Q2 2021 Groupon Inc Earnings Call
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Good day, everyone and welcome to Groupon on second quarter, 2021 financial results conference call.
At this time all participants are in a listen only mode of quest.
<unk> and answer session will follow the form of the company's formal remarks too.
To ask a question perhaps of the Sparky followed by the number 1 on your Touchtone phone. Once again, that's sort of wanted to ask a question today's conference call is being recorded.
For opening remarks, I would like to turn the call over to the Chief Communications Officer, Jennifer be governments. Please go ahead.
Good morning, and welcome to Groupon and second quarter 2021 financial results conference call on the call today, our interim CEO and 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 statements.
Actual results may differ materially from those expressed or implied and 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 that Groupon dot com and as a way of.
And usually finding information about the company.
Groupon promptly makes available on this website. The reports of the company filed or furnished 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 results.
And 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 U S. GAAP.
And with that I'm happy to turn the call over to Eric.
Thanks, Jennifer and good morning, everyone.
It has been an exciting first half of 2021 and coupons and on.
Pleased to report another solid quarter for financial results.
And the second quarter, we generated nearly $430 million and global and local billings and the highest quarterly level since the pandemic began and $41 million of adjusted EBITDA.
And the macro recovery as expected is proving to be inorganic tailwind of economies around the world the open and consumers get back to enjoying local experiences.
And the recovery in North America continues to ebb and flow second quarter, North America local billings grew 20% versus the first quarter and reached 67% of 2019 levels the highest quarterly recovery rates on some of it depends on it.
We ended the second quarter was $15.2 million active north American customers, which was stable compared to the first quarter and is an important milestone that youll hear more about from Melissa later on the call.
For our international business and the second quarter countries begin relaxing COVID-19 restrictions as vaccinations accelerated and and June international local billings reached the highest recovery rate since the onset of wave 2 and October 2020.
International and local billings also stepped up nicely quarter over quarter growing nearly 30% and the second quarter versus the first quarter.
But similar to what we've seen and North America, we expect performance of ebb and flow across international markets.
And as we've said before we expect of longer recovery cycle and the international restrictions have been more prolonged and stricter and the vaccination rollout 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 inventories.
So far our efforts of centered around growing offers inventory within beauty moment and remove the restrictions on deals across the marketplace.
We've also begun to modernize our marketplace with a new customer experience and new feature sets for our merchants, including expanded self service.
Overall, despite the overhang of the pandemic, we are seeing green shoots that give us confidence and our ability to reshape groupon and 2 of destination for local experiences, which we believe will provide a foundation for growth and the years to come.
Our growth thesis is rooted in our ability to deliver the value proposition to our customers and merchants.
Everything we're doing is focused on improving these value propositions.
We want to improve the ease with which merchants can interact with the groupon marketplace extend their reach to new and existing customers and give them the monetization level they need to achieve healthy unit economics.
Likewise for customers, we intend to expand our wallet share by giving them the value selection and convenience they want.
Expanding our inventory is of key elements of our growth strategy and our teams have been making meaningful progress on 2 fronts.
Bringing back pre COVID-19 supply to our marketplace and growing offers and repeatable inventories.
First let me touch on the teams progress on bringing merchants, particularly top merchants from 2019 back to the marketplace and.
Many of you have been asking us about the health of our merchant base and I wanted to provide you with some additional color to highlight our progress to date my.
And my comments will focus on North America, which is leading the way.
And when we think about recovery of our merchant base, we believe the fastest way for us to Reenergize, our local category as to reactivate our top supply.
So we have placed a lot of focus on this goal and our efforts are beginning to pay off.
At this point, we have brought many of our top merchants back to the marketplace.
While we are encouraged by our progress and being these merchants back and retaining them. We know we have to move this number even higher.
As I said, we're confident we can continue to do that and here's why.
First our team is in active dialogue with our top merchants, who are not yet back on the platform and many of them are telling us they want to come back to groupon, but the timing of not yet right.
