Good day, everyone, and welcome to Groupon's Fourth Quarter and Full Year 2016 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 VP of Investor Relations, Deb Schwartz. Please go ahead.

Good morning, and welcome to Groupon's fourth quarter and full year 2016 financial results conference call. On the call today are CEO, Rich Williams; and CFO, Mike Randolfi. The following discussion and responses to your questions reflect management's views as of today, February 15, 2017 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 today's press release and in our filings with the SEC, including our Form 10-K. We encourage investors to use our Investor Relations website 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 and social media postings. On the call today, we will also discuss the following non-GAAP financial measures: adjusted EBITDA, non-GAAP earnings per share, non-GAAP net income or loss attributable to common stockholders and free cash flow, as well as 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 non-GAAP measures, including reconciliations of these measures with U.S. GAAP. Unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2015 and are excluding year-over-year changes in foreign exchange rates throughout the quarter. And with that, I'm happy to turn the call over to Rich.

Thanks, Deb. 2016 was a year of transition for Groupon as we reset the stage for sustained growth in local commerce. It also marked the year of disciplined focus on specific strategic priorities that delivered a year of consistent progress in our marketplace, our operations and in our financials. We committed to all of these things a year ago, and we did what we said we'd do. By no means is our work done, but our strategy is working and we're executing well. Groupon is a stronger company today having remained focused on our strategic initiatives. But to be clear, a year of consistent execution is just the beginning for our new management team. Our initiatives were critical and, in some cases, tough steps we needed to take in order to give ourselves the foundational strength to build the daily habit for local commerce. They're part of a multi-year journey to unlock the profitable growth potential in Groupon. They have us off to a solid start. I'll provide more color on each initiative momentarily, but I'm pleased to say that we made significant gains in all four areas. We added millions of customers to our marketplace. We simplified and streamlined our operations. We reduced empty calories, particularly in our Goods business and we made tangible improvements in the customer experience, both through our products and in customer service. As a result, Groupon reported $1.7 billion in billings for Q4 and $6.1 billion for the full year. These billings generated $935 million in revenue for the quarter and $3.14 billion for 2016, as well as $81 million and $178 million in adjusted EBITDA for the quarter and full year, respectively. Our core North American business, fueled by our investments in customer acquisition and over 30 million active customers, returned to a…

Thanks, Rich. As I discuss our results for the fourth quarter, note that all comparisons unless otherwise stated refer to year-over-year growth and are FX neutral. For the fourth quarter, revenue was $935 million and adjusted EBITDA was $81 million bringing our full year revenue to $3.14 billion and adjusted EBITDA to $178 million. We invested against our four strategic priorities in 2016, accelerated customer growth for the year, and despite softer demand in the period around the election in November, we were pleased to generate $84 million in incremental North America gross profit and finished above our guidance on adjusted EBITDA for the full year. We're seeing the benefits of the investments we made in 2016 and expect to return to a trajectory of positive adjusted EBITDA and free cash flow growth for 2017. In discussing operating results for the quarter and guidance going forward, I'm going to focus my remarks on gross profit, adjusted EBITDA and free cash flow. As Rich mentioned, gross profit rather than revenue in our view more closely aligns with our strategic priorities of growing adjusted EBITDA and free cash flow, and we believe is a better measure of trends in our business, particularly as our product offering evolves over time. Further and importantly, these metrics reflect how we seek to create value for our company and our shareholders. More on this, after we discuss our fourth quarter performance. Gross billings returned to growth in the fourth quarter, totaling $1.7 billion, up 1% led by a 6% increase in North America, followed by EMEA down 5%, and rest of the world declining by 15%, in large part related to our reduced country footprint. On a same country FX neutral basis, gross billings increased 2%. North America local gross billings of $591 million, grew 11%…

Thanks, Mike. In 2016, we undertook a multi-quarter effort to set Groupon on the footing required to truly accelerate our mission to be the daily habit in local. This was no small task and one that has required us to fundamentally change the way we operate the business. As always, the Groupon team embraced this challenge and did so with a new focus, energy and determination. The results have made us stronger operationally and allow us to continue to invest in the core value drivers, customer growth and customer experience that we believe will make a significant difference over the long term. The opportunity in local continues to be immense, and we believe Groupon is better positioned than ever to win there. With that, let's take some questions.

