Groupon, Inc. (GRPN) Q4 2021 Earnings Call Transcript

Groupon, Inc.  (NASDAQ: GRPN) Q4 2021 earnings call dated Mar. 01, 2022

Corporate Participants:

Jennifer Beugelmans — Chief Communications Officer

Kedar Deshpande — Chief Executive Officer

Damien Schmitz — Interim Chief Financial Officer

Analysts:

Trevor Young — Barclays — Analyst

Mike Ng — Goldman Sachs — Analyst

Ygal Arounian — Wedbush Securities — Analyst

Presentation:

Operator

Good day, everyone, and welcome to Groupon’s Fourth Quarter and Full Year 2021 Financial Results Conference Call. [Operator Instructions] Today’s conference call is being recorded. For opening remarks, I would like to turn the call over to Chief Communications Officer, Jennifer Beugelmans. Please go ahead.

Jennifer Beugelmans — Chief Communications Officer

Good morning, and welcome to Groupon’s fourth quarter and full year 2021 financial results conference call. On the call today are CEO Kedar Deshpande; and Interim CFO, Damien Schmitz. The following discussion and responses to your questions reflect management’s views as of today, March 1, 2022 only and will include forward-looking statements. Actual results may differ materially from those expressed or implied in our forward-looking statements.

Additionally, 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 investor.groupon.com as a way of easily finding information about the company. Groupon promptly makes available on this website, the reports of the company filed or furnishes with the SEC, Corporate Governance information and select press releases and social media postings.

On the call today, we will also discuss the following non-GAAP financial measures adjusted EBITDA, free cash flow and FX-neutral results. In our press release and our filings with the SEC, each of which is posted on our Investor Relations website. You will find additional disclosures regarding 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 Kedar.

Kedar Deshpande — Chief Executive Officer

Good morning, everyone, and thank you for joining us today. This morning, I’m going to start by sharing a little bit about myself and why I’m excited about the opportunity to lead Groupon. Then, I will provide some early observation and perspective on our strategic assets, my approach to operational excellence and putting our customers and merchant partners first. I will look forward to sharing the details about our go-forward strategy and priorities on our next earnings call in May.

So, let me start with a little bit about me, where I came from. I have my built career at the crossroad off retention through customer experience and e-commerce, which is why I’m so excited to be joining the team at this pivotal moment in Groupon’s journey. While I am Software Engineer by trade, I have spent the last 10 years at Zappos in various leadership positions across product, tech, marketing and general manager responsibilities before managing the entire business as COO and most recently as CEO. I led the team that was tasked with not only growing our business, but growing profitably. The biggest lesson I learned is that putting customer needs first is the best way to drive long-term success. I believe it is also critical that a company deliver a consistent product experience. This can maximize the impact of marketing, which drives both new customer acquisition through word-of-mouth and long-term loyalty.

What drew me to Groupon specifically is the unique marketplace of local experiences. Our marketplace helps people create memories and forge new connections that can last a lifetime and that is special. With over 23 million active customers, a very familiar brand that drives lot of organic traffic and a globally scaled platform with advanced capabilities, Groupon is unique. Our two-sided marketplace has the ability to connect customers with its inventory of local experiences online and then deliver those experiences offline through local merchant partners.

From outside looking in, I could see the progress Groupon had made over the last 18 months to expand its inventory. Groupon has a tremendous scale in the local experiences market, which is also highly fragmented but despite these positive characteristics, we have not yet tapped into our full potential. Ultimately, I took this job, because I believe we can convince more customers and more merchants to use Groupon more frequently and create value for all our stakeholders. And I felt very confident that my experience, growth mindset and a new perspective on how Groupon can deepen relationships with customers and merchant partners to increase retention could accelerate company’s progress.

Over these last few months, I have immersed myself in the business. I have been reviewing our strategy and operations and speaking with employees, merchant partners and customers around the world. And frankly, I’m even more excited about the opportunity ahead than the day I joined. In a world seeking connection, I firmly believe we have all of the right ingredients to grow our marketplace.