This is particularly true among our things to do merchants, which on a billings basis with our largest vertical in 2019, we're hearing from many of these merchants that they're capacity constrained largely driven by labor shortages and lingering COVID-19 restrictions and high consumer demand and this has led to a supply demand mismatch of.
And other verticals like beauty and wellness and home and auto are more recovered and we have more of these merchants back into groupon marketplace.
We believe this demonstrates that they view groupon as a valued partner.
And second as we continue to engage with our top merchants, we're seeing top supply metrics improved weekly across all verticals.
We believe merchant capacity constraints of transient and that we will successfully bring back top supply, although the timeline to achieve this will likely extend into next year.
Great News on this front is that our top merchants return they will be returning to a fundamentally improved groupon experience when it does a better job of driving customers through their doors.
You are hearing that we still have some work to do on this front, but our progress bringing top supply back on the platform is certainly trending and the right direction to help you triangulate on why it is important top supply recovery has been correlated with our bookings recovery in North America local we.
We believe that as high quality merchants returned to a marketplace that is stimulating consumer demand.
Beyond just our top merchants, we have broad supply with market, leading selection of local experiences and support the vibrancy of our marketplace. We are leveraging our sales team and self service and our inventory partnerships to continue to grow our inventory base and further strengthen our competitive position.
While we are focused first and foremost on recovering our top supply. We are also doing all we can to help small businesses find their footing as they reopen their doors.
Love seeing and these local businesses come back and partnering with us which helps to strengthen our position as the destination for local.
So we've talked a bit about recovery, let me now switch gears and update you on our growth efforts and <unk>.
<unk> is making steady progress on our inventory initiatives, which we believe will allow us to transform our marketplace by growing high quality local supply.
As we've discussed in previous calls and North America, and 2021, we're focused on removing repeat restrictions and deals across all verticals.
And increasing the average number of listings per beauty and wellness merchants.
And I'm excited to announce that as of today's call and more than 70% of our deal inventories now repeatable. This is an important milestone as we strive towards our long term goal of increasing purchase frequency and overall marketplace velocity.
Unrestricted deals will give consumers the opportunity to engage more frequently with more inventory and repeat purchases.
While it is very early days, which means we haven't fully leaned into marketing and these deals. We are encouraged that merchants, who have lifted repeat restriction saw initial 2% lift and units per customer.
We have also hit our goal to increase the average number of listings per beauty and wellness merchant and the first half of 2021, we grew inventory within our North American beauty and wellness vertical with the majority of this growth driven by offers and fact listings for beauty and wellness merchant have grown over 20% since we launched offers which means and on average these merch.
<unk> now have about 4 options for purchase and the groupon marketplace digging and 1 level deeper beauty and wellness merchants leverage offers have nearly 4 times more lifting and merchants, who only and this deal is.
This further demonstrates that our merchant value proposition is resonating and our new offers product is unlocking groupon opportunity with beauty and ones merchants and we will continue to focus on driving lifting per merchant higher when and where it makes sense.
Let me provide some additional context for how this progress is showing up and merchant and consumer behavior as well as our business.
As we look at the 4 cities, where we tested offers Detroit, Denver, Dallas and Seattle during the second half of 2020, we can see the impact of offers offers has now been part of our sales pitch and these markets for about a year, we're still early but we'd be seen of positive response from both sides of our marketplace.
So here's where we are today.
On the supply side merchants are embracing offers the initiatives. We have in place are driving beauty and wellness supply growth and our marketplace and we are testing these initiatives and others to power supply growth and other verticals.
On the demand side customers are also responding particular high intent customers that said again, we are still a bit early and while we're seeing encouraging signals. We have work to do to unlock our full potential and it's also really important to keep in mind that our markets and get to fully benefit from our new customer experience of our marketing investments.
The pandemic has created a lot of noise and Theres a lot of seasonality of that makes measuring instrumentality difficult.
Remember, however that we've tackled the 2 root causes that of prevented customers from doing more with us with unrestricted supply, which now allows customers to buy more than 70% of our inventory again and again and we've systematically gone after full menu with merchants. So they can do more with us and help us to give customers the broader.
