Groupon, Inc.
Aug 5, 2014
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Groupon Announces Second Quarter 2014 Results

CHICAGO--(BUSINESS WIRE)-- Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter ended June 30, 2014.

"We had another record quarter in terms of demand, with worldwide billings increasing 29% and reaching their highest level ever," said Eric Lefkofsky, CEO of Groupon. "Our marketplace continues to gain traction and add to our growth; we reached another all-time high in mobile, and with the launch of Gnome, we believe we're making great strides in connecting local commerce."

Second Quarter 2014 Summary

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.

Highlights

Share Repurchase Program

During the second quarter 2014, Groupon repurchased 17,228,792 shares of its Class A common stock at an average price of $6.15 per share, for an aggregate purchase price of $106.0 million. Under the existing authorization, Groupon has repurchased a total of 24,737,292 shares at an average price of $7.36 per share, for an aggregate purchase price of $182.0 million. Groupon is authorized to repurchase up to an additional $118.0 million of Class A common stock under the August 2013 share repurchase authorization. The program, which is intended to partially offset dilution from employee stock grants, terminates in August 2015.

Line of Credit

The Company has entered into a 3-year, $250 million revolving credit facility, which will provide additional balance sheet flexibility going forward. The Company has no immediate plans to draw on the facility.

Outlook

For the third quarter 2014, the Company expects revenue of between $720 million and $770 million, Adjusted EBITDA of between $50 million and $70 million, and non-GAAP earnings per share excluding stock compensation, amortization of acquired intangible assets, and acquisition-related expenses, net of tax, of between $0.00 and $0.02.

Groupon has revised its full year outlook, and now expects Adjusted EBITDA to exceed $270 million. Although the Company has the opportunity to reduce marketing spend over the remainder of the year to achieve a higher target, given recent returns on those investments, it believes it is important to maintain flexibility for investment in long-term growth.

Conference Call

A conference call will be webcast live today at 4:00 p.m. CT / 5:00 p.m. ET, and will be available on Groupon's investor relations website 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.

Non-GAAP Financial Measures

In addition to financial results reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP), we have provided the following non-GAAP financial measures in this release and the accompanying tables: foreign exchange rate neutral operating results, Adjusted EBITDA, free cash flow and earnings (loss) per share excluding stock-based compensation, amortization of acquired intangible assets, and acquisition-related expense (benefit), net. These non-GAAP financial measures are presented to aid investors in better understanding Groupon's performance and to facilitate comparisons to many of our peers who present similar measures. However, these measures are not intended to be a substitute for those reported in accordance with U.S. GAAP. These measures may be different from non-GAAP financial measures used by other companies, even when similar terms are used to identify such measures. For reconciliations of these measures to the most applicable financial measures under U.S. GAAP, see ''Non-GAAP Reconciliation Schedules'' and ''Supplemental Financial Information and Business Metrics'' included in the tables accompanying this release.

We exclude the following items from one or more of our non-GAAP financial measures:

Stock-based compensation. We exclude stock-based compensation because it is primarily non-cash in nature and we believe that non-GAAP financial measures excluding this item provide meaningful supplemental information about our operating performance and liquidity.

Acquisition-related expense (benefit), net. Acquisition-related expense (benefit), net is comprised of the change in the fair value of contingent consideration arrangements and, beginning in the fourth quarter of 2013, also includes external transaction costs related to business combinations, primarily consisting of legal and advisory fees. External transaction costs were not material for periods prior to the fourth quarter of 2013 presented in this release and the accompanying tables. The composition of our contingent consideration arrangements and the impact of those arrangements on our operating results vary over time based on a number of factors, including the terms of our business combinations and the timing of those transactions. We exclude acquisition-related expense (benefit), net because we believe that non-GAAP financial measures excluding this item provide meaningful supplemental information about our operating performance and facilitate comparisons to our historical operating results.

Depreciation and amortization. We exclude depreciation and amortization 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.

Descriptions of the non-GAAP financial measures included in this release and the accompanying tables are as follows:

Foreign exchange rate neutral operating results show our current period operating results as if foreign currency exchange rates had remained the same as those in effect in the comparable prior-year period.

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

Earnings (loss) per share excluding stock-based compensation, amortization of acquired intangible assets, and acquisition-related expense (benefit), net is a non-GAAP financial measure that adjusts our earnings (loss) per share to exclude the impact of stock-based compensation expense, amortization of acquired intangible assets, and acquisition-related expense (benefit), net, and the income tax effect of those items. We believe that this non-GAAP financial measure provides useful supplemental information for evaluating our operating performance.

Beginning in the first quarter 2014, we have changed our non-GAAP earnings (loss) per share measure to exclude amortization of acquired intangible assets, net of tax, in addition to stock compensation and acquisition-related expenses, which we have excluded historically. Given the significant acquisition activity in January 2014 and potential acquisition activity in the future, we believe that excluding non-cash amortization of acquired intangible assets from our non-GAAP earnings per share measure enables more meaningful comparisons with our historical results.

