Groupon, Inc.
Nov 8, 2012
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Groupon Announces Third Quarter 2012 Results

CHICAGO--(BUSINESS WIRE)-- Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter ended September 30, 2012.

Revenue increased 32% year-over-year to $568.6 million in the third quarter 2012, compared with $430.2 million in the third quarter 2011. Excluding the $26.0 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, revenue growth was 38% compared with third quarter 2011.

Gross billings, which reflects the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds, increased 5% year-over-year to $1.22 billion in the third quarter 2012, compared with $1.16 billion in the third quarter 2011. Excluding the $61.7 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, gross billings growth was 11% compared with third quarter 2011.

Operating income was $25.4 million in the third quarter 2012, which included stock-based compensation and acquisition-related expenses of $25.1 million. This compares with a loss from operations of $0.2 million in the third quarter 2011, which included net positive stock-based compensation and acquisition-related expenses of $1.5 million. Year-over-year changes in foreign exchange rates throughout the quarter had a $2.8 million favorable impact on operating income. Revenue and operating income in the third quarter 2012 included a one-time increase of $18.5 million related to breakage, or income related to unredeemed Groupons internationally, resulting from the clarification of a tax ruling in Germany.

"Our solid performance in North America was offset by continued challenges in Europe," said Andrew Mason, CEO of Groupon. "Groupon Goods has evolved into a second major category that our customers clearly love. With deals on everything from designer sunglasses to big-screen televisions to most-wanted toys, we think it will be a great gifting destination this holiday season."

Operating cash flow decreased 35% year-over-year to $42.1 million, compared with $64.4 million in the third quarter 2011. For the trailing twelve months ended September 30, 2012, operating cash flow was $370.2 million. Free cash flow, a non-GAAP financial measure calculated as operating cash flow less capital expenditures, was $26.1 million for the third quarter 2012, bringing free cash flow for the trailing twelve months ended September 30, 2012 to $300.4 million. This reflects an increase of 123% year-over-year compared to free cash flow in the trailing twelve months ended September 30, 2011 of $134.9 million. At the end of the quarter, Groupon had $1.2 billion in cash and cash equivalents and no long-term debt.

Third quarter 2012 net loss attributable to common stockholders improved by $51.3 million year-over-year, to $3.0 million, or $0.00 per share, reflecting stock-based compensation and acquisition-related expenses of $25.1 million and a diluted share count of 653.2 million. Net loss attributable to common stockholders was $54.2 million, or a loss per share of $0.18 in the third quarter 2011, including net positive stock-based compensation and acquisition-related expenses of $1.5 million.

Groupon, Inc.
Summary Consolidated and Segment Results
(dollars in thousands, except share and per share data)
(unaudited)
               

Three Months Ended

 

Y/Y %
Growth

Nine Months Ended

 

Y/Y %
Growth

September 30,

Y/Y %

excluding

September 30,

Y/Y %

excluding

2011 2012

Growth

FX (1)

2011 2012

Growth

FX (1)

Revenue
North America $ 161,525 $ 291,603 80.5 % 80.7 % $ 455,342 $ 790,349 73.6 % 73.8 %
International   268,636     276,949   3.1 % 12.7 %   662,924     905,821 36.6 % 46.9 %
Consolidated revenue $ 430,161   $ 568,552   32.2 % 38.2 % $ 1,118,266   $ 1,696,170 51.7 % 57.9 %
 
Operating (loss) income $ (239 ) $ 25,438 N/A N/A $ (218,414 ) $ 111,562 N/A N/A
 
Net (loss) income attributable to common stockholders $ (54,229 ) $ (2,979 ) 94.5 % 87.1 % $ (308,115 ) $ 13,712 N/A N/A
 
Net (loss) earnings per share
Basic $ (0.18 ) $ (0.00 ) $ (1.01 ) $ 0.02
Diluted $ (0.18 ) $ (0.00 ) $ (1.01 ) $ 0.02
 
Weighted average basic shares outstanding 307,605,060 653,223,610 305,288,502 648,021,943
Weighted average diluted shares outstanding 307,605,060 653,223,610 305,288,502 663,557,250

(1) Represents change in financial measures that would have resulted had average exchange rates in the reported period been the same as those in effect in the three and nine months ended September 30, 2011.