Collection of experiences. They want these are fundamental challenges that we had to overcome.
Bottom line, we have high conviction that unrestricted inventory and providing new inventory of products will help us drive demand over time.
As we continue to scale elements of our growth strategy, we are positioned to leverage these elements throughout our business to create even more opportunities to drive growth such as launching new products focused on driving frequency and rolling out new branding and exploring new ways to attract loyal customers.
Now that we are beginning to make substantial progress both recovering our pre COVID-19 supply and unlocking of merchants potential to do more with Groupon, we're ready to leverage proven marketplace tactics like inventory multi packs and other merchandising initiatives that were not possible before.
Let me take you through how we are leveraging these marketplace tactics within our strategic priority to modernize the marketplace experience for merchants and customers alike.
I'll start with and merchant experience, we're leveraging technology across our merchant platform to deliver the EZ reach and monetization of local businesses once and Groupon. We have launched new features to significantly improve our self service capabilities and it is now much easier for our merchants to create update and optimize listings and.
In short Groupon is becoming a better partner to our local merchants around the globe and best in class self service options of 2 key challenges for US number 1 and addresses a key merchant pinpoint and number 2 it creates leverage for our sales team as we expand our local inventory.
New and existing merchants alike are transitioning seamlessly to our self service platform. Let me provide a little color on how self service is beginning to show up and our merchant data.
And the past 12 months, we've made strong progress getting merchants to adopt self service and the second quarter alone nearly 50% of the deals launched in North America philosophy of self service. We expect this number of continued to grow over time and.
Moving forward, we believe self service will be and important and standard way for merchants interact with Groupon.
Now that we have made significant progress optimizing on merchant platform to handle standard business operations. We are moving to enhance our feature set with capabilities that are unique to groupon and our opportunities.
For example, and the fourth quarter of 2020, we launched a new recommendation feature which is beginning to deliver results among our top merchants and those that of leveraged our recommendations realized nearly 20% more bookings versus merchants who did not.
And late June we launched a significant new recommendations feature set and merchant adviser of tool that further strengthens our ability to give our merchants and our strategic campaign recommendations to drive growth.
This new feature dynamically analyzes merchant campaign performance and provides these spoke recommendations that help merchants manage their entire portfolio of listings such as recommending new deals to launch based on our merchants menu of services.
We plan to scale this to all merchants and the third quarter and believe it will provide merchants with even more actionable insights to drive growth of win win for both merchants and Groupon.
And Additionally, self service, we're also leveraging partnerships and integrations and we see an opportunity to accelerate improvements to groupon and merchant experience.
A great example of this is our new partnership with books of popular beauty and wellness appointment of App.
Now existing books and merchants can easily connect their inventory to the groupon marketplace, and groupon and we'll be able to offer our merchants free access to books C suite of scheduling and business management tools.
Bookable inventory is an important characteristic of high quality supply, particularly in the beauty and wellness vertical and these types of partnerships can help accelerate growth of our bookable inventory, while also enhancing the customer experience.
Offering a portfolio of free and paid merchant services as part of our overarching long term strategy to provide merchants with a full service platform that they can leverage to build and growth their businesses.
This is of great segue into our progress modernizing the customer experience by now many of you and North America of interacted with our new customer experience as a reminder, our overarching goals and new experiences to drive sell through of our expanding inventory base growth purchase frequency over time and begin to Ben customer perception.
Of Groupon from and inspiration only marketplace to a destination for local experiences.
We want to deliver of modern engaging personalized discovery experience that will give consumers highly relevant search results and recommendations to consider and interact with that will help drive conversion over the long run and drive more customer engagement with our content, which should also lead to an increase and purchase frequency.
And with millions of consumers coming to Groupon every day interacting with our homepage, we have a unique opportunity to educate consumers and how they can leverage our platform to explore the world around them and participate in the 80, plus refundable moment happening every year.