Free cash flow is a non-GAAP financial measure that comprises net cash provided by (used in) operating activities less purchases of property and equipment and capitalized software. We use free cash flow, and ratios based on it, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe that it typically represents a more useful measure of cash flows because purchases of fixed assets, software developed for internal use and website development costs are necessary components of our ongoing operations. Free cash flow is not intended to represent the total increase or decrease in Groupon's cash balance for the applicable period.

Note on Forward-Looking Statements

The statements contained in this release that refer to plans and expectations for the next quarter, the full year 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; including our marketing strategy and spend; responding to changes in the market; effectively dealing with challenges arising from our international operations; retaining existing customers and adding new customers; retaining and adding new and high quality merchants; cyber security breaches; 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 risks; 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; protecting our intellectual property; handling acquisitions, joint ventures and strategic investments effectively; seasonality; payment-related risks; customer and merchant 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 August 5, 2014. Groupon undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this release to conform these statements to actual results or to changes in its expectations.

About Groupon

Groupon (NASDAQ: GRPN) is a global leader of local commerce and the place you start when you want to buy just about anything, anytime, anywhere. By leveraging the company's global relationships and scale, Groupon offers consumers a vast marketplace of unbeatable deals all over the world. Shoppers discover the best a city has to offer on the web or on mobile with Groupon Local, enjoy vacations with Groupon Getaways, and find a curated selection of electronics, fashion, home furnishings and more with Groupon Goods.

Groupon is redefining how traditional small businesses attract, retain and interact with customers by providing merchants with a suite of products and services, including customizable deal campaigns, credit card payment processing capabilities, and point-of-sale solutions that help businesses grow and operate more effectively. To search for great deals or subscribe to Groupon emails, visit www.Groupon.com. To download Groupon's five-star mobile apps, visit www.groupon.com/mobile. To learn more about the company's merchant solutions and how to work with Groupon, visit www.GrouponWorks.com.

 
Groupon, Inc.
Summary Consolidated and Segment Results
(in thousands, except share and per share amounts)
(unaudited)
 
  Three Months Ended      

 

Six Months Ended      

 

June 30, June 30,
  Y/Y %   Y/Y %
Growth Growth
Y/Y % excluding Y/Y % excluding
2014 2013 Growth

FX Effect (2)

FX(2)

2014 2013 Growth

FX Effect (2)

FX(2)

Gross Billings (1):
North America $ 798,845 $ 712,205 12.2 % $ (650 ) 12.3 % $ 1,580,614 $ 1,393,524 13.4 % $ (1,501 ) 13.5 %
EMEA 483,255 482,250 0.2 % 21,215 (4.2 ) % 996,843 974,568 2.3 % 36,442 (1.5 ) %
Rest of World   536,946     219,351   144.8 %   9,424   140.5 %   1,058,800     453,483   133.5 %   (15,222 ) 136.8 %
Consolidated billings $ 1,819,046   $ 1,413,806   28.7 % $ 29,989   26.5 % $ 3,636,257   $ 2,821,575   28.9 % $ 19,719   28.2 %
 
Revenue:
North America $ 423,931 $ 377,182 12.4 % $ (214 ) 12.5 % $ 854,993 $ 716,736 19.3 % $ (503 ) 19.4 %
EMEA 227,690 159,962 42.3 % 10,221 36.0 % 458,583 343,760 33.4 % 17,090 28.4 %
Rest of World   99,955     71,603   39.6 %   (2,994 ) 43.8 %   195,637     149,653   30.7 %   (12,442 ) 39.0 %
Consolidated revenue $ 751,576   $ 608,747   23.5 % $ 7,013   22.3 % $ 1,509,213   $ 1,210,149   24.7 % $ 4,145   24.4 %
 
(Loss) income from operations $ (7,854 ) $ 27,412 (128.7 ) % $ 1,209 (133.1 ) % $ (27,807 ) $ 48,590 (157.2 ) % $ 2,711 (162.8 ) %
 
Net loss attributable to Groupon, Inc. $ (22,875 ) $ (7,574 ) $ (60,670 ) $ (11,566 )
 
Net loss per share:
Basic $ (0.03 ) $ (0.01 ) $ (0.09 ) $ (0.02 )
Diluted $ (0.03 ) $ (0.01 ) $ (0.09 ) $ (0.02 )
 
Weighted average number of shares outstanding:
Basic 675,538,392 662,361,436 678,958,541 660,580,927
Diluted 675,538,392 662,361,436 678,958,541 660,580,927
 
(1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds.
(2) 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 during the three and six months ended June 30, 2013.
 
Groupon, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
    Three Months Ended     Six Months Ended
June 30, June 30,
2014   2013 2014   2013
Operating activities
Net loss $ (20,922 ) $ (5,551 ) $ (56,285 ) $ (8,793 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization of property, equipment and software 23,067 16,255 45,159 31,369
Amortization of acquired intangible assets 11,591 5,213 24,239 10,799
Stock-based compensation 31,655 32,446 55,384 62,353
Deferred income taxes (57 ) (308 ) 516 (566 )
Excess tax benefits on stock-based compensation (4,077 ) (2,936 ) (9,932 ) (3,768 )
Loss on equity method investments 420 14 368 33
Net gain from changes in fair value of contingent consideration - (815 ) (39 ) (747 )
Impairment of cost method investments 191 - 588 -
Change in assets and liabilities, net of acquisitions:
Restricted cash (2,029 ) 744 921 3,267
Accounts receivable (2,872 ) 4,743 (27,265 ) (2,941 )
Prepaid expenses and other current assets (748 ) 3,465 (5,898 ) 15,992
Accounts payable (12,468 ) (3,225 ) (5,153 ) (22,831 )
Accrued merchant and supplier payables (18,296 ) 1,442 (41,945 ) (37,975 )
Accrued expenses and other current liabilities (31,502 ) (20,539 ) (36,881 ) (7,237 )
Other, net   3,300     12,354     12,759     13,107  
Net cash (used in) provided by operating activities (22,747 ) 43,302 (43,464 ) 52,062
 
