2020 ANNUAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number: 1-35335
Groupon, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
27-0903295
(I.R.S. Employer Identification No.)
600 W Chicago Avenue
Suite 400
Chicago
Illinois
(Address of principal executive offices)
60654
(Zip Code)
(312) 334-1579
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.0001 per share
GRPN
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒
No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐
No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒
No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such files).
Yes ☒
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☒
1
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by
the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
No ☒
As of June 30, 2020, the aggregate market value of shares held by non-affiliates of the registrant was $519,746,107 based
on the number of shares of common stock held by non-affiliates as of June 30, 2020 and based on the last reported sale price of
the registrant's common stock on June 30, 2020.
As of February 22, 2021, there were 28,988,465 shares of the registrant's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Report, to the extent not set forth herein, is incorporated herein by reference from
the registrant's definitive proxy statement relating to the Annual Meeting of Stockholders to be held in 2021, which definitive
proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to
which this Report relates.
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TABLE OF CONTENTS
PART I
Page
Forward-Looking Statements
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
PART III
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary (optional)
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PART I
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains 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,
effects of COVID-19 or other pandemics or disease outbreaks on our business; our ability to execute, and achieve
the expected benefits of our go-forward strategy; execution of our business and marketing strategies; volatility in our
operating results; 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 exit from the
European Union; global economic uncertainty; retaining and adding high quality merchants; retaining existing
customers and adding new customers; competing successfully in our industry; providing a strong mobile experience
for our customers; managing refund risks; retaining and attracting members of our executive team and other
qualified personnel; customer and merchant fraud; payment-related risks; our reliance on email, internet search
engines and mobile application marketplaces to drive traffic to our marketplace; cybersecurity breaches; maintaining
and improving our information technology infrastructure; reliance on cloud-based computing platforms; completing
and realizing the anticipated benefits from acquisitions, dispositions, joint ventures and strategic investments; lack
of control over minority investments; managing inventory and order fulfillment risks; claims related to product and
service offerings; protecting our intellectual property; maintaining a strong brand; the impact of future and pending
litigation; 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 or employees; exposure to greater
than anticipated tax liabilities; adoption of tax legislation; our ability to raise capital if necessary; risks related to our
access to capital and outstanding indebtedness, including our convertible senior notes; our common stock, including
volatility in our stock price; our ability to realize the anticipated benefits from the hedge and warrant transactions;
and those risks and other factors discussed in Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K, as
well as in our consolidated financial statements, related notes, and the other financial information appearing
elsewhere in this report and our other filings with the Securities and Exchange Commission (the "SEC"). Moreover,
we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not
possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the
extent to which any factor, or combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements we may make. We do not intend, and undertake no obligation, to
update any of our forward-looking statements after the date of this report to reflect actual results or future events or
circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements.
As used herein, "Groupon," "the Company," "we," "our," "us" and similar terms include Groupon, Inc. and its
subsidiaries, unless the context indicates otherwise.
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ITEM 1. BUSINESS
Groupon is a global scaled two-sided marketplace that connects consumers to merchants. Consumers
access our marketplace through our mobile applications and our websites, primarily localized groupon.com sites in
many countries. We operate in two segments, North America and International, and in three categories, Local,
Goods and Travel. Our mission is to be the destination where consumers discover fun things to do and local
businesses thrive. For our customers, this means giving them an amazing selection of experiences at great values.
For our merchants, this means making it easy for them to partner with Groupon and reach millions of consumers
around the world.
Currently, we generate product and service revenue from the following business operations.
Service Revenue from Local, Travel, and Goods Categories: Service revenue primarily represents the net
commissions earned from selling goods or services on behalf of third-party merchants. Service revenue is reported
on a net basis as the purchase price collected from the customer less the portion of the purchase price that is
payable to the third-party merchant. We also earn commissions when customers make purchases with retailers
using digital coupons accessed through our websites and mobile applications.
Product Revenue from Goods Category: We generate product revenue from our sales of first-party Goods
inventory, which are direct sales of merchandise inventory. For product revenue transactions, we are the primary
party responsible for providing the good to the customer, we have inventory risk and we have discretion in
establishing prices. As such, product revenue is reported on a gross basis as the purchase price received from the
customer. Product revenue, including associated shipping revenue, is recognized when title passes to the customer
upon delivery of the product. We have transitioned to a third-party marketplace in North America as of the end of
2020 and will begin to transition to a third-party marketplace in International in the second quarter 2021. Following
the International transition, we expect our Goods category to primarily generate revenue on a net basis within
service revenue.
GROUPON, the GROUPON logo and other GROUPON-formative marks are trademarks of Groupon, Inc. in
the United States or other countries. This Annual Report on Form 10-K also includes other trademarks of Groupon
and trademarks of other persons.
Our Strategy
In the third quarter 2020, we shifted our strategy and plan to prioritize expanding our Local inventory and
modernizing our marketplace by improving the merchant and customer experiences. While both of these are
important to building a successful marketplace, we believe the most critical of these is expanding Local inventory.
Our Categories
Local. Our Local category includes offerings from local and national merchants, and other revenue sources
that are primarily generated through our relationships with local and national merchants, including advertising
revenue. Our offerings comprise multiple subcategories of local experiences, including: things to do; beauty and
wellness; and dining. In addition to local and national offerings, we give consumers the ability to access digital
coupons from thousands of retailers through our coupons offering.
Goods. In our Goods category, we earn product revenue from transactions in which we sell merchandise
inventory directly to customers, as well as service revenue from transactions in which third-party merchants sell
products to customers through our marketplaces. When our transition to a third-party Goods marketplace is
complete, we will primarily recognize Goods transaction revenue on a net basis within service revenue. Our Goods
category currently offers merchandise across multiple product lines, including electronics, sporting goods, jewelry,
toys, household items and apparel.
Travel. Through our Travel category, we feature travel offers at both discounted and market rates, including
hotels, airfare and package deals covering both domestic and international travel. For many of our travel offerings,
the customer must contact the merchant directly to make a travel reservation after purchasing a travel voucher from
us. However, for some of our hotel offerings, customers make room reservations directly through our websites.
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Distribution
Our customers access our online local commerce marketplaces through our mobile applications and our
websites, which primarily consist of localized groupon.com sites in many countries. Our applications and mobile
websites enable consumers to browse, purchase, manage and redeem deals on their mobile devices. For the year
ended December 31, 2020, over 75% of our global transactions were completed on mobile devices.
We use a variety of marketing channels to direct customers to the offerings available through these
marketplaces, as described in the Marketing section below.
Marketing
We primarily use marketing to acquire and retain customers and promote awareness of our marketplaces.
In light of the impact of COVID-19 on our business in 2020, we significantly reduced marketing expense due to
lower consumer demand and by shortening payback thresholds and delaying brand marketing investments. We
would expect our marketing spend to increase as consumer demand recovers.
We use a variety of marketing channels to make customers aware of our offerings, including search
engines, email and push notifications, affiliate channels, social and display advertising and offline marketing.
Search engines. Customers can access our offerings indirectly through third-party search engines. We use
search engine optimization ("SEO") and search engine marketing ("SEM") to increase the visibility of our offerings in
web search results.
Email and push notifications. We communicate offerings through email and by push notifications to our
customers based on their locations and personal preferences. A customer who interacts with an email or push
notification is directed to our website or mobile application to learn more about the deal and to make a purchase.
Affiliate channels. We have an affiliate program that uses third parties to promote our offerings online.
Affiliates earn commissions when customers access our offerings through links on their websites and make
purchases on our platform. We expect to continue to leverage affiliate relationships to extend our deals to a broad
base of potential customers.
Social and display. We publish offerings through various social networks and adapt our notifications to the
particular format of each of these social networking platforms. Our websites and mobile applications enable
consumers to share our offerings with their personal social networks. We also promote our offerings using display
advertising on websites.
Television and other offline. We use offline marketing such as television advertising, and to a lesser extent,
print and radio advertising, to help build awareness of our offerings and brand.
Our marketing activities also include elements that are not presented as Marketing on our consolidated
statements of operations, such as order discounts and free shipping on qualifying merchandise sales.
Human Capital Management
As of December 31, 2020, we had employees consisting of the following:
North America
International
Total
Sales
Corporate, Operational
and Customer Support
Total Employees
550
726
1,276
774
2,109
2,883
1,324
2,835
4,159
Our sales force consists of merchant sales representatives and sales support staff who acquire and build
merchant relationships and provide ongoing consultative expertise. Other key operational functions include
engineering, product, marketing, and editorial.
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We believe attracting and retaining global talent is key to our success. Our Chief People Officer, together
with our Chief Executive Officer and Chief Administrative Officer, are responsible for developing and executing our
human capital strategy, with oversight of the Board and Board committees. This includes the recruitment,
development, and retention of talent to support our operations and execute our strategy and the design of our
employee compensation and benefit programs.
Key areas of our focus include:
Inclusion and Diversity. Inclusion and diversity is important to all aspects of our business, and particularly
vital to attracting, developing and retaining employees from underrepresented groups. We believe that by building a
global team of employees who have diverse experiences, backgrounds, skills and perspectives, we will be able to
better support our employees, merchants and customers. We have established multiple internal diversity and
inclusion resources that allow employees to engage on important issues. Some of these resources include business
resource groups and resource action groups (Listen, Learn, Mobilize, and Support) that are focused on the Black
Lives Matters movement. In addition to these resources, we invest in our mentoring and leadership programs as
well as other events that are specifically focused on nurturing the professional development of our diverse
employees, showcasing growth opportunities within Groupon, and providing them with unique tools and experiences
they need to thrive at Groupon.
Workplace Culture and Values. To support talent development, we offer training and development programs
supporting our ethics, workplace culture and managers. For example, we require our employees to complete
unconscious bias training and Code of Conduct training. In addition, all managers must complete Respect In the
Workplace Training. We also offer various other training programs to employees, such as, Change & Resilience,
Managing Through Change, FS90 (leader habits and manager expectations for new leaders) and Authentic Allyship
Workshops. We also encourage internal referrals and postings for open roles and partner with organizations in order
to proactively recruit more candidates from diverse backgrounds.
Social Responsibility. Social responsibility is important at Groupon, and we empower our employees to
volunteer and participate in the communities in which we operate and live. We believe thriving local communities
are good for everyone. Further, our efforts in this area support the success of our core Local business. We provide
numerous opportunities for our employees to volunteer with causes they care about throughout the year and
support local communities through our platform and community development efforts.
In 2020, our business was significantly impacted by COVID-19. We implemented changes in our workforce
and how we work in response to the pandemic. For example, we instituted a remote work plan and most of our
employees have been working remotely since early 2020. We continue to evaluate our return to office plans, with
the health and safety of our employees being a primary consideration. In addition, in response to the COVID-19
pandemic, in 2020, our Board approved a multi-phase restructuring plan that includes the termination and furlough
of employees. See Item 8, Note 16, Restructuring and Related Charges, for additional information.
Technology
Our websites are hosted at two U.S. data centers in California and at an international data center in Ireland.
Our data centers host our public-facing websites and applications, as well as our back-end business intelligence
systems. We employ security practices to protect and maintain the systems located at our data centers. We are
migrating our public-facing websites and applications and our back-end business intelligence systems to the cloud.
We have invested in intrusion and anomaly detection tools to try to recognize intrusions to our websites. We engage
independent third-party Internet security firms to regularly test the security of our websites and identify
vulnerabilities. In financial transactions with customers conducted on our websites and mobile applications, we use
data encryption protocols to secure information while in transit. See Risk Factors for additional information relating
to potential cyber threats.
Competition
Our customers and merchants are at the center of our two-sided marketplace. The quality and stability of
both our customers and merchants are key to our business model. We face competition on both sides of our
marketplace.
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We compete with other marketplaces, and some of our competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources. In addition, we compete with companies
who address only specific verticals in the local experiences market, and in some categories, such as Goods and
Travel, companies who have greater scale and larger customer bases than we do. These factors may allow our
competitors to benefit from their existing customer base with lower acquisition costs or to respond more quickly than
we can to new or emerging technologies and changes in customer trends. These competitors may engage in more
extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more
aggressive pricing policies, which may allow them to build a larger subscriber base or to monetize that subscriber
base more effectively than we do.
We also compete with companies that can offer alternative services for our merchants. There are
companies that offer other types of advertising and promotional services to local businesses. Our merchants could
choose to leverage these other platforms to attract customers to their businesses. We believe we can compete due
to the access we provide our merchants to our large customer base, our trusted brand, and the investments we are
making in self-service tools that will allow merchants to manage demand more effectively and better attract and
retain customers.
Seasonality
Historically, we experienced seasonal buying patterns mirroring that of the larger consumer retail and e-
commerce markets, where demand increases during the fourth quarter holiday season. That seasonal pattern was
less pronounced in 2020 due to the impacts of COVID-19 on our business.
Regulation
We are subject to a number of foreign and domestic laws and regulations that affect companies conducting
business on the Internet. Additionally, those laws and regulations may be interpreted differently across domestic and
foreign jurisdictions. As a company in a relatively new and rapidly innovating industry, we are exposed to the risk
that many of those laws may evolve or be interpreted by regulators or in the courts in ways that could materially
affect our business. Those laws and regulations may involve taxation, unclaimed property, intellectual property,
product liability, travel, distribution, electronic contracts and other communications, competition, consumer
protection, the provision of various online payment services, employee, merchant and customer privacy and data
security or other areas.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the "CARD Act"), as well as the
laws of most states, contain provisions governing gift cards, gift certificates, stored value or pre-paid cards or
coupons ("gift cards"). Groupon vouchers may be included within the definition of "gift cards" under many laws. In
addition, certain foreign jurisdictions have laws that govern disclosure and certain product terms and conditions,
including restrictions on expiration dates and fees, that may apply to Groupon vouchers. There are also a number of
legislative proposals pending before the U.S. Congress, various state legislative bodies and foreign governments
that could affect us, and our global operations may be constrained by regulatory regimes and laws in Europe and
other jurisdictions outside the United States that may be more restrictive and adversely impact our business.
Various U.S. laws and regulations, such as the Bank Secrecy Act of 1970 (the "Bank Secrecy Act"), the
Dodd-Frank Wall Street Reform and Consumer Protection Act, the USA PATRIOT Act and the CARD Act impose
certain anti-money laundering requirements on companies that are financial institutions or that provide financial
products and services. Those laws and regulations broadly define financial institutions to include money services
businesses such as money transmitters, check cashers and sellers or issuers of stored value. Requirements
imposed on financial institutions under those laws include customer identification and verification programs, record
retention policies and procedures and transaction reporting. We do not believe that we are a financial institution
subject to those laws and regulations.
We are subject to a variety of federal, state and international laws and regulations governing consumer
data. The General Data Protection Regulation ("GDPR"), which was adopted by the European Union and became
effective in May 2018, and the California Consumer Privacy Act (“CCPA”) which became effective January 1, 2020,
require companies to satisfy specific requirements regarding the handling of personal and sensitive data, including
its collection, use, protection and the ability of persons whose data is stored to, among other things, access and/or
delete such data about themselves. Our ongoing efforts to comply with the GDPR, CCPA and other relevant privacy
and data protection laws and regulations, have required updates to certain business practices and systems. Non-
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compliance with any privacy and data protection laws and regulations could result in significant monetary fines. For
instance, non-compliance with the GDPR could result in proceedings against us by governmental entities or others
and fines up to the greater of €20 million or 4% of annual global revenue. We continue to monitor developments in
laws and regulations relating to privacy and consumer data, and we expect these evolving laws and regulations will
continue to impact our business in the future.
Intellectual Property
We protect our intellectual property rights by relying on federal, state and common law rights, as well as
contractual restrictions. We control access to our proprietary technology by entering into confidentiality and
invention assignment agreements with our employees and contractors, and confidentiality agreements with third
parties.
In addition to those contractual arrangements, we also rely on a combination of trade secrets, copyrights,
trademarks, service marks, trade dress, domain names and patents to protect our intellectual property. Groupon
and its related entities own a number of trademarks and service marks registered or pending in the United States
and internationally. In addition, we own a number of issued patents and pending patent applications in the United
States and internationally and own and have applied for copyright registrations in the United States.
Circumstances outside our control could pose a threat to our intellectual property rights and the efforts we
have taken to protect our proprietary rights may not be sufficient or effective or deter independent development of
equivalent or superior intellectual property rights by others. Any significant impairment of our intellectual property
rights could harm our business or our ability to compete. Also, protecting our intellectual property rights is costly and
time-consuming. Any unauthorized disclosure or use of our intellectual property could make it more expensive to do
business and harm our operating results.
Companies in the Internet, technology and other industries as well as non-practicing entities may own large
numbers of patents, copyrights and trademarks or other intellectual property rights and may request license
agreements, threaten litigation or file suit against us based on allegations of infringement or other violations of
intellectual property rights. We are currently subject to, and expect to face in the future, lawsuits and allegations that
we have infringed the intellectual property rights of third parties. As our business grows, we will likely face more
claims of infringement, and may experience an adverse result which could impact our business and/or our operating
results.
We have received in the past, and we anticipate we will receive in the future, communications alleging that
items offered or sold through our website infringe third-party copyrights, trademarks, patents and trade names or
other intellectual property rights or that we have otherwise infringed third parties’ past, current or future intellectual
property rights. We may be unable to prevent third parties from offering and selling unlawful or infringing goods or
goods of disputed authenticity, and we may be subject to allegations of civil or criminal liability for unlawful activities
carried out by third parties through our website. We may implement measures in an effort to protect against these
potential liabilities that could require us to spend substantial resources and/or to reduce revenue by discontinuing
certain service offerings. Any costs incurred as a result of liability or asserted liability relating to the sale of unlawful
goods or the unlawful sale of goods could harm our business.
Information About Our Executive Officers
The following table sets forth information about our executive officers:
Name
Aaron Cooper
Melissa Thomas
Dane Drobny
Age Position
45
41
53
Interim Chief Executive Officer
Chief Financial Officer
Chief Administrative Officer, General Counsel and Corporate Secretary
Aaron Cooper was appointed as our Interim Chief Executive Officer in March 2020. He previously served as
the President of North America since July 2017, and various senior leadership positions from May 2010 to July
2017, including the Chief Marketing Officer, Head of Global Travel, head of the North America Goods category and
head of the North America Local category. Prior to joining Groupon, Mr. Cooper served as Executive Vice President
Marketing at optionsXpress from January 2009 to May 2010 and as Group Vice President, Online Marketing at
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Orbitz Worldwide, Inc. from 2004 to 2009. Prior to Orbitz, Mr. Cooper held consulting roles at AEG Partners, AOL
and Price Waterhouse Management Consultants.
Melissa Thomas was appointed as our Chief Financial Officer in February 2020. She previously served as
our Interim Chief Financial Officer since August 2019, our Chief Accounting Officer and Treasurer since November
2018 and our Vice President of Commercial Finance since May 2017. Prior to joining Groupon, Ms. Thomas served
as Vice President of Finance at Surgical Care Affiliates from June 2016 to May 2017. From August 2007 to May
2016, Ms. Thomas served in a variety of finance and accounting leadership roles at Orbitz Worldwide (NYSE:
OWW), most recently as Vice President of Finance. Prior to Orbitz, Ms. Thomas held accounting positions at Equity
Office Properties and began her career at PricewaterhouseCoopers.
Dane Drobny has served as our Chief Administrative Officer, General Counsel and Corporate Secretary
since July 2014. Prior to joining Groupon, Mr. Drobny was Senior Vice President, General Counsel and Corporate
Secretary at Sears Holdings Corporation (NASDAQ: SHLD) from May 2010 to June 2014. Prior to joining Sears
Holdings, he spent 17 years at the international law firm of Winston & Strawn LLP, most recently as a partner.
Available Information
We electronically file reports with the SEC. The SEC maintains an Internet site (www.sec.gov) that contains
reports, proxy and information statements and other information regarding issuers that file electronically with the
SEC. Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-
K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 are also available free of charge through our website (www.groupon.com), as soon as reasonably
practicable after electronically filing with or otherwise furnishing such information to the SEC, and are available in
print to any stockholder who requests them. Our Code of Conduct, Corporate Governance Guidelines and
committee charters are also posted on the site. We use our Investor Relations website (investor.groupon.com) and
our blog (www.groupon.com/blog) as a means of disclosing material non-public information and for complying with
our disclosure obligations under Regulation FD. Information contained on our website and blog is not a part of this
Annual Report on Form 10-K.
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ITEM 1A. RISK FACTORS
Our business, prospects, financial condition, operating results and the trading price of our common stock
could be materially adversely affected by the risks described below. In assessing those risks, you should also refer
to the other information contained in this Annual Report on Form 10-K, including Part II, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and the consolidated financial
statements and the related notes in Part II, Item 8. Financial Statements and Supplementary Data of this Annual
Report on Form 10-K.
Summary Risk Factors
The following is a summary of some of the risks and uncertainties that could materially adversely affect our
business, prospects, financial condition, operating results and the trading price of our common stock. You should
read this summary together with the more detailed description of each risk factor contained below.
Risks Related to Our Business, Operations and Strategy
•
The COVID-19 pandemic has, and is expected to continue to, materially affect our business, financial condition
and results of operations, and any future outbreaks of contagious diseases and other adverse public health
developments could materially affect our business.
• Our strategy may be unsuccessful and may expose us to additional risks. If our strategy does not achieve its
expected benefits, there could be negative impacts to our business, financial condition and results of
operations.
• Our operating results may vary significantly from quarter to quarter.
• Our international operations are subject to varied and evolving commercial, employment and regulatory
challenges, and our inability to adapt to the diverse and changing landscapes of our international markets may
adversely affect our business.
• Our future success depends upon our ability to attract and retain high quality merchants and third-party
•
business partners.
If we fail to retain our existing customers or acquire new customers, our operating results and business will be
harmed.
• We operate in a highly competitive industry with relatively low barriers to entry and must compete successfully
in order to grow our business.
• Our success is dependent upon our ability to provide a superior mobile experience for our customers and our
•
•
•
customers' continued ability to access our offerings through mobile devices.
An increase in our refund rates or estimated liabilities with respect to unredeemed vouchers could adversely
affect our financial results.
The loss of key members of our management team, or our failure to attract and retain other highly qualified
personnel in the future could harm our business.
Failure to deal effectively with fraudulent transactions and customer disputes would increase our loss rate and
harm our business.
• We are subject to payments-related risks.
Risks Related to Technology and Cybersecurity
• We rely on email, Internet search engines and mobile applications to drive traffic to our marketplace.
• We may be subject to breaches of our information technology systems, which could harm our relationships with
our customers, merchants and third-party business partners, subject us to negative publicity and litigation, and
cause substantial harm to our business or brand.
• Our business depends on our ability to maintain and improve the technology infrastructure necessary to send
our emails and operate our websites, mobile applications and transaction processing systems, and any
significant disruption in service on our email network infrastructure, websites, mobile applications or transaction
processing systems could result in a loss of customers or merchants.
As we increase our reliance on cloud-based platforms to operate and deliver our products and services, any
disruption or interference with these platforms could adversely affect our financial condition and results of
operations.
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Risks Related to Transactions and Investments
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Acquisitions, dispositions, joint ventures and strategic investments could result in operating difficulties, dilution
and other consequences.
• We do not have the ability to exert control over our minority investments, and therefore we are dependent on
others in order to realize their potential benefits.
Risks Related to Our Brand and Intellectual Property
• We allow third parties to sell products via our site and services and purchase and sell some products from
indirect suppliers, which increase our risk of litigation and other losses.
• We may be subject to substantial liability claims and damage to our brand and reputation if people or property
are harmed by the products or services offered through our marketplace.
• We may not be able to adequately protect our intellectual property rights or may be accused of infringing
intellectual property rights of third parties.
• Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, our ability
to expand our base of customers and merchants could be impaired and our business and operating results
could be harmed.
Risks Related to Legal, Regulatory, Privacy and Tax Matters
• We are involved in pending litigation and other claims and an adverse resolution of such matters may adversely
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affect our business, financial condition, results of operations and cash flows.
The application of certain laws and regulations, including, among other laws, the CARD Act and similar state
and foreign laws, may harm our business and results of operations.
If we are required to materially increase the liability recorded in our financial statements with respect to
unredeemed vouchers our results of operations could be materially and adversely affected.
• Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to
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comply with these regulations could substantially harm our business and results of operations.
Failure to comply with federal, state and international privacy laws and regulations, or the expansion of current
or the enactment of new privacy laws or regulations, could adversely affect our business.
• Misclassification or reclassification of our independent contractors or employees could increase our costs and
adversely impact our business.
• We may suffer liability as a result of information or content retrieved from or transmitted over the Internet and
claims related to our service offerings.
• We may have exposure to greater than anticipated tax liabilities.
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The adoption of tax reform policies, including the enactment of legislation or regulations implementing changes
in the tax treatment of companies engaged in Internet commerce or the U.S. taxation of international business
activities could materially affect our financial position and results of operations.
Federal laws and regulations, such as the Bank Secrecy Act and the USA PATRIOT Act and similar foreign
laws, could be expanded to include Groupon vouchers or other offerings.
State and foreign laws regulating money transmission could be expanded to include Groupon vouchers or other
Groupon products or services.
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Risks Related to Our Capital Structure
• Our access to capital and ability to raise capital in the future may be limited, which could prevent us from
growing, and our existing credit agreement could restrict our business activities.
• We may not have the ability to use cash to settle the principal amount of our 3.25% convertible notes due 2022
(the "Notes") upon conversion or to repurchase the Notes upon a fundamental change, which could result in
dilution and could adversely affect our financial condition.
The terms of the Notes could delay or prevent an attempt to take over our Company.
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Risks Related to Ownership of Our Common Stock
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The trading price of our common stock is highly volatile.
If securities or industry analysts do not publish research or reports about our business, or publish inaccurate or
unfavorable research reports about our business, our share price and trading volume could decline.
• We do not intend to pay dividends for the foreseeable future.
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Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders
may consider favorable.
The convertible note hedge and warrant transactions may affect the value of our common stock.
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Risks Related to Our Business, Operations and Strategy
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COVID-19 pandemic has, and is expected to continue to, materially affect our business, financial
condition and results of operations, and any future outbreaks of contagious diseases and other
adverse public health developments could materially affect our business.
The COVID-19 pandemic has had a material impact on our business and results of operations. COVID-19
has resulted in significant governmental measures being implemented to control the spread of the virus, including
quarantines, travel restrictions, business shutdowns and restrictions on the movement and gathering of people in
the United States and abroad. Our business has been adversely affected in jurisdictions that have imposed
mandatory closures of our merchants, sought voluntary closures or imposed restrictions on operations of our
merchants and activities of consumers, and the continued implementation of such measures may further adversely
affect our business. Even if such measures are not implemented, the perceived risk of infection or significant health
risk may adversely affect our business. Further, the timing of global vaccination distribution and administration and
the long-term effectiveness of any vaccines against COVID-19 and any variants is not certain. The outbreak and the
preventive or protective actions that governments or our merchants and consumers have taken and may take in the
future in response to COVID-19 has resulted, and may continue to result, in a period of business disruption,
reduced voucher and travel sales and increased refunds. Further, any future outbreaks of contagious diseases and
other adverse public health developments could materially affect our business.
Such risks could also adversely affect consumers’ financial condition, resulting in reduced spending on our
offerings and increased refunds, even after restrictions to everyday activities are lifted. COVID-19 may also
adversely affect our ability to implement our strategy to focus on growing our local marketplace.
The cost-saving actions, remote working environment, and other actions we have taken to attempt to
address and mitigate the effects of COVID-19 on our business may lead to disruptions in our business, inability to
grow and evolve our brand, reduced employee morale, engagement and productivity, increased attrition, problems
retaining existing and recruiting future employees, limited resources to complete projects efficiently, and increased
workload for employees all of which could negatively impact our business, results of operations, financial condition
and create risks to the effectiveness of our internal controls. Such disruption also could negatively impact our ability
to realize the full benefits of our strategy.
These and other potential impacts of COVID-19 have and are expected to continue to adversely affect our
business, financial condition and results of operations. The ultimate extent of the impact of COVID-19 (or any
epidemic, pandemic or other health crisis) will depend on future developments, which are highly uncertain and
cannot be predicted, including new information that may emerge concerning the severity of COVID-19, emerging
virus variants and the actions taken to contain COVID-19 and address its impact.
The potential effects of COVID-19 also could intensify or otherwise affect many of our other risk factors that
are included in this Annual Report, including, but not limited to, risks related to the execution of our strategy,
customer and merchant acquisition and retention, macroeconomic factors beyond our control, risks of doing
business outside of the United States and risks related to our indebtedness. Because the COVID-19 situation is
unprecedented and continuously evolving, the other potential impacts to our risk factors that are further described in
this Annual Report are uncertain.
Furthermore, because the COVID-19 pandemic did not impact our results until late in the first quarter of
2020, such impact may not be directly comparable to any historical period and is not necessarily indicative of any
future impact that the COVID-19 pandemic may have on our results for subsequent periods. See Item 8, Note 3,
COVID-19 Pandemic, for more information.
Our strategy may be unsuccessful and may expose us to additional risks. If our strategy does not
achieve its expected benefits, there could be negative impacts to our business, financial condition
and results of operations.
We are implementing a strategy to grow our local experiences marketplace and return the Company to
growth. We intend to execute our strategy by focusing on our priorities: (i) expanding inventory and (ii) modernizing
our marketplace by improving the merchant and customer experiences.
There are no assurances that our actions will be successful in building out a local experiences marketplace
and returning the Company to growth. Our efforts to execute our strategy may prove more difficult than we currently
anticipate. Further, we may not succeed in realizing the benefits of these efforts on our anticipated timeline or at all.
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In addition, as we implement our strategy, COVID-19 related volatility and its impact on our merchants and
customers may make it more difficult to quickly test, learn and scale different initiatives relating to expanding
inventory or improving the merchant and customer experiences. Further, the data we obtain during the period
impacted by COVID-19 may not ultimately be indicative of merchant and customer preferences or behavior in the
future. Even if fully implemented, our strategy may not result in a return to growth or the other anticipated benefits to
our business, financial condition and results of operations. If we are unable to effectively execute our strategy and
realize its anticipated benefits, it could negatively impact our business, financial condition and results of operations.
Our operating results may vary significantly from quarter to quarter.
Our operating results may vary significantly from quarter to quarter due to the rapidly evolving nature of our
business and other reasons, including seasonality. We believe that our ability to achieve and maintain revenue
growth and profitability will depend, among other factors, on our ability to:
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recover from the impact of COVID-19;
acquire new customers, retain existing customers and increase customer purchase frequency;
attract and retain high-quality merchants;
effectively address and respond to challenges in international markets;
increase the variety, quality, density and relevance of supply, including through third party business partners
and technology integrations;
deliver a modern customer and merchant experience on our website and mobile applications;
successfully transition our Goods category to a third party marketplace model, including implementing
necessary technology and operational changes related to the transition;
increase booking capabilities;
increase the awareness of, and evolve, our brand to a local experiences marketplace;
continue to reduce costs and improve SG&A leverage, including through the execution of our restructuring
plan;
successfully achieve the anticipated benefits of business combinations or acquisitions, strategic
investments, divestitures and restructuring activities;
provide a superior customer service experience for our customers;
avoid interruptions to our services, including as a result of attempted or successful cybersecurity attacks or
breaches;
respond to continuous changes in consumer and merchant use of technology;
optimize and diversify our traffic channels;
react to challenges from existing and new competitors;
respond to seasonal changes in supply and demand; and
address challenges from existing and new laws and regulations.
In addition, our margins and profitability may depend on our inventory mix, geographic revenue mix,
discount rates mix, transition of the Goods category to a third-party marketplace model and merchant and third-
party business partner pricing terms. Accordingly, our operating results and profitability may vary significantly from
quarter to quarter.
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Our international operations are subject to varied and evolving commercial, employment and
regulatory challenges, and our inability to adapt to the diverse and changing landscapes of our
international markets may adversely affect our business.
Our international operations require management attention and resources and also require us to localize
our services to conform to a wide variety of local cultures, business practices, laws and policies. Our international
operations are subject to numerous risks, including the following:
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our ability to maintain merchant and customer satisfaction such that our marketplace will continue to attract
high quality merchants;
our ability to successfully respond to macroeconomic challenges, including the impact of COVID-19 and the
ability to optimize our supply to take into account consumer preferences at a particular point in time;
political, economic and civil instability and uncertainty (including acts of terrorism, civil unrest, labor unrest,
violence and outbreaks of war and pandemics or other disease outbreaks);
currency exchange rate fluctuations;
strong local competitors, who may better understand the local market and/or have greater resources in the
local market;
different regulatory or other legal requirements (including potential fines and penalties that may be imposed
for failure to comply with those requirements), such as regulation of gift cards and coupon terms, Internet
services, professional selling, distance selling, bulk emailing, privacy and data protection (including GDPR),
cybersecurity, business licenses and certifications, taxation (including the European Union's voucher
directive, digital service tax and similar regulations), consumer protection laws including those restricting the
types of services we may offer (e.g., medical-related services), banking and money transmitting, that may
limit or prevent the offering of our services in some jurisdictions, cause unanticipated compliance expenses
or limit our ability to enforce contractual obligations;
our ability to use a common technology platform in our North America and International segments to
operate our business without significant business interruptions or delays;
difficulties in integrating with local payment providers, including banks, credit and debit card networks and
electronic funds transfer systems;
the ability to quickly and effectively consult and negotiate with our international workers' councils and trade
unions on various matters including restructuring actions, strategic decisions and other business critical
matters, which could result in the delay of executing key actions or product delivery and increase costs;
the local legal restrictions relating to employment terminations and staffing due to COVID-19 which impacts
our ability to complete our restructuring actions;
difficulty in staffing, developing and managing foreign operations, including through centralized shared
service centers, as a result of distance, language barriers and cultural differences;
seasonal reductions in business activity;
expenses associated with localizing our products; and
differing intellectual property laws.
We are subject to complex laws and regulations that apply to our international operations, such as data
privacy and protection requirements, including GDPR, the Foreign Corrupt Practices Act, the UK Anti-Bribery Act
and similar local laws prohibiting certain payments to government officials, banking and payment processing
regulations and anti-competition regulations, among others. The cost of complying with these various, and
sometimes conflicting, laws and regulations is substantial. We have implemented and continue to implement
policies and procedures to ensure compliance with these laws and regulations, however, we cannot ensure that our
employees, contractors, or agents will not violate our policies. Changing laws, regulations and enforcement actions
in the United States and throughout the world could harm our business. If commercial and regulatory constraints in
our international markets restrict our ability to conduct our operations or execute our strategic plan, our business
may be adversely affected.
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In addition, we are subject to risks associated with Brexit, given our operations in the United Kingdom and
the European Union. Our operations and that of our merchants are highly integrated across the United Kingdom and
the European Union, and we are highly dependent on the free flow of labor and goods in those regions. The
ongoing uncertainty concerning trade between the United Kingdom and European Union nations could negatively
impact our merchant and customer relationships and financial performance. In addition, future developments in the
laws and regulations applicable to our operations in the United Kingdom could vary from those applicable to our
operations in other European Union nations and make it more difficult for us to operate and adversely affect our
financial results.
Our future success depends upon our ability to attract and retain high quality merchants and third-
party business partners.
We must continue to attract and retain high quality merchants in order to increase profitability. A key priority
of our strategy is to increase inventory on our marketplace, which depends on our ability to attract and retain
merchants and the increase volume and breadth of supply. We are also focused on improving the merchant
experience on our platform, including improving tools available to merchants to help grow their businesses. Further,
COVID-19 has negatively impacted many of our merchants and the ultimate effect on their businesses and any
post-COVID recovery is uncertain. We may not be able to retain or re-acquire these merchants in the future. In
addition, as we transition our Goods category to a third-party marketplace model, we may not be able to maintain
vendor relationships on comparable payment terms, margins or at all. If we are not able to effectively attract and
retain merchants, third party partners or vendors, it could adversely affect our business and results of operations.
