Groupon Announces Second Quarter 2012 Results

Consolidated revenue of $568.3 million, up 45% year-over-year

Operating income of $46.5 million versus operating loss of $101.0 million in second quarter 2011

GAAP EPS of $0.04, non-GAAP EPS of $0.08; includes $0.04 per share gain from non-operating items

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

Revenue increased 45% year-over-year to $568.3 million in the second quarter 2012, compared with $392.6 million in the second quarter 2011. Excluding the $32.4 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, revenue growth would have been 53% compared with second quarter 2011.

The second quarter 2012 was the first quarter that direct revenue, or the amount earned from the sale of products for which the Company is the merchant of record, was material to Groupon’s overall performance. Accordingly, the Company’s consolidated revenue presentation now includes third-party revenue, which is related to sales for which the Company acts as an agent for the merchant, as well as direct revenue. Third-party and direct revenues are recorded on a net and gross basis, respectively. Direct revenue was $65.4 million in the quarter, compared with $19.2 million in the first quarter 2012.

Gross billings, which reflects the total amount collected from customers, excluding any applicable taxes and net of estimated refunds, increased 38% year-over-year to $1.29 billion in the second quarter 2012, compared with $929.2 million in the second quarter 2011. Excluding the $75.1 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, gross billings growth would have been 47% compared with second quarter 2011.

Operating income was $46.5 million in the second quarter 2012, which included non-cash stock-based compensation and acquisition-related expenses of $25.4 million. This compares with a loss from operations of $101.0 million in the second quarter 2011, which included non-cash stock-based compensation expense of $38.7 million. Year-over-year changes in foreign exchange rates throughout the quarter had a $0.2 million unfavorable impact on operating income.

“We had a solid quarter despite challenges in Europe and continued investment in technology and infrastructure,” said Andrew Mason, CEO of Groupon. “We’ve deepened our relationships with a growing base of merchants and customers worldwide, demonstrating progress as we work to unlock the opportunity in local commerce.”

Operating cash flow increased 93% year-over-year to $75.3 million, compared with $39.0 million in the second quarter 2011. For the trailing twelve months ended June 30, 2012, operating cash flow was $392.5 million. Free cash flow, a non-GAAP financial measure calculated as operating cash flow less capital expenditures, was $48.6 million for the second quarter 2012, bringing free cash flow for the trailing twelve months ended June 30, 2012 to $330.1 million. This reflects an increase of 243% year-over-year compared to free cash flow in the trailing twelve months ended June 30, 2011 of $96.4 million. At the end of the quarter, Groupon had $1.2 billion in cash and cash equivalents and no long-term debt.

Second quarter 2012 net income attributable to common stockholders improved to $28.4 million, or $0.04 per share. Non-GAAP earnings attributable to common stockholders for the second quarter 2012 improved to $53.8 million, or $0.08 per share, excluding stock-based compensation and acquisition-related expenses of $25.4 million. Second quarter 2012 results included a $33.0 million net gain from non-recurring items, comprised of a $56.0 million non-operating gain and $23.0 million of tax expense. This resulted from a transaction whereby the Company’s minority interest in its China operations was exchanged along with an additional cash investment, for a minority interest in Life Media, Limited (also known as F-tuan), a leading competitor. Net income attributable to common stockholders also included a $3.9 million reduction related to the settling of remaining commitments to purchase additional interests in consolidated subsidiaries from minority shareholders. The net positive impact of these two items was $0.04 per share.

Second quarter 2012 net income attributable to common stockholders improved by $135.8 million year-over-year, from a net loss of $107.4 million, or a loss per share of $0.35 in the second quarter 2011. Non-GAAP net income attributable to common stockholders improved by $122.5 million year-over-year, from a net loss of $68.7 million, or a non-GAAP loss per share of $0.23 in the second quarter 2011, excluding non-cash stock-based compensation expenses of $38.7 million.

Groupon, Inc.
Summary Consolidated and Segment Results
               
Three Months Ended Six Months Ended
June 30, Y/Y % June 30, Y/Y %
2011 2012

Y/Y%
Growth

Growth
excluding
FX(1)

2011 2012

Y/Y%
Growth

Growth
excluding
FX(1)

(dollars in thousands, except share and per share data)

(dollars in thousands, except share and per share data)
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue
North America $ 157,205 $ 260,181 65.5 % 66.0 % $ 293,817 $ 498,746 69.7 % 70.3 %
International   235,377     308,154 30.9 % 44.1 %   394,288     628,872 59.5 % 74.5 %
Consolidated revenue $ 392,582   $ 568,335 44.8 % 53.0 % $ 688,105   $ 1,127,618 63.9 % 72.6 %
 
Operating (loss) income $ (101,027 ) $ 46,485 N/A N/A $ (218,175 ) $ 86,124 N/A N/A
 
Net (loss) income attributable to common stockholders $ (107,406 ) $ 28,386 N/A N/A $ (253,886 ) $ 16,691 N/A N/A
Non-GAAP net (loss) income attributable to common stockholders(2) $ (68,688 ) $ 53,835 N/A N/A $ (196,304 ) $ 70,092 N/A N/A
 
Net (loss) earnings per share attributable to common stockholders
Basic $ (0.35 ) $ 0.04 $ (0.83 ) $ 0.03
Diluted $ (0.35 ) $ 0.04 $ (0.83 ) $ 0.03
 
Non-GAAP net (loss) earnings per share attributable to common stockholders (2) $ (0.23 ) $ 0.08 $ (0.64 ) $ 0.11
 
Weighted average basic shares outstanding 303,414,676 647,149,537 305,626,028 645,072,582
Weighted average diluted shares outstanding 303,414,676 663,122,709 305,626,028 663,230,558
Weighted average diluted shares for non-GAAP net (loss) earnings per share (3) 303,414,676 663,122,709 305,626,028 663,230,558
 
(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 six months ended June 30, 2011.
(2) Non-GAAP net (loss) income attributable to common stockholders is a non-GAAP financial measure. This measure excludes stock-based compensation and acquisition-related costs. See ‘‘Non-GAAP Reconciliation Schedule’’ for a reconciliation of this measure to the most applicable financial measure under U.S. GAAP.
(3) 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.
 