We did a lot of progress on this mission critical initiatives and as of last week on new customer experiences and launched a 100% of north American users across the App mobile web and desktop and <unk>.
Huge shout out to our product and engineering teams for all of their hard work to get this new CX launched.
We havent profoundly changed our customer experience and over 5 years, and this launches and important point and our journey to becoming a destination for local and.
In addition, it was also completed and a much shorter timeframe than any previous changes billings from concept to delivery and just 6 months.
Let me share of few early learnings 90 day plus loans.
We are prepared to see of typical drop and conversion rate that usually happens when you launch of Ucs and.
And while conversion rates are still below prelaunch levels, we've been encouraged to see the impact of the conversion was less than anticipated and we've seen conversion improved steadily since launch.
Engagement is also a bright spot for us we're seeing customers spend more time engaging with our marketplace. Our homepage bounce rate has gone down and category of page views of non op as customers spend more time browsing and exploring local experiences.
Finally, the early read on our likelihood to purchase survey indicates that our new CX, helping and shift our brand perception.
While based on a small sample size through this data we have seen that our new experiences outperforming our old experiences as customers tell us that groupon and showing them the businesses and lifting they're interested in and helping them discover new experiences.
In terms of what's next for our new CX. This recent launches on at the beginning and.
And now that we've unlocked new inventory growth avenues and of launch a foundational new user experience that is local 1 and showcases groupon as a destination marketplace. We're focused on improving the way we surface full menu inventory options and building and launching more features to drive more engagement and repeat purchases.
1 example of our inventory merchant and customer initiatives are coming together to pave the path forward for the new Groupon as of recent pilot of inventory method of tax which allows customers to buy multiple experiences and a single purchase from a merchant at a discounted price will.
We're exploring how we can leverage multi packs and eventually bundles to drive unit growth.
While this product is still in early development. The initial read and customers has been positive leading us to believe that we can capture additional wallet share less.
Yes, and a year ago of product like this would have not been possible. We have been able to create an entirely new product that speaks directly to our merchant and customer value proposition and as I mentioned, we believe this is only the beginning.
With our progress on the inventory of front and the rollout of our new CX and North America and its local communities continue to reopen around the world, we've begun to lean into marketing to maximize the impact of our progress as.
As we look to reeducate customers and expand the perception of our brand from an episodic inspirational marketplace to a destination marketplace, we are being strategic with our marketing investments and we are focusing on deploying resources and a balanced way to make all parts of the funnel work harder.
These strategic also means that we'll continue to assess the impact from the Delta variant and pandemic related constraints.
And of second quarter, we continued moving our spend of the marketing funnel with the ultimate aim of reshaping our brand perception at the destination for local and we.
We saw some great results with our mid funnel efforts and tested new channels to reach of new younger audience.
We've also begun to showcase and leverage our brand repositioning through creative marketing this week and launched our new brand campaign grab life by the Groupon asking people to choose whether to accept life as it is a grab life like their life depends on it.
This campaign and brings our inventory and marketplace modernization work to life and we're excited about this campaign potential among customers who are ready to get out next quarter local communities.
Before I turn the call over to Melissa I want to take a step back and remind everyone of everything we're doing to transform the groupon marketplace. If you look back over the past 10 years and farmers really only able to offer 1 local inventory product deals.
Merchants had only 1 way to interact with Groupon and there was no opportunity for them to do more with us.
And with only 1 product and limited purchase of inventory, we train customers to think about us only episodically.
Fundamentally altered the customer merchant value proposition over the course of just the last year and we.
We're bringing on merchants to east reach and monetization and they need to help their business and succeed with groupon and giving our customers the value selection convenience that they want.
As we've shared today, we have already made significant progress rolling out our new value propositions and will take time influences the hearts and minds of our customers given our longstanding reputation as an inspirational and marketplace, but we're well on our way.
And we're excited about what lies ahead with that I will turn the call over to Melissa to provide insights on our financial performance.
Thanks, Darren and thanks to everyone for joining us today and.
