Groupon Earnings Released, Revenue Up 27%

Chris CrumBusiness

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Groupon just released its earnings for the third quarter with revenue up 27% year-over-year at $757.1 million, GAAP loss per share of $0.03, and non-GAAP earnings per share of $0.03.

The company beat Wall Street expectations.

"We had another record quarter, with worldwide billings increasing 39 percent and reaching their highest level ever," said CEO Eric Lefkofsky. "We also made significant progress in our strategy to become the leading mobile commerce destination, with double-digit growth in our North American Local business, double-digit gross margins in North American Goods and positive Adjusted EBITDA in every segment for the first time in over a year."

Gross billings totaled $1.86 billion for the quarter. At the end of the quarter, active deals were 300,000 globally, compared to 240,000 at the end of the second quarter. Active customers grew 24% year-over-year.

Here's the release in its entirety:

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

"We had another record quarter, with worldwide billings increasing 39 percent and reaching their highest level ever," said Eric Lefkofsky, CEO of Groupon. "We also made significant progress in our strategy to become the leading mobile commerce destination, with double-digit growth in our North American Local business, double-digit gross margins in North American Goods and positive Adjusted EBITDA in every segment for the first time in over a year."

Third Quarter 2014 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 39% globally to $1.86 billion in the third quarter 2014, compared with $1.34 billion in the third quarter 2013. North America billings increased 16%, EMEA increased 10% and Rest of World increased 155%, driven by the first-quarter acquisition of Ticket Monster.
  • Revenue increased 27%, to $757.1 million in the third quarter 2014, compared with $595.1 million in the third quarter 2013.North America revenue increased 16%, EMEA increased 56% and Rest of World increased 26%.
  • Gross profit was $380.1 million in the third quarter 2014, compared with $359.6 million in the third quarter 2013.
  • Adjusted EBITDA, a non-GAAP financial measure, was $67.0 million in the third quarter 2014, compared with $62.3 million in the third quarter 2013, reflecting SG&A expense related to the Ticket Monster and ideel acquisitions, as well as an increase in overall marketing expense.
  • Third quarter 2014 net loss attributable to common stockholders was $21.2 million, or $0.03 per share. Earnings per share excluding stock compensation, amortization of acquired intangible assets, and acquisition-related costs of $46.1 million (or$38.7 million net of tax), a non-GAAP financial measure, was $0.03 per share.
  • Third quarter results included $18.6 million of pre-tax non-operating foreign currency losses and a $7.7 million decrease in liabilities for uncertain tax positions.
  • Operating cash flow for the trailing twelve months ended September 30, 2014 was $180.3 million. Free cash flow, a non-GAAP financial measure, was $25.4 million in the third quarter 2014, bringing free cash flow for the trailing twelve months endedSeptember 30, 2014 to $92.9 million.
  • At the end of the quarter, Groupon had $855.2 million in cash and cash equivalents.

Definitions and reconciliations of all non-GAAP financial measures are included below in the section titled ''Non-GAAP Financial Measures'' and in the accompanying tables.

Highlights

  • Units: Global units, defined as vouchers and products sold before cancellations and refunds, increased 92% year-over-year to 88 million in the third quarter 2014. North America units increased 11%, EMEA units increased 30% and Rest of World units increased 316%.
  • Active deals: At the end of the third quarter 2014, on average, active deals were approximately 300,000 globally, compared with more than 240,000 at the end of the second quarter 2014. North American active deals increased to over 120,000.
  • Active customers: Active customers, or customers that have purchased a voucher or product within the last twelve months, grew 24% year-over-year, to 52.7 million as of September 30, 2014, comprising 23.5 million in North America, 14.9 million in EMEA, and 14.3 million in Rest of World.
  • Customer spend: Third quarter 2014 trailing twelve month billings per average active customer was $149, compared with$141 in the second quarter 2014.
  • Mobile: Mobile mix, as measured by transactions completed on mobile devices, remains over half of the business. Over 100 million people have now downloaded Groupon mobile apps worldwide.
  • Marketplace: The rollout of Groupon's marketplace ("Pull") continued to gain traction. In the third quarter 2014, approximately 10% of total traffic in North America searched, with customers who searched spending significantly more than those who did not.
  • Rest of World: Rest of World billings grew 155% in the third quarter 2014, driven by Ticket Monster. As a result of the significant growth opportunities that exist for Ticket Monster, as well as for the Asian business more broadly, the company has hired financial advisers to evaluate a range of financing and strategic alternatives for those businesses that would, if pursued, unlock shareholder value.

