Groupon, Inc. (GRPN) Earnings Call Transcript & Summary

All right. So I think in the interest of time, we'll start right at 1:45, and we'll get going. It's my pleasure to have Rich Williams, the CEO of Groupon here, Rich's first time ever at the UBS consumer conference. Rich, thanks for coming.

Thanks for having me. Appreciate it.

Yes. So I want to take one step back before we go deep into the weeds. Big announce -- series of announcements around the last earnings call. You're exiting your Goods business. You're making some key investments in the local space and where you want that business to go over the medium term. Let's just set the table by laying out, for those who don't know, what just happened on the last earnings call, what were the key messages from management.

Sure. I'll do that. And for those in the room, I'd just refer you to our safe harbor statements in our Investor Relations site and in our most current releases. But it was great question. We covered a lot of this in our Q4 and full year 2019 release. But there's a couple of big points in there, if you haven't been familiar with the company. And the big one requires us to take one step back. So the history of Groupon was really it started as a local services business. And most people are familiar with that part of the business where it's great deals on things in your neighborhood, whether that's pizza or massages or concert tickets. And over the course of the development of that business, we really by -- we experimented our way into selling physical goods and physical products and created a Goods business. And that was during the time of -- where flash sales was a really big part of e-commerce growth. And so it fit our brand in many ways in those days, where it's about saving a lot of money and limited inventory as well. But -- and that goes back to that 2011, 2012 time frame. And that, over the years since then, had become a pretty big business for us, north -- well, at one point, close to $2 billion of billings, in that range. But really, the e-commerce landscape fundamentally changed, in particular, over the last couple of years, and we saw that business really struggling to compete. And that's -- I think at the crux of our big discussion and our bigger announcements over the last couple of weeks has been we made a decision to exit that physical products business. And we had a really rough Q4 in that business where consumers just were disengaging with it at a really high rate. And when we talk to consumers about it, it's like, look, you -- we were a price leader. We had great prices on products that were popular. But when we're shipping in 2 days versus delivering in 2 days or a day or less, consumers were less willing to trade off price for that. And it's something that we had considered a lot over the ensuing quarters. As we've seen really the last couple of years, that business shrinking was really what's right for the business going forward. And I guess it boils down to a really simple paradigm of can we really let a business that we can't win in keep us from winning in the business we must win in and that we have the right to win in. And that's -- those are hard decisions to make given the size of the business being north of $1 billion in billings. But we didn't feel that we were in a place to compete effectively in the Goods or the physical products business and the level of investment required to effectively compete, didn't make sense for us and that it would, frankly, be a distraction from what is a leading business in local services and local experiences in particular. And we have north of $3 billion of billings, which is far larger than any of our competitors in that space in those -- in that core market. That's really where our brand DNA is and where the core of our customers are. So we made the decision to exit Goods, focus entirely and exclusively on local experiences, which meant really re-factoring our brand and spending a lot to build beyond that value and deals piece of our brand, which is great but it's limiting. It meant really getting back to basics in local in many ways, which is hyper-local focus, getting down to the neighborhood level and bringing on amazing quality merchants where we have great customer demand. And then it really meant focusing on product and really delivering a dedicated and exclusive product that's built around experiences, not one that's built to sell products and experiences and lots of other things but one that's really focused on an amazing customer experience there. And then lastly, we also said we're going to be really focused on cost. Getting rid of $1 billion business also opens up the opportunity to just re-factor how we're organized and where our costs go, how we're investing, et cetera, and where we see big opportunities there to just improve and streamline the company overall.

Okay. When you think about this local space, it's a space where you get a lot of conversations with a lot of different companies of "We want to invest more there. We're thinking about moving into that area." What's the current landscape you see for competition in local e-commerce? How do you relatively set yourself apart? And how do you think about that competitive landscape and what kind of investments you need to make to take that competition on?