Here are my observations so far. To start, Groupon customers love Groupon. You can see this in our app reviews and in the customer comments on our partner offer pages. We are definitely creating great memories. In addition, Groupon teammates are dedicated and eager to help customers and very open to change that will create better outcomes for our customers, merchant partners and Groupon. Second, Groupon has a horizontal marketplace with shoppers who can buy a variety of experiences across our local verticals. So, we have the potential to create a strong cohort of crossover shoppers. This is important for two very critical reasons. Horizontal marketplaces can drive higher purchase frequency because their applicable use case is product and the customer acquisition and retention dynamics are typically much healthier than vertical marketplaces. For example, with a strong dining vertical set, we can spend less to acquire customers but then showcase our selection of things to do experiences, which often have higher average order values to these customers.

Over the long term, this positions Groupon to keep customer acquisition cost in check, while increasing customer lifetime value. Third, this is something I have already highlighted, but it bears repeating. We have tremendous global scale. This means that when we figure out new levers to drive growth, we can roll them out quickly on a global stage and monetize them on our scale platform. Fourth, we have data feedback network that is untapped in our current experience. We have so many data assets such as location, hi log in rates and massive email reach that we can infuse into our customer experience to make our customer journey and merchant partner experience much better. We are not taking advantage of this today. And finally, our focus on winning in Local is the right focus. We are most differentiated in this category. We have a solid foundation in place to accelerate our growth and progress.

So Groupon has several amazing assets that I believe are under-monetized, namely customers, a global scale platform and information. A company with one of these assets would be exciting, so I’m very encouraged by our opportunity to harness the power of all three. In 2021, the team did a great job of controlling the controllables impacting our business and despite challenges created by factors like the Omicron and Delta variants and supply-demand imbalances impacting our merchant partners, the team made progress expanding our Local inventory and modernizing the marketplace.

We grew North America full year Local billings by 22% compared with 2020. We also made progress improving the composition of our customer base and we have grown the number of active local customers in North America on a trailing 12 month basis for the past three consecutive quarters. So, we have made some progress, but from my perspective, we have so much potential to deliver a lot more impact. As I mentioned, the team has done a lot of foundational work over the past year and a half to expand our inventory and increase our offerings to the customers but now, we must build an even better understanding of the critical value propositions we must provide for our customers and the critical value proposition we must provide for our merchant partners.

Despite our competitive advantage, a highly fragmented and large addressable market, Groupon hasn’t been able to capture additional share in the Local. In fact, for some time prior to pandemic, our business was actually shrinking. I believe this performance stems from an operating philosophy that has not been centered enough around delighting our merchant partners and customers and prioritizing initiatives and utilizing the data that serve our core goal. I believe that we must incorporate these operating tenants in order to sustain the growth over the long term and achieve operational excellence. I also believe the root of many of our challenges stems from the broadness of our merchant partner and customer value propositions. We have been trying to be everything to everyone and instead we need to focus on delivering the most important elements of our value proposition to ensure we are delighting and retaining both customers and merchant partners.

Throughout my career, I have learned through experience that if you consistently delight you end users and obsess about details in every single interaction, you will create long-term loyalty and this is the key to retention. So, here at Groupon, we must figure out what is the most critical need we must satisfy for our merchant partners, for our customers. We intent to dig deeper into understanding our value proposition, the key inputs and drivers to do a better job of prioritizing our initiatives and investments and driving focused operational excellence.

While I’m still in the process of digging through our value propositions for merchant partners and customers, my goal is for every decision, every change we make to our marketplace, going forward, to be focused on the long-term benefits to our business. We need to do a better job of prioritizing the interests of customers and merchant partners first, which should also be great for Groupon’s long-term future. In short, we are going to be obsessed with meeting the needs of our customer and merchant partners. I believe this is how we will create significant value for all our stakeholders over the long term. Practically speaking, what does that mean. Let me give you an example. We need to create better algorithm that does a better job of helping us build a more strategic inventory base, one that takes into account our platform capacity and balances both supply coverage as in breadth of inventory and supply density, meaning the depth of inventory. We need to create more certainty around the flywheel impact of adding new merchant partners or of creating supply redundancy. How many new customers can we attract with each new listing we add? I believe that we must more effectively ensure that we have right inventory on our marketplace in order to unlock our growth flywheel. We also need to figure out fundamentals of a stronger partnership that was better for our merchant partners. This is how we will demonstrate our obsession with delighting our merchant partners.