Share Repurchase Program

During the third quarter 2014, Groupon repurchased 1,349,712 shares of its Class A common stock at an average price of $6.16 per share, for an aggregate purchase price of $8.3 million. Under the existing authorization, Groupon has repurchased a total of 26,087,004 shares at an average price of $7.30 per share, for an aggregate purchase price of $190.4 million. Groupon is authorized to repurchase up to an additional $109.6 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.

2014 Investor and Analyst Day

Groupon will be hosting its first Investor and Analyst Day on Tuesday, November 11, 2014 in Chicago. A live webcast of the event will be available on the company's investor relations website at http://investor.groupon.com.

Outlook

Significant movement in foreign exchange rates, the Euro in particular, has led to an approximately $7 million negative impact on Groupon's Adjusted EBITDA estimate since the company last provided full year guidance.

For the fourth quarter 2014, reflecting current foreign exchange rates, Groupon expects revenue of between $875 million and $925 million, Adjusted EBITDA of between $80 million and $100 million, and non-GAAP earnings per share excluding stock compensation, amortization of acquired intangible assets, and acquisition-related expenses, net of tax, of between $0.02 and $0.04.

Conference Call

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

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

Non-GAAP Financial Measures

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

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

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

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

Depreciation and amortization. We exclude depreciation and amortization expenses because they are non-cash in nature and we believe that non-GAAP financial measures excluding these items provide meaningful supplemental information about our operating performance and liquidity.