In addition, in most instances, we do not have long-term arrangements to guarantee the availability of deals
that offer attractive quality, value and variety to customers or favorable payment terms to us. If merchants or third
party partners decide that utilizing our services no longer provides an effective means of attracting new customers
or selling their offerings, they may stop working with us or negotiate to pay us lower margins or fees. In addition,
current or future competitors may accept lower margins, or negative margins, to secure offers that attract attention
and acquire new customers. We also may experience attrition in our merchants resulting from several factors,
including losses to competitors and merchant closures or merchant bankruptcies. If we are unable to attract and
retain high quality merchants and third party partners in numbers sufficient to grow our business, or if merchants
and third party partners are unwilling to offer products or services with compelling terms through our marketplace,
our operating results may be adversely affected.
If we fail to retain our existing customers or acquire new customers, our operating results and
business will be harmed.
We must continue to retain and acquire customers who make purchases on our platform in order to
increase profitability. COVID-19 has negatively impacted our ability to attract and retain customers, and the timing of
recovery and the pandemic's impact on long-term customer behavior is uncertain. Although we intend to focus on
re-engaging and acquiring new customers as our business recovers from COVID-19, our efforts may not be
successful. Further, as our customer base evolves, the composition of our customers may change in a manner that
makes it more difficult to generate revenue to offset the loss of existing customers and the costs associated with
acquiring and retaining customers and to maintain or increase our customers’ purchase frequency. If customers do
not perceive our offerings to be attractive or if we fail to introduce new and more relevant deals or increase
awareness and understanding of the offerings on our marketplace platform, we may not be able to retain or acquire
customers at levels necessary to grow our business and profitability. In addition, changes to search engine
algorithms or similar actions are not within our control and could adversely affect traffic to our websites and mobile
applications. If we are unable to re-engage and acquire new customers in numbers sufficient to grow our business
and offset the number of customers that have ceased to make purchases, or if new customers do not make
purchases at expected levels, our profitability may decrease and our operating results may be adversely affected.
We operate in a highly competitive industry with relatively low barriers to entry and must compete
successfully in order to grow our business.
Competition in our industry may increase in future periods. We compete against e-commerce sites that
attempt to replicate our business model, companies that offer other types of advertising and promotional services to
local businesses and companies who address only specific verticals in the local experiences market. In addition to
such competitors, we may experience increased competition from other large businesses who offer deals similar to
ours as an add-on to their core business. We also compete with other companies that offer digital coupons through
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their websites or mobile applications. Further, we compete against other e-commerce companies that serve niche
markets and interests, including within the local experiences market. In some of our categories, such as Travel and
Goods, we compete against much larger companies who have more resources and significantly greater scale. In
addition, we compete with traditional offline coupon and discount services, as well as newspapers, magazines and
other traditional media companies who provide coupons and discounts on products and services.
We believe that our ability to compete successfully depends upon many factors both within and beyond our
control, including the following:
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recovery from the impact of COVID-19 on our business;
the size, composition and retention of our customer and merchant bases;
density and quality of our inventory;
delivery of a modern user experience for customers and modern experience and tools for merchants;
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understanding local business trends;
our ability to structure deals to generate positive return on investment for merchants;
the timing and market acceptance of deals we offer, including the developments and enhancements to
those deals offered by us or our competitors;
our customer and merchant service and support efforts;
selling and marketing efforts;
ease of use, performance, price and reliability of services offered either by us or our competitors;
our ability to improve customer purchase frequency and customer lifetime value;
our ability to drive traffic to our marketplace;
the number, quality and reliability of the digital coupons that can be accessed through our platform;
the quality and performance of our merchants;
our ability to cost-effectively manage our operations; and
our reputation and brand strength relative to our competitors.
Some of our competitors have longer operating histories, greater financial, marketing and other resources
and larger customer bases than we do. These factors may allow our competitors to benefit from their existing
customer base with lower customer acquisition costs or to respond more quickly than we can to new or emerging
technologies and changes in consumer habits. Further, COVID-19 may not have had a comparable impact on these
competitors' businesses. In addition, our competitors may engage in more extensive research and development
efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may
allow them to build larger customer and/or merchant bases or generate revenue from their customer bases more
effectively than we do. Our competitors may offer deals that are similar to the deals we offer or that achieve greater
market acceptance than the deals we offer. This could attract customers away from our websites and mobile
applications, reduce our market share and adversely impact our gross profit. In addition, we are dependent on some
of our existing or potential competitors for display advertisements and other marketing initiatives to acquire new
customers. Our ability to utilize their platforms to acquire new customers may be adversely affected if they choose
to compete more directly with us or prevent us from using their services.
Our success is dependent upon our ability to provide a superior mobile experience for our
customers and our customers' continued ability to access our offerings through mobile devices.
In the year ended December 31, 2020, over 75% of our global transactions were completed on mobile
devices. While the focus on mobile is key to our long-term strategy, currently average purchase prices and
conversion rates on mobile tend to be significantly lower than desktop. In order to continue to grow our mobile
transactions and improve mobile conversion rates, it is critical that our applications are compatible with a range of
mobile technologies, systems, networks and standards and that we provide a good, modern customer experience.
Our business may be adversely affected if our customers choose not to access our offerings on their mobile
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devices, we are not successful in increasing mobile conversion rates or if we fail to develop applications and
product enhancements with adequate functionality and a positive customer experience on a wide range of mobile
devices. In addition, the success of our mobile application depends on our continued ability to distribute it through
mobile application marketplaces (e.g., an app store).
An increase in our refund rates or estimated liabilities with respect to unredeemed vouchers could
adversely affect our financial results.
COVID-19 has had a significant impact on refunds. A further downturn in general economic conditions or
extended period of low consumer confidence (including the continued impact of and recovery from COVID-19) could
also increase our refund rates. An increase in our refund rates could significantly reduce our liquidity, profitability
and financial results. We estimate future refunds based on historical refund experience by category. We assess the
trends that could affect our estimates on an ongoing basis and make adjustments to the refund reserve calculations
if it appears that changes in circumstances, including changes to our refund policies or general economic
conditions, may cause future refunds to differ from our initial estimates. Our actual level of refund claims could
prove to be greater than the level of refund claims we estimate. If our refund reserves are not adequate to cover
future refund claims, this inadequacy could have a material adverse effect on our financial results. In addition, we
may not be able to obtain reimbursement from merchants (particularly those negatively impacted by COVID-19) for
refunds that we issue, which could have an adverse effect on our financial results.
In recent periods, we have increased our use of redemption payment terms with our North America
merchants. In addition, we are required under the applicable revenue recognition standard to estimate variable
consideration from unredeemed vouchers. As a result, a greater percentage of our transactions in North America
than in prior periods will require us to use projections in order to estimate revenue and liabilities associated with
unredeemed vouchers. If the estimates that we use in projecting the likelihood of vouchers being redeemed prove to
be inaccurate, our liabilities with respect to unredeemed vouchers may be materially higher than the amounts
shown in our financial statements, and our net income could be materially and adversely affected.
The loss of key members of our management team, or our failure to attract and retain other highly
qualified personnel in the future could harm our business.
In order to be successful, we must attract, retain and motivate executives and other key employees,
including those in managerial, technical and sales positions. Hiring and retaining qualified executives, engineers
and qualified sales representatives are critical to our success, and competition for experienced and well qualified
executives and employees can be intense. In 2020, we experienced significant leadership changes, including
appointing a new Interim Chief Executive Officer, a new Chief Financial Officer and the departure of our Chief
Operating Officer. Executive leadership transitions can be difficult to manage and could cause disruption to our
business. Further, disruption in our business due to COVID-19, the execution of our restructuring plan and
implementation of our strategy, including phase down and transition of our Goods category, may make it more
difficult to attract and retain talent. In order to attract and retain executives and other key employees in a competitive
including cash and equity-based
marketplace, we must provide a competitive compensation package,
compensation. We currently utilize restricted stock units and performance share units as our forms of share-based
incentive compensation. If the anticipated value of such equity-based incentive awards does not materialize, if our
equity-based compensation otherwise ceases to be viewed as a valuable benefit or if our total compensation
package is not viewed as competitive, our ability to attract, retain and motivate executives and key employees could
be weakened. The failure to successfully hire and retain executives and key employees or the loss of any
executives and key employees could have a significant impact on our operations.
Failure to deal effectively with fraudulent transactions and customer disputes would increase our
loss rate and harm our business.
We sell a variety of offerings to consumers through our marketplace, including our vouchers and digital
coupon offerings with unique identifier codes. It is possible that consumers or other third parties will seek to create
counterfeit vouchers or codes, fraudulent accounts or fraudulent banking information in order to improperly
purchase or redeem goods and services. While we use advanced anti-fraud technologies, criminals may attempt to
circumvent our anti-fraud systems using increasingly sophisticated methods. In addition, our service could be
subject to employee fraud or other internal security breaches or merchant fraud, and we may be required to
reimburse customers or merchants for any funds stolen or revenue lost as a result of such breaches. If merchants
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are affected by buyer fraud or other types of fraud, they could also request reimbursement, or stop offering goods or
services on our marketplaces.
Although we have not incurred significant losses from fraud or counterfeit vouchers or digital codes in the
past, we could incur significant losses from such activities in future periods. Additionally, we may incur losses from
claims that the customer did not authorize a purchase, from credit card fraud, from merchant fraud, from erroneous
transmissions, and from customers who have closed bank accounts or have insufficient funds in them to satisfy
payments. We also may incur losses as a result of purchases made with fraudulent credit card information, even if
the associated financial institution approved payment of the transaction. In addition to the direct costs of any such
losses, if the losses are related to credit card transactions and become excessive, they could potentially result in our
losing the right to accept credit cards for payment. If we were unable to accept credit cards for payment, we would
suffer substantial reductions in revenue, which would cause our business to suffer. While we have taken measures
to detect and reduce the risk of fraud, these measures need continual improvement and may not be effective
against new and continually evolving forms of fraud and may not timely detect fraud. If we are unable to effectively
combat fraudulent transactions or if we otherwise experience increased levels of fraud or disputed credit card
payments, our business could materially suffer.
We are subject to payments-related risks.
We accept payments using a variety of methods, including credit cards, debit cards and gift certificates. As
we offer new payment options to customers, we may be subject to additional regulations, compliance requirements
and fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which
may increase over time and raise our operating costs and lower profitability. In addition, our credit card and other
payment processors generally have broad discretion to impose receivable holdback or reserve requirements and
could do so in the future. Any material increase in receivable holdback or reserve requirements could have a
material impact on our cash flow and available liquidity. In the event our strategy is unsuccessful or our business
deteriorates significantly due to COVID-19 or other factors, these payment processors could increase holdback
amounts due to concerns with our financial condition, which could adversely affect our liquidity. We rely on third
parties to provide payment processing services, including the processing of credit cards and debit cards, and it
could disrupt our business if these companies become unwilling or unable to provide these services to us. We are
also subject to payment card association operating rules, certification requirements and rules governing electronic
funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to
comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability
to accept credit and debit card payments from customers or facilitate other types of online payments, and our
business and operating results could be adversely affected.
We are also subject to or voluntarily comply with a number of other laws and regulations relating to money
laundering, international money transfers, privacy and information security and electronic fund transfers. If we were
found to be in violation of applicable laws or regulations, we could be subject to civil and criminal penalties. In
addition, events affecting our third-party payment processors or our integration with them, including cyber-attacks,
Internet or other infrastructure or communications impairment or other events that could interrupt the normal
operation of our payment processors or our integration with them, or result in unauthorized access to customer
information, could have a material adverse effect on our business.
Risks Related to Technology and Cybersecurity
We rely on email, Internet search engines and mobile application marketplaces to drive traffic to our
marketplace.
The traffic to our websites and mobile applications, including from consumers responding to our emails and
SEO, has declined in recent years. As such, we must focus on diversifying our sources of traffic, including by
developing sources of traffic in addition to email and SEO and optimizing the efficiency of our marketing spending. If
we are not able to diversify our sources of traffic and acquire and retain customers efficiently, our business and
results of operations could be adversely affected.
Email continues to be a significant source of organic traffic for us. If email providers or Internet service
providers implement new or more restrictive email or content delivery or accessibility policies, including with respect
to net neutrality, it may become more difficult to deliver emails to our customers or for customers to access our site
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and services. For example, certain email providers, including Google, categorize our emails as "promotional," and
these emails are directed to an alternate, and less readily accessible, section of a customer's inbox. If email
providers materially limit or halt the delivery of our emails, or if we fail to deliver emails to customers in a manner
compatible with email providers’ email handling or authentication technologies, our ability to contact customers
through email could be significantly restricted. In addition, if we are placed on "spam" lists or lists of entities that
have been involved in sending unwanted, unsolicited emails, our operating results and financial condition could be
substantially harmed.
We also rely heavily on Internet search engines to generate traffic to our websites, principally through SEM
and SEO. The number of consumers we attract from search engines to our platform is due in large part to how and
where information from, and links to, our websites are displayed on search engine results pages. The display,
including rankings, of search results can be affected by a number of factors, many of which are not in our control
and may change at any time. Search engines frequently update and change the logic that determines the placement
and display of the results of a user’s search, such that the purchased or algorithmic placement of links to our
websites can be negatively affected. In addition, a search engine could, for competitive or other purposes, alter its
search algorithms or results causing our websites to place lower in search query results. If a major Internet search
engine changes its algorithms in a manner that negatively affects the search engine ranking it could create
additional traffic headwinds for us and negatively affect our results of operations.
We also rely on mobile marketplace operators (i.e., app store operators) to drive downloads of our mobile
application. If any mobile marketplace operator determines that our mobile application is non-compliant with
its vendor policies, the operator may revoke our rights to distribute through its marketplace or refuse to permit a
mobile application update at any time. These operators may also change their mobile application marketplaces in a
way that negatively affects the prominence of, or ease with which users can access, our mobile application. Such
actions may adversely impact the ability of customers to access our offerings through mobile devices, which could
have a negative impact on our business and results of operations.
We may be subject to breaches of our information technology systems, which could harm our
relationships with our customers, merchants and third-party business partners, subject us to
negative publicity and litigation, and cause substantial harm to our business or brand.
In operating a global online business, we and our third-party service providers maintain significant
proprietary information and manage large amounts of personal data and confidential information about our
employees, customers and merchants. We and such service providers are at constant risk of cyber-attacks or cyber
intrusions via the Internet, computer viruses, break-ins, malware, phishing attacks, hacking, denial-of-service
attacks or other attacks and similar disruptions from the unauthorized use of or access to computer systems
(including from internal and external sources). These types of incidents continue to be prevalent and pervasive
across industries, including in our industry, and such attacks on our systems have occurred in the past and are
expected to occur in the future. In addition, we expect the sophistication of the perpetrators of these attacks to
continue to expand and could include nation-state actors. Further, we believe that we are a compelling target for
such attacks as a result of the high profile of our brand and the amount and type of information we maintain relating
to our customers and merchants. Any such incident could lead to interruptions, delays or website outages, causing
loss of critical data or the unauthorized disclosure or use of personally identifiable or other confidential information.
Any failure to prevent or mitigate cybersecurity breaches or other improper access to, or disclosure of, our
data or confidential information, including non-public financial information, could result in the loss or misuse of such
data or information, negatively impacting customers’, merchants’ and third-party business partners' confidence in
the security of our services and potentially resulting in significant customer or merchant attrition, a decline in
customer purchase frequency, litigation and/or regulatory investigations, and/or damage to our brand and
reputation.
Our risk and exposure to these matters remains heightened because of, among other things, the evolving
nature of these threats, our prominent size and scale, the large number of transactions that we process, our
geographic footprint and international presence, the complexity of our systems, our number of employees, the
jurisdictions in which we operate and the various and evolving laws and regulatory schemes governing data and
data protection applicable to us, the extent to which our current systems, controls, processes and practices permit
us to detect, log and monitor security events, our use of cloud based technologies and the outsourcing of some of
our business operations.
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Although cybersecurity and the continued development and enhancement of our controls, processes and
practices designed to protect our systems, computers, software, data and networks from attack, damage or
unauthorized access are a high priority for us, our activities and investment may not be deployed quickly enough or
successfully protect our systems against all vulnerabilities, including technologies developed to bypass our security
measures or zero day vulnerabilities. In addition, outside parties may attempt to fraudulently induce employees,
merchants or customers to disclose access credentials or other sensitive information in order to gain access to our
systems and networks. We also may be subject to additional vulnerabilities as we integrate the systems, computers,
software and data of acquired businesses and third-party business partners into our networks and separate the
systems, computers, software and data of disposed businesses from our networks.
We maintain a cybersecurity risk management program that is overseen by our Vice President, Information
Security, who reports directly to our Chief Technology Officer. Our Vice President, Information Security regularly
reports to the Audit Committee on the state of our cybersecurity program and provides updates on cybersecurity
matters. We also conduct an annual cybersecurity review with our Board of Directors. As part of our cybersecurity
risk management program, we employ security practices to protect and maintain the systems located at our data
centers and hosting providers, invest in intrusion, anomaly, and vulnerability detection tools and engage third-party
security firms to test the security of our websites and systems. In addition, we regularly evaluate and assess our
systems and the controls, processes and practices to protect those systems and also conduct penetration testing
against our own system. The evaluations, assessments and testing identify areas of potential weakness in, and
suggested improvements to, the maturity of our systems, processes, and risk management framework as well as
vulnerabilities in those systems, processes, and risk management framework that could be attacked and exploited
to access and acquire proprietary and confidential information, including information about our customers and
merchants. There are no assurances that our cybersecurity risk mitigation program or actions and investments to
improve the maturity of our systems, processes and risk management framework or remediate vulnerabilities will be
sufficient or completed quickly enough to prevent or limit the impact of any cyber intrusion. In addition, in the future
we may be required to expend significant additional resources to modify or enhance our protective measures,
controls and systems or to improve the maturity of our systems, processes and risk management framework, or
investigate or remediate any information security vulnerabilities. These improvements, modifications and
enhancements may take significant time to implement. Further, the sophistication of potential attacks or the
capabilities of our systems and processes may not permit us to detect the occurrence of cyber incidents until
significant data loss has occurred. Moreover, because the techniques used to gain access to or sabotage systems
often are not recognized until launched against a target, we may be unable to anticipate the methods necessary to
defend against these types of attacks and we cannot predict the extent, frequency or impact these problems may
have on us. Any actual breach, the perceived threat of a breach or a perceived breach, could cause our customers,
merchants and payment card processors to cease doing business with us or do business with us less frequently,
subject us to lawsuits (including claims for damages), investigations, regulatory fines or other action or liability or
damage to our brand and reputation, which would harm our business, financial condition and results of operations.
Our business depends on our ability to maintain and improve the technology infrastructure
necessary to send our emails and operate our websites, mobile applications and transaction
processing systems, and any significant disruption in service on our email network infrastructure,
websites, mobile applications or transaction processing systems could result in a loss of customers
or merchants.
Customers access our marketplaces through our websites and mobile applications, as well as via emails
that are often targeted by location, purchase history and personal preferences. Customers can also access our deal
offerings indirectly through third-party search engines. Our reputation and ability to acquire, retain and serve our
current and potential customers are dependent upon the reliable performance of our websites, mobile applications,
email delivery and transaction processing systems and the underlying network infrastructure. Our systems may not
be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that
could be prolonged and harmful to our business. If our websites or mobile applications are unavailable when users
attempt to access them, or if they do not load as quickly as expected, users may not return as often in the future, or
at all. We have spent and expect to continue to spend substantial amounts on data centers and equipment, cloud-
based technology and related network infrastructure and services to handle the traffic on our websites and mobile
applications and to help shorten the time of or prevent system interruptions. The operation of these systems is
expensive and complex and could result in operational failures. While resiliency and redundancy are considerations
in the design and operation of Groupon's systems, interruptions, delays or failures in these systems, whether due to
earthquakes, adverse weather conditions, other natural disasters, power loss, computer viruses, cybersecurity
attacks, physical break-ins, terrorism, errors in our software or otherwise, could be prolonged and could affect the
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security or availability of our websites and applications, and prevent our customers from accessing our services. If
we do not maintain or expand our network infrastructure successfully or if we experience operational failures or
prolonged disruptions or delays in the availability of our systems, we could lose current and potential customers and
merchants, which could harm our operating results and financial condition.
In addition, a portion of our network infrastructure is hosted by third-party providers. We also rely on a
variety of tools and third-party commercial partners to provide certain services and offerings (e.g., booking and
ticketing tools). Any disruption or failure of these providers, tools and/or other third parties to handle existing or
increased traffic and transactions could significantly harm our business. Any financial or other difficulties these
providers face may adversely affect our business, and we exercise little control over these providers, which
increases our vulnerability to problems with the services they provide.
As we increase our reliance on cloud-based applications and platforms to operate and deliver our
products and services, any disruption or interference with these platforms could adversely affect
our financial condition and results of operations.
We rely on cloud-based applications and platforms for critical business functions. We also are migrating a
significant portion of our computing infrastructure to third party hosted cloud-based computing platforms. If we are
not able to complete this migration on our expected timeline, we could incur additional costs. Further, these
migrations can be risky and may cause disruptions to the availability of our products due to service outages,
downtime or other unforeseen issues that could increase our costs. We also may be subject to additional risk of
cybersecurity breaches or other improper access to our data or confidential information during or following
migrations to cloud-based computing platforms. In addition, cloud computing services may operate differently than
anticipated when introduced or when new versions or enhancements are released. As we increase our reliance on
cloud-based computing services, our exposure to damage from service interruptions may increase. In the event any
such issues arise, it may be difficult for us to switch our operations from our primary cloud-based providers to
alternative providers. Further, any such transition could involve significant time and expense and could negatively
impact our ability to deliver our products and services, which could harm our financial condition and results of
operations.
Risks Related to Transactions and Investments
Acquisitions, dispositions, joint ventures and strategic investments could result in operating
difficulties, dilution and other consequences.
We routinely evaluate and consider a wide array of potential strategic transactions, including acquisitions
and dispositions of businesses, joint ventures, technologies, services, products and other assets and minority
investments. The pursuit and consummation of such transactions can result in operating difficulties, dilution,
management distraction and other potentially adverse consequences. In the past, we have acquired and divested a
number of companies and may complete additional transactions in the future.
Acquisitions involve significant risks and uncertainties, including uncertainties as to the future financial
performance of the acquired business and the performance of acquired customers, valuation of the acquired
business and integration risks such as difficulties integrating acquired personnel into our business, the potential loss
of key employees, customers or suppliers, difficulties in integrating different computer, payment and accounting
systems and exposure to unknown or unforeseen liabilities of acquired companies. In addition, the integration of an
acquisition could divert management's time and our resources. If we pay for an acquisition or a minority investment
in cash, it would reduce our cash available for operations or cause us to incur debt, and if we pay with our stock, it
could be dilutive to our stockholders. Additionally, we do not have the ability to exert control over our minority
investments, and therefore we are dependent on others in order to realize their potential benefits. Dispositions and
attempted dispositions also involve significant risks and uncertainties, such as the risk of destabilizing the applicable
operations, the loss of key personnel, the terms and timing of any dispositions, the ability to obtain necessary
governmental or regulatory approvals, post-disposal disputes and indemnification obligations and risks and
uncertainties with respect to the separation of disposed operations, including, for example, transition services,
access by purchasers to certain of our systems and tools during transition periods, the migration of data and
separation of systems, data privacy matters and misuse of trademarks and intellectual property. We may be unable
to successfully complete potential strategic transactions or dispositions on a timely basis or at all, or we may not
realize the anticipated benefits of any of our strategic transactions in the time frame expected or at all.
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We do not have the ability to exert control over our minority investments, and therefore we are
dependent on others in order to realize their potential benefits.
We currently hold non-controlling minority investments in entities and we may make additional strategic
minority investments in the future. Such minority investments inherently involve a lesser degree of control over
business operations, thereby potentially increasing the financial, legal, operational and/or compliance risks
associated with the investments. Other investors in these entities may have business goals and interests that are
not aligned with ours, or may exercise their rights in a manner in which we do not approve. These circumstances
could lead to delayed decisions or disputes and litigation with those other investors, all of which could have a
material adverse impact on our reputation, business, financial condition and results of operations.
If these entities seek additional financing, such financing transactions may result in further dilution of our
ownership stakes and such transactions have and in the future may occur at lower valuations than the investment
transactions through which we acquired such interests, which could significantly decrease the fair values of our
investments in those entities. The lack of availability of financing on commercially reasonable terms or a decline in
the business performance, financial condition and competitive environment of any of our minority investments could
result in lower financial results or forecasted results, which also could significantly decrease the fair values of our
investments in those entities. Further, we have made an irrevocable election to account for our investments in
Monster LP and other entities at fair value with changes in fair value reported in earnings. Our election to apply fair
value accounting to those investments has and may continue to cause fluctuations in our earnings from period to
period.
Risks Related to Our Brand and Intellectual Property
We allow third parties to sell products via our site and services and purchase and sell some
products from indirect suppliers, which increase our risk of litigation and other losses.
We allow third party merchants to sell products to our customers via our marketplace platform in North
America, and we expect to fully transition our International Goods category to a third-party marketplace model in
2021. In International, we currently source some merchandise for sale in our Goods category from indirect suppliers
and third-party distributors, and we take title to some goods before we offer them for sale to our customers. In
addition, by allowing third parties to sell products on our platform and sourcing merchandise from parties other than
the brand owners, we are subject to increased intellectual property and other risks, including that the merchandise
may be of disputed authenticity, obtained or sourced outside of the rights holder's established distribution channels
or damaged, which could result in potential liability under applicable laws, regulations, agreements and orders and
increase the amount of returned merchandise or customer refunds. Further, we may be found to be directly liable for
actions by third party merchants who sell goods on our site. In addition, brand owners or regulators may take legal
action against us. Even if we prevail, any such legal action could result in costly litigation, generate adverse publicity
for us, and have a material adverse impact on our business, financial condition, results of operations, brand and
reputation. Further, in any such matter, we may not be entitled to indemnification from our supplier or merchant, or
able to effectively enforce the supplier’s or merchant’s contractual indemnification obligations.
We may be subject to substantial liability claims and damage to our brand and reputation if people
or property are harmed by the products or services offered through our marketplace.
Some of the products and services offered through our marketplace may expose us to liability claims
relating to personal injury, death, negligence, intentional misconduct, assault, abuse or environmental or property
damage. Certain merchants and third parties sell products and offer services using our marketplace that based on
the type of product or service, may increase our exposure to substantial claims and litigation, especially if these
merchants or third-party sellers do not have sufficient protection from such claims. Although we believe we are not
liable for the goods or services that merchants or third-parties offer through our marketplace, there is no assurance
that a court would rule in our favor on such issues. Further, while we maintain liability insurance, we cannot be
certain our coverage will apply to the claims at issue, be adequate for liabilities actually incurred or that insurance
will continue to be available to us on economically reasonable terms, or at all. In addition, some of our agreements
with vendors, merchants and third-party sellers do not indemnify us from certain liability and costs or we may not be
able to effectively enforce our contractual indemnification rights. Claims relating to products or services offered
through our marketplace also could result in significant damage to our brand and reputation regardless of whether
we are ultimately liable for any such claims.
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Our processes and procedures for onboarding merchants and third-party sellers also may expose us to
liability claims or damage to our brand and reputation if the processes or procedures are deemed inadequate.
Additionally, while we maintain multiple channels through which our customers can submit feedback or complaints
about their experiences with merchants and other third-party sellers on our platform, because our customers often
deal directly with the sellers, pertinent feedback may not be provided to us. Moreover, our evaluation of any
customer feedback or complaints we receive is subjective based on the information, which is sometimes very
limited, that our customers provide, and we may not take action in response to feedback or complaints. If our
systems and procedures with respect to any such feedback or complaints are determined to be inadequate or any
action or inaction is found to be inadequate, including, by way of example, not discontinuing on a timely basis offers
of deals with merchants or sellers that have been the subject of material complaints, we could face substantial
additional liability and damage to our brand and reputation for the misconduct of such merchants or third-party
sellers.
We may not be able to adequately protect our intellectual property rights or may be accused of
infringing intellectual property rights of third parties.
We regard our trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary
technology, merchant lists, subscriber lists, sales methodology and similar intellectual property as critical to our
success, and we rely on trademark, copyright and patent law, trade secret protection and confidentiality and/or
license agreements with our employees and others to protect our proprietary rights. Effective intellectual property
protection may not be available in every country in which our deals are made available. We also may not be able to
acquire or maintain appropriate domain names or trademarks in all countries in which we do business. Furthermore,
regulations governing domain names may not protect our trademarks and similar proprietary rights. We may be
unable to prevent third parties from acquiring and using domain names or trade names that are similar to, infringe
upon or diminish the value of our trademarks and other proprietary rights. We may be unable to prevent third parties
from using and registering our trademarks, or trademarks that are similar to, or diminish the value of, our
trademarks in some countries.
We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights.
Third parties that license our intellectual property rights also may take actions that diminish the value of our
proprietary rights or reputation. The protection of our intellectual property may require the expenditure of significant
financial and managerial resources. Moreover, the steps we take to protect our intellectual property may not
adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights. We
are currently subject to multiple lawsuits and disputes related to our intellectual property and service offerings. We
may in the future be subject to additional litigation and disputes. The costs of engaging in such litigation and
disputes are considerable, and there can be no assurances that favorable outcomes will be obtained.
We are currently subject to third-party claims that we infringe upon proprietary rights or trademarks and
expect to be subject to additional claims in the future. Such claims, whether or not meritorious, may result in the
expenditure of significant financial and managerial resources, injunctions against us or the payment of damages by
us. We may need to obtain licenses from third parties who allege that we have infringed their rights, but such
licenses may not be available on terms acceptable to us or at all. These risks have been amplified by the increase
in third parties whose sole or primary business is to assert such claims.
Our business depends on a strong brand, and if we are not able to maintain and enhance our brand,
our ability to expand our base of customers and merchants could be impaired and our business and
operating results could be harmed.
We believe that the brand identity that we have developed has significantly contributed to the success of our
business. We also believe that maintaining and enhancing the "Groupon" brand is critical to expanding our base of
customers and merchants. In addition, maintaining and enhancing our brand may require us to make substantial
additional investments over time and these investments may not be successful. Further, due to the impact of
COVID-19, we significantly decreased our marketing spend in 2020 and delayed certain brand marketing
investments, which could have an adverse impact on our business in the future. If we fail to promote, maintain and
protect the "Groupon" brand, our business, operating results and financial condition may be adversely affected. We
anticipate that, as the local experiences market becomes increasingly competitive, maintaining and enhancing our
brand may become more difficult and expensive. Maintaining and enhancing our brand will depend largely on our
ability to continue to provide reliable, trustworthy and high quality inventory on our marketplace, which we may not
do successfully.
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We receive a high degree of media coverage around the world. Unfavorable publicity or consumer
perception of our websites, mobile applications, practices or service offerings, or the offerings of our merchants or
their products, could adversely affect our reputation, resulting in difficulties in recruiting, decreased revenue and a
negative impact on the number of merchants we feature and the size of our customer base, the loyalty of our
customers and the number and variety of our offerings. As a result, our business, financial condition and results of
operations could be materially and adversely affected.
Risks Related to Legal, Regulatory, Privacy and Tax Matters
We are involved in pending litigation and other claims and an adverse resolution of such matters
may adversely affect our business, financial condition, results of operations and cash flows.
We are involved from time to time in litigation regarding, among other matters, patent and other intellectual
property claims, consumer claims, contract disputes with merchants and vendors, employment claims, and
securities law claims. Litigation, dispute resolution proceedings and investigations can be expensive, time-
consuming and disruptive to normal business operations. The results of complex legal proceedings are often
uncertain and difficult to predict. An unfavorable outcome with respect to any of these lawsuits or claims could have
a material adverse effect on our business, financial condition, results of operations and cash flows. For additional
information, see Item 8, Note 12, Commitments and Contingencies, to the consolidated financial statements.
The COVID-19 pandemic may also result in additional litigation including disputes with merchants,
customers, vendors, and others over refunds, payments, and contract terms. We may also be the target of tort or
negligence claims relating to incidents, injuries or illnesses incurred by customers visiting merchants. Although we
disclaim legal liability for such claims and advise all of our customers that the merchants are solely responsible to
purchasers for the care and quality of the advertised goods and services, there is no assurance that a court would
rule in our favor on such issues. We also hold indemnity rights with respect to merchants in relation to any such
claims, but there is no assurance that merchants will be sufficiently capitalized to cover all incurred losses.
Although we maintain insurance, we cannot be certain our coverage will apply to the claims at issue, be
adequate for any liability incurred or continue to be available to us on economically reasonable terms, or at all. The
cost of insurance, including directors and officer insurance, errors and omission insurance, product liability, general
liability insurance and other types of policies, could increase at any time or become more limited based on market
conditions or other circumstances outside of our control. Furthermore, certain insurance coverages may not be
available for specific risks faced by us. Insurance premium increases and increased risk due to lack of availability,
reduced coverage or increased deductibles could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
The application of certain laws and regulations, including, among other laws, the CARD Act and
similar state and foreign laws, may harm our business and results of operations.
The application of certain laws and regulations to vouchers is uncertain. Vouchers may be considered gift
cards, gift certificates, stored value cards or prepaid cards and therefore governed by, among other laws, the CARD
Act, and state laws governing gift cards, stored value cards and coupons, and, in certain instances, potentially
subject to unclaimed and abandoned property laws. Other foreign jurisdictions have similar laws in place, in
particular European jurisdictions where the European E-Money Directive regulates the business of electronic money
institutions. Many of these laws contain provisions governing the use of gift cards, gift certificates, stored value
cards or prepaid cards, including specific disclosure requirements and prohibitions or limitations on the use of
expiration dates and the imposition of certain fees. For example, if vouchers are subject to the CARD Act and are
not included in the exemption for promotional programs, it is possible that the purchase value, which is the amount
equal to the price paid for the voucher, or the promotional value, which is the add-on value of the voucher in excess
of the price paid, or both, may not expire before the later of (i) five years after the date on which the voucher was
issued; (ii) the voucher’s stated expiration date (if any); or (iii) a later date provided by applicable state law. In the
event that it is determined that vouchers sold through our platform are subject to the CARD Act or any similar state
or foreign law or regulation, and are not within various exemptions that may be available under the CARD Act or
under some of the various state or foreign jurisdictions, our liabilities with respect to unredeemed vouchers may be
materially higher than the amounts shown in our financial statements and we may be subject to additional fines and
penalties.
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In addition, from time to time, we may be notified of additional laws, or developments in existing laws and
regulations that governmental organizations or others may claim should be applicable to our business, or that
otherwise affect our operations. If we are required to alter our business practices, or there are other market
changes, as a result of any laws and regulations, our revenue could decrease, our costs could increase and our
business could otherwise be harmed. In addition, the costs and expenses associated with defending any actions
related to, or otherwise reacting to, such legal or regulatory developments, and any related payments (including
penalties, judgments, settlements or fees) could adversely impact our profitability. To the extent that we expand into
new lines of business and new geographies, we will become subject to additional laws and regulations.
If we are required to materially increase the liability recorded in our financial statements with
respect to unredeemed vouchers our results of operations could be materially and adversely
affected.