To grow the business, we need to better understand what is the most important area that merchant partners need Groupon’s help with. For instance, right now, we are trying to help merchants partners with both marketing management by driving customer acquisition and awareness and revenue management by running yield management. In order to successfully deliver on what we promise our merchant partners, we need to focus on the role that is most important to them. One early learning we have seen is that while historically we thought Beauty & Wellness merchant partners view us — viewed the Groupon marketplace as a tool to acquire customers. In fact, only roughly 20% are using us to acquire customers and some 80% are using us for yield management. This suggest that we can realign our priorities to better serve this need.

While we haven’t yet determined the most important role for Groupon to play with merchant partners, let me walk you through what I’m digging into first and exploring. Building trust with our merchant partners, we have to ensure that they want to come back to partner with Groupon again and again and merchant partner economics. It’s vital that we get more insight into our merchant partners economics and their expectations for what Groupon will provide and at what cost. Today, we are not capturing this type of information from our merchant partners and we intent to build out our capabilities on this front.

We have long viewed our core customer value proposition has unbeatable value on local experiences and selection and convenience that allows customers to fine and enjoy local experiences. But in my early observation, we may not always be delivering on this promise. One area where we can do more is building customer trust. Customers need to be able to trust that Groupon will always deliver on our value proposition. This is table stakes for any marketplace and we are taking steps to make sure that trust in our marketplace remains high. Building trust with our customers is critical if you want them to come back to our marketplace again and again. For example, in the past, customers didn’t have an easy way to get a refund directly from Groupon if their transaction didn’t go as planned. To address this, we have improved our refund practices to be more proactive. Giving the customer refund if a merchant partner is not honoring Groupon. Trust building is an ongoing process, and we will continue to invest in this area. We also need to make sure that we have great customer service.

We have created a contact button that will allow customers to easily reach customer service through their own account portal. Naturally, trust is just one area we are digging into, but it should give you a sense of how we are digging into our customer value proposition. We will continue to refine our consumer marketing strategy. Philosophically, this is how I see Groupon approaching marketing. I believe, we should spend money on marketing only when we see organic traction. Marketing should not be used to fuel the fire if there is no fire to begin with. With a heightened focus on putting the needs of our customers and merchant partners first, we believe we will be in a better position to assess the organic traction we are gaining and this will be the best signal to indicate where to pour gas to fuel the fire.

While we have been disciplined in our approach to the marketing investment, we will be looking to become even more disciplined going forward, deploying marketing dollars only where we see this organic traction. In the future, you should look forward to Groupon doing a better job of leveraging marketing and proprietary customer information to accelerate our growth. From day-to-day interactions consumers have with our marketplace to strategic opportunities to drive awareness and capture mindshare during big consumer moments era. All of these big picture ideas will require that we take a hard look at how we are balancing the needs of customers, local merchant partners and Groupon.

We are a two-sided marketplace. We need to make sure we delight both customers and merchant partners, while creating a benefit for Groupon. Doing this will enable us to do a better job retaining both customers and merchant partners and allow us to get our flywheel turning. I intent to move quickly and decisively to lead Groupon forward. Over the next three months, as we and the rest of the world emerge from the impact of yet another COVID variant, you can expect to hear from us about our enhanced mission that we are aligning our business and operating strategy to. We will continue to assess as quickly as we can what is working and what isn’t working. This assessment will continue with the core questions about each of our investments. Is this good for the customer? Is this good for our merchant partners? And then, is this good for Groupon?

Within this framework, we will also be assessing two core areas, how can we drive growth with the new supply density and demand inputs and can we gain any additional operating efficiencies by replacing manual processes with the automation throughout our organization. Next quarter, I will share our execution timeline and corresponding near to medium term KPIs and goals that we will use to measure success against our priorities. As I mentioned earlier, at that point, we will be in a position to give you financial guidance for the full year.

