EX-99.1 2 earningsreleasedatedaugust.htm EARNINGS RELEASE DATED AUGUST 13, 2012 Earnings release dated August 13, 2012


Exhibit 99.1
 
GROUPON ANNOUNCES SECOND QUARTER 2012 RESULTS

Consolidated revenue of $568.3 million, up 45% year-over-year
Operating income of $46.5 million versus operating loss of $101.0 million in second quarter 2011
GAAP EPS of $0.04, non-GAAP EPS of $0.08; includes $0.04 per share gain from non-operating items
 
CHICAGO- (BUSINESS WIRE) - August 13, 2012 - Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter ended June 30, 2012.
 
Revenue increased 45% year-over-year to $568.3 million in the second quarter 2012, compared with $392.6 million in the second quarter 2011. Excluding the $32.4 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, revenue growth would have been 53% compared with second quarter 2011.

The second quarter 2012 was the first quarter that direct revenue, or the amount earned from the sale of products for which the Company is the merchant of record, was material to Groupon's overall performance. Accordingly, the Company's consolidated revenue presentation now includes third-party revenue, which is related to sales for which the Company acts as an agent for the merchant, as well as direct revenue. Third-party and direct revenues are recorded on a net and gross basis, respectively. Direct revenue was $65.4 million in the quarter, compared with $19.2 million in the first quarter 2012.
 
Gross billings, which reflects the total amount collected from customers, excluding any applicable taxes and net of estimated refunds, increased 38% year-over-year to $1.29 billion in the second quarter 2012, compared with $929.2 million in the second quarter 2011. Excluding the $75.1 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, gross billings growth would have been 47% compared with second quarter 2011.
 
Operating income was $46.5 million in the second quarter 2012, which included non-cash stock-based compensation and acquisition-related expenses of $25.4 million. This compares with a loss from operations of $101.0 million in the second quarter 2011, which included non-cash stock-based compensation expense of $38.7 million. Year-over-year changes in foreign exchange rates throughout the quarter had a $0.2 million unfavorable impact on operating income.
 
“We had a solid quarter despite challenges in Europe and continued investment in technology and infrastructure,” said Andrew Mason, CEO of Groupon. “We've deepened our relationships with a growing base of merchants and customers worldwide, demonstrating progress as we work to unlock the opportunity in local commerce.”
 
Operating cash flow increased 93% year-over-year to $75.3 million, compared with $39.0 million in the second quarter 2011. For the trailing twelve months ended June 30, 2012, operating cash flow was $392.5 million. Free cash flow, a non-GAAP financial measure calculated as operating cash flow less capital expenditures, was $48.6 million for the second quarter 2012, bringing free cash flow for the trailing twelve months ended June 30, 2012 to $330.1 million. This reflects an increase of 243% year-over-year compared to free cash flow in the trailing twelve months ended June 30, 2011 of $96.4 million. At the end of the quarter, Groupon had $1.2 billion in cash and cash equivalents and no long-term debt.
 
Second quarter 2012 net income attributable to common stockholders improved to $28.4 million, or $0.04 per share. Non-GAAP earnings attributable to common stockholders for the second quarter 2012 improved to $53.8 million, or $0.08 per share, excluding stock-based compensation and acquisition-related expenses of $25.4 million. Second quarter 2012 results included a $33.0 million net gain from non-recurring items, comprised of a $56.0 million non-operating gain and $23.0 million of tax expense. This resulted from a transaction whereby the Company's minority interest in its China operations was exchanged along with an additional cash investment, for a minority interest in Life Media, Limited (also known as F-tuan), a leading competitor. Net income attributable to common stockholders also included a $3.9 million reduction related to the settling of remaining commitments to purchase additional interests in consolidated subsidiaries from minority shareholders. The net positive impact of these two items was $0.04 per share.




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Second quarter 2012 net income attributable to common stockholders improved by $135.8 million year-over-year, from a net loss of $107.4 million, or a loss per share of $0.35 in the second quarter 2011. Non-GAAP net income attributable to common stockholders improved by $122.5 million year-over-year, from a net loss of $68.7 million, or a non-GAAP loss per share of $0.23 in the second quarter 2011, excluding non-cash stock-based compensation expenses of $38.7 million.