Highlights

Fourth Quarter 2012 Outlook

Revenue for the fourth quarter 2012 is expected to be between $625 million and $675 million, an increase of between 27% and 37% compared with the fourth quarter 2011.

Income from operations for the fourth quarter 2012 is expected to be between $0 million and $20 million, compared with a loss from operations of $15.0 million in the fourth quarter 2011. This outlook includes approximately $30 million of stock-based compensation. The outlook further assumes no acquisitions or investments, or material changes in foreign exchange rates.

A conference call will be webcast live today at 4:00 p.m. CT / 5:00 p.m. ET, and will be available on Groupon's investor relations website at http://investor.groupon.com. This call will contain forward-looking statements and other material information regarding the Company's financial and operating results.

Non-GAAP Financial Measure

In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided free cash flow, which is a non-GAAP financial measure, to aid investors in better understanding Groupon's performance. We have provided free cash flow because, although it is similar to cash flow from operations, we believe it typically will present a measure of cash flows more aligned with an analysis of ongoing business operations as purchases of fixed assets, software developed for internal use and website development costs are a necessary component of ongoing operations. However, free cash flow is not intended to be a substitute for cash flows from operations and is not intended to represent the total increase or decrease in Groupon's cash balance for the applicable period. For a reconciliation of free cash flow to cash flow from operations, see ''Non-GAAP Reconciliation Schedule'' included in this release.

Note on Forward Looking Statements

The statements in this release that refer to plans and expectations for the next quarter or the future are forward-looking statements that involve a number of risks and uncertainties, and actual results could differ materially from those discussed. The risks and uncertainties that could cause results to differ materially from those included in the forward-looking statements include, but are not limited to, Groupon's ability to continue to expand the business and continue revenue growth; risks related to Groupon's business strategy; Groupon's ability to manage the growth of the organization; responding to changes in the markets in which Groupon competes for business; retaining existing merchant partners and adding new merchant partners; competing against smaller competitors and competitors with more financial resources; developing new product and service offerings that are appealing to customers; maintaining a strong brand; effectively dealing with challenges arising from Groupon's international operations; integrating Groupon's technology platforms; managing refund risks; retaining the executive team; litigation; regulations, including the CARD Act and regulation of the Internet; tax liabilities; tax legislation; maintaining Groupon's information technology infrastructure; security breaches; protecting Groupon's intellectual property; handling acquisitions, joint ventures and strategic investments effectively; seasonality; payment-related risks; customer and merchant partner fraud; global economic uncertainty; compliance with rules and regulations associated with being a public company; and Groupon's ability to raise capital if necessary. Groupon urges 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, 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 November 8, 2012. Groupon undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this earnings release to conform these statements to actual results or to changes in its expectations.

Groupon encourages investors to use its investor relations website as a way of easily finding information about the company. Groupon promptly makes available on this website, free of charge, the reports that the company files or furnishes with the SEC, corporate governance information (including Groupon's Global Code of Conduct), and select press releases and social media postings.

Groupon, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
         

Three Months Ended
September 30,

Nine Months Ended
September 30,

2011 2012 2011 2012
Operating activities
Net (loss) income $ (14,416 ) $ (940 ) $ (238,083 ) $ 29,016
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 7,058 15,310 22,754 39,836
Stock-based compensation 3,340 22,619 60,922 77,706
Deferred income taxes 2,839 (3,389 ) 602 9,608
Excess tax benefits on stock-based compensation (7,791 ) (2,870 ) (11,323 ) (24,620 )
Loss on equity method investees 11,211 138 19,974 8,694
Acquisition-related (benefit) expense, net (4,793 ) 2,431 (4,793 ) 744
Gain on redemption of common stock (4,916 ) - (4,916 ) -
Gain on E-Commerce transaction - - - (56,032 )
Change in assets and liabilities, net of acquisitions:
Restricted cash (7,116 ) 973 (8,141 ) (1,855 )
Accounts receivable (16,618 ) (10,274 ) (69,690 ) (2,189 )
Prepaid expenses and other current assets (23,802 ) (3,192 ) (41,023 ) (24,937 )
Accounts payable (7,550 ) (5,094 ) (21,924 ) 13,174
Accrued merchant payables 98,002 21,868 314,872 53,889
Accrued expenses and other current liabilities 34,207 4,933 108,963 68,010
Other, net   (5,244 )   (425 )   (6,824 )   10,073  
Net cash provided by operating activities 64,411 42,088 121,370 201,117
 