Net cash used in investing activities (34,498 ) (15,862 ) (173,106 ) (46,541 )
 
Net cash used in financing activities (114,753 ) (7,941 ) (156,245 ) (17,283 )
 
Effect of exchange rate changes on cash and cash equivalents   1,262     (3,138 )   431     (15,516 )
Net (decrease) increase in cash and cash equivalents (170,736 ) 16,361 (372,384 ) (27,278 )
Cash and cash equivalents, beginning of period   1,038,824     1,165,650     1,240,472     1,209,289  
Cash and cash equivalents, end of period $ 868,088   $ 1,182,011   $ 868,088   $ 1,182,011  
 
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,
2014 2013 2014 2013
Revenue:
Third party and other $ 405,941 $ 418,871 $ 832,370 $ 857,979
Direct   345,635     189,876     676,843     352,170  
Total revenue   751,576     608,747     1,509,213     1,210,149  
Cost of revenue:
Third party and other 58,378 55,507 120,729 125,523
Direct   303,336     168,546     612,901     320,923  
Total cost of revenue   361,714     224,053     733,630     446,446  
Gross profit   389,862     384,694     775,583     763,703  
Operating expenses:
Marketing 64,275 55,497 143,199 105,054
Selling, general and administrative 332,844 302,600 657,809 610,806
Acquisition-related expense (benefit), net   597     (815 )   2,382     (747 )
Total operating expenses   397,716     357,282     803,390     715,113  
(Loss) income from operations (7,854 ) 27,412 (27,807 ) 48,590
Other expense, net   (1,023 )   (5,579 )   (1,863 )   (10,662 )
(Loss) income before provision for income taxes (8,877 ) 21,833 (29,670 ) 37,928
Provision for income taxes   12,045     27,384     26,615     46,721  
Net loss (20,922 ) (5,551 ) (56,285 ) (8,793 )
Net income attributable to noncontrolling interests   (1,953 )   (2,023 )   (4,385 )   (2,773 )
Net loss attributable to Groupon, Inc. $ (22,875 ) $ (7,574 ) $ (60,670 ) $ (11,566 )
 
Net loss per share
Basic $ (0.03 ) $ (0.01 ) $ (0.09 ) $ (0.02 )
Diluted $ (0.03 ) $ (0.01 ) $ (0.09 ) $ (0.02 )
 
Weighted average number of shares outstanding 675,538,392 662,361,436 678,958,541 660,580,927
Basic 675,538,392 662,361,436 678,958,541 660,580,927
Diluted
 
Groupon, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
     
June 30, 2014 December 31, 2013
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 868,088 $ 1,240,472
Accounts receivable, net 134,127 83,673
Deferred income taxes 30,033 27,938
Prepaid expenses and other current assets   237,092     210,415  
Total current assets 1,269,340 1,562,498
Property, equipment and software, net 173,403 134,423
Goodwill 460,972 220,827
Intangible assets, net 136,182 28,443
Investments 23,588 20,652
Deferred income taxes, non-current 45,062 35,941
Other non-current assets   28,892     39,226  
Total Assets $ 2,137,439   $ 2,042,010  
Liabilities and Equity
Current liabilities:
Accounts payable $ 31,002 $ 27,573
Accrued merchant and supplier payables 803,374 752,943
Accrued expenses 234,355 226,986
Deferred income taxes 48,915 47,558
Other current liabilities   127,434     132,718  
Total current liabilities 1,245,080 1,187,778
Deferred income taxes, non-current 12,871 10,853
Other non-current liabilities   148,552     131,697  
Total Liabilities   1,406,503     1,330,328  
Commitments and contingencies
Stockholders' Equity
Class A common stock, par value $0.0001 per share, 2,000,000,000 shares authorized, 690,335,467 shares issued and 665,598,175 shares outstanding at June 30, 2014 and 670,149,976 shares issued and 665,717,176 shares outstanding at December 31, 2013 69 67
Class B common stock, par value $0.0001 per share, 10,000,000 shares authorized, 2,399,976 shares issued and outstanding at June 30, 2014 and December 31, 2013 - -
Common stock, par value $0.0001 per share, 2,010,000,000 shares authorized, no shares issued and outstanding at June 30, 2014 and December 31, 2013 - -
Additional paid-in capital 1,791,896 1,584,211
Treasury stock, at cost, 24,737,292 shares at June 30, 2014 and 4,432,800 shares at December 31, 2013 (182,046 ) (46,587 )
Accumulated deficit (909,540 ) (848,870 )
Accumulated other comprehensive income   32,712     24,830  
Total Groupon, Inc. Stockholders' Equity 733,091 713,651
Noncontrolling interests   (2,155 )   (1,969 )
Total Equity   730,936     711,682  
Total Liabilities and Equity $ 2,137,439   $ 2,042,010  
 
