Document
false0001490281 0001490281 2020-02-18 2020-02-18


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 18, 2020
Commission File Number: 1-35335
Groupon, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Delaware
 
27-0903295
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
600 W Chicago Avenue
 
60654
Suite 400
 
(Zip Code)
Chicago
 
 
Illinois
 
(312)
334-1579
(Address of principal executive offices)
 
(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
    240.14d-2(b))
 
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))


Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common stock, par value $0.0001 per share
 
GRPN
 
NASDAQ Global Select Market


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 406 of the Securities Act of 1933 (230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (240.12b-2 of this chapter)
Emerging growth company     ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐







Item 2.02.    Results of Operations and Financial Condition.
On February 18, 2020, Groupon, Inc. (the "Company") issued a press release and a letter to its stockholders announcing its financial results for its fiscal quarter ended December 31, 2019. A copy of the press release and the Company's letter to its stockholders are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and incorporated herein by reference.

Item 9.01.    Financial Statements and Exhibits.
(d)
Exhibits:
 
 
Exhibit No.
 
Description
 
 
99.1*
 
 
 
99.2*
 
 
 
 
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document)
 
 

*The information in Exhibit 99.1 and Exhibit 99.2 is being furnished and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.






























SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
GROUPON, INC.
Date: February 18, 2020


 
By: /s/ Melissa Thomas 
Name: Melissa Thomas
Title: Chief Financial Officer, Chief Accounting Officer and Treasurer












Groupon Announces Fourth Quarter and Fiscal Year 2019 Results
Announces Strategic Plan to Exit Goods Category By End of 2020
Company Focusing on $1 Trillion Local Experiences Market Opportunity
2022 Goals Include High Single-Digit Annual Billings Growth Rate

•
Fourth quarter gross profit of $310 million; $1.2 billion for full year
•
Fourth quarter income from continuing operations of $79 million; $14 million loss for full year
•
Fourth quarter Adjusted EBITDA of $84 million; $227 million for full year
•
Fourth quarter GAAP net income per diluted share of $0.13; net loss of $0.04 per diluted share for full year
•
Fourth quarter non-GAAP net income per diluted share of $0.07; non-GAAP net income per diluted share of $0.13 for full year
•
Operating cash flow of $71 million for the full year; free cash flow of $4 million for the full year

CHICAGO - February 18, 2020 - Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter and year ended December 31, 2019 and provided details on its transformational plan to exit its Goods category to focus on the $1 trillion local experiences market opportunity.

"We did not deliver the financial performance we expected during the fourth quarter and we recognize we must move swiftly to put Groupon back on a growth trajectory," said Groupon CEO Rich Williams. "Groupon is a leader and trusted brand in the highly fragmented, $1 trillion local experiences market. We believe our plan to exit Goods will allow us to dedicate the focus and resources necessary to build a winning position as the purchase of experiences continues to migrate online. Throughout 2020 you'll see a stronger Groupon emerge, with broader inventory, modernized products, a refreshed brand, new ways for merchants to partner with us to grow and a leaner organization. Success in these areas will be key to achieving our goal of reigniting billings growth." 

Rich Williams provided further commentary in a letter to stockholders located on our investor relations website (investor.groupon.com). The company also posted a new presentation on its investor relations website.

Transformational Plan to Exit Goods and Focus on Our Local Experiences Marketplace
Following a comprehensive review of opportunities and strategic alternatives, we determined that a plan to exit the Goods category and focus on our local experiences marketplace best positions us for long-term and sustained growth. We believe this plan will allow us to devote the focused execution necessary to take share in the growing local experiences market. This market, which we estimate to be north of $1 trillion, is highly fragmented, growing, and migrating quickly from offline to online. Currently, we are a market leader, yet we have less than 1% market share. In addition, our 2019 Goods category performance, particularly in the fourth quarter, has made it increasingly clear that we are not well-positioned in a saturated retail market.





We believe that focusing on rapidly growing our local experiences marketplace will allow us to bend our growth curve and deliver value for all of our stakeholders. We are most differentiated in local experiences, which include Things to Do, Beauty & Wellness, and Dining, and we believe our strength in these areas position us well against potential competitors.
In order to maintain and extend our competitive advantage, we believe we must act with urgency and plan to exit our Goods category in North America by the third quarter and globally by the end of the year. We are realigning our organization to attack the local experiences opportunity and our strategy is focused on four key priorities:

•
Inventory: Build high-quality density in core cities and bring on merchants' full catalogs
•
Modernization: Deliver a modern mobile experience for customers and new tools to help merchants grow their businesses
•
Brand: Relaunch the Groupon brand and marketing strategy to move from deal-centric to a local experiences marketplace
•
Cost: Reduce our costs and right-size our spend to support our go-forward business


We believe successful execution will change the growth profile for Groupon and position us to win in local experiences. By 2022, we believe we can deliver:
Annual Metrics
2022 Outlook
Unit growth %
High single-digits
Gross Billings growth %
High single-digits
Revenue growth %
Mid single-digits
Adjusted EBITDA margin (1)
High teens

"The Groupon team is excited and energized about the future," said Groupon CFO Melissa Thomas. "At scale we believe we can unlock the potential of our financial model and become the largest two-sided marketplace that connects merchants to loyal, engaged customers who are looking for unique local experiences around the world."

Target Financial Model
Metric
Goal
Gross Billings
Low double-digit growth
Revenue Take Rate
28% to 30%
Adjusted EBITDA margin (1)
Mid 20% range
Free cash flow conversion rate
65%+

(1) Adjusted EBITDA margin is a non-GAAP financial measure and is defined as Adjusted EBITDA as a percentage of revenue
Fourth Quarter 2019 Summary
North America
•
North America gross profit in the fourth quarter 2019 decreased 16% to $207.3 million primarily due to fewer customers, lower traffic and increased competition in our Goods category. The decrease was partially offset by higher gross profit per customer. In Local, gross profit decreased 6% to $169.7 million. Goods gross profit decreased 45% to $30.6 million. Gross profit in Travel decreased 41% to $6.9 million.





•
North America active customers were 26.5 million as of December 31, 2019, and gross profit per active customer increased 5% for the year ended December 31, 2019.
International
•
International gross profit in the fourth quarter 2019 decreased 13% to $102.8 million (11% FX-neutral) driven by intense competition in our Goods category, weak consumer sentiment in Europe, particularly in the United Kingdom, and a customer shift toward lower margin Local offerings. Local gross profit decreased 8% (6% FX-neutral). Goods gross profit decreased 28% (26% FX-neutral). Gross profit in Travel decreased 14% (11% FX-neutral).
•
International active customers were 17.1 million as of December 31, 2019, and gross profit per active customer decreased 10% (5% FX-neutral) for the year ended December 31, 2019.
Consolidated
•
Revenue was $612.3 million in the fourth quarter 2019, down 23% (23% FX-neutral).
•
Gross profit was $310.0 million in the fourth quarter 2019, down 15% (15% FX-neutral).
•
SG&A was $187.7 million in the fourth quarter 2019 compared with $194.6 million in the fourth quarter 2018. The decrease was primarily driven by lower performance-based compensation, partially offset by an increase in stock-based compensation.
•
Marketing expense declined by 25% to $82.1 million in the fourth quarter 2019 as we continued to manage our marketing spend in line with our payback threshold.
•
Other income, net was $39.3 million in the fourth quarter 2019, compared with $13.2 million of Other expense, net in the fourth quarter 2018 driven primarily by an observable price change for our SumUp investment in the fourth quarter 2019.
•
Net income from continuing operations was $79.2 million in the fourth quarter 2019 compared with $49.9 million in the fourth quarter 2018.
•
Net income attributable to common stockholders was $77.0 million, or $0.13 per diluted share, in the fourth quarter 2019, compared with net income attributable to common stockholders of $46.2 million, or $0.08 per diluted share, in the fourth quarter 2018. Non-GAAP net income attributable to common stockholders plus assumed conversions was $44.6 million, or $0.07 per diluted share, in the fourth quarter 2019, compared with $61.2 million, or $0.10 per diluted share, in the fourth quarter 2018.
•
Adjusted EBITDA, a non-GAAP financial measure, was $83.8 million in the fourth quarter 2019, down from $104.6 million in the fourth quarter 2018.
•
Global units sold were down 16% to 42.6 million in the fourth quarter 2019 largely driven by fewer customers and lower traffic. North America units were down 11% in Local and down 32% in Goods. International units were up 4% in Local and down 22% in Goods.
•
Operating cash flow was $71.3 million for full year 2019, and free cash flow, a non-GAAP financial measure, was $4.0 million for the full year 2019.
•
Cash and cash equivalents as of December 31, 2019 were $750.9 million, and we had no outstanding borrowings under our $400 million revolving credit facility.
Definitions and reconciliations of all non-GAAP financial measures and additional information regarding operating measures are included below in the section titled "Non-GAAP Financial Measures and Operating Metrics" and in the accompanying tables. All comparisons in this press release are year-over-year unless otherwise provided.