Groupon, Inc.
Summary Consolidated and Segment Results
 
 
 
Three Months Ended
June 30,
 
 
 
Y/Y %
Growth
 
Six Months Ended
June 30,
 
 
 
Y/Y %
Growth
 
 
 
2011
 
2012
 
Y/Y % Growth
 
excluding FX(1)
 
2011
 
2012
 
Y/Y % Growth
 
excluding FX(1)
 
 
 
(dollars in thousands, except
share and per share data)
 
 
 
 
 
(dollars in thousands, except
share and per share data)
 
 
 
 
 
 
 
(unaudited)
 
(unaudited)
 
 
 
 
 
(unaudited)
 
(unaudited)
 
 
 
 
 
Revenue
 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
North America
 
$
157,205

 
$
260,181

 
65.5

%
66.0

%
$
293,817

 
$
498,746

 
69.7

%
70.3

%
International
 
235,377

 
308,154

 
30.9

%
44.1

%
394,288

 
628,872

 
59.5

%
74.5

%
Consolidated revenue
 
$
392,582

 
$
568,335

 
44.8

%
53.0

%
$
688,105

 
$
1,127,618

 
63.9

%
72.6

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating (loss) income
 
$
(101,027
)
 
$
46,485

 
 N/A

 
 N/A

 
$
(218,175
)
 
$
86,124

 
 N/A

 
 N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income attributable to common stockholders
 
$
(107,406
)
 
$
28,386

 
 N/A

 
 N/A

 
$
(253,886
)
 
$
16,691

 
 N/A

 
 N/A

 
Non-GAAP net (loss) income attributable to common stockholders(2)
 
$
(68,688
)
 
$
53,835

 
 N/A

 
 N/A

 
$
(196,304
)
 
$
70,092

 
 N/A

 
 N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) earnings per share attributable to common stockholders
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
Basic
 
$
(0.35
)
 
$
0.04

 
 
 
 
 
$
(0.83
)
 
$
0.03

 
 
 
 
 
Diluted
 
$
(0.35
)
 
$
0.04

 
 
 
 
 
$
(0.83
)
 
$
0.03

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP net (loss) earnings per share attributable to common stockholders(2)
 
$
(0.23
)
 
$
0.08

 
 

 
 

 
$
(0.64
)
 
$
0.11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
 
303,414,676

 
647,149,537

 
 

 
 

 
305,626,028

 
645,072,582

 
 
 
 
 
Weighted average diluted shares outstanding
 
303,414,676

 
663,122,709

 
 

 
 

 
305,626,028

 
663,230,558

 
 
 
 
 
Weighted average diluted shares for non-GAAP net (loss) earnings per share (3)
 
303,414,676

 
663,122,709

 
 

 
 

 
305,626,028

 
663,230,558

 
 
 
 
 
 
(1) Represents change in financial measures that would have resulted had average exchange rates in the reported period been the same as those in effect in the three and six months ended June 30, 2011.
(2) Non-GAAP net (loss) income attributable to common stockholders is a non-GAAP financial measure. This measure excludes stock-based compensation and acquisition-related costs. See ‘‘Non-GAAP Reconciliation Schedule’’ for a reconciliation of this measure to the most applicable financial measure under U.S. GAAP.
(3) The weighted-average diluted shares outstanding is calculated using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock units and restricted shares, as calculated using the treasury stock method.

Highlights

Continued North American revenue growth. North American revenues grew 66% year-over-year.
Rapid growth in Groupon Goods. Groupon Goods surpassed the $200 million annual revenue run-rate in the second quarter 2012, in just its third quarter since launch in North America.
Improved marketing efficiencies. Customer acquisition costs improved 43% year-over-year, enabling the reduction of marketing spend by 58% compared with the second quarter 2011.
Solid growth in active customers. As of June 30, 2012, Groupon had 38.0 million active customers, an increase of 65% year-over-year.
Record number of unique merchants featured. For the second straight quarter, Groupon featured more than 100,000 unique merchants, with second quarter 2012 merchants featured achieving a new record level.
Mobile adoption increasing and transaction activity remains high. In July 2012, nearly one third of North American transactions were completed on mobile devices, an increase of over 35% compared with July 2011.
Merchant support tools gaining traction. In the second quarter 2012, nearly 20% of merchants featured were utilizing one or more of Groupon's merchant tools, compared with 10% in the first quarter 2012.
Launched new GrouponWorks site. The Company recently launched an updated site for merchants, featuring over 500 merchant videos on how to work with Groupon. (http://www.grouponworks.com/)

Third Quarter 2012 Outlook
Revenue for the third quarter 2012 is expected to be between $580 million and $620 million, an increase of between 35% and 44% compared with the third quarter 2011.
 

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Income from operations for the third quarter 2012 is expected to be between $15 million and $35 million, compared with a loss from operations of $0.2 million in the third quarter 2011. This outlook includes approximately $30 million of stock-based compensation. The outlook further assumes no acquisitions or investments, or material changes in foreign exchange rates.
 
A conference call will be webcast live today at 4:00 p.m. CT / 5:00 p.m. ET, and will be available on Groupon's investor relations website at http://investor.groupon.com. This call will contain forward-looking statements and other material information regarding the Company's financial and operating results.

