EX-99.1 2 exhibit991-q42012.htm EARNINGS RELEASE Exhibit 99.1 - Q4 2012


Exhibit 99.1
 
GROUPON ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2012 RESULTS
 
Fourth quarter consolidated gross billings of $1.52 billion, up 24% year-over-year
Fourth quarter consolidated revenue of $638.3 million, up 30% year-over-year
Fourth quarter operating loss of $12.9 million, compared with an operating loss of $15.0 million in fourth quarter 2011
Fourth quarter GAAP loss per share of $0.12, including $0.07 loss per share from a non-operating item, compared with a loss per share of $0.12 in fourth quarter 2011
Full year 2012 gross billings grew 35% to $5.38 billion, revenue increased 45% to $2.33 billion, and operating income of $98.7 million compared to a loss of $233.4 million in 2011
 
CHICAGO - (BUSINESS WIRE) - February 27, 2013 - Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter and fiscal year ended December 31, 2012.
 
Gross billings, which reflect the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds, increased 24% year-over-year to $1.52 billion in the fourth quarter 2012, compared with $1.23 billion in the fourth quarter 2011. Excluding the $21.0 million unfavorable impact from year-over-year changes in foreign exchange rates, gross billings growth was 25% compared with fourth quarter 2011.

Revenue increased 30% year-over-year to $638.3 million in the fourth quarter 2012, compared with $492.2 million in the fourth quarter 2011. Excluding the $7.7 million unfavorable impact from year-over-year changes in foreign exchange rates, revenue growth was 31% compared with fourth quarter 2011. Growth was driven by an increase in direct revenue, which grew 1549% year-over-year to $225.2 million in the fourth quarter 2012, compared with $13.7 million in the fourth quarter 2011.
 
Operating loss was $12.9 million in the fourth quarter 2012, including stock-based compensation and acquisition-related expenses of $26.6 million, and depreciation and amortization of $16.0 million. This compares with an operating loss of $15.0 million in the fourth quarter 2011, which included stock-based compensation and acquisition-related expenses of $32.9 million, and depreciation and amortization of $9.3 million. Year-over-year changes in foreign exchange rates had a $0.1 million favorable impact on operating results.

"Record billings growth this quarter is a clear signal that customers love Groupons," said Andrew Mason, CEO of Groupon. "We will continue to invest in growth through 2013 as we see new opportunities to give our customers what they want."

Operating cash flow decreased 61% year-over-year to $65.7 million, compared with $169.1 million in the fourth quarter 2011. Free cash flow, a non-GAAP financial measure calculated as operating cash flow less capital expenditures, decreased 83% year-over-year to $25.7 million, compared with $155.1 million in the fourth quarter 2011. At the end of the quarter, Groupon had $1.2 billion in cash and cash equivalents and no long-term borrowings.

Fourth quarter 2012 net loss attributable to common stockholders was $81.1 million, or $0.12 per share, reflecting stock-based compensation and acquisition-related expenses of $26.6 million and share count of 655.7 million. Fourth quarter 2012 results included a pre-tax non-operating loss of $50.6 million ($45.5 million after tax) related to the impairment of a cost method investment in China.

Net loss attributable to common stockholders increased by $15.7 million year-over-year, from a loss of $65.4 million, or $0.12 per share in the fourth quarter 2011, including stock-based compensation and acquisition-related expenses of $32.9 million.






Full Year 2012

Gross billings increased 35% year-over-year to $5.38 billion in 2012, compared with $3.99 billion in 2011. Excluding the $183.5 million unfavorable impact from year-over-year changes in foreign exchange rates, gross billings growth was 40% compared with 2011.

Revenue increased 45% year-over-year to $2.33 billion in 2012, compared with $1.61 billion in 2011. Excluding the $74.1 million unfavorable impact from year-over-year changes in foreign exchange rates, revenue growth was 50% compared with 2011. Growth was driven by an increase in direct revenue, which grew 2083% to $454.7 million in 2012, compared with $20.8 million in 2011.
 
Operating income was $98.7 million in 2012, including stock-based compensation and acquisition-related expenses of $105.0 million, and depreciation and amortization of $55.8 million. This compares with an operating loss of $233.4 million in 2011, which included stock-based compensation and acquisition-related expenses of $89.1 million, and depreciation and amortization of $32.1 million. Year-over-year changes in foreign exchange rates had a $7.4 million unfavorable impact on operating income.

Operating cash flow decreased 8% year-over-year to $266.8 million, compared with $290.4 million in 2011. Free cash flow decreased 31% year-over-year to $171.0 million, compared with $246.6 million in 2011.

