Groupon, Inc.
Aug 2, 2017
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Groupon Announces Second Quarter 2017 Results

Achieved Double Digit Unit and Gross Profit Growth in North America Local

CHICAGO--(BUSINESS WIRE)-- Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter ended June 30, 2017.

"Local commerce continues to be a vast opportunity, and we made great progress as a leader in the space with double-digit unit and gross profit growth in North America Local," said CEO Rich Williams. "As we continue to build an amazing and voucherless customer experience and invest in our customers and merchants, we are excited about the growing strength of our local marketplace."

Second 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 second quarter 2017, Groupon repurchased 7,185,453 shares of its common stock for an aggregate purchase price of $24.8 million. Groupon repurchased 14,522,134 shares for an aggregate purchase price of $50.9 million for the year-to-date period as of June 30, 2017. Up to $144.3 million of common stock was available for repurchase under Groupon's share repurchase program as of June 30, 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 updating 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. For the three months ended March 31, 2016, special charges and credits also included gains from business dispositions. 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 performance 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. However, Adjusted EBITDA is not intended to be a substitute for income (loss) from continuing operations.

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 liquidity 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 August 2, 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)

(unaudited)

       
June 30, 2017 December 31, 2016
Assets
Current assets:
Cash and cash equivalents $ 618,550 $ 862,977
Accounts receivable, net 60,785 71,272
Prepaid expenses and other current assets 107,527 94,441
Current assets of discontinued operations       63,246  
Total current assets 786,862 1,091,936
Property, equipment and software, net 162,577 169,452
Goodwill 282,011 274,551
Intangible assets, net 32,256 42,915
Investments (including $108,230 and $110,066 at June 30, 2017 and December 31, 2016, respectively, at fair value) 141,436 141,882
Deferred income taxes 4,838 5,151
Other non-current assets 17,457 23,484
Non-current assets of discontinued operations       12,006  
Total Assets $ 1,427,437   $ 1,761,377  
Liabilities and Equity
Current liabilities:
Accounts payable $ 18,389 $ 28,551
Accrued merchant and supplier payables 606,020 770,992
Accrued expenses and other current liabilities 328,998 366,456
Current liabilities of discontinued operations       47,052  
Total current liabilities 953,407 1,213,051
Convertible senior notes, net 184,237 178,995
Deferred income taxes 1,833 1,714
Other non-current liabilities 101,978 99,628
Non-current liabilities of discontinued operations       2,927  
Total Liabilities   1,241,455     1,496,315  
Commitments and contingencies (see Note 7)
Stockholders' Equity
Common stock, par value $0.0001 per share, 2,010,000,000 shares authorized, 743,577,187 shares issued and 557,359,145 shares outstanding at June 30, 2017 and 736,531,771 shares issued and 564,835,863 shares outstanding at December 31, 2016 74 74
Additional paid-in capital 2,145,030 2,112,728
Treasury stock, at cost, 186,218,042 shares at June 30, 2017 and 171,695,908 shares at December 31, 2016 (858,291 ) (807,424 )
Accumulated deficit (1,135,984 ) (1,099,010 )
Accumulated other comprehensive income (loss)   34,358     58,052  
Total Groupon, Inc. Stockholders' Equity 185,187 264,420
Noncontrolling interests   795     642  
Total Equity   185,982     265,062  
Total Liabilities and Equity $ 1,427,437   $ 1,761,377  
 