Highlights

  • Continued North American revenue growth. North American revenues grew 66% year-over-year.
  • Rapid growth in Groupon Goods. Groupon Goods surpassed the $200 million annual revenue run-rate in the second quarter 2012, in just its third quarter since launch in North America.
  • Improved marketing efficiencies. Customer acquisition costs improved 43% year-over-year, enabling the reduction of marketing spend by 58% compared with the second quarter 2011.
  • Solid growth in active customers. As of June 30, 2012, Groupon had 38.0 million active customers, an increase of 65% year-over-year.
  • Record number of unique merchants featured. For the second straight quarter, Groupon featured more than 100,000 unique merchants, with second quarter 2012 merchants featured achieving a new record level.
  • Mobile adoption increasing and transaction activity remains high. In July 2012, nearly one third of North American transactions were completed on mobile devices, an increase of over 35% compared with July 2011.
  • Merchant support tools gaining traction. In the second quarter 2012, nearly 20% of merchants featured were utilizing one or more of Groupon's merchant tools, compared with 10% in the first quarter 2012.
  • Launched new GrouponWorks site. The Company recently launched an updated site for merchants, featuring over 500 merchant videos on how to work with Groupon. (http://www.grouponworks.com/)

Third Quarter 2012 Outlook

Revenue for the third quarter 2012 is expected to be between $580 million and $620 million, an increase of between 35% and 44% compared with the third quarter 2011.

Income from operations for the third quarter 2012 is expected to be between $15 million and $35 million, compared with a loss from operations of $0.2 million in the third 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 Measures

This release includes the following non-GAAP financial measures: non-GAAP net (loss) income attributable to common stockholders and free cash flow. The Supplemental Financial Information Table and Business Metrics also includes operating income and operating margin, in each case excluding stock-based compensation and acquisition-related expenses. Free cash flow and non-GAAP net (loss) income attributable to common stockholders may be different from similar measures used by other companies. Groupon believes that these non-GAAP measures are useful because they provide for more meaningful comparisons of period-to-period results by excluding certain non-cash charges that Groupon believes are not driven by core operating results. However, these non-GAAP measures are not intended to be a substitute for cash flows from operations or net income, and are not intended to represent the total increase or decrease in Groupon’s cash balance for the applicable period. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. These non-GAAP measures should only be used to evaluate Groupon’s results of operations in conjunction with the corresponding GAAP measures. For a reconciliation of these non-GAAP financial measures to the nearest comparable U.S. GAAP measures, see “Non-GAAP Reconciliation Schedule” included in this release.

Non-GAAP net income excludes from GAAP net income stock-based compensation and acquisition-related expenses. Free cash flow represents operating cash flow less purchases of property and equipment. The non-GAAP measures included in this release are adjusted by excluding the items below:

Stock-based compensation expense: Stock-based compensation is excluded because it is a non-cash expense. It is, however, reflected in earnings per share, as it is incorporated in sharecount.

Acquisition-related expense: Acquisition-related costs that are non-cash in nature are excluded. The timing and nature of these expenses are unpredictable, the benefits of an acquisition may not be realized in the quarter in which the acquisition occurs, and Groupon believes that they do not provide for meaningful period-to-period comparisons.

Property and Equipment: Purchases of property and equipment are subtracted from operating cash flow in the calculation of free cash flow because Groupon believes that this is more aligned with an analysis of ongoing business operations, as purchases of fixed assets, software developed for internal use, and website development costs are necessary components of ongoing operations.

Included in the tables below are reconciliations of each of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

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 August 13, 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.
Consolidated Statement of Cash Flows
   
