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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)-- 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            

Y/Y %

  Year Ended            

Y/Y %

 
    December 31,            

Growth

    December 31,            

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.

                 
                 
                 
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 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.   Exchange       At Avg.   Exchange    
   

Q4 2011
Rates (1)

 

Rate
Effect (2)

 

As
Reported

 

Q3 2012
Rates (3)

 

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.   Exchange       At Avg.   Exchange    
   

2011
Rates (1)

 

Rate
Effect (2)

 

As
Reported

 

Q4'11 - Q3'12
Rates (3)

 

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.

     
     
     
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 (Loss) Income 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         1060   %
% 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    
                                                 
Consolidated Results of Operations                                                
Gross Billings (1)   $ 668,174       $ 929,249       $ 1,157,210       $ 1,230,868       $ 1,354,800       $ 1,286,676     $ 1,218,256       $ 1,520,452    
Year-over-year growth     1,405   %     916   %     496   %     196   %     103   %     38 %     5   %     24   %
Year-over-year growth, excluding FX (4)     1,378   %     859   %     465   %     198   %     108   %     47 %     11   %     25   %
Gross Billings (1) (TTM)   $ 1,369,139       $ 2,206,964       $ 3,169,902       $ 3,985,501       $ 4,672,127       $ 5,029,554     $ 5,090,600       $ 5,380,184    
Year-over-year growth     1,651   %     1,227   %     804   %     435   %     241   %     128 %     61   %     35   %
                                                 
Revenue:                                                
Third Party and Other Revenue (2)   $ 295,523       $ 392,582       $ 422,989       $ 478,510       $ 540,053       $ 502,985     $ 423,564       $ 413,127    
Direct Revenue (2)     -         -         7,172         13,654         19,230         65,350       144,988         225,175    
Total Consolidated Revenue   $ 295,523       $ 392,582       $ 430,161       $ 492,164       $ 559,283       $ 568,335     $ 568,552       $ 638,302    
Year-over-year growth     1,358   %     915   %     426   %     186   %     89   %     45 %     32   %     30   %
Year-over-year growth, excluding FX (4)     1,332   %     858   %     401   %     188   %     95   %     53 %     38   %     31   %
Total Consolidated Revenue TTMYear-over-year growth, excluding FX (1)   $ 588,192       $ 942,108       $ 1,290,490       $ 1,610,430       $ 1,874,190       $ 2,049,943     $ 2,188,334       $ 2,334,472    
Year-over-year growth     1,594   %     1,205   %     761   %     415   %     219   %     118 %     70   %     45   %
                                                 
Cost of Revenue:                                                
Third Party and Other Cost of Revenue (3)   $ 39,765       $ 54,803       $ 62,339       $ 86,882       $ 102,629       $ 77,032     $ 54,173       $ 63,905    
Direct Cost of Revenue (3)     -         -         5,707         9,383         16,869         58,152       127,613         218,567    
Total Consolidated Cost of Revenue   $ 39,765       $ 54,803       $ 68,046       $ 96,265       $ 119,498       $ 135,184     $ 181,786       $ 282,472    
% of Total Consolidated Revenue     13   %     14   %     16   %     20   %     21   %     24 %     32   %     44   %
                                                 
Gross Profit                                                
Third Party and Other   $ 255,758       $ 337,779       $ 360,650       $ 391,628       $ 437,424       $ 425,953     $ 369,391       $ 349,222    
Direct     -         -         1,465         4,271         2,361         7,198       17,375         6,608    
Total   $ 255,758       $ 337,779       $ 362,115       $ 395,899       $ 439,785       $ 433,151     $ 386,766       $ 355,830    
% of Total Consolidated Revenue     87   %     86   %     84   %     80   %     79   %     76 %     68   %     56   %
                                                 
Operating (Loss) Income Excl SBC, Acq-Related   $ (98,284 )     $ (62,309 )     $ (1,692 )     $ 17,952       $ 67,590       $ 71,934     $ 50,488       $ 13,703    
Year-over-year growth     N/A         (166 ) %     93.   %     N/A         N/A         N/A       N/A         (24 ) %
Operating Margin Excl SBC, Acq-Related (% of Total Consolidated revenue)     (33.3 ) %     (15.9 ) %     (0.4 ) %     3.6   %     12.1   %     12.7 %     8.9   %     2.1   %
Year-over-year growth (bps)     (7,611 )       4,471         2,760         8,689         4,534         2,853       930         (150 )  
Operating (Loss) Income TTM Excl SBC, Acq-Related   $ (287,964 )     $ (326,848 )     $ (305,646 )     $ (144,333 )     $ 21,541       $ 155,784     $ 207,964       $ 203,715    
Operating Margin TTM Excl SBC, Acq-Related (% of Total Consolidated TTM revenue)     (49.0 ) %     (34.7 ) %     (23.7 ) %     (9.0 ) %     1.1   %     7.6 %     9.5   %     8.7   %
Year-over-year growth (bps)     (7,208 )       (1,333 )       245         4,887         5,011         4,229       3,320         1,770    
                                                 