Full Year 2019 Summary
Consolidated
•
Revenue was $2.2 billion in 2019, down 16% compared with $2.6 billion in 2018.
•
Gross profit was $1.2 billion in 2019, down 10% compared with $1.3 billion in 2018.
•
Net loss from continuing operations was $14.3 million in 2019, compared with net income from continuing operations of $2.0 million in 2018.
•
Net loss attributable to common stockholders was $22.4 million, or $0.04 per diluted share in 2019, compared with net loss attributable to common stockholders of $11.1 million, or $0.02 per diluted share in 2018. Non-GAAP net income attributable to common stockholders plus assumed conversions was $79.7 million, or $0.13 per diluted share in 2019, compared with $112.7 million, or $0.18 per diluted share in 2018.
•
Adjusted EBITDA was $227.2 million in 2019, down 16% compared with $269.8 million in 2018.
•
Global units sold declined 12% year-over-year to 150.9 million in 2019.
•
In 2019, we repurchased 14.0 million shares for $45.2 million.
2020 Outlook
For the full year 2020, the company is focused on achieving the following operational goals:
•
Product: launch a new mobile app and expand bookable offers;
•
Units: grow North America Local units year-over-year in the second half of 2020;
•
Inventory: execute density strategy in 10 cities;
•
Marketing: relaunch the brand and deploy a full-funnel marketing strategy; and
•
SG&A: reset the cost base with the exit of Goods.
Reverse Stock Split Proposal
Groupon also announced that its Board of Directors has approved, and will submit to Groupon's stockholders at the June 2020 Annual Meeting, a proposal to effect a reverse stock split of Groupon common stock at a ratio of between 1-for-10 and 1-for-12. Subject to stockholder approval, the Board of Directors will determine the final ratio following the annual meeting. We currently expect the reverse stock split to be effective by the end of the second quarter.
Conference Call
A conference call will be webcast Wednesday, February 19, 2020 at 7:00 a.m. CT / 8:00 a.m. ET and will be available on Groupon’s investor relations website at https://investor.groupon.com. This call will contain forward-looking statements and other material information regarding our financial and operating results.
Groupon encourages investors to use its investor relations website as a way of easily finding information about the company. Groupon promptly makes available on this website, free of charge, the reports that the company files or furnishes with the SEC, corporate governance information (including Groupon’s Global Code of Conduct), and select press releases and social media postings. Groupon uses its investor relations website (investor.groupon.com) and the Groupon blog





(www.groupon.com/blog) as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.
Non-GAAP Financial Measures and Operating Metrics
In addition to financial results reported in accordance with U.S. GAAP, we have provided the following non-GAAP financial measures: Foreign exchange rate neutral operating results, adjusted EBITDA, non-GAAP income (loss) from continuing operations before provision (benefit) for income taxes, non-GAAP net income (loss) attributable to common stockholders, non-GAAP income (loss) per share, non-GAAP provision (benefit) for income taxes and free cash flow. These non-GAAP financial measures, which are presented on a continuing operations basis, are intended to aid investors in better understanding our current financial performance and prospects for the future as seen through the eyes of management. We believe that these non-GAAP financial measures facilitate comparisons with our historical results and with the results of peer companies who present similar measures (although other companies may define non-GAAP measures differently than we define them, even when similar terms are used to identify such measures). However, these non-GAAP financial measures are not intended to be a substitute for those reported in accordance with U.S. GAAP. For reconciliations of these measures to the most applicable financial measures under U.S. GAAP, see "Non-GAAP Reconciliation Schedules" and "Supplemental Financial and Operating Metrics" included in the tables accompanying this release.
We exclude the following items from one or more of our non-GAAP financial measures:
Stock-based compensation. We exclude stock-based compensation because it is primarily non-cash in nature and we believe that non-GAAP financial measures excluding this item provide meaningful supplemental information about our operating performance and liquidity.
Acquisition-related expense (benefit), net. Acquisition-related expense (benefit), net is comprised of the change in the fair value of contingent consideration arrangements and external transaction costs related to business combinations, primarily consisting of legal and advisory fees. The composition of our contingent consideration arrangements and the impact of those arrangements on our operating results vary over time based on a number of factors, including the terms of our business combinations and the timing of those transactions. We exclude acquisition-related expense (benefit), net because we believe that non-GAAP financial measures excluding this item provide meaningful supplemental information about our operating performance and facilitate comparisons to our historical operating results.
Depreciation and amortization. We exclude depreciation and amortization expenses because they are non-cash in nature and we believe that non-GAAP financial measures excluding these items provide meaningful supplemental information about our operating performance and liquidity.
Interest and Other Non-Operating Items. Interest and other non-operating items include: gains and losses related to minority investments, foreign currency gains and losses, interest income and interest expense, including non-cash interest expense from our convertible senior notes. We exclude interest and other non-operating items from certain of our non-GAAP financial measures because we believe that excluding these items provides meaningful supplemental information about our core operating performance and facilitates comparisons to our historical operating results.
Special Charges and Credits. For the year ended December 31, 2019 and 2018, special charges and credits included charges related to our restructuring plan. For the year ended December 31, 2018, special charges and credits also included the $34.6 million charge related to patent litigation





with IBM. We exclude special charges and credits from Adjusted EBITDA because we believe that excluding those items provides meaningful supplemental information about our core operating performance and facilitates comparisons with our historical results.
Descriptions of the non-GAAP financial measures included in this release and the accompanying tables are as follows:
Foreign exchange rate neutral operating results show current period operating results as if foreign currency exchange rates had remained the same as those in effect in the prior year period. These measures are intended to facilitate comparisons to our historical performance.
Adjusted EBITDA is a non-GAAP performance measure that we define as net income (loss) from continuing operations excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation, acquisition-related expense (benefit), net and other special charges and credits, including items that are unusual in nature or infrequently occurring. Our definition of Adjusted EBITDA may differ from similar measures used by other companies, even when similar terms are used to identify such measures. Adjusted EBITDA is a key measure used by our management and Board of Directors to evaluate operating performance, generate future operating plans and make strategic decisions for the allocation of capital. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors. However, Adjusted EBITDA is not intended to be a substitute for income (loss) from continuing operations.
Adjusted EBITDA margin is a non-GAAP performance measure that we define as Adjusted EBITDA as a percentage of our revenue. Adjusted EBITDA margin is a key measure in our Target Financial Model. Adjusted EBITDA margin is a key measure in our Target Financial Model. Accordingly, we believe that Adjusted EBITDA margin provides useful information to investors and others in understanding and evaluating our operating results.
Non-GAAP income (loss) from continuing operations before provision (benefit) for income taxes, Non-GAAP net income (loss) attributable to common stockholders and non-GAAP income (loss) per diluted share are non-GAAP performance measures that adjust our net income attributable to common stockholders and earnings per share to exclude the impact of:
•
stock-based compensation,
•
amortization of acquired intangible assets,
•
acquisition-related expense (benefit), net,
•
special charges and credits, including restructuring charges,
•
non-cash interest expense on convertible senior notes,
•
non-operating foreign currency gains and losses related to intercompany balances and reclassifications of cumulative translation adjustments to earnings as a result of business dispositions or country exits,
•
non-operating gains and losses from minority investments that we have elected to record at fair value with changes in fair value reported in earnings,
•
non-operating gains and losses from sales of minority investments, and
•
income (loss) from discontinued operations.