Thank you. Our first question is from Sam Kemp with Piper Jaffray. You may begin. Samuel James Kemp - Piper Jaffray & Co.: Great. Thanks guys for taking the question and congrats on a great quarter. In terms of marketing spend in the U.S., do you anticipate having to increase that in terms of a material dollar amount in 2017 or is most of the dollar amount that you are increasing marketing in going to be in EMEA? And then second, do you mind giving us a little bit of color on guidance in terms of the cadence throughout the back half of 2017? Thanks.

Sure. So with regards to marketing, what I would generally expect is that, we're going to generally stay around the same percentage of billings in 2017, as we are 2016. So you'd expect some natural increase there, just as we naturally grow the business. And so I think, it's going to be within that range. We might have a little bit more investment than we've had in the past in EMEA, as we continue to invest in those markets, but I would expect that in aggregate, we will be within the 6% range and we're pretty comfortable with that and we're comfortable with what we've been seeing on our marketing investment. With regard to the cadence and the guidance throughout the year, what I would generally expect talking about it from an adjusted EBITDA perspective is, the EBITDA trajectory will build throughout the year. So if I think about the first quarter, I would expect for adjusted EBITDA would be a little bit above where we were last year in the first quarter of 2017, and then I would expect that on a year-over-year basis that delta will increase as the year progresses.

Yeah. Hey, Sam, it's Rich. I'll just add – on just a little bit of color on the marketing spend, in general with 2017 you should just think there is going to be a little bit of a rebalancing of our marketing expense overall. And as Mike said a little bit earlier, you're going to see some more dollars deployed to fuel customer purchase frequency and engage existing customers to bring them back to the Groupon platform more frequently. And you're also are going to see some redistribution from North America to EMEA as we see the right kinds of opportunities in ROI in EMEA which we expect to be able to start to see throughout the course of the year. So you will see some rebalancing there, but within that general range that we've set out as a percent of billings. Samuel James Kemp - Piper Jaffray & Co.: Great. Thanks.

Thanks.

Thank you. Our next question comes from Paul Bieber with Credit Suisse. You may began. Paul Bieber - Credit Suisse Securities (USA) LLC: Good morning. Thank you for taking my questions. I may have missed it, but can you give us some color on the North America local billings organic growth rate and whether the take rates on a year-over-year basis for just the trends on take rates on organic basis?

Sure. So, our North America local billings were up 11% in aggregate for the quarter on a year-over-year basis, approximately four points of that is attributable to LivingSocial. In terms of just the overall cadence of our local billings, I mean, what you saw this quarter and over the last couple quarters is the continued benefit of the customers that we've added to the platform, the investments we're making in terms of brand building and then the product that we've invested in. So from a billing standpoint, that's the way I would think about it and what was the second question?

On take rate...

Oh.

I can just give it a little bit of a color there. Take rate in general, we've said even within the last couple of years is that it will move within a relatively tight range in the 33% to 35% range. We were in the higher end of that range this quarter. Most of that was really benefiting from seasonal mix shifts and some strength in higher margin categories, our take rate categories, like health and beauty and our leisure business. Paul Bieber - Credit Suisse Securities (USA) LLC: And then just one quick...

I guess, I would just expect from the take rate standpoint, we're going to be within a range over time from a take rate perspective. And if you look at the fourth quarter take rate and you look at it compared to last year, we're in a pretty similar range for fourth quarter. And so the fourth quarter tends to tick up a little bit when you have a lot of demand in the platform and that tends to be the higher point of our take rate range for the year. Paul Bieber - Credit Suisse Securities (USA) LLC: And one quick follow-up, can you provide a little bit of color on the mix of gross profit in 2017 from North America versus EMEA?

Sure. So if you look at gross profit for North America, it was up roughly 10% for the year, $84 million. And if you look at EMEA, EMEA offset a portion of that, but of the portion that was offset in EMEA, a good portion of what was offset in EMEA was attributable to our country exits. So if you think about the decline in EMEA gross profit, a disproportionate amount of it was attributable to the country exits that we had. Now with that being said, even in the existing countries that we're in, in EMEA, we did see gross profit declines and that's a place quite honestly where we still have work to do. We made a lot of changes in the last year moving to shared service centers and streamlining our business and really setting our business up for the longer term. But in the short-term that placed a heavy operational burden on people, so that was reflected in the GP performance there. Paul Bieber - Credit Suisse Securities (USA) LLC: Okay. Thank you.

