Groupon Earnings Released, Revenue Up 20%

Submitted by Anonymous (not verified) on Thu, 02/20/2014 - 21:24

Groupon just released its earnings report for the fourth quarter and full year 2013. Revenue was up 20% for the quarter at $768.4 million with revenue up 18% in North America, but down 15% in the rest of the world. Gross profit increased 6%, to $378.2 million in the quarter.
“Our record performance in the quarter was led by strength in Goods, as shoppers increasingly looked to Groupon to fill their holiday needs,” said CEO Eric Lefkofsky. “Our mobile business continued to gain momentum as our worldwide mobile transaction mix increased more than 10% in the quarter, to nearly 50% in December. With another 9 million downloads this quarter, we now have nearly 70 million app downloads to date.”
Last quarter, the company said that changes to Gmail’s inbox (you know the ones) had a negative impact on people viewing Groupon’s email marketing messages. It will be interesting to see if that’s changed at all over the last few months. It will likely come up on the earnings call.
Here’s the release in its entirety:
CHICAGO–(BUSINESS WIRE)–Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter and fiscal year ended December 31, 2013.

“Our mobile business continued to gain momentum as our worldwide mobile transaction mix increased more than 10% in the quarter, to nearly 50% in December. With another 9 million downloads this quarter, we now have nearly 70 million app downloads to date.”

“Our record performance in the quarter was led by strength in Goods, as shoppers increasingly looked to Groupon to fill their holiday needs,” said Eric Lefkofsky, CEO of Groupon. “Our mobile business continued to gain momentum as our worldwide mobile transaction mix increased more than 10% in the quarter, to nearly 50% in December. With another 9 million downloads this quarter, we now have nearly 70 million app downloads to date.”
“We’re also excited to welcome Ticket Monster and ideeli to the Groupon family. The acquisitions bring scale, relationships, and category expertise, making Groupon an even better place to start when you want to do or buy just about anything, anytime, anywhere.”
Fourth Quarter 2013 Summary
Gross billings, which reflect the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds, increased 5% globally to $1.6 billion in the fourth quarter 2013, compared with $1.5 billion in the fourth quarter 2012. North America growth of 10% and EMEA growth of 6% was offset by an 11% decline in Rest of World.
Revenue increased 20% to $768.4 million in the fourth quarter 2013, compared with $638.3 million in the fourth quarter 2012. North America revenue growth of 18% and EMEA growth of 43% was offset by a 15% decline in Rest of World.
Gross profit increased 6%, to $378.2 million in the fourth quarter 2013, compared with $355.8 million in the fourth quarter 2012.
Adjusted EBITDA, a non-GAAP financial measure, was $72.0 million in the fourth quarter 2013, compared with $29.7 million in the fourth quarter 2012.
Operating income was $13.4 million in the fourth quarter 2013, compared with an operating loss of $12.9 million in the fourth quarter 2012.
Operating income excluding stock compensation and acquisition-related costs, net, a non-GAAP financial measure, was $47.9 million in the fourth quarter 2013, compared with $13.7 million in the fourth quarter 2012.
Fourth quarter 2013 net loss attributable to common stockholders was $81.2 million, or $0.12 per share, including stock compensation and acquisition-related costs, net, of $34.5 million ($31.0 million net of tax). Fourth quarter 2013 results include a pre-tax non-operating loss of $85.5 million ($77.8 million net of tax) related to the impairment of a minority investment in China. Earnings per share excluding this impairment charge, stock compensation and acquisition-related costs, net of tax, a non-GAAP financial measure, was $0.04 per share.
Operating cash flow for the trailing twelve months ended December 31, 2013 was $218.4 million. Free cash flow, a non-GAAP financial measure, was $158.3 million in the fourth quarter 2013, bringing free cash flow for the trailing twelve months ended December 31, 2013 to $154.9 million.
At the end of the quarter, Groupon had $1.2 billion in cash and cash equivalents.
Full Year 2013 Summary
Gross billings increased 7% globally to $5.8 billion in 2013, compared with $5.4 billion in 2012. North America growth of 20% and EMEA growth of 3% was offset by a 14% decline in Rest of World.
Revenue increased 10% to $2.6 billion in 2013, compared with $2.3 billion in 2012. North America revenue growth of 31% was offset by an 8% decline in EMEA and a 15% decline in Rest of World.
Gross profit decreased 7%, to $1.5 billion in 2013, compared with $1.6 billion in 2012.
Adjusted EBITDA, a non-GAAP financial measure, was $286.7 million in 2013, compared with $259.5 million in 2012.
Operating income was $75.8 million in 2013, compared with $98.7 million in 2012.
Operating income excluding stock compensation and acquisition-related costs, net, a non-GAAP financial measure, was $197.2 million in 2013, compared with $203.7 million in 2012.
Full year 2013 net loss attributable to common stockholders was $95.4 million, or $0.14 per share, including stock compensation and acquisition-related costs, net, of $121.5 million ($90.7 million net of tax). 2013 results include a pre-tax non-operating loss of $85.5 million ($77.8 million net of tax) related to the impairment of a minority investment in China in the fourth quarter. Earnings per share excluding this impairment charge, stock compensation and acquisition-related costs, net of tax, a non-GAAP financial measure, was $0.11 per share.
Definitions and reconciliations of all non-GAAP financial measures are included below in the section titled “Non-GAAP Financial Measures” and in the accompanying tables.
Operating Highlights

Units: Global units, defined as vouchers and products sold before cancellations and refunds, increased 11% year-over-year to 56 million in the fourth quarter 2013. North America units increased 17%, EMEA units increased 9%, and Rest of World units decreased 1% year-over-year.
Active deals: At the end of the fourth quarter 2013, on average, active deals in North America were approximately 80,000, compared with more than 65,000 at the end of the third quarter 2013. Globally, active deals exceeded 140,000 at the end of the fourth quarter 2013.
Active customers: Active customers, or customers that have purchased a voucher or product within the last twelve months, grew 9% year-over-year, to 44.9 million as of December 31, 2013, comprising 20.8 million in North America, 14.2 million in EMEA, and 9.9 million in Rest of World.
Customer spend: Fourth quarter 2013 trailing twelve month billings per average active customer was $134, compared with $137 in the third quarter 2013.
Mobile: In December 2013, nearly 50% of global transactions were completed on mobile devices. Nearly 70 million people have now downloaded Groupon mobile apps worldwide, with approximately 9 million people downloading them in the fourth quarter alone.
Marketplace: The rollout of Groupon’s marketplace (“Pull”) continued to gain traction. In December 2013, approximately 8% of total traffic in North America searched, with customers that searched spending over 50% more than those that did not.