Yes, it's a great question. And I think this is a spot where a lot of people have realized how big that landscape is. And when we talk about local experiences, we see that as a $1 trillion-plus TAM. It's very large, it's very fragmented, and it's still very early in its transition from off-line to online. And within that, it's not well served. And so even when I talk about our billing size in that space, we are the largest by a fair bit as far as we can tell in that space. But there's a lot of people who have realized that it's large and underserved and have discussed going into it. And that's everything from folks like Google have -- they have thought about this space quite a bit. There's -- a lot of people talk about the OTAs that have taken a look at the space and see it as an opportunity. And then you have some private players as well that are earlier stage, at valuations much higher than Groupon even though they're a fraction of our size. So there's a lot of people playing in it, for sure, and a lot of people tacking it. The good news for us is, I think, we have an opportunity to demonstrate we have a right to win there, that we are the leader in that space, specifically from a transactions point of view. We sell more units there than anybody else by a long shot. So we have the opportunity to build on that lead. And that lead includes things like just our customer relationships. We have a big group of customers, north of 40 million customers, that actively buy in our platform. We have hundreds and hundreds and hundreds of thousands of merchant relationships in that highly fragmented space, which is hard to build. We have the trust with those consumers and merchants to put consumers through the door and have them transacting and working there. So we have, I think, the foundational elements to succeed and to do well there, and we just need to prove it. And I think one of the things that we're even seeing we're proving to ourselves is -- we mentioned there's so much in our brand and history around local, is that we -- as we started transitioning our goods impressions to local, even over the back part of Q4 and into January, we mentioned our units in local started to grow in January. And that's a huge turn. We were negative 11% in local units in Q4. We got north of 1,000 basis point turn in January. Good news for us. We saw that continue into February because that's just part of our DNA. Local is very much core to what we do. We're seeing, as we focus more as a business on that, we're being rewarded from our customers for that focus.

Got it. You're one of those companies that, when I talk to investors, they know you domestically because they either use or have used the product in the past. But I think there's an underappreciation of how global the company is. Maybe a multipart question. You've done a lot over the years to refine the strategy internationally. What moves have you made? How is that positioned -- business positioned for the long term? And how should we think about it almost relative to what you've done in North America?

Great. And I think one of the things we've learned over the years in this space, especially in local, what works in London, what works in Milan, what works in Rome, Barcelona, Tokyo, it's actually very similar. You may have some disparity in category mix or things like that. But in general, it really is about the fundamentals of our strategy, and that's the right merchants in the right locations with great pricing and great convenience supported by a better product. And so when we think about the work we've done in international, which has been a lot over the years, as you mentioned, I mean, part of that was focusing on a smaller group of markets that still represents about -- an addressable market size about twice the U.S. So -- but narrowing that down so we can focus on the bigger markets and bigger cities, where we see a lot of the characteristics that we like to see. We've done a lot to simplify the product and bring the product to parity. So while it's earlier stage, as an example, we're a global technology stack. We're a single platform company. So what happens in the product in North America happens in international and vice versa. So that's been a big step for us to get to that place of parity in the product. And I know in -- I think one of the things we're doing now as a truly global operation is we're launching things in international first. And that's something -- when we launched our booking tool, as an example, and our booking capabilities, we launched those in our international markets. We were -- and we specifically focused on dining in international where, in the course of a year, we went from basically nothing to north of 65% of our dining business being on our booking software and booked through our tools, which is really significant. And so that -- we're actually using now international to teach us how to do the same thing in the U.S. So a lot of this has been about parity and bringing things to the same level. As we think about the future though, and I think you pointed this out, we're not valued for this. People don't really ascribe a lot of value to our international business. In fact, they ask us all the time like, "Why are you in international, not just North America?" And we say every time, look, the formula is the same, the strategy is the same. A city's a city in this case, and our strategy will hit that piece of it. It's -- in our view, given the size of the addressable market, the population is so large and the markets that we're in have so -- they're so similar in their characteristics to the U.S. It's a significant call option for growth. And I don't think we're valued for that today. I think people underestimate the potential in those markets. But for us, it's about executing the strategy well in those markets, and we see nothing but potential and upside there.

Got it. Coming back to the investment side. So as you look out to '20 and beyond, on the call, you framed some of the investments that are going to put pressure on margins in '20 versus '19. Maybe just frame up again what some of those investments are. How many of them are investments that are new normal for the long term and how many of them are sort of a nonrecurring nature that's sort of about that repositioning effort?