Non-GAAP Financial Measures
This release includes the following non-GAAP financial measures: non-GAAP net (loss) income attributable to common stockholders and free cash flow. The Supplemental Financial Information Table and Business Metrics also includes operating income and operating margin, in each case excluding stock-based compensation and acquisition-related expenses. Free cash flow and non-GAAP net (loss) income attributable to common stockholders may be different from similar measures used by other companies. Groupon believes that these non-GAAP measures are useful because they provide for more meaningful comparisons of period-to-period results by excluding certain non-cash charges that Groupon believes are not driven by core operating results. However, these non-GAAP measures are not intended to be a substitute for cash flows from operations or net income, and are not intended to represent the total increase or decrease in Groupon's cash balance for the applicable period. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. These non-GAAP measures should only be used to evaluate Groupon's results of operations in conjunction with the corresponding GAAP measures. For a reconciliation of these non-GAAP financial measures to the nearest comparable U.S. GAAP measures, see “Non-GAAP Reconciliation Schedule” included in this release.
 
Non-GAAP net income excludes from GAAP net income stock-based compensation and acquisition-related expenses. Free cash flow represents operating cash flow less purchases of property and equipment. The non-GAAP measures included in this release are adjusted by excluding the items below:
 
Stock-based compensation expense: Stock-based compensation is excluded because it is a non-cash expense. It is, however, reflected in earnings per share, as it is incorporated in sharecount.

Acquisition-related expense: Acquisition-related costs that are non-cash in nature are excluded. The timing and nature of these expenses are unpredictable, the benefits of an acquisition may not be realized in the quarter in which the acquisition occurs, and Groupon believes that they do not provide for meaningful period-to-period comparisons.

Property and Equipment: Purchases of property and equipment are subtracted from operating cash flow in the calculation of free cash flow because Groupon believes that this is more aligned with an analysis of ongoing business operations, as purchases of fixed assets, software developed for internal use, and website development costs are necessary components of ongoing operations.
Included in the tables below are reconciliations of each of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
 
Note on Forward Looking Statements
The statements in this release that refer to plans and expectations for the next quarter or the future are forward-looking statements that involve a number of risks and uncertainties, and actual results could differ materially from those discussed. The risks and uncertainties that could cause results to differ materially from those included in the forward-looking statements include, but are not limited to, Groupon's ability to continue to expand the business and continue revenue growth; risks related to Groupon's business strategy; Groupon's ability to manage the growth of the organization; responding to changes in the markets in which Groupon competes for business; retaining existing merchant partners and adding new merchant partners; competing against smaller competitors and competitors with more financial resources; developing new product and service offerings that are appealing to customers; maintaining a strong brand; effectively

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dealing with challenges arising from Groupon's international operations; integrating Groupon's technology platforms; managing refund risks; retaining the executive team; litigation; regulations, including the CARD Act and regulation of the Internet; tax liabilities; tax legislation; maintaining Groupon's information technology infrastructure; security breaches; protecting Groupon's intellectual property; handling acquisitions, joint ventures and strategic investments effectively; seasonality; payment-related risks; customer and merchant partner fraud; global economic uncertainty; compliance with rules and regulations associated with being a public company; and Groupon's ability to raise capital if necessary. Groupon urges 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, and subsequent quarterly reports, copies of which may be obtained by visiting the company's Investor Relations web site at http://investor.groupon.com or the SEC's web site at www.sec.gov. Groupon's actual results could differ materially from those predicted or implied, and reported results should not be considered an indication of future performance.
 
You should not rely upon forward-looking statements as predictions of future events. Although Groupon believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither the company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements reflect Groupon's expectations as of August 13, 2012. Groupon undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this earnings release to conform these statements to actual results or to changes in its expectations.
 
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.
 
Contacts:
 
 
Groupon Investor Relations
 
Groupon Public Relations
Kartik Ramachandran
 
Julie Mossler
Genny Konz
 
312-242-2033
312-999-3098
 
 
ir@groupon.com
 
 


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Groupon, Inc.
Consolidated Statement of Cash Flows
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
2011
 
2012
 
2011

2012
 
(in thousands)
 
(in thousands)
 
(unaudited)

 
(unaudited)

 
(unaudited)
 
(unaudited)
Operating activities
 
 
 
 
 
 
 
Net (loss) income
$
(109,776
)
 
$
33,549

 
$
(223,667
)
 
$
29,956

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
8,098

 
12,810

 
15,696

 
24,526

Stock-based compensation
38,718

 
27,084

 
57,582

 
55,087

Deferred income taxes
1,147

 
13,873

 
(2,237
)
 
12,997

Excess tax benefits on stock based compensation
(3,532
)
 
(18,869
)
 
(3,532
)
 
(21,750
)
Loss on equity method investees
7,881

 
3,428

 
8,763

 
8,556

Acquisition-related

 
(1,739
)
 

 
(1,687
)
Gain on E-Commerce transaction (see Note 5)

 
(56,032
)
 

 
(56,032
)
Change in assets and liabilities, net of acquisitions:


 


 


 


Restricted cash
(1,025
)
 
(1,471
)
 
(1,025
)
 
(2,828
)
Accounts receivable
(37,023
)
 
19,963

 
(53,072
)
 
8,085

Prepaid expenses and other current assets
(8,933
)
 
(17,624
)
 
(17,221
)
 
