Groupon, Inc.
May 3, 2017
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Groupon Announces First Quarter 2017 Results

Continued progress on strategic initiatives in North America; reiterates FY 2017 guidance

CHICAGO--(BUSINESS WIRE)-- Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter ended March 31, 2017.

"In the first quarter, we continued to make solid progress in our mission to be the daily habit in local commerce," said CEO Rich Williams. "Our focus on growing customers in our marketplace, significantly improving the customer experience and continuing to streamline and simplify our business helped drive a 42 percent year-over-year increase in Adjusted EBITDA and gross profit of $309 million for the quarter."

As of March 31, 2017, Groupon has completed the dispositions of our operations in 11 countries. Accordingly, the results of our operations in those 11 countries are presented as discontinued operations, appearing net of tax in a single line in the company's consolidated statements of operations. Prior period results have been updated to reflect that discontinued operations presentation.

First Quarter 2017 Summary

North America

International

Consolidated

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.

Share Repurchase

During the first quarter 2017, Groupon repurchased 7,336,681 shares of its common stock for an aggregate purchase price of $26.0 million. Groupon repurchased 31,744,424 shares for an aggregate purchase price of $125.0 million for the trailing twelve month period as of the first quarter 2017. Up to $169.0 million of common stock was available for repurchase under Groupon's share repurchase program as of March 31, 2017. The timing and amount of any share repurchases are determined based on market conditions, limitations under our Amended and Restated Credit Agreement, share price and other factors, and the program may be discontinued or suspended at any time.

Outlook

Groupon is reiterating its outlook for 2017, which reflects current foreign exchange rates, as well as expected marketing investments and cost benefits associated with our streamlining initiatives. The basis for our full year 2017 guidance is continuing operations.

Conference Call

A conference call will be webcast live today at 9:00 a.m. CDT / 10:00 a.m. EDT 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.

Groupon encourages investors to use its investor relations website as a way of easily finding information about the company. Groupon promptly makes available on this website, free of charge, the reports that the company files or furnishes with the SEC, corporate governance information (including Groupon's Global Code of Conduct), and select press releases and social media postings. Groupon uses its investor relations site (investor.groupon.com) and its blog (https://www.groupon.com/blog) as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

Non-GAAP Financial Measures

In addition to financial results reported in accordance with U.S. GAAP, we have provided the following non-GAAP financial measures: Adjusted EBITDA, non-GAAP net income (loss) attributable to common stockholders, non-GAAP earnings (loss) per share, free cash flow and foreign currency exchange rate neutral operating results. These non-GAAP financial measures, which are presented on a continuing operations basis, are intended to aid investors in better understanding our current financial performance and prospects for the future as seen through the eyes of management. We believe that these non-GAAP financial measures facilitate comparisons with our historical results and with the results of peer companies who present similar measures (although other companies may define non-GAAP measures differently than we define them, even when similar terms are used to identify such measures). However, these non-GAAP financial measures are not intended to be a substitute for those reported in accordance with U.S. GAAP. For reconciliations of these measures to the most applicable financial measures under U.S. GAAP, see "Non-GAAP Reconciliation Schedules" and "Supplemental Financial 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 external transaction costs related to business combinations, primarily consisting of legal and advisory fees. The composition of our contingent consideration arrangements and the impact of those arrangements on our operating results vary over time based on a number of factors, including the terms of our business combinations and the timing of those transactions. We exclude acquisition-related expense (benefit), net because we believe that non-GAAP financial measures excluding this item provide meaningful supplemental information about our operating performance and facilitate comparisons to our historical operating results.

Depreciation and amortization. We exclude depreciation and amortization expenses because they are non-cash in nature and we believe that non-GAAP financial measures excluding these items provide meaningful supplemental information about our operating performance and liquidity.

Interest and Other Non-Operating Items. Interest and other non-operating items include: gains and losses related to minority investments, foreign currency gains and losses, interest income and interest expense, including non-cash interest expense from our convertible senior notes. We exclude interest and other non-operating items from certain of our non-GAAP financial measures because we believe that excluding these items provides meaningful supplemental information about our core operating performance and facilitates comparisons to our historical operating results.

