GRPN
$4.42
Groupon Cl A
$.23
5.49%
Earnings Details
4th Quarter December 2017
Wednesday, February 14, 2018 8:30:02 AM
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Summary

Groupon Cl A Misses

Groupon Cl A (GRPN) reported 4th Quarter December 2017 earnings of $0.08 per share on revenue of $873.2 million. The consensus earnings estimate was $0.09 per share on revenue of $860.6 million. The Earnings Whisper number was $0.12 per share. Revenue fell 6.6% compared to the same quarter a year ago.

Groupon Inc provides a local e-commerce marketplace that connects merchants to consumers by offering goods and services at discount. The Company features a daily deal on stuff to do, see, eat, and buy.

Results
Reported Earnings
$0.08
Earnings Whisper
$0.12
Consensus Estimate
$0.09
Reported Revenue
$873.2 Mil
Revenue Estimate
$860.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Groupon Announces Fourth Quarter and Fiscal Year 2017 Results

Achieves 10% Gross Profit Growth in the Fourth Quarter

--Fourth quarter gross profit of $386.9 million, $1.33 billion for the full year

Fourth quarter net income from continuing operations of $51.1 million, $28.6 million for the full year

--Fourth quarter Adjusted EBITDA of $105.3 million, $249.9 million for the full year

Fourth quarter GAAP earnings per diluted share from continuing operations of $0.08, non-GAAP earnings per diluted share of $0.07 for the fourth quarter

--Fourth quarter operating cash flow of $270.6 million, $137.5 million for the full year

--Fourth quarter free cash flow of $255.1 million, $78.3 million for the full year

--2018 Adjusted EBITDA guidance of $260 million to $270 million

Groupon, Inc. (GRPN) today announced financial results for the quarter and fiscal year ended December 31, 2017.

"In 2017, we made progress in creating a better customer experience that removed friction for our customers while also maximizing gross profit," said CEO Rich Williams. "We are excited to build on this success in 2018, combining our growing mobile penetration and platform power to ultimately become the daily habit in local commerce for customers and merchants."

Fourth Quarter 2017 Summary

North America

North America gross profit in the fourth quarter 2017 increased 6% to $265.0 million from $250.8 million in the fourth quarter 2016. In Local, gross profit increased 6% to $196.7 million driven by continued benefits from our marketing investment and larger customer base. Goods gross profit increased 8% to $54.7 million driven by solid performance during the holiday season. Gross Profit in Travel was $13.6 million versus $15.1 million in the fourth quarter 2016.

During the quarter we continued to make improvements to the customer experience by investing in our voucherless initiatives. We now have approximately 2.7 million cards linked in Groupon+, one of our leading voucherless initiatives, and continue to deepen supply in our more than 25 Groupon+ markets.

North America active customers reached 32.7 million as of December 31, 2017, reflecting the addition of 200 thousand net new active customers during the fourth quarter 2017. Active customers represent unique user accounts that have made a purchase during the trailing twelve months either through one of our online marketplaces or directly with a merchant for which we earned a commission.

International

International gross profit increased 21% (12% FX-neutral) in the fourth quarter 2017 to $121.9 million. Gross profit increased 19% (11% FX-neutral) in Local, 33% (22% FX-neutral) in Goods, and 2% (5% FX-neutral decline) in Travel. We continue to focus on execution of our product, supply, and marketing initiatives, and these initiatives contributed to our positive fourth quarter results in International.

International active customers increased by 200 thousand net new active customers during the fourth quarter 2017 to 16.8 million as of December 31, 2017.

Consolidated

Gross billings were $1.58 billion in the fourth quarter 2017, down 2% (4% FX-neutral) from $1.61 billion in the fourth quarter 2016. Gross billings reflect the total dollar value of customer purchases of goods and services.

Revenue was $873.2 million in the fourth quarter 2017, down 4% (6% FX-neutral) from $904.9 million in the fourth quarter 2016 reflecting our continued focus on maximizing gross profit, including the shift toward offerings in our higher margin, more differentiated Local category, from our Goods category. These strategic actions are expected to continue to create a headwind for revenue.

Gross profit was $386.9 million in the fourth quarter 2017, up 10% (8% FX-neutral) from $351.9 million in the fourth quarter 2016.

SG&A declined 6% year-over-year to $224.7 million in the fourth quarter 2017 as we continue to realize operating leverage from our previously completed restructuring actions.

Marketing expense was $112.5 million in the fourth quarter 2017, up 24% year-over-year. We generated strong results from our offline marketing including our campaigns focused on the holiday season and Groupon local merchants, which aired in the fourth quarter.

Net income from continuing operations was $51.1 million in the fourth quarter 2017. This compares to a net loss of $39.5 million in the fourth quarter 2016.

Net income attributable to common stockholders was $47.7 million, or $0.08 per diluted share. Non-GAAP net income attributable to common stockholders was $42.7 million, or $0.07 per diluted share.