Moving forward, our goal is that everything we we’ve worked on lathers up to the most important tenant for Groupon, acting in the long-term interest of customers, merchant partners and Groupon to create value for all of our stakeholders. This means, we will be obsessed with delighting our customers and merchant partners, that we plan to act with greater intention, to become even more discipline, to bring operational excellence, to everything we do that will allow us to reach our full potential and deliver the focused durable and profitable growth we believe is within our reach.

With that, I will turn it over to Damien for a high-level review of our financial results and first quarter guidance.

Damien Schmitz — Interim Chief Financial Officer

Thanks, Kedar and thanks to everyone who is joining us today. Today, I’ll use my time to provide further insights into our fourth quarter operating and financial results and our financial outlook for the first quarter 2022. I will also provide some perspective on our full-year 2022 trajectory. In addition to my prepared remarks, I encourage you to review our slides, press release and 10-K, which contain more detail on our Q4 results and first quarter outlook.

Starting with our consolidated fourth quarter results. We delivered $621 million of gross billings, $223 million of revenue, $195 million of gross profit and $37 million of adjusted EBITDA. We ended the year with $499 million in cash, including $100 million drawn on the revolver and generated positive free cash flow. As Kedar mentioned earlier, the team did a great job focusing on what we could control and as a result, we made significant progress stabilizing our Local category. In the quarter, global Local billings grew 36% versus the prior year and 8% versus the prior quarter, despite the emergence of the Omicron variant in December, which significantly impacted consumer demand in the latter part of the quarter.

We also continued to make progress improving the composition of our customer base. We continue to take actions aimed at building a stronger, healthier marketplace, which we believe will allow us to allot purchase frequency, capture more customer wallet share and deliver more value to our merchant partners over time. Within our North America customer base, we grew our local active customers for the third consecutive quarter. As a result, we had 11.3 million active local customers in the fourth quarter, up 5% versus the third quarter. This growth in local customers offset the decline in our lower-value goods customers during the quarter.

And within our international markets, we are encouraged by the progress we made rebuilding and improving the composition of our local customer base this quarter, especially in light of the prolonged COVID headwinds there. In fact, we grew our active local customers 10% versus the third quarter and as a result, had 4.5 million active local customers in the fourth quarter. The team also made important progress expanding our Local inventory and modernizing the marketplace. In 2021, we hit our inventory goals. In North America, we removed repeat restrictions on over 80% of our local deal inventory and grew listings for Beauty & Wellness merchant approximately 40% since launching our offers inventory product. And we made substantial improvements to our self-service tools, making it much easier for merchants to partner with Groupon. During the fourth quarter, approximately 57% of the deals launched in North America were launched via self service.

Next, I’ll provide more insights into our fourth quarter financial results. Starting with our segment and category results, as expected, trends hasn’t been linear, the recovery has been volatile as this new COVID variants have emerged. Starting with North America Local. Billings grew 32% versus the prior year and were 65% of 2019 levels, a sequential improvement of 300 basis points. Looking at the trajectory intra-quarter, Local billings as a percent of 2019 levels improved sequentially in October, and were particularly strong during the November peak cyber period, driven by our Beauty & Wellness and things to do verticals. November Local billings reached 76% of 2019 levels, which was the highest point of the recovery we’ve seen so far, however, we saw Local performance pulled back meaningfully in December with the emergence of the Omicron variant and this trend continued into early 2022.

International Local billings grew 49% versus the prior year and were 52% of 2019 levels on an FX-neutral basis, up 500 basis points versus the third quarter. Looking at the trajectory intra-quarter, similar to North America, international Local recovery rates improved in October and early November and while we saw recovery pullback for the remainder of the quarter with the emergence of the Omicron variant across EMEA, the pullback was less pronounced than in North America, given the existing restrictions already in place in those markets. As we’ve said before, we expect a longer recovery cycle in international, where restrictions have been more prolonged and stricter.

