Groupon Announces Fourth Quarter and Fiscal Year 2013 Results

By: Groupon, Inc. via Business Wire News Releases

February 20, 2014 at 16:02 PM EST

Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter and fiscal year ended December 31, 2013.

"Our record performance in the quarter was led by strength in Goods, as shoppers increasingly looked to Groupon to fill their holiday needs,” said Eric Lefkofsky, CEO of Groupon. “Our mobile business continued to gain momentum as our worldwide mobile transaction mix increased more than 10% in the quarter, to nearly 50% in December. With another 9 million downloads this quarter, we now have nearly 70 million app downloads to date.”

“We’re also excited to welcome Ticket Monster and ideeli to the Groupon family. The acquisitions bring scale, relationships, and category expertise, making Groupon an even better place to start when you want to do or buy just about anything, anytime, anywhere.”

Fourth Quarter 2013 Summary

Gross billings, which reflect the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds, increased 5% globally to $1.6 billion in the fourth quarter 2013, compared with $1.5 billion in the fourth quarter 2012. North America growth of 10% and EMEA growth of 6% was offset by an 11% decline in Rest of World.

Revenue increased 20% to $768.4 million in the fourth quarter 2013, compared with $638.3 million in the fourth quarter 2012. North America revenue growth of 18% and EMEA growth of 43% was offset by a 15% decline in Rest of World.

Gross profit increased 6%, to $378.2 million in the fourth quarter 2013, compared with $355.8 million in the fourth quarter 2012.

Adjusted EBITDA, a non-GAAP financial measure, was $72.0 million in the fourth quarter 2013, compared with $29.7 million in the fourth quarter 2012.

Operating income was $13.4 million in the fourth quarter 2013, compared with an operating loss of $12.9 million in the fourth quarter 2012.

Operating income excluding stock compensation and acquisition-related costs, net, a non-GAAP financial measure, was $47.9 million in the fourth quarter 2013, compared with $13.7 million in the fourth quarter 2012.

Fourth quarter 2013 net loss attributable to common stockholders was $81.2 million, or $0.12 per share, including stock compensation and acquisition-related costs, net, of $34.5 million ($31.0 million net of tax). Fourth quarter 2013 results include a pre-tax non-operating loss of $85.5 million ($77.8 million net of tax) related to the impairment of a minority investment in China. Earnings per share excluding this impairment charge, stock compensation and acquisition-related costs, net of tax, a non-GAAP financial measure, was $0.04 per share.

Operating cash flow for the trailing twelve months ended December 31, 2013 was $218.4 million. Free cash flow, a non-GAAP financial measure, was $158.3 million in the fourth quarter 2013, bringing free cash flow for the trailing twelve months ended December 31, 2013 to $154.9 million.

At the end of the quarter, Groupon had $1.2 billion in cash and cash equivalents.

Full Year 2013 Summary

Gross billings increased 7% globally to $5.8 billion in 2013, compared with $5.4 billion in 2012. North America growth of 20% and EMEA growth of 3% was offset by a 14% decline in Rest of World.

Revenue increased 10% to $2.6 billion in 2013, compared with $2.3 billion in 2012. North America revenue growth of 31% was offset by an 8% decline in EMEA and a 15% decline in Rest of World.

Gross profit decreased 7%, to $1.5 billion in 2013, compared with $1.6 billion in 2012.

Adjusted EBITDA, a non-GAAP financial measure, was $286.7 million in 2013, compared with $259.5 million in 2012.

Operating income was $75.8 million in 2013, compared with $98.7 million in 2012.

Operating income excluding stock compensation and acquisition-related costs, net, a non-GAAP financial measure, was $197.2 million in 2013, compared with $203.7 million in 2012.

Full year 2013 net loss attributable to common stockholders was $95.4 million, or $0.14 per share, including stock compensation and acquisition-related costs, net, of $121.5 million ($90.7 million net of tax). 2013 results include a pre-tax non-operating loss of $85.5 million ($77.8 million net of tax) related to the impairment of a minority investment in China in the fourth quarter. Earnings per share excluding this impairment charge, stock compensation and acquisition-related costs, net of tax, a non-GAAP financial measure, was $0.11 per share.

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.

Operating Highlights

Units: Global units, defined as vouchers and products sold before cancellations and refunds, increased 11% year-over-year to 56 million in the fourth quarter 2013. North America units increased 17%, EMEA units increased 9%, and Rest of World units decreased 1% year-over-year.
Active deals: At the end of the fourth quarter 2013, on average, active deals in North America were approximately 80,000, compared with more than 65,000 at the end of the third quarter 2013. Globally, active deals exceeded 140,000 at the end of the fourth quarter 2013.
Active customers: Active customers, or customers that have purchased a voucher or product within the last twelve months, grew 9% year-over-year, to 44.9 million as of December 31, 2013, comprising 20.8 million in North America, 14.2 million in EMEA, and 9.9 million in Rest of World.
Customer spend: Fourth quarter 2013 trailing twelve month billings per average active customer was $134, compared with $137 in the third quarter 2013.
Mobile: In December 2013, nearly 50% of global transactions were completed on mobile devices. Nearly 70 million people have now downloaded Groupon mobile apps worldwide, with approximately 9 million people downloading them in the fourth quarter alone.
Marketplace: The rollout of Groupon’s marketplace (“Pull”) continued to gain traction. In December 2013, approximately 8% of total traffic in North America searched, with customers that searched spending over 50% more than those that did not.

Share Repurchase Program

During the fourth quarter 2013, Groupon repurchased 3,661,900 shares of Class A common stock under its share repurchase authorization at an average price of $10.26 per share, for an aggregate purchase price of $37.6 million. During the full year 2013, Groupon repurchased 4,432,800 shares at an average price of $10.51 per share, for an aggregate purchase price of $46.6 million. Groupon is authorized to repurchase up to approximately $253.4 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.

Subsequent Events

On January 2, 2014, Groupon completed the acquisition of LivingSocial Korea, Inc., the holding company that owns Ticket Monster, for $100 million in cash and $163 million in Groupon Class A common stock. Ticket Monster is a leading Korean ecommerce company, with a broad range of local, travel, and product offers, and is one of the fastest growing ecommerce companies in the region.

On January 13, 2014, Groupon completed the acquisition of Ideeli, Inc. for $43 million in cash. Ideeli is a leading online flash fashion retailer, further extending Groupon’s presence in fashion apparel.

Outlook

In the first quarter 2014, Groupon expects one-time costs related to the integration of its recent acquisitions, specifically as it consolidates Ticket Monster with its Korean business, and makes investments to drive ideeli growth and profitability. Together, in the first quarter, they are expected to contribute approximately $50 million to revenue, and have an approximately $20 million negative impact on Adjusted EBITDA. In addition, Groupon anticipates approximately $25 million of additional investment in marketing and other growth initiatives to drive adoption of the marketplace. As a result, for the first quarter 2014, the Company expects revenue of between $710 million and $760 million, Adjusted EBITDA of between $20 million and $40 million, and earnings per share excluding stock compensation, amortization of acquired intangibles, and acquisition-related expenses, net of tax, of between negative $0.04 and negative $0.02.

As a result of growth investments anticipated in 2014, Groupon expects Adjusted EBITDA for the full year to be slightly above 2013 levels.

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, operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net, Adjusted EBITDA, free cash flow and earnings per share excluding stock-based compensation, acquisition-related expense (benefit), net, and the impairment of a minority investment in China. 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 2013, also includes external transaction costs related to business combinations, primarily consisting of legal and advisory fees. External transaction costs were not material for the prior periods 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 because it is 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.

Impairment of a minority investment in China. For the three months ended December 31, 2013, we recognized an $85.5 million other-than-temporary impairment of our minority investment in Life Media Limited (“F-tuan”), an entity with operations in China. This impairment reduced the carrying value of the investment to zero as of December 31, 2013. We have excluded this impairment from our non-GAAP earnings per share measure, described below, because we believe that excluding this item provides meaningful supplemental information about our core operating performance on a per share basis and facilitates comparisons to our historical operating results.

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 period.

Operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net is a non-GAAP financial measure that comprises the consolidated total of the segment operating income (loss) of our three segments, North America, EMEA, and Rest of World. We have used consolidated operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net to allocate resources and evaluate performance internally. However, in recent periods, our management and Board of Directors have increasingly focused on Adjusted EBITDA, described below, as the primary non-GAAP measure for evaluating our consolidated operating results. Accordingly, we do not expect to continue to report Operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net on a consolidated basis in future periods.

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. Adjusted EBITDA is similar to Operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net, except Adjusted EBITDA also excludes depreciation and amortization. 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 per share excluding stock-based compensation, acquisition-related expense (benefit), net and the impairment of a minority investment in China is a non-GAAP financial measure that adjusts our earnings (loss) per share to exclude the impact of stock-based compensation expense, acquisition-related expense (benefit), net and the impairment of a minority investment in China, 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 will be changing our non-GAAP earnings 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 in future periods will enable more meaningful comparisons with our historical results.

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

Note on Forward-Looking Statements

The statements contained 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 our results to differ materially from those included in the forward-looking statements include, but are not limited to, volatility in our revenue and operating results; risks related to our business strategy; responding to changes in the market; effectively dealing with challenges arising from our international operations; retaining existing customers and adding new customers; retaining existing merchant partners and adding new merchant partners; incurring expenses as we expand our business; competing against competitors with more financial resources than us; maintaining favorable terms with our business partners; maintaining a strong brand; managing inventory and order fulfillment; integrating our technology platforms; managing refund risks; retaining our executive team; litigation; regulations, including the CARD Act and regulation of the Internet; tax liabilities; tax legislation; maintaining our information technology infrastructure; security breaches; protecting our intellectual property; handling acquisitions, joint ventures and strategic investments effectively; seasonality; payment-related risks; customer and merchant partner fraud; global economic uncertainty; compliance with rules and regulations associated with being a public company; and our ability to raise capital if necessary. We urge you to refer to the factors included under the headings ''Risk Factors'' and ''Management’s Discussion and Analysis of Financial Condition and Results of Operations'' in the company’s most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, copies of which may be obtained by visiting the company’s Investor Relations web site at http://investor.groupon.com or the SEC’s web site at www.sec.gov. Groupon’s actual results could differ materially from those predicted or implied and reported results should not be considered an indication of future performance.

You should not rely upon forward-looking statements as predictions of future events. Although Groupon believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither the company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements reflect Groupon’s expectations as of February 20, 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												Y/Y %			Year Ended												Y/Y %
	December 31,												Growth			December 31,												Growth
							Y/Y %						excluding									Y/Y %						excluding
	2013			2012			Growth			FX Effect (2)			FX(2)			2013			2012			Growth			FX Effect (2)			FX(2)
Gross Billings (1):
North America	$	788,721		$	718,952		9.7		%	$	(564	)	9.8		%	$	2,847,244		$	2,373,153		20.0		%	$	(1,115	)	20.0		%
EMEA		565,713			532,481		6.2		%		18,424		2.8		%		1,983,599			1,928,508		2.9		%		37,588		0.9		%
Rest of World		238,673			269,019		(11.3	)	%		(25,873	)	(1.7	)	%		926,487			1,078,523		(14.1	)	%		(76,742	)	(7.0	)	%
Consolidated gross billings	$	1,593,107		$	1,520,452		4.8		%	$	(8,013	)	5.3		%	$	5,757,330		$	5,380,184		7.0		%	$	(40,269	)	7.8		%

Revenue:
North America	$	443,784		$	375,351		18.2		%	$	(189	)	18.3		%	$	1,521,358		$	1,165,700		30.5		%	$	(380	)	30.5		%
EMEA		251,205			176,278		42.5		%		8,839		37.5		%		742,915			805,476		(7.8	)	%		16,114		(9.8	)	%
Rest of World		73,458			86,673		(15.2	)	%		(8,059	)	(5.9	)	%		309,382			363,296		(14.8	)	%		(27,455	)	(7.3	)	%
Consolidated revenue	$	768,447		$	638,302		20.4		%	$	591		20.3		%	$	2,573,655		$	2,334,472		10.2		%	$	(11,721	)	10.7		%

Income (loss) from operations	$	13,352		$	(12,861	)	203.8		%	$	3,306		178.1		%	$	75,754		$	98,701		(23.2	)	%	$	4,042		(27.3	)	%

Net loss attributable to common stockholders	$	(81,247	)	$	(81,089	)										$	(95,393	)	$	(67,377	)

Net loss per share:
Basic	$	(0.12	)	$	(0.12	)										$	(0.14	)	$	(0.10	)
Diluted	$	(0.12	)	$	(0.12	)										$	(0.14	)	$	(0.10	)

Weighted average number of shares outstanding:
Basic		668,046,073			665,678,123												663,910,194			650,214,119
Diluted		668,046,073			665,678,123												663,910,194			650,214,119

(1) Represents the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds. Includes direct billings and third party and other billings.
(2) Represents the change in financial measures that would have resulted had average exchange rates in the reporting period been the same as those in effect during the three months and year ended December 31, 2012.

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

	Three Months Ended						Year Ended
	December 31,						December 31,
	2013			2012			2013			2012
Operating activities
Net loss	$	(78,861	)	$	(80,047	)	$	(88,946	)	$	(51,031	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		24,132			15,965			89,449			55,801
Stock-based compensation		32,239			26,411			121,462			104,117
Deferred income taxes		(16,830	)		(17,259	)		(18,055	)		(7,651	)
Excess tax benefits on stock-based compensation		(8,338	)		(2,403	)		(20,454	)		(27,023	)
(Income) loss on equity method investments		(14	)		1,231			44			9,925
(Gain) loss, net from changes in fair value of contingent consideration		(895	)		153			(3,171	)		897
Gain on E-Commerce transaction		-			-			-			(56,032	)
Impairment of investments		85,925			50,553			85,925			50,553
Change in assets and liabilities, net of acquisitions:
Restricted cash		2,264			(2,517	)		2,183			(4,372	)
Accounts receivable		1,990			12,723			10,989			10,534
Prepaid expenses and other current assets		(76,052	)		(45,922	)		(62,906	)		(70,859	)
Accounts payable		(5,421	)		5,537			(31,288	)		18,711
Accrued merchant and supplier payables		160,758			96,029			88,468			149,918
Accrued expenses and other current liabilities		31,843			(20,268	)		4,053			47,742
Other, net		25,535			25,531			40,679			35,604
Net cash provided by operating activities		178,275			65,717			218,432			266,834

Net cash used in investing activities		(23,330	)		(52,753	)		(96,315	)		(194,979	)

Net cash (used in) provided by financing activities		(55,444	)		(6,495	)		(81,697	)		12,095

Effect of exchange rate changes on cash and cash equivalents		1,114			1,809			(9,237	)		2,404
Net increase in cash and cash equivalents		100,615			8,278			31,183			86,354
Cash and cash equivalents, beginning of period		1,139,857			1,201,011			1,209,289			1,122,935
Cash and cash equivalents, end of period	$	1,240,472		$	1,209,289		$	1,240,472		$	1,209,289

Groupon, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)

	Three Months Ended December 31,						Year Ended December 31,
	2013			2012			2013			2012
Revenue:
Third party and other	$	401,688		$	413,127		$	1,654,654		$	1,879,729
Direct		366,759			225,175			919,001			454,743
Total revenue		768,447			638,302			2,573,655			2,334,472
Cost of revenue:
Third party and other		52,538			63,905			232,062			297,739
Direct		337,701			218,567			840,060			421,201
Total cost of revenue		390,239			282,472			1,072,122			718,940
Gross profit		378,208			355,830			1,501,533			1,615,532
Operating expenses:
Marketing		56,505			60,913			214,824			336,854
Selling, general and administrative		306,086			307,625			1,210,966			1,179,080
Acquisition-related expense (benefit), net		2,265			153			(11	)		897
Total operating expenses		364,856			368,691			1,425,779			1,516,831
Income (loss) from operations		13,352			(12,861	)		75,754			98,701
Income (loss) on equity method investments		14			(1,231	)		(44	)		(9,925	)
Other (expense) income, net		(84,847	)		(48,279	)		(94,619	)		6,166
(Loss) income before provision for income taxes		(71,481	)		(62,371	)		(18,909	)		94,942
Provision for income taxes		7,380			17,676			70,037			145,973
Net loss		(78,861	)		(80,047	)		(88,946	)		(51,031	)
Net income attributable to noncontrolling interests		(2,386	)		(936	)		(6,447	)		(3,742	)
Net loss attributable to Groupon, Inc.		(81,247	)		(80,983	)		(95,393	)		(54,773	)
Adjustment of redeemable noncontrolling interests to redemption value		-			(106	)		-			(12,604	)
Net loss attributable to common stockholders	$	(81,247	)	$	(81,089	)	$	(95,393	)	$	(67,377	)