Share Repurchase Program
During the fourth quarter 2013, Groupon repurchased 3,661,900 shares of Class A common stock under its share repurchase authorization at an average price of $10.26 per share, for an aggregate purchase price of $37.6 million. During the full year 2013, Groupon repurchased 4,432,800 shares at an average price of $10.51 per share, for an aggregate purchase price of $46.6 million. Groupon is authorized to repurchase up to approximately $253.4 million of Class A common stock under the August 2013 share repurchase authorization. The program, which is intended to partially offset dilution from employee stock grants, terminates in August 2015.
Subsequent Events
On January 2, 2014, Groupon completed the acquisition of LivingSocial Korea, Inc., the holding company that owns Ticket Monster, for $100 million in cash and $163 million in Groupon Class A common stock. Ticket Monster is a leading Korean ecommerce company, with a broad range of local, travel, and product offers, and is one of the fastest growing ecommerce companies in the region.
On January 13, 2014, Groupon completed the acquisition of Ideeli, Inc. for $43 million in cash. Ideeli is a leading online flash fashion retailer, further extending Groupon’s presence in fashion apparel.
Outlook
In the first quarter 2014, Groupon expects one-time costs related to the integration of its recent acquisitions, specifically as it consolidates Ticket Monster with its Korean business, and makes investments to drive ideeli growth and profitability. Together, in the first quarter, they are expected to contribute approximately $50 million to revenue, and have an approximately $20 million negative impact on Adjusted EBITDA. In addition, Groupon anticipates approximately $25 million of additional investment in marketing and other growth initiatives to drive adoption of the marketplace. As a result, for the first quarter 2014, the Company expects revenue of between $710 million and $760 million, Adjusted EBITDA of between $20 million and $40 million, and earnings per share excluding stock compensation, amortization of acquired intangibles, and acquisition-related expenses, net of tax, of between negative $0.04 and negative $0.02.
As a result of growth investments anticipated in 2014, Groupon expects Adjusted EBITDA for the full year to be slightly above 2013 levels.
Conference Call
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 athttp://investor.groupon.com. This call will contain forward-looking statements and other material information regarding the Company’s 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.
Non-GAAP Financial Measures
In addition to financial results reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP), we have provided the following non-GAAP financial measures in this release and the accompanying tables: foreign exchange rate neutral operating results, operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net, Adjusted EBITDA, free cash flow and earnings per share excluding stock-based compensation, acquisition-related expense (benefit), net, and the impairment of a minority investment in China. These non-GAAP financial measures are presented to aid investors in better understanding Groupon’s performance and to facilitate comparisons to many of our peers who present similar measures. However, these measures are not intended to be a substitute for those reported in accordance with U.S. GAAP. These measures may be different from non-GAAP financial measures used by other companies, even when similar terms are used to identify such measures. For reconciliations of these measures to the most applicable financial measures under U.S. GAAP, see “Non-GAAP Reconciliation Schedules” and “Supplemental Financial Information and Business 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, beginning in 2013, also includes external transaction costs related to business combinations, primarily consisting of legal and advisory fees. External transaction costs were not material for the prior periods presented in this release and the accompanying tables. 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 because it is 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.
Impairment of a minority investment in China. For the three months ended December 31, 2013, we recognized an $85.5 million other-than-temporary impairment of our minority investment in Life Media Limited (“F-tuan”), an entity with operations in China. This impairment reduced the carrying value of the investment to zero as of December 31, 2013. We have excluded this impairment from our non-GAAP earnings per share measure, described below, because we believe that excluding this item provides meaningful supplemental information about our core operating performance on a per share basis and facilitates comparisons to our historical operating 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 our current period operating results as if foreign currency exchange rates had remained the same as those in effect in the comparable period.
Operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net is a non-GAAP financial measure that comprises the consolidated total of the segment operating income (loss) of our three segments, North America, EMEA, and Rest of World. We have used consolidated operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net to allocate resources and evaluate performance internally. However, in recent periods, our management and Board of Directors have increasingly focused on Adjusted EBITDA, described below, as the primary non-GAAP measure for evaluating our consolidated operating results. Accordingly, we do not expect to continue to report Operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net on a consolidated basis in future periods.
Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation, and acquisition-related expense (benefit), net. Adjusted EBITDA is similar to Operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net, except Adjusted EBITDA also excludes depreciation and amortization. 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 plans and make strategic decisions regarding 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.
Earnings per share excluding stock-based compensation, acquisition-related expense (benefit), net and the impairment of a minority investment in China is a non-GAAP financial measure that adjusts our earnings (loss) per share to exclude the impact of stock-based compensation expense, acquisition-related expense (benefit), net and the impairment of a minority investment in China, and the income tax effect of those items. We believe that this non-GAAP financial measure provides useful supplemental information for evaluating our operating performance.
Beginning in the first quarter 2014, we will be changing our non-GAAP earnings per share measure to exclude amortization of acquired intangible assets, net of tax, in addition to stock compensation and acquisition-related expenses, which we have excluded historically. Given the significant acquisition activity in January 2014 and potential acquisition activity in the future, we believe that excluding non-cash amortization of acquired intangible assets from our non-GAAP earnings per share measure in future periods will enable more meaningful comparisons with our historical results.
Free cash flow is a non-GAAP financial 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.
Note on Forward-Looking Statements
The statements contained 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 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 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 most recent 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 20, 2014. Groupon undertakes 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 its expectations.
About Groupon
Groupon (NASDAQ: GRPN) is a global leader of local commerce and the place you start when you want to buy just about anything, anytime, anywhere. By leveraging the company’s global relationships and scale, Groupon offers consumers a vast marketplace of unbeatable deals all over the world. Shoppers discover the best a city has to offer on the web or on mobile with Groupon Local, enjoy vacations with Groupon Getaways, and find a curated selection of electronics, fashion, home furnishings and more with Groupon Goods.
Groupon is redefining how traditional small businesses attract, retain and interact with customers by providing merchants with a suite of products and services, including customizable deal campaigns, credit card payment processing capabilities, and point-of-sale solutions that help businesses grow and operate more effectively. To search for great deals or subscribe to Groupon emails, visit www.Groupon.com. To download Groupon’s five-star mobile apps, visit www.groupon.com/mobile. To learn more about the company’s merchant solutions and how to work with Groupon, visit www.GrouponWorks.com.

Groupon, Inc.

Summary Consolidated and Segment Results

(in thousands, except share and per share amounts)

(unaudited)

Three Months Ended

Y/Y %

Year Ended

Y/Y %

December 31,

Growth

December 31,

Growth

Y/Y %

excluding

Y/Y %

excluding

2013

2012

Growth

FX Effect (2)

FX(2)

2013

2012

Growth

FX Effect (2)

FX(2)

Gross Billings (1):

North America

$
788,721

$
718,952

9.7

$
(564
)

9.8

$
2,847,244

$
2,373,153

20.0

$
(1,115
)

20.0

EMEA

565,713

532,481

6.2

18,424

2.8

1,983,599

1,928,508

2.9

37,588

0.9

Rest of World

238,673

269,019

(11.3
)
%

(25,873
)

(1.7
)
%

926,487

1,078,523

(14.1
)
%

(76,742
)

(7.0
)
%

Consolidated gross billings

$
1,593,107

$
1,520,452

4.8

$
(8,013
)

5.3

$
5,757,330

$
5,380,184

7.0

$
(40,269
)

7.8

Revenue:

North America

$
443,784

$
375,351

18.2

$
(189
)

18.3

$
1,521,358

$
1,165,700

30.5

$
(380
)

30.5

EMEA

251,205

176,278

42.5

8,839

37.5

742,915

805,476

(7.8
)
%

16,114

(9.8
)
%

Rest of World

73,458

86,673

(15.2
)
%

(8,059
)

(5.9
)
%

309,382

363,296

(14.8
)
%

(27,455
)

(7.3
)
%

Consolidated revenue

$
768,447

$
638,302

20.4

$
591

20.3

$
2,573,655

$
2,334,472

10.2

$
(11,721
)

10.7

Income (loss) from operations

$
13,352

$
(12,861
)

203.8

$
3,306

178.1

$
75,754

$
98,701

(23.2
)
%

$
4,042

(27.3
)
%

Net loss attributable to common stockholders

$
(81,247
)

$
(81,089
)

$
(95,393
)

$
(67,377
)

Net loss per share:

Basic

$
(0.12
)

$
(0.14
)

$
(0.10
)

Diluted

$
(0.12
)

$
(0.14
)

$
(0.10
)

Weighted average number of shares outstanding:

Basic

668,046,073

665,678,123

663,910,194

650,214,119

Diluted

668,046,073

665,678,123

663,910,194

650,214,119

(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 the change in financial measures that would have resulted had average exchange rates in the reporting period been the same as those in effect during the three months and year ended December 31, 2012.