Three Months Ended Six Months Ended
June 30, June 30,
2011   2012 2011   2012
(in thousands) (in thousands)
(unaudited) (unaudited) (unaudited) (unaudited)
Operating activities
Net (loss) income $ (109,776 ) $ 33,549 $ (223,667 ) $ 29,956
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 8,098 12,810 15,696 24,526
Stock-based compensation 38,718 27,084 57,582 55,087
Deferred income taxes 1,147 13,873 (2,237 ) 12,997
Excess tax benefits on stock based compensation (3,532 ) (18,869 ) (3,532 ) (21,750 )
Loss on equity method investees 7,881 3,428 8,763 8,556
Acquisition-related - (1,739 ) - (1,687 )
Gain on sale of investment - (56,032 ) - (56,032 )
Change in assets and liabilities, net of acquisitions:
Restricted cash (1,025 ) (1,471 ) (1,025 ) (2,828 )
Accounts receivable (37,023 ) 19,963 (53,072 ) 8,085
Prepaid expenses and other current assets (8,933 ) (17,624 ) (17,221 ) (21,745 )
Accounts payable 8,091 20,089 (14,374 ) 18,268
Accrued merchant payable 95,697 (13,979 ) 216,870 32,021
Accrued expenses and other current liabilities 38,508 49,657 74,756 63,077
Other, net   1,168     4,576     (1,580 )   10,498  
Net cash provided by operating activities   39,019     75,315     56,959     159,029  
Investing activities
Purchases of property and equipment (10,240 ) (26,709 ) (21,202 ) (39,792 )
Acquisitions of businesses, net of acquired cash (878 ) (17,267 ) (3,696 ) (40,271 )
Purchases of intangible assets (58 ) - (272 ) (10 )
Purchases of investments in subsidiaries (9,387 ) (6,080 ) (34,387 ) (13,427 )
Purchases of cost and equity method investments   (4,621 )   (10,097 )   (9,921 )   (13,097 )
Net cash used in investing activities   (25,184 )   (60,153 )   (69,478 )   (106,597 )
Financing activities
Proceeds from issuance of stock, net of issuance costs - - 509,692 -
Excess tax benefits on stock based compensation 3,532 18,869 3,532 21,750
Tax withholdings related to net share settlements of restricted stock units - 964 - (5,668 )
Payments of contingent acquisition liability - - - (4,250 )
Repayments of loans to related parties - - (14,358 ) -
Repurchase of common stock (5,000 ) - (353,550 ) -
Proceeds from exercise of stock options 909 5,279 1,234 5,657
Proceeds from the sale of common stock 137 - 137 -
Partnership distributions to noncontrolling interest holders - (954 ) - (1,606 )
Redemption of preferred stock   -     -     (35,003 )   -  
Net cash provided by financing activities   (422 )   24,158     111,684     15,883  
Effect of exchange rate changes on cash and cash equivalents 2,992 (14,511 ) 7,095 (5,452 )
Net increase in cash and cash equivalents 16,405 24,809 106,260 62,863
Cash and cash equivalents, beginning of the period   208,688     1,160,989     118,833     1,122,935  
Cash and cash equivalents, end of the period $ 225,093   $ 1,185,798   $ 225,093   $ 1,185,798  
Supplemental disclosure of cash flow information
Non-cash investing activity
Contingent consideration in connection with acquisitions $ - $ - $ 15,920 $ 421
Contribution of investment in E-Commerce transaction $ - $ 47,042 $ - $ 47,042
Liability incurred in E-Commerce transaction $ - $ 20,000 $ - $ 20,000
 
 
 
Groupon, Inc.
Consolidated Statements of Operations
       

Three Months Ended

June 30,

 

Six Months Ended

June 30,

2011 2012 2011 2012

(dollars in thousands, except
share and per share data)

(dollars in thousands, except
share and per share data)

(unaudited) (unaudited) (unaudited) (unaudited)
(Restated)(1)
Third party and other revenue $ 392,582 $ 502,985 $ 688,105 $ 1,043,038
Direct revenue   -     65,350     -     84,580  
Total revenue 392,582 568,335 688,105 1,127,618
Costs and expenses:
Cost of revenue 54,803 135,184 94,568 254,682
Marketing 212,739 88,407 442,824 205,022
Selling, general and administrative 226,067 299,894 368,888 583,477
Acquisition-related   -     (1,635 )   -     (1,687 )
Total operating expenses   493,609     521,850     906,280     1,041,494  
(Loss) income from operations (101,027 ) 46,485 (218,175 ) 86,124
Interest and other income, net 479 57,367 1,539 53,828
Loss on equity method investees   (7,881 )   (3,428 )   (8,763 )   (8,556 )
(Loss) income before provision for income taxes (108,429 ) 100,424 (225,399 ) 131,396
Provision (benefit) for income taxes   1,347     66,875     (1,732 )   101,440  
Net (loss) income (109,776 ) 33,549 (223,667 ) 29,956
Less: Net loss (income) attributable to noncontrolling interests   8,536     (1,220 )   19,759     (2,100 )
Net (loss) income attributable to Groupon, Inc. $ (101,240 ) $ 32,329   $ (203,908 ) $ 27,856  
Redemption of preferred stock in excess of carrying value - - (34,327 ) -
Adjustment of redeemable noncontrolling interests to redemption value   (6,166 )   (3,943 )   (15,651 )   (11,165 )
Net (loss) income attributable to common stockholders $ (107,406 ) $ 28,386   $ (253,886 ) $ 16,691  
 
Net (loss) earnings per share attributable to common stockholders
Basic $ (0.35 ) $ 0.04 $ (0.83 ) $ 0.03
Diluted $ (0.35 ) $ 0.04 $ (0.83 ) $ 0.03
 
Weighted average number of shares outstanding
Basic 303,414,676 647,149,537 305,626,028 645,072,582
Diluted 303,414,676 663,122,709 305,626,028 663,230,558
 

(1) The Company restated the Condensed Consolidated Statements of Operations for the six months ended June 30, 2011, included in the Form S-1 filed with the SEC on September 23, 2011, to correct for an error in its presentation of certain income statement expenses. These changes were to be consistent with the Company's election to report revenue on a net basis. As a result, a portion of technology costs and editorial costs have been reclassified to cost of revenue from selling, general and administrative expense for the six months ended June 30, 2011. In addition, costs associated with the Company’s marketing staff, including payroll, benefits and stock compensation, have been reclassified to marketing for the six months ended June 30, 2011 from selling, general and administrative. The change in presentation had no effect on pre-tax loss, net loss or any per share amounts for the period.