Operating (Loss) Income   $ (117,148 )     $ (101,027 )     $ (239 )     $ (14,972 )     $ 39,639       $ 46,485     $ 25,438       $ (12,861 )  
Year-over-year growth     N/A         (174 ) %     100   %     96.   %     N/A         N/A       N/A         14   %
Operating Margin (% of Total Consolidated revenue)     (39.6 ) %     (25.7 ) %     (0.1 ) %     (3.0 ) %     7.1   %     8.2 %     4.5   %     (2.0 ) %
Year-over-year growth (bps)     (8,192 )       6,949         6,838         19,213         4,673         3,391       457         100    
Operating (Loss) Income TTM   $ (546,064 )     $ (610,272 )     $ (554,543 )     $ (233,386 )     $ (76,599 )     $ 70,913     $ 96,590       $ 98,701    
Operating Margin TTM (% of Total Consolidated TTM revenue)     (92.8 ) %     (64.8 ) %     (43.0 ) %     (14.5 ) %     (4.1 ) %     3.5 %     4.4   %     4.2   %
Year-over-year growth (bps)     (11,533 )       (2,457 )       1,427         11,983         8,875         6,824       4,740         1,870    
                                                 
Net (Loss) Income Attributable to Common Stockholders     (146,480 )       (107,406 )       (54,229 )       (65,379 )       (11,695 )       28,386       (2,979 )       (81,089 )  
Weighted Average Basic Shares Outstanding     307,849         303,415         307,605         528,422         644,097         647,150       653,224         655,678    
Weighted Average Diluted Shares Outstanding (5)     307,849         303,415         307,605         528,422         644,097         663,123       653,224         655,678    
Net (Loss) Earnings per Share                                                
Basic   $ (0.48 )     $ (0.35 )     $ (0.18 )     $ (0.12 )     $ (0.02 )     $ 0.04     $ (0.00 )     $ (0.12 )  
Diluted   $ (0.48 )     $ (0.35 )     $ (0.18 )     $ (0.12 )     $ (0.02 )     $ 0.04     $ (0.00 )     $ (0.12 )  
                                                                               
                                                                               
                                                                               
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  
                                                 
Depreciation and Amortization                                                
North America   $ 1,273       $ 1,910       $ 2,817       $ 4,515       $ 5,004       $ 6,669       $ 8,153       $ 10,754    
International     6,325         6,188         4,241         4,786         6,712         6,141         7,157         5,211    
Consolidated   $ 7,598       $ 8,098       $ 7,058       $ 9,301       $ 11,716       $ 12,810       $ 15,310       $ 15,965    
                                                 
The following is a quarterly reconciliation of Operating (Loss) Income, excluding stock-based compensation and acquisition-related expense (benefit), net, to the most comparable U.S. GAAP measure, "Operating (Loss) Income." (6)
Operating (Loss) Income, excluding stock-based compensation and acquisition-related expense   $ (98,284 )     $ (62,309 )     $ (1,692 )     $ 17,952       $ 67,590       $ 71,934       $ 50,488       $ 13,703    
Stock-based Compensation     (18,864 )       (38,718 )       (3,340 )       (32,668 )       (28,003 )       (27,084 )       (22,619 )       (26,411 )  
Acquisition-related expense (benefit), net     -         -         4,793         (256 )       52         1,635         (2,431 )       (153 )  
Operating (Loss) Income   $ (117,148 )     $ (101,027 )     $ (239 )     $ (14,972 )     $ 39,639       $ 46,485       $ 25,438       $ (12,861 )  
                                                 
The following is a trailing twelve months reconciliation of Operating (Loss) Income, excluding stock-based compensation and acquisition-related expense (benefit), net, to the most comparable U.S. GAAP measure, "Operating (Loss) Income." (6)      
Operating (Loss) Income, excluding stock-based compensation and acquisition-related expense TTM   $ (287,964 )     $ (326,848 )     $ (305,646 )     $ (144,333 )     $ 21,541       $ 155,784       $ 207,964       $ 203,715    
Stock-based Compensation     (54,916 )       (89,674 )       (88,351 )       (93,590 )       (102,729 )       (91,095 )       (110,374 )       (104,117 )  
Acquisition-related expense (benefit), net     (203,184 )       (193,750 )       (160,546 )       4,537         4,589         6,224         (1,000 )       (897 )  
Operating (Loss) Income TTM   $ (546,064 )     $ (610,272 )     $ (554,543 )     $ (233,386 )     $ (76,599 )     $ 70,913       $ 96,590       $ 98,701    
                                                 
The following is a quarterly reconciliation of foreign exchange rate neutral Gross Billings growth from the comprable quarterly periods of the prior year to reported Gross billings growth from the comprable quarterly periods of the prior year.(7)
International Gross Billings, excluding FX     N/A         4,587   %     1,021   %     287   %     138   %     45   %     (4 ) %     9   %
FX Effect     N/A         470   %     94   %     (4 ) %     (11 ) %     (13 ) %     (8 ) %     (3 ) %
International Gross Billings     N/A         5,057   %     1,115   %     283   %     127   %     32   %     (12 ) %     6   %
                                                 