Groupon, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Three Months Ended

Year Ended

December 31,

2013

2012

2013

2012

Operating activities

Net loss

$
(78,861
)

$
(80,047
)

$
(88,946
)

$
(51,031
)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

24,132

15,965

89,449

55,801

Stock-based compensation

32,239

26,411

121,462

104,117

Deferred income taxes

(16,830
)

(17,259
)

(18,055
)

(7,651
)

Excess tax benefits on stock-based compensation

(8,338
)

(2,403
)

(20,454
)

(27,023
)

(Income) loss on equity method investments

(14
)

1,231

9,925

(Gain) loss, net from changes in fair value of contingent consideration

(895
)

153

(3,171
)

897

Gain on E-Commerce transaction

(56,032
)

Impairment of investments

85,925

50,553

85,925

50,553

Change in assets and liabilities, net of acquisitions:

Restricted cash

2,264

(2,517
)

2,183

(4,372
)

Accounts receivable

1,990

12,723

10,989

10,534

Prepaid expenses and other current assets

(76,052
)

(45,922
)

(62,906
)

(70,859
)

Accounts payable

(5,421
)

5,537

(31,288
)

18,711

Accrued merchant and supplier payables

160,758

96,029

88,468

149,918

Accrued expenses and other current liabilities

31,843

(20,268
)

4,053

47,742

Other, net

25,535

25,531

40,679

35,604

Net cash provided by operating activities

178,275

65,717

218,432

266,834

Net cash used in investing activities

(23,330
)

(52,753
)

(96,315
)

(194,979
)

Net cash (used in) provided by financing activities

(55,444
)

(6,495
)

(81,697
)

12,095

Effect of exchange rate changes on cash and cash equivalents

1,114

1,809

(9,237
)

2,404

Net increase in cash and cash equivalents

100,615

8,278

31,183

86,354

Cash and cash equivalents, beginning of period

1,139,857

1,201,011

1,209,289

1,122,935

Cash and cash equivalents, end of period

$
1,240,472

$
1,209,289

$
1,240,472

$
1,209,289

Groupon, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

Three Months Ended December 31,

Year Ended December 31,

2013

2012

2013

2012

Revenue:

Third party and other

$
401,688

$
413,127

$
1,654,654

$
1,879,729

Direct

366,759

225,175

919,001

454,743

Total revenue

768,447

638,302

2,573,655

2,334,472

Cost of revenue:

Third party and other

52,538

63,905

232,062

297,739

Direct

337,701

218,567

840,060

421,201

Total cost of revenue

390,239

282,472

1,072,122

718,940

Gross profit

378,208

355,830

1,501,533

1,615,532

Operating expenses:

Marketing

56,505

60,913

214,824

336,854

Selling, general and administrative

306,086

307,625

1,210,966

1,179,080

Acquisition-related expense (benefit), net

2,265

153

(11
)

897

Total operating expenses

364,856

368,691

1,425,779

1,516,831

Income (loss) from operations

13,352

(12,861
)

75,754

98,701

Income (loss) on equity method investments

(1,231
)

(44
)

(9,925
)

Other (expense) income, net

(84,847
)

(48,279
)

(94,619
)

6,166

(Loss) income before provision for income taxes

(71,481
)

(62,371
)

(18,909
)

94,942

Provision for income taxes

7,380

17,676

70,037

145,973

Net loss

(78,861
)

(80,047
)

(88,946
)

(51,031
)

Net income attributable to noncontrolling interests

(2,386
)

(936
)

(6,447
)

(3,742
)

Net loss attributable to Groupon, Inc.

(81,247
)

(80,983
)

(95,393
)

(54,773
)

Adjustment of redeemable noncontrolling interests to redemption value

(106
)

(12,604
)

Net loss attributable to common stockholders

$
(81,247
)

$
(81,089
)

$
(95,393
)

$
(67,377
)

Net loss per share

Basic

$
(0.12
)

$
(0.14
)

$
(0.10
)

Diluted

$
(0.12
)

$
(0.14
)

$
(0.10
)

Weighted average number of shares outstanding

Basic

668,046,073

665,678,123

663,910,194

650,214,119

Diluted

668,046,073

665,678,123

663,910,194

650,214,119

Groupon, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

December 31, 2013

December 31, 2012

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$
1,240,472

$
1,209,289

Accounts receivable, net

83,673

96,713

Deferred income taxes

27,938

31,211

Prepaid expenses and other current assets

210,415

150,573

Total current assets

1,562,498

1,487,786

Property, equipment and software, net

134,423

121,072

Goodwill

220,827

206,684

Intangible assets, net

28,443

42,597

Investments

20,652

84,209

Deferred income taxes, non-current

35,941

29,916

Other non-current assets

39,226

59,210

Total Assets

$
2,042,010

$
2,031,474

Liabilities and Equity

Current liabilities:

Accounts payable

$
27,573

$
59,865

Accrued merchant and supplier payables

752,943

671,305

Accrued expenses

226,986

246,924

Deferred income taxes

47,558

53,700

Other current liabilities

132,718

136,647

Total current liabilities

1,187,778

1,168,441

Deferred income taxes, non-current

10,853

20,860

Other non-current liabilities

131,697

100,072

Total Liabilities

1,330,328

1,289,373

Commitments and contingencies

Stockholders’ Equity

Class A common stock, par value $0.0001 per share, 2,000,000,000 shares authorized, 670,149,976 shares issued and 665,717,176 shares outstanding at December 31, 2013 and 654,523,706 shares issued and outstanding at December 31, 2012

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, 2013 and December 31, 2012

Common stock, par value $0.0001 per share, 2,010,000,000 shares authorized, no shares issued and outstanding at December 31, 2013 and December 31, 2012

Additional paid-in capital

1,584,211

1,485,006

Treasury stock, at cost, 4,432,800 shares at December 31, 2013 and no shares at December 31, 2012

(46,587
)

Accumulated deficit

(848,870
)

(753,477
)

Accumulated other comprehensive income

24,830

12,446

Total Groupon, Inc. Stockholders’ Equity

713,651

744,040

Noncontrolling interests

(1,969
)

(1,939
)

Total Equity

711,682

742,101

Total Liabilities and Equity

$
2,042,010

$
2,031,474

Groupon, Inc.

Segment Information

(in thousands)

(unaudited)

Three Months Ended December 31,

Year Ended December 31,

2013

2012

2013

2012

North America

Gross Billings (1)

$
788,721

$
718,952

$
2,847,244

$
2,373,153

Revenue

$
443,784

$
375,351

$
1,521,358

$
1,165,700

Segment cost of revenue and operating expenses(2)(3)

418,214

358,319

1,380,746

1,025,974

Segment operating income(2)(3)

$
25,570

$
17,032

$
140,612

$
139,726

Segment operating income as a percent of segment revenue

5.8

4.5

9.2

12.0

EMEA

Gross Billings (1)

$
565,713

$
532,481

$
1,983,599

$
1,928,508

Revenue

$
251,205

$
176,278

$
742,915

$
805,476

Segment cost of revenue and operating expenses(2)(3)

214,187

167,502

631,409

699,470

Segment operating income(2)(3)

$
37,018

$
8,776

$
111,506

$
106,006

Segment operating income as a percent of segment revenue

14.7

5.0

15.0

13.2

Rest of World

Gross Billings (1)

$
238,673

$
269,019

$
926,487

$
1,078,523

Revenue

$
73,458

$
86,673

$
309,382

$
363,296

Segment cost of revenue and operating expenses(2)

88,190

98,778

364,295

405,313

Segment operating loss(2)

$
(14,732
)

$
(12,105
)

$
(54,913
)

$
(42,017
)

Segment operating loss as a percent of segment revenue

(20.1
)
%

(14.0
)
%

(17.7
)
%

(11.6
)
%

Consolidated

Gross Billings (1)

$
1,593,107

$
1,520,452

$
5,757,330

$
5,380,184

Revenue

$
768,447

$
638,302

$
2,573,655

$
2,334,472

Segment cost of revenue and operating expenses(2)

720,591

624,599

2,376,450

2,130,757

Segment operating income(2)

$
47,856

$
13,703

$
197,205

$
203,715

Segment operating income as a percent of segment revenue

6.2

2.1

7.7

8.7

Stock-based compensation

32,239

26,411

121,462

104,117

Acquisition-related expense (benefit), net

2,265

153

(11
)

897

Income (loss) from operations

13,352

(12,861
)

75,754

98,701

(Income) loss on equity method investments

(14
)

1,231

9,925

Other expense (income), net

84,847

48,279

94,619

(6,166
)

(Loss) income before provision for income taxes

(71,481
)

(62,371
)

(18,909
)

94,942

Provision for income taxes

7,380

17,676

70,037

145,973

Net loss

$
(78,861
)

$
(80,047
)

$
(88,946
)

$
(51,031
)

(2) Segment cost of revenue and operating expenses and segment operating income (loss) exclude 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 EMEA Segment operating expenses (increase to EMEA Segment operating income) and a corresponding increase to North America Segment operating expenses (reduction to North America Segment operating income).

