Groupon Announces Third Quarter 2012 Results

  Groupon Announces Third Quarter 2012 Results

  *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

Business Wire

CHICAGO -- November 08, 2012

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 ended September 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 ended September 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 %         Nine Months Ended                           Y/Y %
                                                               Growth                                                     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    $ 430,161        $ 568,552        32.2   %   38.2      %   $ 1,118,266      $ 1,696,170     51.7   %   57.9      %
revenue
                                                                                                                                    
Operating       $ (239        )   $ 25,438          N/A        N/A           $ (218,414    )   $ 111,562       N/A        N/A
(loss) income
                                                                                                                                    
Net (loss)
income
attributable    $ (54,229     )   $ (2,979      )   94.5   %   87.1      %   $ (308,115    )   $ 13,712        N/A        N/A
to common
stockholders
                                                                                                                                    
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     307,605,060       653,223,610                                305,288,502       648,021,943
shares
outstanding
Weighted
average
diluted           307,605,060       653,223,610                                305,288,502       663,557,250
shares
outstanding

(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, 2012, Groupon 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 at
http://investor.groupon.com. This call will contain forward-looking statements
and other material information regarding the Company’s financial and operating
results.

Non-GAAP Financial 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 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 November 8, 2012. Groupon undertakes no
obligation to update publicly any forward-looking statements for any reason
after the date of this earnings release to conform these statements to actual
results or to changes in its expectations.

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

Groupon, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
                                                               
                      Three Months Ended              Nine Months Ended
                      September 30,                   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        7,058         15,310            22,754         39,836
amortization
Stock-based             3,340         22,619            60,922         77,706
compensation
Deferred income         2,839         (3,389    )       602            9,608
taxes
Excess tax benefits
on stock-based          (7,791  )     (2,870    )       (11,323  )     (24,620   )
compensation
Loss on equity          11,211        138               19,974         8,694
method investees
Acquisition-related
(benefit) expense,      (4,793  )     2,431             (4,793   )     744
net
Gain on redemption      (4,916  )     -                 (4,916   )     -
of common stock
Gain on E-Commerce      -             -                 -              (56,032   )
transaction
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       (23,802 )     (3,192    )       (41,023  )     (24,937   )
assets
Accounts payable        (7,550  )     (5,094    )       (21,924  )     13,174
Accrued merchant        98,002        21,868            314,872        53,889
payables
Accrued expenses
and other current       34,207        4,933             108,963        68,010
liabilities
Other, net             (5,244  )    (425      )      (6,824   )    10,073    
Net cash provided
by operating            64,411        42,088            121,370        201,117
activities
                                                                     
Net cash used in
investing               (43,048 )     (35,629   )       (112,526 )     (142,226  )
activities
                                                                     
Net cash provided
by financing            8,608         2,707             120,292        18,590
activities
                                                                     
Effect of exchange
rate changes on        (11,129 )    6,047           (4,034   )    595       
cash and cash
equivalents
Net increase in
cash and cash           18,842        15,213            125,102        78,076
equivalents
Cash and cash
equivalents,           225,093     1,185,798       118,833      1,122,935 
beginning of period
Cash and cash
equivalents, end of   $ 243,935    $ 1,201,011      $ 243,935     $ 1,201,011 
the period

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       $ 422,989         $ 423,564         $ 1,111,094       $ 1,466,602
other revenue
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         62,339            54,173            156,907           233,834
other revenue
Direct revenue         5,707           127,613         5,707           202,634     
Total cost of          68,046          181,786         162,614         436,468     
revenue
Operating expenses:
Marketing               170,349           70,919            613,173           275,941
Selling, general        196,798           287,978           565,686           871,455
and administrative
Acquisition-related
(benefit) expense,     (4,793      )    2,431           (4,793      )    744         
net
Total operating        362,354         361,328         1,174,066       1,148,140   
expenses
(Loss) income from      (239        )     25,438            (218,414    )     111,562
operations
Interest and other      8,269             617               9,808             54,445
income, net
Loss on equity         (11,211     )    (138        )    (19,974     )    (8,694      )
method investees
(Loss) income
before provision        (3,181      )     25,917            (228,580    )     157,313
for income taxes
Provision for          11,235          26,857          9,503           128,297     
income taxes
Net (loss) income       (14,416     )     (940        )     (238,083    )     29,016
Less: Net loss
(income)
attributable to        3,843           (706        )    23,602          (2,806      )
noncontrolling
interests
Net (loss) income
attributable to         (10,573     )     (1,646      )     (214,481    )     26,210
Groupon, Inc.
Redemption of
preferred stock in      -                 -                 (34,327     )     -
excess of carrying
value
Adjustment of
redeemable
noncontrolling         (43,656     )    (1,333      )    (59,307     )    (12,498     )
interests to
redemption value
Net (loss) income
attributable to       $ (54,229     )   $ (2,979      )   $ (308,115    )   $ 13,712      
common stockholders
                                                                            