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

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

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

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

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

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

Note on Forward-Looking Statements

The statements contained in this release that refer to plans and expectations for the next quarter, the full year or the future are forward-looking statements that involve a number of risks and uncertainties, and actual results could differ materially from those discussed. The risks and uncertainties that could cause our results to differ materially from those included in the forward-looking statements include, but are not limited to, volatility in our revenue and operating results; risks related to our business strategy; including our marketing strategy and spend; responding to changes in the market; effectively dealing with challenges arising from our international operations; retaining existing customers and adding new customers; retaining and adding new and high quality merchants; cyber security breaches; incurring expenses as we expand our business; competing against smaller competitors and competitors with more financial resources than us; maintaining favorable terms with our business partners; maintaining a strong brand; managing inventory and order fulfillment risks; integrating our technology platforms; managing refund risks; retaining our executive team; litigation; regulations, including the CARD Act and regulation of the Internet; tax liabilities; tax legislation; maintaining our information technology infrastructure; protecting our intellectual property; handling acquisitions, joint ventures and strategic investments effectively; seasonality; payment-related risks; customer and merchant fraud; global economic uncertainty; compliance with rules and regulations associated with being a public company; and our ability to raise capital if necessary. We urge you to refer to the factors included under the headings ''Risk Factors'' and ''Management's Discussion and Analysis of Financial Condition and Results of Operations'' in the company's Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, copies of which may be obtained by visiting the company's Investor Relations web site at http://investor.groupon.com or the SEC'sweb 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 October 30, 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, visitwww.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 EndedY/Y %Nine Months EndedY/Y %
September 30,GrowthSeptember 30,Growth
Y/Y %excludingY/Y %excluding
20142013GrowthFX Effect (2)FX (2)20142013GrowthFX Effect (2)FX (2)
Gross Billings (1):
North America$774,286$664,99916.4%$(484)16.5%$2,354,900$2,058,52314.4%$(1,995)14.5%
EMEA489,423443,31810.4%2,1569.9%1,486,2661,417,8864.8%38,7882.1%
Rest of World597,026234,331154.8%18,080147.1%1,655,826687,814140.7%1,949140.5%
Consolidated gross billings$1,860,735$1,342,64838.6%$19,75237.1%$5,496,992$4,164,22332.0%$38,74231.1%
Revenue:
North America$418,494$360,83816.0%$(109)16.0%$1,273,487$1,077,57418.2%$(601)18.2%
EMEA230,072147,95055.5%88154.9%688,655491,71040.1%18,07936.4%
Rest of World108,48886,27125.8%(430)26.3%304,125235,92428.9%(12,854)34.4%
Consolidated revenue$757,054$595,05927.2%$34227.2%$2,266,267$1,805,20825.5%$4,62425.3%
(Loss) income from operations$(5,429)$13,812(139.3)%$(159)(138.2)%$(33,236)$62,402(153.3)%$2,325(157.0)%
Net loss attributable to Groupon, Inc.$(21,208)$(2,580)$(81,878)$(14,146)
Net loss per share
Basic$(0.03)$(0.00)$(0.12)$(0.02)
Diluted$(0.03)$(0.00)$(0.12)$(0.02)
Weighted average number of shares outstanding
Basic669,526,524666,432,848675,814,535662,531,567
Diluted669,526,524666,432,848675,814,535662,531,567
(1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds.
(2) Represents the change in financial measures that would have resulted had average exchange rates in the reporting periods been the same as those in effect during the three and nine months ended September 30, 2013.
Groupon, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months EndedNine Months Ended
September 30,September 30,
2014201320142013
Operating activities
Net loss$(19,018)$(1,292)$(75,303)$(10,085)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization of property, equipment and software26,31717,81671,47649,186
Amortization of acquired intangible assets11,8295,33336,06816,131
Stock-based compensation34,57426,87089,95889,223
Deferred income taxes(2,472)(659)(1,956)(1,225)
Excess tax benefits on stock-based compensation(2,641)(8,348)(12,573)(12,116)
Loss on equity method investments912545958
Net gain from changes in fair value of contingent consideration(1,020)(1,529)(1,059)(2,276)