I'm 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 I'll use my time to provide further insight into our second quarter operating and financial results are.
Our restructuring plan and lastly, our updated 2021 financial guidance.
In addition to my prepared remarks, I encourage you to review our sites, 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 coming to.
$266 million of revenue.
$194 million of gross profit and $41 million of adjusted EBITDA.
We ended the quarter with $565 million and cash.
We are encouraged by the recovery of transfer fee.
As expected trends.
Haven't been linear and recover and continues to ebb and flow and certain verticals and countries.
As Aaron mentioned and North America, local Q2 was the highest quarterly billings recovery rate since the onset of the pandemic.
And international within the second quarter local billings reached 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 had been limited given the challenges that merchants are now facing due to the ongoing COVID-19 impact.
The Delta area.
And just a 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 and the second quarter.
And ended the quarter at $15.2 million.
On balance at the end of the first quarter.
But for us it's not.
Not just about stabilizing the day.
It's also about increasing customer purchase frequency, which.
We believe starts with improving the quality of the customer base.
Let me give you a little more color on the progress, we're making on mispriced and North America.
We are improving the value of our customer base.
Adding a higher mix of local customers.
And despite having fewer customers and we get tired of Covid we are.
On improving the gross profit generating per customer.
Local customer and kind of higher value and our good customers.
Local only customers increased approximately 10% versus the first quarter.
And about 85% of new customers and the second quarter core local only customer.
500 basis points versus both the first quarter of 2021 and pre Covid 2019 level.
International active customers have not yet stabilized this is largely dependent on the timing and extent of local recovery, which has been more prolonged and our international markets.
Next I will provide more insights into our second quarter results.
Starting with North America, local and then.
Mentioned, we drove a sequential increase and local billings and the second quarter compared with the first quarter.
Looking at the trajectory intra quarter.
Bookings as a percent of 2019 levels peaked in the month of April and then pulled back.
And <unk>.
The performance and May and June was primarily driven by our day to day category.
Supply of less recovered versus 2019 levels and we didn't see the typical level of seasonal step up and bookings for this vertical.
And international countries, the macro environment started to improve during the second quarter as of.
Vaccination rollout picks up and restrictions were imposed across Europe.
Given the progress international local bookings started to inflect and net with a further step up in Q.
International local billings for the second quarter were 41% of 2019 on and FX neutral basis.
In addition, it's important to note that our second quarter global local gross profit benefited from 10 million of variable consideration from unredeemed vouchers that were sold and a prior year period.
The majority of this benefit was it related to our international segment.
We are observing redemption rates that are lower and our historical estimates for vouchers sold at the onset of the COVID-19 pandemic and are now reaching sort of exploration.
That said, we're encouraged that redemption rates for bookings in recent periods are more in line with 2019 levels.
While customer redemption rates have been more volatile since the onset of the pandemic.
No that redemption is of key sign of a successful customer experience.
Our efforts are focused on increasing redemption rate, which we believe will ultimately lead to increased customer purchase frequency of win win win for customer and merchant and Groupon.
Moving to our goods category growth.
Of that performance continues to be challenge. This is driven by the intense competitive environment for debt switching.
This includes heightened competition and paid marketing channels and.
Targeting headwinds from the recent IRS updates and.
Numerous returning to physical stores.
We are redeploying marketing spend to alternative marketing channels.
We have seen ongoing impacts of goods in July.
Lastly on good I'm pleased to report that the international transition to third party marketplace model, which we began and the second quarter is over 16% complete and expected to be completed at the end of the year.
As we saw in North America is greatly simplifies the operations of our goods category and allows us to run growth with a leaner cost structure.
This simplification will help us to remain focused on winning and local a category where we're most differentiated.
Turning to operating expenses.
Marketing expense was $44 million and the second quarter and reflects an increase in expense as consumer demand for local returns.
And we made investments and our brand repositioning.
SG&A was $138 million, our restructuring actions are now largely complete and we expect to achieve 225 million of run rate savings by the fourth quarter of this year.