Groupon, Inc.

Non-GAAP Reconciliation Schedules

(in thousands, except share and per share amounts)

(unaudited)

The following are reconciliations of diluted earnings per share excluding stock-based compensation, acquisition-related expense (benefit), net and the impairment of a minority investment in China and foreign exchange rate neutral operating results to the most comparable U.S. GAAP financial measures. See “Supplemental Financial Information and Business Metrics” for reconciliations of Adjusted EBITDA, operating income excluding stock-based compensation and acquisition-related (expense) benefit, net and free cash flow to the most comparable U.S. GAAP financial measures.

The following is a reconciliation of diluted net loss per share to diluted earnings per share excluding stock-based compensation, acquisition-related expense (benefit), net and the impairment of Life Media Limited (F-tuan), a minority investment in China, for the three months and year ended December 31, 2013:

Three Months Ended

Year Ended

December 31, 2013

Net loss attributable to common stockholders

$
(81,247
)

$
(95,393
)

Stock-based compensation

32,239

121,462

Acquisition-related expense (benefit), net

2,265

(11
)

Impairment of investment in F-tuan

85,521

Income tax effect of adjustments

(11,301
)

(38,504
)

Net income attributable to common stockholders excluding stock-based compensation,

acquisition-related expense (benefit), net and impairment of investment in F-tuan

$
27,477

$
73,075

Diluted shares

668,046,073

663,910,194

Incremental diluted shares (1)

16,685,634

15,501,759

Adjusted diluted shares

684,731,707

679,411,953

Diluted net loss per share

$
(0.12
)

$
(0.14
)

Impact of stock-based compensation, acquisition-related expense

(benefit), net and impairment of investment in F-tuan and the related income tax effects

0.16

0.25

Diluted earnings per share excluding stock-based compensation,

acquisition-related expense (benefit), net and impairment of investment in F-tuan

$
0.04

$
0.11

(1) Outstanding equity awards are not reflected in the diluted net loss per share calculation for the three months and year ended December 31, 2013 because the effect would be antidilutive. However, those awards have been reflected in the calculation of diluted earnings per share excluding stock-based compensation, acquisition-related expense (benefit), net and the impairment of a minority investment in China for the three months and year ended December 31, 2013 because they have a dilutive effect on that calculation.

The following are reconciliations of foreign exchange rate neutral operating results to the most comparable U.S. GAAP financial measures, “Gross Billings,” “Revenue” and “Income from operations,” for the three months and year ended December 31, 2013.

The effect on the Company’s gross billings, revenue and income from operations from changes in exchange rates versus the U.S. Dollar for the three months ended December 31, 2013 was as follows:

Three Months Ended December 31, 2013

At Avg.

Exchange

At Avg.

Exchange

Q4 2012

Rate

Q3 2013

Rate

Rates (1)

Effect (2)

Reported

Rates (3)

Effect (2)

Reported

Gross billings

$
1,601,120

$
(8,013
)

$
1,593,107

$
1,578,913

$
14,194

$
1,593,107

Revenue

$
767,856

$
591

$
768,447

$
762,153

$
6,294

$
768,447

Income from operations

$
10,046

$
3,306

$
13,352

$
12,184

$
1,168

$
13,352

The effect on the Company’s gross billings, revenue and income from operations from changes in exchange rates versus the U.S. Dollar for the year ended December 31, 2013 was as follows:

Year Ended December 31, 2013

At Avg.

Exchange

At Avg.

Exchange

2012

Rate

Q4’12 – Q3’13

Rate

Rates (1)

Effect (2)

Reported

Rates (3)

Effect (2)

Reported

Gross billings

$
5,797,599

$
(40,269
)

$
5,757,330

$
5,765,679

$
(8,349
)

$
5,757,330

Revenue

$
2,585,376

$
(11,721
)

$
2,573,655

$
2,574,687

$
(1,032
)

$
2,573,655

Income from operations

$
71,712

$
4,042

$
75,754

$
75,009

$
745

$
75,754

(1) Represents the financial statement balances 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, 2012.

(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 financial statement balances 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, 2013.

Groupon, Inc.

Supplemental Financial Information and Business Metrics(14)

(financial data in thousands, except per share data; active customers in millions)

(unaudited)

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Segments

North America Segment

Gross Billings (1)

Local (2) Gross Billings

Third Party

$
430,255

$
450,140

$
449,770

$
401,756

$
436,705

Direct

693

1,040

Total Local Gross Billings

$
430,255

$
450,140

$
450,463

$
402,796

$
436,744

Goods Gross Billings

Third Party

$
31,270

$
17,294

$
15,501

$
12,650

$
23,373

Direct

209,575

148,065

181,377

181,915

262,666

Total Goods Gross Billings

$
240,845

$
165,359

$
196,878

$
194,565

$
286,039

Travel and Other Gross Billings

Third Party and Other

$
47,852

$
65,820

$
64,864

$
67,638

$
65,938

Direct

Total Travel and Other Gross Billings

$
47,852

$
65,820

$
64,864

$
67,638

$
65,938

Total Gross Billings

Third Party and Other

$
509,377

$
533,254

$
530,135

$
482,044

$
526,016

Direct

209,575

148,065

182,070

182,955

262,705

Total Gross Billings

$
718,952

$
681,319

$
712,205

$
664,999

$
788,721

Year-over-year growth

% of Consolidated Gross Billings

Gross Billings Trailing Twelve Months (TTM)

$
2,373,153

$
2,500,915

$
2,664,845

$
2,777,475

$
2,847,244

Revenue (3)

Local Revenue

Third Party

$
142,454

$
171,593

$
174,117

$
158,189

$
159,175

Direct

693

1,040

Total Local Revenue

$
142,454

$
171,593

$
174,810

$
159,229

$
159,214

Goods Revenue

Third Party

$
11,877

$
3,144

$
4,651

$
3,999

$
5,615

Direct

209,575

148,065

181,377

181,915

262,666

Total Goods Revenue

$
221,452

$
151,209

$
186,028

$
185,914

$
268,281

Travel and Other Revenue

Third Party and Other

$
11,445

$
16,752

$
16,344

$
15,695

$
16,289

Direct

Total Travel and Other Revenue

$
11,445

$
16,752

$
16,344

$
15,695

$
16,289

Total Revenue

Third Party and Other Revenue

$
165,776

$
191,489

$
195,112

$
177,883

$
181,079

Direct Revenue

209,575

148,065

182,070

182,955

262,705

Total Revenue

$
375,351

$
339,554

$
377,182

$
360,838

$
443,784

Year-over-year growth

109

% of Consolidated Revenue

Revenue TTM

$
1,165,700

$
1,266,689

$
1,383,690

$
1,452,925

$
1,521,358

Cost of Revenue (4)

Local Cost of Revenue

Third Party

$
23,203

$
25,915

$
19,818

$
18,985

$
17,918

Direct

636

1,887

Total Local Cost of Revenue

$
23,203

$
25,915

$
20,454

$
20,872

$
17,949

Goods Cost of Revenue

Third Party

$
1,935

$
475

$
522

$
480

$
613

Direct

196,789

138,278

158,529

163,825

246,638

Total Goods Cost of Revenue

$
198,724

$
138,753

$
159,051

$
164,305

$
247,251

Travel and Other Cost of Revenue

Third Party and Other

$
1,864

$
2,530

$
3,091

$
4,092

$
4,258

Direct

Total Travel and Other Cost of Revenue

$
1,864

$
2,530

$
3,091

$
4,092

$
4,258

Total Cost of Revenue

Third Party and Other Cost of Revenue

$
27,002

$
28,920

$
23,431

$
23,557

$
22,789

Direct Cost of Revenue

196,789

138,278

159,165

165,712

246,669

Total Cost of Revenue

$
223,791

$
167,198

$
182,596

$
189,269

$
269,458

% of North America Total Revenue

Gross Profit

Local Gross Profit

Third Party

$
119,251

$
145,678

$
154,299

$
139,204

$
141,257

Direct

(847
)