Full year 2012 net loss attributable to common stockholders was $67.4 million, or $0.10 per share, reflecting stock-based compensation and acquisition-related expenses of $105.0 million and share count of 650.2 million.

Net loss attributable to common stockholders improved by $306.1 million year-over-year, from a loss of $373.5 million, or $1.03 per share in 2011, including stock-based compensation and acquisition-related expenses of $89.1 million.











Groupon, Inc.
Summary Consolidated and Segment Results
(dollars in thousands, except share and per share data)
(unaudited)


 
 
Three Months Ended December 31,
 
 
 
 
 
Y/Y %
Growth
 
Year Ended December 31,
 
 
 
 
 
 
Y/Y %
Growth
 
 
2012
 
2011
 
Y/Y % Growth
 
FX Effect(2)
 
excluding FX (2)
 
2012
 
2011
 
Y/Y % Growth
 
FX Effect(2)
 
excluding FX (2)
Gross Billings (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
718,952

 
$
475,807

 
51.1

%
 
$
(2,569
)
 
51.6

%
 
$
2,373,153

 
$
1,561,927

 
51.9

%
 
$
(2,780
)
 
52.1

%
International
 
801,500

 
755,061

 
6.2

%
 
(18,451
)
 
8.6

%
 
3,007,031

 
2,423,574

 
24.1

%
 
(180,739
)
 
31.5

%
Consolidated billings
 
$
1,520,452

 
$
1,230,868

 
23.5

%
 
$
(21,020
)
 
25.2

%
 
$
5,380,184

 
$
3,985,501

 
35.0

%
 
$
(183,519
)
 
39.6

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 

 
 

 
 

 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
375,351

 
$
179,638

 
108.9

%
 
$
(1,082
)
 
109.6

%
 
$
1,165,700

 
$
634,980

 
83.6

%
 
$
(1,156
)
 
83.8

%
International
 
262,951

 
312,526

 
(15.9
)
%
 
(6,629
)
 
(13.7
)
%
 
1,168,772

 
975,450

 
19.8

%
 
(72,960
)
 
27.3

%
Consolidated revenue
 
$
638,302

 
$
492,164

 
29.7

%
 
$
(7,711
)
 
31.3

%
 
$
2,334,472

 
$
1,610,430

 
45.0

%
 
$
(74,116
)
 
49.6

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating (loss) income
 
$
(12,861
)
 
$
(14,972
)
 
14.1

%
 
$
135

 
13.2

%
 
$
98,701

 
$
(233,386
)
 
N/A

 
 
$
(7,401
)
 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss attributable to common stockholders
 
$
(81,089
)
 
$
(65,379
)
 
(24.0
)
%
 
$
1,102

 
(25.7
)
%
 
$
(67,377
)
 
$
(373,494
)
 
82.0

%
 
$
(9,283
)
 
84.4

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$(0.12)
 
$(0.12)
 
 
 
 
 
 
 
 
 
$(0.10)
 
$(1.03)
 
 
 
 
 
 
 
 
Diluted
 
$(0.12)
 
$(0.12)
 
 
 
 
 
 
 
 
 
$(0.10)
 
$(1.03)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
 
655,678,123

 
528,421,712

 
 
 
 
 
 
 
 
 
650,214,119

 
362,261,324

 
 
 
 
 
 
 
 
Weighted average diluted shares outstanding
 
655,678,123

 
528,421,712

 
 
 
 
 
 
 
 
 
650,214,119

 
362,261,324

 
 
 
 
 
 
 
 
 
(1)
Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds. Includes direct billings and third party and other billings.
(2)
Represents change in financial measures that would have resulted had average exchange rates in the reporting period been the same as those in effect in the three months and year ended December 31, 2011.

Highlights
 
Largest sequential gross billings increase in Groupon history. All categories contributed to the biggest sequential increase in platform growth on an absolute dollar basis in Groupon's history.
Unit milestone. The Company surpassed the 50 million unit mark for the first time in the fourth quarter 2012. Consolidated units, defined as vouchers and products ordered before cancellations and refunds, grew 21% year-over-year.
Seasonal strength in Groupon Goods. After a successful holiday season, Goods has now reached an annual run rate of about $2.0 billion in global billings, just five quarters after its launch.
Growing merchant selection and quality. As of the end of the fourth quarter, the number of active deals in North America increased almost 300% year-over-year to nearly 37,000.
Continued customer acquisition efficiencies. Marketing expense per new customer improved 61% year-over-year in the fourth quarter 2012, enabling the reduction of overall marketing spend by 61% compared with the fourth quarter 2011. As of December 31, 2012, Groupon had 41.0 million active customers, an increase of 22% year-over-year, with gross customer additions partially offset by higher customer inactivations.
Substantial growth in mobile transaction activity. In January 2013, nearly 40% of North American transactions were completed on mobile devices, an increase of 44% compared with January 2012. This compares with about one third of transactions completed on mobile devices in October 2012.
Launch of merchant services in 2012. Groupon launched a number of services in 2012 to strengthen relationships with local businesses, including Breadcrumb and Payments.