Groupon, Inc.
Segment Information
(in thousands)
(unaudited)
         
Three Months Ended June 30, Six Months Ended June 30,
2014 2013 2014 2013
North America
Gross billings (1) $ 798,845 $ 712,205 $ 1,580,614 $ 1,393,524
Revenue $ 423,931 $ 377,182 $ 854,993 $ 716,736
Segment cost of revenue and operating expenses(2)   409,386     328,674     829,063     626,862  
Segment operating income(2) $ 14,545 $ 48,508 $ 25,930 $ 89,874
Segment operating income as a percent of segment gross billings 1.8 % 6.8 % 1.6 % 6.4 %
Segment operating income as a percent of segment revenue 3.4 % 12.9 % 3.0 % 12.5 %
 
EMEA
Gross billings (1) $ 483,255 $ 482,250 $ 996,843 $ 974,568
Revenue $ 227,690 $ 159,962 $ 458,583 $ 343,760
Segment cost of revenue and operating expenses(2)   199,981     135,254     411,951     284,876  
Segment operating income(2) $ 27,709 $ 24,708 $ 46,632 $ 58,884
Segment operating income as a percent of segment gross billings 5.7 % 5.1 % 4.7 % 6.0 %
Segment operating income as a percent of segment revenue 12.2 % 15.4 % 10.2 % 17.1 %
 
Rest of World
Gross billings (1) $ 536,946 $ 219,351 $ 1,058,800 $ 453,483
Revenue $ 99,955 $ 71,603 $ 195,637 $ 149,653
Segment cost of revenue and operating expenses(2)   117,811     85,776     238,240     188,215  
Segment operating loss(2) $ (17,856 ) $ (14,173 ) $ (42,603 ) $ (38,562 )
Segment operating loss as a percent of segment gross billings (3.3 ) % (6.5 ) % (4.0 ) % (8.5 ) %
Segment operating loss as a percent of segment revenue (17.9 ) % (19.8 ) % (21.8 ) % (25.8 ) %
 
(1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds.
(2) Segment cost of revenue and operating expenses and segment operating income (loss) exclude stock-based compensation and acquisition-related expense (benefit), net.
 
Groupon, Inc.
Non-GAAP Reconciliation Schedules
(in thousands, except share and per share amounts)
(unaudited)
 

Adjusted EBITDA and earnings (loss) per share excluding stock-based compensation, amortization of acquired intangible assets and acquisition-related (benefit) expense, net of tax, are non-GAAP financial measures. The Company reconciles Adjusted EBITDA to the most comparable U.S. GAAP financial measure, "Net loss," for the periods presented and the Company reconciles earnings (loss) per share excluding stock-based compensation, amortization of acquired intangible assets and acquisition-related (benefit) expense, net to the most comparable U.S. GAAP financial measure, "Diluted net earnings (loss) per share," for the periods presented.

 
 
The following is a quarterly reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure, "Net loss."
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Net loss $ (5,551 ) $ (1,292 ) $ (78,861 ) $ (35,363 ) $ (20,922 )
Adjustments:
Stock-based compensation 32,446 26,870 32,239 23,729 31,655
Acquisition-related (benefit) expense, net (815 ) (1,529 ) 2,265 1,785 597
Depreciation and amortization 21,468 23,149 24,132 34,740 34,658
Other expense (income), net 5,579 (832 ) 84,833 840 1,023
Provision for income taxes   27,384     15,936     7,380     14,570     12,045  
Total adjustments   86,062     63,594     150,849     75,664     79,978  
Adjusted EBITDA $ 80,511 $ 62,302 $ 71,988 $ 40,301 $ 59,056
 
 
The following is a reconciliation of diluted net loss per share to diluted earnings (loss) per share excluding stock-based compensation, amortization of acquired intangible assets and acquisition-related expense, net for the three and six months ended June 30, 2014:
Three Months Ended Six Months Ended
June 30, 2014 June 30, 2014
Net loss attributable to Groupon, Inc. $ (22,875 ) $ (60,670 )
Stock-based compensation 31,655 55,384
Amortization of acquired intangible assets 11,591 24,239
Acquisition-related expense, net 597 2,382
Income tax effect of adjustments   (15,348 )   (23,726 )

Net earnings (loss) attributable to common stockholders excluding stock-based compensation, amortization of acquired intangible assets and acquisition-related expense, net

$ 5,620   $ (2,391 )
 
Diluted shares 675,538,392 678,958,541
Incremental diluted shares (1)   8,823,049     -  
Adjusted diluted shares   684,361,441     678,958,541  
 
Diluted net loss per share $ (0.03 ) $ (0.09 )

Impact of stock-based compensation, amortization of acquired intangible assets and acquisition-related expense, net

  0.04     0.09  

Diluted earnings (loss) per share excluding stock-based compensation, amortization of acquired intangible assets and acquisition-related expense, net

$ 0.01   $ (0.00 )
 
(1) Outstanding equity awards are not reflected in the calculation for the six months ended June 30, 2014 because the effect would be antidilutive.
 
