GROUPON, INC. PRIVILEGED AND CONFIDENTIAL – DO NOT DISTRIBUTE
4Q19 Earnings February 19, 2020
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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 amended, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations. The words "may," "will," "should," "could," "expect," "anticipate," "believe,“ "estimate," "intend," "continue" and other similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, but are not limited to, our ability to execute, and achieve the expected benefits of our go-forward strategy, including our planned exit from the Goods business; volatility in our operating results; execution of our business and marketing strategies; retaining existing customers and adding new customers; challenges arising from our international operations, including fluctuations in currency exchange rates, legal and regulatory developments and any potential adverse impact from the United Kingdom's exit from the European Union, retaining and adding high quality merchants; our reliance on email, internet search engines and mobile application marketplaces to drive traffic to our marketplace; cybersecurity breaches; reliance on cloud-based computing platforms; competing successfully in our industry; providing a strong mobile experience for our customers; maintaining and improving our information technology infrastructure; our voucherless offerings; claims related to product and service offerings; managing inventory and order fulfillment risks; litigation; managing refund risks; retaining and attracting members of our executive team; completing and realizing the anticipated benefits from acquisitions, dispositions, joint ventures and strategic investments; lack of control over minority investments; compliance with domestic and foreign laws and regulations, including the CARD Act, GDPR and regulation of the Internet and e-commerce; classification of our independent contractors or employees; tax liabilities; tax legislation; protecting our intellectual property; maintaining a strong brand; customer and merchant fraud; payment-related risks; our ability to raise capital if necessary and our outstanding indebtedness; global economic uncertainty; our common stock, including volatility in our stock price; our convertible senior notes; and our and our ability to realize the anticipated benefits from the hedge and warrant transactions. For additional information regarding these and other risks and uncertainties, we urge you to refer to the factors included under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2019 and our other filings with the Securities and Exchange Commission, copies of which may be obtained by visiting our Investor Relations website at http://investor.groupon.com or the SEC's web site at www.sec.gov. Groupon's actual results could differ materially from those predicted or implied and reported results should not be considered an indication of future performance.
You should not rely upon forward-looking statements as predictions of future events. Although Groupon believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither our nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements reflect Groupon’s expectations the date of this presentation unless otherwise expressly stated. Groupon undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this presentation to conform these statements to actual results or to changes in its expectations.
Additional information relating to certain of our financial measures contained herein, including non-GAAP financial measures, is available in our most recent earnings release and at our website at investor.groupon.com.
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Connecting 43M+ customers to hundreds of thousands of merchants
● 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 shopping Groupon for 3+ years3
● Large and growing addressable market in local experiences
(1) Verto Analytics, “E-commerce Properties, December 2018,” U.S. Adults, age 18+(2) Comscore Media Metrix® Multi-Platform, Percent Reach, Total Audience, April 2019, U.S.(3) As of December 31, 2019
E-commerce brand 1
Of transactions on mobile 3
App with 200+ million downloads 3
U.S. internet users come to Groupon every month 2
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● Our best NA customers purchased ~58% of total units sold in 2019 and spent ~$2.1B1 last year
● They purchased from us ~7x in 2019 on average
● 1 more purchase from these best customers per year is ~$300M1 opportunity
● We also have 18 million active customers who look similar and 1 more purchase from them is worth ~$450M1
(1) Represents total value a customer has spent on our platform before refunds
has household income of $75K to $100K
lives in a city
loves new experiences and keeping busy with nearby activities happening now
wants a local experiences destination...like the new Groupon
Our best customer...