Total Local Gross Profit

$
119,251

$
145,678

$
154,356

$
138,357

$
141,265

% of North America Total Local Revenue

83.7

84.9

88.3

86.9

88.7

% of North America Total Local Gross Billings

27.7

32.4

34.3

32.3

Goods Gross Profit

Third Party

$
9,942

$
2,669

$
4,129

$
3,519

$
5,002

Direct

12,786

9,787

22,848

18,090

16,028

Total Goods Gross Profit

$
22,728

$
12,456

$
26,977

$
21,609

$
21,030

% of North America Total Goods Revenue

10.3

8.2

14.5

11.6

7.8

% of North America Total Goods Gross Billings

9.4

7.5

13.7

11.1

7.4

Travel and Other Gross Profit

Third Party and Other

$
9,581

$
14,222

$
13,253

$
11,603

$
12,031

Direct

Total Travel and Other Gross Profit

$
9,581

$
14,222

$
13,253

$
11,603

$
12,031

% of North America Total Travel and Other Revenue

83.7

84.9

81.1

73.9

% of North America Total Travel and Other Gross Billings

20.0

21.6

20.4

17.2

18.2

Total Gross Profit

Third Party and Other

$
138,774

$
162,569

$
171,681

$
154,326

$
158,290

Direct

12,786

9,787

22,905

17,243

16,036

Total Gross Profit

$
151,560

$
172,356

$
194,586

$
171,569

$
174,326

% of North America Total Revenue

40.4

50.8

51.6

47.5

39.3

% of North America Total Gross Billings

21.1

25.3

27.3

25.8

22.1

Operating Income Excl Stock-Based Compensation (SBC), Acquisition-Related Expense (Benefit), net

$
17,032

$
41,366

$
48,508

$
25,168

$
25,570

Year-over-year growth

(7
)
%

(36
)
%

% of Consolidated Operating Income Excl SBC, Acq-Related

124

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

4.5

12.2

12.9

7.0

5.8

Year-over-year growth (bps)

(570
)

(460
)

(380
)

(640
)

130

Operating Income TTM Excl SBC, Acq-Related

$
139,726

$
140,920

$
145,999

$
132,074

$
140,612

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

12.0

11.1

10.6

9.1

9.2

Year-over-year growth (bps)

1,120

200

(380
)

(540
)

(280
)

EMEA Segment

Gross Billings

Local Gross Billings

Third Party

$
239,944

$
259,423

$
241,108

$
207,110

$
276,670

Direct

Total Local Gross Billings

$
239,944

$
259,423

$
241,108

$
207,110

$
276,670

Goods Gross Billings

Third Party

$
195,582

$
141,742

$
165,413

$
160,578

$
122,902

Direct

9,020

7,451

2,181

9,271

96,978

Total Goods Gross Billings

$
204,602

$
149,193

$
167,594

$
169,849

$
219,880

Travel and Other Gross Billings

Third Party and Other

$
87,935

$
83,702

$
73,548

$
66,359

$
69,163

Direct

Total Travel and Other Gross Billings

$
87,935

$
83,702

$
73,548

$
66,359

$
69,163

Total Gross Billings

Third Party and Other

$
523,461

$
484,867

$
480,069

$
434,047

$
468,735

Direct

9,020

7,451

2,181

9,271

96,978

Total Gross Billings

$
532,481

$
492,318

$
482,250

$
443,318

$
565,713

Year-over-year growth

(8
)
%

Year-over-year growth, excluding FX (5)

(9
)
%

% of Consolidated Gross Billings

Gross Billings TTM

$
1,928,507

$
1,883,265

$
1,903,136

$
1,950,367

$
1,983,599

Revenue

Local Revenue

Third Party

$
98,668

$
110,715

$
109,481

$
91,448

$
115,259

Direct

Total Local Revenue

$
98,668

$
110,715

$
109,481

$
91,448

$
115,259

Goods Revenue

Third Party

$
49,173

$
45,875

$
32,938

$
32,008

$
22,296

Direct

9,020

7,451

2,181

9,271

96,978

Total Goods Revenue

$
58,193

$
53,326

$
35,119

$
41,279

$
119,274

Travel and Other Revenue

Third Party and Other

$
19,417

$
19,757

$
15,362

$
15,223

$
16,672

Direct

Total Travel and Other Revenue

$
19,417

$
19,757

$
15,362

$
15,223

$
16,672

Total Revenue

Third Party and Other Revenue

$
167,258

$
176,347

$
157,781

$
138,679

$
154,227

Direct Revenue

9,020

7,451

2,181

9,271

96,978

Total Revenue

$
176,278

$
183,798

$
159,962

$
147,950

$
251,205

Year-over-year growth

(27
)
%

(20
)
%

(24
)
%

(21
)
%

Year-over-year growth, excluding FX(5)

(25
)
%

(20
)
%

(25
)
%

(23
)
%

% of Consolidated Revenue

Revenue TTM

$
805,476

$
758,918

$
707,325

$
667,988

$
742,915

Cost of Revenue

Local Cost of Revenue

Third Party

$
10,622

$
14,192

$
10,898

$
10,254

$
10,374

Direct

Total Local Cost of Revenue

$
10,622

$
14,192

$
10,898

$
10,254

$
10,374

Goods Cost of Revenue

Third Party

$
5,294

$
5,880

$
4,705

$
3,972

$
2,203

Direct

14,550

7,472

3,306

8,364

83,545

Total Goods Cost of Revenue

$
19,844

$
13,352

$
8,011

$
12,336

$
85,748

Travel and Other Cost of Revenue

Third Party and Other

$
2,090

$
2,533

$
1,522

$
1,679

$
1,890

Direct

Total Travel and Other Cost of Revenue

$
2,090

$
2,533

$
1,522

$
1,679

$
1,890

Total Cost of Revenue

Third Party and Other Cost of Revenue

$
18,006

$
22,605

$
17,125

$
15,905

$
14,467

Direct Cost of Revenue

14,550

7,472

3,306

8,364

83,545

Total Cost of Revenue

$
32,556

$
30,077

$
20,431

$
24,269

$
98,012

% of EMEA Total Revenue

Gross Profit

Local Gross Profit

Third Party

$
88,046

$
96,523

$
98,583

$
81,194

$
104,885

Direct

Total Local Gross Profit

$
88,046

$
96,523

$
98,583

$
81,194

$
104,885

% of EMEA Total Local Revenue

89.2

87.2

90.0

88.8

91.0

% of EMEA Total Local Gross Billings

36.7

37.2

40.9

39.2

37.9

Goods Gross Profit

Third Party

$
43,879

$
39,995

$
28,233

$
28,036

$
20,093

Direct

(5,530
)

(21
)

(1,125
)

907

13,433

Total Goods Gross Profit

$
38,349

$
39,974

$
27,108

$
28,943

$
33,526

% of EMEA Total Goods Revenue

65.9

75.0

77.2

70.1

28.1

% of EMEA Total Goods Gross Billings

18.7

26.8

16.2

17.0

15.2

Travel and Other Gross Profit

Third Party and Other

$
17,327

$
17,224

$
13,840

$
13,544

$
14,782

Direct

Total Travel and Other Gross Profit

$
17,327

$
17,224

$
13,840

$
13,544

$
14,782

% of EMEA Total Travel and Other Revenue

89.2

87.2

90.1

89.0

88.7

% of EMEA Total Travel and Other Gross Billings

19.7

20.6

18.8

20.4

21.4

Total Gross Profit

Third Party and Other

$
149,252

$
153,742

$
140,656

$
122,774

$
139,760

Direct

(5,530
)