Adjusted EBITDA, a non-GAAP financial measure, was $105.3 million in the fourth quarter 2017, up 31% from $80.2 million in the fourth quarter 2016. This result is the highest quarterly Adjusted EBITDA in our history and was driven by our focus on optimizing gross profit combined with operating leverage from previously implemented streamlining initiatives.

Global units sold declined 6% year-over-year to 54.6 million in the fourth quarter 2017, as we leveraged demand on our site and mobile app to maximize gross profit, which in some instances resulted in fewer units. Units in North America were down 7% with a significant portion of that decline due to the divestiture of certain OrderUp assets and investments in scaling Groupon+. Units are defined as purchases before refunds and cancellations made either through one of our online marketplaces or directly with a merchant for which we earned a commission.

Operating cash flow was $270.6 million in the fourth quarter 2017. Free cash flow, a non-GAAP financial measure, was $255.1 million in the fourth quarter 2017.

Cash and cash equivalents as of December 31, 2017 were $880.1 million, and we had no outstanding borrowings under our $250.0 million revolving credit facility.

Full Year 2017 Summary

Gross Billings were $5.65 billion in 2017, down 1% compared with $5.69 billion in 2016.

Revenue was $2.84 billion in 2017, down 6% compared with $3.01 billion in 2016.

Gross profit was $1.33 billion in 2017, up 4% compared with $1.28 billion in 2016.

Net income from continuing operations was $28.6 million in 2017, compared with a net loss of $166.2 million in 2016.

Net income attributable to common stockholders was $14.0 million, or $0.02 per diluted share. Non-GAAP net income attributable to common stockholders was $70.0 million, or $0.11 per diluted share.

Adjusted EBITDA was $249.9 million in 2017, up 39% compared with $179.9 million in 2016.

-- Global units sold declined 3% year-over-year to 188.9 million in 2017.

Operating cash flow for 2017 was $137.5 million. Free cash flow, a non-GAAP financial measure, was $78.3 million in 2017.

In 2017, we repurchased 16,906,334 shares of our common stock for an aggregate purchase price of approximately $60.0 million. Up to $135.2 million of common stock remains available for repurchase under Groupon’s share repurchase program as of December 31, 2017. The timing and amount of share repurchases, if any, will be determined based on market conditions, limitations under our Amended and Restated Credit Agreement, share price and other factors, and the program may be terminated at any time.

Definitions and reconciliations of all non-GAAP financial measures and additional information regarding operational measures are included below in the section titled "Non-GAAP Financial and Operational Measures" and in the accompanying tables.

Outlook

Groupon is providing its outlook for 2018, which reflects current foreign exchange rates, as well as expected marketing investments and cost benefits associated with our streamlining initiatives. For the full year 2018, Groupon expects Adjusted EBITDA to be between $260 million and $270 million.

Conference Call

A conference call will be webcast live today at 9:00 a.m. CST / 10:00 a.m. EST 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. Groupon uses its investor relations site (investor.groupon.com) and its blog (https://www.groupon.com/blog) as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

Non-GAAP Financial and Operational Measures

In addition to financial results reported in accordance with U.S. GAAP, we have provided the following non-GAAP financial measures: Adjusted EBITDA, non-GAAP net income (loss) attributable to common stockholders, non-GAAP earnings (loss) per share, free cash flow and foreign currency exchange rate neutral operating results. These non-GAAP financial measures, which are presented on a continuing operations basis, are intended to aid investors in better understanding our current financial performance and prospects for the future as seen through the eyes of management. We believe that these non-GAAP financial measures facilitate comparisons with our historical results and with the results of peer companies who present similar measures (although other companies may define non-GAAP measures differently than we define them, even when similar terms are used to identify such measures). However, these non-GAAP financial measures are not intended to be a substitute for those reported in accordance with U.S. GAAP. 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 external transaction costs related to business combinations, primarily consisting of legal and advisory fees. 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.

Interest and Other Non-Operating Items. Interest and other non-operating items include: gains and losses related to minority investments, foreign currency gains and losses, interest income and interest expense, including non-cash interest expense from our convertible senior notes. We exclude interest and other non-operating items from certain of our non-GAAP financial measures because we believe that excluding these items provides meaningful supplemental information about our core operating performance and facilitates comparisons to our historical operating results.

Special Charges and Credits. For the year ended December 31, 2017, special charges and credits included charges related to our restructuring plan and a gain from the sale of intangible assets. For the years ended December 31, 2016 and 2015, special charges and credits included gains from business dispositions and charges related to our restructuring plan. For the year ended December 31, 2015, special charges and credits also included the write-off of a prepaid asset related to a marketing program that was discontinued because the counterparty ceased operations and the expense related to a significant increase in the contingent liability for a securities litigation matter that has subsequently been settled. We exclude special charges and credits from Adjusted EBITDA because we believe that excluding those items provides meaningful supplemental information about our core operating performance and facilitates comparisons with our historical results.

Non-GAAP Provision (Benefit) for Income Taxes. Non-GAAP provision (benefit) for income taxes reflects our current and deferred tax provision computed based on non-GAAP income from continuing operations before provision (benefit) for income taxes.