Net loss per share
Basic	$	(0.12	)	$	(0.12	)	$	(0.14	)	$	(0.10	)
Diluted	$	(0.12	)	$	(0.12	)	$	(0.14	)	$	(0.10	)

Weighted average number of shares outstanding
Basic		668,046,073			665,678,123			663,910,194			650,214,119
Diluted		668,046,073			665,678,123			663,910,194			650,214,119

Groupon, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)

	December 31, 2013			December 31, 2012
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,240,472		$	1,209,289
Accounts receivable, net		83,673			96,713
Deferred income taxes		27,938			31,211
Prepaid expenses and other current assets		210,415			150,573
Total current assets		1,562,498			1,487,786
Property, equipment and software, net		134,423			121,072
Goodwill		220,827			206,684
Intangible assets, net		28,443			42,597
Investments		20,652			84,209
Deferred income taxes, non-current		35,941			29,916
Other non-current assets		39,226			59,210
Total Assets	$	2,042,010		$	2,031,474
Liabilities and Equity
Current liabilities:
Accounts payable	$	27,573		$	59,865
Accrued merchant and supplier payables		752,943			671,305
Accrued expenses		226,986			246,924
Deferred income taxes		47,558			53,700
Other current liabilities		132,718			136,647
Total current liabilities		1,187,778			1,168,441
Deferred income taxes, non-current		10,853			20,860
Other non-current liabilities		131,697			100,072
Total Liabilities		1,330,328			1,289,373
Commitments and contingencies
Stockholders' Equity
Class A common stock, par value $0.0001 per share, 2,000,000,000 shares authorized, 670,149,976 shares issued and 665,717,176 shares outstanding at December 31, 2013 and 654,523,706 shares issued and outstanding at December 31, 2012		67			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, 2013 and December 31, 2012		-			-
Common stock, par value $0.0001 per share, 2,010,000,000 shares authorized, no shares issued and outstanding at December 31, 2013 and December 31, 2012		-			-
Additional paid-in capital		1,584,211			1,485,006
Treasury stock, at cost, 4,432,800 shares at December 31, 2013 and no shares at December 31, 2012		(46,587	)		-
Accumulated deficit		(848,870	)		(753,477	)
Accumulated other comprehensive income		24,830			12,446
Total Groupon, Inc. Stockholders' Equity		713,651			744,040
Noncontrolling interests		(1,969	)		(1,939	)
Total Equity		711,682			742,101
Total Liabilities and Equity	$	2,042,010		$	2,031,474

Groupon, Inc.
Segment Information
(in thousands)
(unaudited)

	Three Months Ended December 31,								Year Ended December 31,
	2013				2012				2013				2012
North America
Gross Billings (1)	$	788,721			$	718,952			$	2,847,244			$	2,373,153
Revenue	$	443,784			$	375,351			$	1,521,358			$	1,165,700
Segment cost of revenue and operating expenses(2)(3)		418,214				358,319				1,380,746				1,025,974
Segment operating income(2)(3)	$	25,570			$	17,032			$	140,612			$	139,726
Segment operating income as a percent of segment revenue		5.8		%		4.5		%		9.2		%		12.0		%

EMEA
Gross Billings (1)	$	565,713			$	532,481			$	1,983,599			$	1,928,508
Revenue	$	251,205			$	176,278			$	742,915			$	805,476
Segment cost of revenue and operating expenses(2)(3)		214,187				167,502				631,409				699,470
Segment operating income(2)(3)	$	37,018			$	8,776			$	111,506			$	106,006
Segment operating income as a percent of segment revenue		14.7		%		5.0		%		15.0		%		13.2		%

Rest of World
Gross Billings (1)	$	238,673			$	269,019			$	926,487			$	1,078,523
Revenue	$	73,458			$	86,673			$	309,382			$	363,296
Segment cost of revenue and operating expenses(2)		88,190				98,778				364,295				405,313
Segment operating loss(2)	$	(14,732	)		$	(12,105	)		$	(54,913	)		$	(42,017	)
Segment operating loss as a percent of segment revenue		(20.1	)	%		(14.0	)	%		(17.7	)	%		(11.6	)	%

Consolidated
Gross Billings (1)	$	1,593,107			$	1,520,452			$	5,757,330			$	5,380,184
Revenue	$	768,447			$	638,302			$	2,573,655			$	2,334,472
Segment cost of revenue and operating expenses(2)		720,591				624,599				2,376,450				2,130,757
Segment operating income(2)	$	47,856			$	13,703			$	197,205			$	203,715
Segment operating income as a percent of segment revenue		6.2		%		2.1		%		7.7		%		8.7		%

Stock-based compensation		32,239				26,411				121,462				104,117
Acquisition-related expense (benefit), net		2,265				153				(11	)			897
Income (loss) from operations		13,352				(12,861	)			75,754				98,701
(Income) loss on equity method investments		(14	)			1,231				44				9,925
Other expense (income), net		84,847				48,279				94,619				(6,166	)
(Loss) income before provision for income taxes		(71,481	)			(62,371	)			(18,909	)			94,942
Provision for income taxes		7,380				17,676				70,037				145,973
Net loss	$	(78,861	)		$	(80,047	)		$	(88,946	)		$	(51,031	)

(1) Represents the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds. Includes direct billings and third party and other billings.
(2) Segment cost of revenue and operating expenses and segment operating income (loss) exclude stock-based compensation and acquisition-related expense (benefit), net.
(3) We record intercompany cross-charges every period for services provided by the United States to our international subsidiaries. We updated our intercompany allocations for those charges during the fourth quarter of 2012, which resulted in a one-time $8.5 million decrease to EMEA Segment operating expenses (increase to EMEA Segment operating income) and a corresponding increase to North America Segment operating expenses (reduction to North America Segment operating income).

Groupon, Inc.

Non-GAAP Reconciliation Schedules

(in thousands, except share and per share amounts)

(unaudited)

The following are reconciliations of diluted earnings per share excluding stock-based compensation, acquisition-related expense (benefit), net and the impairment of a minority investment in China and foreign exchange rate neutral operating results to the most comparable U.S. GAAP financial measures. See "Supplemental Financial Information and Business Metrics" for reconciliations of Adjusted EBITDA, operating income excluding stock-based compensation and acquisition-related (expense) benefit, net and free cash flow to the most comparable U.S. GAAP financial measures.

The following is a reconciliation of diluted net loss per share to diluted earnings per share excluding stock-based compensation, acquisition-related expense (benefit), net and the impairment of Life Media Limited (F-tuan), a minority investment in China, for the three months and year ended December 31, 2013:

	Three Months Ended			Year Ended
	December 31, 2013			December 31, 2013
Net loss attributable to common stockholders	$	(81,247	)	$	(95,393	)
Stock-based compensation		32,239			121,462
Acquisition-related expense (benefit), net		2,265			(11	)
Impairment of investment in F-tuan		85,521			85,521
Income tax effect of adjustments		(11,301	)		(38,504	)
Net income attributable to common stockholders excluding stock-based compensation,
acquisition-related expense (benefit), net and impairment of investment in F-tuan	$	27,477		$	73,075

Diluted shares		668,046,073			663,910,194
Incremental diluted shares (1)		16,685,634			15,501,759
Adjusted diluted shares		684,731,707			679,411,953

Diluted net loss per share	$	(0.12	)	$	(0.14	)
Impact of stock-based compensation, acquisition-related expense
(benefit), net and impairment of investment in F-tuan and the related income tax effects		0.16			0.25
Diluted earnings per share excluding stock-based compensation,
acquisition-related expense (benefit), net and impairment of investment in F-tuan	$	0.04		$	0.11

(1) Outstanding equity awards are not reflected in the diluted net loss per share calculation for the three months and year ended December 31, 2013 because the effect would be antidilutive. However, those awards have been reflected in the calculation of diluted earnings per share excluding stock-based compensation, acquisition-related expense (benefit), net and the impairment of a minority investment in China for the three months and year ended December 31, 2013 because they have a dilutive effect on that calculation.