   
 
 
Groupon, Inc.
Consolidated Balance Sheets
 
December 31, June 30,
2011 2012
(in thousands)
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,122,935 $ 1,185,798
Accounts receivable, net 108,747 98,673
Prepaid expenses and other current assets   91,645     116,141  

Total current assets

1,323,327 1,400,612
Property and equipment, net of accumulated depreciation of $14,627 and $28,147, respectively 51,800 83,293
Goodwill 166,903 192,018
Intangible assets, net 45,667 54,303
Investments in equity interests 50,604 131,177
Deferred income taxes, non-current 46,104 45,517
Other non-current assets   90,071     76,178  
Total Assets $ 1,774,476   $ 1,983,098  
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 40,918 $ 60,364
Accrued merchant payables 520,723 543,840
Accrued expenses 212,007 258,343
Deferred income taxes, current 76,841 73,942
Other current liabilities   144,673     163,692  
Total current liabilities 995,162 1,100,181
Deferred income taxes, non-current 7,428 25,837
Other non-current liabilities   70,766     74,773  
Total Liabilities   1,073,356     1,200,791  
 
Redeemable noncontrolling interests 1,653 5,943
Groupon, Inc. 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, 649,165,744 shares issued and outstanding at June 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 June 30, 2012 - -
Common stock, par value $0.0001 per share, 2,010,000 shares authorized, and no shares issued and outstanding as of December 31, 2011 and June 30, 2012 - -
Additional paid-in capital 1,388,253 1,437,327
Stockholder receivable - (166 )
Accumulated deficit (698,704 ) (670,848 )
Accumulated other comprehensive income   12,928     12,937  
Total Groupon, Inc. Stockholders' Equity 702,541 779,315
Noncontrolling interests   (3,074 )   (2,951 )
Total Equity   699,467     776,364  
Total Liabilities and Equity $ 1,774,476   $ 1,983,098  
 
 
 
Groupon, Inc.
Segment Information
       
Three Months Ended Six Months Ended
June 30, June 30,
2011 2012 2011 2012
(in thousands) (in thousands)
(unaudited) (unaudited) (unaudited) (unaudited)
 
North America
Revenue $ 157,205 $ 260,181 $ 293,817 $ 498,746
Segment operating expenses(1)   167,706     216,752     326,096     415,145  
Segment operating (loss) income (10,501 ) 43,429 (32,279 ) 83,601
Segment (loss) income as a percent of segment revenue (6.7 ) % 16.7 % (11.0 ) % 16.8 %
 
International
Revenue $ 235,377 $ 308,154 $ 394,288 $ 628,872
Segment operating expenses(1)   287,185     279,649     522,602     572,949  
Segment operating (loss) income (51,808 ) 28,505 (128,314 ) 55,923
Segment (loss) income as a percent of segment revenue (22.0 ) % 9.3 % (32.5 ) % 8.9 %
 
Consolidated
Revenue $ 392,582 $ 568,335 $ 688,105 $ 1,127,618
Segment operating expenses(1)   454,891     496,401     848,698     988,094  
Segment operating (loss) income (62,309 ) 71,934 (160,593 ) 139,524
Segment (loss) income as a percent of segment revenue (15.9 ) % 12.7 % (23.3 ) % 12.4 %
 
Stock-based compensation (38,718 ) (27,084 ) (57,582 ) (55,087 )
Acquisition-related   -     1,635     -     1,687  
Operating (loss) income (101,027 ) 46,485 (218,175 ) 86,124
 
Interest and other income, net 479 57,367 1,539 53,828
Loss on equity method investees   (7,881 )   (3,428 )   (8,763 )   (8,556 )
(Loss) income before income taxes (108,429 ) 100,424 (225,399 ) 131,396
Provision (benefit) for income taxes   1,347     66,875     (1,732 )   101,440  
Net (loss) income $ (109,776 ) $ 33,549   $ (223,667 ) $ 29,956  
 

(1) Represents operating expenses, excluding stock-based compensation and acquisition-related expense, which are not allocated to segments.

 
 
 
Foreign Exchange Rate Neutral Operating Results
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 June 30, 2012 are as follows:
           
 
Three Months Ended Three Months Ended
June 30, 2012 June 30, 2012
At Avg. Exchange At Avg. Exchange
Q2 2011 Rate As Q1 2012 Rate As
Rates (1) Effect (2) Reported Rates (3) Effect (2) Reported
(in thousands) (in thousands)
(unaudited) (unaudited)
Revenue $ 600,764 $ (32,429 ) $ 568,335 $ 576,626 $ (8,291 ) $ 568,335
Income from operations $ 46,688 $ (203 ) $ 46,485 $ 45,519 $ 966 $ 46,485
 
 
The effect on the Company's consolidated statements of operations from changes in exchange rates versus the U.S. Dollar for the six months ended June 30, 2012 are as follows:
 
Six Months Ended Six Months Ended
June 30, 2012 June 30, 2012
At Avg. Exchange At Avg. Exchange
Q2 2011 YTD Rate As Q4 '11 - Q1 '12 Rate As
Rates (1) Effect (2) Reported Rates (3) Effect (2) Reported
(in thousands) (in thousands)
(unaudited) (unaudited)
Revenue $ 1,187,851 $ (60,233 ) $ 1,127,618 $ 1,138,103 $ (10,485 ) $ 1,127,618
Income from operations $ 87,368 $ (1,244 ) $ 86,124 $ 85,599 $ 525 $ 86,124
 
(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 six months ended June 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 for operating results.
(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 six months ended March 31, 2012.
 
 
 
Reconciliation of Non-GAAP Financial Measures
       
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 six months ended June 30, 2011 and 2012:
 
Three Months Ended Six Months Ended
June 30, June 30,
2011 2012 2011 2012
(in thousands) (in thousands)
(unaudited) (unaudited) (unaudited) (unaudited)
Net cash provided by operating activities $ 39,019 $ 75,315 $ 56,959 $ 159,029
Purchases of property and equipment   (10,240 )   (26,709 )   (21,202 )   (39,792 )
Free cash flow $ 28,779   $ 48,606   $ 35,757   $ 119,237  
 
Net cash used in investing activities $ (25,184 ) $ (60,153 ) $ (69,478 ) $ (106,597 )
Net cash provided in financing activities $ (422 ) $ 24,158 $ 111,684 $ 15,883
 
 
 