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 current period operating results as if foreign currency exchange rates had remained the same as those in effect in the prior year period. These measures are intended to facilitate comparisons to our historical performance.

Adjusted EBITDA is a non-GAAP performance measure that we define as net income (loss) from continuing operations excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation, acquisition-related expense (benefit), net and other special charges and credits, including items that are unusual in nature or infrequently occurring. 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 operating plans and make strategic decisions for 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. However, Adjusted EBITDA is not intended to be a substitute for income (loss) from continuing operations.

Non-GAAP income from continuing operations before provision (benefit) for income taxes, non-GAAP net income attributable to common stockholders and non-GAAP earnings per diluted share are non-GAAP performance measures that adjust our net income attributable to common stockholders and earnings per share to exclude the impact of:

-- stock-based compensation,

-- amortization of acquired intangible assets,

-- acquisition-related expense (benefit), net,

-- special charges and credits, including restructuring charges,

-- non-cash interest expense on convertible senior notes,

non-operating foreign currency gains and losses related to intercompany balances and reclassifications of cumulative translation adjustments to earnings as a result of business dispositions or country exits,

non-operating gains and losses from minority investments that we have elected to record at fair value with changes in fair value reported in earnings,

non-operating gains and losses from the sale of minority investments, and

-- income (loss) from discontinued operations.

We believe that excluding the above items from our measures of non-GAAP income from continuing operations before provision (benefit) from income taxes, non-GAAP net income attributable to common stockholders and non-GAAP earnings per diluted share provides useful supplemental information for evaluating our operating performance and facilitates comparisons to our historical results by eliminating items that are non-cash in nature, relate to discrete events, or are otherwise not indicative of the core operating performance of our ongoing business.

Free cash flow is a non-GAAP liquidity measure that comprises net cash provided by operating activities from continuing operations less purchases of property and equipment and capitalized software from continuing operations. We use free cash flow to conduct and evaluate our business because, although it is similar to cash flow from continuing 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 our cash balance for the applicable period.

Active customers. We have historically defined active customers as unique user accounts that have made a purchase through one of our online marketplaces during the trailing twelve months ("TTM"). As a result of our ongoing development and testing of voucherless offerings that are linked to customer credit cards, we have updated our definition of active customers as follows: unique user accounts that have made a purchase during the TTM either through one of our online marketplaces or directly with a merchant for which we earned a commission. This change in definition did not have a significant impact on our active customer count for the TTM ended December 31, 2017. We consider this metric to be an important indicator of our business performance as it helps us to understand how the number of customers actively purchasing our offerings is trending. Some customers could establish and make purchases from more than one account, so it is possible that our active customer metric may count certain customers more than once in a given period. For entities that we have acquired in a business combination, this metric includes active customers of the acquired entity, including customers who made purchases prior to the acquisition.

Units. This metric has historically represented the number of purchases made through our online marketplaces, before refunds and cancellations. As a result of our ongoing development and testing of voucherless offerings that are linked to customer credit cards, we have updated our definition of units as follows: purchases during the reporting period, before refunds and cancellations, made either through one of our online marketplaces or directly with a merchant for which we earned a commission. This change in definition did not have a significant impact on our unit count for the year ended December 31, 2017. We consider unit growth to be an important indicator of the total volume of business conducted through our marketplaces.

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 within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations. The words "may," "will," "should," "could," "expect," "anticipate," "believe," "estimate," "intend," "continue" and other similar expressions are intended to identify forward-looking statements. We have based these forward looking statements largely on current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, but are not limited to, risk related to volatility in our operating results; execution of our business and marketing strategies; retaining existing customers and adding new customers; challenges arising from our international operations, including fluctuations in currency exchange rates, legal and regulatory developments and any potential adverse impact from the United Kingdom’s likely exit from the European Union; retaining and adding high quality merchants; our voucherless offerings; cybersecurity breaches; competing successfully in our industry; changes to merchant payment terms; providing a strong mobile experience for our customers; maintaining our information technology infrastructure; delivery and routing of our emails; claims related to product and service offerings; managing inventory and order fulfillment risks; litigation; managing refund risks; retaining and attracting members of our executive team; completing and realizing the anticipated benefits from acquisitions, dispositions, joint ventures and strategic investments; lack of control over minority investments; tax liabilities; tax legislation; compliance with domestic and foreign laws and regulations, including the CARD Act, GDPR and regulation of the Internet and e-commerce; classification of our independent contractors; protecting our intellectual property; maintaining a strong brand; customer and merchant fraud; payment-related risks; our ability to raise capital if necessary and our outstanding indebtedness; global economic uncertainty; our common stock, including volatility in our stock price; our senior convertible notes; our ability to realize the anticipated benefits from the hedge and warrant transactions. For additional information regarding these and other risks and uncertainties, 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 for the year ended December 31, 2017, and our other filings with the Securities and Exchange Commission, copies of which may be obtained by visiting the company’s Investor Relations web site at http://investor.groupon.com or the SEC’s web site at www.sec.gov. Groupon’s actual results could differ materially from those predicted or implied and reported results should not be considered an indication of future performance.