Impairment of investments1,448-2,036-
Change in assets and liabilities, net of acquisitions:
Restricted cash6,040(3,348)6,961(81)
Accounts receivable(2,002)11,940(29,267)8,999
Prepaid expenses and other current assets(26,499)(2,846)(32,397)13,146
Accounts payable(3,811)(3,036)(8,964)(25,867)
Accrued merchant and supplier payables(19,274)(34,315)(61,219)(72,290)
Accrued expenses and other current liabilities9,790(20,553)(27,091)(27,790)
Other, net32,1142,03744,87315,144
Net cash provided by (used in) operating activities45,466(11,905)2,00240,157
Net cash used in investing activities(20,461)(26,444)(193,567)(72,985)
Net cash used in financing activities(16,823)(8,970)(173,068)(26,253)
Effect of exchange rate changes on cash and cash equivalents(21,102)5,165(20,671)(10,351)
Net decrease in cash and cash equivalents(12,920)(42,154)(385,304)(69,432)
Cash and cash equivalents, beginning of period868,0881,182,0111,240,4721,209,289
Cash and cash equivalents, end of period$855,168$1,139,857$855,168$1,139,857
Groupon, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2014201320142013
Revenue:
Third party and other$399,803$394,987$1,232,173$1,252,966
Direct357,251200,0721,034,094552,242
Total revenue757,054595,0592,266,2671,805,208
Cost of revenue:
Third party and other61,49754,001182,226179,524
Direct315,413181,436928,314502,359
Total cost of revenue376,910235,4371,110,540681,883
Gross profit380,144359,6221,155,7271,123,325
Operating expenses:
Marketing59,93553,265203,134158,319
Selling, general and administrative325,942294,074983,751904,880
Acquisition-related (benefit) expense, net(304)(1,529)2,078(2,276)
Total operating expenses385,573345,8101,188,9631,060,923
(Loss) income from operations(5,429)13,812(33,236)62,402
Other (expense) income, net (1)(20,023)832(21,886)(9,830)
(Loss) income before (benefit) provision for income taxes(25,452)14,644(55,122)52,572
(Benefit) provision for income taxes(6,434)15,93620,18162,657
Net loss(19,018)(1,292)(75,303)(10,085)
Net income attributable to noncontrolling interests(2,190)(1,288)(6,575)(4,061)
Net loss attributable to Groupon, Inc.$(21,208)$(2,580)$(81,878)$(14,146)
Net loss per share
Basic$(0.03)$(0.00)$(0.12)$(0.02)
Diluted$(0.03)$(0.00)$(0.12)$(0.02)
Weighted average number of shares outstanding
Basic669,526,524666,432,848675,814,535662,531,567
Diluted669,526,524666,432,848675,814,535662,531,567
(1) Other (expense) income, net includes foreign currency (losses) gains of ($18,638) and $326 for the three months endedSeptember 30, 2014 and 2013, respectively, and ($20,108) and ($11,156) for the nine months ended September 30, 2014 and 2013, respectively.
Groupon, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
September 30, 2014December 31, 2013
(unaudited)
Assets
Current assets:
Cash and cash equivalents$855,168$1,240,472
Accounts receivable, net124,59883,673
Deferred income taxes26,56427,938 
Prepaid expenses and other current assets243,750210,415
Total current assets1,250,0801,562,498
Property, equipment and software, net170,534134,423
Goodwill441,290220,827
Intangible assets, net119,81028,443
Investments23,63920,652
Deferred income taxes, non-current44,70935,941
Other non-current assets22,10339,226
Total Assets$2,072,165$2,042,010 
Liabilities and Equity
Current liabilities:
Accounts payable$25,848$27,573
Accrued merchant and supplier payables754,628752,943
Accrued expenses223,677226,986
Deferred income taxes44,78747,558
Other current liabilities134,116132,718
Total current liabilities1,183,0561,187,778
Deferred income taxes, non-current9,66810,853
Other non-current liabilities151,486131,697
Total Liabilities1,344,2101,330,328
Commitments and contingencies
Stockholders' Equity
Class A common stock, par value $0.0001 per share, 2,000,000,000 shares authorized, 694,272,530 shares issued and 668,185,526 shares outstanding atSeptember 30, 2014 and 670,149,976 shares issued and 665,717,176 shares outstanding at December 31, 20137067
Class B common stock, par value $0.0001 per share, 10,000,000 shares authorized, 2,399,976 shares issued and outstanding at September 30, 2014 and December 31, 2013--
Common stock, par value $0.0001 per share, 2,010,000,000 shares authorized, no shares issued and outstanding at September 30, 2014 and December 31, 2013--
Additional paid-in capital1,814,0401,584,211
Treasury stock, at cost, 26,087,004 shares at September 30, 2014 and 4,432,800 shares at December 31, 2013(190,355)(46,587)
Accumulated deficit(930,748)(848,870)
Accumulated other comprehensive income34,94824,830
Total Groupon, Inc. Stockholders' Equity727,955713,651
Noncontrolling interests-(1,969)
Total Equity727,955711,682
Total Liabilities and Equity$2,072,165$2,042,010
Groupon, Inc.
Segment Information
(in thousands)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2014201320142013