Net cash used in investing activities (43,048 ) (35,629 ) (112,526 ) (142,226 )
 
Net cash provided by financing activities 8,608 2,707 120,292 18,590
 
Effect of exchange rate changes on cash and cash equivalents   (11,129 )   6,047     (4,034 )   595  
Net increase in cash and cash equivalents 18,842 15,213 125,102 78,076
Cash and cash equivalents, beginning of period   225,093     1,185,798     118,833     1,122,935  
Cash and cash equivalents, end of the period $ 243,935   $ 1,201,011   $ 243,935   $ 1,201,011  
Groupon, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
       

Three Months Ended September 30,

Nine Months Ended September 30,
2011 2012 2011 2012
Revenue:
Third party and other revenue $ 422,989 $ 423,564 $ 1,111,094 $ 1,466,602
Direct revenue   7,172     144,988     7,172     229,568  
Total revenue   430,161     568,552     1,118,266     1,696,170  
Cost of revenue:
Third party and other revenue 62,339 54,173 156,907 233,834
Direct revenue   5,707     127,613     5,707     202,634  
Total cost of revenue   68,046     181,786     162,614     436,468  
Operating expenses:
Marketing 170,349 70,919 613,173 275,941
Selling, general and administrative 196,798 287,978 565,686 871,455
Acquisition-related (benefit) expense, net   (4,793 )   2,431     (4,793 )   744  
Total operating expenses   362,354     361,328     1,174,066     1,148,140  
(Loss) income from operations (239 ) 25,438 (218,414 ) 111,562
Interest and other income, net 8,269 617 9,808 54,445
Loss on equity method investees   (11,211 )   (138 )   (19,974 )   (8,694 )
(Loss) income before provision for income taxes (3,181 ) 25,917 (228,580 ) 157,313
Provision for income taxes   11,235     26,857     9,503     128,297  
Net (loss) income (14,416 ) (940 ) (238,083 ) 29,016
Less: Net loss (income) attributable to noncontrolling interests   3,843     (706 )   23,602     (2,806 )
Net (loss) income attributable to Groupon, Inc. (10,573 ) (1,646 ) (214,481 ) 26,210
Redemption of preferred stock in excess of carrying value - - (34,327 ) -
Adjustment of redeemable noncontrolling interests to redemption value   (43,656 )   (1,333 )   (59,307 )   (12,498 )
Net (loss) income attributable to common stockholders $ (54,229 ) $ (2,979 ) $ (308,115 ) $ 13,712  
 
Net (loss) earnings per share
Basic $ (0.18 ) $ (0.00 ) $ (1.01 ) $ 0.02
Diluted $ (0.18 ) $ (0.00 ) $ (1.01 ) $ 0.02
 
Weighted average number of shares outstanding
Basic 307,605,060 653,223,610 305,288,502 648,021,943
Diluted 307,605,060 653,223,610 305,288,502 663,557,250
Groupon, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
   
December 31, 2011 September 30, 2012
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,122,935 $ 1,201,011
Accounts receivable, net 108,747 110,058
Prepaid expenses and other current assets   91,645     121,338  
Total current assets 1,323,327 1,432,407
Property and equipment, net of accumulated depreciation of $14,627 and $37,564, respectively 51,800 103,876
Goodwill 166,903 196,978
Intangible assets, net 45,667 51,447
Investments in equity interests 50,604 131,039
Deferred income taxes, non-current 46,104 48,753
Other non-current assets   90,071     68,314  
Total Assets $ 1,774,476   $ 2,032,814  
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 40,918 $ 60,016
Accrued merchant payables 520,723 573,477
Accrued expenses 212,007 245,083
Deferred income taxes, current 76,841 75,203
Other current liabilities   144,673     171,422  
Total current liabilities 995,162 1,125,201
Deferred income taxes, non-current 7,428 28,585
Other non-current liabilities   70,766     74,643  