You should not rely upon forward-looking statements as predictions of future events. Although Groupon believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither the company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements reflect Groupon’s expectations as of February 14, 2018. 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 (GRPN) is building the daily habit in local commerce, offering a vast mobile and online marketplace where people discover and save on amazing things to do, eat, see and buy. By enabling real-time commerce across local businesses, travel destinations, consumer products and live events, shoppers can find the best a city has to offer.

Groupon is redefining how small businesses attract and retain customers by providing them with customizable and scalable marketing tools and services to profitably grow their businesses.

To download Groupon’s top-rated mobile apps, visit www.groupon.com/mobile. To search for great deals or subscribe to Groupon emails, visit www.groupon.com. To learn more about the company’s merchant solutions and how to work with Groupon, visit www.groupon.com/merchant.

Groupon, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
December 31,
December 31,
2017
2016
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
880,129
$
862,977
Accounts receivable, net
98,294
71,272
Prepaid expenses and other current assets
94,025
94,441
Current assets of discontinued operations
--
63,246
Total current assets
1,072,448
1,091,936
Property, equipment and software, net
151,145
169,452
Goodwill
286,989
274,551
Intangible assets, net
19,196
42,915
Investments (including $109,751 and $110,066 at December 31, 2017
135,189
141,882
and December 31, 2016, respectively, at fair value)
Other non-current assets
12,538
28,635
Non-current assets of discontinued operations
--
12,006
Total Assets
$
1,677,505
$
1,761,377
Liabilities and Equity
Current liabilities:
Accounts payable
$
31,968
$
28,551
Accrued merchant and supplier payables
770,335
770,992
Accrued expenses and other current liabilities
331,196
366,456
Current liabilities held of discontinued operations
--
47,052
Total current liabilities
1,133,499
1,213,051
Convertible senior notes, net
189,753
178,995
Other non-current liabilities
102,408
101,342
Non-current liabilities of discontinued operations
--
2,927
Total Liabilities
1,425,660
1,496,315
Commitments and contingencies
Stockholders’ Equity
Common stock, par value $0.0001 per share, 2,010,000,000 shares
75
74
authorized; 748,541,862 shares issued and 559,939,620 shares
outstanding at December 31, 2017; 736,531,771 shares issued and
564,835,863 shares outstanding at December 31, 2016
Additional paid-in capital
2,174,708
2,112,728
Treasury stock, at cost, 188,602,242 shares at December 31, 2017 and
(867,450 )
(807,424 )
171,695,908 shares at December 31, 2016
Accumulated deficit
(1,088,204 )
(1,099,010 )
Accumulated other comprehensive income (loss)
31,844
58,052
Total Groupon, Inc. Stockholders’ Equity
250,973
264,420
Noncontrolling interests
872
642
Total Equity
251,845
265,062
Total Liabilities and Equity
$
1,677,505
$
1,761,377
Groupon, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended December 31,
Year Ended December 31,
2017
2016
2017
2016
Revenue:
Third-party and other
$
346,568
$
318,427
$
1,266,452
$
1,206,441
Direct
526,598
586,438
1,577,425
1,807,174
Total revenue
873,166
904,865
2,843,877
3,013,615
Cost of revenue:
Third-party and other
37,601
36,025
160,810
150,031
Direct
448,647
516,934
1,349,206
1,582,931
Total cost of revenue
486,248
552,959
1,510,016
1,732,962
Gross profit
386,918
351,906
1,333,861
1,280,653
Operating expenses:
Marketing
112,462
90,952
400,918
352,175
Selling, general and administrative
224,720
238,046
901,781
994,027
Restructuring charges
10
12,060
18,828
40,438
Gain on sale of intangible assets
--
--
(17,149 )
--
Gains on business dispositions
--
--
--
(11,399 )
Acquisition-related expense (benefit), net
--
1,345
48
5,650
Total operating expenses
337,192
342,403
1,304,426
1,380,891
Income (loss) from operations
49,726
9,503
29,435
(100,238 )
Other income (expense), net
(2,112 )
(54,737 )
6,710
(71,289 )
Income (loss) from continuing operations before provision
47,614
(45,234 )
36,145
(171,527 )
(benefit) for income taxes
Provision (benefit) for income taxes
(3,457 )
(5,779 )
7,544
(5,318 )
Income (loss) from continuing operations