(21
)

(1,125
)

907

13,433

Total Gross Profit

$
143,722

$
153,721

$
139,531

$
123,681

$
153,193

% of EMEA Total Revenue

81.5

83.6

87.2

83.6

61.0

% of EMEA Total Gross Billings

27.0

31.2

28.9

27.9

27.1

Operating Income Excl SBC, Acq-Related

$
8,776

$
34,176

$
24,708

$
15,604

$
37,018

Year-over-year growth

(77
)
%

(6
)
%

(22
)
%

(46
)
%

322

% of Consolidated Operating Income Excl SBC, Acq-Related

Operating Margin Excl SBC, Acq-Related (% of EMEA Total revenue)

5.0

18.6

15.4

10.5

14.7

Year-over-year growth (bps)

(1,073
)

282

(500
)

970

Operating Income TTM Excl SBC, Acq-Related

$
106,005

$
103,853

$
96,767

$
83,264

$
111,506

Operating Margin TTM Excl SBC, Acq-Related (% of EMEA Total TTM revenue)

13.2

13.7

12.5

15.0

Year-over-year growth (bps)(6)

N/A

(13
)

(132
)

(300
)

180

Rest of World Segment

Gross Billings

Local Gross Billings

Third Party

$
128,954

$
119,990

$
114,630

$
118,325

$
116,291

Direct

Total Local Gross Billings

$
128,954

$
119,990

$
114,630

$
118,325

$
116,291

Goods Gross Billings

Third Party

$
89,475

$
70,994

$
66,774

$
71,127

$
82,375

Direct

6,581

6,778

5,625

7,846

7,076

Total Goods Gross Billings

$
96,056

$
77,772

$
72,399

$
78,973

$
89,451

Travel and Other Gross Billings

Third Party and Other

$
44,009

$
36,370

$
32,322

$
37,033

$
32,931

Direct

Total Travel and Other Gross Billings

$
44,009

$
36,370

$
32,322

$
37,033

$
32,931

Total Gross Billings

Third Party and Other

$
262,438

$
227,354

$
213,726

$
226,485

$
231,597

Direct

6,581

6,778

5,625

7,846

7,076

Total Gross Billings

$
269,019

$
234,132

$
219,351

$
234,331

$
238,673

Year-over-year growth

(11
)
%

(21
)
%

(13
)
%

(11
)
%

Year-over-year growth, excluding FX

(6
)
%

(16
)
%

(4
)
%

(2
)
%

% of Consolidated Gross Billings

Gross Billings TTM

$
1,078,524

$
1,048,973

$
992,302

$
956,833

$
926,487

Revenue

Local Revenue

Third Party

$
46,166

$
45,085

$
43,323

$
51,507

$
40,314

Direct

Total Local Revenue

$
46,166

$
45,085

$
43,323

$
51,507

$
40,314

Goods Revenue

Third Party

$
25,529

$
18,062

$
14,985

$
17,215

$
19,082

Direct

6,580

6,778

5,625

7,846

7,076

Total Goods Revenue

$
32,109

$
24,840

$
20,610

$
25,061

$
26,158

Travel and Other Revenue

Third Party and Other

$
8,398

$
8,125

$
7,670

$
9,703

$
6,986

Direct

Total Travel and Other Revenue

$
8,398

$
8,125

$
7,670

$
9,703

$
6,986

Total Revenue

Third Party and Other Revenue

$
80,093

$
71,272

$
65,978

$
78,425

$
66,382

Direct Revenue

6,580

6,778

5,625

7,846

7,076

Total Revenue

$
86,673

$
78,050

$
71,603

$
86,271

$
73,458

Year-over-year growth

(14
)
%

(26
)
%

(4
)
%

(15
)
%

Year-over-year growth, excluding FX

(8
)
%

(21
)
%

(6
)
%

% of Consolidated Revenue

Revenue TTM

$
363,296

$
350,984

$
325,988

$
322,597

$
309,382

Cost of Revenue

Local Cost of Revenue

Third Party

$
9,801

$
5,923

$
7,962

$
7,403

$
7,158

Direct

Total Local Cost of Revenue

$
9,801

$
5,923

$
7,962

$
7,403

$
7,158

Goods Cost of Revenue

Third Party

$
7,264

$
11,501

$
5,569

$
5,685

$
6,890

Direct

7,228

6,627

6,075

7,360

7,487

Total Goods Cost of Revenue

$
14,492

$
18,128

$
11,644

$
13,045

$
14,377

Travel and Other Cost of Revenue

Third Party and Other

$
1,832

$
1,067

$
1,420

$
1,451

$
1,234

Direct

Total Travel and Other Cost of Revenue

$
1,832

$
1,067

$
1,420

$
1,451

$
1,234

Total Cost of Revenue

Third Party and Other Cost of Revenue

$
18,897

$
18,491

$
14,951

$
14,539

$
15,282

Direct Cost of Revenue

7,228

6,627

6,075

7,360

7,487

Total Cost of Revenue

$
26,125

$
25,118

$
21,026

$
21,899

$
22,769

% of Rest of World Total Revenue

Gross Profit

Local Gross Profit

Third Party

$
36,365

$
39,162

$
35,361

$
44,104

$
33,156

Direct

Total Local Gross Profit

$
36,365

$
39,162

$
35,361

$
44,104

$
33,156

% of Rest of World Total Local Revenue

78.8

86.9

81.6

85.6

82.2

% of Rest of World Total Local Gross Billings

28.2

32.6

30.8

37.3

28.5

Goods Gross Profit

Third Party

$
18,265

$
6,561

$
9,416

$
11,530

$
12,192

Direct

(648
)

151

(450
)

486

(411
)

Total Goods Gross Profit

$
17,617

$
6,712

$
8,966

$
12,016

$
11,781

% of Rest of World Total Goods Revenue

54.9

27.0

43.5

47.9

45.0

% of Rest of World Total Goods Gross Billings

18.3

8.6

12.4

15.2

13.2

Travel and Other Gross Profit

Third Party and Other

$
6,566

$
7,058

$
6,250

$
8,252

$
5,752

Direct

Total Travel and Other Gross Profit

$
6,566

$
7,058

$
6,250

$
8,252

$
5,752

% of Rest of World Total Travel and Other Revenue

78.2

86.9

81.5

85.0

82.3

% of Rest of World Total Travel and Other Gross Billings

14.9

19.4

19.3

22.3

17.5

Total Gross Profit

Third Party and Other

$
61,196

$
52,781

$
51,027

$
63,886

$
51,100

Direct

(648
)

151

(450
)

486

(411
)

Total Gross Profit

$
60,548

$
52,932

$
50,577

$
64,372

$
50,689

% of Rest of World Total Revenue

69.9

67.8

70.6

74.6

69.0

% of Rest of World Total Gross Billings

22.5

22.6

23.1

27.5

21.2

Operating Loss Excl SBC, Acq-Related

$
(12,105
)

$
(24,389
)

$
(14,173
)

$
(1,619
)

$
(14,732
)

Year-over-year growth

(68
)
%

174

(331
)
%

(22
)
%

% of Consolidated Operating Income Excl SBC, Acq-Related

(88
)
%

(48
)
%

(24
)
%

(4
)
%

(31
)
%

Operating Margin Excl SBC, Acq-Related (% of Rest of World Total revenue)

(14.0
)
%

(31.2
)
%

(19.8
)
%

(1.9
)
%

(20.1
)
%

Year-over-year growth (bps)

3,848

(2,139
)

(1,640
)

1,790

(610
)

Operating Loss TTM Excl SBC, Acq-Related

$
(42,016
)

$
(57,495
)

$
(68,379
)

$
(52,286
)

$
(54,913
)

Operating Margin TTM Excl SBC, Acq-Related (% of Rest of World Total TTM revenue)

(11.6
)
%

(16.4
)
%

(21.0
)
%

(16.2
)
%

(17.7
)
%

Year-over-year growth (bps)(6)

N/A

3,590

788

330

(610
)