Keep in mind, and you think about the SG&A run rate on a go forward basis, we do expect normal inflationary increases such as merit and incremental expenses associated with our ongoing cloud.
Jason.
Now for a quick update on the liquidity front earlier. This year, we issued 230 million of convertible notes due April 2026 and and.
And second quarter, we use of net proceeds from the convertible note issuance, which was included in our restricted cash balance as of March 31.
As well as cash on hand, just on the early repurchase of $250 million convertible notes due April 2022.
Looking ahead to the third quarter beyond we remain laser focused on tackling and most important priority. We believe that we're taking the right steps now to position Groupon for the long term.
In light of our second quarter performance, we are updating our full year 2021 financial guidance.
We now expect to deliver $115 million to $125 million of adjusted EBITDA sort of full year and we remain on track to deliver between $950 million and 990 million of revenue sort of full year low.
Let me provide some additional context around our updated full year outlook.
We expect local performance to continue to ebb and flow and the second half of the year largely driven by factors outside of our control such as the Delta variant and the supply demand mismatch and merchants are facing particularly and the things to do vertical.
With respect of good in light of the headwinds I mentioned earlier this performance level of step down in July to approximately 30% of 2019 billings globally.
Our outlook assumes July performance levels for goods will continue through the remainder of the year and that we will complete our transition to a 3 P model at the end of 2021.
Lastly, our intended for marketing as a percentage of gross profit to step up further and the second half relative to Q2 levels and we invest and our brand repositioning.
However, the timing and extent of the step up of our marketing expense will depend on the macro dynamics we are observing.
Given these factors and our second quarter benefit from variable consideration for and redeemed vouchers, you should expect our third quarter, adjusted EBITDA and lower than the second quarter.
As a reminder, our outlook does not assume a material contribution from our growth strategy.
1 final thought before I turn it back over to Erin we are excited about our path forward and believe we are executing a strategy that will position us for growth over the long term.
While the potential resurgence of the pandemic and related restrictions is a very real headwinds that may extend our recovery timeline.
On the transient challenge and remain optimistic about our future.
I'll now turn it back over to Erin for some closing thoughts.
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 from the start of the pandemic and it would not have been possible without their dedication resilience and hard work. They continue to rise the occasion and I couldnt be prouder of their efforts.
Our people, our most valuable asset and our team has set out to make groupon and place with high performing Carnival and <unk>.
And <unk> and diverse employees and the work to be inspired and still connected to 1 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.
And look forward to updating you on our progress and the second half of the year and with that.
Net open the call for questions.
As a reminder, if you have a question at this time. Please press the star and then the number 1 key on your Touchtone phone is your question and answered all of your rest of remove yourself from the queue. Please press the pound key.
For the first question, we have charter Y'all from Barclays. Your line is open.
Great. Thank you.
2 for me first 1 for Erin Youre seeing some good green shoots since you put out some good innovation on products to improve and CX inventory growing et cetera, but it still sounds like maybe some hesitation from merchants and even some of those of larger merchants and you've worked with in the past still some choppy trends.
Does it take to get merchants to really jump in so that you can harvest. Some of this innovation of improvements that you've put in place and then second 1 I didn't hear and you mentioned of the $250 million EBITDA bogey. If you were to reach 80% of 2019 GP levels.
Does that sort of 1 of the milestones you're aiming towards or is there maybe a change in strategy a bit here that youre going on in the non spend more of whether it's R&D to drive innovation and maybe on the marketing side to drive merchant and customer adoption to get that flywheel going now that you have some of the tools of inventory and the interface addressed thank you.
Thank you and good to hear you.
The first question and then Melissa will take the second so when you asked about all of the changes we're making on the merchant side and your question related to what's going to take US time, what's kind of need to happen for them to jump in.
If you look at the numbers like on 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 1 of Groupon for 1 way for so long.
As a matter of introducing them to our new operating and having to get familiar with it. So if you think about the key components of what we started to do with merchants.