North America
Gross billings (1)$774,286$664,999$2,354,900$2,058,523
Revenue$418,494$360,838$1,273,487$1,077,574
Segment cost of revenue and operating expenses (2)405,910335,6701,234,973962,532
Segment operating income (2)$12,584$25,168$38,514$115,042
Segment operating income as a percent of segment gross billings1.6%3.8%1.6%5.6%
Segment operating income as a percent of segment revenue3.0%7.0%3.0%10.7%
EMEA
Gross billings (1)$489,423$443,318$1,486,266$1,417,886
Revenue$230,072$147,950$688,655$491,710
Segment cost of revenue and operating expenses (2)207,643132,346619,594417,222
Segment operating income (2)$22,429$15,604$69,061$74,488
Segment operating income as a percent of segment gross billings4.6%3.5%4.6%5.3%
Segment operating income as a percent of segment revenue9.7%10.5%10.0%15.1%
Rest of World
Gross billings (1)$597,026$234,331$1,655,826$687,814
Revenue$108,488$86,271$304,125$235,924
Segment cost of revenue and operating expenses (2)114,66087,890352,900276,105
Segment operating loss (2)$(6,172)$(1,619)$(48,775)$(40,181)
Segment operating loss as a percent of segment gross billings(1.0)%(0.7)%(2.9)%(5.8)%
Segment operating loss as a percent of segment revenue(5.7)%(1.9)%(16.0)%(17.0)%
(1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds.
(2) Segment cost of revenue and operating expenses and segment operating income (loss) exclude stock-based compensation and acquisition-related (benefit) expense, net.
Groupon, Inc.
Non-GAAP Reconciliation Schedules
(in thousands, except share and per share amounts)
(unaudited)
Adjusted EBITDA and earnings per share excluding stock-based compensation, amortization of acquired intangible assets and acquisition-related (benefit) expense, net of tax, are non-GAAP financial measures. The Company reconciles Adjusted EBITDA to the most comparable U.S. GAAP financial measure, ''Net loss,'' for the periods presented and the Company reconciles earnings per share excluding stock-based compensation, amortization of acquired intangible assets and acquisition-related (benefit) expense, net to the most comparable U.S. GAAP financial measure, ''Diluted net loss per share,'' for the periods presented.
The following is a quarterly reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure, ''Net loss.''
Q3 2013Q4 2013Q1 2014Q2 2014Q3 2014
Net loss$(1,292)$(78,861)$(35,363)$(20,922)$(19,018)
Adjustments:
Stock-based compensation26,87032,23923,72931,65534,574
Acquisition-related (benefit) expense, net(1,529)2,2651,785597(304)
Depreciation and amortization23,14924,13234,74034,65838,146
Other (income) expense, net(832)84,8338401,02320,023
Provision (benefit) for income taxes15,9367,38014,57012,045(6,434)
Total adjustments63,594150,84975,66479,97886,005
Adjusted EBITDA$62,302$71,988$40,301$59,056$66,987
The following is a reconciliation of diluted net loss per share to diluted earnings per share excluding stock-based compensation, amortization of acquired intangible assets and acquisition-related (benefit) expense, net for the three and nine months endedSeptember 30, 2014:
Three Months EndedNine Months Ended
September 30, 2014September 30, 2014
Net loss attributable to common stockholders$(21,208)$(81,878)
Stock-based compensation34,57489,958
Amortization of acquired intangible assets11,82936,068
Acquisition-related (benefit) expense, net(304)2,078
Income tax effect of adjustments(7,361)(31,090)
Net earnings attributable to common stockholders excluding stock-based compensation,
amortization of acquired intangible assets and acquisition-related (benefit) expense, net$17,530$15,136
Diluted shares669,526,524675,814,535
Incremental diluted shares8,907,05010,317,632
Adjusted diluted shares678,433,574686,132,167
Diluted net loss per share$(0.03)$(0.12)
Impact of stock-based compensation, amortization of acquired intangible assets
and acquisition-related (benefit) expense, net (1)0.060.14
Diluted earnings per share excluding stock-based compensation, amortization of acquired
intangible assets and acquisition-related (benefit) expense, net (1)$0.03$0.02
(1) The sum of per share amounts for quarterly periods may not equal year-to-date amounts due to rounding.
Foreign exchange rate neutral operating results are non-GAAP financial measures. The Company reconciles foreign exchange rate neutral operating results to the most comparable U.S. GAAP financial measures, ''Gross billings,'' ''Revenue'' and ''(Loss) income from operations,'' respectively, for the periods presented. The Company reconciles ''foreign exchange 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 growth'' and ''Revenue growth,'' respectively, for the periods presented.
The effect on the Company's gross billings, revenue and loss from operations from changes in exchange rates versus the U.S. Dollar for the three months ended September 30, 2014 was as follows:
