Good day everyone and welcome to Groupon's Second Quarter 2021 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. [Operator Instructions] 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 second quarter 2021 financial results conference call. On the call today are Interim CEO, Aaron Cooper; and CFO, Melissa Thomas. The following discussion and responses to your questions reflect management's views as of today, August 6, 2021 only and will include forward-looking statement. 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. We encourage investors to use our Investor Relations website at investors.groupon.com as a way of easily finding information about the company. Groupon promptly makes available on this website, the reports of 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, free cash flow and FX-neutral result. 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 good morning everyone. It has been an exciting first half of 2021 at Groupon and I'm pleased to report another solid quarter of financial results. In the second quarter, we generated nearly $430 million in global, Local billings, the highest quarterly level since the pandemic began and $41 million of adjusted EBITDA. The macro recovery as expected is proving to be an organic tailwind as economies around the world reopen and consumers get back to enjoying Local experiences. While the recovery in North America continue to ebb and flow, second quarter North America Local billings grew 20% versus the first quarter and 67% of 2019 levels, the highest quarterly recovery rates since onset of the pandemic. We ended the second quarter with $15.2 million active North American customers which was stable compared to the first quarter and is an important milestone that you'll hear more about from Melissa later in the call. For our international business, in the second quarter countries began relaxing COVID restrictions as vaccinations accelerated and in June International Local billings reached the highest recovery rate since the onset of Wave 2 in October 2020. International Local billings also stepped up nicely quarter over quarter growing nearly 30% in the second quarter versus the first quarter, but similar to what we've seen in North America, we expect performance to ebb and flow across international markets. And as we've said before, we expect a longer recovery cycle in International restrictions have been more prolonged and stricter and the vaccination roll-out has been slower. As we leverage these macro recovery trends to our advantage we are also continuing to execute on our growth strategy. We told you that our goal was to grow high quality local inventory. So far our efforts have centered around growing Offers…

Thanks Aaron, and thanks to everyone who is joining us today. I am proud of the progress we've made during the first half of 2021 and look forward to bringing this energy into the rest of the year. Today, our usual time to provide further insight into our second quarter operating financial results, our restructuring plan, and lastly our updated 2021 financial guidance. In addition to my prepared remarks I encourage you to review our slides which contain additional information on our outlook for the remainder of the year. Starting with our consolidated second quarter results. We delivered $608 million of gross billings, $266 million of revenue, $194 million of gross profit, and $41 million of adjusted EBITDA. We ended the quarter with $565 million in cash. We are encouraged by the recovery trends we have seen, as expected trends haven't been linear and recovery continue to ebb and flow in certain verticals and countries. As Aaron mentioned, in North America Local Q2 was the highest quarterly billings recovery rate since the onset of the pandemic. In International, within the second quarter Local billings reach the highest recovery rate since the second wave of COVID impacts began in October 2020. While we are pleased with our results to date, we believe that billings recovery has been limited, given the challenges that merchants are now facing due to the ongoing COVID impacts, including the Delta Variant, capacity restriction, and labor shortages That said, we believe these challenges are transient and we continue to be focused on what we can control. North America active customers were stable in the second quarter and ended the quarter at $2.2 million, the same balance at the end of the first quarter. But for us it's not just about stabilizing things, it's also about increasing customer…

Thanks, Melissa. Before we move on to the Q&A portion of our call, I'd be remiss if I didn't take a moment to acknowledge all of the incredible work our team has been doing. We've come a long way through to start the pandemic, it would not have been possible without their dedication, resilience and hard work. They continue to rise vacation and I couldn't be prouder of their efforts. Our people are our most valuable asset and our team has set out to make Groupon the place with high performing carnival, engaged and diverse employees come to work to be inspired and feel connected to one another. We've recently launched a variety of new diversity equity and inclusion, culture and volunteer initiatives to support these goals. Happy and healthy organization is integral to our success as we drive towards our long-term vision of being a destination for local experiences, and we look forward to updating you on our progress in the second half of the year. And with that, I’ll open the call for questions.

[Operator Instructions] For the first question we have Trevor Young from Barclays. Your line is open.