We believe that excluding the above items from our measures of non-GAAP income from continuing operations before provision (benefit) from income taxes, non-GAAP net income attributable to common stockholders and non-GAAP earnings per diluted share provides useful supplemental information for evaluating our operating performance and facilitates comparisons to our historical results by eliminating items that are non-cash in nature, relate to discrete events, or are otherwise not indicative of the core operating performance of our ongoing business.
Non-GAAP provision (benefit) for income taxes reflects our current and deferred tax provision computed based on non-GAAP income from continuing operations before provision (benefit) for income taxes.
Free cash flow is a non-GAAP liquidity measure that comprises net cash provided by operating activities from continuing operations less purchases of property and equipment and capitalized software from continuing operations. We use free cash flow to conduct and evaluate our business because, although it is similar to cash flow from continuing operations, we believe that it typically represents a more useful measure of cash flows because purchases of fixed assets, software developed for internal use and website development costs are necessary components of our ongoing operations. Free cash flow is not intended to represent the total increase or decrease in our cash balance for the applicable period.
Descriptions of the operating metrics included in this release and the accompanying tables are as follows:
Gross Billings is the total dollar value of customer purchases of goods and services. Gross billings is presented net of customer refunds, order discounts and sales and related taxes. The substantial majority of our service revenue transactions are comprised of sales of vouchers and similar transactions in which we collect the transaction price from the customer and remit a portion of the transaction price to the third-party merchant who will provide the related goods or services. For these transactions, gross billings differs from revenue reported in our consolidated statements of operations, which is presented net of the merchant's share of the transaction price. For product revenue transactions, gross billings are equivalent to product revenue reported in our consolidated statements of operations. Gross billings is an indicator of our growth and business performance as it measures the dollar volume of transactions generated through our marketplaces. Tracking gross billings on service revenue transactions also allows us to monitor the percentage of gross billings that we are able to retain after payments to merchants. However, we are focused on achieving long-term gross profit and Adjusted EBITDA growth.
Active customers are unique user accounts that have made a purchase during the trailing twelve months ("TTM") either through one of our online marketplaces or directly with a merchant for which we earned a commission. We consider this metric to be an important indicator of our business performance as it helps us to understand how the number of customers actively purchasing our offerings is trending. Some customers could establish and make purchases from more than one account, so it is possible that our active customer metric may count certain customers more than once in a given period. For entities that we have acquired in a business combination, this metric includes active customers of the acquired entity, including customers who made purchases prior to the acquisition. We do not include consumers who solely make purchases with retailers using digital coupons accessed through our websites and mobile applications in our active customer metric, nor do we include consumers who solely make purchases of our inventory through third-party marketplaces with which we partner.





Gross profit per active customer is the TTM gross profit generated per active customer. We use this metrics to evaluate trends in customer spend and in the average contribution to gross profit on a per-customer basis.
Units are the number of purchases during the reporting period, before refunds and cancellations, made either through one of our online marketplaces, a third-party marketplace, or directly with a merchant for which we earn a commission. We do not include purchases with retailers using digital coupons accessed through our websites and mobile applications in our units metric. We consider units to be an important indicator of the total volume of business conducted through our marketplaces.
Note on Forward-Looking Statements
The statements contained in this release that refer to plans and expectations for the next quarter, the full year or the future are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations. The words "may," "will," "should," "could," "expect," "anticipate," "believe," "estimate," "intend," "continue" and other similar expressions are intended to identify forward-looking statements. We have based these forward looking statements largely on current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, but are not limited to, our ability to execute, and achieve the expected benefits of our go-forward strategy, including our planned exit from the Goods business; volatility in our operating results; execution of our marketing strategies; retaining existing customers and adding new customers; challenges arising from our international operations, including fluctuations in currency exchange rates, legal and regulatory developments and any potential adverse impact from the United Kingdom's exit from the European Union, retaining and adding high quality merchants; our reliance on email, internet search engines and mobile application marketplaces to drive traffic to our marketplace; cybersecurity breaches; reliance on cloud-based computing platforms; competing successfully in our industry; providing a strong mobile experience for our customers; maintaining and improving our information technology infrastructure; our voucherless offerings; claims related to product and service offerings; managing inventory and order fulfillment risks; litigation; managing refund risks; retaining and attracting members of our executive team; completing and realizing the anticipated benefits from acquisitions, dispositions, joint ventures and strategic investments; lack of control over minority investments; compliance with domestic and foreign laws and regulations, including the CARD Act, GDPR and regulation of the Internet and e-commerce; classification of our independent contractors or employees; tax liabilities; tax legislation; protecting our intellectual property; maintaining a strong brand; customer and merchant fraud; payment-related risks; our ability to raise capital if necessary and our outstanding indebtedness; global economic uncertainty; our common stock, including volatility in our stock price; our convertible senior notes; and our ability to realize the anticipated benefits from the hedge and warrant transactions. For additional information regarding these and other risks and uncertainties, we urge you to refer to the factors included under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the company's Annual





Report on Form 10-K for the year ended December 31, 2019, and our other filings with the Securities and Exchange Commission (the "SEC"), copies of which may be obtained by visiting the company's Investor Relations web site at investor.groupon.com or the SEC's web site at www.sec.gov. Groupon's actual results could differ materially from those predicted or implied and reported results should not be considered an indication of future performance.
You should not rely upon forward-looking statements as predictions of future events. Although Groupon believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither Groupon nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements reflect our expectations as of February 18, 2020. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this release to conform these statements to actual results or to changes in our expectations.
About Groupon
Groupon (www.groupon.com) (NASDAQ: GRPN) is a local experiences marketplace that brings people more ways to get the most out of their city or wherever they may be. By enabling real-time mobile commerce across local businesses, live events and travel destinations, Groupon helps people find and discover experiences—big and small, new and familiar—that make for a full, fun and rewarding life. Groupon helps local businesses grow and strengthen customer relationships—resulting in strong, vibrant communities. To learn more about Groupon’s community-building efforts, please visit community.groupon.com.
Contacts:
Investor Relations               
Jennifer Beugelmans                    
312-662-7370                    
[email protected]                     

Public Relations
Bill Roberts
312-459-5191
[email protected]






Groupon, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
 
December 31, 2019
 
December 31, 2018
 
(unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
750,887

 
$
841,021

Accounts receivable, net
54,953

 
69,493

Prepaid expenses and other current assets
82,073

 
88,115

Total current assets
887,913

 
998,629

Property, equipment and software, net
124,950

 
143,117

Right-of-use assets - operating leases, net (1)
108,390

 
—

Goodwill
325,017

 
325,491

Intangible assets, net
35,292

 
45,401

Investments (including $1,405 and $84,242 at December 31, 2019 and December 31, 2018 at fair value)
76,576

 
108,515

Other non-current assets
28,605

 
20,989

Total Assets
$
1,586,743

 
$
1,642,142

Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
20,415

 
$
38,359

Accrued merchant and supplier payables
540,940

 
651,781

Accrued expenses and other current liabilities
260,192

 
267,034

Total current liabilities
821,547

 
957,174

Convertible senior notes, net
214,869

 
201,669

Operating lease obligations (2)
110,294

 
—

Other non-current liabilities
44,987

 
100,688

Total Liabilities
1,191,697

 
1,259,531

Commitment and contingencies
 
 
 
Stockholders' Equity
 
 
 
Common stock, par value $0.0001 per share, 2,010,000,000 shares authorized; 771,697,087 shares issued and 565,814,732 shares outstanding at December 31, 2019; 760,939,440 shares issued and 569,084,312 shares outstanding at December 31, 2018
77

 
76

Additional paid-in capital
2,310,320

 
2,234,560

Treasury stock, at cost, 205,882,355 and 191,855,128 shares at December 31, 2019 and December 31, 2018
(922,666
)
 
(877,491
)
Accumulated deficit
(1,032,876
)
 
(1,010,499
)
Accumulated other comprehensive income (loss)
39,081

 
34,602

Total Groupon, Inc. Stockholders' Equity
393,936

 
381,248

Noncontrolling interests
1,110

 
1,363

Total Equity
395,046

 
382,611

Total Liabilities and Equity
$
1,586,743

 
$
1,642,142

(1)
Represents operating lease assets recognized as a result of our adoption of Topic 842 on January 1, 2019, net of accumulated amortization. Refer to Item 8, Note 10, Leases, in our Annual Report on Form 10-K for the year ended December 31, 2019 for additional information.
(2)
Represents the non-current portion of operating lease liabilities as a result of our adoption of Topic 842 on January 1, 2019. Refer to Item 8, Note 10, Leases, in our Annual Report on Form 10-K for the year ended December 31, 2019 for additional information.