Three Months Ended September 30, 2014Three Months Ended September 30, 2014
At Avg.ExchangeAt Avg.Exchange
Q3 2013RateAsQ2 2014RateAs
Rates (1)Effect (2)ReportedRates (3)Effect (2)Reported
Gross billings$1,840,983$19,752$1,860,735$1,877,385$(16,650)$1,860,735
Revenue$756,712$342$757,054$765,015$(7,961)$757,054
Loss from operations$(5,270)$(159)$(5,429)$(5,335)$(94)$(5,429)
The effect on the Company's gross billings, revenue and (loss) income from operations from changes in exchange rates versus the U.S. Dollar for the nine months ended September 30, 2014 was as follows:
Nine Months Ended September 30, 2014Nine Months Ended September 30, 2014
At Avg.ExchangeAt Avg.Exchange
Q3 2013 YTDRateAsQ4'13 - Q2'14RateAs
Rates (1)Effect (2)ReportedRates (3)Effect (2)Reported
Gross billings$5,458,250$38,742$5,496,992$5,503,487$(6,495)$5,496,992
Revenue$2,261,643$4,624$2,266,267$2,273,122$(6,855)$2,266,267
(Loss) income from operations$(35,561)$2,325$(33,236)$(33,353)$117$(33,236)
(1) Represents the financial statement balances that would have resulted had average exchange rates in the reporting period been the same as those in effect during the three and nine months ended September 30, 2013.
(2) Represents the increase or decrease in reported amounts resulting from changes in exchange rates from those in effect in the comparable period.
(3) Represents the financial statement balances that would have resulted had average exchange rates in the reporting periods been the same as those in effect during the three and nine months ended June 30, 2014.
The following is a quarterly reconciliation of foreign exchange rate neutral Gross billings growth from the comparable quarterly periods of the prior year to reported Gross billings growth from the comparable quarterly periods of the prior year.
Q3 2013Q4 2013Q1 2014Q2 2014Q3 2014
EMEA Gross billings growth, excluding FX9%3%1%(4)%10%
FX Effect3%3%3%4%-%
EMEA Gross billings growth12%6%4%-%10%
Rest of World Gross billings growth, excluding FX(4)%(2)%133%141%147%
FX Effect(9)%(9)%(10)%4%8%
Rest of World Gross billings growth(13)%(11)%123%145%155%
Consolidated Gross billings growth, excluding FX11%5%30%27%37%
FX Effect(1)%-%(1)%2%2%
Consolidated Gross billings growth10%5%29%29%39%
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.
Q3 2013Q4 2013Q1 2014Q2 2014Q3 2014
EMEA Revenue growth, excluding FX(23)%38%22%36%55%
FX Effect2%5%4%6%1%
EMEA Revenue growth(21)%43%26%42%56%
Rest of World Revenue growth, excluding FX7%(6)%35%44%26%
FX Effect(11)%(9)%(12)%(4)%-%
Rest of World Revenue growth(4)%(15)%23%40%26%
Consolidated Revenue growth, excluding FX6%20%26%22%27%
FX Effect(1)%-%-%2%-%
Consolidated Revenue growth5%20%26%24%27%
Groupon, Inc.
Supplemental Financial Information and Business Metrics (11)
(financial data in thousands; active customers in millions)
(unaudited)
Q3 2013Q4 2013Q1 2014Q2 2014Q3 2014
Segments
North America Segment:
Gross Billings (1):
Local (2) Gross Billings$405,913$439,131$456,952$461,366$446,573
Goods Gross Billings194,565286,039242,896247,618242,893
Travel (2) Gross Billings64,52163,55181,92189,86184,820
Total Gross Billings$664,999$788,721$781,769$798,845$774,286
Year-over-year growth20%10%15%12%16%
% Third Party and Other72%67%70%70%69%
% Direct28%33%30%30%31%
Gross Billings Trailing Twelve Months (TTM)$2,777,475$2,847,244$2,947,694$3,034,334$3,143,621
Revenue (3):
Local Revenue$162,346$161,601$177,247$164,500$161,912
Goods Revenue185,914268,281237,435241,626238,955
Travel Revenue12,57813,90216,38017,80517,627
Total Revenue$360,838$443,784$431,062$423,931$418,494
Year-over-year growth24%18%27%12%16%
% Third Party and Other49%41%45%43%43%
% Direct51%59%55%57%57%
Revenue TTM$1,452,925$1,521,358$1,612,866$1,659,615$1,717,271
Gross Profit (4):
Local Gross Profit$138,890$140,944$152,622$142,674$138,189
% of North America Total Local Gross Billings34.2%32.1%33.4%30.9%30.9%
Goods Gross Profit21,60921,03012,60422,96123,953
% of North America Total Goods Gross Billings11.1%7.4%5.2%9.3%9.9%
Travel Gross Profit11,07012,35214,44214,36514,000
% of North America Total Travel Gross Billings17.2%19.4%17.6%16.0%16.5%
Total Gross Profit$171,569$174,326$179,668$180,000$176,142
Year-over-year growth7%15%4%(7)%3%
% Third Party and Other90%91%94%88%87%
% Direct10%9%6%12%13%
% of North America Total Gross Billings25.8%22.1%23.0%22.5%22.7%
EMEA Segment:
Gross Billings:
Local Gross Billings$207,803$277,472$262,141$227,266$218,615
Goods Gross Billings169,849219,880183,013190,957191,006
Travel Gross Billings65,66668,36168,43465,03279,802
Total Gross Billings$443,318$565,713$513,588$483,255$489,423
Year-over-year growth12%6%4%-%10%
Year-over-year growth, excluding FX (5)9%3%1%(4)%10%
% Third Party and Other98%83%83%80%78%
% Direct2%17%17%20%22%
Gross Billings TTM$1,950,367$1,983,599$2,004,869$2,005,874$2,051,979