Thank you. Our next question comes from Tom Forte with Maxim Group. You may begin.

Great. Thank you. So wanted to ask some follow-on questions on the television advertising. So it sounds like it was an effective vehicle with the strong return on investment and you're going to continue to spend into the first quarter. Would you consider promoting the Goods effort as well, or are you going to continue to focus on daily deals and experiences and things of that nature? And then why I guess wouldn't it contribute to stronger new customer growth than your expectations in 2017? Thank you.

Sure. Thanks for that, Tom. So, yeah, we were really pleased with how TV shaped up and, as you recall, we launched it really late in Q2, early Q3. Our team here had a good amount of time to start to tune it and get it into shape from an ROI perspective. But, yeah, it's been a good solid contributor to activations and bringing customers back to Groupon. So we're pleased with that. It's primarily focused on Local, but of course in Q4, if you didn't see it, we did promote Goods especially around peak buying season for e-commerce products. And then we shifted back to Local when it became really more last minute gifting, et cetera. I'd expect that same general kind of cadence to occur throughout the course of the year where we'll be primarily focused on Local, but where it makes sense and where it's relevant for customers and seasonally relevant, we'll absolutely push around our Goods value prop because we have no desire to try to slim upstream. So we're going to try to make the most out of that overall investment, which to-date have been pretty encouraging, not just from an ROI perspective, but in this case, we get the extra benefit of educating customers in a longer story format, which given the amount of change that's occurred in Groupon over the past couple years I think is very much beneficial. And as far as contributing to stronger new customer growth and expectations in 2017, look there's always the potential that through great campaigns, not just offline but online as well, that we can uncork more there. But I think we're being thoughtful and prudent in how we think about the customer growth trajectory over the course of the year, especially given the higher attrition rates that we knew we were taking on when we acquired LivingSocial. So, we're expecting that to kind of play itself out in the first part of the year and then slowly move to a place where it's more stable and more in line with what we've experienced over the course of 2016, but that's again toward the back half of the year.

Yeah. And I would just add on LivingSocial, that's obviously a great brand, but it's a brand where there hasn't been as much investment behind that. And so, the attrition rate of the LivingSocial customers is a lot higher than what would be on our traditional platform. We're currently expecting, based on what we're seeing, that the attrition rate of the LivingSocial customers would be in the 200,000 number of customers that would attrit in the next couple of quarters, in each of the quarter. So, that's also bringing down the net addition expectations over the next couple of quarters.

Thank you.

Thank you. Our next question comes from Brian Nowak with Morgan Stanley. You may begin. Brian Nowak - Morgan Stanley & Co. LLC: Thanks for taking my questions. I have two. The first one, just to go back to the impact of LivingSocial in the quarter on the North America Local Billings. Just want to get it right. So, are you saying that organically North America Local Billings grew more like 7%? I think that's the slowing from the 10% last quarter. What drove the deceleration and what are you thinking about in your guidance for core North America Local Billings growth throughout 2017? And then, secondly, on the net additions, the color you just added around LivingSocial was helpful, the 200,000 attrition per quarter. I guess, if we look at the core business of the 700,000 net additions, can you just talk about expectations around gross adds versus churn?

Sure. So first, yeah, you're right. In terms of North America organic billings growth, it was roughly 7% on a year-over-year basis for the fourth quarter. And what I would say is, you've kind of got to dissect the quarter when you're looking at that 7%. Looking at the month of October, had a really nice October, nearly 10% North America Local Billings growth in the month of October. December was double-digit North America Local Billings growth. And what I would say is, towards the very end of October and then the period shortly after the election, we definitely saw consumers behave differently, and it wasn't something we expected and it definitely weighed on our quarter a little bit. So, that's what drove our billings number to be probably a little less than one might have expected for the quarter overall. In terms of gross adds versus churn, we don't break that out specifically, but what I would say is, our gross adds have been pretty consistent over time. Our attrition rate has been pretty consistent over time. I think as we move into the coming year, acquiring new customers continues to be very important for us. But we're also keeping an eye on purchase frequency at the same time and have an increased steer towards purchase frequency. So, that's reflected in how we're spending our marketing dollars.

