Groupon Announces Third Quarter 2012 Results

Tools
  • Consolidated revenue of $568.6 million, up 32% year-over-year
  • Operating income of $25.4 million, versus operating loss of $0.2 million in third quarter 2011
  • Net loss attributable to common stockholders of $3.0 million, or $0.00 per share, which included stock-based compensation and acquisition-related expenses of $25.1 million and a diluted share count of 653.2 million, versus a net loss of $54.2 million and a loss per share of $0.18 in third quarter 2011

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

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

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

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

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

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

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

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

Three Months Ended

 

 

   

Y/Y %
Growth

 

Nine Months Ended

 

     

Y/Y %
Growth

 
    September 30,  

Y/Y %

   

excluding

    September 30,  

Y/Y %

   

excluding

 
    2011   2012  

Growth

   

FX (1)

    2011   2012  

Growth

   

FX (1)

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

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

Highlights

  • Continued strength in North American revenue growth. North American revenues grew 81% year-over-year, driven by growth in direct revenue, or the amount earned from the sale of products for which Groupon is the merchant of record.
  • Rapid growth in Groupon Goods. Groupon Goods reached an annual run rate of nearly $1.5 billion in global billings and nearly $500 million in revenues shortly after its one-year anniversary.
  • Improved marketing efficiencies. Customer acquisition costs improved 55% year-over-year, enabling the reduction of marketing spend by 58% compared with the third quarter 2011.
  • Subscriber milestone. In the third quarter 2012, the Company surpassed the 200 million subscriber mark.
  • Solid growth in active customers. As of September 30, 2012Groupon had 39.5 million active customers, an increase of 37% year-over-year.
  • Growing merchant selection and quality. For the third straight quarter, Groupon featured more than 100,000 unique merchants, with the number of active deals increasing by nearly thirteen times year-over-year to more than 27,000 as of the end of the third quarter.
  • Mobile transaction activity remains high. In October 2012, about one third of North American transactions were completed on mobile devices, an increase of nearly 30% compared with October 2011.
  • Further expansion of merchant tool suite. In the third quarter 2012, the Company expanded its suite of merchant tools, with the launch of Groupon Payments, as well as Breadcrumb, an iPad-based point-of-sale system for restaurants.

Fourth Quarter 2012 Outlook

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

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

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

Non-GAAP Financial Measure

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

Note on Forward Looking Statements

The statements in this release that refer to plans and expectations for the next quarter or the future are forward-looking statements that involve a number of risks and uncertainties, and actual results could differ materially from those discussed. The risks and uncertainties that could cause results to differ materially from those included in the forward-looking statements include, but are not limited to, Groupon's ability to continue to expand the business and continue revenue growth; risks related to Groupon's business strategy; Groupon's ability to manage the growth of the organization; responding to changes in the markets in which Groupon competes for business; retaining existing merchant partners and adding new merchant partners; competing against smaller competitors and competitors with more financial resources; developing new product and service offerings that are appealing to customers; maintaining a strong brand; effectively dealing with challenges arising from Groupon's international operations; integrating Groupon's technology platforms; managing refund risks; retaining the executive team; litigation; regulations, including the CARD Act and regulation of the Internet; tax liabilities; tax legislation; maintaining Groupon's information technology infrastructure; security breaches; protecting Groupon's intellectual property; handling acquisitions, joint ventures and strategic investments effectively; seasonality; payment-related risks; customer and merchant partner fraud; global economic uncertainty; compliance with rules and regulations associated with being a public company; and Groupon's ability to raise capital if necessary. Groupon urges you to refer to the factors included under the headings ''Risk Factors'' and ''Management's Discussion and Analysis of Financial Condition and Results of Operations'' in the Company's Annual Report on Form 10-K, and subsequent quarterly reports, copies of which may be obtained by visiting the company's Investor Relations web site at http://investor.groupon.com or the SEC's web site atwww.sec.gov. Groupon's actual results could differ materially from those predicted or implied, and reported results should not be considered an indication of future performance.

You should not rely upon forward-looking statements as predictions of future events. Although Groupon believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither the company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements reflect Groupon's expectations as of November 8, 2012Groupon undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this earnings release to conform these statements to actual results or to changes in its expectations.

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

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

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

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

Three Months Ended September 30,

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

Total Liabilities

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

Total Liabilities and Equity

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

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

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

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

Q3 2011
Rates (1)

 

Rate
Effect (2)

 

As
Reported

 

Q2 2012
Rates (3)

   

Rate
Effect (2)

 

As
Reported

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

YTD Q3 2011
Rates (1)

Rate
Effect (2)

 

As
Reported

 

Q4'11 - Q2'12
Rates (3)

 

Rate
Effect (2)

 

As
Reported

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

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

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

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

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

% of Consolidated Revenue

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

% of North America Total Revenue

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

 

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

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

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

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

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

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

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

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

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

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

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

 

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

 

Source: Groupon, Inc.

 

 

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