Moving to our Goods category. Performance here was in line with our expectations and we completed the international goods transition to a third party marketplace model during the fourth quarter. Hitting this milestone allows us to run the Goods category on a much lower fixed cost base and significantly simplifies our operations. As a reminder, in the third-party model, we recognized Goods revenue on a net basis.

Moving down the P&L. SG&A was $126 million in the fourth quarter. SG&A expenses came in lower than expected, but were up slightly on a sequential basis, reflecting the planned cost associated with their migration to the cloud. We have continue to focus on controlling fixed cost to ensure that we have the financial flexibility we need to navigate through recovery and invest in future growth opportunities. We also continue to diversify our marketing efforts across both mid and upper funnel campaigns to drive consideration and awareness during the quarter. While marketing expense increased to $58 million, we kept our investment levels at 30% of gross profit, which was in line with our investment in the third quarter and historical averages. As Kedar mentioned, we intent to take advantage of opportunities to leverage marketing to accelerate our growth over time but we will remain prudent with our spend.

Turning to our cash position. In the fourth quarter, we returned to cash generation with $19 million of free cash flow. We ended the year with a cash balance of $499 million, which includes the $100 million drawn on the revolver. Our liquidity position remains solid and we have the balance sheet that provides us with the financial flexibility to withstand the transient impacts of COVID and invest in opportunities to drive long-term growth.

Now, I’ll take you through our expectations for the first quarter of 2022. Taking a step back, we exited 2021 in a better position than we entered the year but like many others, we are seeing volatility from COVID based on this in the first quarter. We expect to deliver $160 million to $170 million of revenue and approximately breakeven adjusted EBITDA.

Let me give you a little more color on our outlook. As you might suspect, Local billings are being impacted by Omicron and this has led to further step down in performance during January in both the U.S. and international markets. With higher case counts, we are seeing a more pronounced impact from Omicron than we saw from the Delta variant. Notwithstanding this and based on what we observed with Delta last year, we continue to believe this headwind is transient. For example, last year when COVID cases were rising, we saw an immediate response from both sides of the marketplace. Lower demand from customers and lower supply availability from our merchant partners.

Similarly, after Delta case counts went down and stayed down, we saw Local recovery ramp in October and November. While past performance isn’t always indicative of future performance, we have begun to see this pattern play out again in the wake of Omicron. In February, as weather has warmed up in parts of the U.S., and restrictions have begun to ease, we are seeing an uptick in Local volumes. Over the past couple of weeks, recovery levels have advanced, although they have not yet fully returned to pre-Omicron levels.

Turning to a few other items for your models. As I mentioned earlier, we have to fully transition our total Goods category to a third-party marketplace and as a result, 2022 total Goods revenue will be recognized on a net basis. To illustrate this effect on our P&L, if Goods revenue have been reported on a net basis in 2021, Goods revenue would have been approximately 55% lower than the $243 million we reported. As a reminder, the revenue recognition change does not impact gross profit. Our first quarter outlook assumes year-over-year Goods performance that is similar to what we reported for the fourth quarter. Lastly, we expect SG&A expense to increase sequentially compared with the fourth quarter driven by the planned expenses associated with our cloud migration and timing of payroll-related expenses.

I’d also like to provide our current perspective on our trajectory for the full year. We expect Local billings recovery to accelerate throughout 2022 important with in both North America and international. Although, we saw a step back in recovery due to Omicron, we are beginning to see signs that organic recovery tailwinds on the supply and demand front are resuming, as Omicron recedes and macro conditions gradually improve.

Regarding our full year adjusted EBITDA, as a reminder, we recorded a $31 million benefit from variable consideration revenue in 2021 related vouchers sold in prior periods. Excluding this benefit, we expect our full year 2022 adjusted EBITDA to be higher than full year 2021 and therefore, expect to generate more than $112 million of adjusted EBITDA in 2022. We wanted to provide these current perspectives on the full year to give you an understanding of our base line expectations while we continue our marketplace assessment. We look forward to sharing our operating priorities go-forward strategy and updated financial outlook in our first quarter results call in May.