 
 
Foreign exchange rate neutral operating results are non-GAAP financial measures. The Company reconciles foreign exchange rate neutral operating results to the most comparable U.S. GAAP financial measures, "Gross billings," "Revenue" and "(Loss) income from operations," respectively, for the periods presented. The Company reconciles "foreign exchange rage neutral Gross billings growth" and "foreign exchange rate neutral Revenue growth" to year-over-year growth rates for the most comparable U.S. GAAP financial measures, "Gross billings growth" and "Revenue growth," respectively, for the periods presented.
 
The effect on the Company's gross billings, revenue and (loss) income from operations from changes in exchange rates versus the U.S. Dollar for the three months ended June 30, 2014 was as follows:
Three Months Ended June 30, 2014 Three Months Ended June 30, 2014
At Avg. Exchange At Avg. Exchange
Q2 2013 Rate As Q1 2014 Rate As

Rates (1)

Effect (2)

Reported

Rates (3)

Effect (2)

Reported
Gross billings $ 1,789,057 $ 29,989 $ 1,819,046 $ 1,801,262 $ 17,784 $ 1,819,046
Revenue $ 744,563 $ 7,013 $ 751,576 $ 748,425 $ 3,151 $ 751,576
(Loss) income from operations $ (9,063 ) $ 1,209 $ (7,854 ) $ (7,216 ) $ (638 ) $ (7,854 )
 
The effect on the Company's gross billings, revenue and (loss) income from operations from changes in exchange rates versus the U.S. Dollar for the six months ended June 30, 2014 was as follows:
 
Six Months Ended June 30, 2014 Six Months Ended June 30, 2014
At Avg. Exchange At Avg. Exchange
Q2 2013 YTD Rate As Q4'13 - Q1'14 Rate As

Rates (1)

Effect (2)

Reported

Rates (3)

Effect (2)

Reported
Gross billings $ 3,616,538 $ 19,719 $ 3,636,257 $ 3,627,234 $ 9,023 $ 3,636,257
Revenue $ 1,505,068 $ 4,145 $ 1,509,213 $ 1,508,271 $ 942 $ 1,509,213
(Loss) income from operations $ (30,518 ) $ 2,711 $ (27,807 ) $ (28,063 ) $ 256 $ (27,807 )
 
(1) Represents the financial statement balances that would have resulted had average exchange rates in the reporting period been the same as those in effect during the three and six months ended June 30, 2013.
(2) Represents the increase or decrease in reported amounts resulting from changes in exchange rates from those in effect in the comparable period.
(3) Represents the financial statement balances that would have resulted had average exchange rates in the reporting periods been the same as those in effect during the three and six months ended March 31, 2014.
 
 
The following is a quarterly reconciliation of foreign exchange rate neutral Gross billings growth from the comparable quarterly periods of the prior year to reported Gross billings growth from the comparable quarterly periods of the prior year.
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
EMEA Gross billings growth, excluding FX 4 % 9 % 3 % 1 % (4 ) %
FX Effect   -   %   3   %   3   %   3   %   4   %
EMEA Gross billings growth 4 % 12 % 6 % 4 % - %
 
Rest of World Gross billings growth, excluding FX (16 ) % (4 ) % (2 ) % 133 % 141 %
FX Effect   (5 ) %   (9 ) %   (9 ) %   (10 ) %   4   %
Rest of World Gross billings growth (21 ) % (13 ) % (11 ) % 123 % 145 %
 
Consolidated Gross billings growth, excluding FX 11 % 11 % 5 % 30 % 27 %
FX Effect   (1 ) %   (1 ) %   -   %   (1 ) %   2   %
Consolidated Gross billings growth 10 % 10 % 5 % 29 % 29 %
 
 
The following is a quarterly reconciliation of foreign exchange rate neutral Revenue growth from the comparable quarterly periods of the prior year to reported Revenue growth from the comparable quarterly periods of the prior year.
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
EMEA Revenue growth, excluding FX (25 ) % (23 ) % 38 % 22 % 36 %
FX Effect   1   %   2   %   5   %   4   %   6   %
EMEA Revenue growth (24 ) % (21 ) % 43 % 26 % 42 %
 
Rest of World Revenue growth, excluding FX (21 ) % 7 % (6 ) % 35 % 44 %
FX Effect   (5 ) %   (11 ) %   (9 ) %   (12 ) %   (4 ) %
Rest of World Revenue growth (26 ) % (4 ) % (15 ) % 23 % 40 %
 
Consolidated Revenue growth, excluding FX 8 % 6 % 20 % 26 % 22 %
FX Effect   (1 ) %   (1 ) %   -   %   -   %   2   %
Consolidated Revenue growth 7 % 5 % 20 % 26 % 24 %
 
Groupon, Inc.
Supplemental Financial Information and Business Metrics(9)
(financial data in thousands, except per share data; active customers in millions)
(unaudited)
             
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Segments
North America Segment
Gross Billings (1)
Local (2) Gross Billings $ 453,030 $ 405,913 $ 439,131 $ 456,952 $ 461,366
Goods Gross Billings 196,878 194,565 286,039 242,896 247,618
Travel (2) Gross Billings   62,297     64,521     63,551     81,921     89,861  