In certain states and foreign jurisdictions, vouchers may be considered a gift card. Some of these states
and foreign jurisdictions include gift cards under their unclaimed and abandoned property laws which require
companies to remit to the government the full value or a portion of the value of the unredeemed balance on the gift
cards after a specified period of time (generally between one and five years) and impose certain reporting and
record-keeping obligations. We do not remit any amounts relating to unredeemed vouchers based on our
assessment of applicable laws. The analysis of the potential application of the unclaimed and abandoned property
laws to vouchers is complex, involving an analysis of constitutional and statutory provisions and factual issues,
including our contractual relationship with customers and merchants. In recent periods, we increased our use of
redemption payment terms with our North America merchants. The determinations we make with respect to variable
consideration that we earn on those transactions may be subject to the laws described above. In the event that one
or more states or foreign jurisdictions successfully challenges our position on the application of its unclaimed and
abandoned property laws to vouchers, our liabilities with respect to unredeemed vouchers, including any resulting
penalties and interest, may be materially higher than the amounts shown in our financial statements which could
have a material adverse impact on our results of operations.
Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or
failure by us to comply with these regulations could substantially harm our business and results of
operations.
We are subject to general business regulations and laws as well as regulations and laws specifically
governing the Internet and e-commerce. Existing and future regulations and laws could impede the growth of the
Internet or other online services. These regulations and laws may involve taxation, tariffs, subscriber privacy, anti-
spam, data protection, content, reference pricing, copyrights, distribution, communications, consumer protection, the
provision of online payment services and the characteristics and quality of services. The application of existing laws
governing issues such as property ownership, sales and other taxes, libel and personal privacy to the Internet is not
clear as the vast majority of these laws were adopted prior to the advent of, and do not contemplate or address the
unique issues raised by, the Internet or e-commerce. In addition, it is possible that governments of one or more
countries may seek to censor, or entirely block access to the content available on our websites, mobile applications,
or marketing emails. Adverse legal or regulatory developments also could substantially harm our business. In
particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability
to retain or increase our customer base may be adversely affected and we may not be able to maintain or grow our
gross profit as anticipated.
Failure to comply with federal, state and international privacy laws and regulations, or the
expansion of current or the enactment of new privacy laws or regulations, could adversely affect
our business.
A variety of federal, state and international laws and regulations govern the collection, use, retention,
sharing and security of consumer data. The existing privacy-related laws and regulations are evolving and subject to
potentially differing interpretations. In addition, various federal, state and foreign legislative and regulatory bodies
may expand current or enact new laws regarding privacy matters. For example, GDPR requires companies to
satisfy requirements regarding the handling of personal and sensitive data, including its collection, use, protection
and the ability of persons whose data is stored to correct or delete such data about themselves. The CCPA also
regulates the collection and use of consumers' data. Complying with the GDPR, CCPA and similar laws and
regulations may cause us to incur substantial operational costs or require us to change our business practices.
Further, despite our diligent efforts to comply with these laws and regulations, we may not be successful either due
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to internal or external factors such as resource allocation limitations or a lack of vendor cooperation. Noncompliance
could result in proceedings against us by governmental entities or others and fines. For example, fines under GDPR
could be up to the greater of €20 million or 4% of annual global revenue and damage our reputation and brand. As a
result of GDPR, CCPA and similar laws and regulations,we may experience difficulty retaining or obtaining new
customers due to the compliance cost, potential risk exposure and portability of customer data. We also may find it
necessary to establish and maintain systems and procedures to comply with these evolving laws and regulations
that involve substantial expense and distraction from other aspects of our business. Additionally, there could be
uncertainty as to how to comply with privacy laws, in various jurisdictions such as country or state-specific laws that
may conflict with or deviate from privacy directives, such as GDPR, CCPA or future laws and regulations.
We have posted privacy policies and practices concerning the collection, use and disclosure of subscriber
data on our websites and applications. Several Internet companies have incurred substantial penalties for failing to
abide by the representations made in their privacy policies and practices. In addition, several states have adopted
legislation that requires businesses to implement and maintain reasonable security procedures and practices to
protect sensitive personal information and to provide notice to consumers in the event of a security breach resulting
in a loss or likely loss of personal information. Any failure, or perceived failure, by us to comply with our posted
privacy policies or with any data-related consent orders, Federal Trade Commission requirements or orders or other
federal, state or international privacy or consumer protection-related laws, regulations or industry self-regulatory
principles could result in claims, proceedings or actions against us by governmental entities or other third-parties or
other liabilities, which could adversely affect our business. In addition, a failure or perceived failure to comply with
industry standards or with our own privacy policies and practices could result in a loss of subscribers or merchants
and adversely affect our business. Federal, state and international governmental authorities continue to evaluate
the privacy implications inherent in the use of third-party web "cookies" for tracking and behavioral advertising. The
regulation of these cookies and other current online advertising practices could adversely affect our business.
Misclassification or reclassification of our independent contractors or employees could increase
our costs and adversely impact our business.
In the United States, our workers are classified as either employees or independent contractors, and if
employees, as either exempt from overtime or non-exempt (and therefore overtime eligible). United States
regulatory authorities and private parties have recently asserted within several industries that some independent
contractors should be classified as employees and that some exempt employees, including those in sales-related
positions, should be classified as non-exempt based upon the applicable facts and circumstances and their
interpretations of existing rules and regulations. If we are found to have misclassified employees as independent
contractors or non-exempt employees as exempt, we could face penalties and have additional exposure under
federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, including for
prior periods, as well as potential liability for employee overtime and benefits and tax withholdings. Legislative,
judicial, or regulatory (including tax) authorities could also introduce proposals or assert interpretations of existing
rules and regulations that would change the classification of a significant number of independent contractors doing
business with us from independent contractor to employee and a significant number of exempt employees to non-
exempt. A reclassification in either case could result in a significant increase in employment-related costs such as
wages, benefits and taxes as well as punitive damages in any related litigation. The costs associated with employee
classification, including any related regulatory action or litigation, could have a material adverse effect on our results
of operations and our financial position.
We may suffer liability as a result of information or content retrieved from or transmitted over the
Internet and claims related to our service offerings.
We may be, and in certain cases have been, sued for defamation, civil rights infringement, negligence,
patent, copyright or trademark infringement, invasion of privacy, personal injury, product liability, breach of contract,
unfair competition, discrimination, antitrust reference pricing or other legal claims relating to information or content
that is published or made available on our websites or service offerings we make available (including provision of an
application programming interface platform for third parties to access our website, mobile device services and
geolocation applications). This risk is enhanced in certain jurisdictions outside the United States, where our liability
for such third-party actions may be less clear. In addition, we could incur significant costs in investigating and
defending such claims, even if we ultimately are not found liable. If any of these events occurs, our business could
be materially and adversely affected.
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We are subject to risks associated with information disseminated through our websites and mobile
applications, including consumer data, content that is produced by our editorial staff and errors or omissions related
to the offerings on our marketplaces. Such information, whether accurate or inaccurate, may result in our being
sued by our merchants, subscribers or third parties and as a result our results of operations and our financial
position could be materially and adversely affected.
We may have exposure to greater than anticipated tax liabilities.
We are subject to income taxes in the United States (federal, state, and local) and numerous foreign
jurisdictions. Tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant
change due to economic, political, and other conditions, and significant judgment is required in evaluating and
estimating our provision and accruals for these taxes. Our income tax obligations are based on our corporate
operating structure, including the manner in which we develop, value and use our intellectual property and the
scope of our international operations.
The tax laws applicable to our domestic and international business activities, including the laws of the
United States and other jurisdictions, are subject to interpretation. The taxing authorities of the jurisdictions in which
we operate may challenge our methodologies for valuing developed technology or intercompany arrangements,
which could potentially increase our worldwide effective tax rate and harm our financial position and results of
operations. In addition, there are many transactions that occur during the ordinary course of business for which the
ultimate tax determination is uncertain. Our effective tax rates could be adversely affected by earnings being lower
than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions
where we have higher statutory rates, losses incurred in jurisdictions for which we are not able to realize the related
tax benefits, changes in foreign currency exchange rates, entry into new businesses and geographies and changes
to our existing businesses, acquisitions and investments, changes in our deferred tax assets and liabilities and their
valuation and changes in the relevant tax, accounting and other laws, regulations, administrative practices,
principles and interpretations, including fundamental changes to the tax laws applicable to corporate multinationals.
Developments in an audit, litigation or the relevant laws, regulations, administrative practices, principles and
interpretations could have a material effect on our financial position, operating results and cash flows in the period
or periods for which that development occurs, as well as for prior and subsequent periods.
We also are subject to regular review and audit by both U.S. (federal, state. local) and foreign tax
authorities. In particular, we currently are, and expect to continue to be, subject to numerous federal, state and
international tax audits relating to income, transfer pricing, sales, VAT and other tax liabilities. Some of these
pending and future audits could involve significant liabilities and/or penalties. We are subject to claims for tax
assessments by foreign jurisdictions, including a proposed assessment for $126.4 million (inclusive of estimated
incremental interest from the original assessment). We believe that the assessment, which primarily relates to
transfer pricing on transactions occurring in 2011, is without merit and we intend to vigorously defend ourselves in
that matter. See Item 8, Note 17, Income Taxes, for additional information. Any adverse outcome of such a review
or audit could have a significant negative effect on our financial position and results of operations. In addition, the
determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment by
management, and there are many transactions where the ultimate tax determination is uncertain. Although we
believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our
financial statements and may materially affect our financial results in the period or periods for which such
determination is made.
The adoption of tax reform policies, including the enactment of legislation or regulations
implementing changes in the tax treatment of companies engaged in Internet commerce and U.S.
taxation could materially affect our financial position and results of operations.
It is possible that various states or foreign countries may regulate our transmissions or levy additional sales,
income or other taxes relating to our activities. Tax authorities at the international, federal, state and local levels are
currently reviewing the appropriate treatment of companies engaged in Internet commerce and marketplace
operators, and new or revised international, federal, state or local tax regulations may subject us or our customers
to additional sales, income and other taxes. We cannot predict the effect of current attempts to impose sales,
income or other taxes on commerce over the Internet. New or revised taxes and, in particular, obligations on online
marketplaces and remote sellers to collect sales taxes, VAT and similar taxes, including digital service taxes, may
result in liability for third party obligations and would likely increase the cost of doing business online and decrease
the attractiveness of advertising and selling goods and services over the Internet. For example, digital service taxes
28
adopted by certain countries or similar regulations could adversely affect our financial results. New taxes or the
enactment of new tax laws could also create significant increases in internal costs necessary to capture data, and
collect and remit taxes. Any of these events could have an adverse effect on our business and results of operations.
On December 22, 2017, new legislation was signed into law that revises the Internal Revenue Code of
1986, as amended. The newly enacted federal income tax law contained significant changes to corporate taxation.
As a result of recent changes in the US Administration, it is likely that further US federal tax law changes will be
introduced. The details of proposed changes are still to be confirmed. While these changes will likely impact
Groupon's worldwide effective tax rate, it is difficult to determine the extent of the impact until further details of the
proposed changed are issued.
Federal laws and regulations, such as the Bank Secrecy Act and the USA PATRIOT Act and similar
foreign laws, could be expanded to include Groupon vouchers or other offerings.
Various federal laws, such as the Bank Secrecy Act and the USA PATRIOT Act and foreign laws and
regulations, such as the European Directive on the prevention of the use of the financial system for the purpose of
money laundering and terrorist financing, impose certain anti-money laundering requirements on companies that
are financial institutions or that provide financial products and services. For these purposes, financial institutions are
broadly defined to include money services businesses such as money transmitters, check cashers and sellers or
issuers of stored value cards. Examples of anti-money laundering requirements imposed on financial institutions
include subscriber identification and verification programs, record retention policies and procedures and transaction
reporting. We do not believe that we are a financial institution subject to these laws and regulations based, in part,
upon the characteristics of Groupon vouchers and our role with respect to the distribution of Groupon vouchers to
customers. For example, the Financial Crimes Enforcement Network ("FinCEN"), a division of the U.S. Treasury
Department tasked with implementing the requirements of the Bank Secrecy Act (the "BSA"), has adopted
regulations expanding the scope of the BSA and requirements for parties involved in stored value or prepaid access
cards, including a proposed expansion of financial institutions to include sellers or issuers of prepaid access cards.
While we believe Groupon vouchers are not subject to these regulations, it is possible that FinCEN or a court of law
could consider Groupon vouchers (or other Groupon products) a financial product and thus deem Groupon to be
subject to such laws and obligations as a financial institution. In the event that we become subject to the
requirements of the Bank Secrecy Act or any other anti-money laundering law or regulation imposing obligations on
us as a money services business, our regulatory compliance costs to meet these obligations would likely increase
which could adversely impact our operating results.
State and foreign laws regulating money transmission could be expanded to include Groupon
vouchers or other Groupon products or services.
Many states and certain foreign jurisdictions impose license and registration obligations on those
companies engaged in the business of money transmission, with varying definitions of what constitutes money
transmission. We currently believe that we are not a money transmitter given our role and the product terms of
Groupon vouchers or other Groupon products or services. However, a successful challenge to our position or
expansion of state or foreign laws could subject us to increased compliance costs and delay our ability to offer
Groupon vouchers or other products or services in certain jurisdictions pending receipt of any necessary licenses or
registrations.
Risks Related to Our Capital Structure
Our access to capital and ability to raise capital in the future may be limited, which could prevent us
from growing, and our existing credit agreement could restrict our business activities.
We may need additional capital in the future and to seek additional financing or covenant relief. Any such
financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could
harm our business. We have outstanding $250.0 million in aggregate principal amount of 3.25% convertible senior
notes (the "Notes"). In addition, we are party to a $225.0 million amended and restated credit agreement with
JPMorgan Chase Bank, N.A., as administrative agent, dated as of May 14, 2019, as amended (the "Amended
Credit Agreement"), which matures in May 2024. In particular, the Notes (as defined below) mature in April 2022. If
we don’t redeem or refinance the Notes at least 91 days prior to their maturity, the maturity date of our Amended
Credit Agreement will spring forward to January 2022, subject to certain exceptions. We continue to evaluate our
long-term capital structure.
29
The Amended Credit Agreement contains financial and other covenants that may restrict our business
activities or our ability to execute our strategic objectives. Due to the impact of COVID-19 on our business, we
entered into an amendment to the Amended Credit Agreement in July 2020 to provide, among other things,
covenant relief through the first quarter of 2021, and we may need to seek additional relief in the future depending
on the timing and volatility of the recovery of our business from COVID-19. Failure to comply with the covenants
contained in our Amended Credit Agreement (if not waived or further amended) could give rise to an event of default
and, if not cured, entitle the lenders to accelerate the indebtedness outstanding thereunder and terminate our ability
to borrow in the future under the Amended Credit Agreement. Further, acceleration of indebtedness under the
Amended Credit Agreement could result in an event of default under the indenture (the "Indenture") governing our
3.25% convertible notes (the "Notes"). Any termination of our ability to borrow or event of default under our
Amended Credit Agreement would have a material adverse impact on our liquidity.
Additionally, other general economic conditions and our future operating performance, could ultimately limit
our access to funding under our Amended Credit Agreement. Furthermore, additional equity financing may dilute the
interests of our common stockholders, and debt financing, if available, may involve restrictive covenants that could
further restrict our business activities or our ability to execute our strategic objectives and could reduce our
profitability. If we cannot access the full capacity of our credit facility or raise or borrow funds on acceptable terms or
at all, it could adversely affect our liquidity, and we may not be able to grow our business or respond to competitive
pressures.
We may not have the ability to use cash to settle the principal amount of our Notes upon conversion
or to repurchase the Notes upon a fundamental change, which could result in dilution and could
adversely affect our financial condition.
The Notes are convertible any time prior to their maturity on April 1, 2022 into cash, stock or a combination
of cash and stock at an initial conversion rate set forth in the Indenture. Notes that are converted in connection with
a make-whole fundamental change (as defined in the Indenture) may be entitled to an increase in the conversation
rate for such Notes. Upon a conversion event, if we do not have adequate cash available or cannot obtain additional
financing, or our use of cash is restricted by applicable law, regulations or agreements governing our current or
future indebtedness, we may not be able to use cash to settle the principal amount of the Notes upon conversion. If
we settle any portion of the principal amount of the Notes upon conversion in stock, it will result in immediate
dilution to the ownership interests of existing stockholders and such dilution could be material.
In addition, holders of the Notes have the right to require us to repurchase their Notes upon the occurrence
of a fundamental change (as defined in the Indenture) at a repurchase price equal to 100% of the principal amount
of the Notes to be repurchased, plus accrued and unpaid interest, if any. If we do not have adequate cash available
or cannot obtain additional financing, or our use of cash is restricted by applicable law, regulations or agreements
governing our current or future indebtedness, we may not be able repurchase the Notes when required under the
Indenture, which would constitute an event of default under the Indenture. An event of default under the Indenture
could also lead to a default under other agreements governing our current and future indebtedness, and if the
repayment of such other indebtedness were accelerated, we may not have sufficient funds to repay the
indebtedness and repurchase the Notes or make cash payments upon conversion of the Notes.
The terms of the Notes could delay or prevent an attempt to take over our Company.
The terms of the Notes require us to repurchase the Notes in the event of a fundamental change. A
takeover of our Company would constitute a fundamental change. This could have the effect of delaying or
preventing a takeover of our Company that may otherwise be beneficial to our stockholders.
Risks Related to Ownership of Our Common Stock
The trading price of our common stock is highly volatile.
The trading price of our common stock has fluctuated significantly since our initial listing on NASDAQ. We
expect that the trading price of our stock will continue to be volatile due to variations in our operating results and
also may change in response to other factors, including factors specific to technology and Internet commerce
companies, many of which are beyond our control. Among the factors that could affect our stock price are:
•
our financial results;
30
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
any financial projections that we provide to the public, any changes in these projections or our
failure for any reason to meet these projections or projections made by research analysts;
the number of shares of our common stock that are available for sale;
the relative success of competitive products or services;
the public's response to press releases or other public announcements by us or others, including
our filings with the SEC and announcements relating to litigation;
the impact of COVID-19 on our business;
speculation about our business in the press or the investment community;
future sales of our common stock by our significant stockholders, officers and directors;
announcements about our share repurchase program and purchases under the program;
changes in our capital structure, such as any refinancing or future issuances of debt or equity
securities;
our entry into new markets or exits from existing markets;
regulatory developments;
strategic acquisitions, joint ventures or restructurings announced or consummated by us or our
competitors;
strategic dispositions of businesses or other assets announced or consummated by us;
our ability to execute our strategy; and
changes in accounting principles.
We expect the stock price volatility to continue for the foreseeable future as a result of these and other
factors.
If securities or industry analysts do not publish research or reports about our business, or publish
inaccurate or unfavorable research reports about our business, our share price and trading volume
could decline.
The trading market for our common stock depends, in part, on the research and reports that securities or
industry analysts publish about us or our business. We do not have any control over these analysts, and in the past,
we have had changes in analyst ratings that have affected our stock price. If one or more of the analysts who cover
us should downgrade our shares or change their opinion of our shares, industry sector or products, our share price
would likely decline. If one or more of these analysts ceases coverage of our company or fails to regularly publish
reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume
to decline.
We do not intend to pay dividends for the foreseeable future.
We intend to retain all of our earnings for the foreseeable future to finance the operation and expansion of
our business and do not anticipate paying cash dividends. As a result, stockholders can expect to receive a return
on their investment in our common stock only if the market price of the stock increases.
Provisions in our charter documents and under Delaware law could discourage a takeover that
stockholders may consider favorable.
Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a
change of control or changes in our management. These provisions include the following:
• Our Board of Directors has the right to elect directors to fill a vacancy created by the expansion of
the Board of Directors or the resignation, death or removal of a director, which prevents
stockholders from being able to fill vacancies on our Board of Directors.
•
Special meetings of our stockholders may be called only by our Chairman of the Board of Directors,
our Chief Executive Officer, our Board of Directors or holders of not less than the majority of our
31
issued and outstanding common stock. This limits the ability of minority stockholders to take certain
actions without an annual meeting of stockholders.
• Our stockholders may not act by written consent unless the action to be effected and the taking of
such action by written consent is approved in advance by our Board of Directors. As a result, a
holder, or holders, controlling a majority of our common stock would generally not be able to take
certain actions without holding a stockholders' meeting.
• Our certificate of incorporation prohibits cumulative voting in the election of directors. This limits the
ability of minority stockholders to elect director candidates.
•
Stockholders must provide timely notice to nominate individuals for election to the Board of
Directors or to propose matters that can be acted upon at an annual meeting of stockholders.
These provisions may discourage or deter a potential acquiror from conducting a solicitation of
proxies to elect the acquiror's own slate of directors or otherwise attempting to obtain control of our
company.
• Our Board of Directors may issue, without stockholder approval, shares of undesignated preferred
stock. The ability to authorize undesignated preferred stock makes it possible for our Board of
Directors to issue preferred stock with voting or other rights or preferences that could impede the
success of any attempt to acquire us.
The convertible note hedge and warrant transactions may affect the value of our common stock.
On May 9, 2016, we purchased convertible note hedges from certain bank counterparties. The convertible
note hedges are intended to reduce the potential economic dilution upon conversion of the Notes. On May 9, 2016,
we also sold warrants to certain bank counterparties. The warrant transactions would separately have a dilutive
effect to the extent that the market price per share of our common stock exceeds the applicable strike price of the
warrants.
The bank counterparties or their respective affiliates may modify their initial hedge positions by entering into
or unwinding various derivatives contracts with respect to our common stock and/or purchasing or selling our
common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and
are likely to do so during any observation period related to a conversion of Notes or following any repurchase of
Notes by us on any fundamental change repurchase date or otherwise). This activity could cause or avoid a
significant change in the market price of our common stock.
In addition, in some circumstances, such as an early termination of the convertible note hedge and warrant
transactions, including in connection with certain change of control transactions or other extraordinary events, the
bank counterparties or their respective affiliates may unwind their hedge positions with respect to our common
stock, which could adversely affect the value of our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
32
ITEM 2. PROPERTIES
As of December 31, 2020, we owned no property and leased approximately 871,000 square feet of space.
Our corporate headquarters and principal executive offices are located in Chicago, Illinois. Other properties are
located throughout the world and largely represent local operating facilities. We believe that our properties are in
good condition and meet the needs of our business, and that suitable additional or alternative space will be
available as needed to accommodate our business operations and future growth.
Description of Use
Corporate offices
Corporate offices
Data centers
Data centers
Segment
North America
International
North America
International
Leased Square Feet
494,000 (1)
348,000
20,000
9,000
(1)
Includes approximately 113,000 square feet of space subleased to third parties. See Item 8, Note 11, Leases for more information.
ITEM 3. LEGAL PROCEEDINGS
For a description of our material pending legal proceedings, please see Item 8, Note 12, Commitments and
Contingencies, to the consolidated financial statements of this Annual Report on Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
33
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock has been listed on the NASDAQ Global Select Market under the symbol "GRPN" since
PART II
November 4, 2011.
Reverse Stock Split
In June 2020, we effectuated a reverse stock split of our shares of common stock at a ratio of 1-for-20 and a
corresponding reduction in the number of authorized shares of our common stock. On the effective date, every 20
shares of issued and outstanding common stock were combined and converted into one issued and outstanding
share of common stock. The number of authorized shares of Common Stock was reduced proportionately.
Fractional shares were cancelled and stockholders received cash in lieu thereof and the par value per share of
common stock remains unchanged. A proportionate adjustment was also made to the maximum number of shares
of common stock issuable under the Groupon, Inc. Stock Plans (the "Plans"), and the Groupon, Inc. 2012 Employee
Stock Purchase Plan, as amended ("ESPP").
As a result, the number of shares and income (loss) per share disclosed throughout this Annual Report on
Form 10-K have been retrospectively adjusted to reflect the reverse stock split.
Holders
As of February 22, 2021, there were 104 holders of record of our common stock. Each holder of our
common stock is entitled to one vote per share on any matter that is submitted to a vote of stockholders.
Recent Sales of Unregistered Securities
During the year ended December 31, 2020, we did not issue any unregistered equity securities.
Issuer Purchases of Equity Securities
In May 2018, the Board authorized us to repurchase up to $300.0 million of our common stock under our
share repurchase program. During the year ended December 31, 2020, we did not purchase any shares under the
repurchase program. As of December 31, 2020, up to $245.0 million of common stock remained available for
purchase under our program.The timing and amount of share repurchases, if any, will be determined based on
market conditions, limitations under the Amended Credit Agreement, share price, available cash and other factors,
and the share repurchase program may be terminated at any time. We will fund the repurchases, if any, through
cash on hand, future cash flows and borrowings under our credit facility. Repurchases will be made in compliance
with SEC rules and other legal requirements and may be made in part under a Rule 10b5-1 plan, which permits
stock repurchases when we might otherwise be precluded from doing so. See Item 8, Note 13, Stockholders' Equity,
for information regarding our share repurchase program.
Since the inception of our share repurchase programs in August 2013 through December 31, 2020, we
have repurchased 10,294,117 shares of our common stock (or Class A common stock prior to the conversion of our
Class A common stock and Class B common stock to a single class of common stock on October 31, 2016) for an
aggregate purchase price of $922.7 million (including fees and commissions).
34
The following table provides information about purchases of shares of our common stock during the three
months ended December 31, 2020 related to shares withheld upon vesting of restricted stock units for minimum tax
withholding obligations:
Date
October 1-31, 2020
November 1-30, 2020
December 1-31, 2020
Total
(1)
Total Number
of Shares
Purchased (1)
Average Price
Paid Per Share
Total Number of Shares
Purchased as Part of Publicly
Announced Program
Maximum Number (or Approximate
Dollar Value) of Shares that May
Yet Be Purchased Under Program
8,458 $
3,652
13,715
25,825 $
20.81
26.83
39.45
31.56
—
—
—
—
—
—
—
—
Total number of shares delivered to us by employees to satisfy the mandatory tax withholding requirement upon vesting of stock-based
compensation awards.
35
Stock Performance Graph
This performance graph shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended (the Exchange Act), or incorporated by reference into any filing of Groupon, Inc. under the
Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific
reference in such filing. Our stock price performance shown in the graph below is not indicative of our future stock
price performance.
The graph set forth below compares the cumulative total return on our common stock (or Class A common
stock prior to the conversion of our Class A common stock and Class B common stock to a single class of common
stock on October 31, 2016) with the cumulative total return of the Nasdaq Composite Index and the Nasdaq 100
Index, resulting from an initial investment of $100 in each and assuming the reinvestment of any dividends, based
on closing prices on the last trading day of each year end period for 2016, 2017, 2018, 2019, and 2020.
36
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in conjunction with our consolidated financial
statements and the accompanying notes thereto in Item 8 of this Annual Report on Form 10-K, and the information
contained in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of
this Annual Report on Form 10-K. Historical results are not necessarily indicative of future results.
Consolidated Statements of Operations Data (1):
Revenue:
Service
Product
Total revenue
Cost of revenue:
Service
Product
Total cost of revenue
Gross profit
Operating expenses:
Marketing
Selling, general and administrative (2)
Goodwill Impairment
Long-lived asset impairment
Restructuring charges
Gain on sale of intangible assets
Gains on business dispositions
Total operating expenses
Income (loss) from operations
Other income (expense), net
Year Ended December 31,
2020
2019
2018
2017 (4)
2016 (4)
(in thousands, except share and per share amounts)
$
643,653 $ 1,126,357 $ 1,205,487 $ 1,266,452 $ 1,206,441
773,215
1,092,558
1,431,259
1,577,425
1,807,174
1,416,868
2,218,915
2,636,746
2,843,877
3,013,615
79,296
660,278
114,462
120,077
160,810
150,031
918,324
1,196,068
1,349,206
1,582,931
739,574
1,032,786
1,316,145
1,510,016
1,732,962
677,294
1,186,129
1,320,601
1,333,861
1,280,653
154,534
603,185
109,486
22,351
64,836
—
—
339,355
806,945
395,737
870,961
400,918
901,829
—
—
31
—
—
—
—
(136)
—
—
—
—
18,828
(17,149)
352,175
999,677
—
—
40,438
—
954,392
1,146,331
1,266,562
1,304,426
1,380,891
(277,098)
(16,968)
39,798
(53,329)
54,039
(53,008)
—
(11,399)
29,435
6,710
36,145
7,544
28,601
(1,974)
26,627
(100,238)
(71,289)
(171,527)
(5,318)
(166,209)
(17,114)
(183,323)
Income (loss) from continuing operations before provision
(benefit) for income taxes
Provision (benefit) for income taxes
Income (loss) from continuing operations
(294,066)
(13,531)
(7,504)
761
(286,562)
(14,292)
Income (loss) from discontinued operations, net of tax
382
2,597
Net income (loss)
(286,180)
(11,695)
1,031
(957)
1,988
—
1,988
Net income attributable to noncontrolling interests
Net income (loss) attributable to Groupon, Inc.
Basic net income (loss) per share (3) :
Continuing operations
Discontinued operations
Basic net income (loss) per share
Diluted net income (loss) per share (3) :
Continuing operations
Discontinued operations
Diluted net income (loss) per share
Weighted average number of shares outstanding (3)
$
$
$
$
$
(1,751)
(287,931) $
(10,682)
(22,377) $
(13,067)
(11,079) $
(12,587)
14,040 $
(11,264)
(194,587)
(10.08) $
(0.88) $
(0.39) $
0.57 $
0.01
0.09
—
(0.07)
(10.07) $
(0.79) $
(0.39) $
0.50 $
(10.08) $
(0.88) $
(0.39) $
0.56 $
0.01
0.09
—
(0.07)
(10.07) $
(0.79) $
(0.39) $
0.49 $
(6.16)
(0.59)
(6.75)
(6.16)
(0.59)
(6.75)
Basic
Diluted
28,604,115
28,370,417
28,325,555
27,968,353
28,817,712
28,604,115
28,370,417
28,325,555
28,420,918
28,817,712
(1)
(2)
(3)
(4)
The consolidated statements of operations data for prior years has been retrospectively adjusted to reflect discontinued operations. See
Item 8, Note 4, Discontinued Operations, for additional information.
Includes $0.7 million and $5.7 million of acquisition-related expenses for the years ended December 31, 2018 and 2016. See Item 8,
Note 5, Business Combinations, for additional information.
All share and per share information has been retroactively adjusted to reflect a reverse stock split. See Item 8, Note 13, Stockholders'
Equity for additional information.
On January 1, 2018, we adopted Topic 606 using the modified retrospective method. Beginning on January 1, 2018, results are
presented in accordance with the revised policies, while prior period amounts are not adjusted and continue to be reported in accordance
with our historical policies.
37
As of December 31,
2020
2019
2018 (1)
2017 (1) (2)
2016 (1) (2)
Consolidated Balance Sheet Data:
(in thousands)
Cash and cash equivalents
Working capital (deficit)
Total assets
Total long-term liabilities
$
850,587 $
750,887 $
841,021 $
880,129 $
862,977
(4,962)
66,366
41,455
(61,051)
(121,115)
1,411,507
1,586,743
1,642,142
1,677,505
1,761,377
364,845
370,150
302,357
292,161
283,264
Total Groupon, Inc. Stockholders' Equity
107,675
393,936
381,248
250,973
264,420
(1)
(2)
On January 1, 2019, we adopted Topic 842 using the modified retrospective transition method. Beginning on January 1, 2019 results are
presented in accordance with the revised policies, while prior period amounts are not adjusted and continue to be reported in accordance
with our historical policies.
On January 1, 2018, we adopted Topic 606 using the modified retrospective method. Beginning on January 1, 2018, results are
presented in accordance with the revised policies, while prior period amounts are not adjusted and continue to be reported in accordance
with our historical policies.
38
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read
together with our consolidated financial statements and related notes included under Item 8 of this Annual Report on
Form 10-K. This discussion contains forward-looking statements about our business and operations. Our actual
results may differ materially from those we currently anticipate as a result of many factors, including those we
describe under Item 1A, Risk Factors, and elsewhere in this Annual Report. See Part I, Forward-Looking
Statements, for additional information.
Overview
Groupon is a global scaled two-sided marketplace that connects consumers to merchants. Consumers
access our marketplace through our mobile applications and our websites, primarily localized groupon.com sites in
many countries. We operate in two segments: North America and International and in three categories: Local,
Goods and Travel. See Item 8, Note 21, Segment Information for additional information.
Currently, we generate product and service revenue from the following business operations.
Service Revenue from Local, Travel, and Goods Categories: Service revenue primarily represents the net
commissions earned from selling goods or services on behalf of third-party merchants. Service revenue is reported
on a net basis as the purchase price collected from the customer less the portion of the purchase price that is
payable to the third-party merchant. We also earn commissions when customers make purchases with retailers
using digital coupons accessed through our websites and mobile applications.
Product Revenue from Goods Category: We generate product revenue from our sales of first-party Goods
inventory, which are direct sales of merchandise inventory. For product revenue transactions, we are the primary
party responsible for providing the good to the customer, we have inventory risk and we have discretion in
establishing prices. As such, product revenue is reported on a gross basis as the purchase price received from the
customer. Product revenue, including associated shipping revenue, is recognized when title passes to the customer
upon delivery of the product. We have transitioned to a third-party marketplace in North America as of the end of
2020 and will begin to transition to a third-party marketplace in International in the second quarter 2021. Following
the International transition, we expect our Goods category to primarily generate revenue on a net basis within
service revenue.
In 2020, the COVID-19 pandemic has led to significant disruption in our business. See Strategy,
Restructuring and Cost Reduction and Factors Affecting our Performance below, and Item 8, Note 3, COVID-19
Pandemic, for more information about the impacts of COVID-19 on our business.
Strategy
In February 2020, we announced a strategic plan to focus on our local experiences marketplace, which
included exiting our Goods category. However, due to the significant disruption in our business due to the COVID-19
pandemic we continue to sell Goods on our platform. In the third quarter 2020, we announced an updated strategy
and plan to prioritize expanding our Local inventory and modernizing our marketplace by improving the merchant
and customer experiences. While both of these are important to building a successful marketplace, we believe the
most critical of these is expanding Local inventory.
To validate our strategic priority of expanding Local inventory, early in the third quarter 2020 we launched a
test in four markets in North America to determine if growing inventory would result in improved billings and units
performance. To grow Local supply, we focused on leveraging three types of inventory: Deals with few restrictions,
new, lower discount Offers, and Market Rate supply. At the conclusion of our test in December 2020, we determined
that we reached our test goals and we intend to scale elements of our inventory strategy more broadly throughout
our marketplace in 2021. We also intend to continue to make enhancements to the customer and merchant
experiences in 2021.
39
Restructuring and Cost Reduction
During the year ended December 31, 2020 we took significant actions to improve our cash position and
materially reduce our cost structure. In April 2020, the Board approved a multi-phase restructuring plan related to
our previously announced strategic shift and as part of the cost cutting measures implemented in response to the
impact of COVID-19 on our business.
The first phase of our restructuring actions included an overall reduction of approximately 1,200 positions
globally and the exit or discontinuation of the use of certain leases and other assets by the end of 2020. The
majority of the first phase of workforce reductions and impairments of our right-of-use and other long-lived assets
occurred during the second quarter 2020. In the third quarter 2020, we initiated the second phase of our
restructuring plan, which included additional workforce reductions and the exit of our operations in New Zealand and
Japan. We expect to incur total pre-tax charges of $75.0 million to $105.0 million in connection with our multi-phase
restructuring plan through the end of 2021. Once fully implemented, we expect our multi-phase restructuring plan to
result in $225.0 million in annualized cost savings. During the year ended December 31, 2020, we recorded
$64.8 million in pre-tax charges in connection with our restructuring actions. See Item 8, Note 16, Restructuring and
Related Charges, for more information.
In addition to the actions described above, we took several steps to reduce costs, preserve cash in the
near-term and improve liquidity, including, but not limited to: furloughing staff; continuing to sell Goods on our
platform instead of quickly exiting the category; reducing marketing expense by significantly shortening payback
thresholds and delaying brand marketing investments; transitioning merchants to redemption payment terms,
instead of fixed payment terms; implementing a hiring freeze; eliminating broad-based merit increases for
employees; replacing cash compensation with equity compensation in 2020 for Board members; and amending our
Credit Agreement to, among other things, provide covenant relief through the first quarter of 2021. See Liquidity and
Capital Resources for further information.