Yes, it's great. And I think it's important to -- if I again step back from it a little bit. We said and I said it just a couple of minutes ago, we're focused acutely on cost. So a lot -- when we talk about a lot of the investments we're making, it's important to remember we're still taking cost out of the business, which means we're really -- it's really about prioritization and reallocating our folks and making sure that we're working on the things that will drive performance and results. But those areas of investment and that -- where we're allocating folks really acutely, one is on, again, resetting how we go to market in local to gather and to bring small businesses on our platform. It's much more targeted, it's much more about neighborhoods, not cities or markets, and it's about matching supply and demand. A piece of that has been us evaluating how we enter the market from a margin perspective and even how we think about discounting on our platform. And this is a place where we see an opportunity based on our results to date to be much more flexible on every one of those. One, that -- our platform should always be competitive in terms of margin. So it's a competitive landscape. We should be competitive on margins. And we should give flexibility to merchants who want to come on our platform. You shouldn't have to discount by 50% to be successful on Groupon. We've now learned, over the last couple of years, that's possible. And we shared this in our Q4, and I don't think a lot of people recognize it. Over the last couple of years, the no discount, low discount part of our business has grown by over 60% CAGR. It's been a really great growth story for us. And in 2019, that was well north of $100 million business. So it's not a small part, and those are no discount, low discount pieces. Learning from that, when we go to market now, it's saying, "Hey, it's your business. You tell us how you want to sell, and we're going to be competitive with everywhere else." So that will create a little bit of some changes in our take rate, but it doesn't really change the unit economics. And I think that's the important thing to remember. So an example is, if normally $100 item is sold for $50 on Groupon and our average take rate is 30%, we take about $15 a unit. When we sell that $100 item, if industry standard margin is 15%, we still make $15. So on a unit basis, we're making the same amount of gross profit per unit basically in those no and low discount environment. But that means a lot to a merchant to have that flexibility that they didn't feel that they had before. So investing in the systems, the tooling, the capabilities to ingest that kind of inventory and go to market that way is a big piece of it. And the other areas that I mentioned, on product, we have a ton of work happening in the product to really re-factor how it works for consumers. The first step of that is even live now. So the app that you saw 7 days ago is different than the app you see today. Look and feel is starting to change. Merchandising is starting to change. More of that is coming, and we're accelerating that road map like crazy to enable merchants to really use that new format and the new tools in the app and merchandising. We're -- and we have a whole series of these milestones that we've laid out. You're seeing more self-service options for them. Self-service deal creation is something you'll see and offer creation is something you'll see even this quarter, moving to offer management and other self-service as we move throughout the year. So there's really a ton of that product -- core product and experience work that's happening, and that's happening while we prepare for really that brand relaunch in the back half of the year.

Got it. So let's stick with the supply side of your marketplace for a minute. So you talked a little bit on the call about achieving deeper density or going more dense on the inventory side in certain markets. Talk a little bit about what that means in terms of the strategy and how you implement that.

Yes. So this is about -- the basics, we haven't talked about the specific markets given how competitive it is out there. But at its most basic level, this is about demand-weighted supply, right? So where we know we have demand, whether that's through all of our app data. We have more than 200 million downloads. We have a lot of data out there. We have billions of search queries every year that's coming through our systems. We know where we have demand, and we know where it's underserved. So a lot of it -- this is about really honing in on where is that demand, in what categories and in what specific areas of the country and really targeting those on a micro market level, all of our sales efforts with the new pitch, with a new product that effectively gives merchants flexibility that targets quality over just raw quantity. So it really -- bringing that demand-weighted intelligence to what we're doing and being much more directed with our sales force, with stronger tools to enable more merchant acquisition. And we're seeing really nice effort. We're only a couple of weeks into our market launches there, but we're already seeing literally an order of magnitude change in our target markets in terms of merchants acquired under the platform. And that's just in the first weeks out of the market. So merchant response has been really encouraging. Too early to tell -- it's too early to see things like purchase frequency, et cetera, but the inputs to that, long term, we know purchase frequency increases with density. So getting that density, getting high-quality merchants in those locations is critical, and we're already seeing really strong response to that.

Okay. You also -- similarly, on the supply side, you talked about a medium-term goal '22 of getting to that 70% of bookable inventory. Where does that sit today if you're able to say? Or help us better understand the glide path towards that 70%.