Total Liabilities

  1,073,356     1,228,429  
Commitments and contingencies
Redeemable noncontrolling interests 1,653 7,190
Stockholders' Equity
Class A common stock, par value $0.0001 per share, 2,000,000,000 shares authorized, 641,745,225 shares issued and outstanding at December 31, 2011; 2,000,000,000 shares authorized, 652,501,880 shares issued and outstanding at September 30, 2012 64 65
Class B common stock, par value $0.0001 per share, 10,000,000 shares authorized, 2,399,976 shares issued and outstanding at December 31, 2011 and September 30, 2012 - -
Common stock, par value $0.0001 per share, 2,010,000,000 shares authorized, no shares issued and outstanding at December 31, 2011 and September 30, 2012 - -
Additional paid-in capital 1,388,253 1,459,485
Accumulated deficit (698,704 ) (672,494 )
Accumulated other comprehensive income   12,928     11,956  
Total Groupon, Inc. Stockholders' Equity 702,541 799,012
Noncontrolling interests   (3,074 )   (1,817 )
Total Equity   699,467     797,195  

Total Liabilities and Equity

$ 1,774,476   $ 2,032,814  
Groupon, Inc.
Segment Information
(in thousands)
(unaudited)
   
Three Months Ended September 30, Nine Months Ended September 30,
2011 2012 2011 2012
North America
Gross Billings (1) $ 400,978 $ 552,369 $ 1,086,119 $ 1,654,201
Revenue $ 161,525 $ 291,603 $ 455,342 $ 790,349
Segment operating expenses(2)   142,689     252,510     468,785     667,655  
Segment operating income (loss) $ 18,836 $ 39,093 $ (13,443 ) $ 122,694
Segment income (loss) as a percent of segment revenue 11.7 % 13.4 % (3.0 ) % 15.5 %
 
International
Gross Billings (1) $ 756,232 $ 665,887 $ 1,668,514 $ 2,205,531
Revenue $ 268,636 $ 276,949 $ 662,924 $ 905,821
Segment operating expenses(2)   289,164     265,554     811,766     838,503  
Segment operating (loss) income $ (20,528 ) $ 11,395 $ (148,842 ) $ 67,318
Segment (loss) income as a percent of segment revenue (7.6 ) % 4.1 % (22.5 ) % 7.4 %
 
Consolidated
Gross Billings (1) $ 1,157,210 $ 1,218,256 $ 2,754,633 $ 3,859,732
Revenue $ 430,161 $ 568,552 $ 1,118,266 $ 1,696,170
Segment operating expenses(2)   431,853     518,064     1,280,551     1,506,158  
Segment operating (loss) income $ (1,692 ) $ 50,488 $ (162,285 ) $ 190,012
Segment (loss) income as a percent of segment revenue (0.4 ) % 8.9 % (14.5 ) % 11.2 %
 
Stock-based compensation 3,340 22,619 60,922 77,706
Acquisition-related (benefit) expense, net   (4,793 )   2,431     (4,793 )   744  
Operating (loss) income (239 ) 25,438 (218,414 ) 111,562
 
Interest and other income, net (8,269 ) (617 ) (9,808 ) (54,445 )
Loss on equity method investees   11,211     138     19,974     8,694  
(Loss) income before provision for income taxes (3,181 ) 25,917 (228,580 ) 157,313
Provision (benefit) for income taxes   11,235     26,857     9,503     128,297  
Net (loss) income $ (14,416 ) $ (940 ) $ (238,083 ) $ 29,016  

(1) Represents the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds.

(2) Represents cost of revenue and operating expenses, excluding stock-based compensation and acquisition-related (benefit) expense, net, which are not allocated to segments.