51,071
(39,455 )
28,601
(166,209 )
Income (loss) from discontinued operations, net of tax
(223 )
(10,749 )
(1,974 )
(17,114 )
Net income (loss)
50,848
(50,204 )
26,627
(183,323 )
Net income (loss) attributable to noncontrolling interests
(3,127 )
(2,384 )
(12,587 )
(11,264 )
Net income (loss) attributable to Groupon, Inc.
$
47,721
$
(52,588 )
$
14,040
$
(194,587 )
Basic net income (loss) per share (1):
Continuing operations
$
0.09
$
(0.07 )
$
0.03
$
(0.31 )
Discontinued operations
(0.00 )
(0.02 )
(0.00 )
(0.03 )
Basic net income (loss) per share
$
0.09
$
(0.09 )
$
0.03
$
(0.34 )
Diluted net income (loss) per share (1):
Continuing operations
$
0.08
$
(0.07 )
$
0.03
$
(0.31 )
Discontinued operations
(0.00 )
(0.02 )
(0.01 )
(0.03 )
Diluted net income (loss) per share
$
0.08
$
(0.09 )
$
0.02
$
(0.34 )
Weighted average number of shares outstanding (1)
Basic
558,170,245
570,546,159
559,367,075
576,354,258
Diluted
570,734,081
570,546,159
568,418,371
576,354,258
(1)
The structure of the Company’s common stock changed during the year
ended December 31, 2016. For additional information, refer to Note
11, Stockholders’ Equity, and Note 17, Income (Loss) per
Share, in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2017.
Groupon, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended December 31,
Year Ended December 31,
2017
2016
2017
2016
Operating activities
Net income (loss)
$
50,848
$
(50,204 )
$
26,627
$
(183,323 )
Less: Income (loss) from discontinued operations, net of tax
(223 )
(10,749 )
(1,974 )
(17,114 )
Income (loss) from continuing operations
51,071
(39,455 )
28,601
(166,209 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization of property, equipment and software
28,440
29,376
114,795
116,961
Amortization of acquired intangible assets
5,410
5,305
23,032
18,948
Stock-based compensation
21,726
22,763
82,044
115,123
Restructuring-related long-lived asset impairments
--
283
--
328
Gains on business dispositions
--
--
--
(11,399 )
Gain on sale of intangible assets
--
--
(17,149 )
--
Gain on sale of investment
--
--
(7,624 )
--
Impairment of investment
2,944
--
2,944
--
Deferred income taxes
(242 )
(3,980 )
603
(10,448 )
(Gain) loss, net from changes in fair value of contingent
--
(38 )
48
4,092
consideration
(Gain) loss from changes in fair value of investments
(5,482 )
40,840
(382 )
48,141
Amortization of debt discount on convertible senior notes
2,794
2,522
10,758
7,376
Change in assets and liabilities, net of acquisitions:
Restricted cash
4,315
(985 )
6,952
(1,317 )
Accounts receivable
(19,580 )
(14,124 )
(18,793 )
(16,584 )
Prepaid expenses and other current assets
7,188
26,748
4,074
35,043
Accounts payable
5,417
7,731
(199 )
5,121
Accrued merchant and supplier payables
168,013
195,673
(29,823 )
26,729
Accrued expenses and other current liabilities
(965 )
16,199
(40,361 )
(32,124 )
Other, net
(485 )
5,735
(22,023 )
(10,853 )
Net cash provided by (used in) operating activities from continuing
270,564
294,593
137,497
128,928
operations
Net cash provided by (used in) operating activities from
(223 )
(5,931 )
(2,418 )
(11,823 )
discontinued operations
Net cash provided by (used in) operating activities
270,341
288,662
135,079
117,105
Investing activities
Purchases of property and equipment and capitalized software
(15,442 )
(19,254 )
(59,158 )
(68,287 )
Cash derecognized upon dispositions of subsidiaries
--
--
--
(1,128 )
Acquisitions of businesses, net of acquired cash
--
15,479
--
14,539
Proceeds from sale of intangible assets
--
--
18,333
--
Proceeds from sales and maturities of investments
--
--
16,561
1,685
Acquisitions of intangible assets and other investing activities
(309 )
(274 )
(1,059 )
(2,395 )
Net cash provided by (used in) investing activities from continuing
(15,751 )
(4,049 )
(25,323 )
(55,586 )
operations
Net cash provided by (used in) investing activities from
--
(1,718 )
(9,548 )
(1,900 )
discontinued operations
Net cash provided by (used in) investing activities
(15,751 )
(5,767 )
(34,871 )
(57,486 )
Financing activities
Proceeds from issuance of convertible senior notes
--
--
--
250,000
Issuance costs for convertible senior notes and revolving credit
--
(50 )
--
(8,147 )
agreement
Purchase of convertible note hedges
--
--
--
(59,163 )
Proceeds from issuance of warrants
--
--
--
35,495
Payments for purchases of treasury stock
--
(49,738 )
(61,233 )
(165,357 )
Taxes paid related to net share settlements of stock-based