 
Groupon, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

       
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
Revenue:
Third-party and other $ 315,854 $ 294,576 $ 617,426 $ 604,205
Direct   346,765     429,184     718,819     817,990  
Total revenue   662,619     723,760     1,336,245     1,422,195  
Cost of revenue:
Third-party and other 38,478 38,109 81,351 79,169
Direct   296,074     370,274     617,376     707,547  
Total cost of revenue   334,552     408,383     698,727     786,716  
Gross profit   328,067     315,377     637,518     635,479  
Operating expenses:
Marketing 100,658 89,180 187,000 176,475
Selling, general and administrative 230,187 258,737 462,233 521,715
Restructuring charges 4,584 15,702 7,315 27,215
Gains on business dispositions (9,339 ) (9,339 )
Acquisition-related expense (benefit), net   36     850     48     4,314  
Total operating expenses   335,465     355,130     656,596     720,380  
Income (loss) from operations (7,398 ) (39,753 ) (19,078 ) (84,901 )
Other income (expense), net   5,878     (11,253 )   1,276     (8,635 )
Income (loss) from continuing operations before provision (benefit) for income taxes (1,520 ) (51,006 ) (17,802 ) (93,536 )
Provision (benefit) for income taxes   3,883     (2,238 )   8,470     (1,229 )
Income (loss) from continuing operations (5,403 ) (48,768 ) (26,272 ) (92,307 )
Income (loss) from discontinued operations, net of tax   (1,376 )   (2,963 )   (889 )   (5,020 )
Net income (loss) (6,779 ) (51,731 ) (27,161 ) (97,327 )
Net income attributable to noncontrolling interests   (2,547 )   (3,173 )   (6,579 )   (6,696 )
Net income (loss) attributable to Groupon, Inc. $ (9,326 ) $ (54,904 ) $ (33,740 ) $ (104,023 )
 
Basic and diluted net income (loss) per share (1):
Continuing operations $ (0.01 ) $ (0.09 ) $ (0.06 ) $ (0.17 )
Discontinued operations   (0.01 )   (0.01 )       (0.01 )
Basic and diluted net income (loss) per share $ (0.02 ) $ (0.10 ) $ (0.06 ) $ (0.18 )
 
Weighted average number of shares outstanding (1)
Basic 559,762,180 576,903,004 560,978,712 579,827,341
Diluted 559,762,180 576,903,004 560,978,712 579,827,341
 
(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 June 30, 2017.
 
 
Groupon, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

         
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
Operating activities
Net income (loss) $ (6,779 ) $ (51,731 ) $ (27,161 ) $ (97,327 )
Less: Income (loss) from discontinued operations, net of tax   (1,376 )   (2,963 )   (889 )   (5,020 )
Income (loss) from continuing operations (5,403 ) (48,768 ) (26,272 ) (92,307 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property, equipment and software 28,496 29,335 57,163 59,096
Amortization of acquired intangible assets 6,183 4,581 11,583 9,235
Stock-based compensation 21,440 36,510 41,141 66,603
Restructuring-related long-lived asset impairments 45
Gains on business dispositions (9,339 ) (9,339 )
Deferred income taxes 833 (2,838 ) 759 (5,148 )
(Gain) loss, net from changes in fair value of contingent consideration 36 850 48 4,292
(Gain) loss from changes in fair value of investments 1,448 4,607 1,145 5,707
Amortization of debt discount on convertible senior notes 2,655 2,396 5,242 2,396
Change in assets and liabilities, net of acquisitions and dispositions:
Restricted cash (1,305 ) (1,197 ) 548 (695 )
Accounts receivable 5,635 5,263 16,229 (500 )
Prepaid expenses and other current assets (16,519 ) (55,839 ) (11,139 ) (36,900 )
Accounts payable 2,461 (4,194 ) (10,723 ) (5,693 )
Accrued merchant and supplier payables (44,716 ) (11,365 ) (182,954 ) (120,629 )
Accrued expenses and other current liabilities (5,451 ) (7,012 ) (41,491 ) 4,955
Other, net   (16,488 )   6,001     (18,207 )   (6,904 )
Net cash provided by (used in) operating activities from continuing operations (20,695 ) (51,009 ) (156,928 ) (125,786 )
Net cash provided by (used in) operating activities from discontinued operations   (1,097 )   (3,001 )   (2,195 )   (4,949 )
Net cash provided by (used in) operating activities   (21,792 )   (54,010 )   (159,123 )   (130,735 )
Investing activities
Purchases of property and equipment and capitalized software (15,385 ) (16,499 ) (29,461 ) (36,351 )
Cash derecognized upon dispositions of subsidiaries (352 ) (352 )
Proceeds from maturity of investment 1,843 1,843
Acquisitions of businesses, net of acquired cash (900 ) (940 )
Acquisitions of intangible assets and other investing activities   (240 )   (1,206 )   (184 )   (1,992 )
Net cash provided by (used in) investing activities from continuing operations (13,782 ) (18,957 ) (27,802 ) (39,635 )
Net cash provided by (used in) investing activities from discontinued operations   (2,001 )   104     (9,548 )   4  
Net cash provided by (used in) investing activities   (15,783 )   (18,853 )   (37,350 )   (39,631 )
Financing activities
Proceeds from issuance of convertible senior notes 250,000 250,000
Issuance costs for convertible senior notes and revolving credit agreement (8,097 ) (8,097 )
Purchase of convertible note hedges (59,163 ) (59,163 )
Proceeds from issuance of warrants 35,495 35,495
Payments for purchases of treasury stock (24,279 ) (25,784 ) (51,513 ) (90,449 )
Taxes paid related to net share settlements of stock-based compensation awards (6,386 ) (11,571 ) (15,356 ) (16,535 )
Proceeds from stock option exercises and employee stock purchase plan 9 114 2,477 2,047
Distributions to noncontrolling interest holders (2,976 ) (3,762 ) (6,426 ) (7,127 )
Payment of contingent consideration related to acquisitions (5,689 ) (285 ) (5,689 ) (285 )
Payments of capital lease obligations (8,603 ) (7,722 ) (16,670 ) (14,676 )
Other financing activities           (473 )    
Net cash provided by (used in) financing activities   (47,924 )   169,225     (93,650 )   91,210  
Effect of exchange rate changes on cash and cash equivalents, including cash classified within current assets of discontinued operations   13,074     (4,742 )   16,830     5,926  
Net increase (decrease) in cash and cash equivalents, including cash classified within current assets of discontinued operations (72,425 ) 91,620 (273,293 ) (73,230 )
Less: Net increase (decrease) in cash classified within current assets of discontinued operations       (2,591 )   (28,866 )   1,402  
Net increase (decrease) in cash and cash equivalents (72,425 ) 94,211 (244,427 ) (74,632 )
Cash and cash equivalents, beginning of period   690,975     655,464     862,977     824,307  
Cash and cash equivalents, end of period $ 618,550   $ 749,675   $ 618,550   $ 749,675  
 