Foreign Exchange Rate Neutral Operating Results
(in thousands)
(unaudited)
         
The effect on the Company's consolidated statements of operations from changes in exchange rates versus the U.S. Dollar for the three months ended September 30, 2012 are as follows:
 
Three Months Ended September 30, 2012 Three Months Ended September 30, 2012
At Avg. Exchange At Avg. Exchange

Q3 2011
Rates (1)

Rate
Effect (2)

As
Reported

Q2 2012
Rates (3)

Rate
Effect (2)

As
Reported

Revenue $ 594,551 $ (25,999 ) $ 568,552 $ 571,154 $ (2,602 ) $ 568,552
Income from operations $ 22,589 $ 2,849 $ 25,438 $ 25,030 $ 408 $ 25,438
 
The effect on the Company's consolidated statements of operations from changes in exchange rates versus the U.S. Dollar for the nine months ended September 30, 2012 are as follows:
 
Nine Months Ended September 30, 2012 Nine Months Ended September 30, 2012
At Avg. Exchange At Avg. Exchange

YTD Q3 2011
Rates (1)

Rate
Effect (2)

As
Reported

Q4'11 - Q2'12
Rates (3)

Rate
Effect (2)

As
Reported

Revenue $ 1,765,476 $ (69,306 ) $ 1,696,170 $ 1,719,681 $ (23,511 ) $ 1,696,170
Income from operations $ 110,767 $ 795 $ 111,562 $ 110,526 $ 1,036 $ 111,562

(1) Represents the outcome that would have resulted had average exchange rates in the reported period been the same as those in effect during the three and nine months ended September 30, 2011.

(2) Represents the increase or decrease in reported amounts resulting from changes in exchange rates from those in effect in the comparable period.

(3) Represents the outcome that would have resulted had average exchange rates in the reported period been the same as those in effect during the three and nine months ended June 30, 2012.

Reconciliation of Non-GAAP Financial Measures
(in thousands)
(unaudited)
       
Free Cash Flow
The following is a reconciliation of free cash flow to the most comparable U.S. GAAP measure, "Net cash provided by operating activities," for the three and nine months ended September 30, 2011 and 2012:
 
Three Months Ended September 30, Nine Months Ended September 30,
2011 2012   2011 2012
Net cash provided by operating activities $ 64,411 $ 42,088 $ 121,370 $ 201,117
Purchases of property and equipment and software capitalization   (8,623 )   (16,010 )   (29,825 )   (55,802 )
Free cash flow $ 55,788   $ 26,078   $ 91,545   $ 145,315  
 
Net cash used in investing activities $ (43,048 ) $ (35,629 ) $ (112,526 ) $ (142,226 )
Net cash provided by financing activities $ 8,608 $ 2,707 $ 120,292 $ 18,590
Supplemental Financial Information and Business Metrics
(in thousands, except per share and headcount data and TTM
Gross Billings / Average Active Customer)
(unaudited)
   
Q1 2011 (6) Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
 
Segments
North America Segment:
Gross Billings (1) $ 315,152 $ 369,990 $ 400,978 $ 475,807 $ 553,557 $ 548,275 $ 552,369
Year-over-year growth 610 % 359 % 204 % 118 % 76 % 48 % 38 %
% of Consolidated Gross Billings 47 % 40 % 35 % 39 % 41 % 43 % 45 %
Gross Billings (1) Trailing Twelve Months (TTM) $ 745,772 $ 1,035,183 $ 1,304,128 $ 1,561,927 $ 1,800,332 $ 1,978,617 $ 2,130,008
 
Revenue:
Third Party and Other Revenue (2) $ 136,612 $ 157,205 $ 161,525 $ 179,638 $ 230,984 $ 207,119 $ 158,545
Direct Revenue (2)   -     -     -     -     7,581     53,062   133,058  
Total Revenue $ 136,612 $ 157,205 $ 161,525 $ 179,638 $ 238,565 $ 260,181 $ 291,603
Year-over-year growth 574 % 341 % 188 % 103 % 75 % 66 % 81 %

% of Consolidated Revenue

46 % 40 % 38 % 36 % 43 % 46 % 51 %
Revenue TTM $ 316,752 $ 438,305 $ 543,705 $ 634,980 $ 736,933 $ 839,909 $ 969,987
 