Special Charges and Credits. For the three months ended March 31, 2017 and 2016, special charges and credits included charges related to our restructuring plan. We exclude special charges and credits from Adjusted EBITDA because we believe that excluding those items provides meaningful supplemental information about our core operating performance and facilitates comparisons with our historical results.

Income Tax Effect of Items Excluded from Non-GAAP Financial Measures. We determine the income tax effect of items excluded from our measures of non-GAAP net income (loss) attributable to common stockholders and non-GAAP earnings (loss) per share by performing a tax provision calculation using pre-tax income (loss) amounts that have been adjusted to exclude those items in the respective jurisdictions to which they relate. The difference between the income tax expense (benefit) determined on that basis and our reported income tax expense (benefit) represents the income tax effect of the excluded items.

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 prior-year period. We present foreign exchange rate neutral information to facilitate comparisons to our historical operating results.

Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) from continuing operations excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation, acquisition-related expense (benefit), net, and other special charges and credits. Our definition of Adjusted EBITDA may differ from similar measures used by other companies, even when similar terms are used to identify such measures. Adjusted EBITDA is a key measure used by our management and Board of Directors to evaluate operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating performance in the same manner as our management and Board of Directors.

Non-GAAP net income (loss) attributable to common stockholders and non-GAAP earnings (loss) per share are non-GAAP performance measures that adjust our net income (loss) attributable to common stockholders and earnings (loss) per share to exclude the impact of:

We believe that excluding the above items from our measures of non-GAAP net income (loss) attributable to common stockholders and non-GAAP earnings (loss) per share provides useful supplemental information for evaluating our operating performance and facilitates comparisons to our historical results by eliminating items that are non-cash in nature, relate to discrete events, or are otherwise not indicative of the core operating performance of our ongoing business.

Free cash flow is a non-GAAP financial measure that comprises net cash provided by (used in) operating activities from continuing operations less purchases of property and equipment and capitalized software from continuing operations. We use free cash flow to conduct and evaluate our business because, although it is similar to cash flow from 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, the full year or the future are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve a number of risks and uncertainties, and actual results could differ materially from those discussed. The words "may," will," should," "could," "expect," anticipate," "believe," "estimate," intend," "continue" and other similar expressions are intended to identify forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, but are not limited to, volatility in our revenue and operating results; risks related to our business strategy, including our strategy to grow our local marketplaces, marketing strategy and spend and the productivity of those marketing investments; effectively dealing with challenges arising from our international operations, including fluctuations in currency exchange rates and any potential adverse impact from the United Kingdom's likely exit from the European Union; retaining existing customers and adding new customers; retaining and adding high quality merchants; cyber security breaches; incurring expenses as we expand our business; competing successfully in our industry; maintaining favorable payment terms with our business partners; providing a strong mobile experience for our customers; delivery and routing of our emails; product liability claims; managing inventory and order fulfillment risks; integrating our technology platforms; litigation; managing refund risks; retaining, attracting and integrating members of our executive team; difficulties, delays or our inability to successfully complete all or part of the announced restructuring actions or to realize the operating efficiencies and other benefits of such restructuring actions; higher than anticipated restructuring charges or changes in the timing of such restructuring charges; completing and realizing the anticipated benefits from acquisitions, dispositions, joint ventures and strategic investments; tax liabilities; tax legislation; compliance with domestic and foreign laws and regulations, including the CARD Act and regulation of the Internet and e-commerce; classification of our independent contractors; maintaining our information technology infrastructure; protecting our intellectual property; maintaining a strong brand; seasonality; customer and merchant fraud; payment-related risks; our ability to raise capital if necessary and our outstanding indebtedness; global economic uncertainty; the impact of our ongoing strategic review and any potential strategic alternatives we may choose to pursue; our senior convertible notes; and our ability to realize the anticipated benefits from the hedge and warrant transactions. For additional information regarding these and other risks and uncertainties, we urge you to refer to the factors included under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the company's Annual Report on Form 10-K for the year ended December 31, 2016, and our other filings with the Securities and Exchange Commission, 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 May 3, 2017. 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 building the daily habit in local commerce, offering a vast mobile and online marketplace where people discover and save on amazing things to do, eat, see and buy. By enabling real-time commerce across local businesses, travel destinations, consumer products and live events, shoppers can find the best a city has to offer.