Groupon, Inc.
Condensed Consolidated Statements of Operations 
(in thousands, except share and per share amounts)
(unaudited)
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
Revenue:
 
 
 
 
 
 
 
Service
$
294,847

 
$
318,824

 
$
1,126,357

 
$
1,205,487

Product
317,469

 
481,103

 
1,092,558

 
1,431,259

Total revenue
612,316

 
799,927

 
2,218,915

 
2,636,746

Cost of revenue:
 
 
 
 
 
 
 
Service
28,293

 
28,910

 
114,462

 
120,077

Product
273,982

 
404,948

 
918,324

 
1,196,068

Total cost of revenue
302,275

 
433,858

 
1,032,786

 
1,316,145

Gross profit
310,041

 
366,069

 
1,186,129

 
1,320,601

Operating expenses:
 
 
 
 
 
 
 
Marketing
82,059

 
109,686

 
339,355

 
395,737

Selling, general and administrative
187,671

 
194,562

 
806,945

 
870,961

Restructuring charges
206

 
(55
)
 
31

 
(136
)
Total operating expenses
269,936

 
304,193

 
1,146,331

 
1,266,562

Income (loss) from operations
40,105

 
61,876

 
39,798

 
54,039

Other income (expense), net
39,273

 
(13,176
)
 
(53,329
)
 
(53,008
)
Income (loss) from continuing operations before provision (benefit) for income taxes
79,378

 
48,700

 
(13,531
)
 
1,031

Provision (benefit) for income taxes
170

 
(1,162
)
 
761

 
(957
)
Income (loss) from continuing operations
79,208

 
49,862

 
(14,292
)
 
1,988

Income (loss) from discontinued operations, net of tax
435

 
—

 
2,597

 
—

Net income (loss)
79,643

 
49,862

 
(11,695
)
 
1,988

Net income attributable to noncontrolling interests
(2,602
)
 
(3,634
)
 
(10,682
)
 
(13,067
)
Net income (loss) attributable to Groupon, Inc.
$
77,041

 
$
46,228

 
$
(22,377
)
 
$
(11,079
)
 
 
 
 
 
 
 
 
Basic net income (loss) per share:
 
 
 
 
 
 
 
Continuing operations
$
0.14

 
$
0.08

 
$
(0.04
)
 
$
(0.02
)
Discontinued operations
0.00

 
—

 
0.00

 
—

Basic net income (loss) per share
$
0.14

 
$
0.08

 
$
(0.04
)
 
$
(0.02
)
 
 
 
 
 
 
 
 
Diluted net income (loss) per share:
 
 
 
 
 
 
 
Continuing operations
$
0.13

 
$
0.08

 
$
(0.04
)
 
$
(0.02
)
Discontinued operations
0.00

 
—

 
0.00

 
—

Diluted net income (loss) per share
$
0.13

 
$
0.08

 
$
(0.04
)
 
$
(0.02
)
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding
 
 
 
 
 
 
 
Basic
564,651,203

 
570,319,704

 
567,408,340

 
566,511,108

Diluted
617,603,560

 
620,708,515

 
567,408,340

 
566,511,108








Groupon, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands) (unaudited)
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
Operating activities
 
 
 
 
 
 
 
Net income (loss)
$
79,643

 
$
49,862

 
$
(11,695
)
 
$
1,988

Less: Income (loss) from discontinued operations, net of tax
435

 
—

 
2,597

 
—

Income (loss) from continuing operations
79,208

 
49,862

 
(14,292
)
 
1,988

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization of property, equipment and software
21,424

 
24,346

 
91,410

 
101,330

Amortization of acquired intangible assets
2,936

 
4,182

 
14,355

 
14,498

Stock-based compensation
19,098

 
14,151

 
81,615

 
64,821

(Gain) loss on sale of investment
—

 
—

 
412

 
—

Impairments of investments
9,961

 
—

 
9,961

 
10,156

Upward adjustment for observable price change of investment
(51,397
)
 
—

 
(51,397
)
 
—

Deferred income taxes
(2,301
)
 
1,575

 
(1,485
)
 
(5,000
)
(Gain) loss from changes in fair value of investments
3,526

 
752

 
72,497

 
9,064

Amortization of debt discount on convertible senior notes
3,428

 
3,094

 
13,200

 
11,916

Change in assets and liabilities, net of acquisitions and dispositions:
 
 
 
 
 
 
 
Accounts receivable
996

 
11,840

 
13,577

 
32,057

Prepaid expenses and other current assets
585

 
9,861

 
3,176

 
7,166

Right-of-use assets - operating leases
6,602

 
—

 
26,226

 
—

Accounts payable
(509
)
 
21,839

 
(17,401
)
 
5,805

Accrued merchant and supplier payables
106,951

 
169,480

 
(109,176
)
 
(45,268
)
Accrued expenses and other current liabilities
17,696

 
13,745

 
(26,071
)
 
(31,430
)
Operating lease obligations
(9,591
)
 
—

 
(28,552
)
 
—

Other, net
(7,212
)
 
(911
)
 
(6,772
)
 
13,752

Net cash provided by (used in) operating activities from continuing operations
201,401

 
323,816

 
71,283

 
190,855

Net cash provided by (used in) operating activities from discontinued operations
—

 
—

 
—

 
—

Net cash provided by (used in) operating activities
201,401

 
323,816

 
71,283

 
190,855

Investing activities
 
 
 
 
 
 
 
Purchases of property and equipment and capitalized software
(15,474
)
 
(16,084
)
 
(67,328
)
 
(69,695
)
Proceeds from sale of intangible assets
—

 
—

 
—

 
1,500

Proceeds from sales and maturities of investments
3,475

 
—

 
3,475

 
8,594

Acquisition of business, net of acquired cash
—

 
(298
)
 
—

 
(58,119
)
Acquisitions of intangible assets and other investing activities
(701
)
 
(1,115
)
 
(3,738
)
 
(18,262
)
Net cash provided by (used in) investing activities from continuing operations
(12,700
)
 
(17,497
)
 
(67,591
)
 
(135,982
)
Net cash provided by (used in) investing activities from discontinued operations
—

 
—

 
—

 
—

Net cash provided by (used in) investing activities
(12,700
)
 
(17,497
)
 
(67,591
)
 
(135,982
)
Financing activities
 
 
 
 
 
 
 
Issuance costs for revolving credit agreement
—

 
—

 
(2,384
)
 
—

Payments for repurchases of common stock
(1,469
)
 
(9,585
)
 
(45,631
)
 
(9,585
)
Taxes paid related to net share settlements of stock-based compensation awards
(4,130
)
 
(5,467
)
 
(18,105
)
 
(24,105
)
Proceeds from stock option exercises and employee stock purchase plan
—

 
5

 
4,123

 
5,715

Distributions to noncontrolling interest holders
(2,248
)
 
(3,260
)
 
(10,935
)
 
(12,576
)
Payments of finance lease obligations
(2,819
)
 
(7,734
)
 
(19,687
)
 
(33,023
)
Payments of contingent consideration related to acquisitions
—

 
—

 
—

 
(1,815
)
Payment of financing obligation related to acquisitions
—

 
(8,391
)
 
—

 
(8,391
)
Other financing activities
—

 
(637
)
 
—

 
(637
)
Net cash provided by (used in) financing activities
(10,666
)
 
(35,069
)
 
(92,619
)
 
(84,417
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash, including cash classified within current assets of discontinued operations
6,009

 
(1,922
)
 
(3,144
)
 
(11,209
)
Net increase (decrease) in cash, cash equivalents and restricted cash, including cash classified within current assets of discontinued operations
184,044

 
269,328

 
(92,071
)
 
(40,753
)
Less: Net increase (decrease) in cash classified within current assets of discontinued operations
—

 
—

 
—

 
—

Net increase (decrease) in cash, cash equivalents and restricted cash
184,044

 
269,328

 
(92,071
)
 
(40,753
)
Cash, cash equivalents and restricted cash, beginning of period
568,613

 
575,400

 
844,728

 
885,481

Cash, cash equivalents and restricted cash, end of period
$
752,657

 
$
844,728

 
$
752,657

 
$
844,728







Groupon, Inc.
Supplemental Financial and Operating Metrics

(dollars and units in thousands; active customers in millions)
(unaudited)
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
 
 
 
 
 
North America Segment:
 
 
 
 
 
 
 
 
 
 
Q4 2019
 
 
 