Two from me. First one for Aaron. We're seeing some good green shoots, as you put out some good innovation on product, the improving CX, inventory growing, et cetera. But it still sounds like maybe some hesitation from merchants and even some of those larger merchants you work with in the past dozen choppy trends, what does it take to get merchants to really jump in so that you can harvest some of this innovation improvements that you've put in place? And then second one, I didn't hear any mention of the $250 million EBITDA above the - if you were to reach 80% of 2019 GP levels. Is that's the one of the milestones you're aiming towards or is there maybe a change in strategy a bit here that you're going to lean in on spend more whether it's R&D to drive innovation, maybe on the marketing side to drive merchant and customer adoption to get that flywheel going now that you have some of tool for inventory and the interface addressed. Thank you.

Thank you. Good to hear you. Let me take the first question and then Melissa will take the second. So when you asked about all the changes we're making on the merchant side in your question related to what's going to take it at time. What's going to need to happen for them to jump in. If you look at the numbers like our merchants are taking advantage of this at a steady clip. It's just going to take a matter of time especially when you have merchants have been working with Groupon of one way for so long, it's a matter of introducing them to our new offering and let them to get familiar with it. So if you think about the key components of what we started to do with merchants, I think the foundational element is self-service. For over 10 years again merchants have been using Groupon in more manual way and now they have a chance do that with self-service. Something that starts with something simple like putting up a deal or deal at it, but as a self-service tool continues to engage with our merchants, there is so much more the we can do, adding sponsored listings, which is now integrated into our self-service tool and we'll begin ramping into the back half of this year and into 2022 is one of a number of things that our merchants can now take advantage of in a far easier way and easier for them also mean it's lower cost. So there is staffing they can put on managing Groupon and what they can do. So for us, honestly, is just a matter of time, the things that we're doing in the uptick that you see us getting is a testament to the fact that were we're hunting in the right direction. But also, these are things that merchants have come to expect in any ad platform and put them out there, they're taking advantage of them. Melissa?

Yes. Thanks, Aaron. Thanks, Trevor for the question. Regarding the $250 million and 80% recovery, that is intended to illustrate the power of our financial model on a significantly reduced fixed cost structure. We have not provided guidance for 2022 at this stage, but it's something that we'll look to do on our fourth quarter earnings conference call. I think what I would highlight is that we're really excited about the progress that we're making on our growth strategy and the foundation we're laying there, but more to come in terms of 2022. We'll look to provide clarity as we get closer or as we get to our Q4 call.

For the next question we have Ygal Arounian from Wedbush Securities. Your line is open.

Thanks for the question. The first one. And sorry that's put you a little bit of an uncomfortable position, apologies in advance. But it's been year-and-a-half since you took over as Interim CEO and I would say, at the very beginning of the pandemic out there over the last year, the message and the strategy has been really as consistent as we've seen it from Groupon, this position that you're laying out, the long-term strategy and I think it's been the kind of really strong roadmap, early part of the roadmap? I'm just wondering from your point of view or what investors should think what the Board is kind of looking for to play out before you can kind of takeover in a permanent role. I think from some investors that we speak to, there's always question marks around the really long-term vision and strategy that could potentially got changed under different leadership. So that's the first one and then? On the marketing efforts early on and clearly a really important component of trying to change the brand image, with a lot of things that you're trying to bring on board. What are things that you're looking for to feel like you're being successful in the marketing efforts? And you've talked a lot about the brand strategy, is there a performance campaign around this - to drive more traffic to the app and drive more consumers to the product? Thanks.