Groupon is redefining how small businesses attract and retain customers by providing them with customizable and scalable marketing tools and services to profitably grow their businesses.

To download Groupon's top-rated mobile apps, visit www.groupon.com/mobile. To search for great deals or subscribe to Groupon emails, visit www.groupon.com. To learn more about the company's merchant solutions and how to work with Groupon, visit www.groupon.com/merchant.

 
Groupon, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
 
March 31, 2017 December 31, 2016
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 690,975 $ 862,977
Accounts receivable, net 63,732 71,272
Prepaid expenses and other current assets 88,512 94,441
Current assets of discontinued operations       63,246  
Total current assets 843,219 1,091,936
Property, equipment and software, net 158,222 169,452
Goodwill 275,978 274,551
Intangible assets, net 37,995 42,915
Investments (including $112,606 and $110,066 at March 31, 2017 and December 31, 2016, respectively, at fair value) 145,003 141,882
Deferred income taxes 5,118 5,151
Other non-current assets 18,300 23,484
Non-current assets of discontinued operations       12,006  
Total Assets $ 1,483,835   $ 1,761,377  
Liabilities and Equity
Current liabilities:
Accounts payable $ 18,805 $ 28,551
Accrued merchant and supplier payables 637,693 770,992
Accrued expenses and other current liabilities 335,531 366,456
Current liabilities of discontinued operations       47,052  
Total current liabilities 992,029 1,213,051
Convertible senior notes, net 181,582 178,995
Deferred income taxes 1,745 1,714
Other non-current liabilities 97,090 99,628
Non-current liabilities of discontinued operations       2,927  
Total Liabilities   1,272,446     1,496,315  
Commitments and contingencies
Stockholders' Equity
Common stock, par value $0.0001 per share, 2,010,000,000 shares authorized, 741,388,884 shares issued and 562,356,295 shares outstanding at March 31, 2017 and 736,531,771 shares issued and 564,835,863 shares outstanding at December 31, 2016 74 74
Additional paid-in capital 2,127,405 2,112,728
Treasury stock, at cost, 179,032,589 shares at March 31, 2017 and 171,695,908 shares at December 31, 2016 (833,451 ) (807,424 )
Accumulated deficit (1,126,658 ) (1,099,010 )
Accumulated other comprehensive income (loss)   42,795     58,052  
Total Groupon, Inc. Stockholders' Equity 210,165 264,420
Noncontrolling interests   1,224     642  
Total Equity   211,389     265,062  
Total Liabilities and Equity $ 1,483,835   $ 1,761,377  
     
Groupon, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
 
Three Months Ended March 31,
2017 2016
Revenue:
Third-party and other $ 301,577 $ 309,629
Direct   372,049     388,806  
Total revenue   673,626     698,435  
Cost of revenue:
Third-party and other 42,873 41,060
Direct   321,302     337,273  
Total cost of revenue   364,175     378,333  
Gross profit   309,451     320,102  
Operating expenses:
Marketing 86,342 87,295
Selling, general and administrative 232,046 262,978
Restructuring charges 2,731 11,513
Acquisition-related expense (benefit), net   12     3,464  
Total operating expenses   321,131     365,250  
Income (loss) from operations (11,680 ) (45,148 )
Other income (expense), net   (4,602 )   2,618  
Income (loss) from continuing operations before provision (benefit) for income taxes (16,282 ) (42,530 )
Provision (benefit) for income taxes   4,587     1,009  
Income (loss) from continuing operations (20,869 ) (43,539 )
Income (loss) from discontinued operations, net of tax   487     (2,057 )
Net income (loss) (20,382 ) (45,596 )
Net income attributable to noncontrolling interests   (4,032 )   (3,523 )
Net income (loss) attributable to Groupon, Inc. $ (24,414 ) $ (49,119 )
 
Basic and diluted net income (loss) per share (1):
Continuing operations $ (0.04 ) $ (0.08 )
Discontinued operations        
Basic and diluted net income (loss) per share $ (0.04 ) $ (0.08 )
 
Weighted average number of shares outstanding
Basic 562,195,243 582,751,678
Diluted 562,195,243 582,751,678
 
(1) The structure of the Company's common stock changed during the year ended December 31, 2016. For additional information, refer to Note 8, Stockholders' Equity and Compensation Arrangements, and Note 12, Income (Loss) per Share, in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.
   