Cost of Revenue:
Third Party and Other Cost of Revenue (3) $ 25,050 $ 32,169 $ 31,316 $ 51,419 $ 62,580 $ 40,155 $ 15,475
Direct Cost of Revenue (3)   -     -     -     -     6,671     46,159   115,560  
Total Cost of Revenue $ 25,050 $ 32,169 $ 31,316 $ 51,419 $ 69,251 $ 86,314 $ 131,035

% of North America Total Revenue

18 % 20 % 19 % 29 % 29 % 33 % 45 %
 
Operating (Loss) Income Excl Stock-Based Compensation (SBC), Acquisition-Related Expenses $ (21,778 ) $ (10,501 ) $ 18,836 $ 18,239 $ 40,172 $ 43,429 $ 39,093
Year-over-year growth N/A (2,678 ) % 496 % N/A N/A N/A 108 %
% of Consolidated Operating (Loss) Income Excl SBC, Acq-Related 22 % 17 % 1,113 % 102 % 59 % 60 % 77 %
Operating Margin Excl SBC, Acq-Related (% of North America Total revenue) (15.9 ) % (6.7 ) % 11.7 % 10.2 % 16.8 % 16.7 % 13.4 %
Year-over-year growth (bps) (5,879 ) (562 ) 603 3,494 3,278 2,337 170
Operating (Loss) Income TTM Excl SBC, Acq-Related $ (40,901 ) $ (51,024 ) $ (35,348 ) $ 4,796 $ 66,746 $ 120,676 $ 140,933
Operating Margin TTM Excl SBC, Acq-Related (% of North America Total TTM revenue) (12.9 ) % (11.6 ) % (6.5 ) % 0.8 % 9.1 % 14.4 % 14.5 %
Year-over-year growth (bps) (3,604 ) (2,266 ) (1,467 ) 596 2,197 2,601 2,100
 
International Segment:
Gross Billings (1) $ 353,022 $ 559,259 $ 756,232 $ 755,061 $ 801,243 $ 738,401 $ 665,887
Year-over-year growth N/A 5,057 % 1,115 % 283 % 127 % 32 % (12 ) %
Year-over-year growth, excluding FX (4) N/A 4,587 % 1,021 % 287 % 138 % 45 % (4 ) %
% of Consolidated Gross Billings 53 % 60 % 65 % 61 % 59 % 57 % 55 %
Gross Billings (1) TTM $ 623,367 $ 1,171,781 $ 1,865,774 $ 2,423,574 $ 2,871,795 $ 3,050,937 $ 2,960,592
 
Revenue:
Third Party and Other Revenue (2) $ 158,911 $ 235,377 $ 261,464 $ 298,872 $ 309,069 $ 295,866 $ 265,019
Direct Revenue (2)   -     -     7,172     13,654     11,649     12,288   11,930  
Total Revenue $ 158,911 $ 235,377 $ 268,636 $ 312,526 $ 320,718 $ 308,154 $ 276,949
Year-over-year growth N/A 7,709 % 947 % 273 % 102 % 31 % 3 %
Year-over-year growth, excluding FX (4) N/A 7,013 % 868 % 276 % 112 % 44 % 13 %
% of Consolidated Revenue 54 % 60 % 62 % 64 % 57 % 54 % 49 %
Revenue TTM $ 271,440 $ 503,803 $ 746,785 $ 975,450 $ 1,137,257 $ 1,210,034 $ 1,218,347
 
Cost of Revenue:
Third Party and Other Cost of Revenue (3) $ 14,715 $ 22,634 $ 31,023 $ 35,463 $ 40,049 $ 36,877 $ 38,698
Direct Cost of Revenue (3)   -     -     5,707     9,383     10,198     11,993   12,053  
Total Cost of Revenue $ 14,715 $ 22,634 $ 36,730 $ 44,846 $ 50,247 $ 48,870 $ 50,751
% of International Total Revenue 9 % 10 % 14 % 14 % 16 % 16 % 18 %
 