Outlook
Revenue for the first quarter 2013 is expected to be between $560 million and $610 million, an increase of between 0% and 9% compared with first quarter 2012.
 
Operating (loss) income for the first quarter 2013 is expected to be between $(10) million and $10 million, compared with $39.6 million in the first quarter 2012. This outlook includes $30 million of stock-based compensation, and assumes no acquisitions or investments, or material changes in foreign exchange rates.
 
For the full year 2013, operating income is expected to increase compared with 2012.

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
In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided the following non-GAAP financial measures in this release and the accompanying tables: foreign exchange rate neutral operating results, free cash flow and consolidated operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net. These non-GAAP financial measures are presented to aid investors in better understanding Groupon's performance. However, these measures are not intended to be a substitute for those reported in accordance with GAAP. These measures may be different from non-GAAP financial measures used by other companies.

Foreign exchange rate neutral operating results show our current period operating results as if foreign currency exchange rates had remained the same as those in effect in the comparable period. These measures are intended to facilitate comparisons to our historical performance. For a reconciliation of foreign exchange rate neutral operating results to our GAAP operating results, see “Reconciliation of Foreign Exchange Rate Neutral Operating Results to U.S. GAAP Operating Results" and "Supplemental Financial Information and Business Metrics" included in the tables accompanying this release.

Free cash flow is a non-GAAP measure that comprises net cash provided by operating activities less purchases of property and equipment and capitalized software. We use free cash flow, and ratios based on it, to conduct and evaluate our business because, although it is similar to cash flow from 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 Groupon's cash balance for the applicable period. For a reconciliation of free cash flow to cash flow from operations, see “Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities” included in the tables accompanying this release.

Consolidated operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net is a non-GAAP measure that comprises the consolidated total of the segment operating income (loss) of our two segments, North America and International. Stock‑based compensation expense and acquisition‑related expense (benefit), net are excluded from segment operating income (loss) that we report under GAAP for our segments. Stock-based compensation expense is primarily a non-cash item. Acquisition-related expense (benefit), net represents the change in the fair value of contingent consideration arrangements related to business combinations. We use consolidated operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net to allocate resources and evaluate performance internally. For a reconciliation of consolidated operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net to consolidated operating income (loss), see "Supplemental Financial Information and Business Metrics" included in the tables accompanying this release.
Note on Forward Looking Statements
The statements contained in this presentation 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 our results to differ materially from those included in the




forward-looking statements include, but are not limited to, volatility in our revenue and operating results; risks related to our business strategy; responding to changes in the market; effectively dealing with challenges arising from our international operations; retaining existing customers and adding new customers; retaining existing merchant partners and adding new merchant partners; incurring expenses as we expand our business; competing against smaller competitors and competitors with more financial resources than us; maintaining favorable terms with our business partners; maintaining a strong brand; managing inventory and order fulfillment; integrating our technology platforms; managing refund risks; retaining our executive team; litigation; regulations, including the CARD Act and regulation of the Internet; tax liabilities; tax legislation; maintaining our information technology infrastructure; security breaches; protecting our 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 our ability to raise capital if necessary. 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 and subsequent Quarterly Reports on Form 10-Q, 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 February 27, 2013. Groupon undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this presentation 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
Genny Konz         Paul Taafe
312-999-3098     312-999-3964
ir@groupon.com





Groupon, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2012
 
2011
 
2012
 
2011
Operating activities
 
 
 
 
 

 
 

Net loss
$
(80,047
)
 
$
(59,679
)
 
$
(51,031
)
 
$
(297,762
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 

 
 
 
 
 
 
Depreciation and amortization
15,965

 
9,301

 
55,801

 
32,055

Stock-based compensation
26,411

 
32,668

 
104,117

 
93,590

Deferred income taxes
(17,259
)
 
31,601

 
(7,651
)
 
32,203

Excess tax benefits on stock-based compensation
(2,403
)
 
1,145

 
(27,023
)
 
(10,178
)
Loss on equity method investees
1,231

 
6,678

 
9,925

 
26,652

Acquisition-related expense (benefit), net
153

 
256

 
897

 
(4,537
)
Gain on return of common stock

 

 