(21,745
)
Accounts payable
8,091

 
20,089

 
(14,374
)
 
18,268

Accrued merchant payable
95,697

 
(13,979
)
 
216,870

 
32,021

Accrued expenses and other current liabilities
38,508

 
49,657

 
74,756

 
63,077

Other, net
1,168

 
4,576

 
(1,580
)
 
10,498

Net cash provided by operating activities
39,019

 
75,315

 
56,959

 
159,029

Investing activities
 
 
 
 
 
 
 
Purchases of property and equipment
(10,240
)
 
(26,709
)
 
(21,202
)
 
(39,792
)
Acquisitions of businesses, net of acquired cash
(878
)
 
(17,267
)
 
(3,696
)
 
(40,271
)
Purchases of intangible assets
(58
)
 

 
(272
)
 
(10
)
Purchases of investments in subsidiaries
(9,387
)
 
(6,080
)
 
(34,387
)
 
(13,427
)
Purchases of cost and equity method investments
(4,621
)
 
(10,097
)
 
(9,921
)
 
(13,097
)
Net cash used in investing activities
(25,184
)
 
(60,153
)
 
(69,478
)
 
(106,597
)
Financing activities
 
 
 
 
 
 
 
Proceeds from issuance of stock, net of issuance costs

 

 
509,692

 

Excess tax benefits on stock based compensation
3,532

 
18,869

 
3,532

 
21,750

Tax withholdings related to net share settlements of restricted stock units

 
964

 

 
(5,668
)
Payments of contingent acquisition liability

 

 

 
(4,250
)
Repayments of loans to related parties

 

 
(14,358
)
 

Repurchase of common stock
(5,000
)
 

 
(353,550
)
 

Proceeds from exercise of stock options
909

 
5,279

 
1,234

 
5,657

Proceeds from the sale of common stock
137

 

 
137

 

Partnership distributions to noncontrolling interest holders

 
(954
)
 

 
(1,606
)
Redemption of preferred stock

 

 
(35,003
)
 

Net cash provided by financing activities
(422
)
 
24,158

 
111,684

 
15,883

Effect of exchange rate changes on cash and cash equivalents
2,992

 
(14,511
)
 
7,095

 
(5,452
)
Net increase in cash and cash equivalents
16,405

 
24,809

 
106,260

 
62,863

Cash and cash equivalents, beginning of the period
208,688

 
1,160,989

 
118,833

 
1,122,935

Cash and cash equivalents, end of the period
$
225,093

 
$
1,185,798

 
$
225,093

 
$
1,185,798

Supplemental disclosure of cash flow information
 
 
 
 
 
 
 
Non-cash investing activity
 
 
 
 
 
 
 
Contingent consideration in connection with acquisitions
$

 
$

 
$
15,920

 
$
421

Contribution of investment in E-Commerce transaction
$

 
$
47,042

 
$

 
$
47,042

Liability incurred in E-Commerce transaction
$

 
$
20,000

 
$

 
$
20,000





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Groupon, Inc.
Consolidated Statements of Operations 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2011
 
2012
 
2011
 
2012
 
 
(dollars in thousands, except share and per share data)
 
(dollars in thousands, except share and per share data)
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
 
 
 
 
 
(Restated) (1)
 
 
Third party and other revenue
 
$
392,582

 
$
502,985

 
$
688,105

 
$
1,043,038

Direct revenue
 

 
65,350

 

 
84,580

Total revenue
 
392,582

 
568,335

 
688,105

 
1,127,618

Costs and expenses:
 
 

 


 
 

 


Cost of revenue
 
54,803

 
135,184

 
94,568

 
254,682

Marketing
 
212,739

 
88,407

 
442,824

 
205,022

Selling, general and administrative
 
226,067

 
299,894

 
368,888

 
583,477

Acquisition-related
 

 
(1,635
)
 

 
(1,687
)
  Total operating expenses
 
493,609

 
521,850

 
906,280

 
1,041,494

(Loss) income from operations
 
(101,027
)
 
46,485

 
(218,175
)
 
86,124

Interest and other income, net
 
479

 
57,367

 
1,539

 
53,828

Loss on equity method investees
 
(7,881
)
 
(3,428
)
 
(8,763
)
 
(8,556
)
(Loss) income before provision for income taxes
 
(108,429
)
 
100,424

 
(225,399
)
 
131,396

Provision (benefit) for income taxes
 
1,347

 
66,875

 
(1,732
)
 
101,440

Net (loss) income
 
(109,776
)
 
33,549

 
(223,667
)
 
29,956

Less: Net loss (income) attributable to noncontrolling interests
 
8,536

 
(1,220
)
 
19,759

 
(2,100
)
Net (loss) income attributable to Groupon, Inc.
 