Yes. So this isn't something we've discussed in the past, but just to give you a rough area, we're at about 25% bookable today when I include our partnerships. And I think that's a really important thing to include because our partnerships, we're bringing on great brands -- whether that's an AMC or Universal Parks & Resorts, et cetera, bringing on great brands that are bookable or they're ticketed. And so -- and our goal isn't to just roll out booking software, it's to make our inventory bookable. In order to do that, our software will play a part of it because we've built booking software that serves many merchants that aren't served by the kind of enterprise-class booking tools. A lot of pen and paper merchants are out there, and we built a really simple tool that helps them. But for the folks that are using enterprise-class tools, we're partnering with folks, whether it's Redeam that we just announced earlier this week or late last week, MINDBODY, et cetera. We want to bring those tools to our merchants so they can use whatever software they want. And if they don't have a software, we'll give them ours. So the partnership plays a big piece of it. It also enables full catalog. And when -- the other thing that we're doing as we go to merchants today that we haven't done in the past is ask them to put all their services on our platform instead of just the one thing that they want to sell or the one deal. If it's the old Groupon, it would have been $59 massages and -- even though that salon has facials and microdermabrasion and all kinds of other things. We're saying to that salon now, "Great. Let's put the $59 massage on, but let's put facials and microdermabrasion and everything else that you have on the platform. And you can put it on for full price, you can put it on for a discount. It's up to you." Partnerships enable that in a really seamless way. So you're going to see us continue to push on that. We've got a big catalog of those that we're working to integrate. That's going to be enabled by really off-the-shelf APIs to make it really easy to integrate with us instead of us doing all the integration work, which will be a nice change. And look, we think we're on the right track there. I mentioned AMC. That's something that we're -- we just integrated AMC later last year, in the back half of last year. We're already on a 7-figure trajectory there. So that's real volume on a platform from a partner because they have great inventory, great quality and an awesome experience. When you buy its movie ticket on Groupon, you just -- you buy it and you scan your Groupon app, the code's right there. So that's the future of the product, and partnership will play a huge part of that.

So without talking about future partnerships, are there certain verticals that you're not as exposed to today where you see the opportunity that if you could gain exposure to certain verticals, that might improve conversion or ROI on the demand side as you're bringing users and traffic onto the platform?

Yes. I think it's a bit of a -- there's a bit of a tale of two cities here, and that's in really the U.S. versus our international markets. In the U.S., you have some really strong category players in, say, like dining, as an example. And we're -- so we're not as far along in dining in the U.S. space. But in international, we're really far along on the dining side. It's much more fragmented there, and we have a nice space to work in there. So -- and the other example that we're really strong in things like ticketed events in the U.S. because we have a great relationship with Live Nation. We work really well with Ticketmaster. We have a lot of integrations on that side. That's much earlier in its development in international for us. So we have spots of strength that's really based on market dynamics across the company. So in a place like the U.S., we're very much focused on our health and beauty, our beauty and wellness business, our things to do in our events business. We have great head starts. They're more fragmented in that space. International, we have a really strong dining business, and we're building up those other businesses. So it's -- we're regionally sensitive there. But the 3 big buckets that I mentioned are really the core of our focus regardless of where they happen to be today.

Got it. One question that came in through the app. And just a reminder, if anybody in the audience does have questions, you can use the conference app to send them up to me. I can try to work them in. When you do strike a big partnership, does that tend to have a greater impact on conversion of traffic or bring new users into Groupon as an ecosystem because people find out that you can book AMC tickets through Groupon in there? Is it a stimulant on the demand side in terms of bringing in traffic and users? Or is it more of a stimulant to conversion when you do these partnerships?

It's a bit of both. And using something like AMC is a great example. We went to AMC because we saw huge demand on our platform for movies. People are coming to Groupon and they're not typing movie deals. They're just looking for movie tickets. So when you want to go to a movie, take us -- we said, "Great. We should partner with AMC." And so that was really about conversion and harvesting demand. But that also -- I think the benefit of that, I do believe it provides a halo, right? When someone searches for movies and they see you have the theater that's in their neighborhood and it's a great theater and they have a great experience, I think that generally is a halo that's positive for the business. You see the same thing in, I mentioned, Universal Parks & Resorts. That's just a great brand. When you see that brand on Groupon, it may surprise some people. And if I were to go back a couple of years, I think people would be very surprised that Universal works with us in the way that they do given we were such a high discount-oriented site at the time. And we discount their tickets very little and yet, we sell a lot. And so when I think people go and they look for something in Orlando and they see what we have or they go to Vegas and see what we have and they see those big brands, I think it helps with conversion. It helps with repeat traffic and visitation, and it's just good for the brand overall.