Groupon, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)

(unaudited)

     
Three Months Ended March 31,
2017 2016
Operating activities
Net income (loss) $ (20,382 ) $ (45,596 )
Less: Income (loss) from discontinued operations, net of tax   487     (2,057 )
Income (loss) from continuing operations (20,869 ) (43,539 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property, equipment and software 28,667 29,761
Amortization of acquired intangible assets 5,400 4,654
Stock-based compensation 19,701 30,093
Restructuring-related long-lived asset impairments 45
Deferred income taxes (74 ) (2,310 )
(Gain) loss, net from changes in fair value of contingent consideration 12 3,442
(Gain) loss from changes in fair value of investments (303 ) 1,100
Amortization of debt discount on convertible senior notes 2,587
Change in assets and liabilities, net of acquisitions and dispositions:
Restricted cash 1,853 502
Accounts receivable 10,594 (5,763 )
Prepaid expenses and other current assets 5,380 18,939
Accounts payable (13,184 ) (1,499 )
Accrued merchant and supplier payables (138,238 ) (109,264 )
Accrued expenses and other current liabilities (36,040 ) 11,967
Other, net   (1,719 )   (12,905 )
Net cash provided by (used in) operating activities from continuing operations (136,233 ) (74,777 )
Net cash provided by (used in) operating activities from discontinued operations   (1,098 )   (1,948 )
Net cash provided by (used in) operating activities   (137,331 )   (76,725 )
 
Investing activities
Purchases of property and equipment and capitalized software (14,076 ) (19,852 )
Cash derecognized upon dispositions of subsidiaries (40 )
Acquisitions of intangible assets and other investing activities   56     (786 )
Net cash provided by (used in) investing activities from continuing operations (14,020 ) (20,678 )
Net cash provided by (used in) investing activities from discontinued operations   (7,547 )   (100 )
Net cash provided by (used in) investing activities   (21,567 )   (20,778 )
 
Financing activities
Payments for purchases of treasury stock (27,234 ) (64,665 )
Taxes paid related to net share settlements of stock-based compensation awards (8,970 ) (4,964 )
Proceeds from stock option exercises and employee stock purchase plan 2,468 1,933
Distributions to noncontrolling interest holders (3,450 ) (3,365 )
Payments of capital lease obligations (8,067 ) (6,954 )
Other financing activities   (473 )    
Net cash provided by (used in) financing activities   (45,726 )   (78,015 )
Effect of exchange rate changes on cash and cash equivalents, including cash classified within current assets of discontinued operations   3,756     10,668  
Net increase (decrease) in cash and cash equivalents, including cash classified within current assets of discontinued operations (200,868 ) (164,850 )
Less: Net increase (decrease) in cash classified within current assets of discontinued operations   (28,866 )   3,993  
Net increase (decrease) in cash and cash equivalents (172,002 ) (168,843 )
Cash and cash equivalents, beginning of period   862,977     824,307  
Cash and cash equivalents, end of period $ 690,975   $ 655,464  
               
Groupon, Inc.
Supplemental Financial Information and Business Metrics (1)
(financial data in thousands; active customers in millions)
(unaudited)
 
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
 
North America Segment: Q1 2017
Gross Billings (2): Y/Y Growth
Local $ 539,623 $ 542,439 $ 530,768 $ 590,684 $ 587,766 8.9 %
Travel 103,390 105,388 93,564 90,059 114,163 10.4
Goods   294,061     318,427     296,630     431,388     262,588   (10.7 )
Total Gross Billings $ 937,074   $ 966,254   $ 920,962   $ 1,112,131   $ 964,517   2.9 %
 