Thank you, Ygal I appreciate your question. So first off, as it relates to - you're asking about like strategy, the consistency in related to the CEO search and so no update, new update on the CEO search. But what's most important here is that the Board, our team, they're, are all lying behind the strategy. This is something that we are working on together and this strategy is not changing. So I wouldn't have any concern with that. Now you can see that from the increasing level of execution that we're getting across the board. So this is very much our obsession. Now, I will say when you ask the question, you seemed a little nervous to me. I appreciate that so I’m recommend for you a reflexology Groupon. I just had a couple weeks ago, it's simply about a certain foot massage followed by some shoulder work and it great quarter of Health, Beauty and Wellness business and we saw volumes up. Now what we are picking up on that, it is actually awesome. Now for your question on marketing, this is - think about the arc of what we're doing. We said and told everybody that we are going to change our merchant value proposition to get more, better supply. Then we said we had to start to change our customer discovery experience and we've now rolled out our CX. That customer discovery experience is really the first part of our marketing effort because now it’s more intuitively communicates what we want to be known for. I mean if you pull up the old site, the flash deal site that - where you have big episodic school oriented experience. We now have a destination oriented experience. When we put that in front of customers and we measure it by the brand metrics and make sure that they understand the brands that we want to be known for and the reputation we want to have as a destination for the categories they are interested in and that's how we're seeing that performance that we want. Because the mission we are on, it's not about near-term performance marketing, which we're very good at great and extremely great and always been with execution, but it's about changing this experience, so that we start to benefit from destination oriented track. Now that is now backed up by us launching our new marketing campaign moving more to mid funnel - into Q we'll continue to do and now upper funnel with our Grab Life by the Groupon campaign. So this long arc of our strategy, very much works together and we got some of the marketing portion of it, but changing that perception for Groupon is obviously core to the strategy and something that we're working on across all components of our execution. Great questions, thank you.

Thanks. And yes, I just don't want to - I didn't want to make you comfortable, that's why I was a little nervous, but just a quick follow-up for Melissa on the next question. I fully understand that 250 at 80 wasn't guidance or intended to be guidance, but are you coming off of that you should no longer be thinking of - if you get there that's the EBITDA level?

I think the point you got to, to take away is that we've created a lot of leverage in our model and significantly higher flow through to EBITDA as a result of the significant reductions that we've made to our - cost structure over the last year unchanged. So I mean that's really I think the key takeaway there where we aren't providing guidance on 2022. But I think the big takeaway is that we create a lot of leverage in the model.

[Operator Instructions] The next question we have Douglas Anmuth from JPMorgan. Your line is open.

This is Neeraj on for Doug. Just a couple of questions, number one is, just on the cadence of the gross profit and EBITDA? I guess so on first quarter you kind of provided the cadence would be improving numbers quarter-on-quarter throughout the year. So, just as you highlighted on the things to do issues, supply demand issues so anything else that we need to read there? And number two would be on the goods business you kind of pointed out, it's going to be close to 30% of 2019 levels. So how should we think about goods business in the long-term and how much are you putting forward in terms of marketing in terms of the goods business? Thank you.

Why don't I start and I'll take your goods question first and then Melissa will come back and get your first question. So as it relates to goods, the way to think about goods is pretty consistent with how we talked about it. We have significantly reduced the cost structure of our goods business. Now winning for us is on the other side of winning in local and so now with a reduced cost structure in our goods business we'll get better EBITDA flow through out of that business. Our focus though is on local and so do expect over time for goods to continue to kind of face the back, that really is just based on our focus on local and getting local growing.

Yes, thanks Aaron. And so as you think about the drivers of our outlook, there is a couple of things that I’d highlight as you look at kind of quarterly ebbs and flows. So first, we did have a larger than expected impact from variable consideration in the second quarter. So we did have a $10 million benefit coming through related to prior period bookings. So that was something that we really hadn't anticipated. The second point that I would call out as you mentioned, we did see a step down in our global goods performance from the second quarter through July on Q around 30% of 2019 levels. We are assuming in our outlook that the competitive had been and probably seen will continue And then as you think about the EBITDA side, it is important to take into account our progression on marketing spend. So if you look at how that investment has progressed through the year, we stepped up investments in Q2 relative to Q1. And as we think about the second half, we expect to further step up our investments in marketing and we would expect marketing as a percentage of gross profit to be higher than it was in the second quarter. And as you think about that you're seeing local demand things needs to return. But in addition to that we are stepping up our investments in our brand repositioning. So that's what you're really look to see from us in the second half is a higher level of marketing investments. On the local side, we are encouraged by the recovery that we saw in the second quarter, but we do remain cautious in the near term, just in light of the spread of the Delta variant as well as the dynamics within our things to do category that we mentioned here, our supply is less recovered in that vertical relative to 2019. So those factors are taken into accounts, into our guidance. And then as you think about seasonality things to do category is an important category for us typically in the second and third quarter. So keep that in mind. And then I would say, bigger picture on to the point that Aaron made, local is really where we're focused. That's where most differentiated we remain positive on our opportunities in local, even as we face the transient headwinds that we're seeing now.

There are no further questions at this time. Thank you, presenters. Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.