...and there are millions of untapped consumers who look like our best customers
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…yet we are capturing only a fraction of the market opportunity
(1) Global Local and Travel Billings as of December 31, 2019(2) Estimated market share of top competitors
$1T+ addressable market
Total captured market2
Groupon 2019 share
for local experiences where we have a right to win
< 1% share Things to Do
$1B+ in 2019 Billings
ConcertsSporting Events
Date Night & Family Night
Beauty & Wellness$900M+
in 2019 Billings
MassageCosmetic Treatments
Yoga Classes
Dining$350M+
in 2019 Billings
RestaurantsBars
Fine Dining
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Challenges Factors We Can Control
Macroeconomic Challenges>$100M in Annual Traffic Headwinds Consumer Demands From To
International economic pressures in Western Europe
SEO
Push
Goods Category can’t compete
Local inventory scaled, but not dense, lacks
freshness
UX not engaging
Brand not aligned with vision
Goods category declines Goods exit
Declining traffic
Category SEO strategyNew traffic channels
Marketing automation
Inventory gaps
Inventory density strategy
Accelerated open platform API development
UX experience with low conversion
New app
Accelerated product innovation
Move to the Cloud
Brand focused only on value Brand relaunch8
● Winning in local experiences will ignite the marketplace flywheel and drive sustainable growth and upside
● Plan to exit Goods will allow us to focus execution on our local experiences marketplace
● Our strategy includes
○ Inventory: Build high-quality density in core cities and bring on merchants’ full catalogs
○ Modernization: Deliver a modern mobile experience for customers and new tools to help merchants grow their businesses
○ Brand: Relaunch the Groupon brand and marketing strategy to move from deal-centric to a local experiences marketplace
○ Cost: Reduce our costs and right-size our spend to support our go-forward business
● More transparent disclosure will allow investors to measure our progress
● Focused on top- and bottom-line growth while returning capital to shareholders
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Large global local purchaser base and improving local purchase frequency
Local Purchasers Year-Over-Year % Local Units/Local Purchaser Year-Over-Year %
Local purchasers = at least one Local purchase in the quarter10
Goods take up ~40% of impressions but deliver ~20% of gross profit
● Goods business is a headwind to performance
○ Cross-shopping between Local and Goods continues to decline
○ Historically an important Local engagement tool, now minimal
○ Goods consume disproportionate share of impressions
● Goods expected to continue to decline
● Goods exit would allow Groupon to
○ Shift Goods impressions to higher margin Local category
○ Transform SG&A cost structure
○ Return to growth
Goods purchasers = at least one Goods purchase in the quarter
Poor Goods Performance Supports Exit Plan
Goods Units Goods Purchasers
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GrowthQuality
MerchantsAmazing
Mobile CX
Geo-targeted Inventory
Frictionless Booking
Customer and Traffic Scale
Full Catalog and Self Service
New App and Yield Management
Location and Personalization
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Build high-quality density in core cities and bring on merchants’ full catalogs● Reach merchants per capita targets in 10+ cities in 2020● Increase offers per merchant; 80%+1 of total merchants on
evergreen contracts globally● Grow global bookable offers to 70% of total by 2022
Accelerate bookable inventory growth with new partnerships● Improve integration speed by 50%
(1) as of January 202014
Bring on merchant’s full catalog, not just heavily discounted deals
Supply density matters: Drive high-quality inventory growth in priority
cities
Grow bookable inventory significantly
Inventory scale and growth are key to unlocking purchase frequency
~60% billings CAGR1 for full price / lower discount inventory
(1) 2017 to 2019 Billings CAGR (2) based off 4 month period in 2019 for countries with high booking tool adoption(3) as of December 31, 2019
~18% purchase frequency lift for customers who buy and
book2
Machine Learning can accelerate targeted inventory growth
~65% of INTL Dining Inventory is Bookable3
Our highest density markets show15-20% improvement in purchase frequency
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● Since 2017, third-party inventory has grown as a % of total inventory
● Partnerships can further accelerate growth of bookable hyper-local supply
● Next gen API should accelerate partnership integrations
○ Goal: Accelerate integration speed by 50%
● Broader portfolio of low discount/low margin offerings will drive inventory growth
● Full catalog offering expected to increase customer engagement
● Integrations with top brands reduce purchase friction and improve the customer experience
(1) 2017 to 2019 Billings CAGR 16
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Product roadmap prioritizes voucherless, bookable, search, discovery, and curation to remove customer and merchant friction
Launch a modern mobile experience● New app in 2Q 2020● Leverage machine learning to produce rapid insights that power
curation, search relevance and other UX improvements● Improve the customer journey from discovery to purchase to
redemption
Prioritize our merchants’ success● Launch tools to help grow their businesses, including pricing tools and
alternative advertising options● Enhance self-service tools to help merchants join the marketplace
more quickly and partner more effectively with Groupon
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Voucherless
Bookable
Local-first
Quality-led
Modern Design
Personalized UI
Curated Merchandising
Map-based Search
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Position Groupon as a more valuable sales and customer acquisition channel and lay the foundation for expanding merchant ad services
