Groupon Incentives Testing Groupon incentives to get new customers to browse and engage with our full catalog of inventory ● Giving additional value via Groupon Bucks to customers when they purchase our full price, market rate inventory ● Testing if it will incen
Slide 17: Create a Better Customer Experience: Search & Relevance
Create a Better Customer Experience: Search & Relevance Testing new search & relevance initiatives in International ● Began testing a new ranking algorithm in four international markets; early results are promising ○ Added autocomplete function that features actual deal offerings in the search drop
Slide 18: Improve Inventory Density
Improve Inventory Density Building the optimal inventory density that satisfies and inspires our customers based on their intent ● Focused only on acquiring and retaining inventory in geographies and verticals that we believe will drive incremental consumer demand ● Restructured our North America sal
Slide 19: Improve Inventory Density: Relaunched Card Linked Offers
Improve Inventory Density: Relaunched Card Linked Offers Relaunched card-linked offers in the high-frequency Dining vertical ● Partnering with leading CLO provider in the food and dining space ● Completed integration in Q3, approximately tripled our Dining inventory in North America ● By making it e
Slide 20: Atlanta Case Study
Atlanta Case Study Testing ability to ‘supercharge’ unit velocity in the Atlanta market Case Study Overview: Simultaneously running a number of our experiments to improve Inventory density and the customer experience Chose the Atlanta market because our current footprint is less mature Key KPIs: Inc
Slide 21: Testing into Marketing to Drive Growth
Testing into Marketing to Drive Growth Strategic marketing will play a key role in retaining and bringing new customers to our platform ● Given the operational progress we've made, we are now in a position to increase our marketing investment to drive growth ● Significantly increased our investments
Slide 22: Differentiate Inventory to Drive Growth
Differentiate Inventory to Drive Growth Testing curated inventory collections that combine Local inventory in new, unique ways to drive consumer demand ● We have a broad spectrum of Deal inventory, but our offering is not always differentiated enough to be compelling to consumers ● These will be uni
Slide 23: Differentiate Inventory to Drive Growth: Beauty platform
Differentiate Inventory to Drive Growth Launching Beauty platform to better serve high-intent customers ● Taking an innovative approach to attract top-tier inventory and better serve high-intent customers ● Plan to launch a new standalone Beauty platform for high-intent customers looking to explore
Slide 24: Launched Inaugural Groupon ESG Report
Launched Inaugural Groupon ESG Report Highlights how we are working to create value for and uplift all of our stakeholders, including our employees, our customers, our merchant partners and the communities where we operate Global Marketplace, Local Diversity, Equity & Inclusion Impact ✓ Workforce di
Slide 25: Third Quarter Results
Third Quarter Results
Slide 26: Key third quarter results
Key third quarter results 20M 12M $434M $144M Active Units Billings Revenue Customers1 Sold $126M $(9)M $308M Gross Profit Adjusted Cash EBITDA2 (as of 9/30)3 1. Active Customers are defined as unique user accounts that have made a purchase during the trailing twelve months ("TTM") either through one
Slide 27: Additional insights on third quarter results
Q3 Global Local Billings - NA and International Local Billings at 49% and 51% of 2019 levels, respectively, as Local performance remains stable Grew our high value, active Local customer base year-over-year in International by Additional 22%, improving the composition of our International customer b
Slide 28: Initiatives Aimed at Customer Retention and Purchase Frequency
NA Active Local Customers 1 11.3M 11.0M 10.8M 10.5M 9.9M Initiatives Aimed at Customer Retention and Purchase Frequency Focused on meeting the needs of our high-value Local customer Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 base to unlock purchase frequency and drive more demand to Groupon merchant pa
Slide 29: 4Q22 Perspective
4Q22 Perspective
Slide 30: 4Q22 perspective
4Q22 perspective Factors to Consider ● Estimated October Local Billings (FXN) (1): ○ North America: ~52% of 2019 levels, or roughly 300 bps above 3Q levels ○ International: In-line with Q3 levels, or ~50% of 2019 levels on an FX neutral basis ○ Consolidated: ~51% of 2019 levels on an FX neutral basi
Slide 31: Global, scaled, two-sided marketplace with undervalued assets and big potential
Scaled local marketplace with room to grow ● Leading player in the large and growing addressable market for local services and experiences ● Two-sided marketplace with massive global scale ● Delivered $1.6B+ in Local Billings in 2021 ● Beloved brand: ~1.5B Groupons sold to date1 Valuable, underutili
Slide 32: Appendix
Appendix
Slide 33: Implications for Expense Reductions
Implications for Expense Reductions Multi-Phase Cost Savings Plan ● Phase 1 will reduce current cost structure by $150M ● Majority of actions will occur in 2022 and relate to the following areas: ○ Right-sizing our tech org to align with our current and future business needs; Intend to reduce tech c
Slide 34: Expected SG&A and Cash Implications for Expense Reductions
Expected SG&A and Cash Implications for Expense Reductions SG&A (1) Cash Savings 2021 SG&A (1) $440M 2022 Cloud migration costs + $35M 2022 Wage & other inflation + $15M SG&A - adjusted baseline $490M SG&A Cost Savings - $(100)M $(100)M CapEx Reduction - -- $(15)M Other Savings (non-SG&A) - -- $(20)M
Slide 35: FY 2023 Adjusted EBITDA to Free Cash Flow Conversion
FY 2023 Adjusted EBITDA to Free Cash Flow Conversion TBD based on Local $100M+ performance ($30-$35M) ($10-$20M) TBD Adjusted EBITDA* CapEx Other Restructuring Net Working Capital Free Cash Expenses Costs Inflows/(Outflows) Flow* Includes ~$135M benefit from cost (tax, interest, other) savings actions
Slide 36: Goods revenue presentation
Goods revenue presentation 1P vs. 3P example1: $100 customer purchase First Party Goods Third Party Goods Billings $100 $100 Billings don’t change; this is what our customer pays to Groupon In 3P model, Groupon revenue is the commission from the sale Revenue $100 $17 (net of merchant payment) Gross
Slide 37: Minority Investments Overview
● SumUp Holdings S.a.r.l. (“SumUp”) ○ Groupon has been a passive investor in SumUp, a privately-held, global payments service provider, since 2013 and currently holds a 2.29% non-controlling ownership Minority interest Investments ○ There is no public market for SumUp securities at this time. Other
Slide 38: Non-GAAP Reconciliations: Adjusted EBITDA
Non-GAAP Reconciliations* Adjusted EBITDA - Quarterly (in thousands) *See Q3 2022 earnings press release posted on our Investor Relations website for additional information regarding non-GAAP financial measures 38
Slide 39: Non-GAAP Reconciliations: Free Cash Flow
Non-GAAP Reconciliations* Free Cash Flow (in thousands) *See Q3 2022 earnings press release posted on our Investor Relations website for additional information regarding non-GAAP financial measures 39
Slide 40: Non-GAAP Reconciliations: Local gross billings
Non-GAAP Reconciliations* Local gross billings as a percentage of 2019 *See Q3 2022 earnings press release posted on our Investor Relations website for additional information regarding non-GAAP financial measures 40
Slide 41: Non-GAAP Reconciliations: SG&A
Non-GAAP Reconciliations* Selling, general and administrative reconciliation *See Q3 2022 earnings press release posted on our Investor Relations website for additional information regarding non-GAAP financial measures 41