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                 91,645            121,338     
current assets
Total current assets                        1,323,327           1,432,407
Property and equipment, net of
accumulated depreciation of                 51,800              103,876
$14,627 and $37,564,
respectively
Goodwill                                    166,903             196,978
Intangible assets, net                      45,667              51,447
Investments in equity interests             50,604              131,039
Deferred income taxes,                      46,104              48,753
non-current
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,                      7,428               28,585
non-current
Other non-current liabilities              70,766            74,643      
Total Liabilities                          1,073,356         1,228,429   
Commitments and contingencies
Redeemable noncontrolling                   1,653               7,190
interests
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          64                  65
31, 2011; 2,000,000,000 shares
authorized, 652,501,880 shares issued
and outstanding at September 30, 2012
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            12,928            11,956      
income
Total Groupon, Inc.                         702,541             799,012
Stockholders' Equity
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      Nine Months Ended September
                      30,                               30,
                      2011            2012              2011            2012
North America
Gross Billings ^      $ 400,978       $ 552,369         $ 1,086,119     $ 1,654,201
(1)
Revenue               $ 161,525       $ 291,603         $ 455,342       $ 790,349
Segment operating      142,689       252,510         468,785       667,655   
expenses^(2)
Segment operating     $ 18,836        $ 39,093          $ (13,443   )   $ 122,694
income (loss)
Segment income
(loss) as a percent     11.7        %   13.4        %     (3.0      ) %   15.5        %
of segment revenue
                                                                                      
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      289,164       265,554         811,766       838,503   
expenses^(2)
Segment operating     $ (20,528   )   $ 11,395          $ (148,842  )   $ 67,318
(loss) income
Segment (loss)
income as a percent     (7.6      ) %   4.1         %     (22.5     ) %   7.4         %
of segment revenue
                                                                                      
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      431,853       518,064         1,280,551     1,506,158 
expenses^(2)
Segment operating     $ (1,692    )   $ 50,488          $ (162,285  )   $ 190,012
(loss) income
Segment (loss)
income as a percent     (0.4      ) %   8.9         %     (14.5     ) %   11.2        %
of segment revenue
                                                                                      
Stock-based             3,340           22,619            60,922          77,706
compensation
Acquisition-related
(benefit) expense,     (4,793    )    2,431           (4,793    )    744       
net
Operating (loss)        (239      )     25,438            (218,414  )     111,562
income
                                                                                      
Interest and other      (8,269    )     (617      )       (9,808    )     (54,445   )
income, net
Loss on equity         11,211        138             19,974        8,694     
method investees
(Loss) income
before provision        (3,181    )     25,917            (228,580  )     157,313
for income taxes
Provision (benefit)    11,235        26,857          9,503         128,297   
for income taxes
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      Rate          As            Q2 2012        Rate          As
             Rates ^(1)   Effect ^(2)   Reported      Rates ^(3)     Effect ^(2)   Reported
Revenue      $ 594,551    $ (25,999 )   $ 568,552     $ 571,154      $ (2,602  )   $ 568,552
Income
from         $ 22,589     $ 2,849       $ 25,438      $ 25,030       $ 408         $ 25,438
operations
                                                                                   
The effect on the Company’s consolidated statements of operations from changes in exchange
rates versus the U.S. Dollar for the nine months ended September 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  Rate          As            Q4'11 -        Rate          As
             Rates ^(1)   Effect ^(2)   Reported      Q2'12          Effect ^(2)   Reported
                                                      Rates ^(3)
Revenue      $ 1,765,476  $ (69,306 )   $ 1,696,170   $ 1,719,681    $ (23,511 )   $ 1,696,170
Income
from         $ 110,767    $ 795         $ 111,562     $ 110,526      $ 1,036       $ 111,562
operations

(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    Nine Months Ended September
                   30,                             30,
                   2011              2012         2011           2012
Net cash
provided by        $  64,411         $ 42,088      $ 121,370      $ 201,117
operating
activities
Purchases of
property and
equipment and        (8,623   )      (16,010 )    (29,825  )    (55,802  )
software
capitalization
Free cash flow     $  55,788        $ 26,078     $ 91,545      $ 145,315  
                                                                  