Revenue:
Local Revenue$92,141$116,061$109,120$96,485$90,002
Goods Revenue41,279119,274106,889115,413123,110
Travel Revenue14,53015,87014,88415,79216,960
Total Revenue$147,950$251,205$230,893$227,690$230,072
Year-over-year growth(21)%43%26%42%56%
Year-over-year growth, excluding FX(23)%38%22%36%55%
% Third Party and Other94%61%61%57%53%
% Direct6%39%39%43%47%
Revenue TTM$667,988$742,915$790,010$857,738$939,860
Gross Profit:
Local Gross Profit$81,808$105,210$100,066$90,373$83,956
% of EMEA Total Local Gross Billings39.4%37.9%38.2%39.8%38.4%
Goods Gross Profit28,94333,52627,30235,43232,252
% of EMEA Total Goods Gross Billings17.0%15.2%14.9%18.6%16.9%
Travel Gross Profit12,93014,45713,66914,89415,440
% of EMEA Total Travel Gross Billings19.7%21.1%20.0%22.9%19.3%
Total Gross Profit$123,681$153,193$141,037$140,699$131,648
Year-over-year growth(24)%7%(8)%1%6%
% Third Party and Other99%91%92%85%85%
% Direct1%9%8%15%15%
% of EMEA Total Gross Billings27.9%27.1%27.5%29.1%26.9%
Rest of World Segment:
Gross Billings:
Local Gross Billings$118,718$116,824$167,833$170,237$190,254
Goods Gross Billings78,97389,451283,091281,300289,210
Travel Gross Billings36,64032,39870,93085,409117,562
Total Gross Billings$234,331$238,673$521,854$536,946$597,026
Year-over-year growth(13)%(11)%123%145%155%
Year-over-year growth, excluding FX(4)%(2)%133%141%147%
% Third Party and Other97%97%99%99%98%
% Direct3%3%1%1%2%
Gross Billings TTM$956,833$926,487$1,214,209$1,531,804$1,894,499
Revenue:
Local Revenue$51,900$40,847$43,814$42,711$45,085
Goods Revenue25,06126,15841,85545,53748,889
Travel Revenue9,3106,45310,01311,70714,514
Total Revenue$86,271$73,458$95,682$99,955$108,488
Year-over-year growth(4)%(15)%23%40%26%
Year-over-year growth, excluding FX7%(6)%35%44%26%
% Third Party and Other91%90%94%93%90%
% Direct9%10%6%7%10%
Revenue TTM$322,597$309,382$327,014$355,366$377,583
Gross Profit:
Local Gross Profit$44,435$33,596$34,748$35,618$38,592
% of Rest of World Total Local Gross Billings37.4%28.8%20.7%20.9%20.3%
Goods Gross Profit12,01611,78122,13524,62322,877
% of Rest of World Total Goods Gross Billings15.2%13.2%7.8%8.8%7.9%
Travel Gross Profit7,9215,3128,1338,92210,885
% of Rest of World Total Travel Gross Billings21.6%16.4%11.5%10.4%9.3%
Total Gross Profit$64,372$50,689$65,016$69,163$72,354
Year-over-year growth1%(16)%23%37%12%
% Third Party and Other99%101%102%100%102%
% Direct1%(1)%(2)%-%(2)%
% of Rest of World Total Gross Billings27.5%21.2%12.5%12.9%12.1%
Consolidated Results of Operations:
Gross Billings:
Local Gross Billings$732,434$833,427$886,926$858,869$855,442
Goods Gross Billings443,387595,370709,000719,875723,109
Travel Gross Billings166,827164,310221,285240,302282,184
Total Gross Billings$1,342,648$1,593,107$1,817,211$1,819,046$1,860,735
Year-over-year growth10%5%29%29%39%
Year-over-year growth, excluding FX11%5%30%27%37%
% Third Party and Other85%77%82%81%81%
% Direct15%23%18%19%19%
Gross Billings TTM$5,684,675$5,757,330$6,166,772$6,572,012$7,090,099
Year-over-year growth12%7%14%18%25%
Revenue:
Local Revenue$306,387$318,509$330,181$303,696$296,999
Goods Revenue252,254413,713386,179402,576410,954
Travel Revenue36,41836,22541,27745,30449,101
Total Revenue$595,059$768,447$757,637$751,576$757,054
Year-over-year growth5%20%26%23%27%
Year-over-year growth, excluding FX6%20%26%22%27%
% Third Party and Other66%52%56%54%53%
% Direct34%48%44%46%47%
Revenue TTM $2,443,510$2,573,655$2,729,890$2,872,719$3,034,714
Year-over-year growth12%10%15%19%24%
Gross Profit:
Local Gross Profit$265,133$279,750$287,436$268,665$260,737
% of Total Consolidated Local Gross Billings36.2%33.6%32.4%31.3%30.5%
Goods Gross Profit62,56866,33762,04183,01679,082
% of Total Consolidated Goods Gross Billings14.1%11.1%8.8%11.5%10.9%
Travel Gross Profit31,92132,12136,24438,18140,325
% of Total Consolidated Travel Gross Billings19.1%19.5%16.4%15.9%14.3%
Total Gross Profit$359,622$378,208$385,721$389,862$380,144
Year-over-year growth(7)%6%2%1%6%
% Third Party and Other95%92%94%89%89%
% Direct5%8%6%11%11%
% of Total Consolidated Gross Billings26.8%23.7%21.2%21.4%20.4%
Adjusted EBITDA$62,302$71,988$40,301$59,056$66,987
% of Total Consolidated Gross Billings4.6%4.5%2.2%3.2%3.6%
% of Total Consolidated Revenue10.5%9.4%5.3%7.9%8.8%
Free cash flow is a non-GAAP financial measure. The following is a reconciliation of free cash flow to the most comparable U.S. GAAP financial measure, ''Net cash provided by (used in) operating activities.''
Net cash (used in) provided by operating activities$(11,905)$178,275$(20,717)$(22,747)$45,466
Purchases of property and equipment and capitalized software(15,064)(19,931)(16,355)(31,053)(20,053)
Free cash flow$(26,969)$158,344$(37,072)$(53,800)$25,413
Net cash provided by operating activities (TTM)$105,874$218,432$188,955$122,906$180,277