How We Measure Our Business
We use several operating and financial metrics to assess the performance of our business and make
decisions on where to allocate capital, time and technology investments. Certain of the financial metrics are
reported in accordance with U.S. generally accepted accounting principles ("GAAP") and certain of those metrics
are considered non-GAAP financial measures. As our business evolves, we may make changes to the key financial
and operating metrics that we use to measure our business. For further information and reconciliations to the most
applicable financial measures under U.S. GAAP, refer to our discussion under Non-GAAP Financial Measures in the
Results of Operations section.
Operating Metrics
• Gross billings is the total dollar value of customer purchases of goods and services. Gross billings is
presented net of customer refunds, order discounts and sales and related taxes. The substantial majority of
our service revenue transactions are comprised of sales of vouchers and similar transactions in which we
collect the transaction price from the customer and remit a portion of the transaction price to the third-party
merchant who will provide the related goods or services. For these transactions, gross billings differs from
revenue reported in our consolidated statements of operations, which is presented net of the merchant's
share of the transaction price. For product revenue transactions, gross billings are equivalent to product
revenue reported in our consolidated statements of operations. Gross billings is an indicator of our growth
and business performance as it measures the dollar volume of transactions generated through our
marketplaces. Tracking gross billings on service revenue transactions also allows us to monitor the
percentage of gross billings that we are able to retain after payments to merchants. However, we are
focused on achieving long-term gross profit and Adjusted EBITDA growth.
•
Active customers are unique user accounts that have made a purchase during the trailing twelve months
("TTM") either through one of our online marketplaces or directly with a merchant for which we earned a
commission. 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. We do not include consumers who solely make purchases
40
with retailers using digital coupons accessed through our websites and mobile applications in our active
customer metric, nor do we include consumers who solely make purchases of our inventory through third-
party marketplaces with which we partner.
•
Units are the number of purchases during the reporting period, before refunds and cancellations, made
either through one of our online marketplaces, a third-party marketplace, or directly with a merchant for
which we earn a commission. We do not include purchases with retailers using digital coupons accessed
through our websites and mobile applications in our units metric. We consider units to be an important
indicator of the total volume of business conducted through our marketplaces.
Our gross billings, units and TTM active customers for the years ended December 31, 2020, 2019 and 2018
were as follows (in thousands):
Gross billings
Units
TTM Active customers
Financial Metrics
Year Ended December 31,
2020
2019
2018
$
2,619,058 $
4,613,531 $
5,202,814
99,219
29,577
150,879
43,620
172,305
48,159
•
Revenue is currently earned through product and service revenue transactions. We earn service revenue
from transactions in which we generate commissions by selling goods or services on behalf of third-party
merchants. Service revenue from those transactions is reported on a net basis as the purchase price
collected from the customer for the offering less an agreed upon portion of the purchase price paid to the
third-party merchant. Service revenue also includes commissions we earn when customers make
purchases with retailers using digital coupons accessed through our digital properties. We generate product
revenue from our sales of first-party Goods inventory. Our product revenue from these first-party
transactions, which are direct sales of merchandise inventory, is the purchase price received from the
customer. We have transitioned to a third-party marketplace in North America as of the end of 2020 and will
begin to transition in International in the second quarter 2021. Following the International transition, we
expect our Goods category to primarily generate revenue on a net basis within service revenue.
• Gross profit reflects the net margin we earn after deducting our cost of revenue from our revenue. Due to
the lack of comparability between product revenue, which is reported on a gross basis, and service
revenue, which primarily consists of transactions reported on a net basis, we believe that gross profit is an
important measure for evaluating our performance.
•
•
Adjusted EBITDA is a non-GAAP financial 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. For further information and a
reconciliation to Income (loss) from continuing operations, refer to our discussion under Non-GAAP
Financial Measures in the Results of Operations section.
Free cash flow is a non-GAAP financial measure that comprises net cash provided by (used in) operating
activities from continuing operations less purchases of property and equipment and capitalized software.
For further information and a reconciliation to Net cash provided by (used in) operating activities from
continuing operations, refer to our discussion in the Liquidity and Capital Resources section.
The following table presents the above financial metrics for the years ended December 31, 2020, 2019 and
2018 (in thousands):
Revenue
Gross profit
Adjusted EBITDA
Free cash flow
Year Ended December 31,
2020
2019
2018
$
1,416,868 $
2,218,915 $
2,636,746
677,294
1,186,129
1,320,601
49,739
(112,309)
227,248
3,955
269,807
121,160
41
Operating Expenses
• Marketing expense consists primarily of online marketing costs, such as search engine marketing,
advertising on social networking sites and affiliate programs, and offline marketing costs, such as television
and radio advertising. Additionally, compensation expense for marketing employees is classified within
marketing expense. We record these costs within Marketing on the consolidated statements of operations
when incurred. From time to time, we have offerings from well-known national merchants for customer
acquisition and activation purposes, for which the amount we owe the merchant for each voucher sold
exceeds the transaction price paid by the customer. Our gross billings from those transactions generate no
service revenue and our net cost (i.e., the excess of the amount owed to the merchant over the amount
paid by the customer) is classified as marketing expense. We evaluate marketing expense as a percentage
of gross profit because it gives us an indication of how well our marketing spend is driving gross profit
performance.
•
•
Selling, general and administrative ("SG&A") expenses include selling expenses such as sales
commissions and other compensation expenses for sales representatives, as well as costs associated with
supporting the sales function such as technology, telecommunications and travel. General and
administrative expenses include compensation expense for employees involved in customer service,
operations, technology and product development, as well as general corporate functions, such as finance,
legal and human resources. Additional costs included in general and administrative include depreciation
and amortization, rent, professional fees, litigation costs, travel and entertainment, recruiting, office
supplies, maintenance, certain technology costs and other general corporate costs. We evaluate SG&A
expense as a percentage of gross profit because it gives us an indication of our operating efficiency.
Restructuring and related charges represent severance and benefit costs for workforce reductions,
impairments and other facilities-related costs and professional advisory fees. See Item 8, Note 16,
Restructuring and Related Charges, for information about our restructuring plan.
Factors Affecting Our Performance
Impact of COVID-19. During the COVID-19 pandemic, various government restrictions and changes in
consumer behavior have had a negative impact on our business, which relies on customers' purchases of local
experiences, including events and activities, beauty and wellness, travel and dining. Recovery from the COVID-19
pandemic could be volatile and prolonged given the unprecedented and continuously evolving nature of the
situation. We continue to monitor the impact of COVID-19 on our business. See Item 8, Note 3, COVID-19
Pandemic, for more information about the impacts of COVID-19 on our business and Item 1A, Risk Factors.
Attracting and retaining local merchants. As we focus on our local experiences marketplace, we depend on
our ability to attract and retain merchants who are willing to offer their experiences on our platform. Merchants can
generally withdraw their offerings from our marketplace at any time, and their willingness to continue offering
services through our marketplace depends on the effectiveness of our marketing and promotional services. Since
the widespread economic impacts of COVID-19 began in March 2020, we are prioritizing opportunities to help drive
demand for our merchants and highlighting offers that customers can enjoy right now. As we continue to navigate
through the volatility of the COVID-19 recovery period, we intend to take a market-by-market approach to attracting
and retaining local merchants.
Driving purchase frequency and re-engaging and retaining customers. In light of significant declines in
consumer demand for local and travel services due to COVID-19, we must highlight offers that customers can enjoy
right now in order to drive purchase frequency and retain customers. This includes surfacing the relevant Local
inventory in each market depending on the government restrictions currently in place and continuing to leverage our
Goods category in the near-term. We must also continue to improve the customer experience on our websites and
mobile applications, launch innovative products that remove friction from the customer journey and drive awareness
to our supply, and grow our high-quality, bookable inventory.
Increasing traffic to our websites and mobile applications. The traffic to our websites and mobile
applications, including from consumers responding to our emails and search engine optimization ("SEO"), has
declined in recent years, and we have experienced further declines in traffic due to the impacts of COVID-19. As
such, we must focus on improving the effectiveness of our emails, as well as developing sources of traffic in addition
to email and SEO and optimizing the efficiency of our marketing spend.
42
Results of Operations
North America
Operating Metrics
North America segment gross billings, units and TTM active customers for the years ended December 31,
2020, 2019 and 2018 were as follows (in thousands, except percentages):
Year Ended December 31,
% Change
2020
2019
2018
2020 vs 2019
2019 vs 2018
Gross billings
Service gross billings:
Local
Goods
Travel
Total service gross billings
1,292,710
2,422,919
2,627,302
Product gross billings - Goods
333,479
563,694
796,393
Total gross billings
$
1,626,189 $
2,986,613 $
3,423,695
$
1,038,542 $
2,021,052 $
2,161,192
(48.6) %
(6.5) %
167,617
86,551
95,855
306,012
113,863
352,247
74.9
(71.7)
(46.6)
(40.8)
(45.6)
(15.8)
(13.1)
(7.8)
(29.2)
(12.8)
Units
Local
Goods
Travel
Total units
36,896
20,797
676
58,369
64,976
25,632
1,514
92,122
74,533
35,330
1,567
111,430
(43.2) %
(12.8) %
(18.9)
(55.4)
(36.6)
(27.4)
(3.4)
(17.3)
TTM Active customers
17,494
26,505
30,579
(34.0) %
(13.3) %
Comparison of the Years Ended December 31, 2020 and 2019:
For the year ended December 31, 2020 North America gross billings declined by $1,360.4 million, units
declined by 33.8 million and TTM active customers declined by 9.0 million. These declines were primarily due to the
significant decrease in consumer demand due to changes in consumer behavior and actions taken by governments
to control the spread of COVID-19, including quarantines, travel restrictions, as well as business restrictions and
shutdowns.
Comparison of the Years Ended December 31, 2019 and 2018:
For the year ended December 31, 2019, North America gross billings declined by $437.1 million, units
declined by 19.3 million and active customers declined by 4.1 million. These declines were primarily due to the
decline in traffic, including traffic from email and SEO, as well as our efforts to improve the efficiency of our
marketing spend, which led to a decrease in the number of active customers.
43
Financial Metrics
North America segment revenue, cost of revenue and gross profit for the years ended December 31, 2020,
2019 and 2018 were as follows (dollars in thousands):
Year Ended December 31,
% Change
2020
2019
2018
2020 vs 2019
2019 vs 2018
Revenue
Service revenue:
Local
Goods
Travel
Total service revenue
Product revenue - Goods
Total revenue
Cost of revenue
Service cost of revenue:
Local
Goods
Travel
Total service cost of revenue
Product cost of revenue - Goods
$
432,183
$
721,038
$
752,863
35,276
17,686
485,145
333,479
16,236
57,939
795,213
563,694
18,283
71,856
843,002
796,393
$
818,624
$
1,358,907
$
1,639,395
$
53,143
$
77,539
$
6,424
4,779
64,346
278,647
3,071
12,200
92,810
458,352
81,511
2,981
13,911
98,403
650,308
Total cost of revenue
$
342,993
$
551,162
$
748,711
Gross profit
Service gross profit:
Local
Goods
Travel
Total service gross profit
Product gross profit - Goods
$
379,040
$
643,499
$
671,352
28,852
12,907
420,799
54,832
13,165
45,739
702,403
105,342
15,302
57,945
744,599
146,085
Total gross profit
$
475,631
$
807,745
$
890,684
Service margin (1)
37.5 %
32.8 %
32.1 %
% of Consolidated revenue
% of Consolidated cost of revenue
% of Consolidated gross profit
57.8 %
46.4
70.2
61.2 %
53.4
68.1
62.2 %
56.9
67.4
(1)
Represents the percentage of service gross billings that we retained after deducting the merchant's share.
Comparison of the Years Ended December 31, 2020 and 2019:
(40.1) %
117.3
(69.5)
(39.0)
(40.8)
(39.8)
(31.5) %
109.2
(60.8)
(30.7)
(39.2)
(37.8)
(41.1) %
119.2
(71.8)
(40.1)
(47.9)
(41.1)
(4.2) %
(11.2)
(19.4)
(5.7)
(29.2)
(17.1)
(4.9) %
3.0
(12.3)
(5.7)
(29.5)
(26.4)
(4.1) %
(14.0)
(21.1)
(5.7)
(27.9)
(9.3)
North America revenue and gross profit decreased by $540.3 million and $332.1 million, for the year ended
December 31, 2020. Those declines were primarily driven by a decline in gross billings and transaction volume due
to the impacts of COVID-19. Revenue also declined due to the ongoing transition of our Goods category to a third-
party marketplace model. In a third-party marketplace model, we generate service revenue which is presented on a
net basis. The increase in service margin was due to a shift in mix of offerings sold and higher variable
consideration from unredeemed vouchers due to our shift towards payment on redemption terms in North America.
North America cost of revenue decreased by $208.2 million for the year ended December 31, 2020 primarily
due to the decrease in transaction volume and gross billings and the impacts of the ongoing transition of our Goods
category to a third-party marketplace model.
44
Comparison of the Years Ended December 31, 2019 and 2018:
North America revenue and gross profit decreased by $280.5 million and $82.9 million for the year ended
December 31, 2019. Those declines were primarily driven by a decline in transaction volume due to fewer
customers and lower customer traffic, including traffic from email and SEO, as discussed above.
The decrease in gross profit was partially offset by a $197.5 million decline in cost of revenue, which was
primarily due to the decrease in transaction volume and gross billings.
Marketing and Contribution Profit
We define contribution profit as gross profit less marketing expense. North America contribution profit for the
years ended December 31, 2020, 2019 and 2018 was as follows (dollars in thousands):
Marketing
% of Gross Profit
Year Ended December 31,
% Change
2020
2019
2018
2020 vs 2019
2019 vs 2018
$
96,039
$
214,069
$
273,787
(55.1) %
(21.8) %
20.2 %
26.5 %
30.7 %
Contribution Profit
$
379,592
$
593,676
$
616,897
(36.1) %
(3.8) %
Comparison of the Years Ended December 31, 2020 and 2019:
North America marketing expense and marketing expense as a percentage of gross profit declined for the
year ended December 31, 2020 due to accelerated traffic declines, significantly shortened payback thresholds and
lower investment in our offline marketing and brand spend in light of COVID-19.
The decline in our North America contribution profit for the year ended December 31, 2020 was primarily
attributable to a $332.1 million decrease in gross profit, as discussed above, partially offset by a $118.0 million
decrease in marketing.
Comparison of the Years Ended December 31, 2019 and 2018:
North America marketing expense and marketing expense as a percentage of gross profit declined for the
year ended December 31, 2019 as compared with the prior year as we leveraged improved marketing analytics to
drive efficiency in our marketing spend and maximize the lifetime value of our customer base.
The decline in our North America Contribution profit for the year ended December 31, 2019 was primarily
attributable to a $82.9 million decrease in gross profit, as discussed above, partially offset by a $59.7 million
decrease in marketing.
45
International
Operating Metrics
International segment gross billings, units and TTM active customers for the years ended December 31,
2020, 2019 and 2018 were as follows (in thousands, except percentages and gross billings per unit):
Year Ended December 31,
% Change
2020
2019
2018
2020 vs 2019
2019 vs 2018
Gross billings
Service gross billings:
Local
Goods
Travel
Total service gross billings
Product gross billings - Goods
$
421,845 $
855,820 $
865,271
(50.7) %
(1.1) %
61,860
69,428
553,133
439,736
51,663
190,571
71,492
207,490
1,098,054
1,144,253
528,864
634,866
19.7
(63.6)
(49.6)
(16.9)
(39.0)
(27.7)
(8.2)
(4.0)
(16.7)
(8.6)
Total gross billings
$
992,869 $
1,626,918 $
1,779,119
Units
Local
Goods
Travel
Total units
16,567
23,685
598
40,850
33,069
24,269
1,419
58,757
32,055
27,300
1,520
60,875
(49.9) %
3.2 %
(2.4)
(57.9)
(30.5)
(11.1)
(6.6)
(3.5)
TTM Active customers
12,083
17,115
17,580
(29.4) %
(2.6) %
Comparison of the Years Ended December 31, 2020 and 2019:
For the year ended December 31, 2020 International gross billings declined by $634.0 million, units
declined by 17.9 million and active customers decreased by 5.0 million. Those decreases were primarily due to the
significant decrease in consumer demand due to changes in consumer behavior and actions taken by governments
to control the spread of COVID-19, including quarantines, travel restrictions, as well as business restrictions and
shutdowns. The decline in gross billings was partially offset by a $11.9 million favorable impact from year-over-year
changes in foreign currency exchange rates.
Comparison of the Years Ended December 31, 2019 and 2018:
For the year ended December 31, 2019 International gross billings declined by $152.2 million, units
declined by 2.1 million and active customers decreased by 0.5 million. Those decreases were primarily due to weak
consumer sentiment in Europe, especially in the United Kingdom, and intense competition in our Goods business.
The decline in gross billings was also driven by an $83.1 million unfavorable impact from year-over-year changes in
foreign currency exchange rates.
46
Financial Metrics
International segment revenue, cost of revenue and gross profit for the years ended December 31, 2020,
2019 and 2018 were as follows (dollars in thousands):
Year Ended December 31,
% Change
2020
2019
2018
2020 vs 2019
2019 vs 2018
Revenue
Service revenue:
Local
Goods
Travel
Total service revenue
Product revenue - Goods
Total revenue
Cost of revenue
Service cost of revenue:
Local
Goods
Travel
Total service cost of revenue
Product cost of revenue - Goods
Gross profit
Service gross profit:
Local
Goods
Travel
Total service gross profit
Product gross profit - Goods
$
138,274
$
287,611
$
306,700
(51.9) %
(6.2) %
11,757
8,477
158,508
439,736
9,441
34,092
331,144
528,864
14,602
41,183
362,485
634,866
$
598,244
$
860,008
$
997,351
24.5
(75.1)
(52.1)
(16.9)
(30.4)
(35.3)
(17.2)
(8.6)
(16.7)
(13.8)
$
12,362
$
17,945
$
17,273
(31.1) %
3.9 %
1,261
1,327
14,950
381,631
932
2,775
21,652
459,972
1,350
3,051
21,674
545,760
35.3
(52.2)
(31.0)
(17.0)
(17.7)
(31.0)
(9.0)
(0.1)
(15.7)
(15.1)
$
125,912
$
269,666
$
289,427
(53.3) %
(6.8) %
10,496
7,150
143,558
58,105
8,509
31,317
309,492
68,892
13,252
38,132
340,811
89,106
23.4
(77.2)
(53.6)
(15.7)
(46.7)
(35.8)
(17.9)
(9.2)
(22.7)
(12.0)
Total cost of revenue
$
396,581
$
481,624
$
567,434
Total gross profit
$
201,663
$
378,384
$
429,917
Service margin (1)
28.7 %
30.2 %
31.7 %
% of Consolidated revenue
% of Consolidated cost of revenue
% of Consolidated gross profit
42.2 %
53.6
29.8
38.8 %
46.6
31.9
37.8 %
43.1
32.6
(1)
Represents the percentage of service gross billings that we retained after deducting the merchant's share from revenue.
Comparison of the Years Ended December 31, 2020 and 2019:
International revenue and gross profit decreased by $261.8 million and $176.7 million for the year ended
December 31, 2020. Those decreases were primarily driven by a decline in gross billings due to the impacts of
COVID-19 as discussed above. The decreases in revenue and gross profit were partially offset by favorable impacts
of $9.5 million and $3.2 million from year-over-year changes in foreign currency exchange rates.
Cost of revenue decreased by $85.0 million for the year ended December 31, 2020 primarily due to the
decrease in transaction volume and gross billings and a $6.3 million unfavorable impact from year-over-year
changes in foreign currency exchange rates.
47
Comparison of the Years Ended December 31, 2019 and 2018:
International revenue and gross profit decreased by $137.3 million and $51.5 million for the year ended
December 31, 2019. Those decreases were primarily driven by a decline in gross billings as a result of weak
consumer sentiment in Europe, especially in the United Kingdom, and intense competition in our Goods business,
as well as unfavorable impacts on revenue and gross profit of $45.3 million and $19.3 million from year-over-year
changes in foreign currency exchange rates. The decrease in gross profit was also driven by a customer shift
toward lower margin offerings.
The decline in gross profit was partially offset by a decrease in cost of revenue of $85.8 million, which was
primarily due to the decline in gross billings, as discussed above, a shift in our Goods category mix from product
revenue transactions, which are reported on a gross basis, toward service revenue transactions, which are reported
on a net basis, and a $26.0 million favorable impact from year-over-year changes in foreign currency exchange
rates.
Marketing and Contribution Profit
International contribution profit for the years ended December 31, 2020, 2019 and 2018 were as follows
(dollars in thousands):
Marketing
% of Gross Profit
Year Ended December 31,
% Change
2020
2019
2018
2020 vs 2019
2019 vs 2018
$
58,495
$
125,286
$
121,950
(53.3) %
2.7 %
29.0 %
33.1 %
28.4 %
Contribution Profit
$
143,168
$
253,098
$
307,967
(43.4) %
(17.8) %
Comparison of the Years Ended December 31, 2020 and 2019:
International marketing expense and marketing expense as a percentage of gross profit decreased for the
year ended December 31, 2020 due to accelerated traffic declines, significantly shortened payback thresholds and
lower investment in our offline marketing and brand spend in light of COVID-19, partially offset by a $0.7 million
unfavorable impact from year-over-year change in foreign currency exchange rates.
The decrease in international contribution profit for the year ended December 31, 2020 was primarily
attributable to a $176.7 million decrease in gross profit, partially offset by a $66.8 million decrease in marketing.
Comparison of the Years Ended December 31, 2019 and 2018:
International marketing expense and marketing expense as a percentage of gross profit for the year ended
December 31, 2019 increased as we continued to invest in the long-term potential of our International segment,
partially offset by a $6.2 million favorable impact from year-over-year change in foreign currency exchange rates.
The decrease in our contribution profit for the year ended December 31, 2019 as compared with the prior
year was primarily attributable to a $51.5 million decrease in Gross Profit.
48
Operating Expenses
Operating expenses for the years ended December 31, 2020, 2019 and 2018 were as follows (dollars in
thousands):
Year Ended December 31,
% Change
2020
2019
2018
2020 vs 2019
2019 vs 2018
Marketing
$
154,534
$
339,355
$
395,737
Selling, general and administrative
Goodwill impairment
Long-lived asset impairment
Restructuring and related charges
Total Operating expenses
% of Gross profit:
Marketing
Selling, general and administrative
603,185
109,486
22,351
64,836
806,945
870,961
—
—
31
—
—
(136)
NM
(54.5) %
(25.3)
—
—
$
954,392
$ 1,146,331
$ 1,266,562
(16.7)
22.8 %
89.1 %
28.6 %
68.0 %
30.0 %
66.0 %
(14.2) %
(7.4)
—
—
(122.8)
(9.5)
Comparison of the Years ended December 31, 2020 and 2019:
Marketing expense and marketing expense as a percentage of gross profit declined for the year ended
December 31, 2020 due to accelerated traffic declines, significantly shortened payback thresholds and lower
investment in our offline marketing and brand spend in light of COVID-19.
SG&A decreased for the year ended December 31, 2020 primarily due to lower payroll-related expenses
due to furloughs and restructuring actions. SG&A as a percentage of gross profit increased for the year ended
December 31, 2020 due to the decline in demand and traffic as a result of COVID-19.
During the first quarter 2020, we performed an interim quantitative impairment assessment of goodwill and
long-lived assets as a result of significant deterioration in our financial performance due to the impact of COVID-19.
As a result, we recognized goodwill impairment of $109.5 million, that represented the excess of the EMEA
reporting unit's carrying value over its fair value, and long-lived asset impairment of $22.4 million for the year ended
December 31, 2020. See Item 8, Note 3, COVID-19 Pandemic, for additional information about goodwill and long-
lived asset impairments.
Restructuring and related charges increased for the year ended December 31, 2020 related to severance
and benefit costs for workforce reductions, impairments and other facilities-related charges, and professional
advisory fees resulting from our restructuring activities. See Item 8, Note 16, Restructuring and Related Charges, for
more information.
Comparison of the Years ended December 31, 2019 and 2018:
Marketing expense and marketing expense as a percentage of gross profit for the year ended December
31, 2019 decreased as we leveraged marketing analytics to drive efficiency in our marketing spend and maximize
the lifetime value of our customer base and decreased our offline marketing spend during the year.
SG&A decreased for the year ended December 31, 2019 primarily due to the absence of expense related to
our patent litigation with IBM of $34.6 million recorded in 2018, lower facilities and payroll-related expenses and a
$16.6 million favorable impact from year-over-year changes in foreign currency exchange rates.
Other Income (Expense), Net
Other income (expense), net includes interest income, interest expense, gains and losses on fair value
option investments, adjustments for observable price changes of investments, impairments of investments and
foreign currency gains and losses, primarily resulting from intercompany balances with our subsidiaries that are
denominated in foreign currencies.
49
Other income (expense), net for the years ended December 31, 2020, 2019 and 2018 was as follows
(dollars in thousands):
Interest income
Interest expense
Changes in fair value of investments
Foreign currency gains (losses), net
Impairments of investments
Upward adjustment for observable price changes of investment
Other
Other income (expense), net
Year Ended December 31,
2020
2019
2018
$
6,351 $
7,744 $
6,420
(33,192)
(1,405)
17,919
(6,684)
—
43
(23,593)
(72,497)
(5,960)
(9,961)
51,397
(459)
(21,909)
(9,064)
(20,325)
(10,156)
—
2,026
$
(16,968) $
(53,329) $
(53,008)
Comparison of the Years Ended December 31, 2020, 2019, and 2018:
The change in Other income (expense), net for the year ended December 31, 2020 as compared with the
prior year is primarily related to a $71.1 million decrease in losses from changes in fair value of investments, and a
$23.9 million increase in foreign currency gains (losses), net, partially offset by a decrease in unrealized gain of
$51.4 million as a result of an upward adjustment for observable price changes on an other equity investment.
The change in Other income (expense), net for the year ended December 31, 2019 as compared with the
prior year was primarily related to $69.4 million loss from changes in fair value of our investment in Monster LP,
partially offset by an unrealized gain of $51.4 million as a result of an upward adjustment for observable price
changes on an other equity investment. See Item 8, Note 8, Investments, for additional information. The change in
Other income (expense) was partially offset by a $14.4 million decrease in foreign currency losses for the year
ended December 31, 2019. Foreign currency gains (losses) primarily result from intercompany balances with our
subsidiaries that are denominated in foreign currencies.
Provision (Benefit) for Income Taxes
Comparison of the Years Ended December 31, 2020, 2019, and 2018:
Provision (benefit) for income taxes for the years ended December 31, 2020, 2019 and 2018 was as follows
(dollars in thousands):
Provision (benefit) for income taxes
$
(7,504)
$
761
$
Effective tax rate
2.6 %
(5.6) %
(957)
(92.8) %
1,086.1 %
179.5 %
Year Ended December 31,
% Change
2020
2019
2018
2020 vs 2019
2019 vs 2018
Our U.S. Federal income tax rate was 21% for the years ended December 31, 2020, 2019 and 2018. The
primary factor impacting the effective tax rate for the years ended December 31, 2020, 2019 and 2018 was the
pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets. We
expect that our consolidated effective tax rate in future periods will continue to differ significantly from the U.S.
federal income tax rate as a result of our tax obligations in jurisdictions with profits and valuation allowances in
jurisdictions with losses. See Item 8, Note 17, Income Taxes, for additional information relating to tax audits and
assessments and regulatory and legal developments that may impact our business and results of operations in the
future.
The effective tax rate for the years ended December 31, 2020 and 2019 also reflected the reversal of
reserves for uncertain tax positions due to the closure of tax audits and due to the closure of applicable statutes of
limitation. The year ended December 31, 2020 was also impacted by the carryback of federal net operating losses
due to the income tax relief provided by the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The
effective tax rate for year ended December 31, 2018 also reflected a $6.4 million income tax benefit resulting from
the impact of adopting Topic 606 on intercompany activity in certain foreign jurisdictions.
50
Income (Loss) from Discontinued Operations
In connection with a strategic initiative to optimize our global footprint, we sold or ceased our operations in
12 countries between November 2016 and March 2017. The financial results of those operations have been
presented as discontinued operations in the consolidated financial statements.
Non-GAAP Financial Measures
In addition to financial results reported in accordance with U.S. GAAP, we have provided the following non-
GAAP financial measures: Adjusted EBITDA, free cash flow and foreign currency exchange rate neutral operating
results. Those 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 those 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, those non-GAAP financial measures are not intended to be a substitute for those reported in
accordance with U.S. GAAP.
Adjusted EBITDA. 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.
We exclude stock-based compensation expense and depreciation and amortization because they are
primarily non-cash in nature and we believe that non-GAAP financial measures excluding those items provide
meaningful supplemental information about our operating performance and liquidity. 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. For the year ended December 31, 2020, special charges and credits also included charges related to
our restructuring plan, goodwill and long-lived asset impairments and strategic advisor costs. For the year ended
December 31, 2018, special charges and credits also included a charge related to our patent litigation with IBM. 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.
51
The following is a reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure,
Income (loss) from continuing operations for the years ended December 31, 2020, 2019, and 2018 (dollars in
thousands):
Income (loss) from continuing operations
$
(286,562) $
(14,292) $
1,988
Year Ended December 31,
2020
2019
2018
Adjustments:
Stock-based compensation
Depreciation and amortization
Acquisition-related expense (benefit), net
Restructuring and related charges (1)
Goodwill impairment
Long-lived asset impairment
Strategic advisor costs
IBM patent litigation
Other (income) expense, net
Provision (benefit) for income taxes
Total adjustments
Adjusted EBITDA
39,010
87,522
6
64,836
109,486
22,351
3,626
—
16,968
(7,504)
336,301
81,615
105,765
64,821
115,828
39
31
—
—
—
—
53,329
761
241,540
655
(136)
—
—
—
34,600
53,008
(957)
267,819
269,807
$
49,739 $
227,248 $
(1)
Restructuring and related charges includes $21.6 million of long-lived asset impairments and $1.7 million of additional stock
compensation for the year ended December 31, 2020.
Free cash flow. 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.
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.
Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for
discretionary expenditures. For example, free cash flow does not include cash payments for business acquisitions.
In addition, free cash flow reflects the impact of the timing difference between when we are paid by customers and
when we pay merchants and suppliers. Therefore, we believe it is important to view free cash flow as a complement
to our entire consolidated statements of cash flows. For a reconciliation of free cash flow to the most comparable
U.S. GAAP financial measure, see Liquidity and Capital Resources below.
Foreign currency exchange rate neutral operating results. Foreign currency 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. Those measures are intended to facilitate comparisons to our historical
performance.
52
The following table represents the effect on our consolidated statements of operations from changes in
exchange rates versus the U.S. dollar for the years ended December 31, 2020 and 2019 (in thousands):
Gross billings
Revenue
Cost of revenue
Gross profit
Marketing
Selling, general and administrative
Restructuring charges
Year Ended December 31, 2020
Year Ended December 31, 2019
At Avg. 2019
Rates (1)
Exchange
Rate Effect (2)
As Reported
At Avg. 2018
Rates (1)
Exchange
Rate Effect (2)
As Reported
$
2,607,185 $
11,873 $
2,619,058 $
4,696,950 $
(83,419) $
4,163,531
1,407,327
733,270
674,057
153,865
602,162
64,859
9,541
6,304
3,237
669
1,023
(23)
1,416,868
739,574
677,294
154,534
603,185
64,836
2,264,279
1,058,791
1,205,488
345,568
823,527
27
(45,364)
(26,005)
(19,359)
(6,213)
(16,582)
4
2,218,915
1,032,786
1,186,129
339,355
806,945
31
Income (loss) from operations
$
(282,683) $
5,585 $
(277,098) $
36,366 $
3,432 $
39,798
(1)
(2)
Represents the financial statement balances that would have resulted had exchange rates in the reporting period been the same as those
in effect in the prior year period.
Represents the increase or decrease in the reported amount resulting from changes in exchange rates from those in effect in the prior
year period.
Liquidity and Capital Resources
Our principal sources of liquidity are cash flows from operations and cash balances, which primarily consist
of bank deposits and government money market funds. As of December 31, 2020, cash balances, including
outstanding borrowings under our Amended Credit Agreement, were $850.6 million.
Our net cash flows from operating, investing and financing activities from continuing operations for the
years ended December 31, 2020, 2019 and 2018 were as follows (in thousands):
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Year Ended December 31,
2020
2019
2018
$
$
(63,598) $
71,283 $
190,855
(21,346)
(67,591)
(135,982)
176,798 $
(92,619) $
(84,417)
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. Our free cash flow for the years ended December 31, 2020, 2019 and 2018 and reconciliations to the
most comparable U.S. GAAP financial measure, Net cash provided by (used in) operating activities from continuing
operations, for those periods are as follows (in thousands):
Year Ended December 31,
2020
2019
2018
Net cash provided by (used in) operating activities from continuing operations
$
(63,598) $
71,283 $
190,855
Purchases of property and equipment and capitalized software from continuing operations
(48,711)
(67,328)
(69,695)
Free cash flow
$
(112,309) $
3,955 $
121,160
Our revenue-generating transactions are primarily structured such that we collect cash up-front from
customers and pay third-party merchants at a later date, either upon the customer's redemption of the related
voucher or fixed payment terms, which are generally biweekly, throughout the term of the merchant's offering.
Historically, we have primarily paid merchants on fixed payment terms in North America and upon voucher
redemption internationally. In prior periods, we began to increase our use of redemption payment terms with our
North America merchants, and we accelerated this transition in 2020 to improve liquidity as our business was
impacted by COVID-19. We largely completed the transition to redemption payment terms in the third quarter 2020.
53
Our cash balances fluctuate significantly throughout the year based on many variables, including gross
billings growth rates, the timing of payments to merchants and suppliers, seasonality and the mix of transactions
between Goods and Local.
For the year ended December 31, 2020, our net cash used in operating activities from continuing operations
was $63.6 million, as compared with our $286.6 million loss from continuing operations. That difference was
primarily attributable to $295.6 million of non-cash items, including $109.5 million of goodwill impairment, $22.4
million of long-lived asset impairments, $21.6 million of restructuring-related impairments, depreciation and
amortization and stock-based compensation, partially offset by a $72.6 million net decrease from changes in
working capital and other assets and liabilities. The working capital decrease was due to the impacts of COVID-19,
partially offset by the transition to a third-party goods marketplace in North America.
For the year ended December 31, 2019, our net cash provided by operating activities from continuing
operations was $71.3 million, as compared with our $14.3 million loss from continuing operations. That difference
was primarily attributable to $230.2 million of non-cash items, including depreciation and amortization, stock-based
compensation, a $69.4 million loss from changes in fair value of our investment in Monster LP and a $51.4 million
upward adjustment to another equity investment for observable price changes in an orderly transaction. The
difference between our net cash provided by operating activities and our income from continuing operations due to
non-cash items was, partially offset by a $145.0 million net decrease from changes in working capital and other
assets and liabilities. The working capital impact was primarily related to the decline of billings, and to a lesser
extent seasonal timing of payments to inventory suppliers.
For the year ended December 31, 2018, our net cash provided by operating activities from continuing
operations was $190.9 million, as compared with our $2.0 million income from continuing operations. That
difference was primarily attributable to $206.8 million of non-cash items, including depreciation and amortization,
and stock-based compensation. The difference between net cash provided by operating activities and our income
from continuing operations due to non-cash items was partially offset by a $17.9 million net decrease from changes
in working capital and other assets and liabilities. The working capital impact was primarily related to the seasonal
timing of payments to inventory suppliers and also includes $42.1 million of the payment to IBM related to the
settlement of our patent litigation.