The following are reconciliations of foreign exchange rate neutral operating results to the most comparable U.S. GAAP financial measures, "Gross Billings," "Revenue" and "Income from operations," for the three months and year ended December 31, 2013.

The effect on the Company’s gross billings, revenue and income from operations from changes in exchange rates versus the U.S. Dollar for the three months ended December 31, 2013 was as follows:

	Three Months Ended December 31, 2013							Three Months Ended December 31, 2013
	At Avg.		Exchange					At Avg.		Exchange
	Q4 2012		Rate			As		Q3 2013		Rate			As
	Rates (1)		Effect (2)			Reported		Rates (3)		Effect (2)			Reported
Gross billings	$	1,601,120	$	(8,013	)	$	1,593,107	$	1,578,913	$	14,194		$	1,593,107
Revenue	$	767,856	$	591		$	768,447	$	762,153	$	6,294		$	768,447
Income from operations	$	10,046	$	3,306		$	13,352	$	12,184	$	1,168		$	13,352

The effect on the Company’s gross billings, revenue and income from operations from changes in exchange rates versus the U.S. Dollar for the year ended December 31, 2013 was as follows:

	Year Ended December 31, 2013							Year Ended December 31, 2013
	At Avg.		Exchange					At Avg.		Exchange
	2012		Rate			As		Q4'12 - Q3'13		Rate			As
	Rates (1)		Effect (2)			Reported		Rates (3)		Effect (2)			Reported
Gross billings	$	5,797,599	$	(40,269	)	$	5,757,330	$	5,765,679	$	(8,349	)	$	5,757,330
Revenue	$	2,585,376	$	(11,721	)	$	2,573,655	$	2,574,687	$	(1,032	)	$	2,573,655
Income from operations	$	71,712	$	4,042		$	75,754	$	75,009	$	745		$	75,754

(1) Represents the financial statement balances that would have resulted had average exchange rates in the reported period been the same as those in effect during the three months and year ended December 31, 2012.

(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 reported period been the same as those in effect during the three and twelve months ended September 30, 2013.

Groupon, Inc.
Supplemental Financial Information and Business Metrics(14)
(financial data in thousands, except per share data; active customers in millions)
(unaudited)

	Q4 2012				Q1 2013				Q2 2013				Q3 2013				Q4 2013
Segments
North America Segment
Gross Billings (1)
Local (2) Gross Billings
Third Party	$	430,255			$	450,140			$	449,770			$	401,756			$	436,705
Direct		-				-				693				1,040				39
Total Local Gross Billings	$	430,255			$	450,140			$	450,463			$	402,796			$	436,744
Goods Gross Billings
Third Party	$	31,270			$	17,294			$	15,501			$	12,650			$	23,373
Direct		209,575				148,065				181,377				181,915				262,666
Total Goods Gross Billings	$	240,845			$	165,359			$	196,878			$	194,565			$	286,039
Travel and Other Gross Billings
Third Party and Other	$	47,852			$	65,820			$	64,864			$	67,638			$	65,938
Direct		-				-				-				-				-
Total Travel and Other Gross Billings	$	47,852			$	65,820			$	64,864			$	67,638			$	65,938
Total Gross Billings
Third Party and Other	$	509,377			$	533,254			$	530,135			$	482,044			$	526,016
Direct		209,575				148,065				182,070				182,955				262,705
Total Gross Billings	$	718,952			$	681,319			$	712,205			$	664,999			$	788,721
Year-over-year growth		51		%		23		%		30		%		20		%		10		%
% of Consolidated Gross Billings		47		%		48		%		50		%		50		%		50		%
Gross Billings Trailing Twelve Months (TTM)	$	2,373,153			$	2,500,915			$	2,664,845			$	2,777,475			$	2,847,244

Revenue (3)
Local Revenue
Third Party	$	142,454			$	171,593			$	174,117			$	158,189			$	159,175
Direct		-				-				693				1,040				39
Total Local Revenue	$	142,454			$	171,593			$	174,810			$	159,229			$	159,214
Goods Revenue
Third Party	$	11,877			$	3,144			$	4,651			$	3,999			$	5,615
Direct		209,575				148,065				181,377				181,915				262,666
Total Goods Revenue	$	221,452			$	151,209			$	186,028			$	185,914			$	268,281
Travel and Other Revenue
Third Party and Other	$	11,445			$	16,752			$	16,344			$	15,695			$	16,289
Direct		-				-				-				-				-
Total Travel and Other Revenue	$	11,445			$	16,752			$	16,344			$	15,695			$	16,289
Total Revenue
Third Party and Other Revenue	$	165,776			$	191,489			$	195,112			$	177,883			$	181,079
Direct Revenue		209,575				148,065				182,070				182,955				262,705
Total Revenue	$	375,351			$	339,554			$	377,182			$	360,838			$	443,784
Year-over-year growth		109		%		42		%		45		%		24		%		18		%
% of Consolidated Revenue		59		%		56		%		62		%		61		%		58		%
Revenue TTM	$	1,165,700			$	1,266,689			$	1,383,690			$	1,452,925			$	1,521,358

Cost of Revenue (4)
Local Cost of Revenue
Third Party	$	23,203			$	25,915			$	19,818			$	18,985			$	17,918
Direct		-				-				636				1,887				31
Total Local Cost of Revenue	$	23,203			$	25,915			$	20,454			$	20,872			$	17,949
Goods Cost of Revenue
Third Party	$	1,935			$	475			$	522			$	480			$	613
Direct		196,789				138,278				158,529				163,825				246,638
Total Goods Cost of Revenue	$	198,724			$	138,753			$	159,051			$	164,305			$	247,251
Travel and Other Cost of Revenue
Third Party and Other	$	1,864			$	2,530			$	3,091			$	4,092			$	4,258
Direct		-				-				-				-				-
Total Travel and Other Cost of Revenue	$	1,864			$	2,530			$	3,091			$	4,092			$	4,258
Total Cost of Revenue
Third Party and Other Cost of Revenue	$	27,002			$	28,920			$	23,431			$	23,557			$	22,789
Direct Cost of Revenue		196,789				138,278				159,165				165,712				246,669
Total Cost of Revenue	$	223,791			$	167,198			$	182,596			$	189,269			$	269,458
% of North America Total Revenue		60		%		49		%		48		%		52		%		61		%

Gross Profit
Local Gross Profit
Third Party	$	119,251			$	145,678			$	154,299			$	139,204			$	141,257
Direct		-				-				57				(847	)			8
Total Local Gross Profit	$	119,251			$	145,678			$	154,356			$	138,357			$	141,265
% of North America Total Local Revenue		83.7		%		84.9		%		88.3		%		86.9		%		88.7		%
% of North America Total Local Gross Billings		27.7		%		32.4		%		34.3		%		34.3		%		32.3		%
Goods Gross Profit
Third Party	$	9,942			$	2,669			$	4,129			$	3,519			$	5,002
Direct		12,786				9,787				22,848				18,090				16,028
Total Goods Gross Profit	$	22,728			$	12,456			$	26,977			$	21,609			$	21,030
% of North America Total Goods Revenue		10.3		%		8.2		%		14.5		%		11.6		%		7.8		%
% of North America Total Goods Gross Billings		9.4		%		7.5		%		13.7		%		11.1		%		7.4		%
Travel and Other Gross Profit
Third Party and Other	$	9,581			$	14,222			$	13,253			$	11,603			$	12,031
Direct		-				-				-				-				-
Total Travel and Other Gross Profit	$	9,581			$	14,222			$	13,253			$	11,603			$	12,031
% of North America Total Travel and Other Revenue		83.7		%		84.9		%		81.1		%		73.9		%		73.9		%
% of North America Total Travel and Other Gross Billings		20.0		%		21.6		%		20.4		%		17.2		%		18.2		%
Total Gross Profit
Third Party and Other	$	138,774			$	162,569			$	171,681			$	154,326			$	158,290
Direct		12,786				9,787				22,905				17,243				16,036
Total Gross Profit	$	151,560			$	172,356			$	194,586			$	171,569			$	174,326
% of North America Total Revenue		40.4		%		50.8		%		51.6		%		47.5		%		39.3		%
% of North America Total Gross Billings		21.1		%		25.3		%		27.3		%		25.8		%		22.1		%