                 
Non-GAAP Reconciliation Schedule
(dollars in thousands, except share and per share data)
(unaudited)
Quarterly Non-GAAP Reconciliation
Revenue Cost of Revenue Marketing SG&A Acq-Related Total OpEx Operating Income (Loss) Net Income (Loss) attributable to common stockholders Sharecount Diluted EPS (1)
 
Three months ended June 30, 2012
GAAP $ 568,335 $ 135,184 $ 88,407 $ 299,894 $ (1,635 ) $ 521,850 $ 46,485 $ 28,386 663,122,709 $ 0.04
Stock-based compensation (2) - (1,015 ) (646 ) (25,423 ) - (27,084 ) 27,084 27,084 - 0.04
Acquisition-related charges (3)   -   -     -     -     1,635     1,635     (1,635 )   (1,635 ) -   -  
Non-GAAP $ 568,335 $ 134,169   $ 87,761   $ 274,471   $ -   $ 496,401   $ 71,934   $ 53,835   663,122,709 $ 0.08  
 
Three months ended March 31, 2012
GAAP $ 559,283 $ 119,498 $ 116,615 $ 283,583 $ (52 ) $ 519,644 $ 39,639 $ (11,695 ) 644,097,375 $ (0.02 )
Stock-based compensation (2) - (482 ) (726 ) (26,795 ) - (28,003 ) 28,003 28,003 - 0.04
Acquisition-related charges (3)   -   -     -     -     52     52     (52 )   (52 ) -   (0.00 )
Non-GAAP $ 559,283 $ 119,016   $ 115,889   $ 256,788   $ -   $ 491,693   $ 67,590   $ 16,256   663,665,615 ((1 )) $ 0.02  
 
Three months ended December 31, 2011
GAAP $ 492,164 $ 96,265 $ 155,299 $ 255,316 $ 256 $ 507,136 $ (14,972 ) $ (65,379 ) 528,421,712 $ (0.12 )
Stock-based compensation (2) - (650 ) (1,492 ) (30,526 ) - (32,668 ) 32,668 32,668 - 0.06
Acquisition-related charges (3)   -   -     -     -     (256 )   (256 )   256     256   -   -  
Non-GAAP $ 492,164 $ 95,615   $ 153,807   $ 224,790   $ -   $ 474,212   $ 17,952   $ (32,455 ) 528,421,712 $ (0.06 )
 
Three months ended September 30, 2011
GAAP $ 430,161 $ 68,046 $ 170,349 $ 196,798 $ (4,793 ) $ 430,400 $ (239 ) $ (54,229 ) 307,605,060 $ (0.18 )
Stock-based compensation (2) - (56 ) (53 ) (3,231 ) - (3,340 ) 3,340 3,340 - 0.01
Acquisition-related charges (3)   -   -     -     -     4,793     4,793     (4,793 )   (4,793 ) -   (0.01 )
Non-GAAP $ 430,161 $ 67,990   $ 170,296   $ 193,567   $ -   $ 431,853   $ (1,692 ) $ (55,682 ) 307,605,060 $ (0.18 )
 
Three months ended June 30, 2011
GAAP $ 392,582 $ 54,803 $ 212,739 $ 226,067 $ - $ 493,609 $ (101,027 ) $ (107,406 ) 303,414,676 $ (0.35 )
Stock-based compensation (2) - (212 ) (493 ) (38,013 ) - (38,718 ) 38,718 38,718 - 0.12
Acquisition-related charges (3)   -   -     -     -     -     -     -     -   -   -  
Non-GAAP $ 392,582 $ 54,591   $ 212,246   $ 188,054   $ -   $ 454,891   $ (62,309 ) $ (68,688 ) 303,414,676 $ (0.23 )
 
Three months ended March 31, 2011 (Restated)(4)
GAAP $ 295,523 $ 39,765 $ 230,085 $ 142,821 $ - $ 412,671 $ (117,148 ) $ (146,480 ) 307,849,412 $ (0.48 )
Stock-based compensation (2) - (212 ) (493 ) (18,159 ) - (18,864 ) 18,864 18,864 - 0.07
Acquisition-related charges (3)   -   -     -     -     -     -     -     -   -   -  
Non-GAAP $ 295,523 $ 39,553   $ 229,592   $ 124,662   $ -   $ 393,807   $ (98,284 ) $ (127,616 ) 307,849,412 $ (0.41 )
 
Year-to-Date Non-GAAP Reconciliation
Revenue Cost of Revenue Marketing SG&A Acq-Related Total OpEx Operating Income (Loss) Net Income (Loss) attributable to common stockholders Sharecount Diluted EPS (1)
 
Six months ended June 30, 2012
GAAP $ 1,127,618 $ 254,682 $ 205,022 $ 583,477 $ (1,687 ) $ 1,041,494 $ 86,124 $ 16,691 663,230,558 $ 0.03
Stock-based compensation (2) - (1,497 ) (1,372 ) (52,218 ) - (55,087 ) 55,087 55,087 - 0.08
Acquisition-related charges (3)   -   -     -     -     1,687     1,687     (1,687 )   (1,687 ) -   -  
Non-GAAP $ 1,127,618 $ 253,185   $ 203,650   $ 531,259   $ -   $ 988,094   $ 139,524   $ 70,091   663,230,558 $ 0.11  
 
Six months ended June 30, 2011 (Restated)(4)
GAAP $ 688,105 $ 94,568 $ 442,824 $ 368,888 $ - $ 906,280 $ (218,175 ) $ (253,886 ) 305,626,028 $ (0.83 )
Stock-based compensation (2) - (424 ) (986 ) (56,172 ) - (57,582 ) 57,582 57,582 - 0.19
Acquisition-related charges (3)   -   -     -     -     -     -     -     -   -   -  
Non-GAAP $ 688,105 $ 94,144   $ 441,838   $ 312,716   $ -   $ 848,698   $ (160,593 ) $ (196,304 ) 305,626,028 $ (0.64 )
 