Okay. Flipping now to the demand side. You talked about the new marketing strategy, taking a more full funnel approach. Can you talk a little bit about how you see your marketing funnel evolving? What are the investments you want to make into that funnel? And most of what you talked about with the company is sort of a 3-year arc towards '22. What does your marketing funnel look like a couple of years down the road?

Yes, it's great question. I think we're -- in the industry, we're kind of known as a really adept transactional market, kind of lower funnel marketing. And when we set out on this course, we said, look, we recognize our brand has a ton of equity. This is a brand with awareness. It's almost 90% total awareness on the brand. So it's a well-known brand, but it's a well-known brand for discounts and deals. And the opportunity is to bring that awareness level to really a new position. So as we look at that, we said, yes, look, our marketing needs to just -- to not just be good at the bottom of the funnel, it needs to be good everywhere. And there's real work for us to do at the top, and there's real work for us to do in the middle. And our view on that, and I think it's important to say, usually when investors hear something like jargony, like full funnel marketing, they're thinking, "Okay, they're going to spend a bunch of money on ads, like really expensive fancy ads." We actually think about it in a different way. We're thinking much more, "Let's use our low funnel expertise and efficiencies that we keep gaining there to help us explore some of those areas. And yes, if we're going to run video ads, those video ads should be aligned with our new brand position." So we need to do that at the very top. But a lot of our focus and I think where we're going to see a lot of leverage over time is really in the middle of the funnel. And when I think about the middle of the funnel, it's much more in the social sphere, where instead of being a very adept display advertiser on Facebook, it's really about how are you inserting yourself and making it easy to drive conversation and dialogue from your brand. And so that will be a big piece for us, which is less about raw spend and much more about how we enable consumers to share and explore and help others discover great things. So we see that combination of great efficiency at the bottom enabling us to invest more and really reallocate and redistribute spend throughout the funnel to achieve a much more balanced marketing approach. Instead of just being -- really drilling at the bottom and being just an adept search advertiser, we need to be much more expansive than that.

Okay. You've called out traffic headwinds. Google pretty much every year creates some degrees of Google -- traffic headwinds for folks in the industry. Talk a little bit about the traffic headwinds you've seen that have acted as headwind for the business, how you can overcome them, what investments you're making in sort of altering your exposure maybe even to those headwinds.

Sure. It's a spot -- we've been very transparent about the traffic headwinds we've experienced, and even last year, it was north of $100 million of traffic headwinds and -- with e-mail being a big part of that. You can see that in the data we've shared, just how much e-mail has reduced as a percentage of our traffic over the last 5 years. SEO is also one. People talk about that one a lot. There's been a ton of algorithm changes over the course of last year. Some of them help, some of them hurt. But I think, again, obstructing from that a little bit, I think the core of how we improve here and where -- it's not so much about the changes in the consumer and the marketplace. If the core is having a great value proposition, that drives direct traffic. And that's the one thing that when you look at our traffic mix today, we're basically a majority direct traffic business at scale, which a lot of folks are much more dependent on Google than we are and other big traffic sources. So we're kind of in an interesting position, and how we've invested in mobile over the years has helped us build that direct traffic. But we see the work that we're doing on hyper-local supply, being incredibly focused on supply density, revamping the product to be more rewarding as a local experiences platform, having more top-of-mind awareness through sharper marketing and full funnel integrated programs. Those are the things that are going to drive direct traffic, and that's really critical. The other pieces from that, when you have that really strong value prop that's getting people to come back, new channel development in the mid-funnel as an example with things like social, that just becomes easy. It becomes much easier when people want to share what you have. They want to tell their friends, and they want to get back to that viral capability that really created Groupon. So I think so much of what we're doing now to offset some of those challenges is all about value prop. It's all about being really clear to consumers how -- and merchants for that matter, how our platform works, why it's good for them, why we create unique value that can't be created elsewhere and how we take care of them in that process. And I think that's really at the crux of it, and the other pieces will track along with that. You can see our track record there which, in direct, is really -- I think really impressive over the last couple of years, but we see a ton of opportunity to do even more.

So one that came in from the audience that maybe dovetails on top of that, that could be interesting is you've had a lot of users that either have the app on their phone, relatively inactive or nonactive. Is there a plan in place to try to reengage with people that you think already have the app on their phone or have been a customer in the past that can create direct traffic with someone that's already sort of aware of the brand?