Operating Income Excl Stock-Based Compensation (SBC), Acquisition-Related Expense (Benefit), net	$	17,032			$	41,366			$	48,508			$	25,168			$	25,570
Year-over-year growth		(7	)	%		3		%		12		%		(36	)	%		50		%
% of Consolidated Operating Income Excl SBC, Acq-Related		124		%		81		%		82		%		64		%		53		%
Operating Margin Excl SBC, Acq-Related (% of North America Total revenue)		4.5		%		12.2		%		12.9		%		7.0		%		5.8		%
Year-over-year growth (bps)		(570	)			(460	)			(380	)			(640	)			130
Operating Income TTM Excl SBC, Acq-Related	$	139,726			$	140,920			$	145,999			$	132,074			$	140,612
Operating Margin TTM Excl SBC, Acq-Related (% of North America Total TTM revenue)		12.0		%		11.1		%		10.6		%		9.1		%		9.2		%
Year-over-year growth (bps)		1,120				200				(380	)			(540	)			(280	)
EMEA Segment
Gross Billings
Local Gross Billings
Third Party	$	239,944			$	259,423			$	241,108			$	207,110			$	276,670
Direct		-				-				-				-				-
Total Local Gross Billings	$	239,944			$	259,423			$	241,108			$	207,110			$	276,670
Goods Gross Billings
Third Party	$	195,582			$	141,742			$	165,413			$	160,578			$	122,902
Direct		9,020				7,451				2,181				9,271				96,978
Total Goods Gross Billings	$	204,602			$	149,193			$	167,594			$	169,849			$	219,880
Travel and Other Gross Billings
Third Party and Other	$	87,935			$	83,702			$	73,548			$	66,359			$	69,163
Direct		-				-				-				-				-
Total Travel and Other Gross Billings	$	87,935			$	83,702			$	73,548			$	66,359			$	69,163
Total Gross Billings
Third Party and Other	$	523,461			$	484,867			$	480,069			$	434,047			$	468,735
Direct		9,020				7,451				2,181				9,271				96,978
Total Gross Billings	$	532,481			$	492,318			$	482,250			$	443,318			$	565,713
Year-over-year growth		2		%		(8	)	%		4		%		12		%		6		%
Year-over-year growth, excluding FX (5)		4		%		(9	)	%		4		%		9		%		3		%
% of Consolidated Gross Billings		35		%		35		%		34		%		33		%		36		%
Gross Billings TTM	$	1,928,507			$	1,883,265			$	1,903,136			$	1,950,367			$	1,983,599

Revenue
Local Revenue
Third Party	$	98,668			$	110,715			$	109,481			$	91,448			$	115,259
Direct		-				-				-				-				-
Total Local Revenue	$	98,668			$	110,715			$	109,481			$	91,448			$	115,259
Goods Revenue
Third Party	$	49,173			$	45,875			$	32,938			$	32,008			$	22,296
Direct		9,020				7,451				2,181				9,271				96,978
Total Goods Revenue	$	58,193			$	53,326			$	35,119			$	41,279			$	119,274
Travel and Other Revenue
Third Party and Other	$	19,417			$	19,757			$	15,362			$	15,223			$	16,672
Direct		-				-				-				-				-
Total Travel and Other Revenue	$	19,417			$	19,757			$	15,362			$	15,223			$	16,672
Total Revenue
Third Party and Other Revenue	$	167,258			$	176,347			$	157,781			$	138,679			$	154,227
Direct Revenue		9,020				7,451				2,181				9,271				96,978
Total Revenue	$	176,278			$	183,798			$	159,962			$	147,950			$	251,205
Year-over-year growth		(27	)	%		(20	)	%		(24	)	%		(21	)	%		43		%
Year-over-year growth, excluding FX(5)		(25	)	%		(20	)	%		(25	)	%		(23	)	%		38		%
% of Consolidated Revenue		28		%		31		%		26		%		25		%		33		%
Revenue TTM	$	805,476			$	758,918			$	707,325			$	667,988			$	742,915

Cost of Revenue
Local Cost of Revenue
Third Party	$	10,622			$	14,192			$	10,898			$	10,254			$	10,374
Direct		-				-				-				-				-
Total Local Cost of Revenue	$	10,622			$	14,192			$	10,898			$	10,254			$	10,374
Goods Cost of Revenue
Third Party	$	5,294			$	5,880			$	4,705			$	3,972			$	2,203
Direct		14,550				7,472				3,306				8,364				83,545
Total Goods Cost of Revenue	$	19,844			$	13,352			$	8,011			$	12,336			$	85,748
Travel and Other Cost of Revenue
Third Party and Other	$	2,090			$	2,533			$	1,522			$	1,679			$	1,890
Direct		-				-				-				-				-
Total Travel and Other Cost of Revenue	$	2,090			$	2,533			$	1,522			$	1,679			$	1,890
Total Cost of Revenue
Third Party and Other Cost of Revenue	$	18,006			$	22,605			$	17,125			$	15,905			$	14,467
Direct Cost of Revenue		14,550				7,472				3,306				8,364				83,545
Total Cost of Revenue	$	32,556			$	30,077			$	20,431			$	24,269			$	98,012
% of EMEA Total Revenue		18		%		16		%		13		%		16		%		39		%

Gross Profit
Local Gross Profit
Third Party	$	88,046			$	96,523			$	98,583			$	81,194			$	104,885
Direct		-				-				-				-				-
Total Local Gross Profit	$	88,046			$	96,523			$	98,583			$	81,194			$	104,885
% of EMEA Total Local Revenue		89.2		%		87.2		%		90.0		%		88.8		%		91.0		%
% of EMEA Total Local Gross Billings		36.7		%		37.2		%		40.9		%		39.2		%		37.9		%
Goods Gross Profit
Third Party	$	43,879			$	39,995			$	28,233			$	28,036			$	20,093
Direct		(5,530	)			(21	)			(1,125	)			907				13,433
Total Goods Gross Profit	$	38,349			$	39,974			$	27,108			$	28,943			$	33,526
% of EMEA Total Goods Revenue		65.9		%		75.0		%		77.2		%		70.1		%		28.1		%
% of EMEA Total Goods Gross Billings		18.7		%		26.8		%		16.2		%		17.0		%		15.2		%
Travel and Other Gross Profit
Third Party and Other	$	17,327			$	17,224			$	13,840			$	13,544			$	14,782
Direct		-				-				-				-				-
Total Travel and Other Gross Profit	$	17,327			$	17,224			$	13,840			$	13,544			$	14,782
% of EMEA Total Travel and Other Revenue		89.2		%		87.2		%		90.1		%		89.0		%		88.7		%
% of EMEA Total Travel and Other Gross Billings		19.7		%		20.6		%		18.8		%		20.4		%		21.4		%
Total Gross Profit
Third Party and Other	$	149,252			$	153,742			$	140,656			$	122,774			$	139,760
Direct		(5,530	)			(21	)			(1,125	)			907				13,433
Total Gross Profit	$	143,722			$	153,721			$	139,531			$	123,681			$	153,193
% of EMEA Total Revenue		81.5		%		83.6		%		87.2		%		83.6		%		61.0		%
% of EMEA Total Gross Billings		27.0		%		31.2		%		28.9		%		27.9		%		27.1		%