 
 
Gross Billings (1):
 
 
 
 
 
 
 
 
 
 
Y/Y Growth
 
 
 
 
 
 
Local
$
535,869

 
$
502,309

 
$
503,830

 
$
511,173

 
$
503,740

 
(6.0)
%
 
 
 
 
 
Travel
71,948

 
92,083

 
84,029

 
71,144

 
58,756

 
(18.3)
 
 
 
 
 
 
Goods
319,922

 
174,638

 
147,354

 
133,076

 
204,481

 
(36.1)
 
 
 
 
 
 
Total Gross Billings
$
927,739

 
$
769,030

 
$
735,213

 
$
715,393

 
$
766,977

 
(17.3)
%
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
Local
$
199,523

 
$
180,377

 
$
177,082

 
$
175,140

 
$
188,439

 
(5.6)
%
 
 
 
 
 
Travel
14,667

 
18,941

 
16,125

 
13,680

 
9,193

 
(37.3)
 
 
 
 
 
 
Goods
290,534

 
157,847

 
131,453

 
114,776

 
175,854

 
(39.5)
 
 
 
 
 
 
Total Revenue
$
504,724

 
$
357,165

 
$
324,660

 
$
303,596

 
$
373,486

 
(26.0)
%
 
 
 
 
Gross Profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Local
$
179,932

 
$
161,082

 
$
157,673

 
$
155,032

 
$
169,712

 
(5.7)
%
 
 
 
 
 
Travel
11,839

 
15,268

 
12,806

 
10,717

 
6,948

 
(41.3)
 
 
 
 
 
 
Goods
55,814

 
33,452

 
28,105

 
26,326

 
30,624

 
(45.1)
 
 
 
 
 
 
Total Gross Profit
$
247,585

 
$
209,802

 
$
198,584

 
$
192,075

 
$
207,284

 
(16.3)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
$
39,289

 
$
5,336

 
$
(372
)
 
$
15,691

 
$
45,073

 
14.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International Segment:
 
 
 
 
 
 
 
 
 
 
Q4 2019
 
Gross Billings:
 
 
 
 
 
 
 
 
 
 
Y/Y Growth
 
FX Effect (2)
 
Y/Y Growth excluding
FX (2)
 
 
Local
$
235,093

 
$
207,396

 
$
203,450

 
$
204,823

 
$
240,151

 
2.2
 
1.8
 
4.0
%
 
Travel
55,046

 
51,939

 
43,348

 
44,098

 
51,186

 
(7.0)
 
2.7
 
(4.3)
 
 
Goods
211,180

 
147,643

 
138,934

 
129,064

 
164,886

 
(21.9)
 
2.4
 
(19.5)
 
 
Total Gross Billings
$
501,319

 
$
406,978

 
$
385,732

 
$
377,985

 
$
456,223

 
(9.0)
 
2.2
 
(6.8)
%
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Local
$
84,751

 
$
73,190

 
$
69,995

 
$
65,440

 
$
78,986

 
(6.8)
 
1.6
 
(5.2)
%
 
Travel
10,654

 
8,737

 
8,077

 
8,003

 
9,275

 
(12.9)
 
2.4
 
(10.5)
 
 
Goods
199,798

 
139,318

 
129,845

 
118,573

 
150,569

 
(24.6)
 
2.2
 
(22.4)
 
 
Total Revenue
$
295,203

 
$
221,245

 
$
207,917

 
$
192,016

 
$
238,830

 
(19.1)
 
2.1
 
(17.0)
%
Gross Profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Local
$
80,213

 
$
68,978

 
$
65,780

 
$
61,183

 
$
73,725

 
(8.1)
 
1.7
 
(6.4)
%
 
Travel
9,913

 
8,041

 
7,370

 
7,332

 
8,574

 
(13.5)
 
2.5
 
(11.0)
 
 
Goods
28,358

 
19,195

 
20,398

 
17,350

 
20,458

 
(27.9)
 
2.3
 
(25.6)
 
 
Total Gross Profit
$
118,484

 
$
96,214

 
$
93,548

 
$
85,865

 
$
102,757

 
(13.3)
 
1.9
 
(11.4)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
$
22,587

 
$
(3,141
)
 
$
(6,767
)
 
$
(11,054
)
 
$
(4,968
)
 
(122.0)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
Consolidated Results of Operations:
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
Gross Billings:
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
Local
$
770,962

 
$
709,705

 
$
707,280

 
$
715,996

 
$
743,891

 
(3.5)
 
0.5
 
(3.0)
%
 
Travel
126,994

 
144,022

 
127,377

 
115,242

 
109,942

 
(13.4)
 
1.1
 
(12.3)
 
 
Goods
531,102

 
322,281

 
286,288

 
262,140

 
369,367

 
(30.5)
 
1.0
 
(29.5)
 
 
Total Gross Billings
$
1,429,058

 
$
1,176,008

 
$
1,120,945

 
$
1,093,378

 
$
1,223,200

 
(14.4)
 
0.8
 
(13.6)
%
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Local
$
284,274

 
$
253,567

 
$
247,077

 
$
240,580

 
$
267,425

 
(5.9)
 
0.5
 
(5.4)
%
 
Travel
25,321

 
27,678

 
24,202

 
21,683

 
18,468

 
(27.1)
 
1.1
 
(26.0)
 
 
Goods
490,332

 
297,165

 
261,298

 
233,349

 
326,423

 
(33.4)
 
0.9
 
(32.5)
 
  Total Revenue
$
799,927

 
$
578,410

 
$
532,577

 
$
495,612

 
$
612,316

 
(23.5)
 
0.8
 
(22.7)
%
Gross Profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Local
$
260,145

 
$
230,060

 
$
223,453

 
$
216,215

 
$
243,437

 
(6.4)
 
0.5
 
(5.9)
%
 
Travel
21,752

 
23,309

 
20,176

 
18,049

 
15,522

 
(28.6)
 
1.1
 
(27.5)
 
 
Goods
84,172

 
52,647

 
48,503

 
43,676

 
51,082

 
(39.3)
 
0.7
 
(38.6)
 
 
Total Gross Profit
$
366,069

 
$
306,016

 
$
292,132

 
$
277,940

 
$
310,041

 
(15.3)
 
0.6
 
(14.7)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
$
61,876

 
$
2,195

 
$
(7,139
)
 
$
4,637

 
$
40,105

 
(35.2)
%
 
 
 
 
Net cash provided by (used in) operating activities from continuing operations
$
323,816

 
$
(147,483
)
 
$
(1,219
)
 
$
18,584

 
$
201,401

 
(37.8)
%
 
 
 
 
Free Cash Flow
$
307,732

 
$
(164,960
)
 
$
(17,903
)
 
$
891

 
$
185,927

 
(39.6)
%
 
 
 
 





 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
Active Customers (3)
 
 
 
 
 
 
 
 
 
 
 
North America
30.6

 
29.6

 
28.6

 
27.7

 
26.5

 
 
International
17.6

 
17.5

 
17.6

 
17.5

 
17.1

 
 
Total Active Customers
48.2

 
47.2

 
46.2

 
45.3

 
43.6

 
 
 
 
 
 
 
 
 
 
 
 
 
TTM Gross Profit / Active Customer
 
 
 
 
 
 
 
 
 
 
North America
$
29.13

 
$
29.72

 
$
30.05

 
$
30.56

 
$
30.48

 
International
24.46

 
24.00

 
23.37

 
22.51

 
22.11

 
Consolidated
27.42

 
27.59

 
27.51

 
27.45

 
27.19

 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Units
 
 
 
 
 
 
 
 
 
 
 
Local
27,084

 
24,132

 
23,879

 
24,573

 
25,461

 
 
Goods
22,626

 
12,237

 
10,735

 
10,494

 
16,435


 
Travel
771

 
824

 
710

 
687

 
712

 
 
Total consolidated units
50,481

 
37,193

 
35,324

 
35,754

 
42,608

 
 
 
 
 
 
 
 
 
 
 
 
 
Headcount
 
 
 
 
 
 
 
 
 
 
 
Sales (4)
2,268

 
2,377

 
2,327

 
2,438

 
2,316

 
 
Other
4,308

 
3,928

 
3,952

 
4,036

 
4,029

 
 
Total Headcount
6,576

 
6,305

 
6,279

 
6,474

 
6,345

 
(1)
Represents the total dollar value of customer purchases of goods and services.
(2)
Represents the change in financial measures that would have resulted had average exchange rates in the reporting periods been the same as those in effect in the prior year periods.
(3)
Reflects the total number of unique user accounts that have made a purchase during the TTM either through one of our online marketplaces or directly with a merchant for which we earned a commission.
(4)
Includes merchant sales representatives, as well as sales support personnel.