 

Total Gross Billings $ 712,205 $ 664,999 $ 788,721 $ 781,769 $ 798,845
Year-over-year growth 30 % 20 % 10 % 15 % 12 %
% Third Party and Other 74 % 72 % 67 % 70 % 70 %
% Direct 26 % 28 % 33 % 30 % 30 %
Gross Billings Trailing Twelve Months (TTM) $ 2,664,845 $ 2,777,475 $ 2,847,244 $ 2,947,694 $ 3,034,334
 
Revenue (3)
Local Revenue $ 177,377 $ 162,346 $ 161,601 $ 177,247 $ 164,500
Goods Revenue 186,028 185,914 268,281 237,435 241,626
Travel Revenue   13,777     12,578     13,902     16,380     17,805  
Total Revenue $ 377,182 $ 360,838 $ 443,784 $ 431,062 $ 423,931
Year-over-year growth 45 % 24 % 18 % 27 % 12 %
% Third Party and Other 52 % 49 % 41 % 45 % 43 %
% Direct 48 % 51 % 59 % 55 % 57 %
Revenue TTM $ 1,383,690 $ 1,452,925 $ 1,521,358 $ 1,612,866 $ 1,659,615
 
Gross Profit (4)
Local Gross Profit $ 155,728 $ 138,890 $ 140,944 $ 152,622 $ 142,674
% of North America Total Local Gross Billings 34.4 % 34.2 % 32.1 % 33.4 % 30.9 %
Goods Gross Profit 26,977 21,609 21,030 12,604 22,961
% of North America Total Goods Gross Billings 13.7 % 11.1 % 7.4 % 5.2 % 9.3 %
Travel Gross Profit 11,881 11,070 12,352 14,442 14,365
% of North America Total Travel Gross Billings   19.1   %   17.2   %   19.4   %   17.6   %   16.0   %
Total Gross Profit $ 194,586 $ 171,569 $ 174,326 $ 179,668 $ 180,000
Year-over-year growth 12 % 7 % 15 % 4 % (7 ) %
% Third Party and Other 88 % 90 % 91 % 94 % 88 %
% Direct 12 % 10 % 9 % 6 % 12 %
% of North America Total Gross Billings 27.3 % 25.8 % 22.1 % 23.0 % 22.5 %
 
EMEA Segment
Gross Billings
Local Gross Billings $ 241,856 $ 207,803 $ 277,472 $ 262,141 $ 227,266
Goods Gross Billings 167,594 169,849 219,880 183,013 190,957
Travel Gross Billings   72,800     65,666     68,361     68,434     65,032  
Total Gross Billings $ 482,250 $ 443,318 $ 565,713 $ 513,588 $ 483,255
Year-over-year growth 4 % 12 % 6 % 4 % - %
Year-over-year growth, excluding FX (5) 4 % 9 % 3 % 1 % (4 ) %
% Third Party and Other 100 % 98 % 83 % 83 % 80 %
% Direct - % 2 % 17 % 17 % 20 %
Gross Billings TTM $ 1,903,136 $ 1,950,367 $ 1,983,599 $ 2,004,869 $ 2,005,874
 
Revenue
Local Revenue $ 110,229 $ 92,141 $ 116,061 $ 109,120 $ 96,485
Goods Revenue 35,119 41,279 119,274 106,889 115,413
Travel Revenue   14,614     14,530     15,870     14,884     15,792  
Total Revenue $ 159,962 $ 147,950 $ 251,205 $ 230,893 $ 227,690
Year-over-year growth (24 ) % (21 ) % 43 % 26 % 42 %
Year-over-year growth, excluding FX (25 ) % (23 ) % 38 % 22 % 36 %
% Third Party and Other 99 % 94 % 61 % 61 % 57 %
% Direct 1 % 6 % 39 % 39 % 43 %
Revenue TTM $ 707,325 $ 667,988 $ 742,915 $ 790,010 $ 857,738
 
Gross Profit
Local Gross Profit $ 99,318 $ 81,808 $ 105,210 $ 100,066 $ 90,373
% of EMEA Total Local Gross Billings 41.1 % 39.4 % 37.9 % 38.2 % 39.8 %
Goods Gross Profit 27,108 28,943 33,526 27,302 35,432
% of EMEA Total Goods Gross Billings 16.2 % 17.0 % 15.2 % 14.9 % 18.6 %
Travel Gross Profit 13,105 12,930 14,457 13,669 14,894
% of EMEA Total Travel Gross Billings   18.0   %   19.7   %   21.1   %   20.0   %   22.9   %
Total Gross Profit $ 139,531 $ 123,681 $ 153,193 $ 141,037 $ 140,699
Year-over-year growth (24 ) % (24 ) % 7 % (8 ) % 1 %
% Third Party and Other 101 % 99 % 91 % 92 % 85 %
% Direct (1 ) % 1 % 9 % 8 % 15 %
% of EMEA Total Gross Billings 28.9 % 27.9 % 27.1 % 27.5 % 29.1 %
 