 
(4,916
)
Gain on E-Commerce transaction

 

 
(56,032
)
 

Impairment of cost method investment
50,553

 

 
50,553

 

Change in assets and liabilities, net of acquisitions:
 
 
 
 
 
 
 
Restricted cash
(2,517
)
 
(4,378
)
 
(4,372
)
 
(12,519
)
Accounts receivable
12,723

 
(686
)
 
10,534

 
(70,376
)
Prepaid expenses and other current assets
(45,922
)
 
4,731

 
(70,859
)
 
(36,292
)
Accounts payable
5,537

 
927

 
18,711

 
(20,997
)
Accrued merchant and supplier payables
96,029

 
65,236

 
149,918

 
380,108

Accrued expenses and other current liabilities
(20,268
)
 
80,164

 
47,742

 
189,127

Other, net
25,531

 
1,113

 
35,604

 
(5,711
)
Net cash provided by operating activities
65,717

 
169,077

 
266,834

 
290,447

 
 
 
 
 
 
 
 
Net cash used in investing activities
(52,753
)
 
(34,907
)
 
(194,979
)
 
(147,433
)
 
 
 
 
 
 
 
 
Net cash (used in) provided by financing activities
(6,495
)
 
746,913

 
12,095

 
867,205

 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
1,809

 
(2,083
)
 
2,404

 
(6,117
)
Net increase in cash and cash equivalents
8,278

 
879,000

 
86,354

 
1,004,102

Cash and cash equivalents, beginning of period
1,201,011

 
243,935

 
1,122,935

 
118,833

Cash and cash equivalents, end of the period
$
1,209,289

 
$
1,122,935

 
$
1,209,289

 
$
1,122,935






Groupon, Inc.
Consolidated Statements of Operations 
(in thousands, except share and per share data)
(unaudited)

 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2012
 
2011
 
2012
 
2011
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
Third party and other revenue
 
$
413,127

 
$
478,510

 
$
1,879,729

 
$
1,589,604

Direct revenue
 
225,175

 
13,654

 
454,743

 
20,826

Total revenue
 
638,302

 
492,164

 
2,334,472

 
1,610,430

Cost of revenue:
 
 
 
 
 
 
 
 
Third party and other revenue
 
63,905

 
86,882

 
297,739

 
243,789

Direct revenue
 
218,567

 
9,383

 
421,201

 
15,090

Total cost of revenue
 
282,472

 
96,265

 
718,940

 
258,879

Gross profit
 
355,830

 
395,899

 
1,615,532

 
1,351,551

Operating expenses:
 
 
 
 
 
 
 
 
Marketing
 
60,913

 
155,299

 
336,854

 
768,472

Selling, general and administrative
 
307,625

 
255,316

 
1,179,080

 
821,002

Acquisition-related expense (benefit), net
 
153

 
256

 
897

 
(4,537
)
  Total operating expenses
 
368,691

 
410,871

 
1,516,831

 
1,584,937

(Loss) income from operations
 
(12,861
)
 
(14,972
)
 
98,701

 
(233,386
)
Interest and other (expense) income, net
 
(48,279
)
 
(3,835
)
 
6,166

 
5,973

Loss on equity method investees
 
(1,231
)
 
(6,678
)
 
(9,925
)
 
(26,652
)
(Loss) income before provision for income taxes
 
(62,371
)
 
(25,485
)
 
94,942

 
(254,065
)
Provision for income taxes
 
17,676

 
34,194

 
145,973

 
43,697

Net loss
 
(80,047
)
 
(59,679
)
 
(51,031
)
 
(297,762
)
Less: Net (income) loss attributable to noncontrolling interests
 
(936
)
 
(5,267
)
 
(3,742
)
 
18,335

Net loss attributable to Groupon, Inc.
 
(80,983
)
 
(64,946
)
 
(54,773
)
 
(279,427
)
Redemption of preferred stock in excess of carrying value
 

 

 

 
(34,327
)
Adjustment of redeemable noncontrolling interests to redemption value
 
(106
)
 
(433
)
 
(12,604
)
 
(59,740
)
Net loss attributable to common stockholders
 
$
(81,089
)
 
$
(65,379
)
 
$
(67,377
)
 
$
(373,494
)
 
 
 
 
 
 
 
 
 
Net loss per share
 
 
 
 
 
 
 
 
Basic
 
$(0.12)
 
$(0.12)
 
$(0.10)
 
$(1.03)
Diluted
 
$(0.12)
 
$(0.12)
 
$(0.10)
 
$(1.03)
 
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding
 
 
 
 
 
 
 