Revenue:
Local $ 192,153 $ 184,139 $ 176,220 $ 209,799 $ 200,545 4.4 %
Travel 20,914 21,401 21,241 19,023 20,462 (2.2 )
Goods   287,746     311,382     285,820     421,931     252,350   (12.3 )
Total Revenue $ 500,813   $ 516,922   $ 483,281   $ 650,753   $ 473,357   (5.5 ) %
 
Gross Profit:
Local $ 164,018 $ 158,812 $ 152,873 $ 185,280 $ 169,342 3.2 %
Travel 15,712 16,334 17,257 15,052 15,165 (3.5 )
Goods   36,213     42,028     31,531     50,437     36,430   0.6
Total Gross Profit $ 215,943   $ 217,174   $ 201,661   $ 250,769   $ 220,937   2.3 %
 
Operating income (loss) $ (41,934 ) $ (31,284 ) $ (24,471 ) $ 12,246 $ (14,783 ) 64.7 %
 
International Segment: Q1 2017
Gross Billings: Y/Y Growth FX Effect (3) Y/Y Growth excluding FX (3)
Local $ 200,141 $ 196,857 $ 184,068 $ 221,337 $ 191,219 (4.5 ) % 3.4 (1.1 ) %
Travel 63,723 56,409 58,964 60,099 53,161 (16.6 ) 1.0 (15.6 )
Goods   168,748     170,019     158,965     211,963     149,079   (11.7 ) 3.0 (8.7 )
Total Gross Billings $ 432,612   $ 423,285   $ 401,997   $ 493,399   $ 393,459   (9.1 ) % 2.9 (6.2 ) %
 
Revenue:
Local $ 68,907 $ 67,956 $ 64,282 $ 68,900 $ 63,575 (7.7 ) % 3.8 (3.9 ) %
Travel 12,451 11,640 13,524 12,141 11,002 (11.6 ) 1.5 (10.1 )
Goods   116,264     127,242     125,468     173,071     125,692   8.1 3.7 11.8
Total Revenue $ 197,622   $ 206,838   $ 203,274   $ 254,112   $ 200,269   1.3 % 3.6 4.9 %
 
Gross Profit:
Local $ 64,221 $ 62,970 $ 59,257 $ 63,987 $ 59,194 (7.8 ) % 3.9 (3.9 ) %
Travel 11,242 10,484 12,378 11,087 10,036 (10.7 ) 1.8 (8.9 )
Goods   28,696     24,749     19,972     26,063     19,284   (32.8 ) 2.0 (30.8 )
Total Gross Profit $ 104,159   $ 98,203   $ 91,607   $ 101,137   $ 88,514   (15.0 ) % 3.2 (11.8 ) %
 
Operating income (loss) $ (3,214 ) $ (8,469 ) $ (370 ) $ (2,749 ) $ 3,103 196.5 %
 
Consolidated Results of Operations:
Gross Billings:
Local $ 739,764 $ 739,296 $ 714,836 $ 812,021 $ 778,985 5.3 % 0.9 6.2 %
Travel 167,113 161,797 152,528 150,158 167,324 0.1 0.4 0.5
Goods   462,809     488,446     455,595     643,351     411,667   (11.1 ) 1.1 (10.0 )
Total Gross Billings $ 1,369,686   $ 1,389,539   $ 1,322,959   $ 1,605,530   $ 1,357,976   (0.9 ) % 0.9 %
 
Revenue:
Local $ 261,060 $ 252,095 $ 240,502 $ 278,699 $ 264,120 1.2 % 1.0 2.2 %
Travel 33,365 33,041 34,765 31,164 31,464 (5.7 ) 0.6 (5.1 )
Goods   404,010     438,624     411,288     595,002     378,042   (6.4 ) 1.0 (5.4 )

 

Total Revenue

$ 698,435   $ 723,760   $ 686,555   $ 904,865   $ 673,626   (3.6 ) % 1.0 (2.6 ) %
 