Operating Income Excl SBC, Acq-Related	$	8,776			$	34,176			$	24,708			$	15,604			$	37,018
Year-over-year growth		(77	)	%		(6	)	%		(22	)	%		(46	)	%		322		%
% of Consolidated Operating Income Excl SBC, Acq-Related		64		%		67		%		42		%		40		%		77		%
Operating Margin Excl SBC, Acq-Related (% of EMEA Total revenue)		5.0		%		18.6		%		15.4		%		10.5		%		14.7		%
Year-over-year growth (bps)		(1,073	)			282				40				(500	)			970
Operating Income TTM Excl SBC, Acq-Related	$	106,005			$	103,853			$	96,767			$	83,264			$	111,506
Operating Margin TTM Excl SBC, Acq-Related (% of EMEA Total TTM revenue)		13.2		%		13.7		%		13.7		%		12.5		%		15.0		%
Year-over-year growth (bps)(6)		N/A				(13	)			(132	)			(300	)			180
Rest of World Segment
Gross Billings
Local Gross Billings
Third Party	$	128,954			$	119,990			$	114,630			$	118,325			$	116,291
Direct		-				-				-				-				-
Total Local Gross Billings	$	128,954			$	119,990			$	114,630			$	118,325			$	116,291
Goods Gross Billings
Third Party	$	89,475			$	70,994			$	66,774			$	71,127			$	82,375
Direct		6,581				6,778				5,625				7,846				7,076
Total Goods Gross Billings	$	96,056			$	77,772			$	72,399			$	78,973			$	89,451
Travel and Other Gross Billings
Third Party and Other	$	44,009			$	36,370			$	32,322			$	37,033			$	32,931
Direct		-				-				-				-				-
Total Travel and Other Gross Billings	$	44,009			$	36,370			$	32,322			$	37,033			$	32,931
Total Gross Billings
Third Party and Other	$	262,438			$	227,354			$	213,726			$	226,485			$	231,597
Direct		6,581				6,778				5,625				7,846				7,076
Total Gross Billings	$	269,019			$	234,132			$	219,351			$	234,331			$	238,673
Year-over-year growth		17		%		(11	)	%		(21	)	%		(13	)	%		(11	)	%
Year-over-year growth, excluding FX		20		%		(6	)	%		(16	)	%		(4	)	%		(2	)	%
% of Consolidated Gross Billings		18		%		17		%		16		%		17		%		15		%
Gross Billings TTM	$	1,078,524			$	1,048,973			$	992,302			$	956,833			$	926,487

Revenue
Local Revenue
Third Party	$	46,166			$	45,085			$	43,323			$	51,507			$	40,314
Direct		-				-				-				-				-
Total Local Revenue	$	46,166			$	45,085			$	43,323			$	51,507			$	40,314
Goods Revenue
Third Party	$	25,529			$	18,062			$	14,985			$	17,215			$	19,082
Direct		6,580				6,778				5,625				7,846				7,076
Total Goods Revenue	$	32,109			$	24,840			$	20,610			$	25,061			$	26,158
Travel and Other Revenue
Third Party and Other	$	8,398			$	8,125			$	7,670			$	9,703			$	6,986
Direct		-				-				-				-				-
Total Travel and Other Revenue	$	8,398			$	8,125			$	7,670			$	9,703			$	6,986
Total Revenue
Third Party and Other Revenue	$	80,093			$	71,272			$	65,978			$	78,425			$	66,382
Direct Revenue		6,580				6,778				5,625				7,846				7,076
Total Revenue	$	86,673			$	78,050			$	71,603			$	86,271			$	73,458
Year-over-year growth		20		%		(14	)	%		(26	)	%		(4	)	%		(15	)	%
Year-over-year growth, excluding FX		23		%		(8	)	%		(21	)	%		7		%		(6	)	%
% of Consolidated Revenue		14		%		13		%		12		%		14		%		10		%
Revenue TTM	$	363,296			$	350,984			$	325,988			$	322,597			$	309,382

Cost of Revenue
Local Cost of Revenue
Third Party	$	9,801			$	5,923			$	7,962			$	7,403			$	7,158
Direct		-				-				-				-				-
Total Local Cost of Revenue	$	9,801			$	5,923			$	7,962			$	7,403			$	7,158
Goods Cost of Revenue
Third Party	$	7,264			$	11,501			$	5,569			$	5,685			$	6,890
Direct		7,228				6,627				6,075				7,360				7,487
Total Goods Cost of Revenue	$	14,492			$	18,128			$	11,644			$	13,045			$	14,377
Travel and Other Cost of Revenue
Third Party and Other	$	1,832			$	1,067			$	1,420			$	1,451			$	1,234
Direct		-				-				-				-				-
Total Travel and Other Cost of Revenue	$	1,832			$	1,067			$	1,420			$	1,451			$	1,234
Total Cost of Revenue
Third Party and Other Cost of Revenue	$	18,897			$	18,491			$	14,951			$	14,539			$	15,282
Direct Cost of Revenue		7,228				6,627				6,075				7,360				7,487
Total Cost of Revenue	$	26,125			$	25,118			$	21,026			$	21,899			$	22,769
% of Rest of World Total Revenue		30		%		32		%		29		%		25		%		31		%

Gross Profit
Local Gross Profit
Third Party	$	36,365			$	39,162			$	35,361			$	44,104			$	33,156
Direct		-				-				-				-				-
Total Local Gross Profit	$	36,365			$	39,162			$	35,361			$	44,104			$	33,156
% of Rest of World Total Local Revenue		78.8		%		86.9		%		81.6		%		85.6		%		82.2		%
% of Rest of World Total Local Gross Billings		28.2		%		32.6		%		30.8		%		37.3		%		28.5		%
Goods Gross Profit
Third Party	$	18,265			$	6,561			$	9,416			$	11,530			$	12,192
Direct		(648	)			151				(450	)			486				(411	)
Total Goods Gross Profit	$	17,617			$	6,712			$	8,966			$	12,016			$	11,781
% of Rest of World Total Goods Revenue		54.9		%		27.0		%		43.5		%		47.9		%		45.0		%
% of Rest of World Total Goods Gross Billings		18.3		%		8.6		%		12.4		%		15.2		%		13.2		%
Travel and Other Gross Profit
Third Party and Other	$	6,566			$	7,058			$	6,250			$	8,252			$	5,752
Direct		-				-				-				-				-
Total Travel and Other Gross Profit	$	6,566			$	7,058			$	6,250			$	8,252			$	5,752
% of Rest of World Total Travel and Other Revenue		78.2		%		86.9		%		81.5		%		85.0		%		82.3		%
% of Rest of World Total Travel and Other Gross Billings		14.9		%		19.4		%		19.3		%		22.3		%		17.5		%
Total Gross Profit
Third Party and Other	$	61,196			$	52,781			$	51,027			$	63,886			$	51,100
Direct		(648	)			151				(450	)			486				(411	)
Total Gross Profit	$	60,548			$	52,932			$	50,577			$	64,372			$	50,689
% of Rest of World Total Revenue		69.9		%		67.8		%		70.6		%		74.6		%		69.0		%
% of Rest of World Total Gross Billings		22.5		%		22.6		%		23.1		%		27.5		%		21.2		%

Operating Loss Excl SBC, Acq-Related	$	(12,105	)		$	(24,389	)		$	(14,173	)		$	(1,619	)		$	(14,732	)
Year-over-year growth		(68	)	%		174		%		(331	)	%		91		%		(22	)	%
% of Consolidated Operating Income Excl SBC, Acq-Related		(88	)	%		(48	)	%		(24	)	%		(4	)	%		(31	)	%
Operating Margin Excl SBC, Acq-Related (% of Rest of World Total revenue)		(14.0	)	%		(31.2	)	%		(19.8	)	%		(1.9	)	%		(20.1	)	%
Year-over-year growth (bps)		3,848				(2,139	)			(1,640	)			1,790				(610	)
Operating Loss TTM Excl SBC, Acq-Related	$	(42,016	)		$	(57,495	)		$	(68,379	)		$	(52,286	)		$	(54,913	)
Operating Margin TTM Excl SBC, Acq-Related (% of Rest of World Total TTM revenue)		(11.6	)	%		(16.4	)	%		(21.0	)	%		(16.2	)	%		(17.7	)	%
Year-over-year growth (bps)(6)		N/A				3,590				788				330				(610	)
Consolidated Results of Operations
Gross Billings
Local Gross Billings
Third Party	$	799,153			$	829,553			$	805,508			$	727,191			$	829,666
Direct		-				-				693				1,040				39
Total Local Gross Billings	$	799,153			$	829,553			$	806,201			$	728,231			$	829,705
Goods Gross Billings
Third Party	$	316,327			$	230,030			$	247,688			$	244,355			$	228,650
Direct		225,176				162,294				189,183				199,032				366,720
Total Goods Gross Billings	$	541,503			$	392,324			$	436,871			$	443,387			$	595,370
Travel and Other Gross Billings
Third Party and Other	$	179,796			$	185,892			$	170,734			$	171,030			$	168,032
Direct		-				-				-				-				-
Total Travel and Other Gross Billings	$	179,796			$	185,892			$	170,734			$	171,030			$	168,032
Total Gross Billings
Third Party and Other	$	1,295,276			$	1,245,475			$	1,223,930			$	1,142,576			$	1,226,348
Direct		225,176				162,294				189,876				200,072				366,759
Total Gross Billings	$	1,520,452			$	1,407,769			$	1,413,806			$	1,342,648			$	1,593,107
Year-over-year growth		24		%		4		%		10		%		10		%		5		%
Year-over-year growth, excluding FX		25		%		5		%		11		%		11		%		5		%
Gross Billings (TTM)	$	5,380,184			$	5,433,153			$	5,560,283			$	5,684,675			$	5,757,330
Year-over-year growth		35		%		16		%		11		%		12		%		7		%