$
(101,240
)
 
$
32,329

 
$
(203,908
)
 
$
27,856

Redemption of preferred stock in excess of carrying value
 

 

 
(34,327
)
 

Adjustment of redeemable noncontrolling interests to redemption value
 
(6,166
)
 
(3,943
)
 
(56,561
)
 
(11,165
)
Net (loss) income attributable to common stockholders
 
$
(107,406
)
 
$
28,386

 
$
(253,886
)
 
$
16,691

 
 
 
 
 
 
 
 
 
Net (loss) earnings per share
 
 

 
 
 
 

 
 
Basic
 
$
(0.35
)
 
$
0.04

 
$
(0.83
)
 
$
0.03

Diluted
 
$
(0.35
)
 
$
0.04

 
$
(0.83
)
 
$
0.03

 
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding
 
 

 
 
 
 

 
 
Basic
 
303,414,676

 
647,149,537

 
305,626,028

 
645,072,582

Diluted
 
303,414,676

 
663,122,709

 
305,626,028

 
663,230,558

 
(1) The Company restated the Condensed Consolidated Statements of Operations for the six months ended June 30, 2011, included in the Form S-1 filed with the SEC on September 23, 2011, to correct for an error in its presentation of certain income statement expenses. These changes were to be consistent with the Company's election to report revenue on a net basis. As a result, a portion of technology costs and editorial costs have been reclassified to cost of revenue from selling, general and administrative expense for the six months ended June 30, 2011. In addition, costs associated with the Company’s marketing staff, including payroll, benefits and stock compensation, have been reclassified to marketing for the six months ended June 30, 2011 from selling, general and administrative. The change in presentation had no effect on pre-tax loss, net loss or any per share amounts for the period.








6 of 13



Groupon, Inc.
Consolidated Balance Sheets


 
 
December 31,
 
June 30,
 
 
2011
 
2012
 
 
(in thousands)
 
 

 
(unaudited)
Assets
 
 

 
 
Current assets:
 
 

 
 
Cash and cash equivalents
 
$
1,122,935

 
$
1,185,798

Accounts receivable, net
 
108,747

 
98,673

Prepaid expenses and other current assets
 
91,645

 
116,141

Total current assets
 
1,323,327

 
1,400,612

Property and equipment, net of accumulated depreciation of $14,627 and $28,147, respectively
 
51,800

 
83,293

Goodwill
 
166,903

 
192,018

Intangible assets, net
 
45,667

 
54,303

Investments in equity interests
 
56,604

 
131,177

Deferred income taxes, non-current
 
46,104

 
45,517

Other non-current assets
 
90,071

 
76,178

Total Assets
 
$
1,774,476

 
$
1,983,098

Liabilities and Stockholders' Equity
 
 

 


Current liabilities:
 
 

 


Accounts payable
 
$
40,918

 
$
60,364

Accrued merchant payables
 
520,723

 
543,840

Accrued expenses
 
212,007

 
258,343

Deferred income taxes, current
 
76,841

 
73,942

Other current liabilities
 
144,673

 
163,692

Total current liabilities
 
995,162

 
1,100,181

Deferred income taxes, non-current
 
7,428

 
25,837

Other non-current liabilities
 
70,766

 
74,773

Total Liabilities
 
1,073,356

 
1,200,791

 
 


 


Redeemable noncontrolling interests
 
1,653

 
5,943

Groupon, Inc. Stockholders' Equity
 


 


Class A common stock, par value $0.0001 per share, 2,000,000,000 shares authorized, 641,745,225 shares issued and outstanding at December 31, 2011; 2,000,000,000 shares authorized, 649,165,744 shares issued and outstanding at June 30, 2012
 
64

 
65

Class B common stock, par value $0.0001 per share, 10,000,000 shares authorized, 2,399,976 shares issued and outstanding at December 31, 2011 and June 30, 2012
 

 

Common stock, par value $0.0001 per share, 2,010,000 shares authorized, and no shares issued and outstanding as of December 31, 2011 and June 30, 2012
 

 

Additional paid-in capital
 
1,388,253

 
1,437,327

Stockholder receivable
 

 
(166
)
Accumulated deficit
 
(698,704
)
 
(670,848
)
Accumulated other comprehensive income
 
12,928

 
12,937

Total Groupon, Inc. Stockholders' Equity
 
702,541

 
779,315

Noncontrolling interests
 
(3,074
)
 
(2,951
)
Total Equity
 
699,467

 
776,364

Total Liabilities and Equity
 
$
1,774,476

 
$
1,983,098







7 of 13



Groupon, Inc.
Segment Information
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
2011
 
2012
 
2011
 
2012
 
 
 
(in thousands)
 
(in thousands)
 
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
North America
 
 

 


 
 

 
 

 
Revenue
 
$
157,205

 
$
260,181

 
$
293,817

 
$
498,746

 
Segment operating expenses(1)
 
167,706

 
216,752

 
326,096

 
415,145

 
Segment operating (loss) income
 
(10,501
)
 
43,429

 
(32,279
)
 
83,601

 
Segment (loss) income as a percent of segment revenue
 
(6.7
)
%
16.7

%
(11.0
)
%
16.8

%
 
 
 