Groupon, Inc.
Non-GAAP Reconciliation Schedules
(in thousands, except share and per share amounts)
(unaudited)  
The following is a quarterly reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP performance measure, Income (loss) from continuing operations.
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
Income (loss) from continuing operations
 
$
49,862

 
$
(41,170
)
 
$
(37,645
)
 
$
(14,685
)
 
$
79,208

Adjustments:
 
 
 
 
 
 
 
 
 
 
  Stock-based compensation (1)
 
14,251

 
16,411

 
26,563

 
19,543

 
19,098

  Depreciation and amortization
 
28,528

 
28,416

 
27,116

 
25,873

 
24,360

  Acquisition-related expense (benefit), net
 
—

 
—

 
28

 
5

 
6

  Restructuring charges
 
(55
)
 
(67
)
 
(47
)
 
(61
)
 
206

  Other (income) expense, net
 
13,176

 
46,855

 
28,494

 
17,253

 
(39,273
)
  Provision (benefit) for income taxes
 
(1,162
)
 
(3,490
)
 
2,012

 
2,069

 
170

Total adjustments
 
54,738

 
88,125

 
84,166

 
64,682

 
4,567

Adjusted EBITDA
 
$
104,600

 
$
46,955

 
$
46,521

 
$
49,997

 
$
83,775

(1)
Represents stock-based compensation expense recorded within Selling, general and administrative, Cost of revenue and Marketing.





The following is a reconciliation of non-GAAP net income (loss) attributable to common stockholders to net income (loss) attributable to common stockholders and a reconciliation of non-GAAP net income (loss) per share to diluted net income (loss) per share for the three months and years ended December 31,2019 and 2018.
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
Net income (loss) attributable to common stockholders
$
77,041

 
$
46,228

 
$
(22,377
)
 
$
(11,079
)
Less: Net income (loss) attributable to noncontrolling interest
(2,602
)
 
(3,634
)
 
(10,682
)
 
(13,067
)
Net income (loss)
79,643

 
49,862

 
(11,695
)
 
1,988

Less: Income (loss) from discontinued operations, net of tax
435

 
—

 
2,597

 
—

Income (loss) from continuing operations
79,208

 
49,862

 
(14,292
)
 
1,988

Less: Provision (benefit) for income taxes
170

 
(1,162
)
 
761

 
(957
)
Income (loss) from continuing operations before provision (benefit) for income taxes
79,378

 
48,700

 
(13,531
)
 
1,031

Stock-based compensation
19,098

 
14,251

 
81,615

 
64,821

Amortization expense of acquired intangibles
2,936

 
4,182

 
14,355

 
14,498

Acquisition-related expense (benefit), net
6

 
—

 
39

 
655

Restructuring charges
206

 
(55
)
 
31

 
(136
)
IBM patent litigation
—

 
—

 
—

 
34,600

(Gain) loss from changes in fair value of investments
3,526

 
752

 
72,497

 
9,064

(Gain) loss from sale of investment
—

 
—

 
412

 
—

(Gain) loss on equity method investment
(51,397
)
 
—

 
(51,397
)
 
—

Intercompany foreign currency losses (gains) and reclassifications of translation adjustments to earnings
(4,744
)
 
4,374

 
6,454

 
13,820

Non-cash interest expense on convertible senior notes
3,428

 
3,094

 
13,200

 
11,916

Non-GAAP income (loss) from continuing operations before provision (benefit) for income taxes
52,437

 
75,298

 
123,675

 
150,269

Less: Non-GAAP provision for income taxes
6,716

 
11,656

 
38,573

 
29,512

Non-GAAP net income (loss)
45,721

 
63,642

 
85,102

 
120,757

Net income attributable to noncontrolling interest
(2,602
)
 
(3,634
)
 
(10,682
)
 
(13,067
)
Non-GAAP net income (loss) attributable to common stockholders
43,119

 
60,008

 
74,420

 
107,690

Plus: Cash interest expense from assumed conversion of convertible senior notes (1)
1,459

 
1,149

 
5,253

 
5,027

Non-GAAP Net Income (loss) attributable to common stockholders plus assumed conversions
$
44,578

 
$
61,157

 
$
79,673

 
$
112,717

 
 
 
 
 
 
 
 
Weighted-average shares of common stock - diluted
617,603,560

 
620,708,515

 
567,395,071

 
566,511,108

Incremental dilutive securities
—

 
—

 
51,653,333

 
54,071,955

Weighted-average shares of common stock - non-GAAP
617,603,560

 
620,708,515

 
619,048,404

 
620,583,063

 
 
 
 
 
 
 
 
Diluted net income (loss) per share
$
0.13

 
$
0.08

 
$
(0.04
)
 
$
(0.02
)
Impact of non-GAAP adjustments and related tax effects
(0.06
)
 
0.02

 
0.17

 
0.20

Non-GAAP net income per share
$
0.07

 
$
0.10

 
$
0.13

 
$
0.18

(1)
Adjustment to interest expense for assumed conversion of convertible senior notes excludes non-cash interest expense that has been added back above in calculating non-GAAP net income (loss) attributable to common stockholders.






Free cash flow is a non-GAAP liquidity measure. The following is a reconciliation of free cash flow and free cash flow to the most comparable U.S. GAAP liquidity measure, Net cash provided by (used in) operating activities from continuing operations.
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
Net cash provided by (used in) operating activities from continuing operations
$
323,816

 
$
(147,483
)
 
$
(1,219
)
 
$
18,584

 
$
201,401

Purchases of property and equipment and capitalized software from continuing operations
(16,084
)
 
(17,477
)
 
(16,684
)
 
(17,693
)
 
(15,474
)
Free cash flow
$
307,732

 
$
(164,960
)
 
$
(17,903
)
 
$
891


$
185,927

 
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) investing activities from continuing operations
$
(17,497
)
 
$
(18,115
)
 
$
(17,235
)
 
$
(19,541
)
 
$
(12,700
)
Net cash provided by (used in) financing activities
$
(35,069
)
 
$
(27,777
)
 
$
(31,581
)
 
$
(22,595
)
 
$
(10,666
)
Our International and consolidated gross profit per active customer for the TTM ended December 31, 2019 and 2018 were as follows:
 
 
Q4 2018
 
Q4 2019
 
Y/Y Growth
 
FX Effect
 
Y/Y Growth excluding FX (1)
International TTM Gross Profit / Active Customer
 
$24.46
 
$22.11
 
(9.6
)%
 
4.6
%
 
(5.0
)%
Consolidated TTM Gross Profit / Active Customer
 
$27.42
 
$27.19
 
(0.8
)%
 
1.6
%
 
0.8
 %
(1)
Represents the change in financial measures that would have resulted had average exchange rates in the reporting periods been the same as those in effect in the prior year periods.



1 Q4 2019 LETTER TO STOCKHOLDERS DEAR FELLOW STOCKHOLDERS, Q4 2019 FEBRUARY 18, 2020 Today we announced our fourth quarter and full year earnings. I’m incredibly disappointed with our 2019 performance. Our failure to meet the expectations we set will understandably frustrate our shareholders, as it has us. This performance shortfall, coupled with the significant headwinds we continue to face, call for profound change. We’re taking immediate and decisive action to return the company to growth. Our strategy is simple: turn We worked with our board and external advisors to develop a strategy and execution plan to Groupon into THE local unlock the potential in the platform and assets we’ve built over the last 10 years. We believe experiences marketplace. that our plan can return Groupon to high single-digit Billings growth by 2022 while expanding Adjusted EBITDA margins. Our strategy is simple: turn Groupon into THE local experiences marketplace. This means planning a quick exit from the Goods category, dedicating our resources to expanding our local experiences marketplace and executing a new course of action focused on four core priorities: • Inventory: Build high-quality density in core cities and bring on merchants’ full catalogs • Modernization: Deliver a modern mobile experience for customers and new tools to help merchants grow their businesses • Brand: Relaunch the Groupon brand and marketing strategy to move from deal-centric to a local experiences marketplace • Cost: Reduce our costs and right-size our spend to support our go-forward business Our strategy is designed to remove limitations and distractions, and allow us to be laser-focused on the biggest opportunity for Groupon. Local experiences is where Groupon’s strength lies.