Finally, I wanted to provide you with a few insights on cash flow. Typical characteristic of a healthy, growing marketplace is a positive net working capital and cash flow generation. Many of the cash flow headwinds we faced in 2021 were transient in nature and we expect to return to historical cash flow patterns going forward. If our Local recovery accelerates throughout the year, as we are expecting, there is no reason why our marketplace should not be generating free cash flow in 2022.

I’ll now turn it back over to Kedar for some closing thoughts.

Kedar Deshpande — Chief Executive Officer

Thanks, Damien. Let me be clear. We are moving with a sense of urgency. As I did today and going forward, you can expect me to continue to ask the right questions to make sure I’m focusing on what matters most, explain our findings both good and bad along with any next steps we will be taking and transparently communicate with you regularly to bring you along for the journey from here to there. Although we have a lot of what ahead of us, Groupon has employees who I know are up to the challenge and energize by team’s sense of urgency. I couldn’t be more excited about the opportunities we have to accelerate Groupon’s progress towards becoming the destination for Local and I look forward to providing additional updates next quarter.

With that, I will turn it over to the operator for any questions on our fourth quarter and full year performance.

Questions and Answers:

Operator

[Operator Instructions] Your first question is from the line of Trevor Young with Barclays.

Trevor Young — Barclays — Analyst

Great. Thanks. A few if I may, so let’s take them one-by-one. First, we didn’t quite get the stabilization in users that we expected earlier in the year, but some positive indications on the subset of local customers that was a new disclosure that was super helpful. When will overall customers turn the corner and any sort of positive indication so far that marketing efforts are driving increased app downloads, engagement, converting the transactions that sort of thing?

Kedar Deshpande — Chief Executive Officer

Good morning, Trevor. Thanks for your question. This is Kedar, I would like to provide some commentary on this particular question, and then probably Damien can add more insights to that. So, first and foremost, I think Local customers are the most important customers for us as we have mentioned and the way I look at the overall customer base is that we can get other customers and get them to experience our local hoppers, that’s the most critical aspect for us. We have grown our Local customers every single quarter for past three consecutive quarters in North America and very pleased with that particular performance. Now going forward, we will continue to be focused on how can we grow these local customers and continue to look for the opportunities to get more customer — existing customers engage into Local and that’s what we will be focused on. Damien, you want to add?

Damien Schmitz — Interim Chief Financial Officer

Thanks, Kedar, and thanks for your question, Trevor. As you mentioned, one of those key metrics is Local customers, which is why we wanted to provide this transparency for you and obviously, Omicron is impacting us in the first quarter but as Local ramps, we would expect to grow Local customers over the course of 2022. Note that in the short term, we will see some further headwinds from Goods in the first half of this year in those total top customer accounts. Thanks for that question.

Trevor Young — Barclays — Analyst

That’s really helpful. Thanks and then, Damien on the 1Q guide obviously, the continued revenue declines and I know you gave a little bit of math around the impact from the 1P to 3P shift, how much of this is really a mix of seasonality and the guided step down in GBs and Omicron versus that business shift? And on the EBITDA, what if any incremental areas of spend are we seeing that kind of informing that EBITDA down to something closer to breakeven?

Damien Schmitz — Interim Chief Financial Officer

Yes. Trevor, so coming off the backdrop of the positive fourth quarter results totally get the question here and so, if you can unpack the revenue number a little bit around one-third of the revenue sequential move is from seasonality and the overall migration from Good third party, two-thirds of which is more of the business pullback from Omicron. So, it’s mostly an Omicron story in this first quarter again, which we continue to believe is transient on our marketplace. As far as the cost profile overall, we did call out the cost associated with cloud migration but beyond cloud, which is always part of our planned expenditures really no other areas of structural investments. And you should assume kind of this opex profile, that run rate that we intent to grow and ramp our top line off this lower fixed cost base going forward.

Trevor Young — Barclays — Analyst

That’s super helpful. And last one just to kind of get this on the record since we get so many questions. Groupon has liquidated a lot of minority stakes. You’ve cut your SumUp stake in the past. If you can comment on your plans for your SumUp stake, specifically or if not broadly what your general philosophy towards these minority stakes? Thank you.