 
Groupon, Inc.

Supplemental Financial Information and Business Metrics (1)

(financial data in thousands; active customers in millions)

(unaudited)

             
 
 
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
 
North America Segment: Q2 2017
Gross Billings (2): Y/Y Growth
Local $ 542,439 $ 530,768 $ 590,684 $ 587,766 $ 615,833 13.5 %
Travel 105,388 93,564 90,059 114,163 112,670 6.9
Goods   318,427     296,630     431,388     262,588     245,924   (22.8 )
Total Gross Billings $ 966,254   $ 920,962   $ 1,112,131   $ 964,517   $ 974,427   0.8 %
 
Revenue:
Local $ 184,139 $ 176,223 $ 209,799 $ 200,545 $ 207,534 12.7 %
Travel 21,401 21,239 19,023 20,462 22,320 4.3
Goods   311,382     285,819     421,931     252,350     222,058   (28.7 )
Total Revenue $ 516,922   $ 483,281   $ 650,753   $ 473,357   $ 451,912   (12.6 ) %
 
Gross Profit:
Local $ 158,812 $ 152,873 $ 185,280 $ 169,342 $ 179,609 13.1 %
Travel 16,334 17,257 15,052 15,165 17,755 8.7
Goods   42,028     31,531     50,437     36,430     36,496   (13.2 )
Total Gross Profit $ 217,174   $ 201,661   $ 250,769   $ 220,937   $ 233,860   7.7 %
 
Operating income (loss) $ (31,284 ) $ (24,470 ) $ 12,265 $ (14,783 ) $ (12,033 ) 61.5 %
 
International Segment: Q2 2017
Gross Billings: Y/Y Growth FX Effect (3) Y/Y Growth excluding FX (3)
Local $ 196,857 $ 184,068 $ 221,337 $ 191,219 $ 189,408 (3.8 ) % 3.9 0.1 %
Travel 56,409 58,964 60,099 53,161 45,981 (18.5 ) 1.8 (16.7 )
Goods   170,019     158,965     211,963     149,079     154,417   (9.2 ) 2.5 (6.7 )
Total Gross Billings $ 423,285   $ 401,997   $ 493,399   $ 393,459   $ 389,806   (7.9 ) % 3.0 (4.9 ) %
 