Our net cash used in investing activities from continuing operations was $21.3 million, $67.6 million and
$136.0 million for the years ended December 31, 2020, 2019 and 2018. For the year ended December 31, 2020,
our net cash used in investing activities from continuing operations included purchases of property and equipment
and capitalized software of $48.7 million, which was partially offset by proceeds from the sale of an investment of
$31.6 million. For the year ended December 31, 2019, our net cash used in investing activities from continuing
operations included purchases of property and equipment and capitalized software of $67.3 million. For the year
ended December 31, 2018, our net cash used in investing activities from continuing operations included net cash
paid for a business acquisition of $58.1 million, purchases of property and equipment and capitalized software of
$69.7 million and net cash paid of $18.3 million for acquisitions of intangible assets, including $15.4 million related
to the settlement of our IBM patent litigation.
Our net cash provided by financing activities was $176.8 million for the year ended December 31, 2020.
Our net cash used in financing activities was $92.6 million and $84.4 million for the years ended December 31 2019
and 2018. For the year ended December 31, 2020, net cash provided by financing activities included $200.0 million
of borrowings under our revolving credit facility, partially offset by $10.6 million in taxes paid related to net share
settlements of stock-based compensation awards and $8.9 million in payments of finance lease obligations. For the
year ended December 31, 2019, net cash used in financing activities included $45.6 million in repurchases of
common stock under our share repurchase program, $19.7 million in payments of finance lease obligations and
$18.1 million in taxes paid related to net share settlements of stock-based compensation awards. For the year
ended December 31, 2018, net cash used in financing activities included $33.0 million in payments of finance lease
obligations, $24.1 million in taxes paid related to net share settlements of stock-based compensation awards, $9.6
million in repurchases of common stock under our share repurchase program and an $8.4 million payment of a
financing obligation related to a business acquisition.
In April 2016, we issued convertible notes with an aggregate principal amount of $250.0 million, due April
2022. We received net proceeds of $243.2 million from the issuance of the Notes. We have used the proceeds from
the Notes for general corporate purposes, including repurchases of shares of our common stock. Additionally, we
entered into note hedge and warrant transactions with certain bank counterparties that are designed to offset, in
54
part, the potential dilution from conversion of the Notes. See Item 8, Note 10, Financing Arrangements, for
additional information.
The amendment to the revolving credit agreement (the "Amendment" and the revolving credit agreement as
amended, the "Amended Credit Agreement") provides for aggregate principal borrowings of up to $225.0 million. As
of December 31, 2020, we had $200.0 million of borrowings and $20.6 million of letters of credit outstanding under
the Amended Credit Agreement and were in compliance with all covenants.
In July 2020, we entered into an amendment of our Credit Agreement in order to, among other things,
provide us operational flexibility and covenant relief through the end of the first quarter 2021 in light of the ongoing
impacts of COVID-19 on our business. We may need to seek additional covenant relief in the future depending on
the timing and volatility of the recovery of our business from COVID-19. In addition, the Amended Credit Agreement
matures in May 2024. If we do not redeem or refinance the Notes at least 91 days prior to their maturity, the maturity
date of our Amended Credit Agreement will spring forward to January 2022, subject to certain exceptions. We
continue to evaluate our long-term capital structure, and may need to seek additional financing in the future. See
Item 1, Risk Factors and Item 8, Note 10, Financing Arrangements, for additional information.
We believe that our cash balances, excluding borrowings under the Amended Credit Agreement, and cash
generated from operations will be sufficient to meet our working capital requirements and capital expenditures for at
least the next 12 months. We plan to continue to actively manage and optimize our cash balances and liquidity,
working capital and operating expenses, although there can be no assurances that we will be able to do so. In 2020,
we took several steps to reduce costs and preserve cash in the near-term as described in Item 8, Note 3, COVID-19
Pandemic.
As of December 31, 2020, we had $267.5 million in cash held by our international subsidiaries, which is
primarily denominated in Euros, British Pounds Sterling, Canadian dollars, and, to a lesser extent, Australian dollars
and Japanese yen. In general, it is our practice and intention to re-invest the earnings of our non-U.S. subsidiaries
in those operations. We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy
domestic liquidity needs arising in the ordinary course of business.
In May 2018, the Board of Directors authorized us to repurchase up to $300.0 million of our common stock
under our share repurchase program. As of December 31, 2020, up to $245.0 million of common stock remained
available for purchase under our program. The timing and amount of share repurchases, if any, will be determined
based on market conditions, limitations under the Amended Credit Agreement, share price, available cash and other
factors, and the program may be terminated at any time. Repurchases will be made in compliance with SEC rules
and other legal requirements and may be made, in part, under a Rule 10b5-1 plan, which permits share
repurchases when we might otherwise be precluded from doing so.
55
Contractual Obligations and Commitments
The following table summarizes (in thousands) our future contractual obligations and commitments as of
December 31, 2020. The table below excludes $25.6 million of non-current liabilities for unrecognized tax benefits,
including interest and penalties, as of December 31, 2020. We cannot make a reasonable estimate of the period of
cash settlement for the tax positions classified as non-current liabilities.
Finance lease obligations (1)
Operating lease obligations (2)
Convertible senior notes (3)
Purchase obligations (4)
138,641
266,250
Total
2021
Payments due by period
2023
2024
2022
2025
Thereafter
$
5,444 $
4,717 $
715 $
12 $
— $
— $
—
38,690
35,451
27,025
19,599
16,175
1,701
8,125
258,125
—
82,567
27,365
27,452
27,730
—
20
—
—
—
—
Total
$
492,902 $
78,897 $
321,743 $
54,767 $
19,619 $
16,175 $
1,701
(1)
(2)
(3)
(4)
Finance lease obligations include both principal and interest components of future minimum finance lease payments.
Operating lease obligations are primarily for office facilities and are noncancelable. Certain leases contain periodic rent escalation
adjustments and renewal and expansion options. Operating lease obligations expire at various dates with the latest maturity in 2027.
Represents the principal amount and related interest on our convertible senior notes.
Purchase obligations primarily represent noncancelable contractual obligations related to cloud computing and other information
technology services.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2020.
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our
consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Our significant
accounting policies are discussed in Item 8, Note 2, Summary of Significant Accounting Policies, in the notes to the
consolidated financial statements.
The preparation of consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts and classifications of assets and liabilities, revenue and expenses,
and related disclosure of contingent liabilities. Management bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from those estimates under different assumptions or conditions.
We believe that the estimates and assumptions related to revenue recognition, lease recognition and
measurement, impairment assessments of goodwill and long-lived assets, income taxes and fair value option
investments have the greatest potential impact on our consolidated financial statements. Therefore, we consider
these to be our critical accounting policies and estimates.
Revenue Recognition
See Item 8, Note 2, Summary of Significant Accounting Policies and Item 8, Note 15, Revenue Recognition,
for information about our revenue recognition accounting policies, including estimates of our refund liabilities and
estimates of variable consideration from unredeemed vouchers.
56
Leases
See Item 8, Note 2, Summary of Significant Accounting Policies for information about our lease recognition
and measurement accounting policies.
Impairment Assessments of Goodwill and Long-Lived Assets
See Item 8, Note 2, Summary of Significant Accounting Policies for information about our accounting
policies relating to impairment of goodwill and long-lived assets. Additional information about those accounting
policies and estimates is set forth in the following paragraphs.
When determining fair values in impairment tests, we use one of the following recognized valuation
methods: the income approach (including discounted cash flows), the market approach and the cost approach. Our
significant estimates in those fair value measurements include identifying business factors such as size, growth,
profitability, risk and return on investment and assessing comparable revenue and earnings multiples. Further, when
measuring fair value based on discounted cash flows, we make assumptions about risk-adjusted discount rates;
rates of increase in revenue, cost of revenue and operating expenses; weighted average cost of capital; rates of
long-term growth; and income tax rates. Valuations are performed by management or third-party valuation
specialists under management's supervision, where appropriate. We believe that the estimated fair values used in
impairment tests are based on reasonable assumptions that marketplace participants would use. However, such
assumptions are inherently uncertain and actual results could differ from those estimates.
During the first quarter 2020, we determined a triggering event occurred that required us to evaluate our
goodwill and long-lived assets for impairment, and we recorded impairment charges as a result of that assessment.
During the third quarter 2020, we exited our operations in Japan and New Zealand, which represents the majority of
the countries in our Asia Pacific reporting unit. As a result, we combined the remainder of the Asia Pacific reporting
unit and the EMEA reporting unit into a single International reporting unit, consistent with how management reviews
the operating results of the business. Our two reporting units as of our October 1, 2020 annual goodwill impairment
test were North America and International.
Future changes in our assumptions or the interrelationship of the assumptions described above may
negatively impact future valuations. In future measurements of fair value, adverse changes in assumptions could
result in impairments of goodwill or long-lived assets that would require non-cash charges to the consolidated
statements of operations and may have a material effect on our financial condition and operating results.
Income Taxes
See Item 8, Note 2, Summary of Significant Accounting Policies, and Note 17, Income Taxes, for
information about our income tax accounting policies.
Fair Value Option Investments
See Item 8, Note 8, Investments, for information about the fair value measurements of our fair value option
investments.
Estimating the fair values of our investments requires significant judgment regarding the assumptions that
market participants would use in pricing those assets. As the fair value measurements involve significant
unobservable inputs, such as cash flow projections and discount rates, they are classified as Level 3 within the fair
value hierarchy. Future changes in judgment about the related fair value inputs, including changes that may result
from any subsequent financing transactions undertaken by those investees, could result in significant increases or
decreases in fair value that would be recognized in earnings. Our election to apply fair value accounting to those
investments has and may continue to cause fluctuations in our earnings from period to period.
Recently Issued Accounting Standards
For a description of recently issued accounting standards, please see Item 8, Note 2, Summary of
Significant Accounting Policies.
57
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have operations both within the United States and internationally, and we are exposed to market risks in
the ordinary course of our business, including the effect of foreign currency fluctuations, interest rate changes and
inflation. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.
Foreign Currency Exchange Risk
We transact business in various foreign currencies other than the U.S. dollar, principally the euro, British
pound sterling, Canadian dollar and Australian dollar, which exposes us to foreign currency risk. For the year ended
December 31, 2020, we derived approximately 42.2% of our revenue from our International segment. Revenue and
related expenses generated from our international operations are generally denominated in the local currencies of
the corresponding countries. The functional currencies of our subsidiaries that either operate or support these
markets are generally the same as the corresponding local currencies. However, the results of operations of, and
certain of our intercompany balances associated with, our international operations are exposed to foreign currency
exchange rate fluctuations. Upon consolidation, as exchange rates vary, our revenue and other operating results
may differ materially from expectations, and we may record significant gains or losses on the re-measurement of
intercompany balances.
We assess our foreign currency exchange risk based on hypothetical changes in rates utilizing a sensitivity
analysis that measures the potential impact on working capital based on a 10% change (increase and decrease) in
currency rates. We use a current market pricing model to assess the changes in the value of the U.S. dollar on
foreign currency denominated monetary assets and liabilities. The primary assumption used in this model is a
hypothetical 10% weakening or strengthening of the U.S. dollar against those currency exposures as of December
31, 2020 and 2019.
As of December 31, 2020, our net working capital surplus (defined as current assets less current liabilities)
from subsidiaries that are subject to foreign currency translation risk was $11.4 million. The potential increase in this
working capital surplus from a hypothetical 10% adverse change in quoted foreign currency exchange rates would
be $1.1 million. This compares to a $69.2 million working capital deficit subject to foreign currency exposure as of
December 31, 2019, for which a 10% adverse change would have resulted in a potential increase in this working
capital deficit of $6.9 million.
Interest Rate Risk
Our cash balance as of December 31, 2020 consists of bank deposits and government money market
funds, so exposure to market risk for changes in interest rates is limited. In April 2016, we issued convertible notes
with an aggregate principal amount of $250.0 million (see Item 8, Note 10, Financing Arrangements). The
convertible notes bear interest at a fixed rate, so we have no financial statement impact from changes in interest
rates. However, changes in market interest rates impact the fair value of the convertible notes along with other
variables such as our credit spreads and the market price and volatility of our common stock. In June 2020, we
entered into the Amended Credit Agreement which provides for aggregate principal borrowings of up to $225.0
million. As of December 31, 2020, we had $200.0 million of borrowings outstanding and $20.6 million of outstanding
letters of credit under the Amended Credit Agreement. See Item 7, Liquidity and Capital Resources, for additional
information. Because borrowings under the Amended Credit Agreement bear interest at a variable rate, we are
exposed to market risk relating to changes in interest rates if we borrow under the Amended Credit Agreement. We
also have $129.4 million of lease obligations as of December 31, 2020. Interest rates on existing leases typically do
not change unless there is a modification to a lease agreement and as such, we do not believe that the interest rate
risk on the lease obligations is significant.
Impact of Inflation
We believe that our results of operations are not materially impacted by moderate changes in the inflation
rate. Inflation and changing prices did not have a material effect on our business, financial condition or results of
operations for the year ended December 31, 2020.
58
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Table of Contents
Groupon, Inc.
Consolidated Financial Statements
As of December 31, 2020 and 2019 and for the Years Ended December 31, 2020, 2019 and 2018
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
60
64
65
66
67
68
70
59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Groupon, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Groupon, Inc. and subsidiaries (the “Company”)
as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income
(loss), stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2020, and
the related notes and the schedule listed in the Index at Item 15(2) (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of
the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in
the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on
criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 25, 2021, expressed an unqualified
opinion on the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Notes 2 and 11 to the financial statements, the Company has changed its method of accounting for
leases in 2019 due to the adoption of the guidance in ASC Topic 842, Leases, using the modified retrospective
method.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Income Taxes—Foreign Tax Position—Refer to Notes 2 and 17 to the financial statements
Critical Audit Matter Description
The Company received a proposed income tax assessment from the tax authority in one foreign jurisdiction in the
amount of $126.4 million, inclusive of estimated incremental interest from the original assessment. The Company
believes the assessment, which primarily relates to transfer pricing on transactions occurring during 2011, is without
merit and it intends to vigorously defend itself.
60
Given the complexity of the relevant tax laws and regulations, auditing management’s evaluation and accounting for
the tax position associated with the foreign income tax assessment involved especially subjective and complex
judgments.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the accounting for the tax position associated with the foreign income tax
assessment included the following, among others:
• We tested the effectiveness of controls over income taxes, including those over accounting for uncertain tax
positions.
• With the assistance of our foreign and US income tax specialists, we evaluated management’s analysis
regarding the likelihood of sustaining its foreign tax position upon examination by the relevant foreign tax
authorities; and, we evaluated management’s estimate of the amount of tax benefit recognized.
• We assessed the basis of the Company’s analysis and measurement by:
◦ Obtaining, reading, and evaluating the outside legal opinion received by the Company supporting
its foreign tax position
◦ Obtaining, reading, and evaluating the written response from the outside legal counsel representing
the Company provided to us as part of our annual legal inquiry process
◦ Obtaining, reading, and evaluating management’s written analysis supporting the accounting
position
◦ Making direct inquiries of the outside legal counsel representing the Company in this proposed
assessment by the foreign tax authority
◦
Evaluating any developments in the matter during the current fiscal year through inquiry of
Company personnel and their outside legal counsel.
Goodwill—Refer to Notes 2, 3, and 7 to the financial statements
Critical Audit Matter Description
The Company’s annual and periodic evaluations of goodwill impairment involve the comparison of the fair value of
each of the Company’s reporting units to its carrying value. The Company determines the fair value of its reporting
units using the income approach (including discounted cash flows). With respect to the income approach,
management makes significant estimates and assumptions related to forecasts of future performance, including
revenues, cost of revenue, and operating expenses and risk-adjusted discount rates. The goodwill balance subject
to the impairment test was $214.7 million as of December 31, 2020. The Company recorded goodwill impairment
charges of $109.5 million for the year ended December 31, 2020.
Auditing the estimates and assumptions that impacted the valuation of the reporting units involved especially
subjective judgment, specifically related to the forecasts of revenues and cost of revenue and operating expenses
and selection of risk-adjusted discount rates.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s forecasts of revenues, cost of revenue, and operating expenses and
its selection of risk-adjusted discount rates included the following, among others:
• We tested the effectiveness of controls over the annual and periodic goodwill impairment assessment,
including those over the forecasts.
61
• We evaluated management’s ability to reliably forecast by comparing actual results to management’s
historical forecasts.
• We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical
results and previous forecasts, (2) internal communications to management and the Board of Directors, (3)
macroeconomic forecasts, and (4) forecasts utilized in other areas of the audit to evaluate consistency,
where appropriate. Additionally, we obtained and evaluated management’s written analysis supporting the
forecasted cash flows.
• With the assistance of fair value specialists, we evaluated the reasonableness of the 1) valuation
methodology and 2) risk-adjusted discount rates by:
◦
◦
Evaluating whether the fair value models being used are appropriate considering the Company’s
circumstances and valuation premise identified
Testing the source information and the mathematical accuracy of the calculation underlying the
determination of the risk-adjusted discount rates, and developing a range of independent estimates
and comparing those to the risk-adjusted discount rates selected by management.
Long-Lived Assets—Refer to Notes 2, 3 and 6 to the financial statements
Critical Audit Matter Description
The Company determined the significant deterioration in its financial performance due to the disruption in its
operations from COVID-19 and the sustained decrease in its stock price required evaluation of its long-lived assets
for impairment, which resulted in a $22.4 million impairment of its long-lived assets for the year ended December
31, 2020. The Company determines the fair value of its asset groups using the income approach (including
discounted cash flows). With respect to the income approach, management makes significant estimates and
assumptions related to forecasts of future performance, including revenue, cost of revenue, and operating expenses
and risk-adjusted discount rates.
Auditing the estimates and assumptions that impacted the valuation of the asset groups involved especially
subjective judgment, specifically related to the forecasts of revenues, cost of revenue, and operating expenses and
selection of risk-adjusted discount rates.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s forecasts of revenues, cost of revenue, and operating expenses and
its selection of risk-adjusted discount rates included the following, among others:
• We tested the effectiveness of controls over the long-lived asset impairment assessment, including those
over the forecasts.
• We evaluated management’s ability to reliably forecast by comparing actual results to management’s
historical forecasts.
• We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical
results and previous forecasts, (2) internal communications to management and the Board of Directors, (3)
macroeconomic forecasts, and (4) forecasts utilized in other areas of the audit to evaluate consistency,
where appropriate. Additionally, we obtained and evaluated management’s written analysis supporting the
forecasted cash flows.
• With the assistance of fair value specialists, we evaluated the reasonableness of the risk-adjusted discount
rate by testing the source information and the mathematical accuracy of the calculation and developing a
range of independent estimates and comparing those to the risk-adjusted discount rates selected by
management.
/s/ Deloitte & Touche LLP
62
Chicago, Illinois
February 25, 2021
We have served as the Company's auditor since 2017.
63
GROUPON, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other current assets
Total current assets
Property, equipment and software, net
Right-of-use assets - operating leases, net
Goodwill
Intangible assets, net
Investments
Other non-current assets
Total Assets
Liabilities and Equity
Current liabilities:
Short-term borrowings
Accounts payable
Accrued merchant and supplier payables
Accrued expenses and other current liabilities
Total current liabilities
Convertible senior notes, net
Operating lease obligations
Other non-current liabilities
Total Liabilities
Commitments and contingencies (see Note 12)
Stockholders' Equity
Common stock, par value $0.0001 per share, 100,500,000 shares authorized; 39,142,896
shares issued and 28,848,779 shares outstanding at December 31, 2020; 38,584,854 shares
issued and 28,290,737 shares outstanding at December 31, 2019 (1)
Additional paid-in capital (1)
Treasury stock, at cost, 10,294,117 shares at December 31, 2020 and December 31, 2019 (1)
Accumulated deficit
Accumulated other comprehensive income (loss)
Total Groupon, Inc. Stockholders' Equity
Noncontrolling interests
Total Equity
Total Liabilities and Equity
December 31,
2020
2019
$
850,587 $
42,998
40,441
934,026
85,284
75,349
214,699
30,151
37,671
34,327
750,887
54,953
82,073
887,913
124,950
108,390
325,017
35,292
76,576
28,605
$
$
1,411,507 $
1,586,743
200,000 $
33,026
410,963
294,999
938,988
229,490
90,927
44,428
—
20,415
540,940
260,192
821,547
214,869
110,294
44,987
1,303,833
1,191,697
4
2,348,114
(922,666)
4
2,310,393
(922,666)
(1,320,886)
(1,032,876)
3,109
107,675
(1)
107,674
$
1,411,507 $
39,081
393,936
1,110
395,046
1,586,743
(1)
Prior period share information and balances have been retroactively adjusted to reflect a reverse stock split. See Note 13, Stockholders'
Equity for additional information.
See Notes to Consolidated Financial Statements.
64
GROUPON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Year Ended December 31,
2020
2019
2018
$
643,653 $
1,126,357
Revenue:
Service
Product
Total revenue
Cost of revenue:
Service
Product
Total cost of revenue
Gross profit
Operating expenses:
Marketing
Selling, general and administrative
Goodwill impairment
Long-lived asset impairment
Restructuring and related charges
Total operating expenses
Income (loss) from operations
Other income (expense), net
Income (loss) from continuing operations before provision (benefit) for
income taxes
Provision (benefit) for income taxes
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of tax
Net income (loss)
Net (income) loss attributable to noncontrolling interests
Net income (loss) attributable to Groupon, Inc.
Basic and diluted net income (loss) per share: (1)
Continuing operations
Discontinued operations
Basic and diluted net income (loss) per share
Weighted average number of shares outstanding: (1)
Basic
Diluted
773,215
1,416,868
79,296
660,278
739,574
677,294
154,534
603,185
109,486
22,351
64,836
954,392
(277,098)
(16,968)
(294,066)
(7,504)
(286,562)
382
(286,180)
(1,751)
1,092,558
2,218,915
114,462
918,324
1,032,786
1,186,129
339,355
806,945
—
—
31
39,798
(53,329)
(13,531)
761
(14,292)
2,597
(11,695)
(10,682)
$
$
$
(287,931) $
(22,377) $
(10.08) $
(0.88) $
0.01
0.09
(10.07) $
(0.79) $
1,205,487
1,431,259
2,636,746
120,077
1,196,068
1,316,145
1,320,601
395,737
870,961
—
—
(136)
54,039
(53,008)
1,031
(957)
1,988
—
1,988
(13,067)
(11,079)
(0.39)
—
(0.39)
1,146,331
1,266,562
28,604,115
28,370,417
28,325,555
28,604,115
28,370,417
28,325,555
(1)
All share and per share information has been retroactively adjusted to reflect a reverse stock split. See Note 13, Stockholders' Equity for
additional information.
See Notes to Consolidated Financial Statements.
65
GROUPON, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Income (loss) from continuing operations
$
(286,562) $
(14,292) $
1,988
Year Ended December 31,
2020
2019
2018
Other comprehensive income (loss) from continuing operations:
Net change in unrealized gain (loss) on foreign currency translation
adjustments
Net change in unrealized gain (loss) on available-for-sale securities (net of
tax effect of $0, $0 and $34 for the years ended December 31, 2020, 2019,
and 2018)
Other comprehensive income (loss) from continuing operations
Comprehensive income (loss) from continuing operations
Income (loss) from discontinued operations
Comprehensive income (loss) from discontinued operations
(35,972)
—
(35,972)
(322,534)
382
382
4,858
(379)
4,479
(9,813)
2,597
2,597
Comprehensive income (loss)
Comprehensive income attributable to noncontrolling interests
(322,152)
(1,751)
(7,216)
(10,682)
Comprehensive income (loss) attributable to Groupon, Inc.
$
(323,903) $
(17,898) $
See Notes to Consolidated Financial Statements.
3,332
(735)
2,597
4,585
—
—
4,585
(13,067)
(8,482)
66
GROUPON, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
Common Stock (1)
Shares
Amount
Additional
Paid-In
Capital (1)
Treasury Stock (1)
Shares
Amount
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total Groupon,
Inc.
Stockholders'
Equity
Non-
controlling
Interests
Total
Equity
Groupon, Inc. Stockholders' Equity
Balance at December 31, 2017
37,427,093 $
4 $ 2,174,779
(9,430,112) $ (867,450) $ (1,088,204) $
31,844 $
250,973 $
872 $ 251,845
Cumulative effect of change in accounting principle due to adoption
of ASC Topic 606, net of tax
Reclassification for impact of U.S. tax rate change
Comprehensive income (loss)
Exercise of stock options
Vesting of restricted stock units and performance share units
Shares issued under employee stock purchase plan
Shares issued to settle liability-classified awards
Tax withholdings related to net share settlements of stock-based
compensation awards
Stock-based compensation on equity-classified awards
Repurchases of common stock
Distributions to noncontrolling interest holders
Balance at December 31, 2018
Comprehensive income (loss)
Exercise of stock options
Vesting of restricted stock units and performance share units
Shares issued under employee stock purchase plan
Tax withholdings related to net share settlements of stock-based
compensation awards
Stock-based compensation on equity-classified awards
Repurchases of common stock
Distributions to noncontrolling interest holders
—
—
—
33,639
713,244
81,053
62,018
(270,075)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
81
—
5,634
6,436
(22,709)
70,411
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(162,644)
(10,041)
—
—
88,945
(161)
(11,079)
—
161
2,597
88,945
—
—
—
88,945
—
(8,482)
13,067
4,585
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
81
—
5,634
6,436
(22,709)
70,411
(10,041)
—
—
—
—
—
—
—
81
—
5,634
6,436
(22,709)
70,411
(10,041)
—
(12,576)
(12,576)
38,046,972 $
4 $ 2,234,632
(9,592,756) $ (877,491) $ (1,010,499) $
34,602 $
381,248 $ 1,363 $ 382,611
—
3,743
720,951
74,299
(261,111)
—
—
—
—
—
—
—
—
—
—
—
—
40
—
4,083
(17,413)
89,051
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(701,361)
(45,175)
—
—
(22,377)
4,479
(17,898)
10,682
(7,216)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
40
—
4,083
(17,413)
89,051
(45,175)
—
—
—
—
—
—
40
—
4,083
(17,413)
89,051
(45,175)
—
(10,935)
(10,935)
Balance at December 31, 2019
38,584,854 $
4 $ 2,310,393
(10,294,117) $ (922,666) $ (1,032,876) $
39,081 $
393,936 $ 1,110 $ 395,046
Cumulative effect of change in accounting principle due to adoption
of ASC Topic 326, net of tax
Comprehensive income (loss)
Vesting of restricted stock units and performance share units
Shares issued under employee stock purchase plan
Tax withholdings related to net share settlements of stock-based
compensation awards
Stock-based compensation on equity-classified awards
Distributions to noncontrolling interest holders
—
—
784,385
69,371
(295,714)
—
—
—
—
—
—
—
—
—
—
—
—
1,791
(9,754)
45,684
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(79)
—
(79)
—
(79)
(287,931)
(35,972)
(323,903)
1,751
(322,152)
—
—
—
—
—
—
—
—
—
—
—
1,791
(9,754)
45,684
—
—
—
—
—
1,791
(9,754)
45,684
—
(2,862)
(2,862)
Balance at December 31, 2020
39,142,896 $
4 $ 2,348,114
(10,294,117) $ (922,666) $ (1,320,886) $
3,109 $
107,675 $
(1) $ 107,674
(1)
All share information and balances have been retroactively adjusted to reflect a reverse stock split. See Note 13, Stockholders' Equity, for additional information.
See Notes to Consolidated Financial Statements.
67
GROUPON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Operating activities
Net income (loss)
Less: Income (loss) from discontinued operations, net of tax
Income (loss) from continuing operations
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property, equipment and software
Amortization of acquired intangible assets
Impairment of goodwill
Impairment of long-lived assets
Restructuring-related impairment
Stock-based compensation
Impairments of investments
Upward adjustment for observable price change of investment
Deferred income taxes
(Gain) loss from changes in fair value of investments
Amortization of debt discount on convertible senior notes
Change in assets and liabilities, net of acquisitions and dispositions:
Accounts receivable
Prepaid expenses and other current assets
Right-of-use assets - operating leases
Accounts payable
Accrued merchant and supplier payables
Accrued expenses and other current liabilities
Operating lease obligations
Other, net
Net cash provided by (used in) operating activities from continuing operations
Net cash provided by (used in) operating activities from discontinued operations
Net cash provided by (used in) operating activities
Investing activities
Year Ended December 31,
2020
2019
2018
$
(286,180) $
(11,695) $
382
(286,562)
77,792
9,730
109,486
22,351
21,622
39,010
6,684
—
(7,101)
1,405
14,621
13,524
42,249
22,463
11,414
(142,624)
36,159
(36,864)
(18,957)
(63,598)
—
(63,598)
2,597
(14,292)
91,410
14,355
—
—
—
81,615
9,961
(51,397)
(1,485)
72,497
13,200
13,577
3,176
26,226
(17,401)
(109,176)
(26,071)
(28,552)
(6,360)
71,283
—
71,283
1,988
—
1,988
101,330
14,498
—
—
—
64,821
10,156
—
(5,000)
9,064
11,916
32,057
7,166
—
5,805
(45,268)
(31,430)
—
13,752
190,855
—
190,855
Purchases of property and equipment and capitalized software
(48,711)
(67,328)
(69,695)
Proceeds from sale of intangible assets
Proceeds from sales and maturities of investments
Acquisition of business, net of acquired cash
Acquisitions of intangible assets and other investing activities
Net cash provided by (used in) investing activities from continuing operations
Net cash provided by (used in) investing activities from discontinued operations
Net cash provided by (used in) investing activities
Financing activities
Proceeds from borrowings under revolving credit agreement
Issuance costs for revolving credit agreement
Payments for repurchases of common stock
Taxes paid related to net share settlements of stock-based compensation awards
Proceeds from stock option exercises and employee stock purchase plan
Distributions to noncontrolling interest holders
Payments of finance lease obligations
Payments of contingent consideration related to acquisitions
Payment of financing obligation related to acquisition
Other financing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash, including cash
classified within current assets of discontinued operations
Net increase (decrease) in cash, cash equivalents and restricted cash, including cash classified
within current assets of discontinued operations
Less: Net increase (decrease) in cash classified within current assets of discontinued operations
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period (1)
Cash, cash equivalents and restricted cash, end of period (1)
—
31,605
—
(4,240)
(21,346)
1,224
(20,122)
200,000
(1,686)
—
(10,607)
1,791
(2,862)
(8,930)
(908)
—
—
—
3,475
—
(3,738)
(67,591)
—
1,500
8,594
(58,119)
(18,262)
(135,982)
—
(67,591)
(135,982)
—
(2,384)
(45,631)
(18,105)
4,123
(10,935)
(19,687)
—
—
—
—
—
(9,585)
(24,105)
5,715
(12,576)
(33,023)
(1,815)
(8,391)
(637)
176,798
(92,619)
(84,417)
6,574
(3,144)
(11,209)
99,652
1,224
98,428
752,657
(92,071)
(40,753)
—
(92,071)
844,728
—
(40,753)
885,481
844,728
$
851,085 $
752,657 $
See Notes to Consolidated Financial Statements.
68
GROUPON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Supplemental disclosure of cash flow information
Income tax payments (refunds) for continuing operations
Cash paid for interest
Non-cash investing and financing activities
Continuing operations:
Equipment acquired under capital lease arrangements
Supplemental cash flow information on our leasing obligations
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for lease liabilities:
Finance leases
Operating leases
Year Ended December 31,
2019
2018
2020
$
3,262 $
11,898 $
12,749
9,145
2,781
9,556
$
$
— $
— $
18,064
(522) $
(1,021) $
(36,864)
(36,723)
—
16,415
3,929
27,293
—
—
—
—
(1)
The following table provides a reconciliation of cash, cash equivalents and restricted cash shown above to amounts reported within the
consolidated balance sheets as of December 31, 2020, 2019 and 2018 (in thousands):
Cash and cash equivalents
Restricted cash included in prepaid expenses and other current assets
Restricted cash included in other non-current assets
Cash, cash equivalents and restricted cash
December 31, 2020
December 31, 2019
December 31, 2018
$
$
850,587 $
750,887 $
841,021
498
—
1,534
236
3,320
387
851,085 $
752,657 $
844,728
See Notes to Consolidated Financial Statements.
69
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Company Information
Groupon, Inc. and subsidiaries, which commenced operations in October 2008, is a global scaled two-sided
marketplace that connects consumers to merchants by offering goods and services, generally at a discount.
Consumers access our marketplace through our mobile applications and our websites, primarily localized
groupon.com sites in many countries.
Our operations are organized into two segments: North America and International. See Note 21, Segment
Information
COVID-19 Pandemic
For the year ended December 31, 2020, the COVID-19 pandemic has had an adverse impact on our
financial condition, results of operations and cash flow, including the impairment of our long-lived assets and
goodwill. See Note 3, COVID-19 Pandemic, for more information.
Reverse Stock Split
In June 2020, we effectuated a reverse stock split of our shares of common stock at a ratio of 1-for-20. See
Note 13, Stockholders' Equity, for additional information. As a result, the number of shares and income (loss) per
share disclosed throughout this Annual Report on Form 10-K have been retrospectively adjusted to reflect the
reverse stock split.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Groupon, Inc. and its subsidiaries. All
intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial
statements were prepared in accordance with U.S. GAAP and include the assets, liabilities, revenue and expenses
of all wholly-owned subsidiaries and majority-owned subsidiaries over which we exercise control and variable
interest entities for which we have determined that we are the primary beneficiary. Outside stockholders' interests in
subsidiaries are shown on the consolidated financial statements as Noncontrolling interests. Investments in entities
in which we do not have a controlling financial interest are accounted for at fair value, as available-for-sale
securities or at cost adjusted for observable price changes and impairments, as appropriate.
Adoption of New Accounting Standards
We adopted the guidance in ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) -
Measurement of Credit Losses of Financial Instruments ("CECL"), on January 1, 2020. This ASU requires entities to
measure credit losses for financial assets measured at amortized cost based on expected losses over the lifetime of
the asset rather than incurred losses. The adoption of ASU 2016-13 did not have a material impact on the
consolidated financial statements.
We adopted the guidance in ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the
Test for Goodwill Impairment, on January 1, 2020. This ASU eliminates Step 2 of the goodwill impairment test and
requires a goodwill impairment to be measured as the amount by which a reporting unit's carrying amount exceeds
its fair value, not to exceed the carrying amount of its goodwill. During the first quarter 2020, we determined a
triggering event occurred that required us to evaluate our goodwill for impairment, and we recorded an impairment
charge as a result of that assessment. See Note 3, COVID-19 Pandemic, for additional information.
We adopted the guidance in ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurements, on January 1, 2020. This ASU modifies the
disclosure requirements in Topic 820, Fair Value Measurements by removing, modifying, or adding certain
disclosures. The adoption of ASU 2018-13 did not have a material impact on the consolidated financial statements.
70
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We adopted the guidance in ASU 2016-02, Leases (Topic 842), on January 1, 2019. This ASU requires the
recognition of lease assets and liabilities for operating leases, in addition to the finance lease assets and liabilities
historically recorded on our consolidated balance sheets. We adopted Topic 842 using the modified retrospective
transition method. Beginning on January 1, 2019, our consolidated financial statements are presented in
accordance with the revised policies, while prior period amounts are not adjusted and continue to be reported in
accordance with our historical policies. For additional information on the impact of adoption of Topic 842 on our
accounting policies, refer to our discussion under Lease and Asset Retirement Obligations below.
The modified retrospective transition method required the cumulative effect, if any, of initially applying the
guidance to be recognized as an adjustment to our accumulated deficit as of our adoption date. As a result of
adopting Topic 842, we recognized additional lease assets and liabilities of $109.6 million as of January 1, 2019.