Rest of World Segment
Gross Billings
Local Gross Billings $ 115,156 $ 118,718 $ 116,824 $ 167,833 $ 170,237
Goods Gross Billings 72,399 78,973 89,451 283,091 281,300
Travel Gross Billings   31,796     36,640     32,398     70,930     85,409  
Total Gross Billings $ 219,351 $ 234,331 $ 238,673 $ 521,854 $ 536,946
Year-over-year growth (21 ) % (13 ) % (11 ) % 123 % 145 %
Year-over-year growth, excluding FX (16 ) % (4 ) % (2 ) % 133 % 141 %
% Third Party and Other 97 % 97 % 97 % 99 % 99 %
% Direct 3 % 3 % 3 % 1 % 1 %
Gross Billings TTM $ 992,302 $ 956,833 $ 926,487 $ 1,214,209 $ 1,531,804
 
Revenue
Local Revenue $ 43,849 $ 51,900 $ 40,847 $ 43,814 $ 42,711
Goods Revenue 20,610 25,061 26,158 41,855 45,537
Travel Revenue   7,144     9,310     6,453     10,013     11,707  
Total Revenue $ 71,603 $ 86,271 $ 73,458 $ 95,682 $ 99,955
Year-over-year growth (26 ) % (4 ) % (15 ) % 23 % 40 %
Year-over-year growth, excluding FX (21 ) % 7 % (6 ) % 35 % 44 %
% Third Party and Other 92 % 91 % 90 % 94 % 93 %
% Direct 8 % 9 % 10 % 6 % 7 %
Revenue TTM $ 325,988 $ 322,597 $ 309,382 $ 327,014 $ 355,366
 
Gross Profit
Local Gross Profit $ 35,885 $ 44,435 $ 33,596 $ 34,748 $ 35,618
% of Rest of World Total Local Gross Billings 31.2 % 37.4 % 28.8 % 20.7 % 20.9 %
Goods Gross Profit 8,966 12,016 11,781 22,135 24,623
% of Rest of World Total Goods Gross Billings 12.4 % 15.2 % 13.2 % 7.8 % 8.8 %
Travel Gross Profit 5,726 7,921 5,312 8,133 8,922
% of Rest of World Total Travel Gross Billings   18.0   %   21.6   %   16.4   %   11.5   %   10.4   %
Total Gross Profit $ 50,577 $ 64,372 $ 50,689 $ 65,016 $ 69,163
Year-over-year growth (33 ) % 1 % (16 ) % 23 % 37 %
% Third Party and Other 101 % 99 % 101 % 102 % 100 %
% Direct (1 ) % 1 % (1 ) % (2 ) % - %
% of Rest of World Total Gross Billings 23.1 % 27.5 % 21.2 % 12.5 % 12.9 %
 
Consolidated Results of Operations
Gross Billings
Local Gross Billings $ 810,042 $ 732,434 $ 833,427 $ 886,926 $ 858,869
Goods Gross Billings 436,871 443,387 595,370 709,000 719,875
Travel Gross Billings   166,893     166,827     164,310     221,285     240,302  
Total Gross Billings $ 1,413,806 $ 1,342,648 $ 1,593,107 $ 1,817,211 $ 1,819,046
Year-over-year growth 10 % 10 % 5 % 29 % 29 %
Year-over-year growth, excluding FX 11 % 11 % 5 % 30 % 27 %
% Third Party and Other 87 % 85 % 77 % 82 % 81 %
% Direct 13 % 15 % 23 % 18 % 19 %
Gross Billings (TTM) $ 5,560,283 $ 5,684,675 $ 5,757,330 $ 6,166,772 $ 6,572,012
Year-over-year growth 11 % 12 % 7 % 14 % 18 %
 
Revenue
Local Revenue $ 331,455 $ 306,387 $ 318,509 $ 330,181 $ 303,696
Goods Revenue 241,757 252,254 413,713 386,179 402,576
Travel Revenue   35,535     36,418     36,225     41,277     45,304  
Total Revenue $ 608,747 $ 595,059 $ 768,447 $ 757,637 $ 751,576
Year-over-year growth 7 % 5 % 20 % 26 % 23 %
Year-over-year growth, excluding FX 8 % 6 % 20 % 26 % 22 %
% Third Party and Other 69 % 66 % 52 % 56 % 54 %
% Direct 31 % 34 % 48 % 44 % 46 %

Total Consolidated Revenue TTM

$ 2,417,003 $ 2,443,510 $ 2,573,655 $ 2,729,890 $ 2,872,719
Year-over-year growth 18 % 12 % 10 % 15 % 19 %
 
Gross Profit
Local Gross Profit $ 290,931 $ 265,133 $ 279,750 $ 287,436 $ 268,665
% of Total Consolidated Local Gross Billings 35.9 % 36.2 % 33.6 % 32.4 % 31.3 %
Goods Gross Profit 63,051 62,568 66,337 62,041 83,016
% of Total Consolidated Goods Gross Billings 14.4 % 14.1 % 11.1 % 8.8 % 11.5 %
Travel Gross Profit 30,712 31,921 32,121 36,244 38,181
% of Total Consolidated Travel Gross Billings   18.4   %   19.1   %   19.5   %   16.4   %   15.9   %
Total Gross Profit $ 384,694 $ 359,622 $ 378,208 $ 385,721 $ 389,862
Year-over-year growth (11 ) % (7 ) % 6 % 2 % 1 %
% Third Party and Other 94 % 95 % 92 % 94 % 89 %
% Direct 6 % 5 % 8 % 6 % 11 %
% of Total Consolidated Gross Billings 27.2 % 26.8 % 23.7 % 21.2 % 21.4 %
 