In addition of element of self service for over 10 years again merchants have been using groupon and a more manual way and now they have a chance to use it with self service something that starts with something simple like putting up of deal or deal at it but it's a self service tool continues to engage with our merchants. There is so much more of the BTG, adding.
Sponsored listings, which is now integrated into our self service tool and will begin ramping into the back half of this year and into 'twenty..2 is 1 of a number of things that our merchants can now take advantage of.
Far easier way and easier for them also means it's lower cost so theres more of.
Staffing and they can put on managing Groupon and there is and what they can do so for US honestly, it's just a matter of time of things that we're doing and the uptick that you see is getting is a testament to the fact that we're hunting and the right direction. But also these are things that merchants of come to expect that any AD platform and when we put them out there and they are taking advantage of it.
Most of them.
And yes, I think Darren.
Thanks, Joshua and Trevor on for the question regarding the 250 million and 80% recovery that was intended to illustrate the power of our financial model on a <unk>.
And if I can't leave reduced.
<unk> cost structure, and we have not provided guidance for 2022 at this stage, but it's something that we'll look to do on.
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.
And there, but more to come on in terms of 2022, we'll look to provide clarity and.
And we get closer.
And we get to our Q4 call.
Great. Thank you.
For your next question, we have <unk> <unk> from Wedbush Securities. Your line is open.
Hey, good morning, guys. Thanks for the question.
First of all on.
And sorry, if this puts you on a little bit of on uncomfortable position apologies and of beds, but.
It's been a year and a half took over as interim CEO and.
I would say.
And the very beginning of the pandemic out sales over the last year.
Sure.
The message and the strategy has been really as consistent as we've seen it from.
And with Groupon, the provision that you're laying out the long term strategy.
And I think it's been.
So kind of really strong.
The roadmap the early part of the roadmap and just.
Wondering if maybe your point of view or what investors should think of what the board is kind of looking for.
And to play out before.
You can kind of take over and of permanent role.
I think from some investors that we speak to there's always a question marks around a really long term vision and strategy.
And that could potentially get.
Changed under different leadership so.
That's the first 1 and then.
On the marketing efforts early on and cash.
Clearly a really important component of trying to change the brand image with a lot of things of that Youre trying to bring on board.
What are sort of things that youre looking for to feel like youre being successful and the marketing efforts and.
And you've talked a lot about the brand strategy is there.
Performance campaign around this do to drive more traffic to the App and.
And drive more consumers of that product. Thanks.
Thank you.
And I appreciate your question so.
First off as it relates to EBIT.
You are asking about like the strategy of the consistency and.
And 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. We are all aligned behind the strategy. This is something that we are working on together and this is the strategy is not changing so I wouldn't I wouldn't have any concern with that.
And now you can see debt 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 too. So I appreciate that so I'm going to recommend for you Ah Reflexology Groupon.
I just have a couple of weeks ago.
And about a 30 minute foot massage followed by some shoulder work.
And it's great quarter of health beauty, wellness, and fitness and we sell millions of them.
Now hopefully you're picking up on that is actually awesome.
And now.
Your question on marketing.
This is this is think about the arc of what we're doing we said and pulled everybody that we're going to change our merchant value proposition to get more better supply.
And then we said we had to start to change our customer discovery expertise and we've now rolled out our CX that customer discovery experience is really the first part of our marketing efforts because now it is more intuitively communicate what we kind of be known for and if you pull up the old site of flash the flash deal site debt, where you had the big.
Basaltic scroll oriented.
Variance, we now have a destination oriented experience and we put that in front of customers and we measure it by the brand metrics and make sure that they understand the brand that we want to be known for and the reputation of 1 half as a destination for the categories. They are interested and and that's how we're seeing net performance that we bought because of the mission. We're on it's not about near term performance marketing.
Which we're very good at and the take rate and always been bit of execution, but it's about changing this experience. So that we start to benefit from destination oriented traffic now.