 
Basic
 
655,678,123

 
528,421,712

 
650,214,119

 
362,261,324

Diluted
 
655,678,123

 
528,421,712

 
650,214,119

 
362,261,324






Groupon, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)

 
 
December 31,
 
 
2012
 
2011
Assets
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
1,209,289

 
$
1,122,935

Accounts receivable, net
 
96,713

 
108,747

Deferred income taxes
 
31,211

 
19,243

Prepaid expenses and other current assets
 
150,573

 
72,402

Total current assets
 
1,487,786

 
1,323,327

Property, equipment and software, net
 
121,072

 
51,800

Goodwill
 
206,684

 
166,903

Intangible assets, net
 
42,597

 
45,667

Investments
 
84,209

 
50,604

Deferred income taxes, non-current
 
29,916

 
46,104

Other non-current assets
 
59,210

 
90,071

Total Assets
 
$
2,031,474

 
$
1,774,476

Liabilities and Stockholders' Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
59,865

 
$
40,918

Accrued merchant and supplier payables
 
671,305

 
520,723

Accrued expenses
 
246,924

 
212,007

Deferred income taxes
 
53,700

 
76,841

Other current liabilities
 
136,647

 
144,673

Total current liabilities
 
1,168,441

 
995,162

Deferred income taxes, non-current
 
20,860

 
7,428

Other non-current liabilities
 
100,072

 
70,766

Total Liabilities
 
1,289,373

 
1,073,356

Commitments and contingencies
 
 
 
 
Redeemable noncontrolling interests
 

 
1,653

Stockholders' Equity
 
 
 
 
Class A common stock, par value $0.0001 per share, 2,000,000,000 shares authorized, 654,523,706 and 641,745,225 shares issued and outstanding at December 31, 2012 and 2011, respectively
 
65

 
64

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, 2012 and 2011
 

 

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

 

Additional paid-in capital
 
1,485,006

 
1,388,253

Accumulated deficit
 
(753,477
)
 
(698,704
)
Accumulated other comprehensive income
 
12,446

 
12,928

Total Groupon, Inc. Stockholders' Equity
 
744,040

 
702,541

Noncontrolling interests
 
(1,939
)
 
(3,074
)
Total Equity
 
742,101

 
699,467

Total Liabilities and Equity
 
$
2,031,474

 
$
1,774,476






Groupon, Inc.
Segment Information
(in thousands)
(unaudited)
 
 
Three Months Ended December 31,
 
 
Year Ended December 31,
 
 
2012
 
2011
 
 
2012
 
2011
 
North America
 

 
 
 
 
 

 
 

 
Gross Billings (1)
$
718,952

 
$
475,807

 
 
$
2,373,153

 
$
1,561,927

 
Revenue
$
375,351

 
$
179,638

 
 
$
1,165,700

 
$
634,980

 
Segment cost of revenue and operating expenses (2)(3)
358,319

 
161,399

 
 
1,025,974

 
630,184

 
Segment operating income (3)
$
17,032

 
$
18,239

 
 
$
139,726

 
$
4,796

 
Segment income as a percent of segment revenue
4.5

%
10.2

%
 
12.0

%
0.8

%
 
 
 
 
 
 
 
 
 
 
International
 

 
 
 
 
 

 
 
 
Gross Billings (1)
$
801,500

 
$
755,061

 
 
$
3,007,031

 
$
2,423,574

 
Revenue
$
262,951

 
$
312,526

 
 
$
1,168,772

 
$
975,450

 
Segment cost of revenue and operating expenses (2)(3)
266,280

 
312,813

 
 
1,104,783

 
1,124,579

 
Segment operating (loss) income (3)
$
(3,329
)
 
$
(287
)
 
 
$
63,989

 
$
(149,129
)
 
Segment (loss) income as a percent of segment revenue
(1.3
)
%
(0.1
)
%
 
5.5

%
(15.3
)
%
 
 
 
 
 
 
 
 
 
 
Consolidated
 

 
 
 
 
 

 
 
 
Gross Billings (1)
$
1,520,452

 
$
1,230,868

 
 
$
5,380,184

 
$
3,985,501

 
Revenue
$
638,302

 
$
492,164

 
 
$
2,334,472

 
$
1,610,430

 
Segment cost of revenue and operating expenses (2)
624,599

 
474,212

 
 
2,130,757

 
1,754,763

 
Segment operating income (loss)
$
13,703

 
$
17,952

 
 
$
203,715

 
$
(144,333
)
 
Segment income (loss) as a percent of segment revenue
2.1

%
3.6

%
 
8.7

%
(9.0
)
%
 
 
 
 
 
 
 
 
 