Thank you. Our next question comes from Mark Mahaney with RBC Capital Markets. You may begin.

Yeah. I'd like to follow-up on those comments about the election's impact. Was it just on the consumer side that you saw an impact or did you also see it in terms of your local – your sales force? And I say that because this obviously came up as an issue with Yelp, and you are two of the few region really having two (38:58) large local businesses, and you're seeing a dynamic that's pretty interesting. So, any more color on that. Was it just consumers or do you see a productivity hit with your sales force as well? And any color on why you think that happened. I mean, I've got a couple of theories, but love to hear it from you.

Sure. Thanks for that, Mark. I've been in e-commerce for a while now and Q4 is always an action-packed time of the year and this one was no different. I think this one had some different dynamics than we've seen in a long time. The media noise and the media weight that was placed around the election was unprecedented in recent history. And I frankly think, we just had a lot of distracted consumers that were consuming different things than products and services. And you could see that in things like even Google Trends. If you look at core category search terms in local and in e-commerce, there were some really big dips there of consumer behavior, which we watch very, very closely. So, I think you just had, generally, a distracted consumer. We didn't see anything on the productivity side with our sales force. Our sales force did a great job in Q4. I think what we saw was merchants that wanted more demand. It wasn't just on Groupon as a challenge with local services, in general, again, if you go back and look at Google Trends in those times, you're going to see that that service – search query volume was just lower. So, we were able to connect with merchants and get more merchants and quality merchants on the platform during Q4, and saw a strong performance on that side. It just took a while for the U.S. consumer to kind of shake the election period and get back into the holiday season in December. But once we saw December come around, December, as Mike said, was a very strong month for us and that was in the teens on the growth rate side. So, we're really happy with how the customer bounced back and how demand bounced back, but it was definitely a – it was a strange time.

So I guess people looking for experiences, actually had one unfolding right before their eyes, maybe that's the right interpretation. And then, if I could just ask...

I mean, you saw it like I did, I mean it definitely was a different kind of experience, watching what was going on. And in general, the U.S. responded to that period of time, I mean, it was obviously a big part of people lives to watch what was going on in the country. So, it was for sure different.

And then did you comment briefly on the January trends like, I know you said that the December month trends look good. Did you say anything about the – was that – if you look at January, was it clear than November was the aberration that January trends were somewhat similar to December and then given all the seasonal – I know, adjusting for seasonality, et cetera?

Yeah. We haven't commented on anything within the current quarter and what I would say is, we recovered quite nicely in the month of December and we're pleased with that and from everything we see, November looks like it was an aberration.

Okay. Thank you very much.

Thanks, Mark.

Thank you. Our next question is from Aaron Turner with Wedbush Securities. You may begin.

Great. Thank you. Good morning. Two questions for Rich, if I could. It's been about 10 months since the Atairos investment in Groupon. And at the time, you mentioned that, you were going to explore collaboration opportunities. Just wondering, if after 10 months if you have any update on, if you've been able to find opportunities to collaborate with them? And then the second, now that you're driving these bigger incremental cohorts, I would imagine that the data you're getting from these users is just a trove of data. And so, how are you thinking about maybe leveraging that data to attract additional merchants on to the platform? Thanks.

Sure. Thanks for that Aaron. Good morning. So, yeah, it's roughly 10 months since the Atairos investment, we continue to work closely with both Atairos and Comcast to try to uncover bigger opportunity potential. I mean, what I don't worry about is our ability to generate ideas and ways to work together. I think, to-date, our challenge has been finding the right ways to work together that we can execute and find pockets of scalable success. So that's where our focus remains is on picking a handful of things and that we think can have some good potential for both Groupon and Comcast, and trying to get those into market. And our hope is that over the next couple quarters that we'll have a little bit more traction on that side and a little bit more to tell, but at this point, we're still trying to find the right opportunities to double down on. On the cohort side and data, there is really two dimensions to that, and I think, it is a piece of the Groupon business that we don't talk a lot about and that, we're not always asked about, but we do have a lot of data. I mean, we have north of 50 million customers. We have a lot of merchants on the platform and a different kind of data than a lot of folks have. It's obviously local intent data is the core of what we have, which is very powerful. And as we think about the uses of that data, as I said, the two pieces are really both, it's on a consumer side and the merchant side. The consumer side, when we talk about shifting more marketing dollars to customer engagement to drive purchase frequency, a big piece of that is using our data footprint to intelligently remarket to customers, target them in the category that we know they're interested in, they have intent in, in the right places and the right times. We have a unique data advantage in our space to be able to do that at scale. So that's absolutely a piece of our uses of data. On the merchant side, we use that same, the same data just to help merchants understand where we have pockets of customers that are interested in their types of products and services. And we absolutely use that to make the Groupon more attractive for merchants, help them understand the opportunity space on the Groupon platform, which every day we add more, more customers through our acquisition programs, the richer it becomes, so we absolutely use it on both sides and it's a part of what we do on both fronts. You'll just see it. You'll see it accelerate in 2017 particularly on the customer side first, because it's frankly more baked into how we work every day already as a sales force and the merchant front.