Consolidated Gross Billings, excluding FX     1,378   %     859   %     465   %     198   %     108   %     47   %     11   %     25   %
FX Effect     27   %     57   %     31   %     (2 ) %     (5 ) %     (9 ) %     (6 ) %     (1 ) %
Condolidated Gross Billings     1,405   %     916   %     496   %     196   %     103   %     38   %     5   %     24   %
                                                 
The following is a quarterly reconciliation of foreign exchange rate neutral Revenue growth from the comprable quarterly periods of the prior year to reported Revenue growth from the comprable quarterly periods of the prior year.(7)
International Revenue, excluding FX     N/A         7,013   %     868   %     276   %     112   %     44   %     13   %     (14 ) %
FX Effect     N/A         696   %     79   %     (3 ) %     (10 ) %     (13 ) %     (10 ) %     (2 ) %
International Revenue     N/A         7,709   %     947   %     273   %     102   %     31   %     3   %     (16 ) %
                                                 
Consolidated Revenue, excluding FX     1,332   %     858   %     401   %     188   %     95   %     53   %     38   %     31   %
FX Effect     26   %     57   %     25   %     (2 ) %     (6 ) %     (8 ) %     (6 ) %     (1 ) %
Consolidated Revenue     1,358   %     915   %     426   %     186   %     89   %     45   %     32   %     30   %
                                                 
Cash Flow                                                
Operating cash flow (TTM)   $ 91,928       $ 128,316       $ 173,291       $ 290,447       $ 356,221       $ 392,517       $ 370,194       $ 266,834    
Purchases of property, equipment and capitalized software, net (TTM)     (24,780 )       (31,949 )       (38,414 )       (43,811 )       (45,932 )       (62,401 )       (69,788 )       (95,836 )  
Free cash flow (TTM) (9)   $ 67,148       $ 96,367       $ 134,877       $ 246,636       $ 310,289       $ 330,116       $ 300,406       $ 170,998    
                                                 
Net cash (used in) provided by investing activities (TTM)   $ (55,510 )     $ (83,226 )     $ (124,301 )     $ (147,433 )     $ (149,583 )     $ (184,552 )     $ (177,133 )     $ (194,979 )  
Net cash provided by (used in) financing activities (TTM)   $ 142,549       $ 125,404       $ 130,593       $ 867,205       $ 746,824       $ 771,404       $ 765,503       $ 12,095    
                                                 
Other Metrics:                                                
Active Customers (10)                                                
North America     8,213         11,039         12,823         14,084         14,876         15,121         15,983         17,215    
International     7,163         11,998         16,083         19,658         21,974         22,925         23,542         23,834    
Total Active Customers     15,376         23,037         28,906         33,742         36,850         38,046         39,525         41,049    
                                                 
TTM Gross Billings / Average Active Customer (11)   $ 169       $ 174       $ 189       $ 187       $ 179       $ 165       $ 149       $ 144    
                                                 
Headcount                                                
Sales (12)     3,556         4,850         4,853         5,196         5,735         5,587         5,087         4,677    
% North America     19 %       20 %       21 %       20 %       21 %       20 %       24 %       25 %  
% International     81 %       80 %       79 %       80 %       79 %       80 %       76 %       75 %  
Other     3,551         4,775         5,565         6,275         6,813         7,233         6,779         6,717    
Total Headcount     7,107         9,625         10,418         11,471         12,548         12,820         11,866         11,394    
                                                                                 

(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)

 

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 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.

(3)

 

Cost of revenue is comprised of direct and indirect costs incurred to generate revenue. Direct cost of revenue includes the purchase price of consumer products, warehousing, shipping 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 revenue, direct revenue and other revenue in proportion to relative gross billings during the period.

(4)

 

Represents change in financial measures that would have resulted had average exchange rates in the reported period been the same as those in effect in the prior year period.

(5)

 

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.

(6)

 

Operating income excluding stock-based compensation and acquisition-related activities is a non-GAAP financial measure. The Company reconciles this measure to the most comparable U.S. GAAP measure, ‘‘Operating Income," for the periods presented.

(7)

 

Foreign Exchange Rate neutral operating results are non-GAAP financial measures. The Company reconciles these measures to the most comparable U.S. GAAP measures, ‘‘Gross Billings" and "Revenue," for the periods presented.

(8)

 

Year-over-year growth is unavailable for select international growth measures as Groupon did not commence international operations until the second quarter of 2010.

(9)

 

Free cash flow is a non-GAAP financial measure. The Company reconciles this measure to the most comparable U.S. GAAP measure, ‘‘Net cash provided by operating activities," for the periods presented. See "Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities."

(10)

 

Reflects the total number of unique accounts who have purchased Groupons during the trailing twelve months.

(11)

 

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

(12)

 

Includes inside and outside merchant sales representatives, as well as sales support.

(13)

 

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.

 

Groupon Investor Relations
Genny Konz, 312-999-3098
ir@groupon.com
or
Groupon Public Relations
Paul Taaffe, 312-999-3964

Source: Groupon, Inc.

 

 

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