Absolutely. And so there's a lot of work going on right now on that front, and there's a really specific focus right now for us on cross-shoppers. And when I say cross-shoppers, it's folks that have been multi-category buyers both in goods and in local. So a lot of our focus in that world right now is on ensuring we have a great experience for those cross-shoppers and we can successfully and really rewarding -- in a rewarding way transition them to being local buyers. So that's a lot of it, and that's really a great test bed for us as we move those folks into being more local specific because we have to get them to engage in different ways. We have to build that top-of-mind awareness. We have to build a different value prop for them and deliver it. And then from that, we can extend that everywhere else. And you've seen a lot of things from -- on that front from us, whether that's exclusive deals, early access, et cetera. So there's a whole cadre of things that we're doing there that are supported by our density initiatives, our brand initiatives and product initiatives as well.

Okay. You mentioned earlier investing in the tech stack, having a more global tech stack. You're making a transition to the cloud, a number of investments you're going to make there over the next 3 to 4 years. Talk about why you made that decision to go down that road to transition into the cloud, how to think about the investment you're making to transition in that manner. What sort of -- walk us through the thought process around that.

Yes. I mean it's an interesting thing. Most people, when we talk about that, were actually surprised we weren't in the cloud. We're a scale player, but we're not mega scale, right? We're in this zone where most people are surprised that we're still running O&O data centers. Part of that has been, historically, we had a really complex technical environment. We had -- we didn't have a stack, we had 8. We had 8 different platforms running around the world. And so part of our process here was getting to one. And when you have one, that migration becomes a lot easier. So the reason why, ultimately, besides having -- there's only -- a company our scale and with our size, we may run a data center really well, but you can only have so many data centers within our scale. And so a big reason for moving to the cloud is you have reduced latency, we can be closer to customers and deliver a faster experience for them. You also have really rich tool sets that you can leverage, whether that's machine learning tool sets, AI tool sets that are off the shelf so that we're not always having to create those ourselves from 0. We can leverage an existing tool and tune it. So we see that, given all the work that we're doing on hyper-local density on marketing and getting closer to customers, there's just so much opportunity to accelerate that process, moving to the cloud. So there's a lot of that. There's just agility there and proximity. You also have things like disaster recovery and business continuity that's just hardened in that space. That's difficult to replicate when you're an O&O provider. So there's a lot of reasons for it. The -- from an expense perspective, we actually see it as a cost-saving opportunity. We're a subscale player running data centers, so we see that as ultimately a cost-saving opportunity for us. But in the short term, there is a change between CapEx or, in some cases, financial leases and operating expenses in the cloud. So some of this is optical shifting around versus dollars moving from one spot to the next. But more than anything, it's about speed, it's about security, it's about agility and capability. And we do see it with some cost benefits over the long term.

So maybe just one quick follow-up there. While I think the amount of money, the cost for the transition bought more the headlines on this topic, when can investors expect there to be a yield or an output from those investments, either in the shape of more business flexibility, taking advantage of some of those tools or more yield in the form of maybe OpEx synergies or free cash flow conversion? Is that a couple of years out?

Yes, I would think about some benefits being -- some of what you mentioned there being a couple of years out. We said it was a 3- to 4-year process. If that's when we can pull in because we're seeing benefits, we'll pull it in. But we obviously have a big -- a lot of software. With the exit of the Goods business, that's a bit of a shifting sands environment there that we need to clear. But if we can move faster, we will. My actual -- my belief there is that we'll see more leverage initially coming out of the agility and speed, faster speed to market on new product development. We will likely see more benefit from that faster than we will some of the cost pieces as they transition off. That's at least what we're building toward and what our hope is. And if we're seeing more benefits there, we're going to pull in time lines as fast as we can.

Great. Okay. So let's tie it up in the last few minutes. You laid out some goals over the next couple of years of where you want the company over '22. We touched upon them a little bit earlier in the conversation, but why don't you walk us through the framework of how we should expect the business to evolve, whether it be from a growth standpoint or a margin evolution standpoint? And how should investors be thinking about point A, which is Q4 of '19, which is behind you, to '22, which is a couple of years off in the distance?