Consolidated Results of Operations

Gross Billings

Local Gross Billings

Third Party

$
799,153

$
829,553

$
805,508

$
727,191

$
829,666

Direct

693

1,040

Total Local Gross Billings

$
799,153

$
829,553

$
806,201

$
728,231

$
829,705

Goods Gross Billings

Third Party

$
316,327

$
230,030

$
247,688

$
244,355

$
228,650

Direct

225,176

162,294

189,183

199,032

366,720

Total Goods Gross Billings

$
541,503

$
392,324

$
436,871

$
443,387

$
595,370

Travel and Other Gross Billings

Third Party and Other

$
179,796

$
185,892

$
170,734

$
171,030

$
168,032

Direct

Total Travel and Other Gross Billings

$
179,796

$
185,892

$
170,734

$
171,030

$
168,032

Total Gross Billings

Third Party and Other

$
1,295,276

$
1,245,475

$
1,223,930

$
1,142,576

$
1,226,348

Direct

225,176

162,294

189,876

200,072

366,759

Total Gross Billings

$
1,520,452

$
1,407,769

$
1,413,806

$
1,342,648

$
1,593,107

Year-over-year growth

Year-over-year growth, excluding FX

Gross Billings (TTM)

$
5,380,184

$
5,433,153

$
5,560,283

$
5,684,675

$
5,757,330

Year-over-year growth

Revenue

Local Revenue

Third Party

$
287,288

$
327,393

$
326,921

$
301,144

$
314,748

Direct

693

1,040

Total Local Revenue

$
287,288

$
327,393

$
327,614

$
302,184

$
314,787

Goods Revenue

Third Party

$
86,579

$
67,081

$
52,574

$
53,222

$
46,993

Direct

225,175

162,294

189,183

199,032

366,720

Total Goods Revenue

$
311,754

$
229,375

$
241,757

$
252,254

$
413,713

Travel and Other Revenue

Third Party and Other

$
39,260

$
44,634

$
39,376

$
40,621

$
39,947

Direct

Total Travel and Other Revenue

$
39,260

$
44,634

$
39,376

$
40,621

$
39,947

Total Revenue

Third Party and Other Revenue

$
413,127

$
439,108

$
418,871

$
394,987

$
401,688

Direct Revenue

225,175

162,294

189,876

200,072

366,759

Total Revenue

$
638,302

$
601,402

$
608,747

$
595,059

$
768,447

Year-over-year growth

Year-over-year growth, excluding FX

Total Consolidated Revenue TTM

$
2,334,472

$
2,376,591

$
2,417,003

$
2,443,510

$
2,573,655

Year-over-year growth

Cost of Revenue

Local Cost of Revenue

Third Party

$
43,626

$
46,030

$
38,678

$
36,642

$
35,450

Direct

636

1,887

Total Local Cost of Revenue

$
43,626

$
46,030

$
39,314

$
38,529

$
35,481

Goods Cost of Revenue

Third Party

$
14,493

$
17,856

$
10,796

$
10,137

$
9,706

Direct

218,567

152,377

167,910

179,549

337,670

Total Goods Cost of Revenue

$
233,060

$
170,233

$
178,706

$
189,686

$
347,376

Travel and Other Cost of Revenue

Third Party and Other

$
5,786

$
6,130

$
6,033

$
7,222

$
7,382

Direct

Total Travel and Other Cost of Revenue

$
5,786

$
6,130

$
6,033

$
7,222

$
7,382

Total Cost of Revenue

Third Party and Other Cost of Revenue

$
63,905

$
70,016

$
55,507

$
54,001

$
52,538

Direct Cost of Revenue

218,567

152,377

168,546

181,436

337,701

Total Cost of Revenue

$
282,472

$
222,393

$
224,053

$
235,437

$
390,239

% of Total Consolidated Revenue

Gross Profit

Local Gross Profit

Third Party

$
243,662

$
281,363

$
288,243

$
264,502

$
279,298

Direct

(847
)

Total Local Gross Profit

$
243,662

$
281,363

$
288,300

$
263,655

$
279,306

% of Total Consolidated Local Revenue

84.8

85.9

88.0

87.2

88.7

% of Total Consolidated Local Gross Billings

30.5

33.9

35.8

36.2

33.7

Goods Gross Profit

Third Party

$
72,086

$
49,225

$
41,778

$
43,085

$
37,287

Direct

6,608

9,917

21,273

19,483

29,050

Total Goods Gross Profit

$
78,694

$
59,142

$
63,051

$
62,568

$
66,337

% of Total Consolidated Goods Revenue

25.2

25.8

26.1

24.8

16.0

% of Total Consolidated Goods Gross Billings

14.5

15.1

14.4

14.1

11.1

Travel and Other Gross Profit

Third Party and Other

$
33,474

$
38,504

$
33,343

$
33,399

$
32,565

Direct

Total Travel and Other Gross Profit

$
33,474

$
38,504

$
33,343

$
33,399

$
32,565

% of Total Consolidated Travel and Other Revenue

85.3

86.3

84.7

82.2

81.5

% of Total Consolidated Travel and Other Gross Billings

18.6

20.7

19.5

19.4

Total Gross Profit

Third Party and Other

$
349,222

$
369,092

$
363,364

$
340,986

$
349,150

Direct

6,608

9,917

21,330

18,636

29,058

Total Gross Profit

$
355,830

$
379,009

$
384,694

$
359,622

$
378,208

% of Total Consolidated Revenue

55.7

63.0

63.2

60.4

49.2

% of Total Consolidated Gross Billings

23.4

26.9

27.2

26.8

23.7

Operating Income Excl SBC, Acq-Related

$
13,703

$
51,153

$
59,043

$
39,153

$
47,856

Year-over-year growth

(24
)
%

(18
)
%

(22
)
%

249

Operating Margin Excl SBC, Acq-Related (% of Total Consolidated revenue)

2.1

8.5

9.7

6.6

6.2

Year-over-year growth (bps)

(150
)

(360
)

(300
)

(230
)

410

Operating Income TTM Excl SBC, Acq-Related

$
203,715

$
187,278

$
174,387

$
163,052

$
197,205

Operating Margin TTM Excl SBC, Acq-Related (% of Total Consolidated TTM revenue)

8.7

7.9

7.2

6.7

7.7

Year-over-year growth (bps)

1,770

680

(40
)

(280
)

(100
)

Operating (Loss) Income

$
(12,861
)

$
21,178

$
27,412

$
13,812

$
13,352

Year-over-year growth

(47
)
%

(41
)
%

(46
)
%

204

Operating Margin (% of Total Consolidated revenue)

(2.0
)
%

3.5

4.5

2.3

1.7

Year-over-year growth (bps)

100

(360
)

(370
)

(220
)

370

Operating Income TTM

$
98,701

$
80,240

$
61,167

$
49,541

$
75,754

Operating Margin TTM (% of Total Consolidated TTM revenue)

4.2

3.4

2.5

2.0

2.9

Year-over-year growth (bps)

1,870

750

(100
)

(240
)

(130
)

Net Loss Attributable to Common Stockholders

(81,089
)

(3,992
)

(7,574
)

(2,580
)

(81,247
)

Weighted Average Basic Shares Outstanding

655,678

658,800

662,361

666,433

668,046

Weighted Average Diluted Shares Outstanding (7)

655,678

658,800

662,361

666,433

668,046

Net Loss per Share:

Basic

$
(0.12
)

$
(0.01
)

$
(0.00
)

$
(0.12
)

Diluted

$
(0.12
)

$
(0.01
)

$
(0.00
)

$
(0.12
)

The following is a quarterly reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure, “Net loss.” (8)

Net loss

$
(80,047
)

$
(3,242
)

$
(5,551
)

$
(1,292
)

$
(78,861
)

Adjustments:

Stock-based compensation

26,411

29,907

32,446

26,870

32,239

Acquisition-related expense (benefit), net

153

(815
)

(1,529
)

2,265

Depreciation and amortization

15,965

20,700

21,468

23,149

24,132

Non-operating items:

Loss (income) on equity method investments

1,231

(14
)