Damien Schmitz — Interim Chief Financial Officer

So philosophically, as we deal with our overall broader investment portfolio and we regularly evaluate how we can leverage our investments to create long-term shareholder value. As you name the SumUp, we do hold — then, you saw in our recent disclosures we do hold a 2.4% passive stake in SumUp and this has been a great investment for Groupon overall. I would just also remind you that there is no public market for shares of SumUp at this time.

Trevor Young — Barclays — Analyst

Great. Thanks. I’ll hop back in the queue.

Operator

The next question is from the line of Mike Ng with Goldman Sachs.

Mike Ng — Goldman Sachs — Analyst

Good morning. Thank you for the question. Two if I could. First, it was encouraging to hear about Groupon is focused on improving the customer experience, doing things like proactively providing customer refunds and removing restrictions. Kedar, I was just wondering if you could talk about any areas of the merchant experience that may be suboptimal that might present itself as a similar level of low hanging fruit to improve the experience? Thank you.

Kedar Deshpande — Chief Executive Officer

Thanks, Mike. I think, there are two different things with the merchants. One, we need to better understand the intent why merchant is coming on Groupon platform. So, for example, I have talked about we have the ability to understand if the merchant need is marketing management from Groupon and we are going to acquire more customers for them or they are looking for more yield on their inventory. Unfortunately, some of these particular datapoints in the value proposition to create that sort of feedback for our merchants, these are not capturing those even at the point that we are making or working with our merchant partners. So, I will have more information for you in terms of what we are going to offer for our merchant partners as we collect more data. So, right now, I’m more focused on collecting and making sure that we have a complete understanding of merchant needs and how we can calibrate what their expectations are to what the information we provide them back. It’s just right now. It’s going to take time for us to go through those value propositions.

Mike Ng — Goldman Sachs — Analyst

Great. Thank you very much. And if I could just ask a quick modeling question, just on the path of Local improvement throughout the year, can you just talk a little bit about the drivers of that improvement? Is it simply reopening or are there some things on the product roadmap that might help that? Thank you very much.

Kedar Deshpande — Chief Executive Officer

I think the there are two different aspects of I would say not just recovery but growth and so, one of the things is for us to make sure that for our focus growth to happen, we have to play it consistently a customer expectation that we address. So for example, if we are saving the time for customers or if we are saving the money for our customers, we have to consistently do that. And so, if you peel back that and say in the global recovery, what are the features? Trust is very important for us but then there are other aspects as well. There are some trends, some verticals, which are coming back very rapidly and there are some verticals, which are lagging and in general, what we will see is that it’s also based on geographies but one thing is consistent and those are value props and that’s why we are making sure that our value prop understanding and undercurrent within those value crops is what will drive the growth for us. So, still going through that particular understanding for myself.

Mike Ng — Goldman Sachs — Analyst

Great. Thanks, Kedar, and congratulations on the new role.

Kedar Deshpande — Chief Executive Officer

Thank you.

Operator

[Operator Instructions] And your next question is from the line of Ygal Arounian with Wedbush.

Ygal Arounian — Wedbush Securities — Analyst

Hey, good morning guys and I’d also like to echo that congrats, Kedar and welcome aboard. Maybe just taking one step back and thinking about the strategy that the team have put in place before you joined and a lot of focus on inventory density, on offers, right, growing that out, removing the restrictions and kind of going there market-by-market, developing it. And now we’re kind of talking about assessing and refining and kind of feels like we’re going back to the drawing board a little bit. Is that strategy changing off the table? Is it just evolving? You could talk about where — bridging from where we have been to where you want to get I guess to start there?