 
2 Q4 2019 LETTER TO STOCKHOLDERS It’s a $1T market opportunity. With $3.4B of Billings related to this market, we are a clear leader in the space, with significant scale. It’s where we believe we can grow, and where we have the right to win. Q4 AND 2019 RECAP We are very excited about our go-forward opportunity, but it’s important to acknowledge that our fourth quarter and full year performance was not acceptable. Heading into the fourth quarter we set expectations that we believed we could achieve based upon our accelerated pace of product launches and other execution successes. Indeed, we had built momentum in our North America local business as we exited the third quarter, with unit performance improving steadily over each month of the quarter. We expected these positive trends to continue through the end of the year and build into 2020. We also expected that Goods performance would peak during the holidays as it has historically. Midway through the fourth quarter it became abundantly clear that we were not competing effectively in Goods. We saw far fewer customers engage with Goods in the fourth quarter than we anticipated, which impacted overall traffic to our site. The lower traffic ultimately impeded performance in all of our categories. This was particularly notable in November, including during the holiday peak period when Goods engagement has historically been a business driver. While we saw strong performance from guest checkout, other conversion initiatives did not deliver on expectations. Groupon Select added to our challenges in the quarter as it over-indexed to Goods, pressured margins and drove higher than anticipated customer acquisition costs. This brings us to the future of Select. The program’s fourth quarter performance showed that it cannot provide the ROI needed for it to be a key priority for us at this time. Select’s current features began appealing disproportionately to customers purchasing goods vs. those transacting on our local platform. As a result, we will continue to provide Select benefits to current members, but we will not pursue new enrollees for the program. That said, we gathered a lot of important data from Select. The program showed us, among other things, that we can drive improvements in purchase frequency through loyalty programs. In addition, we also know that there is a meaningful cohort of the Groupon customer base that is very loyal and continues to transact on the platform many years after activation. For example, more than 20% of our customers purchase 4 or more times per year. And, ~30% of our customers purchase 2-3 times per year. If we can compel that ~30% to move up to 4 purchases per year, we see an annual gross profit opportunity of more than $200 million. So while a loyalty program is not a 2020 priority, it is an avenue for potential growth that we will continue to explore. PLAN TO EXIT GOODS Our management team and board have been evaluating the role of Goods in our ecosystem for some time. Goods’ contribution to gross profit has been declining for four quarters, but it has historically been a meaningful engagement tool for Local shoppers and its overall impact on the business extended beyond its direct contribution to gross profit. Recently we’ve seen engagement with our Goods inventory shift meaningfully lower, driven in large part by our inability to compete in a fiercely competitive, and in some cases, economically irrational retail landscape. In 2019, we were devoting about 40% of our site impressions to a category that was only delivering about 20% of our gross profit and no longer generating the cross-shopping behavior or customer activation activity to continue to justify this investment. In short, Goods has outlived its role as a business driver and has become a significant drag on our business.


 
3 Q4 2019 LETTER TO STOCKHOLDERS Our fourth quarter performance, and the challenges Goods has posed over the past few years, has clarified our path forward. What we’ve now realized is that too many of our efforts in the past, even good products like Select and Groupon+, didn’t address the core of our product or Inventory: build high- business model, nor did they overcome the limitations in the legacy Groupon business. quality density in core cities and bring In order to deliver on our growth strategy to attack the large and growing market opportunity on merchants’ full in local experiences, we have to be willing to walk away from any and all distractions. This is catalogs why we plan to exit Goods. 2020 Goal: Launch inventory density To be successful, we believe we must manage through three key challenges: strategy in 10+ cities, return NA units to Minimizing the internal disruption caused by the planned Goods exit: This means we year-over-year need to encourage our employees to relentlessly focus on our four core priorities. We believe growth in the second that aligning our global organization against one vision that we can achieve will be energizing and half of 2020 inspiring. That said, we do not want to underestimate the impact that these tough changes will have on our team. We intend to do right by our employees in the process and we are incredibly grateful for all of the work they have done to help build Groupon into the global brand it is today. Consult and negotiate with international works councils: We will consult with our works councils on an exit plan for Goods operations, and our goal is to exit North America by the third quarter of 2020 and International by the end of the year. Along the way, we intend to move fast where possible to reallocate Goods impressions to our Local offerings. Keeping our cross-shopping customers engaged in the go-forward Groupon value proposition: We intend to target our Goods-Local cross-shoppers with aggressive marketing efforts on and off Groupon as we shift more impressions and energy toward Local. We will do our absolute best to profitably retain as many Goods customers as possible. For context, at the end of 2019, our customer base excluding Goods-only customers was 35 million and included approximately 7 million Goods cross-shoppers. With our focused Local strategy, we believe we will be positioned for growth and frequency gains within our new core customer base. BECOMING THE LOCAL EXPERIENCES MARKETPLACE Groupon is the largest multi-category local commerce platform in our markets and we are well- positioned to capitalize on the massive opportunity in local experiences. In 2019, we were a market leader and trusted brand, but with less than 1% market share. While the competitive landscape is fragmented, others are mobilizing against this opportunity so we believe we must act now to extend our lead. To do this, we have to move quickly against a singular mission: winning in local experiences. We intend to put our power behind our four priorities -- inventory, modernization, brand and cost structure -- in order to set the stage for Groupon’s return to growth. Inventory: build high-quality density in core cities and bring on merchants’ full catalogs 2020 Goal: Launch inventory density strategy in 10+ cities, return North America units to year- over-year growth in the second half of 2020 We believe that increasing our inventory - with a strong focus on inventory quality and density in targeted, core cities - is mission critical. When merchant density is higher we see an increase in purchase frequency. In fact, our highest density markets show 15-20% improvement in purchase frequency. We also know from our third-party partnership work that our customers want to see a more comprehensive catalog of experiences.


 
4 Q4 2019 LETTER TO STOCKHOLDERS In order to be the local experiences marketplace, we have to offer unbeatable selection in the most desired locations. To do this, we intend to realign our sales teams to target merchants in core cities with a new go-to-market strategy, focused on improving quality supply in specific neighborhoods and offering clear, competitive, up-front pricing. We will urge every merchant to put their full catalog of experiences on Groupon, from market rate to slightly discounted to deeply discounted offers, which we believe will strengthen our value proposition for consumers. We expect this approach to allow us to better leverage our deeply experienced and skilled local sales team, and further empower our market-leading sales force efficiency. Modernization: deliver the modern mobile We will take a phased rollout approach, with cities coming online starting this quarter and experience our building throughout the year. By year-end, we expect to have at least 10 core cities deployed. customers want, and In addition, we plan to accelerate our inventory expansion with third-party partnerships, the tools our merchants which will begin to benefit from our first generation of open platform APIs by the end of Q2. need to grow their businesses We expect partnerships to add inventory to our target cities and expand inventory breadth to all Groupon markets. 2020 Goal: launch a new mobile app and Modernization: deliver the modern mobile experience our customers want, and the expand bookable offers tools our merchants need to grow their businesses 2020 Goal: launch a new mobile app and expand bookable offers Delivering table-stakes e-commerce capabilities like our recent launches of guest checkout and universal cart is important, but we also must innovate on the products that will make Groupon more engaging, intuitive and fun. We need to deliver a modern mobile product that matches what consumers want from Groupon - a personalized experience, with curated local merchandising. We’re excited to be launching a new app in the second quarter of this year that will begin to bring this new experience to life. Throughout this year, you should also expect to see our product roadmap prioritize bookability, search, discovery and curation. We intend to lean further into cloud-based machine learning capabilities to help us deliver on these goals faster and more efficiently. We believe these efforts need to be complemented by initiatives that expand our bookable inventory, which is an important avenue to creating the modern, seamless experience our customers expect. We’ve already seen how bookability can drive the business as we’ve scaled booking in International Dining, with 18% gains in purchase frequency vs. customers who purchase traditional voucher deals. This is why we’ll be focused on driving our bookable inventory higher in 2020 and beyond. We also need to begin prioritizing new merchant features at parity with our customer work, as merchant satisfaction is critical in our two-sided marketplace. So this year, our product roadmap includes new merchant tools, with a focus on self-service options that help merchants join the Groupon marketplace more quickly, with more flexible pricing, and improved campaign reporting. In addition, we expect to continue to roll out more ways for merchants to reach customers and promote on our platform via new advertising options that can extend our platform and revenue streams over time. We believe we are building a foundation to enhance our long-term partnerships with our merchants. Building the marketplace that our customers want should allow us to remove friction from their journey, from discovery to purchase to redemption, help our merchants grow and improve the