Revenue
Local Revenue
Third Party	$	287,288			$	327,393			$	326,921			$	301,144			$	314,748
Direct		-				-				693				1,040				39
Total Local Revenue	$	287,288			$	327,393			$	327,614			$	302,184			$	314,787
Goods Revenue
Third Party	$	86,579			$	67,081			$	52,574			$	53,222			$	46,993
Direct		225,175				162,294				189,183				199,032				366,720
Total Goods Revenue	$	311,754			$	229,375			$	241,757			$	252,254			$	413,713
Travel and Other Revenue
Third Party and Other	$	39,260			$	44,634			$	39,376			$	40,621			$	39,947
Direct		-				-				-				-				-
Total Travel and Other Revenue	$	39,260			$	44,634			$	39,376			$	40,621			$	39,947
Total Revenue
Third Party and Other Revenue	$	413,127			$	439,108			$	418,871			$	394,987			$	401,688
Direct Revenue		225,175				162,294				189,876				200,072				366,759
Total Revenue	$	638,302			$	601,402			$	608,747			$	595,059			$	768,447
Year-over-year growth		30		%		8		%		7		%		5		%		20		%
Year-over-year growth, excluding FX		31		%		8		%		8		%		6		%		20		%
Total Consolidated Revenue TTM	$	2,334,472			$	2,376,591			$	2,417,003			$	2,443,510			$	2,573,655
Year-over-year growth		45		%		27		%		18		%		12		%		10		%

Cost of Revenue
Local Cost of Revenue
Third Party	$	43,626			$	46,030			$	38,678			$	36,642			$	35,450
Direct		-				-				636				1,887				31
Total Local Cost of Revenue	$	43,626			$	46,030			$	39,314			$	38,529			$	35,481
Goods Cost of Revenue
Third Party	$	14,493			$	17,856			$	10,796			$	10,137			$	9,706
Direct		218,567				152,377				167,910				179,549				337,670
Total Goods Cost of Revenue	$	233,060			$	170,233			$	178,706			$	189,686			$	347,376
Travel and Other Cost of Revenue
Third Party and Other	$	5,786			$	6,130			$	6,033			$	7,222			$	7,382
Direct		-				-				-				-				-
Total Travel and Other Cost of Revenue	$	5,786			$	6,130			$	6,033			$	7,222			$	7,382
Total Cost of Revenue
Third Party and Other Cost of Revenue	$	63,905			$	70,016			$	55,507			$	54,001			$	52,538
Direct Cost of Revenue		218,567				152,377				168,546				181,436				337,701
Total Cost of Revenue	$	282,472			$	222,393			$	224,053			$	235,437			$	390,239
% of Total Consolidated Revenue		44		%		37		%		37		%		40		%		51		%

Gross Profit
Local Gross Profit
Third Party	$	243,662			$	281,363			$	288,243			$	264,502			$	279,298
Direct		-				-				57				(847	)			8
Total Local Gross Profit	$	243,662			$	281,363			$	288,300			$	263,655			$	279,306
% of Total Consolidated Local Revenue		84.8		%		85.9		%		88.0		%		87.2		%		88.7		%
% of Total Consolidated Local Gross Billings		30.5		%		33.9		%		35.8		%		36.2		%		33.7		%
Goods Gross Profit
Third Party	$	72,086			$	49,225			$	41,778			$	43,085			$	37,287
Direct		6,608				9,917				21,273				19,483				29,050
Total Goods Gross Profit	$	78,694			$	59,142			$	63,051			$	62,568			$	66,337
% of Total Consolidated Goods Revenue		25.2		%		25.8		%		26.1		%		24.8		%		16.0		%
% of Total Consolidated Goods Gross Billings		14.5		%		15.1		%		14.4		%		14.1		%		11.1		%
Travel and Other Gross Profit
Third Party and Other	$	33,474			$	38,504			$	33,343			$	33,399			$	32,565
Direct		-				-				-				-				-
Total Travel and Other Gross Profit	$	33,474			$	38,504			$	33,343			$	33,399			$	32,565
% of Total Consolidated Travel and Other Revenue		85.3		%		86.3		%		84.7		%		82.2		%		81.5		%
% of Total Consolidated Travel and Other Gross Billings		18.6		%		20.7		%		19.5		%		19.5		%		19.4		%
Total Gross Profit
Third Party and Other	$	349,222			$	369,092			$	363,364			$	340,986			$	349,150
Direct		6,608				9,917				21,330				18,636				29,058
Total Gross Profit	$	355,830			$	379,009			$	384,694			$	359,622			$	378,208
% of Total Consolidated Revenue		55.7		%		63.0		%		63.2		%		60.4		%		49.2		%
% of Total Consolidated Gross Billings		23.4		%		26.9		%		27.2		%		26.8		%		23.7		%

Operating Income Excl SBC, Acq-Related	$	13,703			$	51,153			$	59,043			$	39,153			$	47,856
Year-over-year growth		(24	)	%		(24	)	%		(18	)	%		(22	)	%		249		%
Operating Margin Excl SBC, Acq-Related (% of Total Consolidated revenue)		2.1		%		8.5		%		9.7		%		6.6		%		6.2		%
Year-over-year growth (bps)		(150	)			(360	)			(300	)			(230	)			410
Operating Income TTM Excl SBC, Acq-Related	$	203,715			$	187,278			$	174,387			$	163,052			$	197,205
Operating Margin TTM Excl SBC, Acq-Related (% of Total Consolidated TTM revenue)		8.7		%		7.9		%		7.2		%		6.7		%		7.7		%
Year-over-year growth (bps)		1,770				680				(40	)			(280	)			(100	)

Operating (Loss) Income	$	(12,861	)		$	21,178			$	27,412			$	13,812			$	13,352
Year-over-year growth		14		%		(47	)	%		(41	)	%		(46	)	%		204		%
Operating Margin (% of Total Consolidated revenue)		(2.0	)	%		3.5		%		4.5		%		2.3		%		1.7		%
Year-over-year growth (bps)		100				(360	)			(370	)			(220	)			370
Operating Income TTM	$	98,701			$	80,240			$	61,167			$	49,541			$	75,754
Operating Margin TTM (% of Total Consolidated TTM revenue)		4.2		%		3.4		%		2.5		%		2.0		%		2.9		%
Year-over-year growth (bps)		1,870				750				(100	)			(240	)			(130	)

Net Loss Attributable to Common Stockholders		(81,089	)			(3,992	)			(7,574	)			(2,580	)			(81,247	)
Weighted Average Basic Shares Outstanding		655,678				658,800				662,361				666,433				668,046
Weighted Average Diluted Shares Outstanding (7)		655,678				658,800				662,361				666,433				668,046
Net Loss per Share:
Basic	$	(0.12	)		$	(0.01	)		$	(0.01	)		$	(0.00	)		$	(0.12	)
Diluted	$	(0.12	)		$	(0.01	)		$	(0.01	)		$	(0.00	)		$	(0.12	)