Adjusted EBITDA $ 80,511 $ 62,302 $ 71,988 $ 40,301 $ 59,056
% of Total Consolidated Gross Billings 5.7 % 4.6 % 4.5 % 2.2 % 3.2 %
% of Total Consolidated Revenue 13.2 % 10.5 % 9.4 % 5.3 % 7.9 %
 

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."

Net cash provided by (used in) operating activities $ 43,302 $ (11,905 ) $ 178,275 $ (20,717 ) $ (22,747 )
Purchases of property and equipment and capitalized software   (14,042 )   (15,064 )   (19,931 )   (16,355 )   (31,053 )
Free cash flow $ 29,260 $ (26,969 ) $ 158,344 $ (37,072 ) $ (53,800 )
 
Net cash provided by operating activities (TTM) $ 159,867 $ 105,874 $ 218,432 $ 188,955 $ 122,906
Purchases of property and equipment and capitalized software (TTM)   (84,554 )   (83,608 )   (63,505 )   (65,392 )   (82,403 )
Free cash flow (TTM) $ 75,313 $ 22,266 $ 154,927 $ 123,563 $ 40,503
 
Net cash used in investing activities $ (15,862 ) $ (26,444 ) $ (23,330 ) $ (138,608 ) $ (34,498 )
Net cash used in financing activities $ (7,941 ) $ (8,970 ) $ (55,444 ) $ (41,492 ) $ (114,753 )
 
Net cash used in investing activities (TTM) $ (134,923 ) $ (125,738 ) $ (96,315 ) $ (204,244 ) $ (222,880 )
Net cash used in financing activities (TTM) $ (21,071 ) $ (32,748 ) $ (81,697 ) $ (113,847 ) $ (220,659 )
 
Other Metrics
Active Customers (6)
North America 19.1 19.9 20.8 21.8 22.6
EMEA 13.9 14.0 14.2 14.5 14.5
Rest of World   9.6     9.6     9.9     15.5     16.1  
Total Active Customers 42.6 43.5 44.9 51.8 53.2
 
TTM Gross Billings / Average Active Customer (7)
North America $ 156 $ 155 $ 150 $ 147 $ 145
EMEA $ 135 $ 137 $ 139 $ 141 $ 141
Rest of World $ 108 $ 102 $ 95 $ 97 $ 119
Consolidated $ 138 $ 137 $ 134 $ 132 $ 137
 
Headcount
Sales (8) 4,679 4,801 4,834 5,231 5,057
% North America 26 % 28 % 29 % 27 % 26 %
% EMEA 39 % 37 % 37 % 37 % 39 %
% Rest of World 35 % 35 % 34 % 36 % 35 %
Other   6,306     6,453     6,449     7,099     6,888  
Total Headcount 10,985 11,254 11,283 12,330 11,945
 
(1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds.
(2) Local represents deals from local merchants, deals with national merchants, and deals through local events. Other revenue transactions, which include advertising, payment processing, point of sale, reservation and commission revenue, were previously aggregated with our Travel category. During the three months ended March 31, 2014, the Company updated its presentation of category information to include gross billings, revenue and gross profit from those other revenue sources within the Local category, and prior period category information has been retrospectively adjusted to conform to the current period presentation.
(3) Includes third party revenue, direct revenue and other revenue. Third party revenue is related to sales for which the Company acts as a marketing agent for the merchant. This revenue is recorded on a net basis. Direct revenue is primarily related to the sale of products for which the Company is the merchant of record. These revenues are accounted for on a gross basis, with the cost of inventory included in cost of revenue. Other revenue primarily consists of advertising revenue, payment processing revenue, point of sale revenue, reservation revenue and commission revenue.
(4) Represents third party revenue, direct revenue and other revenue reduced by cost of revenue. Cost of revenue is comprised of direct and certain indirect costs incurred to generate revenue. Third party cost of revenue includes estimated refunds for which the merchant's share is not recoverable. Direct cost of revenue includes the cost of inventory, shipping and fulfillment costs and inventory markdowns. Other costs incurred to generate revenue are allocated to cost of third party and other revenue and direct revenue for each of our categories (Local, Goods, and Travel) in proportion to gross billings during the period.
(5) Represents the change in financial measures that would have resulted had average exchange rates in the reporting periods been the same as those in effect in the prior year period.
(6) Reflects the total number of unique user accounts who have purchased a voucher or product from us during the trailing twelve months.
(7) Reflects the total gross billings generated in the trailing twelve months per average active customer over that period.
(8) Includes merchant sales representatives, as well as sales support.
(9) 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, Inc.
Investor Relations
Genny Konz, 312-999-3098
ir@groupon.com
or
Public Relations
Paul Taaffe, 312-999-3964

Source: Groupon, Inc.

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