Net cash used
in investing       $  (43,048  )     $ (35,629 )   $ (112,526 )   $ (142,226 )
activities
Net cash
provided by        $  8,608          $ 2,707       $ 120,292      $ 18,590
financing
activities

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       610         %   359         %   204         %   118         %   76          %   48        %   38          %
   growth
   % of
   Consolidated         47          %   40          %   35          %   39          %   41          %   43        %   45          %
   Gross Billings
Gross Billings ^(1)
Trailing Twelve       $ 745,772       $ 1,035,183     $ 1,304,128     $ 1,561,927     $ 1,800,332     $ 1,978,617   $ 2,130,008
Months (TTM)
                                                                                                                                  
Revenue:
   Third Party and
   Other Revenue ^    $ 136,612       $ 157,205       $ 161,525       $ 179,638       $ 230,984       $ 207,119     $ 158,545
   (2)
   Direct Revenue ^    -             -             -             -             7,581         53,062       133,058   
   (2)
   Total Revenue      $ 136,612       $ 157,205       $ 161,525       $ 179,638       $ 238,565       $ 260,181     $ 291,603
   Year-over-year       574         %   341         %   188         %   103         %   75          %   66        %   81          %
   growth
   % of
   Consolidated         46          %   40          %   38          %   36          %   43          %   46        %   51          %
   Revenue
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      $ 25,050        $ 32,169        $ 31,316        $ 51,419        $ 62,580        $ 40,155      $ 15,475
   Revenue ^(3)
   Direct Cost of      -             -             -             -             6,671         46,159       115,560   
   Revenue ^ (3)
   Total Cost of      $ 25,050        $ 32,169        $ 31,316        $ 51,419        $ 69,251        $ 86,314      $ 131,035
   Revenue
   % of North
   America Total        18          %   20          %   19          %   29          %   29          %   33        %   45          %
   Revenue
                                                                                                                                  
Operating (Loss)
Income Excl
Stock-Based           $ (21,778   )   $ (10,501   )   $ 18,836        $ 18,239        $ 40,172        $ 43,429      $ 39,093
Compensation (SBC),
Acquisition-Related
Expenses
   Year-over-year       N/A             (2,678    ) %   496         %   N/A             N/A             N/A           108         %
   growth
   % of
   Consolidated
   Operating (Loss)     22          %   17          %   1,113       %   102         %   59          %   60        %   77          %
   Income Excl SBC,
   Acq-Related
Operating Margin
Excl SBC,
Acq-Related (% of       (15.9     ) %   (6.7      ) %   11.7        %   10.2        %   16.8        %   16.7      %   13.4        %
North America Total
revenue)
   Year-over-year       (5,879    )     (562      )     603             3,494           3,278           2,337         170
   growth (bps)
Operating (Loss)
Income TTM Excl       $ (40,901   )   $ (51,024   )   $ (35,348   )   $ 4,796         $ 66,746        $ 120,676     $ 140,933
SBC, Acq-Related
Operating Margin
TTM Excl SBC,
Acq-Related (% of       (12.9     ) %   (11.6     ) %   (6.5      ) %   0.8         %   9.1         %   14.4      %   14.5        %
North America Total
TTM revenue)
   Year-over-year       (3,604    )     (2,266    )     (1,467    )     596             2,197           2,601         2,100
   growth (bps)
                                                                                                                                  
International
Segment:
Gross Billings ^(1)   $ 353,022       $ 559,259       $ 756,232       $ 755,061       $ 801,243       $ 738,401     $ 665,887
   Year-over-year       N/A             5,057       %   1,115       %   283         %   127         %   32        %   (12       ) %
   growth
   Year-over-year
   growth,              N/A             4,587       %   1,021       %   287         %   138         %   45        %   (4        ) %
   excluding FX ^
   (4)
   % of
   Consolidated         53          %   60          %   65          %   61          %   59          %   57        %   55          %
   Gross Billings
Gross Billings ^(1)   $ 623,367       $ 1,171,781     $ 1,865,774     $ 2,423,574     $ 2,871,795     $ 3,050,937   $ 2,960,592
TTM
                                                                                                                                  