The following is a quarterly reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure, "Net loss." (8)
Net loss	$	(80,047	)		$	(3,242	)		$	(5,551	)		$	(1,292	)		$	(78,861	)
Adjustments:
Stock-based compensation		26,411				29,907				32,446				26,870				32,239
Acquisition-related expense (benefit), net		153				68				(815	)			(1,529	)			2,265
Depreciation and amortization		15,965				20,700				21,468				23,149				24,132
Non-operating items:
Loss (income) on equity method investments		1,231				19				14				25				(14	)
Other expense (income), net		48,279				5,064				5,565				(857	)			84,847
Provision for income taxes		17,676				19,337				27,384				15,936				7,380
Total adjustments		109,715				75,095				86,062				63,594				150,849
Adjusted EBITDA	$	29,668			$	71,853			$	80,511			$	62,302			$	71,988

The following is a quarterly reconciliation of Operating income, excluding stock-based compensation and acquisition-related (expense) benefit, net, to the most comparable U.S. GAAP financial measure, "Operating (loss) income." (8)
Operating income, excluding stock-based compensation and acquisition-related (expense) benefit, net	$	13,703			$	51,153			$	59,043			$	39,153			$	47,856
Stock-based compensation		(26,411	)			(29,907	)			(32,446	)			(26,870	)			(32,239	)
Acquisition-related (expense) benefit, net		(153	)			(68	)			815				1,529				(2,265	)
Operating (loss) income	$	(12,861	)		$	21,178			$	27,412			$	13,812			$	13,352

The following is a trailing twelve months reconciliation of Operating income, excluding stock-based compensation and acquisition-related (expense) benefit, net, to the most comparable U.S. GAAP financial measure, “Operating Income." (8)
Operating income, excluding stock-based compensation and acquisition-related (expense) benefit, net TTM	$	203,715			$	187,278			$	174,387			$	163,052			$	197,205
Stock-based compensation		(104,117	)			(106,021	)			(111,383	)			(115,634	)			(121,462	)
Acquisition-related (expense) benefit, net		(897	)			(1,017	)			(1,837	)			2,123				11
Operating income TTM	$	98,701			$	80,240			$	61,167			$	49,541			$	75,754

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.(9)

EMEA Gross Billings growth, excluding FX		4		%		(9	)	%		4		%		9		%		3		%
FX Effect		(2	)	%		1		%		-		%		3		%		3		%
EMEA Gross Billings growth		2		%		(8	)	%		4		%		12		%		6		%

Rest of World Gross Billings growth, excluding FX		20		%		(6	)	%		(16	)	%		(4	)	%		(2	)	%
FX Effect		(3	)	%		(5	)	%		(5	)	%		(9	)	%		(9	)	%
Rest of World Gross Billings growth		17		%		(11	)	%		(21	)	%		(13	)	%		(11	)	%

Consolidated Gross Billings growth, excluding FX		25		%		5		%		11		%		11		%		5		%
FX Effect		(1	)	%		(1	)	%		(1	)	%		(1	)	%		-		%
Consolidated Gross Billings growth		24		%		4		%		10		%		10		%		5		%

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.(9)

EMEA Revenue growth, excluding FX		(25	)	%		(20	)	%		(25	)	%		(23	)	%		38		%
FX Effect		(2	)	%		-		%		1		%		2		%		5		%
EMEA Revenue growth		(27	)	%		(20	)	%		(24	)	%		(21	)	%		43		%

Rest of World Revenue growth, excluding FX		23		%		(8	)	%		(21	)	%		7		%		(6	)	%
FX Effect		(3	)	%		(6	)	%		(5	)	%		(11	)	%		(9	)	%
Rest of World Revenue growth		20		%		(14	)	%		(26	)	%		(4	)	%		(15	)	%

Consolidated Revenue growth, excluding FX		31		%		8		%		8		%		6		%		20		%
FX Effect		(1	)	%		-		%		(1	)	%		(1	)	%		-		%
Consolidated Revenue growth		30		%		8		%		7		%		5		%		20		%

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	$	65,717			$	8,760			$	43,302			$	(11,905	)		$	178,275
Purchases of property and equipment and capitalized software		(40,034	)			(14,468	)			(14,042	)			(15,064	)			(19,931	)
Free cash flow (10)	$	25,683			$	(5,708	)		$	29,260			$	(26,969	)		$	158,344

Net cash provided by operating activities (TTM)	$	266,834			$	191,880			$	159,867			$	105,874			$	218,432
Purchases of property and equipment and capitalized software (TTM)		(95,836	)			(97,221	)			(84,554	)			(83,608	)			(63,505	)
Free cash flow (TTM)	$	170,998			$	94,659			$	75,313			$	22,266			$	154,927

Net cash used in investing activities	$	(52,753	)		$	(30,679	)		$	(15,862	)		$	(26,444	)		$	(23,330	)
Net cash used in financing activities	$	(6,495	)		$	(9,342	)		$	(7,941	)		$	(8,970	)		$	(55,444	)

Net cash used in investing activities (TTM)	$	(194,979	)		$	(179,214	)		$	(134,923	)		$	(125,738	)		$	(96,315	)
Net cash provided by (used in) financing activities (TTM)	$	12,095			$	11,028			$	(21,071	)		$	(32,748	)		$	(81,697	)

Other Metrics
Active Customers (11)
North America		17.2				18.2				19.1				19.9				20.8
EMEA		14.3				14.0				13.9				14.0				14.2
Rest of World		9.5				9.5				9.6				9.6				9.9
Total Active Customers		41.0				41.7				42.6				43.5				44.9

TTM Gross Billings / Average Active Customer (12)
North America	$	152			$	151			$	156			$	155			$	150
EMEA	$	146			$	137			$	135			$	137			$	139
Rest of World	$	126			$	116			$	108			$	102			$	95
Consolidated	$	144			$	138			$	138			$	137			$	134

Headcount
Sales (13)		4,677				4,566				4,679				4,801				4,834
% North America		25		%		28		%		26		%		28		%		29		%
% EMEA		42		%		38		%		39		%		37		%		37		%
% Rest of World		33		%		34		%		35		%		35		%		34		%
Other		6,717				6,433				6,306				6,453				6,449
Total Headcount		11,394				10,999				10,985				11,254				11,283

(1) Represents the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds. Includes direct billings and third party and other billings.
(2) Local represents deals from local merchants, deals with national merchants, and deals through local events.
(3) 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.
(4) Cost of revenue is comprised of direct and certain indirect costs incurred to generate revenue. Direct cost of revenue includes the cost of inventory, shipping and fulfillment costs and inventory markdowns. Third party cost of revenue includes estimated refunds for which the merchant's share is not recoverable. Other costs incurred to generate revenue are allocated to cost of third party and other revenue and direct revenue for each of our categories (Local, Goods, and Travel and other) 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 period been the same as those in effect in the prior year period.
(6) International operating margin information broken out between EMEA and Rest of World is not readily available for quarterly periods during the year ended December 31, 2010. Therefore, the Company is presenting year-over-year basis point (bps) growth for operating margin TTM excluding stock-based compensation and acquisition-related expense (benefit), net beginning in the first quarter of 2013.
(7) 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.
(8) Adjusted EBITDA and Operating income excluding stock-based compensation and acquisition-related (expense) benefit, net 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 Operating income excluding stock-based compensation and acquisition-related (expense) benefit, net to the most comparable U.S. GAAP financial measure, "Operating (loss) income," for the periods presented.
(9) Foreign Exchange Rate neutral operating results are non-GAAP financial measures. The Company reconciles "foreign exchange rate 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" and "Revenue," respectively, for the periods presented.
(10) Free cash flow is a non-GAAP financial measure. The Company reconciles this measure to the most comparable U.S. GAAP financial measure, "Net cash provided by (used in) operating activities," for the periods presented.
(11) Reflects the total number of unique user accounts who have purchased a voucher or product from us during the trailing twelve months.
(12) Reflects the total gross billings generated in the trailing twelve months per average active customer over that period.
(13) Includes merchant sales representatives, as well as sales support.
(14) 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.

Contacts:

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