Other expense (income), net

48,279

5,064

5,565

(857
)

84,847

Provision for income taxes

17,676

19,337

27,384

15,936

7,380

Total adjustments

109,715

75,095

86,062

63,594

150,849

Adjusted EBITDA

$
29,668

$
71,853

$
80,511

$
62,302

$
71,988

The following is a quarterly reconciliation of Operating income, excluding stock-based compensation and acquisition-related (expense) benefit, net, to the most comparable U.S. GAAP financial measure, “Operating (loss) income.” (8)

Operating income, excluding stock-based compensation and acquisition-related (expense) benefit, net

$
13,703

$
51,153

$
59,043

$
39,153

$
47,856

Stock-based compensation

(26,411
)

(29,907
)

(32,446
)

(26,870
)

(32,239
)

Acquisition-related (expense) benefit, net

(153
)

(68
)

815

1,529

(2,265
)

Operating (loss) income

$
(12,861
)

$
21,178

$
27,412

$
13,812

$
13,352

The following is a trailing twelve months reconciliation of Operating income, excluding stock-based compensation and acquisition-related (expense) benefit, net, to the most comparable U.S. GAAP financial measure, “Operating Income.” (8)

Operating income, excluding stock-based compensation and acquisition-related (expense) benefit, net TTM

$
203,715

$
187,278

$
174,387

$
163,052

$
197,205

Stock-based compensation

(104,117
)

(106,021
)

(111,383
)

(115,634
)

(121,462
)

Acquisition-related (expense) benefit, net

(897
)

(1,017
)

(1,837
)

2,123

Operating income TTM

$
98,701

$
80,240

$
61,167

$
49,541

$
75,754

The following is a quarterly reconciliation of foreign exchange rate neutral Gross Billings growth from the comparable quarterly periods of the prior year to reported Gross Billings growth from the comparable quarterly periods of the prior year.(9)

EMEA Gross Billings growth, excluding FX

(9
)
%

FX Effect

(2
)
%

EMEA Gross Billings growth

(8
)
%

Rest of World Gross Billings growth, excluding FX

(6
)
%

(16
)
%

(4
)
%

(2
)
%

FX Effect

(3
)
%

(5
)
%

(9
)
%

Rest of World Gross Billings growth

(11
)
%

(21
)
%

(13
)
%

(11
)
%

Consolidated Gross Billings growth, excluding FX

FX Effect

(1
)
%

Consolidated Gross Billings growth

The following is a quarterly reconciliation of foreign exchange rate neutral Revenue growth from the comparable quarterly periods of the prior year to reported Revenue growth from the comparable quarterly periods of the prior year.(9)

EMEA Revenue growth, excluding FX

(25
)
%

(20
)
%

(25
)
%

(23
)
%

FX Effect

(2
)
%

EMEA Revenue growth

(27
)
%

(20
)
%

(24
)
%

(21
)
%

Rest of World Revenue growth, excluding FX

(8
)
%

(21
)
%

(6
)
%

FX Effect

(3
)
%

(6
)
%

(5
)
%

(11
)
%

(9
)
%

Rest of World Revenue growth

(14
)
%

(26
)
%

(4
)
%

(15
)
%

Consolidated Revenue growth, excluding FX

FX Effect

(1
)
%

Consolidated Revenue growth

The following is a reconciliation of free cash flow to the most comparable U.S. GAAP financial measure, “Net cash provided by (used in) operating activities.”

Net cash provided by (used in) operating activities

$
65,717

$
8,760

$
43,302

$
(11,905
)

$
178,275

Purchases of property and equipment and capitalized software

(40,034
)

(14,468
)

(14,042
)

(15,064
)

(19,931
)

Free cash flow (10)

$
25,683

$
(5,708
)

$
29,260

$
(26,969
)

$
158,344

Net cash provided by operating activities (TTM)

$
266,834

$
191,880

$
159,867

$
105,874

$
218,432

Purchases of property and equipment and capitalized software (TTM)

(95,836
)

(97,221
)

(84,554
)

(83,608
)

(63,505
)

Free cash flow (TTM)

$
170,998

$
94,659

$
75,313

$
22,266

$
154,927

Net cash used in investing activities

$
(52,753
)

$
(30,679
)

$
(15,862
)

$
(26,444
)

$
(23,330
)

Net cash used in financing activities

$
(6,495
)

$
(9,342
)

$
(7,941
)

$
(8,970
)

$
(55,444
)

Net cash used in investing activities (TTM)

$
(194,979
)

$
(179,214
)

$
(134,923
)

$
(125,738
)

$
(96,315
)

Net cash provided by (used in) financing activities (TTM)

$
12,095

$
11,028

$
(21,071
)

$
(32,748
)

$
(81,697
)

Other Metrics

Active Customers (11)

North America

17.2

18.2

19.1

19.9

20.8

EMEA

14.3

14.0

13.9

14.0

14.2

Rest of World

9.5

9.6

9.9

Total Active Customers

41.0

41.7

42.6

43.5

44.9

TTM Gross Billings / Average Active Customer (12)

North America

$
152

$
151

$
156

$
155

$
150

EMEA

$
146

$
137

$
135

$
137

$
139

Rest of World

$
126

$
116

$
108

$
102

$
95

Consolidated

$
144

$
138

$
137

$
134

Headcount

Sales (13)

4,677

4,566

4,679

4,801

4,834

% North America

% EMEA

% Rest of World

Other

6,717

6,433

6,306

6,453

6,449

Total Headcount

11,394

10,999

10,985

11,254

11,283

(2) Local represents deals from local merchants, deals with national merchants, and deals through local events.

(3) Third party revenue is related to sales for which the Company acts as a marketing agent for the merchant. This revenue is recorded on a net basis. Direct revenue is primarily related to the sale of products for which the Company is the merchant of record. These revenues are accounted for on a gross basis, with the cost of inventory included in cost of revenue.

(4) Cost of revenue is comprised of direct and certain indirect costs incurred to generate revenue. Direct cost of revenue includes the cost of inventory, shipping and fulfillment costs and inventory markdowns. Third party cost of revenue includes estimated refunds for which the merchant’s share is not recoverable. Other costs incurred to generate revenue are allocated to cost of third party and other revenue and direct revenue for each of our categories (Local, Goods, and Travel and other) in proportion to gross billings during the period.

(5) Represents the 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 prior year period.

(6) International operating margin information broken out between EMEA and Rest of World is not readily available for quarterly periods during the year ended December 31, 2010. Therefore, the Company is presenting year-over-year basis point (bps) growth for operating margin TTM excluding stock-based compensation and acquisition-related expense (benefit), net beginning in the first quarter of 2013.

(7) 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.

(8) Adjusted EBITDA and Operating income excluding stock-based compensation and acquisition-related (expense) benefit, net are non-GAAP financial measures. The Company reconciles Adjusted EBITDA to the most comparable U.S. GAAP financial measure, “Net loss” for the periods presented, and the Company reconciles Operating income excluding stock-based compensation and acquisition-related (expense) benefit, net to the most comparable U.S. GAAP financial measure, “Operating (loss) income,” for the periods presented.

(9) Foreign Exchange Rate neutral operating results are non-GAAP financial measures. The Company reconciles “foreign exchange rate neutral Gross Billings growth” and “foreign exchange rate neutral Revenue growth” to year-over-year growth rates for the most comparable U.S. GAAP financial measures, “Gross Billings” and “Revenue,” respectively, for the periods presented.

(10) Free cash flow is a non-GAAP financial measure. The Company reconciles this measure to the most comparable U.S. GAAP financial measure, “Net cash provided by (used in) operating activities,” for the periods presented.

(11) Reflects the total number of unique user accounts who have purchased a voucher or product from us during the trailing twelve months.

(12) Reflects the total gross billings generated in the trailing twelve months per average active customer over that period.

(13) Includes merchant sales representatives, as well as sales support.

(14) The definition, methodology, and appropriateness of each of our supplemental metrics is reviewed periodically. As a result, metrics are subject to removal and/or change.

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