Hello, and welcome to Groupon's Fourth Quarter 2024 Financial Results Conference Call. On the call today are Chief Executive Officer, Dusan Senkypl; Chief Financial Officer, Jiri Ponrt; and Senior Vice President of Corporate Development and Investor Relations, Rana Kashyap. 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 reflects 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 or 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 Dusan 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 and 10-K, 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 as 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've shifted from chasing volume to building quality, evidenced by North America Local's positive 8% billings 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, they 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 EBITDA, 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…

Thanks, Dusan. Our first question comes from Sean McGowan from ROTH Capital. Sean, you can now unmute.

Thank you. Appreciate that. Yes, can you talk a little bit about the - 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 was running down, through October. So what do you think drove that turnaround in the late part of the quarter?

Yes. 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, during the last several earnings calls, I was talking about our strategy shift, shifting to curated marketplace with sales organization focusing on quality when we don't go - for quantity. But we really look what we need on our platform. We are also spending much more time with our merchants, to make sure that they have deals, 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 more loyal customers? Were you able to get any of those guys back?

It's highly related to overall platform stability, which significantly improved. We saw improvement in that cohort. But overall, I would say that the team did a great job really on focusing on what's wrong and what are the issues with every individual customer, which we have. And it reflected in better results not only from this cohort, but overall on the platform through higher conversions.

Great. Thank you very much.

Thank you.

Our next question will come from Bobby Brooks from Northland Capital. Bobby, you can now unmute your line.

Hi, good morning guys. Thank you for taking my question. So I wanted to ask on the top in the slide deck, and mentioned that the top five metro areas in North America saw double-digit 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 if so, then is this something that you think you can then roll out and replicate that, strategy something that you could roll out and replicate to other metros?

Yes. Thanks Bobby 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 actually is hitting 2019 numbers. And during 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 upon the platform and actually also deals, which should not be on the platform. So this is the reflection of the 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, will be scaling to other locations too.

Got it. So it's something where yes, those top five metros were targeted first, and going and you're still working on figuring out what the optimism, or how to optimize it best. But it's something that you haven't yet rolled out to all different metros?

Yes, we are still learning the right way how to do it. It's a combination of market management, where 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 scalable process, which we can have everywhere, we will be rolling that out to 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?

Yes. So I will go back again to platform stability, because it was a big topic for us last year, and really in Q4, when like all these pieces - put 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 we still have a 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 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 our focus is customer retention. Second, third, fourth transaction.

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

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

Got it. Appreciate it. I'll return back to the queue. Thanks guys, and congrats on a 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 line 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 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 question. So I will start with verticals. Yes, we see different behavior in different verticals on the platform. There are verticals like online retail, where customers are not buying really the local services, and experiences where it's quite often one open, it will depend on our marketing performance, and on our marketing systems to be typically in Google, on Facebook when they are looking for some solution. So if you are buying some stuff, which is kind of commodity and it's still in Groupon, then it's very different behavior. But when we move to categories, which are more local, then that behavior is different and we see a huge potential to increase purchase frequency. Both we are and we started already late 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. And our main intention, is to offer those ASAP after the first purchase. In the past, we quite often focused after the purchase just to deliver 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 consumer demand and some of them 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 businesses have fixed cost, or they are selling memberships and suddenly the economics of 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 they have their own issues with their own quite often legacy platforms, and we need to be able to connect them. But in general when I'm meeting 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 Dusan. Can you share what 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 though, 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 December, was very good. However, what we have to take into account, is that year-over-year compare was impacted by timing of Black Friday and some Cyber Monday. So it's not really apples-to-apples, but even said that on a like-for-like 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 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 billings.

Great. We have a few more questions from our analysts on the call. It looks like Bobby, you had your hand up first.

Hi thanks guys, and thanks for taking the question again. So bringing higher quality supply onto the platform is a strategy, you've talked about a lot since Dusan you took over, and specifically on this call. So I was just interested on, really how you are getting these higher quality merchants onto the Groupon platform. Maybe some examples of wins, but what is the typically the selling point that wins these guys over? 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 - give you one example. When we started, and we were reviewing what we call deal books internally, which is like let's say 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 per hour. But when we are doing the analytics, we see that really the massages, which we sell most actually something completely else, they are quite often above $100. It's a couple massage with nice merchants. So we have to convince ourselves sales force 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. We will be selling high quality stuff, which will be a good deal 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 per hour massage, but we go there with a massage, which makes them more money, which makes also more money to Groupon, and actually customer love it, love it more. And it's actually combined with the gifting strategy, which works very well. These are the types of deals, which you can buy and give us a gift, because you'll see the quality immediately. So this is the main strategy really starting on our side deciding what are, the good deals, which we need. Identify right merchants and negotiate a deal, which makes sense for merchant and Groupon.

Awesome. That's terrific. That makes a lot of sense. This is the last one from me. So obviously you guys give a lot of value to the consumers. Like you just mentioned there's obviously, some pressure on the consumers here with more macro, more macro related stuff. So I'm just curious if you could just maybe talk about high level. Like would you guys actually see like a counter, kind of countercyclical tailwinds if the consumer sees more pressure or 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 we start to see pressure on the consumer?