Operating (Loss) Income Excl SBC, Acq-Related $ (76,506 ) $ (51,808 ) $ (20,528 ) $ (287 ) $ 27,418 $ 28,505 $ 11,395
Year-over-year growth N/A (125 ) % 21 % 100 % N/A 155 N/A
% of Consolidated Operating (Loss) Income Excl SBC, Acq-Related 78 % 83 % (1,213 ) % (2 ) % 41 % 40 % 23 %
Operating Margin Excl SBC, Acq-Related (% of International Total revenue) (48.1 ) % (22.0 ) % (7.6 ) % (0.1 ) % 8.5 % 9.3 % 4.1 %
Year-over-year growth (bps) N/A 74,265 9,392 14,474 5,669 3,126 1,170
Operating (Loss) Income TTM Excl SBC, Acq-Related $ (247,063 ) $ (275,824 ) $ (270,298 ) $ (149,129 ) $ (45,205 ) $ 35,108 $ 67,031
Operating Margin TTM Excl SBC, Acq-Related (% of International Total TTM revenue) (91.0 ) % (54.7 ) % (36.2 ) % (15.3 ) % (4.0 ) % 2.9 % 5.5 %
Year-over-year growth (bps) N/A 70,992 13,508 13,628 8,704 5,765 4,170
 
Consolidated Results of Operations
Gross Billings (1) $ 668,174 $ 929,249 $ 1,157,210 $ 1,230,868 $ 1,354,800 $ 1,286,676 $ 1,218,256
Year-over-year growth 1,405 % 916 % 496 % 196 % 103 % 38 % 5 %
Year-over-year growth, excluding FX (4) 1,378 % 859 % 465 % 198 % 108 % 47 % 11 %
Gross Billings (1) (TTM) $ 1,369,139 $ 2,206,964 $ 3,169,902 $ 3,985,501 $ 4,672,127 $ 5,029,554 $ 5,090,600
Year-over-year growth 1,651 % 1,227 % 804 % 435 % 241 % 128 % 61 %
 
Revenue:
Third Party and Other Revenue (2) $ 295,523 $ 392,582 $ 422,989 $ 478,510 $ 540,053 $ 502,985 $ 423,564
Direct Revenue (2)   -     -     7,172     13,654     19,230     65,350   144,988  
Total Consolidated Revenue $ 295,523 $ 392,582 $ 430,161 $ 492,164 $ 559,283 $ 568,335 $ 568,552
Year-over-year growth 1,358 % 915 % 426 % 186 % 89 % 45 % 32 %
Year-over-year growth, excluding FX (4) 1,332 % 858 % 401 % 188 % 95 % 53 % 38 %
Total Consolidated Revenue TTM

 

$ 588,192 $ 942,108 $ 1,290,490 $ 1,610,430 $ 1,874,190 $ 2,049,943 $ 2,188,334
Year-over-year growth 1,594 % 1,205 % 761 % 415 % 219 % 118 % 70 %
 
Cost of Revenue:
Third Party and Other Cost of Revenue (3) $ 39,765 $ 54,803 $ 62,339 $ 86,882 $ 102,629 $ 77,032 $ 54,173
Direct Cost of Revenue (3)   -     -     5,707     9,383     16,869     58,152   127,613  
Total Consolidated Cost of Revenue $ 39,765 $ 54,803 $ 68,046 $ 96,265 $ 119,498 $ 135,184 $ 181,786
% of Total Consolidated Revenue 13 % 14 % 16 % 20 % 21 % 24 % 32 %
 
Operating (Loss) Income Excl SBC, Acq-Related $ (98,284 ) $ (62,309 ) $ (1,692 ) $ 17,952 $ 67,590 $ 71,934 $ 50,488
Year-over-year growth N/A (166 ) % 93. % N/A N/A N/A N/A
Operating Margin Excl SBC, Acq-Related (% of Total Consolidated revenue) (33.3 ) % (15.9 ) % (0.4 ) % 3.6 % 12.1 % 12.7 % 8.9 %
Year-over-year growth (bps) (7,611 ) 4,471 2,760 8,689 4,534 2,853 930
Operating (Loss) Income TTM Excl SBC, Acq-Related $ (287,964 ) $ (326,848 ) $ (305,646 ) $ (144,333 ) $ 21,541 $ 155,784 $ 207,964
Operating Margin TTM Excl SBC, Acq-Related (% of Total Consolidated TTM revenue) (49.0 ) % (34.7 ) % (23.7 ) % (9.0 ) % 1.1 % 7.6 % 9.5 %
Year-over-year growth (bps) (7,208 ) (1,333 ) 245 4,887 5,011 4,229 3,320
 