Revenue:
Local $ 67,956 $ 64,282 $ 68,900 $ 63,575 $ 66,108 (2.7 ) % 4.2 1.5 %
Travel 11,640 13,524 12,141 11,002 10,796 (7.3 ) 1.9 (5.4 )
Goods   127,242     125,468     173,071     125,692     133,803   5.2 2.8 8.0
Total Revenue $ 206,838   $ 203,274   $ 254,112   $ 200,269   $ 210,707   1.9 % 3.2 5.1 %
 
Gross Profit:
Local $ 62,970 $ 59,257 $ 63,987 $ 59,194 $ 62,303 (1.1 ) % 4.3 3.2 %
Travel 10,484 12,378 11,087 10,036 9,996 (4.7 ) 1.9 (2.8 )
Goods   24,749     19,972     26,063     19,284     21,908   (11.5 ) 2.5 (9.0 )
Total Gross Profit $ 98,203   $ 91,607   $ 101,137   $ 88,514   $ 94,207   (4.1 ) % 3.6 (0.5 ) %
 
Operating income (loss) $ (8,469 ) $ (370 ) $ (2,762 ) $ 3,103 $ 4,635 154.7 %
 
Consolidated Results of Operations:
Gross Billings:
Local $ 739,296 $ 714,836 $ 812,021 $ 778,985 $ 805,241 8.9 % 1.1 10.0 %
Travel 161,797 152,528 150,158 167,324 158,651 (1.9 ) 0.6 (1.3 )
Goods   488,446     455,595     643,351     411,667     400,341   (18.0 ) 0.8 (17.2 )
Total Gross Billings $ 1,389,539   $ 1,322,959   $ 1,605,530   $ 1,357,976   $ 1,364,233   (1.8 ) % 0.9 (0.9 ) %
 
Revenue:
Local $ 252,095 $ 240,505 $ 278,699 $ 264,120 $ 273,642 8.5 % 1.2 9.7 %
Travel 33,041 34,763 31,164 31,464 33,116 0.2 0.7 0.9
Goods   438,624     411,287     595,002     378,042     355,861   (18.9 ) 0.9 (18.0 )
Total Revenue $ 723,760   $ 686,555   $ 904,865   $ 673,626   $ 662,619   (8.4 ) % 0.9 (7.5 ) %
 
Gross Profit:
Local $ 221,782 $ 212,130 $ 249,267 $ 228,536 $ 241,912 9.1 % 1.2 10.3 %
Travel 26,818 29,635 26,139 25,201 27,751 3.5 0.7 4.2
Goods   66,777     51,503     76,500     55,714     58,404   (12.5 ) 0.9 (11.6 )
Total Gross Profit $ 315,377   $ 293,268   $ 351,906   $ 309,451   $ 328,067   4.0 % 1.2 5.2 %
 
Operating income (loss) $ (39,753 ) $ (24,840 ) $ 9,503 $ (11,680 ) $ (7,398 ) 81.4 %
 
Net cash provided by (used in) operating activities from continuing operations $ (51,009 ) $ (39,879 ) $ 294,593 $ (136,233 ) $ (20,695 ) 59.4 %
 
Free Cash Flow $ (67,508 ) $ (52,561 ) $ 275,339 $ (150,309 ) $ (36,080 ) 46.6 %
   
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
 
Other Metrics:
Active Customers (4)
North America 27.9 29.1 31.1 31.6 31.9
International   17.0     16.6     16.8     16.7     16.4  
Total Active Customers 44.9 45.7 47.9 48.3 48.3
 
TTM Gross Billings / Average Active Customer
North America $ 145 $ 142 $ 138 $ 136 $ 133
International 105 103 102 101 101
Consolidated 129 127 124 123 121
 
TTM Gross Profit / Average Active Customer
North America $ 32 $ 31 $ 31 $ 30 $ 30
International 25 25 23 22 23
Consolidated 29 29 28 27 28
 
Consolidated Units 46.2 44.4 57.9 45.7 44.5
Year-over-year unit growth:
North America 5.9 % 6.4 % 3.2 % (0.4 ) % (1.9 ) %
International (18.4 ) (18.5 ) (0.3 ) (8.7 ) (7.8 )
Consolidated (3.2 ) (2.9 ) 2.0 (3.1 ) (3.8 )
 
Headcount (5)
Sales (6) 2,893 2,695 2,626 2,624 2,485
Other   4,383     4,389     4,641     4,496     4,176  
Total Headcount 7,276 7,084 7,267 7,120 6,661
 

(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 June 30, 2017 includes approximately 0.7 million incremental active customers from the acquisition of LivingSocial, Inc.