 
Stock-based compensation
26,411

 
32,668

 
 
104,117

 
93,590

 
Acquisition-related expense (benefit), net
153

 
256

 
 
897

 
(4,537
)
 
Operating (loss) income
(12,861
)
 
(14,972
)
 
 
98,701

 
(233,386
)
 
 
 
 
 
 
 
 
 
 
 
Interest and other expense (income), net
48,279

 
3,835

 
 
(6,166
)
 
(5,973
)
 
Loss on equity method investees
1,231

 
6,678

 
 
9,925

 
26,652

 
(Loss) income before provision for income taxes
(62,371
)
 
(25,485
)
 
 
94,942

 
(254,065
)
 
Provision for income taxes
17,676

 
34,194

 
 
145,973

 
43,697

 
Net loss
$
(80,047
)
 
$
(59,679
)
 
 
$
(51,031
)
 
$
(297,762
)
 
 
(1)
Represents the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds. Includes direct billings and third party and other billings.
(2)
Represents cost of revenue and operating expenses, excluding stock-based compensation and acquisition-related expense (benefit), net.
(3)
We record intercompany cross-charges every period for services provided by the United States to our international subsidiaries. We updated our intercompany allocations for those charges during the fourth quarter of 2012, which resulted in a one-time $8.5 million decrease to International Segment operating expenses (reduction to International Segment operating loss) and a corresponding increase to North America Segment operating expenses (reduction to North America Segment operating income).





Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities
(in thousands)
(unaudited)
 
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 months and years ended December 31, 2012 and 2011, respectively: 
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2012
 
2011
 
2012
 
2011
Net cash provided by operating activities
 
$
65,717

 
$
169,077

 
$
266,834

 
$
290,447

Purchases of property and equipment and capitalized software
 
(40,034
)
 
(13,986
)
 
(95,836
)
 
(43,811
)
Free cash flow
 
$
25,683

 
$
155,091

 
$
170,998

 
$
246,636

 
 
 
 
 
 
 
 
 
Net cash used in investing activities
 
$
(52,753
)
 
$
(34,907
)
 
$
(194,979
)
 
$
(147,433
)
Net cash (used in) provided by financing activities
 
$
(6,495
)
 
$
746,913

 
$
12,095

 
$
867,205






Reconciliation of Foreign Exchange Rate Neutral Operating Results to Revenue and (Loss) Income from Operations
(in thousands)
(unaudited)
 
The following is a reconciliation of foreign exchange rate neutral operating results to the most comparable U.S. GAAP measures, "Revenue" and "(Loss) income from operations," for the three months and year ended December 31, 2012:

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 December 31, 2012 are as follows: 
 
 
Three Months Ended December 31, 2012
 
Three Months Ended December 31, 2012
 
 
At Avg. Q4 2011
Rates
(1)
 
Exchange Rate
Effect
(2)
 
As
Reported
 
At Avg. Q3 2012
Rates
(3)
 
Exchange Rate
Effect
(2)
 
As
Reported
Revenue
 
$
646,013

 
$
(7,711
)
 
$
638,302

 
$
634,734

 
$
3,568

 
$
638,302

Loss from operations
 
$
(12,996
)
 
$
135

 
$
(12,861
)
 
$
(12,075
)
 
$
(786
)
 
$
(12,861
)


The effect on the Company’s consolidated statements of operations from changes in exchange rates versus the U.S. Dollar for the year ended December 31, 2012 are as follows:
 
 
Year Ended December 31, 2012
 
Year Ended December 31, 2012
 
 
At Avg. 2011 Rates(1)
 
Exchange Rate
Effect
(2)
 
As
Reported
 
At Avg. Q4'11 - Q3'12
Rates
(3)
 
Exchange Rate
Effect
(2)
 
As
Reported
Revenue
 
$
2,408,588

 
$
(74,116
)
 
$
2,334,472

 
$
2,344,952

 
$
(10,480
)
 
$
2,334,472

Income from operations
 
$
106,102

 
$
(7,401
)
 
$
98,701

 
$
105,467

 
$
(6,766
)
 
$
98,701


(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 months and year ended December 31, 2011.
(2)
Represents the increase or decrease in reported amounts resulting from changes in exchange rates from those in effect in the comparable period.
(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 twelve months ended September 30, 2012.