Annual Non-GAAP Reconciliation
Revenue Cost of Revenue Marketing SG&A Acq-Related Total OpEx Operating Income (Loss) Net Income (Loss) attributable to common stockholders Sharecount Diluted EPS (1)
 
Twelve months ended December 31, 2011
GAAP $ 1,610,430 $ 258,879 $ 768,472 $ 821,002 $ (4,537 ) $ 1,843,816 $ (233,386 ) $ (373,494 ) 362,261,324 $ (1.03 )
Stock-based compensation (2) - (1,130 ) (2,531 ) (89,929 ) - (93,590 ) 93,590 93,590 - 0.25
Acquisition-related charges (3)   -   -     -     -     4,537     4,537     (4,537 )   (4,537 ) -   (0.01 )
Non-GAAP $ 1,610,430 $ 257,749   $ 765,941   $ 731,073   $ -   $ 1,754,763   $ (144,333 ) $ (284,441 ) 362,261,324 $ (0.79 )
 
Twelve months ended December 31, 2010
GAAP $ 312,941 $ 42,896 $ 290,569 $ 196,637 $ 203,183 $ 733,285 $ (420,344 ) $ (456,320 ) 342,698,772 $ (1.33 )
Stock-based compensation (2) - (157 ) (129 ) (35,882 ) - (36,168 ) 36,168 36,168 - 0.11
Acquisition-related charges (3)   -   -     -     -     (203,183 )   (203,183 )   203,183     203,183   -   0.59  
Non-GAAP $ 312,941 $ 42,739   $ 290,440   $ 160,755   $ -   $ 493,934   $ (180,993 ) $ (216,969 ) 342,698,772 $ (0.63 )
 
Twelve months ended December 31, 2009
GAAP $ 14,540 $ 4,716 $ 5,053 $ 5,848 $ - $ 15,617 $ (1,077 ) $ (6,916 ) 337,208,284 $ (0.02 )
Stock-based compensation (2) - - - (115 ) - (115 ) 115 115 - -
Acquisition-related charges (3)   -   -     -     -     -     -     -     -   -   -  
Non-GAAP $ 14,540 $ 4,716   $ 5,053   $ 5,733   $ -   $ 15,502   $ (962 ) $ (6,801 ) 337,208,284 $ (0.02 )
 
(1)   Per U.S. GAAP, Diluted EPS is calculated using the weighted-average diluted shares outstanding rather than weighted-average basic shares outstanding. 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.
(2) Represents non-cash stock-based compensation expense recorded within selling, general and administrative expenses, marketing expenses and cost of revenue on the income statement.
(3) Primarily represents non-cash charges for measurement of the fair value of contingent consideration related to acquisitions made since 2010.
(4)

The Company restated the Condensed Consolidated Statements of Operations for the three months ended March 31, 2011, included in the Form S-1 filed with the SEC on June 2, 2011, to correct for an error in its presentation of revenue. Most significantly, the Company restated its reporting of revenue from Groupons to be net of the amounts related to merchant fees. Historically, the Company reported the gross amounts billed to its subscribers as revenue. The Condensed Consolidated Statement of Operations for the three months ended March 31, 2011, was restated to show the net amount the Company retains after paying the merchant fees. The effect of the correction resulted in a reduction of previously reported revenue and corresponding reductions in cost of revenue in those periods. The change in presentation had no effect on pre-tax loss, net loss or any per share amounts for the period.

 

The Company also changed the presentation of certain other income statement expenses for the three months ended March 31, 2011, to be consistent with reporting revenue on a net basis. These changes included presenting loyalty programs as a component of marketing rather than as an offset to revenue. The Company believes that this classification is most appropriate as it is acting as an agent on behalf of the merchant in driving traffic to generate revenue. In addition, refunds made to customers which are not recovered by the merchant are presented as a component of cost of revenue, rather than as an offset to revenue, as these amounts are not paid directly to the merchants.

 

A portion of technology costs and editorial costs were reclassified to cost of revenue from selling, general and administrative for the three months ended March 31, 2011.

 

Costs associated with the Company’s marketing staff, including payroll, benefits and stock compensation, were reclassified to marketing for the three months ended March 31, 2011, from selling general and administrative.

 

Additionally, the Company restated the Condensed Consolidated Statements of Operations for the six months ended June 30, 2011, included in the Form S-1 filed with the SEC on September 23, 2011, to correct for an error in its presentation of certain income statement expenses. These changes were to be consistent with the Company's election to report revenue on a net basis. As a result, a portion of technology costs and editorial costs have been reclassified to cost of revenue from selling, general and administrative expense for the six months ended June 30, 2011. In addition, costs associated with the Company’s marketing staff, including payroll, benefits and stock compensation, have been reclassified to marketing for the six months ended June 30, 2011 from selling, general and administrative. The change in presentation had no effect on pre-tax loss, net loss or any per share amounts for the period.