 
 
 
 
 
 
 
International
 
 

 


 
 

 


 
Revenue
 
$
235,377

 
$
308,154

 
$
394,288

 
$
628,872

 
Segment operating expenses(1)
 
287,185

 
279,649

 
522,602

 
572,949

 
Segment operating (loss) income
 
(51,808
)
 
28,505

 
(128,314
)
 
55,923

 
Segment (loss) income as a percent of segment revenue
 
(22.0
)
%
9.3

%
(32.5
)
%
8.9

%
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 

 


 
 

 


 
Revenue
 
$
392,582

 
$
568,335

 
$
688,105

 
$
1,127,618

 
Segment operating expenses(1)
 
454,891

 
496,401

 
848,698

 
988,094

 
Segment operating (loss) income
 
(62,309
)
 
71,934

 
(160,593
)
 
139,524

 
Segment (loss) income as a percent of segment revenue
 
(15.9
)
%
12.7

%
(23.3
)
%
12.4

%
 
 
 
 
 
 
 
 
 
 
Stock-based compensation
 
(38,718
)
 
(27,084
)
 
(57,582
)
 
(55,087
)
 
Acquisition-related
 

 
1,635

 

 
1,687

 
Operating (loss) income
 
(101,027
)
 
46,485

 
(218,175
)
 
86,124

 
 
 
 
 
 
 
 
 
 
 
Interest and other income, net
 
479

 
57,367

 
1,539

 
53,828

 
Loss on equity method investees
 
(7,881
)
 
(3,428
)
 
(8,763
)
 
(8,556
)
 
(Loss) income before provision for income taxes
 
(108,429
)
 
100,424

 
(225,399
)
 
131,396

 
Provision (benefit) for income taxes
 
1,347

 
66,875

 
(1,732
)
 
101,440

 
Net (loss) income
 
$
109,776

 
$
33,549

 
$
(223,667
)
 
$
29,956

 
 
(1) Represents operating expenses, excluding stock-based compensation and acquisition-related expense, which are not allocated to segments.



8 of 13



Reconciliation of Non-GAAP Financial Measures

Foreign exchange rate neutral operating results
 
The effect on the Company’s consolidated statements of operations from changes in exchange rates versus the U.S. Dollar for the three months ended June 30, 2012 are as follows:
 
 
 
Three Months Ended June 30, 2012
 
Three Months Ended June 30, 2012
 
 
At Avg.
 
Exchange
 
 
 
At Avg.
 
Exchange
 
 
 
 
Q2 2011
Rates (1)
 
Rate
Effect (2)
 
As
Reported
 
Q1 2012
Rates (3)
 
Rate
Effect (2)
 
As
Reported
 
 
(in thousands)
(unaudited)
 
(in thousands)
(unaudited)
Revenue
 
$
600,764

 
$
(32,429
)
 
$
568,335

 
$
576,626

 
$
(8,291
)
 
$
568,335

Income from operations
 
$
46,688

 
$
(203
)
 
$
46,485

 
$
45,519

 
$
966

 
$
46,485



The effect on the Company’s consolidated statements of operations from changes in exchange rates versus the U.S. Dollar for the six months ended June 30, 2012 are as follows:

 
 
Six Months Ended June 30, 2012
 
Six Months Ended June 30, 2012
 
 
At Avg.
 
Exchange
 
 
 
At Avg.
 
Exchange
 
 
 
 
 Q2 2011 YTD
Rates (1)
 
Rate
Effect (2)
 
As
Reported
 
Q4'11 - Q1'12
Rates (3)
 
Rate
Effect (2)
 
As
Reported
 
 
(in thousands)
(unaudited)
 
(in thousands)
(unaudited)
Revenue
 
$
1,187,851

 
$
(60,233
)
 
$
1,127,618

 
$
1,138,103

 
$
(10,485
)
 
$
1,127,618

Income from operations
 
$
87,368

 
$
(1,244
)
 
$
86,124

 
$
85,599

 
$
525

 
$
86,124



(1)   Represents the outcome that would have resulted had average exchange rates in the reported period been the same as those in effect during the three and six months ended June 30, 2011.
(2) Represents the increase or decrease in reported amounts resulting from changes in exchange rates from those in effect in the comparable period for operating results.
(3) Represents the outcome that would have resulted had average exchange rates in the reported period been the same as those in effect during the three and six months ended March 31, 2012.