11 of 15



Supplemental Financial Information and Business Metrics (13) 
(in thousands, except per share and headcount data and TTM
Gross Billings / Average Active Customer)
(unaudited)
 
 
Q1 2011 (8)
 
Q2 2011
 
Q3 2011
 
Q4 2011
 
Q1 2012
 
Q2 2012
 
Q3 2012
 
Q4 2012
 
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
Segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America Segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Billings(1)
$
315,152

 
$
369,990

 
$
400,978

 
$
475,807

 
$
553,557

 
$
548,275

 
$
552,369

 
$
718,952

 
 
Year-over-year growth
610

%
359

%
204

%
118

%
76

%
48

%
38

%
51

%
 
% of Consolidated Gross Billings
47

%
40

%
35

%
39

%
41

%
43

%
45

%
47

%
Gross Billings(1) Trailing Twelve Months (TTM)
$
745,772

 
$
1,035,183

 
$
1,304,128

 
$
1,561,927

 
$
1,800,332

 
$
1,978,617

 
$
2,130,008

 
$
2,373,153

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Party and Other Revenue(2)
$
136,612

 
$
157,205

 
$
161,525

 
$
179,638

 
$
230,984

 
$
207,119

 
$
158,545

 
$
165,776

 
 
Direct Revenue(2)

 

 

 

 
7,581

 
53,062

 
133,058

 
209,575

 
Total Revenue
$
136,612

 
$
157,205

 
$
161,525

 
$
179,638

 
$
238,565

 
$
260,181

 
$
291,603

 
$
375,351

 
 
Year-over-year growth
574

%
341

%
188

%
103

%
75

%
66

%
81

%
109

%
 
% of Consolidated Revenue
46

%
40

%
38

%
36

%
43

%
46

%
51

%
59

%
Revenue TTM
$
316,752

 
$
438,305

 
$
543,705

 
$
634,980

 
$
736,933

 
$
839,909

 
$
969,987

 
$
1,165,700

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Party and Other Cost of Revenue(3)
$
25,050

 
$
32,169

 
$
31,316

 
$
51,419

 
$
62,580

 
$
40,155

 
$
15,475

 
$
27,002

 
 
Direct Cost of Revenue(3)

 

 

 

 
6,671

 
46,159

 
115,560

 
196,789

 
Total Cost of Revenue
$
25,050

 
$
32,169

 
$
31,316

 
$
51,419

 
$
69,251

 
$
86,314

 
$
131,035

 
$
223,791

 
 
% of North America Total Revenue
18

%
20

%
19

%
29

%
29

%
33

%
45

%
60

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Party and Other
$
111,562

 
$
125,036

 
$
130,209

 
$
128,219

 
$
168,404

 
$
166,964

 
$
143,070

 
$
138,774

 
 
Direct

 

 

 

 
910

 
6,903

 
17,498

 
12,786

 
 
Total
$
111,562

 
$
125,036

 
$
130,209

 
$
128,219

 
$
169,314

 
$
173,867

 
$
160,568

 
$
151,560

 
 
% of North America Total Revenue
82

%
80

%
81

%
71

%
71

%
67

%
55

%
40

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating (Loss) Income Excl Stock-Based Compensation (SBC), Acquisition-Related Expenses
$
(21,778
)
 
$
(10,501
)
 
$
18,836

 
$
18,239

 
$
40,172

 
$
43,429

 
$
39,093

 
$
17,032

 
 
Year-over-year growth
 N/A

 
(2,678
)
%
496

%
 N/A

 
 N/A

 
 N/A

 
108

%
(7
)
%
 
% of Consolidated Operating Income (Loss) Excl SBC, Acq-Related
22

%
17

%
1,113

%
102

%
59

%
60

%
77

%
124

%
Operating Margin Excl SBC, Acq-Related (% of North America Total revenue)
(15.9
)
%
(6.7
)
%
11.7

%
10.2

%
16.8

%
16.7

%
13.4

%
4.5

%
 
Year-over-year growth (bps)
(5,879
)
 
(562
)
 
603

 
3,494

 
3,278

 
2,337

 
170

 
(570
)
 
Operating (Loss) Income TTM Excl SBC, Acq-Related
$
(40,901
)
 
$
(51,024
)
 
$
(35,348
)
 
$
4,796

 
$
66,746

 
$
120,676

 
$
140,933

 
$
139,726

 
Operating Margin TTM Excl SBC, Acq-Related (% of North America Total TTM revenue)
(12.9
)
%
(11.6
)
%
(6.5
)
%
0.8

%
9.1

%
14.4

%
14.5

%
12.0

%
 
Year-over-year growth (bps)
(3,604
)
 
(2,266
)
 
(1,467
)
 
596

 
2,197

 
2,601

 
2,100

 
1,120

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International Segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Billings(1)
$
353,022

 
$
559,259

 
$
756,232

 
$
755,061

 
$
801,243

 
$
738,401

 
$
665,887

 
$
801,500

 
 