(4,341 )
(6,450 )
(27,681 )
(29,777 )
compensation awards
Proceeds from stock option exercises and employee stock purchase plan
27
2
5,513
4,978
Distributions to noncontrolling interest holders
(3,383 )
(2,660 )
(12,357 )
(11,811 )
Payments of contingent consideration related to acquisitions
--
--
(7,790 )
(285 )
Payments of capital lease obligations
(8,727 )
(8,637 )
(34,025 )
(30,598 )
Other financing activities
--
--
(473 )
--
Net cash provided by (used in) financing activities
(16,424 )
(67,533 )
(138,046 )
(14,665 )
Effect of exchange rate changes on cash and cash equivalents,
3,306
(13,263 )
26,124
(6,470 )
including cash classified within current assets of discontinued
operations
Net increase (decrease) in cash and cash equivalents, including
241,472
202,099
(11,714 )
38,484
cash classified within current assets of discontinued operations
Less: Net increase (decrease) in cash classified within current
--
1,202
(28,866 )
(186 )
assets of discontinued operations
Net increase (decrease) in cash and cash equivalents
241,472
200,897
17,152
38,670
Cash and cash equivalents, beginning of period
638,657
662,080
862,977
824,307
Cash and cash equivalents, end of period
$
880,129
$
862,977
$
880,129
$
862,977
Groupon, Inc.
Supplemental Financial Information and Business Metrics (1)
(financial data in thousands; active customers in millions)
(unaudited)
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
North America Segment:
Q4 2017
Gross Billings (2):
Y/Y Growth
Local
$
590,684
$
587,766
$
615,833
$
606,184
$
605,460
2.5
%
Travel
90,059
114,163
112,670
93,186
84,504
(6.2 )
Goods
431,388
262,588
245,924
229,479
369,973
(14.2 )
Total Gross Billings
$ 1,112,131
$
964,517
$
974,427
$
928,849
$ 1,059,937
(4.7 )
%
Revenue:
Local
$
209,799
$
200,545
$
207,534
$
194,090
$
223,410
6.5
%
Travel
19,023
20,462
22,320
18,300
17,413
(8.5 )
Goods
421,931
252,350
222,058
201,824
333,862
(20.9 )
Total Revenue
$
650,753
$
473,357
$
451,912
$
414,214
$
574,685
(11.7 )
%
Gross Profit:
Local
$
185,280
$
169,342
$
179,609
$
162,914
$
196,708
6.2
%
Travel
15,052
15,165
17,755
14,060
13,614
(9.6 )
Goods
50,437
36,430
36,496
30,934
54,651
8.4
Total Gross Profit
$
250,769
$
220,937
$
233,860
$
207,908
$
264,973
5.7
%
Operating income (loss)
$
12,265
$
(14,783 )
$
(12,033 )
$
(6,995 )
$
33,766
175.3
%
International Segment:
Q4 2017
Y/Y Growth
excluding FX
Gross Billings:
Y/Y Growth
FX Effect (3)
(3)
Local
$
221,337
$
191,219
$
189,408
$
202,991
$
229,167
3.5
%
(6.1 )
(2.6 )
%
Travel
60,099
53,161
45,981
49,837
59,666
(0.7 )
(6.2 )
(6.9 )
Goods
211,963
149,079
154,417
159,820
233,422
10.1
(8.8 )
1.3
Total Gross Billings
$
493,399
$
393,459
$
389,806
$
412,648
$
522,255
5.8
%
(7.2 )
(1.4 )
%
Revenue:
Local
$
68,900
$
63,575
$
66,108
$
71,574
$
80,209
16.4
%
(7.6 )
8.8
%
Travel
12,141
11,002
10,796
9,801
12,187
0.4
(6.7 )
(6.3 )
Goods
173,071
125,692
133,803
138,877
206,085
19.1
(10.0 )
9.1
Total Revenue
$
254,112
$
200,269
$
210,707
$
220,252
$
298,481
17.5
%
(9.2 )
8.3
%
Gross Profit:
Local
$
63,987
$
59,194
$
62,303
$
67,860
$
75,991
18.8
%
(8.0 )
10.8
%
Travel
11,087
10,036
9,996
8,922
11,334
2.2
(6.9 )
(4.7 )
Goods
26,063
19,284
21,908
24,735
34,620
32.8
(10.6 )
22.2
Total Gross Profit
$
101,137
$
88,514
$
94,207
$
101,517
$
121,945
20.6
%
(8.5 )
12.1
%
Operating income (loss)
$
(2,762 )
$
3,103
$
4,635
$
5,782
$
15,960
677.8
%
Consolidated Results of Operations:
Gross Billings:
Local
$
812,021
$
778,985
$
805,241
$
809,175
$
834,627
2.8
%
(1.7 )
1.1
%
Travel
150,158
167,324
158,651
143,023
144,170
(4.0 )
(2.5 )
(6.5 )
Goods
643,351
411,667
400,341
389,299
603,395
(6.2 )
(2.9 )
(9.1 )
Total Gross Billings
$ 1,605,530
$ 1,357,976
$ 1,364,233
$ 1,341,497
$ 1,582,192
(1.5 )
%
(2.2 )
(3.7 )
%
Revenue:
Local
$
278,699
$
264,120
$
273,642
$
265,664
$
303,619
8.9
%
(1.8 )
7.1
%
Travel
31,164
31,464
33,116
28,101
29,600
(5.0 )
(2.6 )
(7.6 )
Goods
595,002
378,042
355,861
340,701
539,947
(9.3 )
(2.9 )
(12.2 )
Total Revenue
$
904,865
$
673,626
$
662,619
$
634,466
$
873,166
(3.5 )
%
(2.6 )
(6.1 )
%
Gross Profit:
Local
$
249,267
$
228,536
$
241,912
$
230,774
$
272,699
9.4
%
(2.0 )
7.4
%
Travel
26,139
25,201
27,751
22,982
24,948
(4.6 )
(2.9 )
(7.5 )
Goods
76,500
55,714
58,404
55,669
89,271
16.7
(3.6 )
13.1
$
351,906
$
309,451
$
328,067
$
309,425
$
386,918
9.9
%
(2.4 )
7.5
%
Total Gross Profit
Operating income (loss)
$
9,503
$