The discount rate used to calculate that adjustment was the rate implicit in the lease, unless that rate was not
readily determinable. For leases for which the rate was not readily determinable, the discount rate used was our
incremental borrowing rate as of the adoption date, January 1, 2019. There was no cumulative effect adjustment to
our accumulated deficit as a result of initially applying the guidance. Aside from the impact to our consolidated
balance sheet discussed above, lease accounting policies and presentation within the consolidated statement of
operations and consolidated statements of cash flows is substantially consistent with historical treatment.
We elected the package of practical expedients permitted under the transition guidance within Topic 842,
which allowed us to carry forward prior conclusions about lease identification, classification and initial direct costs
for leases entered into prior to adoption of Topic 842. Additionally, we elected to not separate lease and non-lease
components for all of our leases. For leases with a term of 12 months or less, we elected the short-term lease
exemption, which allowed us to not recognize right-of-use assets or lease liabilities for qualifying leases existing at
transition and new leases we may enter into in the future.
We adopted the guidance in ASU 2018-07, Compensation - Stock Compensation (Topic 718) -
Improvements to Nonemployee Share-Based Payment Accounting, on January 1, 2019. This ASU expands the
scope to make the guidance for share-based payment awards to nonemployees consistent with the guidance for
share-based payment awards to employees. The adoption of ASU 2018-07 did not have a material impact on the
consolidated financial statements.
We adopted the guidance in ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software
(Subtopic 350-40) - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement
That Is a Service Contract, on January 1, 2019. This ASU requires entities in a hosting arrangement that is a service
contract to follow the guidance in Subtopic 350-40, Internal-Use Software, to determine which costs to implement
the service contract would be capitalized as an asset related to the service contract and which costs would be
expensed. The requirements of ASU 2018-15 have been applied on a prospective basis to implementation costs
incurred on or after January 1, 2019. As a result of the adoption of ASU 2018-15, we capitalized $10.5 million and
$7.4 million of implementation costs for the years ended December 31, 2020 and 2019. We recognized $1.7 million
of amortization related to these implementation costs for the year ended December 31, 2020. We did not recognize
any amortization related to these implementation costs for the year ended December 31, 2019.
71
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We adopted the guidance in ASC Topic 606, Revenue from Contracts with Customers, on January 1, 2018.
Topic 606 is a comprehensive new revenue recognition model that requires a company to recognize revenue to
depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to
receive in exchange for those goods or services. We adopted Topic 606 using the modified retrospective method.
Beginning on January 1, 2018, results are presented in accordance with the revised policies. The adoption of Topic
606 did not significantly impact our presentation of revenue on a gross or net basis. For additional information on
the impact of adoption of Topic 606 on our accounting policies, refer to our discussion under Revenue Recognition
below.
We recorded a net reduction to our opening accumulated deficit of $88.9 million, which is net of a $6.7
million income tax effect, as of January 1, 2018 due to the cumulative impact of adopting Topic 606. The following
table summarizes balance sheet accounts impacted by the cumulative effect of adopting Topic 606 (in thousands):
Prepaid expenses and other current assets
Other non-current assets
Accrued merchant and supplier payables
Accrued expenses and other current liabilities
Other non-current liabilities
Effect on beginning accumulated deficit
Increase (decrease) to
beginning accumulated
deficit
$
$
(4,007)
(10,223)
(64,970)
(13,188)
3,443
(88,945)
We adopted the guidance in ASU 2016-01, Financial Instruments (Topic 825-10) - Recognition and
Measurement of Financial Assets and Financial Liabilities, as amended, on January 1, 2018. This ASU generally
requires equity investments to be measured at fair value with changes in fair value recognized through net income
and eliminates the cost method for equity securities. However, for equity investments without readily determinable
fair values, the ASU permits entities to elect to measure the investments at cost adjusted for observable price
changes and impairments, with changes in the measurement recognized through net income. We applied that
measurement alternative to our equity investments that were previously accounted for under the cost method. The
adoption of ASU 2016-01 did not have a material impact on the consolidated financial statements.
We adopted the guidance in ASU 2016-18, Statement of Cash Flows (Topic 230) - Restricted Cash, on
January 1, 2018. This ASU requires companies to include amounts generally described as restricted cash and
restricted cash equivalents, along with cash and cash equivalents, when reconciling the beginning-of-period and
end-of-period amounts shown on the consolidated statements of cash flows. Previously, changes in restricted cash
were reported within cash flows from operating activities.
We adopted the guidance in ASU 2017-05, Other Income-Gains and Losses from the Derecognition of
Nonfinancial Assets (Subtopic 610-20) - Clarifying the Scope of Asset Derecognition Guidance and Accounting for
Partial Sales of Nonfinancial Assets, on January 1, 2018. This ASU is meant to clarify the scope of ASC Subtopic
610-20, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets, and to add guidance for
partial sales of nonfinancial assets. The adoption of ASU 2017-05 did not have a material impact on the
consolidated financial statements.
We adopted the guidance in ASU 2017-07, Compensation - Retirement Benefits (Topic 715) - Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, on January 1, 2018. This
ASU requires employers to include only the service cost component of net periodic pension cost in operating
expenses, together with other employee compensation costs. The other components of net periodic pension cost,
including interest cost, expected return on plan assets, amortization of prior service cost and settlement and
curtailment effects, are to be included in non-operating expenses. The adoption of ASU 2017-07 did not have a
material impact on the consolidated financial statements.
We adopted the guidance in ASU 2017-09, Compensation - Stock Compensation (Topic 718) - Scope of
Modification Accounting, on January 1, 2018. This ASU clarifies the changes to terms or conditions of a share-
based payment award that require an entity to apply modification accounting. The adoption of ASU 2017-09 did not
have a material impact on the consolidated financial statements.
72
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We adopted the guidance in ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic
220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, as of January 1,
2018. This ASU permits a reclassification from accumulated other comprehensive income to retained earnings for
stranded tax effects resulting from the Tax Cuts and Jobs Act (the "Jobs Act"). As a result of the adoption of ASU
2018-02, we reclassified $0.2 million from accumulated other comprehensive income to accumulated deficit.
Reclassifications
Certain reclassifications have been made to the consolidated financial statements of prior periods and the
accompanying notes to conform to the current period presentation.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the amounts reported in the consolidated financial statements and
accompanying notes. Estimates in our consolidated financial statements include, but are not limited to, variable
consideration from unredeemed vouchers; income taxes; leases; initial valuation and subsequent impairment testing
of goodwill, other intangible assets and long-lived assets; investments; receivables; customer refunds and other
reserves; contingent liabilities; and the useful lives of property, equipment and software and intangible assets.
Actual results could differ materially from those estimates.
Cash, Cash Equivalents and Restricted Cash
We consider all highly liquid investments with an original maturity of three months or less from the date of
purchase to be cash equivalents. Restricted cash represents amounts that we are unable to access for operational
purposes. These amounts primarily relate to withholdings from employee paychecks under our employee stock
purchase plan ("ESPP").
Accounts Receivable, Net
Accounts receivable primarily represents the net cash due from credit card and other payment processors
and from merchants and performance marketing networks for commissions earned on consumer purchases. The
carrying amount of receivables is reduced by an allowance for expected credit losses that reflects management's
best estimate of amounts that will not be collected. We establish an allowance for expected credit losses on
accounts receivable based on identifying the following customer risk characteristics: size, type of customer, and
payment terms offered in the normal course of business. Receivables with similar risk characteristics are grouped
into pools. For each pool, we consider the historical credit loss experience, current economic conditions, bankruptcy
filings, published or estimated credit default rates, age of the receivable and any recoveries in assessing the lifetime
expected credit losses.
Inventories
Inventories, consisting of merchandise purchased for resale, are accounted for using the first-in, first-out
method of accounting and are valued at the lower of cost or net realizable value. We write down our inventory to the
lower of cost or net realizable value based upon assumptions about future demand and market conditions. If actual
market conditions are less favorable than those projected, additional inventory write-downs may be required. Once
established, the original cost of the inventory less the related inventory write-down represents a new cost basis.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization of property and equipment is
recorded on a straight-line basis over the estimated useful lives of the assets. Generally, the useful lives are three to
five years for computer hardware, office equipment and furniture and fixtures and the shorter of the term of the
lease or five years for leasehold improvements and assets under finance leases.
73
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Internal-Use Software
We incur costs related to internal-use software and website development, including purchased software and
internally-developed software. Costs incurred in the planning and evaluation stage of internally-developed software
and website development are expensed as incurred. Costs incurred and accumulated during the application
development stage are capitalized and included within Property, equipment and software, net on the consolidated
balance sheets. Amortization of internal-use software is recorded on a straight-line basis over the two-year
estimated useful life of the assets.
Cloud Computing Costs
We have entered into non-cancelable cloud computing hosting arrangements for which we incur
implementation costs. Costs incurred in the planning and evaluation stage of the cloud computing hosting
arrangement are expensed as incurred. Costs incurred during the application development stage related to
implementation of the hosting arrangement are capitalized and included within Other current and non-current assets
on the consolidated balance sheets. Amortization of implementation costs is recorded on a straight-line basis over
the term of the associated hosting arrangement for each module or component of the related hosting arrangement
when it is ready for its intended use. Amortization costs are recorded primarily in Selling, general and administrative
expense on the consolidated statements of operations.
Goodwill
Goodwill is allocated to our reporting units at acquisition. Once goodwill has been allocated to the reporting
units, it no longer retains its identification with a particular acquisition and becomes identified with the reporting unit
in its entirety. Accordingly, the fair value of the reporting unit as a whole is available to support the recoverability of
its goodwill.
We evaluate goodwill for impairment annually on October 1 or more frequently when an event occurs or
circumstances change that indicates the carrying value may not be recoverable. We have the option to assess
goodwill for impairment by first performing a qualitative assessment to determine whether it is more-likely-than-not
that the fair value of a reporting unit is less than its carrying value. If it is determined that the reporting unit fair value
is more-likely-than-not less than its carrying value, or if we do not elect the option to perform an initial qualitative
assessment, we perform a quantitative assessment of the reporting unit's fair value. If the fair value of the reporting
unit is in excess of its carrying value, the related goodwill is not impaired. If the fair value is less than the carrying
value, we recognize an impairment equal to the difference between the carrying value of the reporting unit and its
fair value, not to exceed the carrying value of goodwill. During the first quarter 2020, we determined a triggering
event occurred that required us to evaluate our goodwill for impairment, and we recorded an impairment charge as
a result of that assessment. During the third quarter 2020, we exited our operations in Japan and New Zealand,
which represents the majority of the countries in our Asia Pacific reporting unit. As a result, we combined the
remainder of the Asia Pacific reporting unit and the EMEA reporting unit into a single International reporting unit,
consistent with how management reviews the operating results of the business. See Note 3, COVID-19 Pandemic,
and Note 7, Goodwill and Other Intangible Assets, for more information.
Investments
Investments in equity shares without a readily determinable fair value and for which we do not have the
ability to exercise significant influence are accounted for at cost adjusted for observable price changes and
impairments, with changes in the measurement recognized through net income (loss). Those investments are
classified within Investments on the consolidated balance sheets.
We have investments in common stock or in-substance common stock for which we have the ability to
exercise significant influence and we have made an irrevocable election to account for those investments at fair
value. Those investments are classified within Investments on the consolidated balance sheets.
Investments in convertible debt securities and convertible redeemable preferred shares are accounted for
as available-for-sale securities, which are classified within Investments on the consolidated balance sheets.
Available-for-sale securities are recorded at fair value each reporting period. Unrealized gains and losses, net of the
related tax effects, are excluded from earnings and recorded as a separate component within Accumulated other
74
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
comprehensive income (loss) on the consolidated balance sheets until realized. Interest income from available-for-
sale securities is reported within Other income (expense), net on the consolidated statements of operations.
Other-than-Temporary Impairment of Investments
We conduct reviews of our available-for-sale investments with unrealized losses on a quarterly basis to
evaluate whether those impairments are other-than-temporary. Investments with unrealized losses that are
determined to be other-than-temporary are written down to fair value with a charge to earnings. Unrealized losses
that are determined to be temporary in nature are recorded, net of tax, in Accumulated other comprehensive income
(loss) for available-for-sale securities.
Income Taxes
We account for income taxes using the asset and liability method, under which deferred income tax assets
and liabilities are recognized based upon anticipated future tax consequences attributable to differences between
the financial statement carrying amounts of assets and liabilities and their respective tax bases. We regularly review
deferred tax assets to assess whether it is more likely than not that the deferred tax assets will be realized and, if
necessary, establish a valuation allowance for portions of such assets to reduce the carrying value.
For purposes of assessing whether it is more likely than not that deferred tax assets will be realized, we
consider the following four sources of taxable income for each tax jurisdiction: (a) future reversals of existing taxable
temporary differences, (b) projected future earnings, (c) taxable income in carryback years, to the extent that
carrybacks are permitted under the tax laws of the applicable jurisdiction, and (d) tax planning strategies, which
represent prudent and feasible actions that a company ordinarily might not take, but would take to prevent an
operating loss or tax credit carryforward from expiring unused. To the extent that evidence about one or more of
these sources of taxable income is sufficient to support a conclusion that a valuation allowance is not necessary,
other sources need not be considered. Otherwise, evidence about each of the sources of taxable income is
considered in arriving at a conclusion about the need for and amount of a valuation allowance. See Note 17, Income
Taxes, for further information about our valuation allowance assessments.
We are subject to taxation in the United States, various states and foreign jurisdictions. Significant judgment
is required in determining the worldwide provision for income taxes and recording the related income tax assets and
liabilities. During the ordinary course of business, there are many transactions and calculations for which the
ultimate tax determination is uncertain. For example, our effective tax rate could be adversely affected by earnings
being lower than anticipated in countries where it has lower statutory rates and higher than anticipated in countries
where it has higher statutory rates, by changes in foreign currency exchange rates, by changes in the valuation of
deferred tax assets and liabilities, by changes in the measurement of uncertain tax positions or by changes in the
relevant laws, regulations, principles and interpretations. We account for uncertainty in income taxes by recognizing
the financial statement benefit of a tax position only after determining that the relevant tax authority would more
likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not criteria, the
amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent
likelihood of being realized upon ultimate settlement with the relevant tax authority.
Lease and Asset Retirement Obligations
We have entered into various non-cancelable operating lease agreements for our offices and data centers
and non-cancelable finance lease agreements for property and equipment. Significant judgment is required when
determining whether a contract is or contains a lease. We review contracts to determine whether the language
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
We classify leases at their commencement as either operating or finance leases. We may receive renewal
or expansion options, rent holidays, leasehold improvements or other incentives on certain lease agreements. We
recognize a right-of-use asset and lease liability for all of our leases at the commencement of the lease. Lease
liabilities are measured based on the present value of the minimum lease payments discounted by a rate
determined as of the date of commencement. Right-of-use assets are measured based on the lease liability
adjusted for any initial direct costs, prepaid rent, or lease incentives. Minimum lease payments made under
operating and finance leases are apportioned between interest expense and a reduction of the related operating
and finance lease obligations. Operating lease costs, including interest expense on operating leases, are presented
75
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
within Selling, general and administrative expense on the consolidated statements of operations and the related
operating lease obligation is presented within Accrued expenses and other current liabilities and Operating lease
obligations on the consolidated balance sheets. Amortization and interest expense on finance leases are presented
within Selling, general and administrative expense and Other income (expense), net, respectively, on the
consolidated statements of operations and the related finance lease obligation is presented within Accrued
expenses and other current liabilities and Other non-current liabilities on the consolidated balance sheets.
As discussed above, the present value of minimum lease payments is used in determining the value of our
operating and finance lease liabilities. The discount rate used to calculate the present value for lease payments is
the rate implicit in the lease, unless that rate cannot be readily determined. For leases in which the rate implicit in
the lease is not readily determinable, the discount rate is our incremental borrowing rate, which is determined based
on information available at lease commencement and is equal to the rate of interest that we would have to pay to
borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic
environment.
Certain lease agreements include variable lease costs which are primarily related to costs that are
dependent on our usage of the underlying asset or lease payments that are dependent on an index when that index
has changed since lease commencement. Those costs are expenses in the period in which they are incurred.
We establish liabilities for the present value of estimated future costs to retire long-lived assets at the
termination or expiration of a lease. Those costs are capitalized and amortized over the lease term, and the
recorded liabilities are accreted to the future value of the estimated retirement costs. The related amortization and
accretion expenses are presented within Selling, general and administrative expense on the consolidated
statements of operations.
We have also subleased certain office facilities under operating lease agreements, for which we
recognize sublease income on a straight-line basis over their respective lease terms. Sublease income is generally
presented within Selling, general and administrative expense on the consolidated statements of operations.
Revenue Recognition
We recognize revenue when we satisfy a performance obligation by transferring a promised good or service
to a customer. Substantially all of our performance obligations are satisfied at a point in time rather than over time.
We offer goods and services through our online marketplaces in three primary categories: Local, Goods and Travel.
Service revenue
Service revenue primarily represents the net commissions earned from selling goods or services on behalf
of third-party merchants. Those transactions generally involve a customer's purchase of a voucher through one of
our online marketplaces that can be redeemed by the customer with a third-party merchant for goods or services (or
for discounts on goods or services). Service revenue from those transactions is reported on a net basis as the
purchase price collected from the customer less the portion of the purchase price that is payable to the third-party
merchant. We recognize revenue from those transactions when our commission has been earned, which occurs
when a sale through one of our online marketplaces is completed and the related voucher has been made available
to the customer. We believe that our remaining obligations to remit payment to the merchant and to provide
information about vouchers sold are administrative activities that are immaterial in the context of the contract with
the merchant. Revenue from hotel reservation offerings is recognized at the time the reservation is made, net of an
allowance for estimated cancellations.
We also earn commissions when customers make purchases with retailers using digital coupons accessed
through our websites and mobile applications. We recognize those commissions as revenue in the period in which
the underlying transactions between the customer and the third-party merchant are completed. Additionally, we earn
advertising revenue when the advertiser's logo or website link has been included on our websites or in specified
email distributions for the requisite period of time as set forth in the agreement with the advertiser.
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GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Product revenue
We generate product revenue from our sales of first-party Goods transactions, which are direct sales of
merchandise inventory. For product revenue transactions, we are the primary party responsible for providing the
good to the customer, we have inventory risk and we have discretion in establishing prices. As such, product
revenue is reported on a gross basis as the purchase price received from the customer. Product revenue, including
associated shipping revenue, is recognized when title passes to the customer upon delivery of the product.
Variable Consideration for Unredeemed Vouchers
For merchant agreements with redemption payment terms, the merchant is not paid its share of the sale
price for a voucher sold through one of our online marketplaces until the customer redeems the related voucher. If
the customer does not redeem a voucher with such merchant payment terms, we retain all of the gross billings for
that voucher, rather than retaining only our net commission. We estimate the variable consideration from vouchers
that will not ultimately be redeemed using our historical voucher redemption experience at the time of sale. We
apply a constraint to ensure it is probable that a significant reversal of revenue will not occur in future periods. In
2020, we have increased our constraint on revenue from unredeemed vouchers as customer redemptions have
decreased due to the impacts of COVID-19 and may not be reflective of future redemption behavior. If actual
redemptions differ from our estimates, the effects could be material to the consolidated financial statements.
Refunds
Refunds are recorded as a reduction of revenue. The liability for estimated refunds is included within
Accrued expenses and other current liabilities on the consolidated balance sheets.
We estimate our refund reserve using historical refund experience by category. We assess the trends that
could affect our estimates on an ongoing basis and make adjustments to the refund reserve calculations if it
appears that changes in circumstances, including changes to our refund policies or general economic conditions,
may cause future refunds to differ from our initial estimates. In 2020, we have experienced increased refund levels
due to the impacts of COVID-19. If actual refunds differ from our estimates, the effects could be material to the
consolidated financial statements.
Discounts, Customer Credits and Other Consideration Payable to Customers
We provide discount offers to encourage purchases of goods and services through our online marketplaces.
We record discounts as a reduction of revenue.
Additionally, we issue credits to customers that can be applied to future purchases through our online
marketplaces. Credits are primarily issued as consideration for refunds. To a lesser extent, credits are issued for
customer relationship purposes. Credits issued to satisfy refund requests are applied as a reduction to the refund
reserve and customer credits issued for relationship purposes are classified as a reduction of revenue. Breakage
income from customer credits that are not expected to be used is estimated and recognized as revenue in
proportion to the pattern of redemption for customer credits that are used.
Customer credits can be redeemed through our online marketplaces for goods or services provided by a
third-party merchant or for merchandise inventory sold by us. When customer credits are redeemed for goods or
services provided by a third-party merchant, service revenue is recognized on a net basis as the difference between
the carrying amount of the customer credit liability derecognized and the amount due to the merchant for the related
transaction. When customer credits are redeemed for merchandise inventory sold by us, product revenue is
recognized on a gross basis equal to the amount of the customer credit liability derecognized. Historically, customer
credits have primarily been used within one year of issuance; however, usage patterns have been impacted from
changes in customer behavior due to COVID-19.
Sales and Related Taxes
Sales, use, value-added and related taxes that are imposed on specific revenue-generating transactions
are presented on a net basis and excluded from revenue.
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GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Costs of Obtaining Contracts
Incremental costs to obtain contracts with third-party merchants, such as sales commissions, are deferred
and recognized on a straight-line basis over the expected period of the merchant arrangement, generally from 12 to
18 months. Those costs are classified within Selling, general and administrative expense in the consolidated
statements of operations.
Cost of Revenue
Cost of revenue is comprised of direct and certain indirect costs incurred to generate revenue. Costs
incurred to generate revenue, which include credit card processing fees, editorial costs, compensation expense for
technology support personnel who are responsible for maintaining the infrastructure of our websites, amortization of
internal-use software relating to customer-facing applications, web hosting and other processing fees are attributed
to the cost of service and product revenue in proportion to gross billings during the period. For product revenue
transactions, cost of revenue also includes the cost of inventory, shipping and fulfillment costs and inventory
markdowns. Fulfillment costs are comprised of third-party logistics provider costs, as well as rent, depreciation,
personnel costs and other costs of operating our fulfillment center.
Impairment of Long-Lived Assets
We review our long-lived assets, such as property, equipment and software, intangible assets and right-of-
use assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset or asset group may not be recoverable. If circumstances require that a long-lived asset or asset group to be
held and used be tested for possible impairment, we first compare the undiscounted cash flows expected to be
generated by that long-lived asset or asset group to its carrying amount. If the carrying amount of the long-lived
asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the
extent that the carrying amount exceeds its fair value.
Long-lived assets or disposal groups classified as held for sale are recorded at the lower of their carrying
amount or fair value less estimated selling costs. Long-lived assets are not depreciated or amortized while classified
as held for sale.
During the first quarter 2020, we determined a triggering event occurred that required us to evaluate our
long-lived assets for impairment, and we recorded an impairment charge as a result of that assessment. See Note
3, COVID-19 Pandemic, for more information. During the year ended December 31, 2020, we recognized long-lived
asset impairment charges related to our restructuring plan. See Note 16 Restructuring and Related Charges, for
more information.
Stock-Based Compensation
We measure stock-based compensation cost at fair value. Expense is generally recognized on a straight-
line basis over the service period during which awards are expected to vest, except for awards with both
performance conditions and a graded vesting schedule, which are recognized using the accelerated method. We
present stock-based compensation expense within the consolidated statements of operations based on the
classification of the respective employees' cash compensation. See Note 14, Compensation Arrangements.
Foreign Currency
Balance sheet accounts of our operations outside of the United States are translated from foreign
currencies into U.S. dollars at exchange rates as of the consolidated balance sheet dates. Revenue and expenses
are translated at average exchange rates during the period. Foreign currency translation adjustments and foreign
currency gains and losses on intercompany balances that are of a long-term investment nature are included within
Accumulated other comprehensive income on the consolidated balance sheets. Foreign currency gains and losses
resulting from transactions that are denominated in currencies other than the entity's functional currency, including
foreign currency gains and losses on intercompany balances that are not of a long-term investment nature, are
included within Other income (expense), net on the consolidated statements of operations.
78
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Business Combinations
The results of businesses acquired are included in the consolidated financial statements beginning on the
respective acquisition dates. The fair value of consideration transferred in business combinations is allocated to the
tangible and intangible assets acquired and liabilities assumed at the acquisition date, with the remaining
unallocated amount recorded as goodwill. Acquired goodwill represents the premium paid over the fair value of the
net tangible and intangible assets acquired. We may pay a premium for a number of reasons, including growing our
merchant base and acquiring an assembled workforce. The goodwill from business combinations is generally not
deductible for tax purposes.
Recently Issued Accounting Standards
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting
for Income Taxes. This ASU simplifies the accounting for income taxes by removing certain exceptions to the
general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.
The ASU will be effective for annual reporting periods beginning after December 15, 2020 and interim periods within
those annual periods and early adoption is permitted. We believe that the adoption of this guidance will not have a
material impact on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments. This
ASU amends a wide variety of Topics in the Codification, including revolving-debt arrangements and allowance for
credit losses related to leases. This ASU will be effective for annual reporting periods beginning after December 15,
2020 and interim periods within those annual periods and early adoption is permitted. We believe that the adoption
of this guidance will not have a material impact on our consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity's Own Equity. This ASU amends the guidance on convertible
instruments and the derivatives scope exception for contracts in an entity's own equity, and also improves and
amends the related EPS guidance for both Subtopics. This ASU will be effective for annual reporting periods
beginning after December 15, 2021 and interim periods within those annual periods and early adoption is permitted.
We believe the accounting for our convertible senior notes will be affected by ASU 2020-06, however, we are still
assessing the impact on our consolidated financial statements.
In October 2020, the FASB issued ASU 2020-10, Codification Improvements. This ASU amends a variety of
Topics, including presentation and disclosures of financial statements, interim reporting, accounting changes and
error corrections. This ASU will be effective for annual reporting periods beginning after December 15, 2021 and
interim periods within those annual periods beginning after December 15, 2022 and early adoption is permitted. We
are still assessing the impact of ASU 2020-10 on our consolidated financial statements.
There are no other accounting standards that have been issued but not yet adopted that we believe could
have a material impact on our consolidated financial statements.
79
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. COVID-19 PANDEMIC
Since March 2020, the COVID-19 pandemic has led to a significant decrease in consumer demand, a
decrease in customer redemptions and elevated refund levels due to changes in consumer behavior and actions
taken by governments to control the spread of COVID-19, including quarantines, travel restrictions, as well as
business restrictions and shutdowns. The COVID-19 pandemic has had an adverse impact on our financial
condition, results of operations and cash flows. Recovery from the COVID-19 pandemic could be volatile and
prolonged given the unprecedented and continuously evolving nature of the situation. We continue to monitor the
impact of COVID-19 on our business.
We plan to continue to actively manage and optimize our cash balances and liquidity, working capital and
operating expenses, although there can be no assurances that we will be able to do so. In 2020, we took several
steps to reduce costs, preserve cash in the near-term and improve liquidity, including, but not limited to: reducing
our workforce and furloughing staff; continuing to sell Goods on our platform instead of quickly exiting the category;
reducing marketing expense by significantly shortening payback thresholds and delaying brand marketing
investments; transitioning merchants to redemption payment terms, instead of fixed payment terms; implementing a
hiring freeze; eliminating broad-based merit increases for employees; replacing cash compensation with equity
compensation in 2020 for all members of our Board of Directors ("the Board"); and amending our Credit Agreement
(See Note 10, Financing Arrangements) to, among other things, provide covenant relief through the first quarter of
2021. The future impact of COVID-19 on our business, results of operations, financial condition and liquidity is
highly uncertain and will ultimately depend on future developments, including the magnitude and duration of the
pandemic and the protective measures associated with reducing its spread.
During the first quarter 2020, we determined the significant deterioration in our financial performance due to
the disruption in our operations from COVID-19 and the sustained decrease in our stock price required us to
evaluate our long-lived assets and goodwill for impairment, which resulted in impairments of our long-lived assets
and goodwill. See Note 6, Property, Equipment and Software, Net, Note 7, Goodwill and Other Intangible Assets,
Note 9, Supplemental Consolidated Balance Sheets and Statements of Operations Information and Note 11,
Leases, for more information.
In April 2020, the Board approved a multi-phase restructuring plan related to our previously announced
strategic shift and as part of the cost cutting measures implemented in response to the impact of COVID-19 on our
business. Actions taken under our restructuring plan changed how we used certain long-lived assets and required
us to evaluate those long-lived assets for impairment, which resulted in impairments of our long-lived assets. These
impairments are included in Restructuring and related charges on the consolidated statement of operations. See
Note 16, Restructuring and Related Charges, for more information.
COVID-19 impacted the financial performance of our investees and resulted in an impairment of an Other
equity investment and a loss on a fair value option investment that are included in Other income (expense), net on
the consolidated statement of operations. See Note 8, Investments, for more information.
80
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. DISCONTINUED OPERATIONS
In October 2016, we completed a strategic review of our international markets and decided to pursue
strategic alternatives for our operations in 12 countries, which were primarily based in Asia and Latin America. The
dispositions of our operations in those 12 countries were completed between November 2016 and March 2017. In
connection with the dispositions of our operations in Latin America, we recorded indemnification liabilities for certain
tax and other matters. See Note 12, Commitments and Contingencies, for additional information about the
indemnification liabilities.
For the years ended December 31, 2020 and 2019, we recognized $0.4 million and $2.6 million in income
(loss) from discontinued operations, net of tax primarily for a gain related to the expiration of certain contingent
liabilities under indemnification agreements. There was no activity related to discontinued operations for the year
ended December 31, 2018.
5. BUSINESS COMBINATIONS
On April 30, 2018, we acquired 80% of the outstanding shares of Cloud Savings Company, Ltd. ("Cloud
Savings"), a UK-based business that operates online discount code and digital gift card platforms. Concurrent with
the acquisition, we entered into an agreement that gave us the right to acquire the remaining outstanding shares of
Cloud Savings, and in December 2018 we exercised that right. The primary purpose of this acquisition was to
expand digital coupon offerings in our International segment. The aggregate acquisition-date fair value of the
consideration transferred for the Cloud Savings acquisition was $74.6 million.
The results of the Cloud Savings acquisition were included in the consolidated financial statements
beginning on the acquisition date of April 30, 2018. The revenue and net income of Cloud Savings included in our
consolidated statements of operations were $12.9 million and $1.1 million for the period from April 30, 2018 through
December 31, 2018. Pro forma results of operations for the Cloud Savings acquisition are not presented because
the pro forma effects of that acquisition were not material to our consolidated results of operations.
We did not acquire any other businesses during the years ended December 31, 2020, 2019 and 2018.
6. PROPERTY, EQUIPMENT AND SOFTWARE, NET
The following summarizes property, equipment and software, net as of December 31, 2020 and 2019 (in
thousands):
Warehouse equipment
Furniture and fixtures
Leasehold improvements
Office equipment
Purchased software
Computer hardware
Internally-developed software (1)
Total property, equipment and software, gross
Less: accumulated depreciation and amortization
Property, equipment and software, net
December 31,
2020
2019
$
— $
5,005
24,808
676
435
121,307
264,103
416,334
(331,050)
$
85,284 $
5,144
9,113
47,927
1,735
7,207
143,118
222,140
436,384
(311,434)
124,950
(1)
The net carrying amount of internally-developed software was $57.9 million and $71.1 million as of December 31, 2020 and 2019.
Due to the triggering event and subsequent review of long-lived assets for impairment in the first quarter of
2020 described in Note 3, COVID-19 Pandemic, we recognized long-lived asset impairment of property, equipment
and software, net of $15.2 million within our International segment related to our EMEA operations.
The assets that we deemed impaired were written down to fair value based on the discounted cash flow
method that uses Level 3 inputs. The significant estimates used in the discounted cash flow models are the risk-
81
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
adjusted discount rates; forecasted revenue, cost of revenue and operating expenses; forecasted capital
expenditures and working capital needs; weighted-average cost of capital; rates of long-term growth; and income
tax rates.
The following table summarizes impairment for long-lived assets by asset type for the year ended
December 31, 2020 (in thousands), of which $9.6 million is included in $22.4 million of Long-lived asset impairment
and $5.6 million is included in $21.6 million of Restructuring and related charges on the consolidated statements of
operations:
Long-Lived Asset Category
Property, equipment and software, net
Furniture and fixtures
Leasehold improvements
Office equipment
Purchased software
Computer hardware
Capitalized software
Internally-developed software
Total
Impairment
$
413
8,419
198
14
2,842
304
2,988
$
15,178
Depreciation and amortization expense on property, equipment and software is classified as follows in the
accompanying consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018 (in
thousands):
Service cost of revenue
Product cost of revenue
Selling, general and administrative
Total
Year Ended December 31,
2020
2019
2018
$
$
28,443 $
28,917 $
9,434
39,915
6,466
56,027
28,102
8,467
64,761
77,792 $
91,410 $
101,330
The above amounts include amortization of internally-developed software of $58.8 million, $56.6 million and
$53.9 million, and amortization expense on assets under finance leases of $6.7 million, $18.9 million and $30.2
million, for the years ended December 31, 2020, 2019 and 2018.
82
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. GOODWILL AND OTHER INTANGIBLE ASSETS
The following table summarizes goodwill activity by segment for the years ended December 31, 2020 and
2019 (in thousands):
Balance as of December 31, 2018
Foreign currency translation
Balance as of December 31, 2019
Impairment
Foreign currency translation
Balance as of December 31, 2020
North America
International (1)
Consolidated
$
$
$
178,685 $
146,806 $
325,491
—
(474)
178,685 $
146,332 $
—
—
(109,486)
(832)
(474)
325,017
(109,486)
(832)
178,685 $
36,014 $
214,699
(1)
As of December 31, 2020, the International reporting unit had a negative carrying value.
Due to the triggering event and subsequent review of goodwill for impairment in the first quarter of 2020, as
described in Note 3, COVID-19 Pandemic, we recognized goodwill impairment of $109.5 million within our
International segment related to our EMEA operations. In order to evaluate goodwill for impairment in the first
quarter 2020, we compared the fair values of our three reporting units (North America, EMEA and Asia Pacific) to
their carrying values. In determining fair values for our reporting units, we used the discounted cash flow method
and the market multiple valuation approach that use Level 3 inputs. The significant estimates used in the discounted
cash flow models are the risk-adjusted discount rates; forecasted revenue, cost of revenue and operating expenses;
forecasted capital expenditures and working capital needs; weighted average cost of capital; rates of long-term
growth; and income tax rates. These estimates considered the recent deterioration in financial performance of the
reporting units as well as the anticipated rate of recovery, and implied risk premiums based on the market prices of
our equity and debt as of the assessment date. The significant estimates used in the market multiple valuation
approach include identifying business factors such as size, growth, profitability, risk and return on investment and
assessing comparable revenue and earnings multiples. We did not recognize any goodwill impairment in our North
America or Asia Pacific reporting units.
During the third quarter 2020, we exited our operations in Japan and New Zealand as part of our
restructuring plan, which represents the majority of the countries in our Asia Pacific reporting unit. As a result, we
combined the remainder of the Asia Pacific reporting unit and the EMEA reporting unit into a single International
reporting unit, consistent with how management reviews the operating results of the business. As a result of the
change in reporting units, we performed a qualitative assessment of potential goodwill impairment for the new
International reporting unit and performed separate qualitative assessments of potential goodwill impairment for our
Asia Pacific and EMEA reporting units immediately prior to the change. Based on those assessments, which
considered current market conditions and recent business performance, we determined that the likelihood of a
goodwill impairment did not reach the more-likely-than-not threshold. Accordingly, we concluded that goodwill
relating to those reporting units was not impaired and further quantitative testing was not required to be performed.