Year-over-year growth
 N/A

 
5,057

%
1,115

%
283

%
127

%
32

%
(12
)
%
6

%
 
Year-over-year growth, excluding FX(4)
 N/A

 
4,587

%
1,021

%
287

%
138

%
45

%
(4
)
%
9

%
 
% of Consolidated Gross Billings
53

%
60

%
65

%
61

%
59

%
57

%
55

%
53

%
Gross Billings(1) TTM
$
623,367

 
$
1,171,781

 
$
1,865,774

 
$
2,423,574

 
$
2,871,795

 
$
3,050,937

 
$
2,960,592

 
$
3,007,031

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Party and Other Revenue(2)
$
158,911

 
$
235,377

 
$
261,464

 
$
298,872

 
$
309,069

 
$
295,866

 
$
265,019

 
$
247,351

 
 
Direct Revenue(2)

 

 
7,172

 
13,654

 
11,649

 
12,288

 
11,930

 
15,600

 
Total Revenue
$
158,911

 
$
235,377

 
$
268,636

 
$
312,526

 
$
320,718

 
$
308,154

 
$
276,949

 
$
262,951

 
 
Year-over-year growth
 N/A

 
7,709

%
947

%
273

%
102

%
31

%
3

%
(16
)
%
 
Year-over-year growth, excluding FX(4)
 N/A

 
7,013

%
868

%
276

%
112

%
44

%
13

%
(14
)
%
 
% of Consolidated Revenue
54

%
60

%
62

%
64

%
57

%
54

%
49

%
41

%
Revenue TTM
$
271,440

 
$
503,803

 
$
746,785

 
$
975,450

 
$
1,137,257

 
$
1,210,034

 
$
1,218,347

 
$
1,168,772

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Party and Other Cost of Revenue(3)
$
14,715

 
$
22,634

 
$
31,023

 
$
35,463

 
$
40,049

 
$
36,877

 
$
38,698

 
$
36,903

 
 
Direct Cost of Revenue(3)

 

 
5,707

 
9,383

 
10,198

 
11,993

 
12,053

 
21,778

 
Total Cost of Revenue
$
14,715

 
$
22,634

 
$
36,730

 
$
44,846

 
$
50,247

 
$
48,870

 
$
50,751

 
$
58,681

 
 
% of International Total Revenue
9

%
10

%
14

%
14

%
16

%
16

%
18

%
22

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Party and Other
$
144,196

 
$
212,743

 
$
230,441

 
$
263,409

 
$
269,020

 
$
258,989

 
$
226,321

 
$
210,448

 
 
Direct

 

 
1,465

 
4,271

 
1,451

 
295

 
(123
)
 
(6,178
)
 
 
Total
$
144,196

 
$
212,743

 
$
231,906

 
$
267,680

 
$
270,471

 
$
259,284

 
$
226,198

 
$
204,270

 
 
% of International Total Revenue
91

%
90

%
86

%
86

%
84

%
84

%
82

%
78

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Operating (Loss) Income Excl SBC, Acq-Related
$
(76,506
)
 
$
(51,808
)
 
$
(20,528
)
 
$
(287
)
 
$
27,418

 
$
28,505

 
$
11,395

 
$
(3,329
)
 
 
Year-over-year growth
 N/A

 
(125
)
%
21

%
100

%
 N/A

 
155

%
N/A

 
(1,060
)
%

% of Consolidated Operating (Loss) Income Excl SBC, Acq-Related
78

%
83

%
(1,213
)
%
(2
)
%
41

%
40

%
23

%
(24
)
%
Operating Margin Excl SBC, Acq-Related (% of International Total revenue)
(48.1
)
%
(22.0
)
%
(7.6
)
%
(0.1
)
%
8.5

%
9.3

%
4.1

%
(1.3
)
%
 
Year-over-year growth (bps)
 N/A

 
74,265

 
9,392

 
14,474

 
5,669

 
3,126

 
1,170

 
(120
)
 
Operating (Loss) Income TTM Excl SBC, Acq-Related
$
(247,063
)
 
$
(275,824
)
 
$
(270,298
)
 
$
(149,129
)
 
$
(45,205
)
 
$
35,108

 
$
67,031

 
$
63,989

 
Operating Margin TTM Excl SBC, Acq-Related (% of International Total TTM revenue)
(91.0
)
%
(54.7
)
%
(36.2
)
%
(15.3
)
%
(4.0
)
%
2.9

%
5.5

%
5.5

%
 
Year-over-year growth (bps)
 N/A

 
70,992

 
13,508

 
13,628

 
8,704

 
5,765

 
4,170

 
2,080