From To
Limited ongoing engagement with platform and customers Ongoing use of Groupon for customer acquisition, retention and insights
Heavy discount focus; limited catalog inventory Tools that make it easier for merchants to list their full catalogs and createbookable offerings
Heavy-touch processes required to join marketplace and manage offers Self-service tools: easy onboarding, dynamic pricing, yield management
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Merchant Cohort Retention Rate1
● On average, ~30% of our merchants remain on Groupon 3 years after their first sale
● Retained merchants sell ~30% more units in Year 4 vs. Year 12
● 2013 cohort merchants have sold $4.6B+ on the Groupon marketplace
● We’ve placed over 80%3 of merchants on evergreen contracts globally
● Well positioned for full catalog growth
(1) Global Local & Travel Merchants including third party partnerships; must have at least one transaction each year to count(2) On average(3) as of January 2020
2013 2014 2015 2016 2017 2018
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Modernization•App relaunch
Merchant Tools•Self-service offer management
Inventory•3rd party inventory tools•Launch inventory density strategy in 3 top tier cities
Modernization•Personalization
Merchant Tools•Self-service offer management•Yield management tools
Inventory•3rd party inventory tools•Launch inventory density strategy in 3 top tier cities
Modernization•Advanced merchandising
Merchant Tools•Self-service offer management •Insights & recommendations
Inventory•3rd party inventory platform•Have inventory density strategy launched in 10+ cities
Modernization•Map-based search
Merchant Tools•Self-service offer creation •24/7 365 merchant support
Inventory•Booking tool expansion •Launch inventory density strategy in 2 top tier cities
Prioritizes strategic inventory growth, marketplace modernization & merchant success
Voucherless • Curation • Bookable • Search • Discovery • Personalization
Steady cadence of new features will improve the customer and merchant experience
Moving to best-in-class infrastructure on the cloud will power and accelerate innovation22
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2022 GoalIncrease
by 50%
While Groupon is a well-known brand, we are not top-of-mind
Aided Awareness88%
Top-of-Mind Awareness
23%
Consideration77%
Familiarity50%
Likelihood to Purchase32%
US Data as of January 202024
Aggressive mid-funnel focus to drive top-of-mind awareness
Global Brand RelaunchForce brand reconsideration
Build SEO/Social/ContentCapture “intent” at mid-funnel
Optimize Transactional EffortsNew traffic sources and move beyond “last click”
Drive Retention/Frequency by Unlocking Personalization “Right message, right person, right time”
UPPER
MID
LOWER
POST PURCHASE
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● Selected TBWA\Chiat\Day
● 12-week brand development/customer research process
● Brand position will support global vision for local experiences marketplace
○ Touching all communications platforms including UX, merchants, employees, customer service
● Full-funnel approach
○ Deploying advanced analytics and new tools to drive personalization
○ Spanning multiple channels, including social
● New campaign expected to launch in 2H 2020
New marketing strategy to leverage brand asset
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Meaningful opportunities to lower costs, improve speed and leverage
(1) The goal of approximating these direct goods costs is to help you size the cost structure of the Goods category and its impact to AEBITDA in 2019. We currently anticipate that when we exit the Goods category, its financial results will be presented as a discontinued operation, but these estimates are not intended to approximate discontinued operations financial information nor do they take into account any indirect costs.
Planned exit of Goods category will allow us to right-size our spend to support our go-forward business
Estimate we can take out ~$751 million of direct costs related to Goods exit
Pursuing additional $50+ million cost savings opportunity
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The International growth opportunity is large if we apply our global strategy
● International market is ~2x size of NA
● Many top 50 markets are in International
● Customer/Merchant penetration very low
● Since rationalizing our country footprint in 2017, we have been working to build inventory and accelerate product innovation
● Believe we have significant opportunity to take market share as we accelerate our timeline
$301M1
>$130M GP opportunity from closing NA:INTL conversion rate gap
(1) 2019 International Local & Travel Gross Profit
40%+
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2020 Milestones● Product: launch a new mobile app and expand
bookable offers;
● Units: grow North America Local units year-over-year in the second half of 2020;
● Inventory: execute density strategy in 10+ cities;
● Marketing: relaunch the brand and deploy a full-funnel marketing strategy; and
● SG&A: reset the cost base with the exit of Goods.
2020 Challenges ● Consulting and negotiating with
International Works Councils which could impact expected timing of planned Goods exit
● Minimizing the internal disruption caused by the planned Goods exit
● Keeping our cross-shopping customers engaged in the go-forward Groupon value proposition
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Annual Metrics 2022 Outlook
Unit Growth % High single-digits
Billings Growth % High single-digits
Revenue Growth % Mid single-digits
Adjusted EBITDA Margin1 High teens
(1) Adjusted EBITDA Margin is defined as Adjusted EBITDA as a % of Revenue. Adjusted EBITDA (AEBITDA) is a non-GAAP financial measure. See the appendix for a reconciliation to the most comparable U.S. GAAP financial measure, “Net income (loss) from continuing operations.”