We did not identify any other triggering events that required us to evaluate goodwill impairment in our North America
or International reporting units during the remainder of 2020. Additionally, we concluded that there was no goodwill
impairment for either of our reporting units as a result of our annual goodwill impairment analysis. Therefore, we did
not recognize additional goodwill impairment for any of our reporting units during the year ended December 31,
2020.
There was no goodwill impairment for the years ended December 31, 2019 and 2018.
83
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes intangible assets as of December 31, 2020 and 2019 (in thousands):
December 31, 2020
December 31, 2019
Gross
Carrying Value
Accumulated
Amortization
Net Carrying
Value
Gross
Carrying Value
Accumulated
Amortization
Net Carrying
Value
Customer relationships
$
— $
— $
— $
16,200 $
16,200 $
Merchant relationships
Trade names
Developed technology
Patents
Other intangible assets
20,208
9,651
2,121
10,813
17,823
9,236
7,921
1,863
4,697
6,748
10,972
1,730
258
6,116
11,075
22,193
9,558
3,651
23,021
26,115
8,268
7,369
2,685
18,167
12,757
Total
$
60,616 $
30,465 $
30,151 $
100,738 $
65,446 $
—
13,925
2,189
966
4,854
13,358
35,292
Amortization of intangible assets is computed using the straight-line method over their estimated useful
lives, which range from 1 to 10 years. Amortization expense from continuing operations related to intangible assets
was $9.7 million, $14.4 million and $14.5 million for the years ended December 31, 2020, 2019 and 2018. As of
December 31, 2020, our estimated future amortization expense related to intangible assets is as follows (in
thousands):
2021
2022
2023
2024
2025
Thereafter
Total
$
8,551
7,955
6,780
3,065
1,481
2,319
$
30,151
84
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. INVESTMENTS
The following table summarizes investments as of December 31, 2020 and 2019 (dollars in thousands):
December 31,
2020
Percent Ownership
of Voting Stock
December 31,
2019
Percent Ownership
of Voting Stock
Available-for-sale securities - redeemable preferred shares
$
Fair value option investments
Other equity investments
Total investments
Available-for-Sale Securities
—
—
19% to
25% $
—
19% to
25%
10% to
19%
1,405
10% to
19%
37,671
1% to
19%
75,171
1% to
19%
$
37,671
$
76,576
The fair value of redeemable preferred shares was $0.0 million as of December 31, 2020 and 2019. We
recorded $10.0 million and $5.6 million of impairments of available-for-sale securities for the years ended December
31, 2019 and 2018 due to declines in the financial performance of the investee. Those impairments are classified
within Other income (expense), net on the consolidated statements of operations.
In September 2018, we sold an available-for-sale security for total consideration of $8.6 million, which
approximated its carrying amount and amortized cost as of the closing date.
Fair Value Option Investments
In connection with the dispositions of controlling stakes in Ticket Monster, an entity based in the Republic of
Korea, and Groupon India in prior periods, we obtained minority investments in Monster Holdings LP ("Monster LP")
and in Nearbuy Pte Ltd. ("Nearbuy"). We made an irrevocable election to account for both of those investments at
fair value with changes in fair value reported in earnings. We elected to apply fair value accounting to those
investments because we believe that fair value is the most relevant measurement attribute for those investments, as
well as to reduce operational and accounting complexity. Our election to apply fair value accounting to those
investments has and may continue to cause fluctuations in our earnings from period to period.
The following table summarizes gains and losses due to changes in fair value of those investments for the
years ended December 31, 2020, 2019 and 2018 (in thousands):
Monster LP
Nearbuy
Total
Monster LP
Year Ended December 31,
2020
2019
2018
$
$
— $
(69,408) $
(1,405)
(3,089)
(1,405) $
(72,497) $
(9,509)
445
(9,064)
In 2015, we completed the sale of a controlling stake in Ticket Monster to an investor group, whereby we
contributed all of the issued and outstanding share capital of Ticket Monster to Monster LP in exchange for Class B
units of Monster LP, a newly-formed limited partnership, and $285.0 million in cash consideration. In February 2017,
we participated in a recapitalization transaction with Monster LP whereby it exchanged all of its Class B units for
16,609,195 newly issued Class A-1 units. Upon closing of the transaction, we own 57% of the outstanding Class A-1
units, which represents 9% of the total outstanding partnership units.
Following the February 2017 recapitalization transaction, the Class A-1 units are entitled to a $150.0 million
liquidation preference, including an $85.0 million liquidation preference attributable to the Class A-1 units held by us,
which must be paid prior to any distributions to the holders of the Class A-2, Class B and Class C units. Class A-1
unit holders are also entitled to share in distributions between $950.0 million and $1,494.0 million in accordance
with the terms of Monster LP's distribution waterfall and in distributions in excess of $1,494.0 million based on their
pro rata ownership of total outstanding partnership units. As a result of the February 2017 recapitalization
transaction, we currently hold an investment in the most senior equity units in Monster LP’s capital structure.
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GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
However, while providing more downside protection, those Class A-1 units provide less opportunity for appreciation
than the Class B units previously held by us.
We determined that the fair value of our investment in Monster LP was $0.0 million as of December 31,
2020 and 2019. In 2019 we recognized a $69.4 million loss from changes in the fair value of our investment in
Monster LP mainly due to revised cash flow projections provided by Monster LP and an increase in the discount rate
applied to those forecasts to 26.0% as of March 31, 2019, as compared with 21.0% as of December 31, 2018. The
revisions to the financial projections were made as a result of the deterioration in Ticket Monster's financial condition
and continued underperformance compared with prior projections.
Nearbuy
In 2015, Groupon India completed an equity financing transaction with a third-party investor that obtained a
majority voting interest in the entity, whereby (a) the investor contributed $17.0 million in cash to Nearbuy, a newly
formed Singapore-based entity, in exchange for Series A Preference Shares and (b) we contributed the shares of
Groupon India to Nearbuy in exchange for seed preference shares of Nearbuy. In January 2017, Nearbuy issued
additional Series A Preference Shares to its controlling investor for total proceeds of $3.0 million. Upon closing of
that transaction, the Series A Preference Shares are entitled to a $20.0 million liquidation preference, which must be
paid prior to any distributions to other equity holders. In December 2017, Nearbuy sold its subsidiary Nearbuy India
Pte Ltd., which represented substantially all of its business operations, to a third-party investor in exchange for a
minority investment in the acquirer.
We determined that the fair value of our investment in Nearbuy was $0.0 million as of December 31, 2020
and $1.4 million as of December 31, 2019. During the first quarter 2020, we recognized a $1.4 million loss from
changes in the fair value of our investment in Nearbuy due to revised cash flow projections and an increase in the
discount rate applied to those forecasts, which increased to 30% as of March 31, 2020, as compared with 20% as of
December 31, 2019. The revisions to the financial projections and the increase in the discount rate applied as of
March 31, 2020 were due to the deterioration in the financial condition of Nearbuy as a result of COVID-19, which
resulted in underperformance as compared with prior projections and an increase to financial projection risk. In
2019, we recognized a $3.1 million loss from changes in the fair value of our investment in Nearbuy due to revised
cash flow projections.
Other Equity Investments
Other equity investments represent equity investments without readily determinable fair values. We have
elected to record equity investments without readily determinable fair values at cost adjusted for observable price
changes and impairments.
The following table summarizes other equity investment activity for the years ended December 31, 2020
and 2019 (in thousands):
Balance as of December 31, 2018
Upward adjustments for observable price changes
Dispositions
Foreign currency translation
Balance as of December 31, 2019
Impairment of investments included in earnings
Dispositions
Foreign currency translation
Balance as of December 31, 2020
$
$
$
24,273
51,397
(640)
141
75,171
(6,684)
(33,843)
3,027
37,671
In the first quarter 2020, we recorded a $6.7 million impairment to an other equity method investment as a
result of revised cash flow projections and a deterioration in financial condition due to COVID-19. This impairment is
classified within Other income (expense), net on the consolidated statements of operations. We did not recognize
any other impairments to other equity investments during the year ended December 31, 2020.
86
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In the fourth quarter 2019, we adjusted the carrying value of an other equity investment due to observable
price changes in orderly transactions, which resulted in an unrealized gain of $51.4 million. This unrealized gain is
classified within Other income (expense), net on the consolidated statements of operations for the year ended
December 31, 2019. During the first quarter 2020, we sold 50% of our shares in that investment for total cash
consideration of $34.0 million, which approximated the cost adjusted for observable price changes as of December
31, 2019.
For the year ended December 31, 2018, we recorded a $4.6 million impairment of an other equity
investment. This impairment is classified within Other income (expense), net on the consolidated statements of
operations.
9. SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS
INFORMATION
The following table summarizes other income (expense), net for the years ended December 31, 2020, 2019
and 2018 (in thousands):
Interest income
Interest expense
Changes in fair value of investments
Foreign currency gains (losses), net
Impairments of investments
Upward adjustment for observable price change of investment
Other
Other income (expense), net
Year Ended December 31,
2020
2019
2018
$
6,351 $
7,744 $
(33,192)
(1,405)
17,919
(6,684)
—
43
(23,593)
(72,497)
(5,960)
(9,961)
51,397
(459)
6,420
(21,909)
(9,064)
(20,325)
(10,156)
—
2,026
$
(16,968) $
(53,329) $
(53,008)
The following table summarizes prepaid expenses and other current assets as of December 31, 2020 and
2019 (in thousands):
Merchandise inventories
Prepaid expenses
Income taxes receivable
Other
Total prepaid expenses and other current assets
December 31,
2020
2019
$
$
1,280 $
18,038
5,437
15,686
40,441 $
25,426
27,077
4,791
24,779
82,073
87
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes other non-current assets as of December 31, 2020 and December 31, 2019
(in thousands):
Deferred income tax
Debt issue costs, net
Deferred contract acquisition costs
Deferred cloud implementation costs (1)
Other
Total other non-current assets
December 31,
2020
2019
$
11,593 $
1,852
5,315
10,402
5,165
$
34,327 $
4,829
2,156
10,133
7,372
4,115
28,605
(1)
Following our review of long-lived assets for impairment in the first quarter of 2020, as described in Note 3, COVID-19 Pandemic, we
recognized $0.9 million of long-lived asset impairments related to our EMEA operations, which is included in Other non-current assets.
See Note 3, COVID-19 Pandemic, for more information.
The following table summarizes accrued merchant and supplier payables as of December 31, 2020 and
2019 (in thousands):
Accrued merchant payables
Accrued supplier payables (1)
Total accrued merchant and supplier payables
December 31,
2020
2019
$
$
303,260 $
107,703
410,963 $
366,573
174,367
540,940
(1)
Amounts include payables to suppliers of inventories and providers of shipping and fulfillment services.
88
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes accrued expenses and other current liabilities as of December 31, 2020
and 2019 (in thousands):
Refund reserve
Compensation and benefits
Accrued marketing
Restructuring-related liabilities
Customer credits
Income taxes payable
Deferred revenue
Deferred payroll taxes (1)
Operating and finance lease obligations
Deferred cloud computing contract incentive
Other
December 31,
2020
2019
$
33,173 $
54,958
15,299
13,746
61,006
7,862
11,223
2,922
37,755
3,000
54,055
22,002
49,009
41,110
—
13,764
5,044
17,951
—
40,768
—
70,544
260,192
Total accrued expenses and other current liabilities
$
294,999 $
(1)
We have elected to defer certain payroll taxes under the Coronavirus Aid, Relief and Economic Security ("CARES") Act. These amounts
are due by December 31, 2021.
The following table summarizes other non-current liabilities as of December 31, 2020 and 2019 (in
thousands):
Contingent income tax liabilities
Finance lease obligations
Restructuring-related liabilities
Deferred income taxes
Deferred payroll taxes (1)
Deferred cloud computing contract incentive
Other
Total other non-current liabilities
December 31,
2020
2019
$
25,593 $
730
385
3,170
2,922
4,250
7,378
$
44,428 $
30,121
5,831
—
3,903
—
—
5,132
44,987
(1)
We have elected to defer certain payroll taxes under the Coronavirus Aid, Relief and Economic Security ("CARES") Act. These amounts
are due by December 31, 2022.
89
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the activity for accumulated other comprehensive income (loss), net of tax,
for the years ended December 31, 2020, 2019 and 2018 (in thousands):
Balance as of December 31, 2017
$
30,962 $
882 $
Foreign currency
translation
adjustments
Unrealized gain
(loss) on available-
for-sale securities
Total
Other comprehensive income (loss) before reclassification adjustments
Reclassification adjustments included in net income (loss)
Other comprehensive income (loss)
Reclassification for impact of U.S. tax rate change
Balance as of December 31, 2018
Other comprehensive income (loss) before reclassification adjustments
Reclassification adjustments included in net income (loss)
Other comprehensive income (loss)
Balance as of December 31, 2019
Other comprehensive income (loss) before reclassification adjustments
Reclassification adjustments included in net income (loss)
Other comprehensive income (loss)
Balance as of December 31, 2020
10. FINANCING ARRANGEMENTS
Convertible Senior Notes
3,332
—
3,332
—
34,294
4,858
—
4,858
39,152
(35,972)
—
(35,972)
(841)
106
(735)
161
308
(379)
—
(379)
(71)
—
—
—
$
3,180 $
(71) $
31,844
2,491
106
2,597
161
34,602
4,479
—
4,479
39,081
(35,972)
—
(35,972)
3,109
On April 4, 2016, we issued $250.0 million in aggregate principal amount of convertible senior notes (the
"Notes") in a private placement to A-G Holdings, L.P. ("AGH"). Michael Angelakis, the chairman and chief executive
officer of Atairos Group, Inc. ("Atairos"), joined our Board of Directors (the "Board") in connection with the issuance
of the Notes. Atairos controls the voting power of AGH. The net proceeds from this offering were $243.2 million after
deducting issuance costs. The Notes bear interest at a rate of 3.25% per annum, payable annually in arrears on
April 1 of each year, beginning on April 1, 2017. The Notes will mature on April 1, 2022, subject to earlier conversion
or redemption.
Each $1,000 of principal amount of the Notes initially is convertible into 9.25926 shares of common stock,
which is equivalent to an initial conversion price of $108.00 per share, subject to adjustment upon the occurrence of
specified events. Upon conversion, we can elect to settle the conversion value in cash, shares of our common
stock, or any combination of cash and shares of our common stock. Holders of the Notes may convert their Notes at
their option at any time until the close of business on the scheduled trading day immediately preceding the maturity
date. In addition, if specified corporate events occur prior to the maturity date, we may be required to increase the
conversion rate for holders who elect to convert based on the effective date of such event and the applicable stock
price attributable to the event, as set forth in a table contained in the indenture governing the Notes (the
"Indenture"). Based on the closing price of the common stock of $37.99 as of December 31, 2020, the if-converted
value of the Notes was less than the principal amount.
With certain exceptions, upon a fundamental change (as defined in the Indenture), the holders of the Notes
may require us to repurchase all or a portion of their Notes for cash at a purchase price equal to the principal
amount plus accrued and unpaid interest. In addition, we may redeem the Notes, at our option, at a purchase price
equal to the principal amount plus accrued and unpaid interest on or after April 1, 2020, if the closing sale price of
the common stock exceeds 150% of the then-current conversion price for 20 or more trading days in the 30
consecutive trading-day period preceding the exercise of this redemption right.
The Notes are senior unsecured obligations that rank equal in right of payment to all senior unsecured
indebtedness and rank senior in right of payment to any indebtedness that is contractually subordinated to the
Notes.
The Indenture includes customary events of default. If an event of default, as defined in the Indenture,
occurs and is continuing, the principal amount of the Notes and any accrued and unpaid interest may be declared
90
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
immediately due and payable. In the case of bankruptcy or insolvency, the principal amount of the Notes and any
accrued and unpaid interest would automatically become immediately due and payable.
We have separated the Notes into their liability and equity components in the accompanying consolidated
balance sheets. The carrying amount of the liability component was calculated by measuring the fair value of a
similar liability that does not have an associated conversion feature. The carrying amount of the equity component,
representing the conversion option, was determined by deducting the fair value of the liability component from the
principal amount of the Notes. The difference between the principal amount of the Notes and the liability component
(the "debt discount") is amortized to interest expense at an effective interest rate of 9.75% over the term of the
Notes. The equity component of the Notes is included in additional paid-in capital in the consolidated balance
sheets and is not remeasured as long as it continues to meet the conditions for equity classification.
We incurred transaction costs of approximately $6.8 million related to the issuance of the Notes. Those
transaction costs were allocated to the liability and equity components in the same manner as the allocation of the
proceeds from the Notes. Transaction costs attributable to the liability component of $4.8 million were recorded as a
debt discount in the consolidated balance sheet and are being amortized to interest expense over the term of the
Notes. Transaction costs attributable to the equity component of $2.0 million were recorded in stockholders' equity
as a reduction of the equity component.
The carrying amount of the Notes consisted of the following as of December 31, 2020 and 2019 (in
thousands):
Liability component:
Principal amount
Less: debt discount
Net carrying amount of liability component
Net carrying amount of equity component
December 31,
2020
2019
$
$
$
250,000 $
(20,510)
229,490 $
250,000
(35,131)
214,869
67,014 $
67,014
The estimated fair value of the Notes as of December 31, 2020 and 2019 was $263.3 million and $262.7
million, and was determined using a lattice model. We classified the fair value of the Notes as a Level 3
measurement due to the lack of observable market data over fair value inputs such as our stock price volatility over
the term of the Notes and our cost of debt.
As of December 31, 2020, the remaining term of the Notes is approximately 1 years and 3 months. During
the years ended December 31, 2020, 2019 and 2018, we recognized interest costs on the Notes as follows (in
thousands):
Contractual interest (3.25% of the principal amount per annum)
Amortization of debt discount
Total
Note Hedges and Warrants
Year Ended December 31,
2020
2019
2018
$
$
8,128 $
8,128 $
14,621
13,200
22,749 $
21,328 $
8,128
11,916
20,044
In May 2016, we purchased convertible note hedges with respect to our common stock for a cost of $59.1
million from certain bank counterparties. The convertible note hedges provide us with the right to purchase up to 2.3
million shares of our common stock at an initial strike price of $108.00 per share, which corresponds to the initial
conversion price of the Notes, and are exercisable upon conversion of the Notes. The convertible note hedges are
intended to reduce the potential economic dilution upon conversion of the Notes. The convertible note hedges are
separate transactions and are not part of the terms of the Notes. Holders of the Notes do not have any rights with
respect to the convertible note hedges.
91
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In May 2016, we also sold warrants for total cash proceeds of $35.5 million to certain bank counterparties.
The warrants provide the counterparties with the right to purchase up to 2.3 million shares of our common stock at a
strike price of $170.00 per share. The warrants expire on various dates between July 1, 2022 and August 26, 2022
and are exercisable on their expiration dates. The warrants are separate transactions and are not part of the terms
of the Notes or convertible note hedges. Holders of the Notes and convertible note hedges do not have any rights
with respect to the warrants.
The amounts paid and received for the convertible note hedges and warrants were recorded in additional
paid-in capital in the consolidated balance sheets as of December 31, 2020 and 2019. The convertible note hedges
and warrants are not remeasured as long as they continue to meet the conditions for equity classification. The
amounts paid for the convertible note hedges are tax deductible over the term of the Notes, while the proceeds
received from the warrants are not taxable.
Under the if-converted method, the shares of common stock underlying the conversion option in the Notes
are included in the diluted earnings per share denominator and the interest expense on the Notes, net of tax, is
added to the numerator. However, upon conversion, there will be no economic dilution from the Notes, as exercise
of the convertible note hedges eliminates any dilution from the Notes that would have otherwise occurred when the
price of our common stock exceeds the conversion price. Taken together, the purchase of the convertible note
hedges and sale of warrants are intended to offset any actual dilution from the conversion of the Notes and to
effectively increase the overall conversion price from $108.00 to $170.00 per share.
Revolving Credit Agreement
In May 2019, we entered into a second amended and restated senior secured revolving credit agreement
which provided for aggregate principal borrowings of up to $400.0 million (prior to the Amendment described below)
and matures in May 2024.
In July 2020, we entered into an amendment to the revolving credit agreement (the "Amendment" and the
revolving credit agreement as amended, the "Amended Credit Agreement") in order to provide us with operational
flexibility and covenant relief through the end of the first quarter of 2021 (the "Suspension Period") in light of the
ongoing impacts of COVID-19 on our business. In addition to the covenant relief described below, the Amendment
permanently reduces borrowing capacity under our senior secured revolving credit facility from $400.0 million to
$225.0 million.
We deferred debt issuance costs of $3.2 million as a result of entering into the Amended Credit Agreement.
Deferred debt issuance costs are included within Other non-current assets on the consolidated balance sheet as of
December 31, 2020 and are amortized to interest expense over the term of the respective agreement.
Pursuant to the Amendment, during the Suspension Period, the Company will be exempt from certain
covenant restrictions, namely the requirements to maintain a maximum funded indebtedness to EBITDA ratio, a
maximum senior secured indebtedness to EBITDA ratio, a minimum fixed charge coverage ratio, unrestricted cash
of not less than $250.0 million and a minimum liquidity balance (including any undrawn amounts under the credit
facility) of at least 70% of our accrued merchant and supplier payables balance (collectively, the "Existing Financial
Covenants"). Additionally, the Amendment provides that, during the Suspension Period, we will be required to
maintain specified minimum quarterly EBITDA levels and to maintain a monthly minimum liquidity balance (including
any undrawn amounts under the credit facility) of at least 100% of our accrued merchant and supplier payables
balance for such month plus $50.0 million. Following the Suspension Period, we will be subject to the Existing
Financial Covenants.
In addition, under the Amended Credit Agreement, we are subject to various covenants, including
customary restrictive covenants that limit our ability to, among other things: incur additional indebtedness; make
dividend and other restricted payments, including limiting the amount of our share repurchases; enter into sale and
leaseback transactions; make investments, loans or advances; grant or incur liens on assets; sell assets; engage in
mergers, consolidations, liquidations or dissolutions; and engage in transactions with related parties and other
affiliates. The Amendment further restricts certain of these negative covenants during the Suspension Period,
including our ability to make share repurchases, acquisitions, investments and to incur additional indebtedness and
liens.
92
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Non-compliance with the covenants under the Amended Credit Agreement may result in termination of the
commitments thereunder and any then outstanding borrowings may be declared due and payable immediately. We
have the right to terminate the Amended Credit Agreement or reduce the available commitments at any time.
The Amendment also increases interest rates through the end of the first quarter of 2021, raising the
alternative base rate and Canadian prime spreads to 1.50%, the fixed rate spreads to 2.50% and the commitment
fee to 0.4% on the daily amount of the unused commitments under the Amended Credit Agreement. Following the
Suspension Period, the applicable spread and commitment fee will revert to pre-Amendment levels, which provides
for (a) interest at a rate per annum equal to (i) an adjusted LIBO rate or (ii) a customary base rate (with loans
denominated in certain currencies bearing interest at rates specific to such currencies) plus an additional margin
ranging between 0.50% and 2.00% and (b) commitment fees ranging from 0.25% to 0.35% on the daily amount of
unused commitments. The Amended Credit Agreement also provides for the issuance of up to $75.0 million in
letters of credit, provided that the sum of outstanding borrowings and letters of credit do not exceed the maximum
funding commitment of $225.0 million.
The Amended Credit Agreement is secured by substantially all of our tangible and intangible assets,
including a pledge of 100% of the outstanding capital stock of substantially all of our direct and indirect domestic
subsidiaries and 65% of the shares or equity interests of first-tier foreign subsidiaries and each U.S. entity whose
assets substantially consist of capital stock and/or intercompany debt of one or more foreign subsidiaries, subject to
certain exceptions. Certain of our domestic and foreign subsidiaries are guarantors under the Amended Credit
Agreement.
We had $200.0 million of borrowings and $20.6 million of outstanding letters of credit under the Amended
Credit Agreement as of December 31, 2020. We had no borrowings and $18.1 million of outstanding letters of credit
under the credit agreement as of December 31, 2019.
11. LEASES
Adoption of ASC Topic 842, Leases
On January 1, 2019, we adopted ASC Topic 842 using the modified retrospective transition method.
Beginning on January 1, 2019, our consolidated financial statements are presented in accordance with the revised
policies, while prior period amounts are not adjusted and continue to be reported in accordance with our historical
policies. Aside from the impact to our consolidated balance sheet discussed in Note 2, Summary of Significant
Accounting Policies, lease presentation within the consolidated statements of operations and consolidated
statements of cash flows are substantially consistent with historical treatment.
General Description of Leases
Our operating leases primarily consist of leases for real estate throughout the world with lease expirations
between 2021 and 2027. These arrangements typically do not transfer ownership of the underlying asset as we do
not assume, nor do we intend to assume, the risks and rewards of ownership. Our finance leases are related to
purchases of property and equipment, primarily computer hardware, with expirations between 2021 and 2023. We
have also subleased certain office facilities under operating lease agreements, with expirations between 2023 and
2026.
We lease our headquarters located in Chicago, Illinois ("600 West Chicago"). Our lease agreement for 600
West Chicago extends through January 31, 2026 and includes rent escalations that range from one to two percent
per year, as well as expansion options and a five-year renewal option. The 600 West Chicago lease represents
$66.8 million of the estimated future payments under operating leases shown in the table below. We account for the
600 West Chicago lease as an operating lease and recognize rent expense on a straight-line basis, taking into
account rent escalations and lease incentives. We sublease a portion of our office space at 600 West Chicago to
Uptake, Inc., a Lightbank LLC portfolio company as a related party transaction. The sublease was a market rate
transaction on terms that we believe are no less favorable than would have been reached with an unrelated party.
The sublease extends through January 31, 2026 and sublease rentals over the entire term total $18.2 million.
For more information about our lease accounting policies, including lease recognition policy and significant
assumptions and judgments used, see Note 2, Summary of Significant Accounting Policies.
93
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following summarizes right-of-use assets as of December 31, 2020 and 2019 (in thousands):
Right-of-use assets - operating leases
Right-of-use assets - finance leases (1)
Total right-of-use assets, gross
Less: accumulated depreciation and amortization
Right-of-use assets, net
December 31, 2020
December 31, 2019
$
$
107,509 $
21,523
129,032
(44,590)
84,442 $
133,832
28,193
162,025
(36,380)
125,645
(1)
Right-of-use assets for finance leases are included in Property, equipment and software, net on the consolidated balance sheet.
Due to the triggering event and subsequent review of long-lived assets for impairment in the first quarter of
2020, as described in Note 3, COVID-19 Pandemic, we recognized a long-lived asset impairment of $10.5 million
related to right-of-use assets - operating leases and $1.3 million related to right-of-use assets - finance leases within
our International segment related to our EMEA operations, which are presented in Long-lived asset impairments on
the consolidated statements of operations.
Due to actions taken under our restructuring plan, we recognized long-lived asset impairments of
$16.0 million related to right-of-use assets - operating leases for the year ended December 31, 2020, which is
presented in Restructuring and related charges on the consolidated statements of operations.
The following table summarizes our lease costs and sublease income for the year ended December 31,
2020 and 2019 (in thousands):
Financing lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Total finance lease cost
Operating lease cost (1) (2)
Variable lease cost (3)
Short-term lease cost
Sublease income, gross (4)
Total lease cost
Year Ended December 31,
2020
2019
$
6,737 $
522
7,259
30,870
8,143
313
(4,693)
41,892 $
$
18,922
1,021
19,943
34,397
8,551
365
(5,045)
58,211
(1)
(2)
(3)
(4)
Rent expense under operating leases was $40.1 million for the year ended December 31, 2018.
Operating lease costs presented as Selling, general and administrative and Restructuring and related charges totaled $23.1 million and
$7.8 million in the consolidated statements of operations for the year ended December 31, 2020.
Variable lease costs presented as Selling, general and administrative and Restructuring and related charges totaled $7.0 million and $1.1
million in the consolidated statements of operations for the year ended December 31, 2020.
Sublease income, gross presented as Selling, general and administrative and Restructuring and related charges totaled $1.2 million and
$3.5 million in the consolidated statements of operations for the year ended December 31, 2020. Sublease income was $6.5 million for
the year ended December 31, 2018.
94
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 2020, the future payments under finance leases and operating leases for each of the
next five years and thereafter are as follows (in thousands):
Finance Leases
Operating Leases
2021
2022
2023
2024
2025
Thereafter
Total minimum lease payments
Less: Amount representing interest
Present value of net minimum lease payments
Less: Current portion of lease obligations
Total long-term lease obligations
$
4,717 $
715
12
—
—
—
5,444
(92)
5,352
(4,622)
$
730 $
38,690
35,451
27,025
19,599
16,175
1,701
138,641
(14,581)
124,060
(33,133)
90,927
As of December 31, 2020, we do not have any non-cancelable operating lease commitments that have not
yet commenced.
As of December 31, 2020, the future amounts due under subleases for each of the next five years and
thereafter are as follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total future sublease income
Subleases
5,065
5,103
4,385
2,333
2,362
197
19,445
$
$
As of December 31, 2020, the weighted-average remaining lease term and weighted-average discount rate
for our finance leases and operating leases were as follows:
Weighted-average lease term
Weighted-average discount rate
12. COMMITMENTS AND CONTINGENCIES
Purchase Obligations
Finance Leases
Operating Leases
1 year
5.4 %
4 years
5.4 %
We have entered into non-cancelable arrangements with third-parties, primarily related to cloud computing
and other information technology services. As of December 31, 2020, future payments under these contractual
obligations were as follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total purchase obligations
95
$
27,365
27,452
27,730
20
—
—
$
82,567
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Legal Matters and Other Contingencies
From time to time, we are party to various legal proceedings incident to the operation of our business. For
example, we currently are involved in proceedings brought by merchants, employment and related matters,
intellectual property infringement suits, customer lawsuits, stockholder claims relating to U.S. securities law,
consumer class actions and suits alleging, among other things, violations of state consumer protection or privacy
laws.
On April 28, 2020, an individual plaintiff filed a securities fraud class action complaint in the United States
District Court for the Northern District of Illinois, and in July 2020, another individual was appointed as lead plaintiff.
The lawsuit covers the time period from July 30, 2019 through February 18, 2020. The lead plaintiff alleges that
Groupon and certain of its officers made materially false and/or misleading statements or omissions regarding its
business, operations and prospects, specifically as it relates to reiterating its full year guidance on November 4,
2019 and the Groupon Select program. Groupon filed a motion to dismiss the complaint in this matter and is
awaiting a ruling by the court. We intend to vigorously defend against these allegations, which we believe to be
without merit.
In addition, third parties have from time to time claimed, and others may claim in the future, that we have
infringed their intellectual property rights. We are subject to intellectual property disputes, including patent
infringement claims, and expect that we will continue to be subject to intellectual property infringement claims as our
services expand in scope and complexity. In the past, we have litigated such claims, and we are presently involved
in several patent infringement and other intellectual property-related claims, including pending litigation or trademark
disputes relating to, for example, our Goods category, some of which could involve potentially substantial claims for
damages or injunctive relief. We may also become more vulnerable to third-party claims as laws such as the Digital
Millennium Copyright Act are interpreted by the courts, and we become subject to laws in jurisdictions where the
underlying laws with respect to the potential liability of online intermediaries are either unclear or less favorable. We
believe that additional lawsuits alleging that we have violated patent, copyright or trademark laws may be filed
against us. Intellectual property claims, whether meritorious or not, are time consuming and often costly to resolve,
could require expensive changes in our methods of doing business or the goods we sell, or could require us to enter
into costly royalty or licensing agreements.
We also are subject to consumer claims or lawsuits relating to alleged violations of consumer protection or
privacy rights and statutes, some of which could involve potentially substantial claims for damages, including
statutory or punitive damages. Consumer and privacy related claims or lawsuits, whether meritorious or not, could
be time consuming, result in costly litigation, damage awards, fines and penalties, injunctive relief or increased
costs of doing business through adverse judgment or settlement, or require us to change our business practices,
sometimes in expensive ways.
We are also subject to, or in the future may become subject to, a variety of regulatory inquiries, audits, and
investigations across the jurisdictions where we conduct our business, including, for example, inquiries related to
consumer protection, employment matters and/or hiring practices, marketing practices, tax, unclaimed property and
privacy rules and regulations. Any regulatory actions against us, whether meritorious or not, could be time
consuming, result in costly litigation, damage awards, fines and penalties, injunctive relief or increased costs of
doing business through adverse judgment or settlement, require us to change our business practices in expensive
ways, require significant amounts of management time, result in the diversion of significant operational resources,
materially damage our brand or reputation, or otherwise harm our business.
We establish an accrued liability for loss contingencies related to legal and regulatory matters when the loss
is both probable and reasonably estimable. Those accruals represent management's best estimate of probable
losses and, in such cases, there may be an exposure to loss in excess of the amounts accrued. For certain of the
matters described above, there are inherent and significant uncertainties based on, among other factors, the stage
of the proceedings, developments in the applicable facts of law, or the lack of a specific damage claim. However, we
believe that the amount of reasonably possible losses in excess of the amounts accrued for those matters would not
have a material adverse effect on our business, consolidated financial position, results of operations or cash flows.
Our accrued liabilities for loss contingencies related to legal and regulatory matters may change in the future as a
result of new developments, including, but not limited to, the occurrence of new legal matters, changes in the law or
regulatory environment, adverse or favorable rulings, newly discovered facts relevant to the matter, or changes in
the strategy for the matter. Regardless of the outcome, litigation and other regulatory matters can have an adverse
impact on us because of defense and settlement costs, diversion of management resources and other factors.
96
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Indemnifications
In connection with the disposition of our operations in Latin America in 2017, we recorded $5.4 million in
indemnification liabilities for certain tax and other matters upon the closing of the transactions as an adjustment to
the net loss on the dispositions within discontinued operations at their fair value. We estimated the indemnification
liabilities using a probability-weighted expected cash flow approach. In 2020 and 2019, we decreased our
indemnification liabilities due to the expiration of certain indemnification obligations. The resulting benefit of $0.4
million and $2.2 million is recorded within Income (loss) from discontinued operations on the consolidated
statements of operations for the years ended December 31, 2020 and 2019. Our remaining indemnification liabilities
were $2.8 million as of December 31, 2020. We estimate that the total amount of obligations that are reasonably
possible to arise under the indemnifications in excess of amounts accrued as of December 31, 2020 is
approximately $11.7 million.
In the normal course of business to facilitate transactions related to our operations, we indemnify certain
parties, including employees, lessors, service providers, merchants, and counterparties to investment agreements
and asset and stock purchase agreements with respect to various matters. We have agreed to hold certain parties
harmless against losses arising from a breach of representations or covenants, or other claims made against those
parties. These agreements may limit the time within which an indemnification claim can be made and the amount of
the claim. We are also subject to increased exposure to various claims as a result of our divestitures and
acquisitions, particularly in cases where we are entering into new businesses in connection with such acquisitions.
We may also become more vulnerable to claims as we expand the range and scope of our services and are subject
to laws in jurisdictions where the underlying laws with respect to potential liability are either unclear or less
favorable. In addition, we have entered into indemnification agreements with our officers, directors and underwriters,
and our bylaws contain similar indemnification obligations that cover officers, directors, employees and other
agents.
Except as noted above, it is not possible to determine the maximum potential amount under these
indemnification agreements due to the limited history of prior indemnification claims and the unique facts and
circumstances involved in each particular agreement. Historically, any payments that we have made under these
agreements have not had a material impact on our operating results, financial position or cash flows.
13. STOCKHOLDERS' EQUITY
Reverse Stock Split
On June 9, 2020, our stockholders approved amendments to our Restated Certificate of Incorporation to
effect a reverse stock split of our shares of common stock, and our Board approved a final reverse stock split ratio
of 1-for-20 and a corresponding reduction in the number of authorized shares of our common stock. The reverse
stock split became effective on June 10, 2020. On the effective date, every 20 shares of issued and outstanding
common stock were combined and converted into one issued and outstanding share of common stock. The number
of authorized shares of Common Stock was reduced proportionately. Fractional shares were cancelled and
stockholders received cash in lieu thereof and the par value per share of common stock remains unchanged. A
proportionate adjustment was also made to the maximum number of shares of common stock issuable under the
Groupon, Inc. Stock Plans (the "Plans"), and the Groupon, Inc. 2012 Employee Stock Purchase Plan, as amended
("ESPP").