 
 
 
Supplemental Financial Information and Business Metrics
(in thousands, except percentages, per share and headcount data and TTM Gross Billings / Average Active Customer)
(unaudited)
           
Q1 2011 (7) Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012
(Restated)(12)
Consolidated Results of Operations
Gross Billings $ 668,174 $ 929,249 $ 1,157,210 $ 1,230,868 $ 1,354,800 $ 1,286,676
Year-over-year growth 1,405 % 916 % 496 % 196 % 103 % 38 %
Year-over-year growth, excluding FX (2) 1,378 % 859 % 465 % 198 % 108 % 47 %
Gross Billings Trailing Twelve Months (TTM) $ 1,369,139 $ 2,206,964 $ 3,169,902 $ 3,985,501 $ 4,672,127 $ 5,029,554
Year-over-year growth 1,651 % 1,227 % 804 % 435 % 241 % 128 %
 
Third Party and Other Revenue (1) $ 295,523 $ 392,582 $ 422,989 $ 478,510 $ 540,053 $ 502,985
Direct Revenue (1)   -     -     7,172     13,654     19,230     65,350
Total Consolidated Revenue $ 295,523 $ 392,582 $ 430,161 $ 492,164 $ 559,283 $ 568,335
Year-over-year growth 1,358 % 915 % 426 % 186 % 89 % 45 %
Year-over-year growth, excluding FX (2) 1,332 % 858 % 401 % 188 % 95 % 53 %
Consolidated Revenue TTM $ 588,192 $ 942,108 $ 1,290,490 $ 1,610,430 $ 1,874,190 $ 2,049,943
Year-over-year growth 1,594 % 1,205 % 761 % 415 % 219 % 118 %
 
Operating (Loss) Income $ (117,148 ) $ (101,027 ) $ (239 ) $ (14,972 ) $ 39,639 $ 46,485
Year-over-year growth N/A (174 ) % 100 % 96 % N/A N/A
Operating Margin (% of revenue) (39.6 ) % (25.7 ) % (0.1 ) % (3.0 ) % 7.1 % 8.2 %
Year-over-year growth (bps) (8,192 ) 6,949 6,838 19,213 4,673 3,391
Operating (Loss) Income TTM $ (546,064 ) $ (610,272 ) $ (554,543 ) $ (233,386 ) $ (76,599 ) $ 70,913
Operating Margin TTM (% of TTM revenue) (92.8 ) % (64.8 ) % (43.0 ) % (14.5 ) % (4.1 ) % 3.5 %
Year-over-year growth (bps) (11,533 ) (2,457 ) 1,427 11,983 8,875 6,824
Net Loss Attributable to Common Stockholders $ (146,480 ) $ (107,406 ) $ (54,229 ) $ (65,379 ) $ (11,695 ) $ 28,386
Weighted Average Basic Shares Outstanding 307,849 303,415 307,605 528,422 644,097 647,150
Weighted Average Diluted Shares Outstanding (3) 307,849 303,415 307,605 528,422 644,097 663,123
Net (Loss) Earnings per Share Attributable to Common Stockholders
Basic $ (0.48 ) $ (0.35 ) $ (0.18 ) $ (0.12 ) $ (0.02 ) $ 0.04
Diluted $ (0.48 ) $ (0.35 ) $ (0.18 ) $ (0.12 ) $ (0.02 ) $ 0.04
 
Operating (Loss) Income Excl Stock-Based Compensation (SBC), Acquisition-Related Expenses (4) $ (98,284 ) $ (62,309 ) $ (1,692 ) $ 17,952 $ 67,590 $ 71,934
Year-over-year growth N/A (166 ) % 93 % N/A N/A N/A
Operating Margin Excl SBC, Acq-Related (% of revenue) (4) (33.3 ) % (15.9 ) % (0.4 ) % 3.6 % 12.1 % 12.7 %
Year-over-year growth (bps) (7,611 ) 4,471 2,760 8,689 4,534 2,853
Operating (Loss) Income TTM Excl SBC, Acq-Related (4) $ (287,964 ) $ (326,848 ) $ (305,646 ) $ (144,333 ) $ 21,541 $ 155,784
Operating Margin TTM Excl SBC, Acq-Related (% of TTM revenue) (4) (49.0 ) % (34.7 ) % (23.7 ) % (9.0 ) % 1.1 % 7.6 %
Year-over-year growth (bps) (7,208 ) (1,333 ) 245 4,887 5,011 4,229
Non-GAAP Net (Loss) Earnings Attributable to Common Stockholders (5) $ (127,616 ) $ (68,688 ) $ (55,682 ) $ (32,455 ) $ 16,256 $ 53,835
Weighted Average Diluted Shares for non-GAAP Net (Loss) Income per Share (3) 307,849 303,415 307,605 528,422 663,666 663,123
Non-GAAP Net (Loss) Earnings per Share Attributable to Common Stockholders (5) $ (0.41 ) $ (0.23 ) $ (0.18 ) $ (0.06 ) $ 0.02 $ 0.08
 
Segments
North America Segment:
Revenue $ 136,612 $ 157,205 $ 161,525 $ 179,638 $ 238,565 $ 260,181
Year-over-year growth 574 % 341 % 188 % 103 % 75 % 66 %
% of Consolidated Revenue 46 % 40 % 38 % 36 % 43 % 46 %
Revenue TTM $ 316,752 $ 438,305 $ 543,705 $ 634,980 $ 736,933 $ 839,909
 
Segment Operating (Loss) Income (6) $ (21,778 ) $ (10,501 ) $ 18,836 $ 18,239 $ 40,172 $ 43,429
Year-over-year growth N/A (2,678 ) % 496 % N/A N/A N/A
% of Consolidated Segment Operating Income 22 % 17 % 1,113 % 102 % 59 % 60 %
Segment Operating Margin (% of North America revenue) (6) (15.9 ) % (6.7 ) % 11.7 % 10.2 % 16.8 % 16.7 %
Year-over-year growth (bps) (5,879 ) (562 ) 603 3,494 3,278 2,337
Segment Operating (Loss) Income TTM (6) $ (40,901 ) $ (51,024 ) $ (35,348 ) $ 4,796 $ 66,746 $ 120,676
Segment Operating Margin TTM (% of North America TTM revenue) (6) (12.9 ) % (11.6 ) % (6.5 ) % 0.8 % 9.1 % 14.4 %
Year-over-year growth (bps) (3,604 ) (2,266 ) (1,467 ) 596 2,197 2,601
 