Gross Profit:
Local $ 228,239 $ 221,782 $ 212,130 $ 249,267 $ 228,536 0.1 % 1.1 1.2 %
Travel 26,954 26,818 29,635 26,139 25,201 (6.5 ) 0.7 (5.8 )
Goods   64,909     66,777     51,503     76,500     55,714   (14.2 ) 0.9 (13.3 )
Total Gross Profit $ 320,102   $ 315,377   $ 293,268   $ 351,906   $ 309,451   (3.3 ) % 1.0 (2.3 ) %
 
Operating income (loss) $ (45,148 ) $ (39,753 ) $ (24,841 ) $ 9,497 $ (11,680 ) 74.1 %
 
Net cash provided by (used in) operating activities from continuing operations $ (74,777 ) $ (51,009 ) $ (39,879 ) $ 294,593 $ (136,233 ) (82.2 ) %
 
Free Cash Flow $ (94,629 ) $ (67,508 ) $ (52,561 ) $ 275,339 $ (150,309 ) (58.8 ) %
 
 
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
Other Metrics:
Active Customers (4)
North America 26.9 27.9 29.1 31.1 31.6
International   17.3     17.0     16.6     16.8     16.7  
Total Active Customers 44.2 44.9 45.7 47.9 48.3
 
TTM Gross Billings / Average Active Customer

 

North America

$ 146 $ 145 $ 142 $ 138 $ 136

 

International

109 105 103 102 101

 

Consolidated

131 129 127 124 123
 
TTM Gross Profit / Average Active Customer

 

North America

$ 32 $ 32 $ 31 $ 31 $ 30

 

International

26 25 25 23 22

 

Consolidated

30 29 29 28 27
 
Consolidated Units 47.2 46.2 44.4 57.9 45.7
Year-over-year growth:
North America 6.0 % 5.9 % 6.4 % 3.2 % (0.4 ) %
International (15.6 ) (18.4 ) (18.5 ) (0.3 ) (8.7 )
Consolidated (2.2 ) (3.2 ) (2.9 ) 2.0 (3.1 )
 
Headcount
Sales (5) 3,068 2,893 2,695 2,626 2,624
Other   4,777     4,383     4,389     4,641     4,496  
Total Headcount 7,845 7,276 7,084 7,267 7,120
 
 
(1) The financial results of the exited 11 countries are presented as discontinued operations in the accompanying condensed consolidated financial statements and tables. All prior period financial information and operational metrics have been retrospectively adjusted to reflect this presentation.
(2) Represents the total dollar value of customer purchases of goods and services.
(3) Represents the change in financial measures that would have resulted had average exchange rates in the reporting periods been the same as those in effect in the prior year periods.
(4) Reflects the total number of unique user accounts who made a purchase through one of our online marketplaces during the trailing twelve months. North America active customers for the quarter ended March 31, 2017 includes approximately 0.9 million incremental active customers from the acquisition of LivingSocial, Inc.
(5) Includes merchant sales representatives, as well as sales support personnel from our continuing operations.
           
Groupon, Inc.
Non-GAAP Reconciliation Schedules
(in thousands, except share and per share amounts)
(unaudited)
 
Adjusted EBITDA, non-GAAP earnings attributable to common stockholders and non-GAAP earnings per share are non-GAAP performance measures. The Company reconciles Adjusted EBITDA to the most comparable U.S. GAAP performance measure, "Net income (loss) from continuing operations" for the periods presented and the Company reconciles non-GAAP earnings per share to the most comparable U.S. GAAP performance measure, "Diluted net income (loss) per share," for the periods presented.
 
The following is a quarterly reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP performance measure, "Income (loss) from continuing operations."
 
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
Income (loss) from continuing operations $ (43,539 ) $ (48,768 ) $ (34,447 ) $ (39,455 ) $ (20,869 )
Adjustments:
Stock-based compensation (1) 27,293 34,210 25,457 22,563 19,650
Depreciation and amortization 34,415 33,916 32,897 34,681 34,067
Acquisition-related expense (benefit), net 3,464 850 (9 ) 1,345 12
Restructuring charges 11,513 15,702 1,163 12,060 2,731
Gains on business dispositions

(9,339

)

(2,060

)