Yes, that's great. And so in '22, just to frame that for folks, if you haven't seen it, our view there is we're working toward high single-digit units in billing growth, mid-single-digit revenue growth and adjusted EBITDA margins in the teens. And so from here to there, there's a couple of really key pieces of it. The first, as I mentioned, is -- and this is wave 1, is starting to transition from the Goods business to the local business. And we're already seeing positive unit trajectory there in now January and February, which is great, but that's really tip of the spear. And then we've said that starts to carry us through, and in the second half, we should have more consistent positive growth in units and -- which I think is really key, just to reignite demand on the platform. And that's really -- the thing we're most focused on now in terms of the core of the local business is igniting demand, which is that's the -- coming off of a year in 2018 and 2019 where we had local unit compression, really accurately and acutely using those impressions to drive that demand and rekindle that demand is absolutely critical. Along that process as well, you're seeing -- we expect some -- and we talked about this, the margin profile or take rate profile will change. But you'd also expect an ASP change or an average selling price change that start to go along with that because we're selling more full price stuff. Even if that full price stuff comes at a lower take rate, you're seeing some more of that. And that combination of unit trajectory and demand, unit growth with higher ASPs, and you should start to see billings track that. Historically, those have been coupled really well. And then on the bottom end, as we think about getting into that margin profile that we discussed, in the teens, we're very focused on cost takeout. So we've talked about just in the Goods business, there's about $75 million of SG&A that we'll remove. There's another $50 million-plus that we're attacking on top of that, some of that being indirect expenses associated with it, some being just opportunities to improve how we work. So there's a cost improvement as we go through that process as well. And that's the formula and the model to get there. And a lot of that cost, as we mentioned, the Q3 -- end of Q3 exit estimate for Goods in the U.S., end of the year estimate of exit for international, given we have works councils and things like that, that could slow us down a little bit on the international side. You should start to see the cost profile really start to hit in 2021 and beyond, but we're going to do everything we can to gain cost and efficiency this year as well. But it's really that construct of demand and starting to get density driving -- and selection really driving more billings and more capacity that's supported by a more efficient, more sustainable cost structure.

Okay. And I want to end on one thing that I think, unfortunately, the stock or the dialogue with investors gets very bogged down in, which is customer net additions, right? I mean there's going to be some interesting puts and takes in the next year. You're exiting the Goods business, and there clearly were probably users that were more goods users than local users. But you also, it seems like, in Q4, saw less attach rate or more of a drag on the business as goods went off, so you made the decision to exit. So just help educate investors so there isn't a lot of confusion in the next 12 to 18 months of how you think about what type of customer growth you want to have and what type of customer you're going after in terms of marketing investments.

It's great. And I'm glad you brought that up because it -- this is a part that will have noise. And this is the first time we've broken out our customer base by here's people that are local buyers, here's some cross-shoppers and here's the dedicated goods buyer. And we also talked about in Q4, goods was disproportionate in our loss of customers, and it's not surprising given the magnitude of the shrinkage there. So we said there's roughly 8 million goods-only buyers. I would expect -- you should expect us we're going to do everything we can to keep those people on our platform. We've invested in them. They get their haircut, they go get massages, they have kids that they take to bounce houses, too. We're going to do our best to keep them on the platform. But we should expect, if we remove what they're buying today, we're going to have some amount of loss there. I just don't know -- I don't know how to estimate that yet given we're still early in the transition, but we should estimate that loss. The important thing, however, which is also something we shared for the first time, is our local purchasers specifically. When I talk about purchaser, it's someone who breaks out their credit card and buys in the period. So as we think about it, the more important measures for us and really the important measures of demand and the quality of customers that we have, it's purchasers and it's units per purchaser, and we shared that data for the first time coming out of Q4. And you can see the trajectory in both of those is what we want. They're both up and to the right. So we're actually getting more purchase frequency out of our local buyers, and we're having stronger performance period-over-period in local purchasers. That's the formula for long-term purchase frequency, and that will drive health of customer base long term. And over the course of the next year, 1.5 years, maybe even into 2021, given it's a TTM measure, 2021 will be a reflection of what -- of actions that were taken in 2020. So it's unfortunate lagging measure of that active customer piece. What I would recommend investors look at is what we look at every day, purchasers, units per purchaser. Those are like true health of marketplace measures, and we'll be sharing those as we go.

Right. Well, Rich, there was a lot of puts and takes in there, very complicated last earnings call. So thank you for taking the time. Thanks for coming here to meet with investors and have the conversation. We look forward to seeing how the transition evolves over the next couple of quarters and couple of years.

Thanks. We appreciate it.

Great. Thanks, Rich, and please join me in thanking Rich for being part of the conference.

Thank you, guys.