Purchases of property and equipment and capitalized software (TTM)(83,608)(63,505)(65,392)(82,403)(87,392)
Free cash flow (TTM)$22,266$154,927$123,563$40,503$92,885
Net cash used in investing activities$(26,444)$(23,330)$(138,608)$(34,498)$(20,461)
Net cash used in financing activities$(8,970)$(55,444)$(41,492)$(114,753)$(16,823)
Net cash used in investing activities (TTM)$(125,738)$(96,315)$(204,244)$(222,880)$(216,897)
Net cash used in financing activities (TTM)$(32,748)$(81,697)$(113,847)$(220,659)$(228,512)
Other Metrics:
Active Customers (6)
North America19.920.821.822.623.5
EMEA14.014.214.514.514.9
Rest of World (7)8.78.714.114.514.3
Total Active Customers (8)42.643.750.451.652.7
TTM Gross Billings / Average Active Customer (9)
North America$155$150$147$145$145
EMEA$137$139$141$141$142
Rest of World (7)$109$104$106$132$165
Consolidated (8)$139$137$135$141$149
Headcount
Sales (10)4,8014,8345,2315,0574,929
% North America28%29%27%26%26%
% EMEA37%37%37%39%39%
% Rest of World35%34%36%35%35%
Other6,4536,4497,0996,8886,827
Total Headcount11,25411,28312,33011,94511,756
(1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds.
(2) Local represents deals from local merchants, deals with national merchants, and deals through local events. Other revenue transactions, which include advertising, payment processing, point of sale and commission revenue, were previously aggregated with our Travel category. During the three months ended March 31, 2014, the Company updated its presentation of category information to include gross billings, revenue and gross profit from those other revenue sources within the Local category, and prior period category information has been retrospectively adjusted to conform to the current period presentation.
(3) Includes third party revenue, direct revenue and other revenue. Third party revenue is related to sales for which the Company acts as a marketing agent for the merchant. This revenue is recorded on a net basis. Direct revenue is primarily related to the sale of products for which the Company is the merchant of record. These revenues are accounted for on a gross basis, with the cost of inventory included in cost of revenue. Other revenue primarily consists of advertising revenue, payment processing revenue, point of sale revenue and commission revenue.
(4) Represents third party revenue, direct revenue and other revenue reduced by cost of revenue. Cost of revenue is comprised of direct and certain indirect costs incurred to generate revenue. Third party cost of revenue includes estimated refunds for which the merchant's share is not recoverable. Direct cost of revenue includes the cost of inventory, shipping and fulfillment costs and inventory markdowns. Other costs incurred to generate revenue are allocated to cost of third party and other revenue and direct revenue for each of our categories (Local, Goods, and Travel) in proportion to gross billings during the period.
(5) Represents the change in financial measures that would have resulted had average exchange rates in the reporting periods been the same as those in effect in the prior year period.
(6) Reflects the total number of unique user accounts who have purchased a voucher or product from us during the trailing twelve months.
(7) Active customers in our Rest of World segment as of September 30, 2013, December 31, 2013, March 31, 2014, and June 30, 2014 have been reduced by 0.9 million, 1.2 million, 1.4 million, and 1.6 million, respectively, from the amounts previously reported to correct that operational information. Those adjustments increased TTM gross billings per average active customer in our Rest of World segment for the 12-month periods ended September 30, 2013, December 31, 2013, March 31, 2014, and June 30, 2014 by$7, $9, $9, and $13, respectively, from the amounts previously reported.
(8) The adjustments of active customers in our Rest of World segment as of September 30, 2013, December 31, 2013, March 31, 2014, and June 30, 2014, described in footnote (7) above, reduced consolidated active customers by the same amounts. Those adjustments increased consolidated TTM gross billings per average active customer for the 12-month periods ended September 30, 2013, December 31, 2013, March 31, 2014, and June 30, 2014 by $2, $3, $3, and $4, respectively, from the amounts previously reported.
(9) Reflects the total gross billings generated in the trailing twelve months per average active customer over that period.
(10) Includes merchant sales representatives, as well as sales support.
(11) The definition, methodology and appropriateness of each of our supplemental metrics is reviewed periodically. As a result, metrics are subject to removal and/or change.

 

Groupon, Inc.

Image via Groupon

Chris Crum

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