Non-operating expense (income), net (2,618 ) 11,253 7,917 54,737 4,602
Provision (benefit) for income taxes   1,009     (2,238 )   1,690     (5,779 )   4,587  
Total adjustments   75,076     84,354     67,055     119,607     65,649  
Adjusted EBITDA $ 31,537   $ 35,586   $ 32,608   $ 80,152   $ 44,780  
 
(1) Represents stock-based compensation recorded within cost of revenue, marketing expense, and selling, general and administrative expense. Non-operating expense (income), net, includes $0.2 million, $0.2 million, $0.3 million, $0.2 million and $0.1 million of additional stock-based compensation for the three months ended March 31, 2016, June 30, 2016, September 30, 2016, December 31, 2016 and March 31, 2017, respectively. Restructuring charges includes $2.6 million and $2.1 million of additional stock-based compensation for the three months ended March 31, 2016 and June 30, 3016, respectively.
 
The following is a reconciliation of the Company's annual outlook for Adjusted EBITDA to the Company's outlook for the most comparable U.S. GAAP performance measure, "Income (loss) from continuing operations."

 

 
Year Ending December 31, 2017
Expected income (loss) from continuing operations range $(42,500) to $(17,500)
Expected adjustments:
Stock-based compensation 80,000 to 90,000
Depreciation and amortization 130,000
Restructuring charges 5,000
Non-operating expense (income), net 20,000
Provision (benefit) for income taxes 7,500 to 12,500
Total expected adjustments $242,500 to $257,500
Expected Adjusted EBITDA range $200,000 to $240,000
 
The outlook provided above does not reflect the potential impact of any additional restructuring actions that the Company may decide to pursue, business acquisitions or dispositions, changes in the fair values of investments or contingent consideration, foreign currency gains or losses or unusual or infrequently occurring items that may occur during 2017.
 
 
The following is a reconciliation of net income (loss) attributable to common stockholders to non-GAAP net income (loss) attributable to common stockholders and a reconciliation of diluted net income (loss) per share to non-GAAP net income (loss) per share for the three months ended March 31, 2017:
 
Three Months Ended March 31, 2017
Net income (loss) attributable to common stockholders $ (24,414 )
Stock-based compensation 19,701
Amortization of acquired intangible assets 5,400
Acquisition-related expense (benefit), net 12
Restructuring charges 2,731
Losses (gains), net from changes in fair value of investments (303 )
Intercompany foreign currency losses (gains) and reclassifications of translation adjustments to earnings (110 )
Non-cash interest expense on convertible senior notes 2,587
Income tax effect of above adjustments 55
Income from discontinued operations, net of tax $ (487 )
Non-GAAP net income (loss) attributable to common stockholders $ 5,172  
 
Weighted-average shares of common stock - basic 562,195,243
Effect of dilutive securities   7,527,970  
Weighted-average shares of common stock - diluted   569,723,213  
 
Diluted net income (loss) per share $ (0.04 )
Impact of stock-based compensation, amortization of acquired intangible assets, acquisition-related expense (benefit), net, intercompany foreign currency losses (gains), special charges and credits, income from discontinued operations and related tax effects   0.05  
Non-GAAP net income (loss) per share $ 0.01  
 
 
Free cash flow is a non-GAAP financial measure. 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 from continuing operations."
 
 
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
 
Net cash provided by (used in) operating activities from continuing operations $ (74,777 ) $ (51,009 ) $ (39,879 ) $ 294,593 $ (136,233 )
Purchases of property and equipment and capitalized software from continuing operations   (19,852 )   (16,499 )   (12,682 )   (19,254 )   (14,076 )
Free cash flow $ (94,629 ) $ (67,508 ) $ (52,561 ) $ 275,339 $ (150,309 )
 
Net cash provided by (used in) investing activities from continuing operations $ (20,678 ) $ (18,957 ) $ (11,902 ) $ (4,049 ) $ (14,020 )
Net cash provided by (used in) financing activities $ (78,015 ) $ 169,225 $ (38,342 ) $ (67,533 ) $ (45,726 )

Groupon, Inc.
Investor Relations
Deb Schwartz
312-999-3098
ir@groupon.com
or
Public Relations
Bill Roberts
312-459-5191

Source: Groupon, Inc.

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