Free Cash Flow
 
The following is a reconciliation of free cash flow to the most comparable U.S. GAAP measure, “Net cash provided by operating activities,” for the three and six months ended June 30, 2011 and 2012:
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2011
 
2012
 
2011
 
2012
 
 
(in thousands)
 
(in thousands)
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
Net cash provided by operating activities
 
$
39,019

 
$
75,315

 
$
56,959

 
$
159,029

Purchases of property and equipment
 
(10,240
)
 
(26,709
)
 
(21,202
)
 
(39,792
)
Free cash flow
 
$
28,779

 
$
48,606

 
$
35,757

 
$
119,237

 
 
 
 
 
 
 
 
 
Net cash used in investing activities
 
$
(25,184
)
 
$
(60,153
)
 
$
(69.478
)
 
$
(106.597
)
Net cash provided in financing activities
 
$
(422
)
 
$
24,158

 
$
111.684

 
$
15.883



9 of 13



Non-GAAP Reconciliation Schedule
(in thousands, except share and per share data)
(unaudited) 
Quarterly Non-GAAP Reconciliation
 
 
Revenue
 
Cost of Revenue
 
Marketing
 
SG&A
 
Acq-Related
 
Total OpEx
 
Operating 
Income (Loss)
 
Net Income (Loss)
attributable to
common
stockholders
 
Sharecount
 
Diluted EPS (1)
Three months ended June 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
$
568,335

 
$
135,184

 
$
88,407

 
$
299,894

 
$
(1,635
)
 
$
521,850

 
$
46,485

 
$
28,386

 
663,122,709

 
$
0.04

Stock-based compensation (2)
 

 
(1,015
)
 
(646
)
 
(25,423
)
 

 
(27,084
)
 
27,084

 
27,084

 

 
0.04

Acquisition-related charges (3)
 

 

 

 

 
1,635

 
1,635

 
(1,635
)
 
(1,635
)
 

 

Non-GAAP
 
$
568,335

 
$
134,169

 
$
87,761

 
$
274,471

 
$

 
$
496,401

 
$
71,934

 
$
53,835

 
663,122,709

 
$
0.08

Three months ended March 31, 2012
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

 
 

GAAP
 
$
559,283

 
$
119,498

 
$
116,615

 
$
283,583

 
$
(52
)
 
$
519,644

 
$
39,639

 
$
(11,695
)
 
644,097,375

 
$
(0.02
)
Stock-based compensation (2)
 

 
(482
)
 
(726
)
 
(26,795
)
 

 
(28,003
)
 
28,003

 
28,003

 

 
0.04

Acquisition-related charges (3)
 

 

 

 

 
52

 
52

 
(52
)
 
(52
)
 

 

Non-GAAP
 
$
559,283

 
$
119,016

 
$
115,889

 
$
256,788

 
$

 
$
491,693

 
$
67,590

 
$
16,256

 
663,665,615

(1
)
$
0.02

Three months ended December 31, 2011
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

GAAP
 
$
492,164

 
$
96,265

 
$
155,299

 
$
255,316

 
$
256

 
$
507,136

 
$
(14,972
)
 
$
(65,379
)
 
528,421,712

 
$
(0.12
)
Stock-based compensation (2)
 

 
(650
)
 
(1,492
)
 
(30,526
)
 

 
(32,668
)
 
32,668

 
32,668

 

 
0.06

Acquisition-related charges (3)
 

 

 

 

 
(256
)
 
(256
)
 
256

 
256

 

 

Non-GAAP
 
$
492,164

 
$
95,615

 
$
153,807

 
$
224,790

 
$

 
$
474,212

 
$
17,952

 
$
(32,455
)
 
528,421,712

 
$
(0.06
)
Three months ended September 30, 2011
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

GAAP
 
$
430,161

 
$
68,046

 
$
170,349

 
$
196,798

 
$
(4,793
)
 
$
430,400

 
$
(239
)
 
$
(54,229
)
 
307,605,060

 
$
(0.18
)
Stock-based compensation (2)
 

 
(56
)
 
(53
)
 
(3,231
)
 

 
(3,340
)
 
3,340

 
3,340

 

 
0.01

Acquisition-related charges (3)
 

 

 

 

 
4,793

 
4,793

 
(4,793
)
 
(4,793
)
 

 
(0.01
)
Non-GAAP
 
$
430,161

 
$
67,990

 
$
170,296

 
$
193,567

 
$

 
$
431,853

 
$
(1,692
)
 
$
(55,682
)
 
307,605,060

 
$
(0.18
)
Three months ended June 30, 2011
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

GAAP
 
$
392,582

 
$
54,803

 
$
212,739

 
$
226,067

 
$

 
$
493,609

 
$
(101,027
)
 
$
(107,406
)
 
303,414,676

 
$
(0.35
)
Stock-based compensation (2)
 

 
(212
)
 
(493
)
 
(38,013
)
 

 
(38,718
)
 
38,718

 
38,718

 

 
0.12

Acquisition-related charges (3)
 

 

 

 

 

 

 

 

 

 

Non-GAAP
 
$
392,582

 
$
54,591

 
$
212,246

 
$
188,054

 
$

 
$
454,891

 
$
(62,309
)
 
$
(68,688
)
 
303,414,676

 
$
(0.23
)
Three months ended March 31, 2011 (Restated)(4)
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

GAAP
 
$
295,523

 
$
39,765

 
$
230,085

 
$
142,821

 
$

 
$
412,671

 
$
(117,148
)
 