Revenue:
   Third Party and
   Other Revenue ^    $ 158,911       $ 235,377       $ 261,464       $ 298,872       $ 309,069       $ 295,866     $ 265,019
   (2)
   Direct Revenue ^    -             -             7,172         13,654        11,649        12,288       11,930    
   (2)
   Total Revenue      $ 158,911       $ 235,377       $ 268,636       $ 312,526       $ 320,718       $ 308,154     $ 276,949
   Year-over-year       N/A             7,709       %   947         %   273         %   102         %   31        %   3           %
   growth
   Year-over-year
   growth,              N/A             7,013       %   868         %   276         %   112         %   44        %   13          %
   excluding FX
   ^(4)
   % of
   Consolidated         54          %   60          %   62          %   64          %   57          %   54        %   49          %
   Revenue
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      $ 14,715        $ 22,634        $ 31,023        $ 35,463        $ 40,049        $ 36,877      $ 38,698
   Revenue ^(3)
   Direct Cost of      -             -             5,707         9,383         10,198        11,993       12,053    
   Revenue ^(3)
   Total Cost of      $ 14,715        $ 22,634        $ 36,730        $ 44,846        $ 50,247        $ 48,870      $ 50,751
   Revenue
   % of
   International        9           %   10          %   14          %   14          %   16          %   16        %   18          %
   Total Revenue
                                                                                                                                  
Operating (Loss)
Income Excl SBC,      $ (76,506   )   $ (51,808   )   $ (20,528   )   $ (287      )   $ 27,418        $ 28,505      $ 11,395
Acq-Related
   Year-over-year       N/A             (125      ) %   21          %   100         %   N/A             155           N/A
   growth
   % of
   Consolidated
   Operating (Loss)     78          %   83          %   (1,213    ) %   (2        ) %   41          %   40        %   23          %
   Income Excl SBC,
   Acq-Related
Operating Margin
Excl SBC,
Acq-Related (% of       (48.1     ) %   (22.0     ) %   (7.6      ) %   (0.1      ) %   8.5         %   9.3       %   4.1         %
International Total
revenue)
   Year-over-year       N/A             74,265          9,392           14,474          5,669           3,126         1,170
   growth (bps)
Operating (Loss)
Income TTM Excl       $ (247,063  )   $ (275,824  )   $ (270,298  )   $ (149,129  )   $ (45,205   )   $ 35,108      $ 67,031
SBC, Acq-Related
Operating Margin
TTM Excl SBC,
Acq-Related (% of       (91.0     ) %   (54.7     ) %   (36.2     ) %   (15.3     ) %   (4.0      ) %   2.9       %   5.5         %
International Total
TTM revenue)
   Year-over-year       N/A             70,992          13,508          13,628          8,704           5,765         4,170
   growth (bps)
                                                                                                                                  
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       1,405       %   916         %   496         %   196         %   103         %   38        %   5           %
   growth
   Year-over-year
   growth,              1,378       %   859         %   465         %   198         %   108         %   47        %   11          %
   excluding FX (4)
Gross Billings ^(1)   $ 1,369,139     $ 2,206,964     $ 3,169,902     $ 3,985,501     $ 4,672,127     $ 5,029,554   $ 5,090,600
(TTM)
   Year-over-year       1,651       %   1,227       %   804         %   435         %   241         %   128       %   61          %
   growth
                                                                                                                                  
Revenue:
   Third Party and
   Other Revenue      $ 295,523       $ 392,582       $ 422,989       $ 478,510       $ 540,053       $ 502,985     $ 423,564
   ^(2)
   Direct Revenue      -             -             7,172         13,654        19,230        65,350       144,988   
   ^(2)
   Total
   Consolidated       $ 295,523       $ 392,582       $ 430,161       $ 492,164       $ 559,283       $ 568,335     $ 568,552
   Revenue
   Year-over-year       1,358       %   915         %   426         %   186         %   89          %   45        %   32          %
   growth
   Year-over-year
   growth,              1,332       %   858         %   401         %   188         %   95          %   53        %   38          %
   excluding FX
   ^(4)
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       1,594       %   1,205       %   761         %   415         %   219         %   118       %   70          %
   growth
                                                                                                                                  
Cost of Revenue:
   Third Party and
   Other Cost of      $ 39,765        $ 54,803        $ 62,339        $ 86,882        $ 102,629       $ 77,032      $ 54,173
   Revenue ^(3)
   Direct Cost of      -             -             5,707         9,383         16,869        58,152       127,613   
   Revenue ^(3)
   Total
   Consolidated       $ 39,765        $ 54,803        $ 68,046        $ 96,265        $ 119,498       $ 135,184     $ 181,786
   Cost of Revenue
   % of Total
   Consolidated         13          %   14          %   16          %   20          %   21          %   24        %   32          %
   Revenue
                                                                                                                                  