Got it. Thank you.

Thank you. Our next question is from Brian Fitzgerald with Jefferies. You may begin.

Hi. Good morning. This is Stan Velikov for Brian. Just if you could give us an update like you've done in previous quarters, what was the level of order discount in Q4?

So for Q4, our level of order discount was about $60 million for the quarter, so that was up I think it was $20 million year-over-year roughly. And then what I would just say about order discounts, we think about that part and parcel as another tool similar to marketing. We're finding it's a good way to acquire customers and engage with customers. We've put together over the last year a really good framework in terms of how to measure the payback on order discounts very similarly the way we analytically measure marketing. We have similar expectations in terms of the payback thresholds for order discounts as we do marketing. And so, we're pretty pleased with what we're seeing.

So basically every dollar spent on discount you are measuring through the same ROI framework or similar framework you measure marketing expense?

That's correct.

Right. Okay, great. And last question, can you give us a brief update on your Coupons business?

Sure, I can do that, Stan. Coupons is a great business, it's doing really well for us. It's continued to grow steadily. I think, the most important part of the Coupons – part of the story of Coupons is that it's just a part of local, it's a baked in part of our local experience and a growing piece of that experience. I think, we have a high quality offerings with a lot of unique specific offers for Groupon customers and we work with the top retailers in e-commerce and in the retail world in general. So, I think, it's a piece of the business that we like. Our customers have shown that they appreciate the product offering and continue to use it at increasing scale. So we think it's a great business, off to a great start.

All right. Great. Thanks for taking my questions.

Thanks, Stan.

Thank you. And we have time for one more question. Our last question is from Blake Harper with Loop Capital. You may begin.

Hey. Thanks, guys. I wanted to ask you about the customer order frequency and just where is that right now, what would be the kind of the goal for 2017 for you to get to? And how do you kind of get there with new product rollouts, you talked in the past about some card linked offers and some other tests around the product to drive that customer frequency, but wanted to see if you could comment some more on that?

Sure. Thanks for that, Blake. Look the categories that we work in, our core categories in local, the average customer is transacting in those categories, hundreds of times a year. Today on Groupon, they're transacting roughly 4 times, 4.5 times a year. So we have a long way to go to I think unlock what's truly potential working space there from a frequency perspective. So, part of that's like why we say our mission is to be a daily habit. Today, we're about a quarterly habit, which is a lot of running room to get to where we want to be, and our goal in 2017 is to get that moving forward, that's number one is to get the pace really set to stick with that moving forward. And that is the biggest unlock in this business is to get that to start to move. How we do that, it's very much customer experience, I mentioned it before, number one in that space customers have to find what they're looking for, like that – so which requires a lot more supply, more density, more and better quality merchants on the platform. A big piece of getting more density faster for us is starting to make the platform more flexible, like what we've done when – as we've put our takeout and delivery product on the side, and we've done historically with our Getaways business that deep discounts which are great for lots of merchants, lots of the time are also a limiter for – how many merchants you can have on the platform at any one time. So we know that by opening up low discount, even market rate experiences on our side, we can get more inventory on the platform and that our customers understand it, will transact with…

Thanks. That's really helpful, Rich.

Thanks, Blake.

Thank you. Ladies and gentlemen, thank you for participating on today's conference. This concludes the conference. You may now disconnect and everyone have a wonderful day.