 
5 Q4 2019 LETTER TO STOCKHOLDERS overall health of our marketplace. Brand: re-launching the Groupon brand and marketing strategy to move from deal- Brand: re-launching the centric to a local experiences marketplace Groupon brand and 2020 Goal: New marketing strategy and brand relaunch marketing strategy to move from deal-centric Groupon is already a beloved brand and a household name, with over 80% aided brand to local experiences marketplace awareness in the United States. Our opportunity, however, is not just being known, it’s being 2020 Goal: New top of mind when our customers are looking for the best things to do around them, when they marketing strategy and need something to do with their kids on the weekend or for when they’re planning date night. brand relaunch Building this top of mind awareness and consideration requires moving beyond our association with deals and advancing the brand position to reflect our focus on local experiences. Today, we are well known for value and discovery; we have an opportunity to illustrate for consumers the convenience and incredible breadth of “Grouponable” moments -- for most consumers we estimate 80+ moments per year -- and evolve our image to become the de facto standard in local experiences in consumers’ minds. As we scale inventory in the right locations and modernize our products, we believe we will be in a great position to relaunch our Brand in the second half of 2020. Across all customer touch points, we plan to lead with our experiences value proposition. We will support our brand with a full-funnel marketing strategy -- combining targeted, hyper-local marketing and new channel development, including social, with broader brand advertising and efficient transactional advertising to build the brand, drive consideration and efficiently reduce our reliance on legacy channels like email. Cost: Reduce our costs and right-size our spend to support our go-forward business Cost: Reduce our costs 2020 Goal: Reset the cost base with the planned exit of Goods and right-size our spend to support our We believe we can further strengthen our culture of operational efficiency. With the planned go-forward business exit of Goods and the opportunity to right-size the organization to align with the needs of our go-forward business, we believe we can deliver leverage in our cost structure over time as we 2020 Goal: Reset the cost base with the grow the top-line. planned exit of Goods GRATEFUL FOR THE SUPPORT OF OUR INVESTORS Throughout this process we engaged with strategic advisors who provided an outside view of the business and helped us explore a wide range of strategic alternatives. The conclusion of the management team, board and our advisors is that the best path forward - standalone or otherwise - to maximize value for shareholders is to get Local back to growth and drive product innovation to deliver more value to both sides of the marketplace. Over the past 10+ years we have assembled rare and valuable assets that position us well for success: tens of millions of customers, relationships with hundreds of thousands of merchants, the largest catalog of local experiences in our markets, one of the most trafficked retail apps in the US and a brand that’s a household name. We’re a leader in a massive market that is fast moving online. At the same time, we recognize that we need to do a better job providing the sign posts that are indicative of our progress towards our longer term goals. So expect us to be deliberate about disclosing our progress against our 2020 and beyond goals. We’re committed to providing you


 
6 Q4 2019 LETTER TO STOCKHOLDERS with the data disclosure we believe you need to make informed decisions about Groupon. I’d like to close with a word about our people. Change of this magnitude can’t happen without a committed and motivated team that believes in our mission and our ability to win. In just the last 18 months, we added a new Chief Product Officer, Chief Marketing Officer and Chief Technology Officer. I’m also very happy that Melissa Thomas will become our permanent CFO. Melissa has long been a key part of our senior team, and I’m thrilled to have her take on this expanded role permanently. Today, we announced that Valerie Mosley and Helen Vaid have been elected to our Board of Directors. They join Richard Merage, who we recently appointed as a Board advisor, and we look forward to benefiting from their perspectives as we execute against our strategy to deliver on the promise of our global two-sided marketplace, and bend the growth curve in our collective favor. We have a team who is ready and excited to forge ahead. We’re at the beginning of an exciting journey and I appreciate your support as we build the next phase of growth. Rich Williams CEO


 
7 Q4 2019 LETTER TO STOCKHOLDERS APPENDIX Webcast Conference Call Details Wednesday, February 19, 2020 8:00 a.m. EST Groupon will hold a conference call to discuss its full year and fourth quarter 2019 financial results on Wednesday, February 19, 2020, at 8:00 a.m. EST. The webcast can be accessed live at investor.groupon.com. A replay of the webcast will be available through the same link following the conference call, along with the earnings press release, financial tables and slides. Non-GAAP Financial Measures and Operating Metrics This letter contains references to non-GA AP financial measures Adjusted EBITDA and free cash flow. These non-GA AP financial measures, which are presented on a continuing operations basis, are intended to aid investors in better understanding our current financial performance and prospects for the future as seen through the eyes of management. We believe that these non-GAAP financial measures facilitate comparisons with our historical results and with the results of peer companies who present similar measures (although other companies may define their non-GAAP measures differently than us, even when similar term are used to identify such measures). However, these non-GAAP financial measures are not intended to be a substitute for those reported in accordance with U.S. GAAP. For additional information regarding these non-GAAP financial measures, reconciliation of these measures to the most applicable financial measures under U.S. GAAP, see “Non-GAAP Reconciliation Schedules” and “Supplemental Financial and Operating Metrics” included in the tables accompanying the earnings press release announcing our financial results for the full year and quarter ended December 31, 2019, posted to our Investor Relations website, investor.groupon.com. Note on Forward-Looking Statements The statements contained in this letter that refer to plans and expectations for the next quarter, the full year or the future are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations. The words “may,” “will,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “continue” and other similar expressions are intended to identify forward-looking statements. We have based these forward looking statements largely on current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, but are not limited to, our ability to execute, and achieve the expected benefits of our go-forward strategy, including our planned exit from the Goods business; volatility in our operating results; execution of our marketing strategies; retaining existing customers and adding new customers; challenges arising from our international operations, including fluctuations in currency exchange rates, legal and regulatory developments and any potential adverse impact from the United Kingdom’s exit from the European Union, retaining and adding high quality merchants; our reliance on email, internet search engines and mobile application marketplaces to drive traffic to our marketplace; cybersecurity breaches; reliance on cloud-based computing platforms; competing successfully in our industry; providing a strong mobile experience for our customers; maintaining and improving our information technology infrastructure; our voucherless offerings; claims related to product and service offerings; managing inventory and order fulfillment risks; litigation; managing refund risks; retaining and attracting members of our executive team; completing and realizing the anticipated benefits from acquisitions, dispositions, joint ventures and strategic investments; lack of control over minority investments; compliance with domestic and foreign laws and regulations, including the CARD Act, GDPR and regulation of the Internet and e-commerce; classification of our independent contractors or employees; tax liabilities; tax legislation; protecting our intellectual property; maintaining a strong brand; customer and merchant fraud; payment-related risks; our ability to raise capital if necessary and our outstanding indebtedness; global economic uncertainty; our common stock, including volatility in our stock price; our convertible senior notes; and our ability to realize the anticipated benefits from the hedge and warrant transactions. For additional information regarding these and other risks and uncertainties, we urge you to refer to the factors included under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s Annual Report on Form 10-K for the year ended December 31, 2019, and our other filings with the Securities and Exchange Commission (the “SEC”), copies of which may be obtained by visiting the company’s Investor Relations web site at investor.groupon.com or the SEC’s web site at www.sec.gov. Groupon’s actual results could differ materially from those predicted or implied and reported results should not be considered an indication of future performance. You should not rely upon forward-looking statements as predictions of future events. Although Groupon believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither Groupon nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements reflect our expectations as of February 18, 2020. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this letter to conform these statements to actual results or to changes in our expectations. About Groupon Groupon (www.groupon.com) (NASDAQ: GRPN) is a local experiences marketplace that brings people more ways to get the most out of their city or wherever they may be. By enabling real-time mobile commerce across local businesses, live events and travel destinations, Groupon helps people find and discover experiences––big and small, new and familiar––that make for a full, fun and rewarding life. Groupon helps local businesses grow and strengthen customer relationships––resulting in strong, vibrant communities. To learn more about Groupon’s community-building efforts, please visit community.groupon.com .