(11,680 )
$
(7,398 )
$
(1,213 )
$
49,726
423.3
%
Net cash provided by (used in) operating activities from continuing
$
294,593
$
(136,233 )
$
(20,695 )
$
23,861
$
270,564
(8.2 )
%
operations
Free Cash Flow
$
275,339
$
(150,309 )
$
(36,080 )
$
9,606
$
255,122
(7.3 )
%
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Other Metrics:
Active Customers (4)
North America
31.1
31.6
31.9
32.5
32.7
International
16.8
16.7
16.4
16.6
16.8
Total Active Customers
47.9
48.3
48.3
49.1
49.5
TTM Gross Billings / Average Active Customer
North America
$
138
$
136
$
133
$
129
$
123
International
102
101
101
102
102
Consolidated
124
123
121
120
116
TTM Gross Profit / Average Active Customer
North America
$
31
$
30
$
30
$
30
$
29
International
23
22
23
23
24
Consolidated
28
27
28
27
27
Consolidated Units
57.9
45.7
44.5
44.1
54.6
Year-over-year unit growth:
North America
3.2
%
(0.4 )
%
(1.9 )
%
(0.1 )
%
(6.6 )
%
International
(0.3 )
(8.7 )
(7.8 )
(1.5 )
(3.9 )
Consolidated
2.0
(3.1 )
(3.8 )
(0.5 )
(5.7 )
Headcount (5)
2,626
2,624
2,485
2,457
2,407
Sales (6)
Other
4,641
4,496
4,176
4,159
4,265
Total Headcount
7,267
7,120
6,661
6,616
6,672
(1)
We disposed of our operations in 11 countries, primarily based in
Asia and Latin America, between November 2016 and March 2017. The
financial results of our operations in those 11 countries are
presented as discontinued operations in the accompanying
consolidated financial statements and tables. All prior period
financial information and operational metrics have been
retrospectively adjusted to reflect this presentation.
(2)
Represents the total dollar value of customer purchases of goods and
services.
(3)
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 periods.
(4)
Reflects the total number of unique user accounts that have made a
purchase during the TTM either through one of our online
marketplaces or directly with a merchant for which we earned a
commission.
(5)
Including employees of discontinued operations, our headcount
decreased by 1,651 employees, or 20%, year-over-year in the fourth
quarter of 2017, from 8,323 total employees in the prior year period.
(6)
Includes merchant sales representatives, as well as sales support
personnel from our continuing operations.
Groupon, Inc.
Non-GAAP Reconciliation Schedules
(in thousands, except share and per share amounts)
(unaudited)
Adjusted EBITDA, non-GAAP earnings attributable to common
stockholders and non-GAAP earnings per share are non-GAAP
performance measures. The Company reconciles Adjusted EBITDA to the
most comparable U.S. GAAP performance measure, Net income (loss)
from continuing operations for the periods presented and the Company
reconciles non-GAAP earnings per share to the most comparable U.S.
GAAP performance measure, Diluted net income (loss) per share, for
the periods presented.
The following is a quarterly reconciliation of Adjusted EBITDA to
the most comparable U.S. GAAP performance measure, "Income (loss)
from continuing operations."
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Income (loss) from continuing operations
$
(39,455 )
$
(20,869 )
$
(5,403 )
$
3,802
$
51,071
Adjustments:
Stock-based compensation (1)
22,563
19,650
21,392
18,235
21,673
Depreciation and amortization
34,681
34,067
34,679
35,231
33,850
Acquisition-related expense (benefit), net
1,345
12
36
--
--
Restructuring charges
12,060
2,731
4,584
11,503
10
Gain on sale of intangible assets
--
--
--
(17,149 )
--
Non-operating expense (income), net
54,737
4,602
(5,878 )
(7,546 )
2,112
Provision (benefit) for income taxes
(5,779 )
4,587
3,883
2,531
(3,457 )
Total adjustments
119,607
65,649
58,696
42,805
54,188
Adjusted EBITDA
$
80,152
$
44,780
$
53,293
$
46,607
$
105,259
(1)
Represents stock-based compensation recorded within Selling,
general and administrative, Cost of Revenue and Marketing.
Non-operating expense (income), net, includes $0.2 million, $0.1
million, $0.0 million, $0.1 million and $0.1 million of additional
stock-based compensation for the three months ended December 31,
2016, March 31, 2017, June 30, 2017, September 30, 2017, and
December 31, 2017, respectively. Restructuring charges include
$0.8 million of additional stock-based compensation for the three
months ended September 30, 2017
The following is a reconciliation of the Company’s annual outlook
for Adjusted EBITDA to the Company’s outlook for the most comparable