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(1) Take rate is defined as revenue as a % of billings(2) Adjusted EBITDA margin is defined as Adjusted EBITDA as a % of revenue
Metrics Target
Billings Low Double-Digits
Revenue Take Rate1 28% to 30%
Adjusted EBITDA Margin2 Mid 20% range
Free Cash Flow Conversion Rate 65%+
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Ending the year with 43.6M active customers
(1) Active customers represent unique user accounts that have made a purchase during the trailing twelve months either through one of our online marketplaces or directly with a merchant for which we earned a commission, excluding coupons and purchases made through third-party marketplaces
48.2
4Q18
47.2
1Q19
46.2
2Q19
45.3
3Q19
43.6
4Q19
Global Active Customers1 (millions)
$27.42
4Q18
$27.59
1Q19
$27.19
4Q19
$27.45
3Q19
$27.51
2Q19
Global TTM Gross Profit/Active Customer1
35
$210
1Q19
$199
2Q19
$192
3Q19
$207
4Q19
North America
Global gross profit of $310 million in Q4
4Q18
$248
$96
1Q19
$94
2Q19
$86
3Q19
$103
4Q19
International
4Q18
$118
$306
1Q19
$292
2Q19
$278
3Q19
$310
4Q19
Global
4Q18
$366
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$161
1Q19
$158
2Q19
$155
3Q19
$170
4Q19
NA Local Gross Profit
North America gross profit of $207 million in Q4
4Q18
$180
NA Goods Gross Profit
$210
1Q19
$199
2Q19
$192
3Q19
$207
4Q194Q18
$248
NA Gross Profit
$33
1Q19
$28
2Q19
$26
3Q19
$31
4Q194Q18
$56
37
$69
1Q19
$66
2Q19
$61
3Q19
$74
4Q19
International Local Gross Profit
4Q18
$80
International Goods Gross Profit
$96
1Q19
$94
2Q19
$86
3Q19
$103
4Q194Q18
$118
International Gross Profit
$19
1Q19
$20
2Q19
$17
3Q19
$20
4Q194Q18
$28
International gross profit of $103 million in Q4
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(1) Includes Order Discounts of $53 million in North America and $20 million in International
Marketing (including order discounts) decreased $4 million in Q4
Marketing Expense Order Discounts
Marketing ROI = = 100%Incremental Gross Profit
Incremental Marketing Spend
Time to Payback — 12 to 18 months
Marketing + Order Discounts (USD Millions)
$159
4Q18
$145
1Q19
$146
2Q19
$136
3Q19
$155
4Q19
$49$52 $57
$61$731
$110$93
$89$75 $82
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2022 Goal: ~70% global inventory is bookable
● International bookable inventory grew over 25% in 2019
● International Dining vertical is 65%1 bookable; other verticals are beginning to scale
● Groupon booking tool launched in North America in Q4 2019
(1) as of December 31, 201941
Local, travel, and cross-shoppers only; excludes goods-only purchasers
Represents customers who make at least one purchase in each subsequent year of activation; includes customers who bought at least one local or travel deal in a given year
● Customer cohorts have degraded since 2011 early adopters
● Monetization of local customers has increased, in-line with our focus on quality vs. quantity
● Increasing customer LTV helping to offset lower retention rate
● Current initiatives aimed squarely at driving engagement and frequency
2011 2012 2013 2014
2015 2016 2017 2018
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Cumulative local spend1 by customer cohort
(1) Represents total value a customer has spent on our platform before refunds
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Quarters since activation
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We estimate there are 80+ Grouponable moments per year
● 4x+ per year customer base has been stable since 2013
● ~70% retention rate for 4x+ per year customers in 2019
● ~40% retention rate for 2-3x per year customers in 2019
>20% of customers purchase 4x+ / year
~30% of customers purchase 2-3x / year
Driving purchase frequency from 2-3x to
4x per year is >$200M GP opportunity
4+ Purchases 2-3 Purchases 1 Purchase
Customer data on this slide is global trailing twelve month active customers; includes local, travel, and goods purchasers44
● Traffic headwinds of over $100M in 2019, largely driven by declines in email traffic
● Focused on decreasing our dependence on email and leveraging our direct traffic
● ~48% of traffic comes to us direct; ~65% of traffic comes to us from free channels other than email
● Driving paid traffic growth with greater efficiency
Traffic is defined as global daily unique visitors
Paid Other Managed SEO Email Direct
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● >80% of traffic on mobile1
● Mobile web traffic converts at 50%1 of mobile app; mobile app at ~75%1 of desktop and has been taking share from desktop
● UX improvements aimed at driving conversion rate expansion
(1) as of December 31, 2019
Desktop Mobile Web App46
● Winning in local experiences will ignite the marketplace flywheel and drive sustainable growth and upside
● Plan to exit Goods will allow us to focus execution on our local experiences marketplace
● Our strategy includes
○ Inventory: Build high-quality density in core cities and bring on merchants’ full catalogs
○ Modernization: Deliver a modern mobile experience for customers and new tools to help merchants grow their businesses
○ Brand: Relaunch the Groupon brand and marketing strategy to move from deal-centric to a local experiences marketplace
○ Cost: Reduce our costs and right-size our spend to support our go-forward business
● More transparent disclosure will allow investors to measure our progress
● Focused on top- and bottom-line growth while returning capital to shareholders
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Adjusted EBITDA - Quarterly
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Free Cash Flow
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