International Segment:
Revenue $ 158,911 $ 235,377 $ 268,636 $ 312,526 $ 320,718 $ 308,154
Year-over-year growth N/A 7,709 % 947 % 273 % 102 % 31 %
Year-over-year growth, excluding FX (2) N/A 7,013 % 868 % 276 % 112 % 44 %
% of Consolidated Revenue 54 % 60 % 62 % 64 % 57 % 54 %
Revenue TTM $ 271,440 $ 503,803 $ 746,785 $ 975,450 $ 1,137,257 $ 1,210,034
 
Segment Operating (Loss) Income (6) $ (76,506 ) $ (51,808 ) $ (20,528 ) $ (287 ) $ 27,418 $ 28,505
Year-over-year growth N/A (125 ) % 21 % 100 % N/A 155 %
% of Consolidated Segment Operating Income 78 % 83 % (1,213 ) % (2 ) % 41 % 40 %
Segment Operating Margin (% of International revenue) (6) (48.1 ) % (22.0 ) % (7.6 ) % (0.1 ) % 8.5 % 9.3 %
Year-over-year growth (bps) N/A 74,265 9,392 14,474 5,669 3,126
Segment Operating (Loss) Income TTM (6) $ (247,063 ) $ (275,824 ) $ (270,298 ) $ (149,129 ) $ (45,205 ) $ 35,108
Segment Operating Margin TTM (% of International TTM revenue) (6) (91.0 ) % (54.7 ) % (36.2 ) % (15.3 ) % (4.0 ) % 2.9 %
Year-over-year growth (bps) N/A 70,992 13,508 13,628 8,704 5,765
 
 
 
Supplemental Financial Information and Business Metrics (continued)
(in thousands, except percentages, per share and headcount data and TTM Gross Billings / Average Active Customer)
(unaudited)
  Q1 2011 (7)   Q2 2011   Q3 2011   Q4 2011   Q1 2012   Q2 2012
(Restated)(12)
Cash Flow
Operating cash flow (TTM) $ 91,928 $ 128,316 $ 173,291 $ 290,447 $ 356,221 $ 392,517
Purchases of Property and Equipment (TTM)   (24,780 )   (31,949 )   (38,414 )   (43,811 )   (45,932 )   (62,401 )
Free cash flow (TTM) (8) $ 67,148 $ 96,367 $ 134,877 $ 246,636 $ 310,289 $ 330,116
 
Other Metrics:
Active Customers(9) 15,376 23,037 28,906 33,742 36,850 38,046
TTM Gross Billings / Average Active Customer (10) $ 169 $ 174 $ 189 $ 187 $ 179 $ 165
Headcount
Sales (11) 3,556 4,850 4,853 5,196 5,735 5,587
% North America 19 % 20 % 21 % 20 % 21 % 20 %
% International 81 % 80 % 79 % 80 % 79 % 80 %
Other 3,551 4,775 5,565 6,275 6,813 7,233
Total Headcount 7,107 9,625 10,418 11,471 12,548 12,820
 
(1)   The second quarter 2012 marked the first time that direct revenue was material to the Company’s consolidated performance. As a result, beginning in the second quarter 2012, third party and other and direct revenue are presented separately. Third party revenue is related to sales for which the company acts as an 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 recorded in cost of revenue.
(2) 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.
(3) 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.
(4) Please see the section entitled ‘‘Non-GAAP Financial Measures’’ above for further information on these metrics.
(5) Non-GAAP net (loss) income attributable to common stockholders is a non-GAAP financial measure. This measure excludes stock-based compensation and acquisition-related costs. See ‘‘Non-GAAP Reconciliation Schedule’’ for a reconciliation of this measure to the most applicable financial measure under U.S. GAAP.
(6) Segment operating income excludes stock-based compensation and acquisition-related expenses, as they are not allocated at the segment level.
(7) Year-over-year growth is unavailable for select international growth measures as Groupon did not commence international operations until the second quarter of 2010.
(8) 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.
(9) Reflects the total number of unique accounts who have purchased Groupons during the trailing twelve months.
(10) Reflects the total gross billings generated in the trailing twelve months per average active customer.
(11) Includes inside and outside merchant sales representatives, as well as sales support.
(12) The Company restated the Condensed Consolidated Statements of Operations for the three months ended March 31, 2011, included in the Form S-1 filed with the SEC on June 2, 2011, to correct for an error in its presentation of revenue. Most significantly, the Company restated its reporting of revenue from Groupons to be net of the amounts related to merchant fees. Historically, the Company reported the gross amounts billed to its subscribers as revenue. The Condensed Consolidated Statement of Operations for the three months ended March 31, 2011, was restated to show the net amount the Company retains after paying the merchant fees. The effect of the correction resulted in a reduction of previously reported revenue and corresponding reductions in cost of revenue in those periods. The change in presentation had no effect on pre-tax loss, net loss or any per share amounts for the period.

 

The Company has also changed the presentation of certain other income statement expenses for the three months ended March 31, 2011 to be consistent with reporting revenue on a net basis. These changes include presenting loyalty programs as a component of marketing rather than as an offset to revenue. The Company believes that this classification is most appropriate as it is acting as an agent on behalf of the merchant in driving traffic to generate revenue. In addition, refunds made to customers which are not recovered by the merchant are presented as a component of cost of revenue, rather than as an offset to revenue, as these amounts are not paid directly to the merchants.

 

A portion of technology costs and editorial costs have been reclassified to cost of revenue from selling, general and administrative for the three months ended March 31, 2011.

 

Costs associated with the Company’s marketing staff, including payroll, benefits and stock compensation, have been reclassified to marketing for the three months ended March 31, 2011 from selling general and administrative.

Contacts

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

Release Summary

Groupon Announces Second Quarter 2012 Results

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Contacts

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