And that is now backed up by us launching our new marketing campaign, and moving more to mid funnel, which we didnt your Q and we'll continue to do and now upper funnel with our graduate side of Groupon campaigns. So this long arc of our strategy very much works together and Youre asking about the marketing portion of it but changing that perception for Groupon is obviously quoted of strategy and and something that we will.
Working on across all components of our execution great questions. Thank you.
Thanks.
Yes.
I don't want of making them comfortable so that's why I was a little nervous but.
A quick follow up for most of them.
And then a question.
Fully understand that debt $2.50 of at 80.
Guidance.
And tended to be guidance, but are.
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 and got to takeaway is that we've created.
A lot of leverage and our model and significantly higher flow through to EBITDA. As a result of the significant reduction that we've made 2 of our cost share over the cost structure over the last year and change so.
That's really I think that the key takeaway there.
And when we arent providing guidance on on 2022, but I think the big takeaway is that.
And we've created a lot of leverage on the model.
Okay. Thank you.
Thank you Paul.
Again, if you have a question at this time. Please press the Star then the number 1 key on your Touchtone phone.
The next question, we have Douglas Anmuth from Jpmorgan. Your line is open.
Hi, This is <unk> on for Doug.
And a couple of questions.
Number 1 is of units.
Just on 2 of them.
On the cadence of the gross profit on an EBITDA I guess on first quarter, you kind of equal weighted.
And the cadence would be improving.
Our numbers quarter on quarter channel data.
So just as you.
Highlighted on the.
And the things to do issue was simple and demand issues.
So anything and that we need to repurchase and number 2 would be on the boots business, you've kind of sort of pointed out.
It's going to be close to 30% of 2019 levels. So how should we think about good business and the long term.
And how much are you pulling forward in terms of on marketing.
In terms of the of goods business. Thank you.
Why don't I start and I will take your goods question first and then I'll come back and get your first question. So as it relates to good.
Way to think about good debt is pretty consistent with how we've talked about it.
And we have.
<unk> significantly reduced the cost structure of our goods business now winning for US is on the other side of winning and local and and.
And so for US now with our reduced cost structure in our goods business will get better EBITDA flow through out of that business. Our focus though is on local and so you expect over time for goods to continue to kind of phase of the back but really it's just based on our focus on local and getting local growth.
Yes, I think they are and so as you think about the drivers of our.
Our outlook.
And there's a couple of things that I'd highlight.
You look at kind of quarterly ebbs and flows. So first we did have a large are bang on.
Expected impact from variable consideration and the second quarter, and we did have a $10 million benefit come through.
<unk> 2 prior period bookings so that was something that we hadn't anticipated on the second point that I would call out as you mentioned, we did see a step down on.
Our global good performance on the second quarter July.
July on Q around 30% of 2019 levels, who are assuming and our outlook.
Competitive homebuilding and his team.
We will continue.
And then as you.
Think about the EBITDA side. It is important and we will take into account of progression on marketing spend. So if you look at how that investment has progressed through the year and stepped up investments and Q2 relative to Q1 and as we think about the second half we expect to.
Further step up our investment and marketing analytics, that's marketing of the percentage of gross profit to be higher than.
And on the second quarter and I can talk about that was too low.
So on demand clinical sort of return.
But in addition to that.
And are stepping up our investment and our brand group with us and so that's what you'll really low.
To see from us and the second half and with a higher level of marketing investment on the local side. We are encouraged by the recovery that we saw in the second quarter, but we do remain cautious on.
And in the near term just in light of the thread of without that variance as well as the dynamics within our sales to the category that we mentioned and clear.
Our supply is less of recovered on that vertical.
For 2019.
These factors are taken into accounts and so.
Our guidance and then as you think about seasonality and certain category of an important category for us typically and the second and third quarter.
So some of that.
And by the in mind, and then I would say that our hooks are on to the point that era and load.
Local is low.
And we're focused that's where all of us differentiate it.
Positive and opportunity of the muscle.
And at the face of transient headwinds that we're seeing now.
Thank you.
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.
Okay.
Okay.
Sure.
And then.
[music] momentum.