Jiri, do you want to take this one?

Yes. Thank you, Bobby. I think this will be headwinds and tailwinds definitely on - we will be the business, which will be interesting for merchants in terms of having, if they will have empty capacity, they will be looking for the options, how they can bring the customers in. And I think the Groupon is great place for that. For sure there will be also tailwinds, because the people might have a little bit deeper pockets. So it might have impacted the categories like table or goods or high value. But I believe the customers will be looking for the value, and I think that the Groupon is a good place for 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.

Yes, thank you. Just I was wondering Dusan, if you could give any metrics around the improvement in gifting. This seems to have been a big priority of the company, and you've set some goals of improving that as a percentage of total business. So can you give us some sense of that progress?

He didn't disclose any specific numbers yet, but I can share some like top level view. I mentioned that gifting is gaining importance, and what I can share with you is that during the peak holiday season, the gifting was in double-digits share of our orders, very low double-digits obviously, but it's significant improvement 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 others. It's all interconnected. We - it will take us time to get, and I believe in the past we were mentioning that the benchmark, which we had was 50% for a holiday season. We are very far from that. But for that we need to improve inventory. I was answering the previous question with like - more luxurious let's say massage deals. We need to have enough deals like this, because these are the deals, which are bought as gifts more, more often. 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 - good path in delivering.

Great. Thank you.

Thank you, Sean. We'll move back to some written questions. Another one for you Dusan. 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?

I was actually mentioning in previous answer that we have some cities in Spain, which are already near 2019 levels, which is extremely encouraging. We see very positive signals and trends in all our big countries, which is Spain, U.K., France and Germany. These four make approximately 80% of our international local. In Spain as I mentioned, we started two years ago by strengthening the sales force. By focusing more on market management, on really deciding what's needed on the platform, and we are following same steps in other countries. It starts with strong leadership. So we are strengthening, and we did strengthen teams in every single country, which I mentioned. We are holistically looking on performance of the country, what deals we should be bringing. But then also 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, just by optimizing supply and marketing we were able to get them to grow, and we are very optimistic going forward.

Another written question for you Dusan. 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 salespeople 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 good path there. And yes in sales varies, and there will be always much, much higher turnover. We pretty much went back to original way how Groupon, but also many other companies I was working with in the past, were working. We are hiring a lot of junior people. Quite often it's their first job, or second job. 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 salespeople. So this is the simply the way how we are working. And there will be high turnover especially during the initial stage of hiring. And in terms of remuneration, we are highly performance motivated company and comp structure I would say. And our top salespeople, are making money, which they simply deserve for what they are bringing. And I believe they're happy with remuneration system.

Thanks, Dusan. A written question for you Jiri. What do you believe if any will be the impact on Groupon of recent U.S. tariffs?

Yes, as we understand the current discussions about tariff policies, they are targeted mostly to the goods, or consumer products. If I look on Groupon business, most of our business is local experience meaning local merchants, local products and impact from tariffs 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 of, was less than 5% 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 tariffs implications, would be minimal and would not be material to our 2025 outlook.

Thank you, Jiri. We have one more question it looks like from Sean McGowan. Sean, go ahead and unmute your line.

Thanks. 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 could 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 which is coming together with higher quality supply. It's driving also higher, 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 each incremental or each turn of user engagement adds, 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, and what do - expect over the next couple of years?

So I am not able to be exactly specific about the numbers. But like 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. But I expect improvements this year, and then it will gradually continue in next years.

Okay. Thank you.

Thank you, Sean. We have one more written question for Jiri. Jiri, 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 and we enter Q4, after a very turmoil Q3. So we are continuing in Q1. We expect in Q1 still negative, slightly negative trend in billings. This is what we put there. We continue and we will see the lower take rates. It means year-over-year. It means that our revenues impact, will be more negative versus trends of the billings. But we believe we will be as we were last year, positive and adjusted EBITDA about the cash flow. This is these things, which we have to take into account. Our business is seasonal in terms of we have strong holiday season in Q4, which is redempted by our customers in Q1 which resulted naturally in negative cash flow in Q1. So this is about Q1. For full year, we actually expect that we will be growing billings. We expect will be growing revenues. We will be adjusted EBITDA 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 beginning of Q2, and I'm meaning not fully 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 SG&A, will be flattish year-over-year. It might be a little bit different each quarter, but we see some pockets where we can still have savings in our SG&A. On the other hand, we are hiring. We are hiring especially to our salesforce, and this is a place where - we would like to take our savings, which we will deliver during this '25 - during the year 2025 and bringing back to the business, and definitely strengthen our capacities in sales force. About marketing, we expect, and it was also said here, we expect to be stable, spending roughly 30%, 35% of our gross profit on marketing. Assuming and being conditioned that we are positive in ROI, if we will be positive ROI, we would be able to spend even more, which will certainly will impact our outer plan positively.

Thank you, Jiri. 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.