Kedar Deshpande — Chief Executive Officer

Sure. Thanks for the question, and thank you for the longer questions. So, I think the overall team has done a pretty great job in last 18 months of building the inventory. I think going back, this particular inventory buildup just doesn’t mean that we will have much more traction. We have to have the consistency in this inventory build-up to make sure that when customer expects, there are X number of providers in this particular marketplace, in this particular location to have that kind of density, otherwise the customer expectations that oh, I looked for this particular thing on Groupon, it was not there, that’s sort of intent capturing requires us to have the right amount of supply density and breadth both in each vertical. And that’s what we are focused right now to make sure those KPIs are something we should be intentional about as opposed to that is a byproduct of getting just supply density buildup, that is not going to do it. So, we need to have understanding of this demand and supply, that’s one aspect and we are working on that with the great focus at the moment.

Ygal Arounian — Wedbush Securities — Analyst

Okay. Understood. Maybe so bigger picture as you tackle on board and given your previous experience and in line with all the stuff we’re talking about just how you view the competitive landscape and obviously, those like Google and Facebook have taken real share in local ad dollars over time in a real material way and are pretty big competitors and certainly, just how you think about that competitive landscape of competing with those kinds of players as you start your own misty?

Kedar Deshpande — Chief Executive Officer

That’s a great question. The way to look at competitors, I think I will first start with what I’m excited about Groupon. As I mentioned, three biggest asset on Groupon front are horizontal local marketplace, the data that we have in our network, which frankly, we are not leveraging as I have mentioned before and then the third is global scale. Now, there are — all of these competitors that you mentioned none of them are specifically focused on Local. There is advertising market and there is a utility market. There is a difference, but each one not them has a different application. Groupon is actually focused on local transactions and that’s why I believe that we have the ability to go both what if merchants and customers to go through the Local transaction versus other marketplaces are a different utility for our customers for a different application but it was not meant to be a transaction marketplace.

Ygal Arounian — Wedbush Securities — Analyst

Got it. And if I could ask one more, Damien you kind of highlighted or mentioned in the 1Q EBITDA guide the cloud investment, but nothing incremental there. You guys sound pretty confident that EBITDA for the full year will be at least as good as it was in 2021 and you’re also at the beginning of this plan to kind of reassess and refine the strategy and see kind of where — what you need to do where to improve the platform and the product and what gives you the confidence that there isn’t incremental levels of investment that you need to put in place to get to where you want to go? And thanks guys.

Damien Schmitz — Interim Chief Financial Officer

Thanks for the question, Ygal, but before I get into kind of investment levels, that initial perspective that we’ve given here on the full year is really our initial baseline view and that we wanted to communicate out that how we’re thinking about the year with top line trajectory, namely in Local and both North America and international ramping throughout the year. The bottom line EBITDA performance is a reflection of that ramping of growth but as we’ve said before and I think we’ve consistently said that we firmly believe we can grow off of a much lower fixed cost base going forward. And as I shared in one of the earlier Q&A remarks, we don’t — we are kind of running at our SG&A profile that we want right now. You shouldn’t really see any kind of incremental investment into totality and instead any of those investments really be rebalancing within our existing portfolio.

Ygal Arounian — Wedbush Securities — Analyst

All right. Great. Thanks for the color.

Operator

We have a follow-up question from the line of Trevor Young with Barclays.

Trevor Young — Barclays — Analyst

Great. Thanks. Kedar, just back to some comments you made in the prepared remarks about your willingness to lean in on ad spend to the extent there is kind of that organic demand or the spark if you will before you add fuel to the fire. What are like to one or two gating factors in your view, at least initially as to what’s keeping that organic demand from coming on? Thanks.

Kedar Deshpande — Chief Executive Officer

Thanks for the question, Trevor. Organic demand in general, we can go and look into, hey, which particular vertical is getting the organic demand back and which vertical geography is getting organic demand back. And we always look at cross-verifying these particular demand signals across different geographies, different verticals to see, hey, what is happening. What to me is more important is to find out what are the undercurrent themes, what are we seeing and then can we replicate that on the other marketplace — sorry other geographies to make sure that that’s sort of understanding for customer, that sort of context for customers we are providing that. Today, our technological experience is not there to actually take advantage of that across the board and that’s why in some particular cases the organic demand is not — even if the traffic comes back, the things that we are showcasing to our customers might not be there in the best way.

Trevor Young — Barclays — Analyst

Great. Thank you.

Operator

[Operator Closing Remarks]