(5)

 

Prior period headcount amounts exclude employees of discontinued operations. Including those employees, our headcount decreased by 1,944 employees, or 23%, year-over-year in the second quarter of 2017, from 8,605 total employees in the prior year period.

(6)

 

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."
 
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
Income (loss) from continuing operations $ (48,768 ) $ (34,447 ) $ (39,455 ) $ (20,869 ) $ (5,403 )
Adjustments:
Stock-based compensation (1) 34,210 25,457 22,563 19,650 21,392
Depreciation and amortization 33,916 32,897 34,681 34,067 34,679
Acquisition-related expense (benefit), net 850 (9 ) 1,345 12 36
Restructuring charges 15,702 1,163 12,060 2,731 4,584
Gains on business dispositions (9,339 ) (2,060 )
Non-operating expense (income), net 11,253 7,917 54,737 4,602 (5,878 )
Provision (benefit) for income taxes   (2,238 )   1,690     (5,779 )   4,587     3,883  
Total adjustments   84,354     67,055     119,607     65,649     58,696  
Adjusted EBITDA $ 35,586   $ 32,608   $ 80,152   $ 44,780   $ 53,293  
 

(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, $0.3 million, $0.2 million, $0.1 million and $0.0 million of additional stock-based compensation for the three months ended June 30, 2016, September 30, 2016, December 31, 2016, March 31, 2017, and June 30, 2017, respectively. Restructuring charges include $2.1 million of additional stock-based compensation for the three months ended June 30, 2016.
 
 
 
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 $(17,500) to $(7,500)
Expected adjustments:
Stock-based compensation 80,000 to 90,000
Depreciation and amortization 135,000
Restructuring charges 7,500
Non-operating expense (income), net 1,000
Provision (benefit) for income taxes 9,000 to 14,000
Total expected adjustments $232,500 to $247,500
Expected Adjusted EBITDA range $215,000 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 or asset 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 the remainder of 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 and six months ended June 30, 2017:
 
Three Months Ended Six Months Ended
June 30, 2017 June 30, 2017
Net income (loss) attributable to common stockholders $ (9,326 ) $ (33,740 )
Stock-based compensation 21,440 41,141
Amortization of acquired intangible assets 6,183 11,583
Acquisition-related expense (benefit), net 36 48
Restructuring charges 4,584 7,315
Losses (gains), net from changes in fair value of investments 1,448 1,145
Intercompany foreign currency losses (gains) and reclassifications of translation adjustments to earnings (10,112 ) (10,222 )
Non-cash interest expense on convertible senior notes 2,655 5,242
Income tax effect of above adjustments (6,329 ) (6,274 )
Loss from discontinued operations, net of tax

 

1,376  

 

889  
Non-GAAP net income (loss) attributable to common stockholders $ 11,955   $ 17,127  
 
Weighted-average shares of common stock - basic 559,762,180 560,978,712
Effect of dilutive securities   6,821,360     7,152,421  
Weighted-average shares of common stock - diluted   566,583,540     568,131,133  
 
Diluted net income (loss) per share $ (0.02 ) $ (0.06 )
Impact of stock-based compensation, amortization of acquired intangible assets, acquisition-related expense (benefit), net, intercompany foreign currency losses (gains), special charges and credits, loss from discontinued operations and related tax effects   0.04     0.09  
Non-GAAP net income (loss) per share $ 0.02   $ 0.03  
 
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."
 
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
 
Net cash provided by (used in) operating activities from continuing operations $ (51,009 ) $ (39,879 ) $ 294,593 $ (136,233 ) $ (20,695 )
Purchases of property and equipment and capitalized software from continuing operations   (16,499 )   (12,682 )   (19,254 )   (14,076 )   (15,385 )
Free cash flow $ (67,508 ) $ (52,561 ) $ 275,339 $ (150,309 ) $ (36,080 )
 
Net cash provided by (used in) investing activities from continuing operations $ (18,957 ) $ (11,902 ) $ (4,049 ) $ (14,020 ) $ (13,782 )
Net cash provided by (used in) financing activities $ 169,225 $ (38,342 ) $ (67,533 ) $ (45,726 ) $ (47,924 )

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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