U.S. GAAP performance measure, Income (loss) from continuing
operations.
Year Ending December 31, 2018
Expected income (loss) from continuing operations range
$25,000 to $35,000
Expected adjustments:
Stock-based compensation
95,000
Depreciation and amortization
112,000
Non-operating expense (income), net
20,000
Provision (benefit) for income taxes
8,000
Total expected adjustments
$235,000
Expected Adjusted EBITDA range
$260,000 to $270,000
The outlook provided above does not reflect the potential impact of
any business or asset acquisitions or dispositions, changes in the
fair values of investments or contingent consideration, foreign
currency gains or losses or unusual or infrequently occurring items
that may occur during 2018.
The following is a reconciliation of net income (loss) attributable
to common stockholders to non-GAAP net income (loss) attributable to
common stockholders and a reconciliation of diluted net income
(loss) per share to non-GAAP net income (loss) per share for the
three months and year ended December 31, 2017:
Three Months
Ended
Year Ended
December 31,
December 31,
2017
2017
Net income attributable to common stockholders
$
47,721
$
14,040
Less: Net income attributable to noncontrolling interest
(3,127 )
(12,587 )
Net income
50,848
26,627
Less: Loss from discontinued operations, net of tax
(223 )
(1,974 )
Income from continuing operations
51,071
28,601
Less: Provision (benefit) for income taxes
(3,457 )
7,544
Income from continuing operations before provision (benefit) for
47,614
36,145
income taxes
Stock-based compensation (1)
21,726
81,168
Amortization of acquired intangible assets
5,410
23,032
Acquisition-related expense (benefit), net
--
48
Restructuring charges
10
18,828
Gain on sale of intangible assets
--
(17,149 )
Gain on sale of investment
--
(7,624 )
Losses (gains), net from changes in fair value of investments
(5,482 )
(382 )
Intercompany foreign currency losses (gains) and reclassifications
(112 )
(16,177 )
of translation adjustments to earnings
Non-cash interest expense on convertible senior notes
2,794
10,758
Non-GAAP income from continuing operations before provision
71,960
128,647
(benefit) for income taxes
Non-GAAP provision (benefit) for income taxes
27,103
50,452
Non-GAAP net income
44,857
78,195
Net income attributable to noncontrolling interest
(3,127 )
(12,587 )
Non-GAAP net income attributable to common stockholders
41,730
65,608
Plus: Cash interest expense from assumed conversion of convertible
1,004
4,337
senior notes (2)
Non-GAAP net income attributable to common stockholders plus
$
42,734
$
69,945
assumed conversions
Weighted-average shares of common stock - diluted
570,734,081
568,418,371
Incremental dilutive securities
46,296,300
46,296,300
Weighted-average shares of common stock - non-GAAP
617,030,381
614,714,671
Diluted net income per share
$
0.08
$
0.02
Impact of non-GAAP adjustments and related tax effects
(0.01 )
0.09
Non-GAAP net income per share
$
0.07
$
0.11
(1)
Represents stock-based compensation expense recorded within Selling,
general and administrative, Cost of Revenue, Marketing, and Other
(income) expense, net. Restructuring charges include $0.8 million of
additional stock-based compensation for the twelve months ended
December 31, 2017.
(2)
Adjustments to interest expense for assumed conversion of
convertible senior notes excludes non-cash interest expense that has
been added back above in calculating non-GAAP net income (loss)
attributable to common stockholders.
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 from continuing operations.
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Net cash provided by (used in) operating activities from continuing
$ 294,593
$ (136,233 )
$ (20,695 )
$
23,861
$ 270,564
operations
Purchases of property and equipment and capitalized software from
(19,254 )
(14,076 )
(15,385 )
(14,255 )
(15,442 )
continuing operations
Free Cash Flow
$ 275,339
$ (150,309 )
$ (36,080 )
$
9,606
$ 255,122
Net cash provided by (used in) investing activities from continuing
$
(4,049 )
$
(14,020 )
$ (13,782 )
$
18,230
$ (15,751 )
operations
Net cash provided by (used in) financing activities
$ (67,533 )
$
(45,726 )
$ (47,924 )
$ (27,972 )
$ (16,424 )

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SOURCE: Groupon, Inc.

Groupon, Inc.
Investor Relations
Erin Stone
312-662-6352
ir@groupon.com
or
Public Relations
Bill Roberts
312-459-5191
press@groupon.com