Operating (Loss)
Income Excl SBC,      $ (98,284   )   $ (62,309   )   $ (1,692    )   $ 17,952        $ 67,590        $ 71,934      $ 50,488
Acq-Related
   Year-over-year       N/A             (166      ) %   93.         %   N/A             N/A             N/A           N/A
   growth
Operating Margin
Excl SBC,
Acq-Related (% of       (33.3     ) %   (15.9     ) %   (0.4      ) %   3.6         %   12.1        %   12.7      %   8.9         %
Total Consolidated
revenue)
   Year-over-year       (7,611    )     4,471           2,760           8,689           4,534           2,853         930
   growth (bps)
Operating (Loss)
Income TTM Excl       $ (287,964  )   $ (326,848  )   $ (305,646  )   $ (144,333  )   $ 21,541        $ 155,784     $ 207,964
SBC, Acq-Related
Operating Margin
TTM Excl SBC,
Acq-Related (% of       (49.0     ) %   (34.7     ) %   (23.7     ) %   (9.0      ) %   1.1         %   7.6       %   9.5         %
Total Consolidated
TTM revenue)
   Year-over-year       (7,208    )     (1,333    )     245             4,887           5,011           4,229         3,320
   growth (bps)
                                                                                                                                  
Operating (Loss)      $ (117,148  )   $ (101,027  )   $ (239      )   $ (14,972   )   $ 39,639        $ 46,485      $ 25,438
Income
   Year-over-year       N/A             (174      ) %   100         %   96.         %   N/A             N/A           N/A
   growth
Operating Margin (%
of Total                (39.6     ) %   (25.7     ) %   (0.1      ) %   (3.0      ) %   7.1         %   8.2       %   4.5         %
Consolidated
revenue)
   Year-over-year       (8,192    )     6,949           6,838           19,213          4,673           3,391         457
   growth (bps)
Operating (Loss)      $ (546,064  )   $ (610,272  )   $ (554,543  )   $ (233,386  )   $ (76,599   )   $ 70,913      $ 96,590
Income TTM
Operating Margin
TTM (% of Total         (92.8     ) %   (64.8     ) %   (43.0     ) %   (14.5     ) %   (4.1      ) %   3.5       %   4.4         %
Consolidated TTM
revenue)
   Year-over-year       (11,533   )     (2,457    )     1,427           11,983          8,875           6,824         4,740
   growth (bps)
                                                                                                                                  
Net (Loss) Income
Attributable to         (146,480  )     (107,406  )     (54,229   )     (65,379   )     (11,695   )     28,386        (2,979    )
Common Stockholders
Weighted Average
Basic Shares            307,849         303,415         307,605         528,422         644,097         647,150       653,224
Outstanding
Weighted Average
Diluted Shares          307,849         303,415         307,605         528,422         644,097         663,123       653,224
Outstanding ^(5)
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       Q2 2011       Q3 2011       Q4 2011       Q1 2012       Q2 2012       Q3 2012
                  ^(6)
                                                                                                      
Cash Flow
Operating cash    $ 91,928      $ 128,316     $ 173,291     $ 290,447     $ 356,221     $ 392,517     $ 370,194
flow (TTM)
Purchases of
Property and
Equipment and      (24,780 )    (31,949 )    (38,414 )    (43,811 )    (45,932 )    (62,401 )    (69,788 )
Software
Capitalization
(TTM)
Free cash flow    $ 67,148      $ 96,367      $ 134,877     $ 246,636     $ 310,289     $ 330,116     $ 300,406
(TTM) ^ (7)
                                                                                                      
Other Metrics:
Active              15,376        23,037        28,906        33,742        36,850        38,046        39,525
Customers ^ (8)
TTM Gross
Billings /        $ 169         $ 174         $ 189         $ 187         $ 179         $ 165         $ 149
Average Active
Customer ^(9)
Headcount
  Sales ^(10)       3,556         4,850         4,853         5,196         5,735         5,587         5,087
  % North           19      %     20      %     21      %     20      %     21      %     20      %     24      %
  America
  %                 81      %     80      %     79      %     80      %     79      %     80      %     76      %
  International
  Other            3,551       4,775       5,565       6,275       6,813       7,233       6,779   
  Total             7,107         9,625         10,418        11,471        12,548        12,820        11,866
  Headcount

(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.

Contact:

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