$
(146,480
)
 
307,849,412

 
$
(0.48
)
Stock-based compensation (2)
 

 
(212
)
 
(493
)
 
(18,159
)
 

 
(18,864
)
 
18,864

 
18,864

 

 
0.07

Acquisition-related charges (3)
 

 

 

 

 

 

 

 

 

 

Non-GAAP
 
$
295,523

 
$
39,553

 
$
229,592

 
$
124,662

 
$

 
$
393,807

 
$
(98,284
)
 
$
(127,616
)
 
307,849,412

 
$
(0.41
)
 
Year-to-Date Non-GAAP Reconciliation
 
 
Revenue
 
Cost of Revenue
 
Marketing
 
SG&A
 
Acq-Related
 
Total OpEx
 
Operating 
Income (Loss)
 
Net Income (Loss)
attributable to
common
stockholders
 
Sharecount
 
Diluted EPS (1)
Six months ended June 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
$
1,127,618

 
$
254,682

 
$
205,022

 
$
583,477

 
$
(1,687
)
 
$
1,041,494

 
$
86,124

 
$
16,691

 
663,230,558

 
$
0.03

Stock-based compensation (2)
 

 
(1,497
)
 
(1,372
)
 
(52,218
)
 

 
(55,087
)
 
55,087

 
55,087

 

 
0.08

Acquisition-related charges (3)
 

 

 

 

 
1,687

 
1,687

 
(1,687
)
 
(1,687
)
 

 

Non-GAAP
 
$
1,127,618

 
$
253,185

 
$
203,650

 
$
531,259

 
$

 
$
988,094

 
$
139,524

 
$
70,091

 
663,230,558

 
$
0.11

Six months ended June 30, 2011 (Restated)(4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
$
688,105

 
$
94,568

 
$
442,824

 
$
368,888

 
$

 
$
906,280

 
$
(218,175
)
 
$
(253,886
)
 
305,626,028

 
$
(0.83
)
Stock-based compensation (2)
 

 
(424
)
 
(986
)
 
(56,172
)
 

 
(57,582
)
 
57,582

 
57,582

 

 
0.19

Acquisition-related charges (3)
 

 

 

 

 

 

 

 

 

 

Non-GAAP
 
$
688,105

 
$
94,144

 
$
441,838

 
$
312,716

 
$

 
$
848,698

 
$
(160,593
)
 
$
(196,304
)
 
305,626,028

 
$
(0.64
)

10 of 13



Non-GAAP Reconciliation Schedule
(in thousands, except share and per share data)
(unaudited) 
Annual Non-GAAP Reconciliation
 
 
Revenue
 
Cost of Revenue
 
Marketing
 
SG&A
 
Acq-Related
 
Total OpEx
 
Operating 
Income (Loss)
 
Net Income (Loss)
attributable to
common
stockholders
 
Sharecount
 
Diluted EPS(1)
Twelve months ended December 31, 2011
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
GAAP
 
$
1,610,430

 
$
258,879

 
$
768,472

 
$
821,002

 
$
(4,537
)
 
$
1,843,816

 
$
(233,386
)
 
$
(373,494
)
 
362,261,324

 
$
(1.03
)
Stock-based compensation (2)
 

 
(1,130
)
 
(2,531
)
 
(89,929
)
 

 
(93,590
)
 
93,590

 
93,590

 

 
0.25

Acquisition-related charges (3)
 

 

 

 

 
4,537

 
4,537

 
(4,537
)
 
(4,537
)
 

 
(0.01
)
Non-GAAP
 
$
1,610,430

 
$
257,749

 
$
765,941

 
$
731,073

 
$

 
$
1,754,763

 
$
(144,333
)
 
$
(284,441
)
 
362,261,324

 
$
(0.79
)
Twelve months ended December 31, 2010
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
GAAP
 
$
312,941

 
$
42,896

 
$
290,569

 
$
196,637

 
$
203,183

 
$
733,285

 
$
(420,344
)
 
$
(456,320
)
 
342,698,772

 
$
(1.33
)
Stock-based compensation (2)
 

 
(157
)
 
(129
)
 
(35,882
)
 

 
(36,168
)
 
36,168

 
36,168

 

 
0.11

Acquisition-related charges (3)
 

 

 

 

 
(203,183
)
 
(203,183
)
 
203,183

 
203,183

 

 
0.59

Non-GAAP
 
$
312,941

 
$
42,739

 
$
290,440

 
$
160,755

 
$

 
$
493,934

 
$
(180,993
)
 
$
(216,969
)
 
342,698,772

 
$
(0.63
)
Twelve months ended December 31, 2009
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
GAAP
 
$
14,540

 
$
4,716

 
$
5,053

 
$
5,848

 
$

 
$
15,617

 
$
(1,077
)
 
$
(6,916
)
 
337,208,284

 
$
(0.02
)
Stock-based compensation (2)