Operating (Loss) Income $ (117,148 ) $ (101,027 ) $ (239 ) $ (14,972 ) $ 39,639 $ 46,485 $ 25,438
Year-over-year growth N/A (174 ) % 100 % 96. % N/A N/A N/A
Operating Margin (% of Total Consolidated revenue) (39.6 ) % (25.7 ) % (0.1 ) % (3.0 ) % 7.1 % 8.2 % 4.5 %
Year-over-year growth (bps) (8,192 ) 6,949 6,838 19,213 4,673 3,391 457
Operating (Loss) Income TTM $ (546,064 ) $ (610,272 ) $ (554,543 ) $ (233,386 ) $ (76,599 ) $ 70,913 $ 96,590
Operating Margin TTM (% of Total Consolidated TTM revenue) (92.8 ) % (64.8 ) % (43.0 ) % (14.5 ) % (4.1 ) % 3.5 % 4.4 %
Year-over-year growth (bps) (11,533 ) (2,457 ) 1,427 11,983 8,875 6,824 4,740
 
Net (Loss) Income Attributable to Common Stockholders (146,480 ) (107,406 ) (54,229 ) (65,379 ) (11,695 ) 28,386 (2,979 )
Weighted Average Basic Shares Outstanding 307,849 303,415 307,605 528,422 644,097 647,150 653,224
Weighted Average Diluted Shares Outstanding (5) 307,849 303,415 307,605 528,422 644,097 663,123 653,224
Net (Loss) Earnings per Share
Basic $ (0.48 ) $ (0.35 ) $ (0.18 ) $ (0.12 ) $ (0.02 ) $ 0.04 $ (0.00 )
Diluted $ (0.48 ) $ (0.35 ) $ (0.18 ) $ (0.12 ) $ (0.02 ) $ 0.04 $ (0.00 )
Supplemental Financial Information and Business Metrics
(in thousands, except per share and headcount data and TTM
Gross Billings / Average Active Customer)
(unaudited)
               
Q1 2011 (6) Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
 
Cash Flow
Operating cash flow (TTM) $ 91,928 $ 128,316 $ 173,291 $ 290,447 $ 356,221 $ 392,517 $ 370,194
Purchases of Property and Equipment and Software Capitalization (TTM)   (24,780 )   (31,949 )   (38,414 )   (43,811 )   (45,932 )   (62,401 )   (69,788 )
Free cash flow (TTM) (7) $ 67,148 $ 96,367 $ 134,877 $ 246,636 $ 310,289 $ 330,116 $ 300,406
 
Other Metrics:
Active Customers (8) 15,376 23,037 28,906 33,742 36,850 38,046 39,525
TTM Gross Billings / Average Active Customer (9) $ 169 $ 174 $ 189 $ 187 $ 179 $ 165 $ 149
Headcount
Sales (10) 3,556 4,850 4,853 5,196 5,735 5,587 5,087
% North America 19 % 20 % 21 % 20 % 21 % 20 % 24 %
% International 81 % 80 % 79 % 80 % 79 % 80 % 76 %
Other   3,551     4,775     5,565     6,275     6,813     7,233     6,779  
Total Headcount 7,107 9,625 10,418 11,471 12,548 12,820 11,866

(1) Represents the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds.

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

(3) The third quarter 2012 marked the first time the Company disclosed direct cost of revenue which reflects the allocation of all variable costs related to the Direct business. As a result, third party and other cost of revenue and direct cost of revenue are presented separately.

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

(5) The weighted-average diluted shares outstanding is calculated using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock units and restricted shares, as calculated using the treasury stock method.

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

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

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

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

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

Groupon Investor Relations
Genny Konz, 312-999-3098
ir@groupon.com
or
Groupon Public Relations
Julie Mossler, 312-242-2033

Source: Groupon, Inc.

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