As a result, the number of shares and income (loss) per share disclosed throughout this Annual Report on
Form 10-K have been retrospectively adjusted to reflect the reverse stock split.
Preferred Stock
Our Board of Directors has the authority, without approval by the stockholders, to issue up to a total of
50,000,000 shares of preferred stock in one or more series. The Board may establish the number of shares to be
included in each such series and may fix the designations, preferences, powers and other rights of the shares of a
series of preferred stock. The Board could authorize the issuance of preferred stock with voting or conversion rights
that could dilute the voting power or rights of the holders of our common stock. As of December 31, 2020 and 2019,
there were no shares of preferred stock outstanding.
97
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Common Stock
Pursuant to our restated certificate of incorporation, the Board has the authority to issue up to a total of
100,500,000 shares of common stock. Each holder of common stock is entitled to one vote per share on any matter
that is submitted to a vote of stockholders. In addition, holders of our common stock will vote as a single class of
stock on any matter that is submitted to a vote of stockholders.
Share Repurchase Program
In May 2018, the Board authorized us to repurchase up to $300.0 million of our common stock under our
share repurchase program. During the year ended December 31, 2020, we did not repurchase any shares under
the program. As of December 31, 2020, up to $245.0 million of common stock remained available for purchase
under our program. The timing and amount of share repurchases, if any, will be determined based on market
conditions, limitations under the Amended Credit Agreement, share price, available cash and other factors, and the
share repurchase program may be terminated at any time.
14. COMPENSATION ARRANGEMENTS
Groupon, Inc. Stock Plans
In January 2008, we adopted the 2008 Stock Option Plan, as amended (the "2008 Plan"), under which
options for up to 3,230,925 shares of common stock were authorized to be issued to employees, consultants and
directors. The 2008 Plan was frozen in December 2010. In April 2010, we established the Groupon, Inc. 2010 Stock
Plan, as amended in April 2011 (the "2010 Plan"), under which options and restricted stock units ("RSUs") for up to
1,000,000 shares of common stock were authorized for future issuance to employees, consultants and directors. No
new awards may be granted under the 2010 Plan following our initial public offering in November 2011. In August
2011, we established the Groupon, Inc. 2011 Stock Plan (the "2011 Plan"), as amended in November 2013, May
2014, June 2016 and April 2019, under which options, RSUs and performance stock units for up to
9,375,000 shares of common stock were authorized for future issuance to employees, consultants and directors.
The Groupon, Inc. Stock Plans described above (the "Plans") are administered by the Compensation
Committee of the Board (the "Compensation Committee"). As of December 31, 2020, 3,135,422 shares of common
stock were available for future issuance under the Plans.
The stock-based compensation expense related to stock awards issued under the Plans and acquisition-
related awards are presented within the following line items of the consolidated statements of operations for the
years ended December 31, 2020, 2019 and 2018 (in thousands):
Cost of revenue
Marketing
Selling, general and administrative
Restructuring and related charges
Other income (expense), net
Year Ended December 31,
2020
2019
2018
$
662 $
1,482 $
1,522
36,826
1,735
—
5,809
74,324
—
—
1,485
6,948
56,288
—
100
Total stock-based compensation expense
$
40,745 $
81,615 $
64,821
We capitalized $4.5 million, $7.1 million and $7.4 million of stock-based compensation for the years ended
December 31, 2020, 2019 and 2018, in connection with internally-developed software and cloud computing
arrangements.
Employee Stock Purchase Plan
The Groupon, Inc. 2012 Employee Stock Purchase Plan, as amended, authorizes us to grant up to
1,000,000 shares of common stock under that plan. For the years ended December 31, 2020, 2019 and 2018,
69,371, 74,300 and 81,053 shares of common stock were issued under the ESPP.
98
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Restricted Stock Units
The restricted stock units granted under the Plans generally have vesting periods between one and four
years and are amortized on a straight-line basis over their requisite service period.
The table below summarizes restricted stock unit activity under the Plans for the year ended December 31,
2020:
Restricted Stock
Units
Weighted- Average
Grant Date Fair Value
(per share)
Unvested at December 31, 2019
$
1,527,014 $
Granted
Vested
Forfeited
1,836,665
(679,944)
(830,728)
Unvested at December 31, 2020
$
1,853,007 $
74.80
24.92
72.25
62.48
31.91
The weighted-average grant date fair value of restricted stock units granted in 2019 and 2018 was $68.80
and $91.80. The fair value of restricted stock units that vested during each of the three years ended December 31,
2020, 2019 and 2018 was $19.2 million, $43.8 million and $64.1 million. As of December 31, 2020, $38.8 million of
unrecognized compensation costs related to unvested employee restricted stock units are expected to be
recognized over a remaining weighted-average period of 0.92 years.
Performance Share Units
We grant performance share units under the Plans that vest in shares of our common stock upon the
achievement of financial and operational targets specified in the respective award agreement ("Performance Share
Units"). During the year ended December 31, 2019, we also granted performance share units subject to a market
condition ("Market-based Performance Share Units").
The Market-based Performance Share Units will vest if our average daily closing stock price is equal to or
greater than $120.00 per share over a period of 30 consecutive trading days prior to December 31, 2022 or if a
change in control occurs during the performance period at the specified stock price (and on a proportional basis for
a change in control price between the grant date price and the specified stock price). We used a Monte Carlo
simulation to calculate the grant date fair value of the awards and the related derived service period over which we
recognized the expense. The key inputs used in the Monte Carlo simulation were the risk-free rate, our volatility of
49.8% and our cost of equity of 12.8%.
Our Performance Share Units and Market-based Performance Share Units are subject to continued
employment through the performance period dictated by the award and certification by the Compensation
Committee that the specified performance conditions have been achieved.
The table below summarizes Performance Share Unit activity under the Plans for the year ended December
31, 2020:
Unvested at December 31, 2019
Granted
Vested
Forfeited
Unvested at December 31, 2020
Weighted-
Average Grant
Date Fair
Value (per
unit)
Market-based
Performance
Share Units
Weighted-
Average Grant
Date Fair
Value (per
unit)
Performance
Share Units
203,853 $
96,598
(104,441)
(71,301)
124,709 $
79.76
15.44
80.77
79.91
29.73
341,002 $
60.60
—
—
(283,334)
57,668 $
—
—
60.60
60.60
Maximum shares issuable upon vesting at December 31, 2020
173,008
57,668
99
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 2020, $1.3 million of unrecognized compensation costs related to unvested
Performance Share Units are expected to be recognized over a remaining weighted-average period of 1.54 years.
We have recognized all compensation costs related to our unvested Market-Based Performance Share Units.
15. REVENUE RECOGNITION
We recognize revenue when we satisfy a performance obligation by transferring a promised good or service
to a customer. Substantially all of our performance obligations are satisfied at a point in time rather than over time.
We offer goods and services through our online marketplaces in three primary categories: Local, Goods and Travel.
See , Note 21, Segment Information, for revenue summarized by reportable segment and category.
In connection with most of our product and service revenue transactions, we collect cash from credit card
payment processors shortly after a sale occurs. For transactions in which we earn commissions when customers
make purchases with retailers using digital coupons accessed through our websites and mobile applications, we
generally collect payment from affiliate networks on terms ranging from 30 to 150 days.
Contract Balances
A substantial majority of our deferred revenue relates to product sales for which revenue will be recognized
as the products are delivered to customers, generally within one week following the balance sheet date. Our
deferred revenue was $11.2 million as of December 31, 2020. As of December 31, 2019 and 2018, our deferred
revenue was $18.0 million and $25.5 million, all of which was recognized during the years ended December 31,
2020 and 2019, respectively.
Customer Credits
We issue credits to customers that can be applied to future purchases through our online marketplaces.
Credits are primarily issued as consideration for refunds. To a lesser extent, credits are issued for customer
relationship purposes. The following table summarizes the activity in the liability for customer credits for the years
ended December 31, 2020 and 2019 (in thousands):
Balance as of December 31, 2018
Credits issued
Credits redeemed
Breakage revenue recognized
Foreign currency translation
Balance as of December 31, 2019
Credits issued
Credits redeemed
Breakage revenue recognized
Foreign currency translation
Balance as of December 31, 2020
Cost of Obtaining Contracts
Customer Credits
15,118
115,031
(102,682)
(13,699)
(4)
13,764
213,826
(147,096)
(21,364)
1,876
61,006
$
$
$
Deferred contract acquisition costs are presented within the following line items of the consolidated balance
sheets as of December 31, 2020 and 2019 (in thousands):
Prepaid expenses and other current assets
Other non-current assets
December 31,
2020
2019
$
1,009 $
5,315
2,501
10,133
For the years ended December 31, 2020, 2019 and 2018, we amortized $15.3 million, $20.4 million and
$25.2 million of deferred contract acquisition costs and did not recognize any impairment losses in relation to the
deferred costs.
100
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Allowance for Expected Credit Losses on Accounts Receivable
The following table summarizes the activity in the allowance for expected credit losses on accounts
receivables for the year ended December 31, 2020 (in thousands):
Balance as of January 1, 2020
Change in provision
Write-offs
Foreign currency translation
Balance as of December 31, 2020
Allowance for Expected
Credit Losses
$
$
3,693
9,631
(3,315)
(253)
9,756
16. RESTRUCTURING AND RELATED CHARGES
In April 2020, the Board approved a multi-phase restructuring plan of up to $105.0 million of total pretax
charges related to our previously announced strategic shift and as part of the cost cutting measures implemented in
response to the impact of COVID-19 on our business. We expect to incur total pretax charges of $75.0 million to
$105.0 million in connection with the multi-phase restructuring actions through the end of 2021. The first phase of
the restructuring actions included an overall reduction of approximately 1,200 positions globally and the exit or
discontinuation of the use of certain leases and other assets. The majority of the first phase of workforce reductions
and impairments of our right-of-use and other long-lived assets occurred during the second quarter 2020. In the
third quarter 2020, we initiated the second phase of our restructuring plan, which included additional workforce
reductions and the exit of our operations in New Zealand and Japan. The majority of our restructuring charges are
expected to be paid in cash and primarily relate to employee severance and benefits expenses, facilities-related
costs and professional advisory fees. We will continue to evaluate our cost structure, including additional workforce
reductions, as part of our restructuring plan. Costs incurred related to the restructuring plan are classified as
Restructuring and related charges on the consolidated statements of operations.
The following table summarizes costs incurred by segment related to the restructuring plan for the year
ended December 31, 2020 (in thousands):
Employee Severance
and Benefit Costs (1)
Legal and Advisory
Costs
Property, Equipment
and Software
Impairments (2)
Right-of-Use Asset
Impairments and
Lease-related
Charges (3)
Total Restructuring
Charges
Year Ended December 31, 2020
North America
$
17,322 $
International
20,679
Consolidated
$
38,001 $
1,308 $
829
2,137 $
5,322 $
13,775 $
291
5,310
5,613 $
19,085 $
37,727
27,109
64,836
(1)
(2)
(3)
The employee severance and benefits costs for the year ended December 31, 2020 are related to the termination and planned
termination of approximately 1,200 employees. Additional severance and benefits costs may be incurred in future periods. Substantially
all of the remaining cash payments for the costs accrued as of December 31, 2020 are expected to be disbursed by the end of 2021.
Includes long-lived asset impairments of $5.6 million for the year ended December 31, 2020.
Includes long-lived asset impairments of $16.0 million for the year ended December 31, 2020.
101
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As a part of our restructuring plan, we vacated several of our leased facilities, and many of those facilities
are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or
modify those leases. Rent expense, including amortization of the right-of-use asset and accretion of the operating
lease liability, sublease income and other variable lease costs related to the leased facilities vacated as part of our
restructuring plan are presented within Restructuring and related charges in the consolidated statements of
operations. The current and non-current liabilities associated with these leases continue to be presented within
Other current liabilities and Operating lease obligations in the consolidated balance sheets.
Due to actions taken under our restructuring plan, we recognized $18.1 million and $3.5 million of long-lived
asset impairment in our North America and International segments during the year ended December 31, 2020.
The following table summarizes restructuring liability activity for the years ended December 31, 2020 and
2019 (in thousands):
Balance as of December 31, 2018
Charges payable in cash
Cash payments
Foreign currency translation
Balance as of December 31, 2019 (1)
Charges payable in cash (2)
Cash payments
Foreign currency translation
Balance as of December 31, 2020
Employee Severance
and Benefit Costs
Other Exit Costs
Total
$
$
$
1,119 $
— $
31
(436)
(15)
—
—
—
699 $
— $
36,266
(25,328)
1,660
2,137
(1,289)
(14)
13,297 $
834 $
1,119
31
(436)
(15)
699
38,403
(26,617)
1,646
14,131
(1)
(2)
Amounts included in the year ended December 31, 2019 are related to prior restructuring plans and the liabilities under those plans have
been substantially settled.
Excludes stock-based compensation of $1.7 million related to accelerated vesting of stock-based compensation awards for certain
employees terminated as a result of our restructuring activities during the year ended December 31, 2020.
17. INCOME TAXES
The components of pretax income (loss) from continuing operations for the years ended December 31,
2020, 2019 and 2018 were as follows (in thousands):
United States
International
Income (loss) before provision (benefit) for income taxes
Year Ended December 31,
2020
2019
2018
$
$
(55,699) $
6,758 $
(238,367)
(20,289)
(294,066) $
(13,531) $
23,349
(22,318)
1,031
The provision (benefit) for income taxes for the years ended December 31, 2020, 2019 and 2018 was
allocated between continuing operations and discontinued operations as follows (in thousands):
Continuing Operations
Discontinued Operations
Total
Year Ended December 31,
2020
2019
2018
$
$
(7,504) $
—
(7,504) $
761 $
—
761 $
(957)
—
(957)
102
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The provision (benefit) for income taxes from continuing operations for the years ended December 31,
2020, 2019 and 2018 consisted of the following components (in thousands):
Current taxes:
U.S. federal
State
International
Total current taxes
Deferred taxes:
U.S. federal
State
International
Total deferred taxes
Year Ended December 31,
2020
2019
2018
$
(180) $
(5,901) $
1,719
(1,942)
(403)
32
114
(7,247)
(7,101)
929
7,218
2,246
32
(9)
(1,508)
(1,485)
Provision (benefit) for income taxes
$
(7,504) $
761 $
768
57
3,218
4,043
(319)
—
(4,681)
(5,000)
(957)
The items accounting for differences between the income tax provision (benefit) from continuing operations
computed at the U.S. federal statutory rate and the provision (benefit) for income taxes for the years ended
December 31, 2020, 2019 and 2018 were as follows (in thousands):
Year Ended December 31,
2020
2019
2018 (2)
U.S. federal income tax provision (benefit) at statutory rate
$
(61,805) $
(2,842) $
Foreign income and losses taxed at different rates (1)
State income taxes, net of federal benefits, and state tax credits
Change in valuation allowances
Effect of income tax rate changes on deferred items
Tax effects of intercompany transactions
8,608
6,487
(4,474)
618
—
5,529
5,297
(10,074)
(3,443)
—
Adjustments related to uncertain tax positions
(15,518)
(12,418)
Non-deductible stock-based compensation expense
Tax (windfalls)/shortfalls on stock-based compensation awards
Federal research and development credits, net of adjustments
Forgiveness of intercompany liabilities
Ordinary stock loss
Net operating loss expiration
Goodwill impairment
Non-deductible or non-taxable items
Provision (benefit) for income taxes
3,803
3,876
6,043
(2,863)
—
19,962
23,202
4,557
6,355
2,042
3,447
67
—
12,537
—
(5,736)
$
(7,504) $
761 $
216
2,113
720
(7,727)
1,544
607
18
3,239
(335)
(8,331)
(1,340)
(11,815)
—
—
20,134
(957)
(1)
(2)
Tax rates in foreign jurisdictions were generally lower than the U.S. federal statutory rate through December 31, 2020. This results in an
adverse impact to the provision (benefit) for income taxes in this rate reconciliation for the years ended December 31, 2020, 2019 and
2018 prior to the impact of valuation allowances, due to the net pretax losses from continuing operations in certain foreign jurisdictions with
lower tax rates.
During the year ended December 31, 2019, we updated our net operating losses to remove deferred tax assets that could never be utilized
due to IRC Section 382 limitations. The amount of State income taxes, net of federal benefits, and state tax credits, Change in valuation
allowances and Non-deductible or non-taxable items for the year ended December 31, 2018 have been updated from $2.0 million, $3.8
million and $7.3 million previously reported to reflect that change.
103
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The deferred income tax assets and liabilities consisted of the following components as of December 31,
2020 and 2019 (in thousands):
Deferred tax assets:
Accrued expenses and other liabilities
Operating lease obligation
Stock-based compensation
Net operating loss and tax credit carryforwards
Intangible assets, net
Investments
Unrealized foreign currency exchange losses
Other
Total deferred tax assets
Less: Valuation allowances
Deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Prepaid expenses and other assets
Property, equipment and software, net
Right-of-use asset
Convertible senior notes
Deferred revenue
Total deferred tax liabilities
Net deferred tax asset (liability)
December 31,
2020
2019
$
54,699 $
16,279
5,129
142,835
22,974
24,885
1,244
985
269,030
(212,143)
56,887
(12,288)
(8,211)
(11,433)
(1,163)
(15,369)
(48,464)
$
8,423 $
35,565
22,557
7,657
157,202
21,002
23,012
3,765
1,017
271,777
(206,394)
65,383
(16,343)
(11,994)
(20,172)
(1,883)
(14,064)
(64,456)
927
We have incurred significant losses in recent periods and had an accumulated deficit of $1,320.9 million as
of December 31, 2020. As a result, we maintained valuation allowances against our domestic deferred tax assets
and substantially all of our foreign deferred tax assets as of December 31, 2020 and 2019 to reduce their carrying
values to amounts that are realizable either through future reversals of existing taxable temporary differences or
through taxable income in carryback years for the applicable jurisdictions.
We had $24.1 million of federal net operating loss carryforwards as of December 31, 2020 which will begin
expiring in 2027. We had $77.5 million of state net operating loss carryforwards as of December 31, 2020, which
began expiring in the current period. As of December 31, 2020, we had $465.2 million of foreign net operating loss
carryforwards, a significant portion of which carry forward for an indefinite period.
We are subject to taxation in the United States, state jurisdictions and foreign jurisdictions. Significant
judgment is required in determining the worldwide provision for income taxes and recording the related income tax
assets and liabilities. We recognize the financial statement benefit of a tax position only after determining that the
relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting
the more-likely-than-not criterion, the amount recognized in the financial statements is the largest benefit that has a
greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.
104
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes activity related to our gross unrecognized tax benefits, excluding interest
and penalties, for the years ended December 31, 2020, 2019 and 2018 (in thousands):
Year Ended December 31,
2020
2019
2018
Beginning Balance
$
64,361 $
87,637 $
Increases related to prior year tax positions
Decreases related to prior year tax positions
Increases related to current year tax positions
Decreases based on settlements with taxing authorities
Decreases due to lapse of statute limitations
Foreign currency translation
Ending Balance
8,389
(22,541)
1,994
—
(5,640)
2,397
3,754
(28,767)
6,086
—
(3,875)
(474)
$
48,960 $
64,361 $
87,359
1,500
(21)
7,533
—
(9,447)
713
87,637
The total amount of unrecognized tax benefits as of December 31, 2020, 2019 and 2018 that, if recognized,
would affect the effective tax rate are $19.9 million, $25.1 million and $33.3 million.
We recognized $1.0 million, $1.4 million and $1.6 million of interest and penalties within Provision (benefit)
for income taxes on our consolidated statements of operations for the years ended December 31, 2020, 2019 and
2018. Total accrued interest and penalties as of December 31, 2020 and 2019 were $4.9 million and $4.9 million,
and are included within Other non-current liabilities in our consolidated balance sheets.
We are currently under audit by several foreign jurisdictions. It is likely that the examination phase of some
of those audits will conclude in the next 12 months. There are many factors, including factors outside of our control,
which influence the progress and completion of those audits. We recognized income tax benefits of $8.9 million,
$12.3 million and $7.9 million for the years ended December 31, 2020, 2019 and 2018, as a result of new
information that impacted our estimates of the amounts that are more-likely-than not of being realized upon
settlement of the related tax positions and due to expirations of the applicable statutes of limitations. We are subject
to claims for tax assessments by foreign jurisdictions, including a proposed assessment for $126.4 million, inclusive
of estimated incremental interest from the original assessment. We believe that the assessment, which primarily
relates to transfer pricing on transactions occurring in 2011, is without merit and we intend to vigorously defend
ourselves in that matter. In addition to any potential increases in our liabilities for uncertain tax positions from the
ultimate resolution of that assessment, we believe that it is reasonably possible that reductions of up to $3.4 million
in unrecognized tax benefits may occur within the 12 months following December 31, 2020 upon closing of income
tax audits or the expiration of applicable statutes of limitations.
In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those
operations. Additionally, while we did not incur the deemed repatriation tax, an actual repatriation from our non-U.S.
subsidiaries could be subject to foreign and U.S. state income taxes. Aside from limited exceptions for which the
related deferred tax liabilities recognized as of December 31, 2020 and 2019 are immaterial, we do not intend to
distribute earnings of foreign subsidiaries for which we have an excess of the financial reporting basis over the tax
basis of our investments and therefore have not recorded any deferred taxes related to such amounts. The actual
tax cost resulting from a distribution would depend on income tax laws and circumstances at the time of distribution.
Determination of the amount of unrecognized deferred tax liability related to the excess of the financial reporting
basis over the tax basis of our foreign subsidiaries is not practical due to the complexities associated with the
calculation.
Groupon uses a cost-sharing arrangement under which controlled members agree to share the costs and
risks of developing intangible properties in accordance with their reasonably anticipated share of benefits from the
intangibles. In 2019, the Ninth Circuit Court of Appeals entered a decision in Altera Corp. v. Commissioner requiring
related parties in an intercompany cost-sharing arrangement to share expenses related to stock-based
compensation. Altera then petitioned the United States Supreme Court to review the Ninth Circuit's decision. In June
2020, the Supreme Court denied this petition, and accordingly, the Ninth Circuit's Altera decision stands. The Altera
decision did not have a material impact on our provision for income taxes for the years ended December 31, 2020
and 2019.
105
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. VARIABLE INTEREST ENTITY
We have an arrangement with a strategic partner to offer deals related to live events, and a limited liability
company ("LLC") has been established to administer that arrangement. Groupon and the strategic partner each own
50% of the outstanding LLC interests, and income and cash flows of the LLC are allocated based on agreed upon
percentages specified in the related LLC agreement.
Our obligations associated with our interests in the LLC are primarily administering transactions,
contributing intellectual property, identifying deals and promoting the sale of deal offerings, coordinating the
distribution of deal offerings and providing the record keeping.
Under the LLC agreement, as amended, the LLC shall be dissolved upon the occurrence of any of the
following events: (1) either party becoming a majority owner; (2) July 2022; (3) certain elections of Groupon or the
strategic partner based on the operational performance of the LLC or other changes to certain terms in the
agreement; (4) election of either Groupon or the strategic partner in the event of bankruptcy by the other party; (5)
sale of the LLC; or (6) a court's dissolution of the LLC.
We have determined that the LLC is a VIE and that we are its primary beneficiary. We consolidate the LLC
because we have the power to direct the activities of the LLC that most significantly impact the LLC's economic
performance. In particular, we identify and promote the deal offerings, provide all of the operational and back office
support, present the LLC's deal offerings via our websites and mobile applications and provide the editorial
resources that create the verbiage for the related deal offers.
19. FAIR VALUE MEASUREMENTS
Fair value is defined under U.S. GAAP as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is a
market-based measurement that is determined based on assumptions that market participants would use in pricing
an asset or a liability.
To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs in
valuation methodologies used to measure fair value:
Level 1 - Measurements that reflect quoted prices (unadjusted) for identical assets or liabilities in active
markets.
Level 2 - Measurements that include other inputs that are directly or indirectly observable in the
marketplace.
Level 3 - Measurements derived from valuation techniques in which one or more significant inputs or
significant value drivers are unobservable. These fair value measurements require significant judgment.
In determining fair value, we use various valuation approaches within the fair value measurement
framework. The valuation methodologies used for our assets and liabilities measured at fair value and their
classification in the valuation hierarchy are summarized below:
Fair value option investments and available-for-sale securities. We use the discounted cash flow method,
which is an income approach, to estimate the fair value of the investees. The key inputs to determining fair
values under that approach are cash flow forecasts and discount rates. We also use a market approach
valuation technique, which is based on market multiples of guideline companies, to determine the fair value
of each entity.
We also have investments in redeemable preferred shares. We measure the fair value of those available-
for-sale securities using the discounted cash flow method.
We have classified our fair value option investments and our investments in available-for-sale securities as
Level 3 due to the lack of observable market data over fair value inputs such as cash flow projections and
discount rates. Increases in projected cash flows and decreases in discount rates contribute to increases in
the estimated fair values of the fair value option investments and available-for-sale securities, whereas
106
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
decreases in projected cash flows and increases in discount rates contribute to decreases in their fair
values. Our fair value option investments were $0.0 million and $1.4 million as of December 31, 2020 and
2019.
Contingent consideration. We are subject to a contingent consideration arrangement to transfer a maximum
payout in cash of $2.5 million to the former owners of a business acquired on April 30, 2018. See Note 5,
Business Combinations, for further discussion of that acquisition.
The following table provides a roll-forward of the fair value of recurring Level 3 fair value measurements for
the years ended December 31, 2020, 2019 and 2018 (in thousands):
Year Ended December 31,
2020
2019
2018
Assets
Fair value option investments:
Beginning Balance
Total gains (losses) included in earnings
Ending Balance
Unrealized (losses) gains still held (1)
Available-for-sale securities
Convertible debt securities:
Beginning Balance
Proceeds from sales and maturities of convertible debt securities
Transfer to other equity method investment upon conversion of convertible
debt security
Total gains (losses) included in other comprehensive income (loss)
Total gains (losses) included in earnings (2)
Ending Balance
Unrealized gains (losses) still held (1)
Redeemable preferred shares:
Beginning Balance
Total gains (losses) included in other comprehensive income (loss)
Impairments included in earnings
Ending Balance
Unrealized gains (losses) still held (1)
Liabilities
Contingent Consideration:
Beginning Balance
Issuance of contingent consideration in connection with acquisitions
Settlements of contingent consideration liabilities
Total losses (gains) included in earnings
Foreign currency translation
Ending Balance
Unrealized losses (gains) still held (1)
$
$
$
$
$
$
$
$
$
$
$
$
1,405 $
73,902 $
(1,405)
— $
(1,405) $
(72,497)
1,405 $
(72,497) $
— $
— $
—
—
—
—
— $
— $
—
—
—
—
— $
— $
— $
10,340 $
—
—
— $
— $
(379)
(9,961)
— $
(10,340) $
1,298 $
1,529 $
—
(908)
6
(70)
326 $
6 $
—
(312)
39
42
1,298 $
39 $
82,966
(9,064)
73,902
(9,064)
11,354
(8,594)
(4,008)
(1,148)
2,396
—
—
15,431
379
(5,470)
10,340
(5,091)
—
1,589
—
56
(116)
1,529
56
(1)
(2)
Represents the unrealized gains or losses recorded in earnings and/or other comprehensive income (loss) during the period for assets
and liabilities classified as Level 3 that are still held (or outstanding) at the end of the period.
Represents a gain at maturity of a previously impaired convertible debt security, accretion of interest income and changes in the fair value
of the embedded derivative.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis, including assets that are
written down to fair value as a result of an impairment or increased due to an observable price change in an orderly
transaction.
We recognized $109.5 million in non-cash impairment charges related to goodwill and $44.0 million in non-
107
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
cash impairment charges related to long-lived assets during the year ended December 31, 2020, of which
$21.6 million is included in Restructuring and related charges on our consolidated statements of operations. See
Note 6, Property, Equipment and Software, Net, Note 7, Goodwill and Other Intangible Assets, Note 11, Leases and
Note 16, Restructuring and Related Charges, for additional information.
We recognized a $6.7 million impairment related to an other equity method investment during the year
ended December 31, 2020. See Note 8, Investments, for additional information.
For the year ended December 31, 2019, we adjusted the carrying value of an other equity investment for
observable price changes in an orderly transaction, which resulted in an unrealized gain of $51.4 million. See Note
8, Investments, for additional information.
For the year ended December 31, 2018, we recorded a $4.6 million impairment of an other equity
investment. To determine the fair value of the investment, we considered the financial condition of the investee and
applied a market approach. We have classified the fair value measurement of that other equity investment as Level
3 because it involves significant unobservable inputs. See Note 8, Investments, for additional information.
Estimated Fair Value of Financial Assets and Liabilities Not Measured at Fair Value
Our financial instruments not carried at fair value consist primarily of accounts receivable, restricted cash,
accounts payable, accrued merchant and supplier payables and accrued expenses. The carrying values of those
assets and liabilities approximate their respective fair values as of December 31, 2020 and 2019 due to their short-
term nature.
20. INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed using the weighted-average number of common shares
outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number
of common shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive
securities include stock options, restricted stock units, performance share units, performance bonus awards, ESPP
shares, warrants and convertible senior notes. If dilutive, those potentially dilutive securities are reflected in diluted
net income (loss) per share using the treasury stock method, except for the convertible senior notes, which are
subject to the if-converted method.
The following table sets forth the computation of basic and diluted net income (loss) per share of common
stock for the years ended December 31, 2020, 2019 and 2018 (in thousands, except share amounts and per share
amounts):
Basic and diluted net income (loss) per share:
Numerator
Net income (loss) - continuing operations
Less: Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to common stockholders - continuing operations
Net income (loss) attributable to common stockholders - discontinued operations
Net income (loss) attributable to common stockholders
Denominator
Weighted-average common shares outstanding
Basic and diluted net income (loss) per share:
Continuing operations
Discontinued operations
Basic and diluted net income (loss) per share
108
Year Ended December 31,
2020
2019
2018
(286,562) $
(14,292) $
1,751
10,682
1,988
13,067
(288,313) $
(24,974) $
(11,079)
382
2,597
—
(287,931) $
(22,377) $
(11,079)
28,604,115
28,370,417
28,325,555
(10.08) $
(0.88) $
(0.39)
0.01
0.09
—
(10.07) $
(0.79) $
(0.39)
$
$
$
$
$
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following weighted-average potentially dilutive instruments are not included in the diluted net income
(loss) per share calculations above because they would have had an antidilutive effect on the net income (loss) per
share from continuing operations:
Restricted stock units
Other stock-based compensation awards
Convertible senior notes
Warrants
Total
Year Ended December 31,
2020
2019
2018
1,887,322
199,629
2,314,815
2,314,815
6,716,581
1,652,002
125,562
2,314,815
2,314,815
6,407,194
1,527,601
102,054
2,314,815
2,314,815
6,259,285
We had outstanding Market-based Performance Share Units as of December 31, 2020 that were eligible to
vest into shares of common stock subject to the achievement of specified performance or market conditions.
Contingently issuable shares are excluded from the computation of diluted earnings per share if, based on current
period results, the shares would not be issuable if the end of the reporting period were the end of the contingency
period. As of December 31, 2020, there were up to 57,668 shares of common stock issuable upon vesting of
outstanding Market-based Performance Share Units that were excluded from the table above as the performance or
market conditions were not satisfied as of the end of the period.
21. SEGMENT INFORMATION
The segment information reported in the tables below reflects the operating results that are regularly
reviewed by our chief operating decision maker to assess performance and make resource allocation decisions.
During the third quarter 2020, we changed our measure of segment profitability from operating income (loss) to
contribution profit, defined as gross profit less marketing expense, which is consistent with how management
reviews the operating results of the segments. Contribution profit measures the amount of marketing investment
needed to generate gross profit. Other operating expenses are excluded from contribution profit as management
does not review those expenses by segment. Our operations are organized into two segments: North America and
International.
109
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes revenue by reportable segment and category for the years ended
December 31, 2020, 2019 and 2018 (in thousands):
North America
Service revenue:
Local
Goods
Travel
Total service revenue
Product revenue - Goods
Total North America revenue (1)
International
Service revenue:
Local
Goods
Travel
Total service revenue
Product revenue - Goods
Total International revenue (1)
Year Ended December 31,
2020
2019
2018
$
432,183 $
721,038 $
752,863
35,276
17,686
485,145
333,479
16,236
57,939
795,213
563,694
18,283
71,856
843,002
796,393
$
818,624 $
1,358,907 $
1,639,395
$
138,274 $
287,611 $
306,700
11,757
8,477
158,508
439,736
9,441
34,092
331,144
528,864
$
598,244 $
860,008 $
14,602
41,183
362,485
634,866
997,351
(1)
North America includes revenue from the United States of $808.3 million, $1,333.9 million and $1,600.2 million for the years ended
December 31, 2020, 2019 and 2018. International includes revenue from the United Kingdom of $216.3 million, $314.3 million and $390.4
million for the years ended December 31, 2020, 2019 and 2018. There were no other individual countries that represented more than 10%
of consolidated total revenue for the years ended December 31, 2020, 2019 and 2018. Revenue is attributed to individual countries based
on the location of the customer.
The following table summarizes gross profit by reportable segment and category for the years ended
December 31, 2020, 2019 and 2018 (in thousands):
North America
Service gross profit:
Local
Goods
Travel
Total service gross profit
Product gross profit - Goods
Total North America gross profit
International
Service gross profit:
Local
Goods
Travel
Total service gross profit
Product gross profit - Goods
Total International gross profit
Year Ended December 31,
2020
2019
2018
$
379,040 $
643,499 $
671,352
28,852
12,907
420,799
54,832
13,165
45,739
702,403
105,342
$
475,631 $
807,745 $
15,302
57,945
744,599
146,085
890,684
$
125,912 $
269,666 $
289,427
10,496
7,150
143,558
58,105
8,509
31,317
309,492
68,892
$
201,663 $
378,384 $
13,252
38,132
340,811
89,106
429,917
110
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes contribution profit by reportable segment for the years ended December 31,
2020, 2019 and 2018 (in thousands):
Year Ended December 31,
2020
2019
2018
North America
Gross profit
Marketing
Contribution profit
International
Gross profit
Marketing
Contribution profit
Consolidated
Gross profit
Marketing
Contribution profit
Selling, general and administrative
Goodwill impairment
Long-lived asset impairment
Restructuring and related charges
Income (loss) from operations
$
475,631 $
807,745 $
96,039
379,592
214,069
593,676
890,684
273,787
616,897
429,917
121,950
307,967
395,737
924,864
870,961
—
—
(136)
54,039
201,663
58,495
143,168
677,294
154,534
522,760
603,185
109,486
22,351
64,836
378,384
125,286
253,098
339,355
846,774
806,945
—
—
31
1,186,129
1,320,601
$
(277,098) $
39,798 $
The following table summarizes total assets by reportable segment as of December 31, 2020 and 2019 (in
thousands):
Total assets:
North America (1)
International (1)
Consolidated total assets
December 31,
2020
2019
$
$
971,110 $
1,045,500
440,397
541,243
1,411,507 $
1,586,743
(1)
North America contains assets from the United States of $948.1 million and $1,020.0 million as of December 31, 2020 and 2019.
International contains assets from Switzerland of $151.7 million and $175.2 million as of December 31, 2020 and 2019. There were no
other individual countries that represented more than 10% of consolidated total assets as of December 31, 2020 and 2019.
The following table summarizes tangible property and equipment, net of accumulated depreciation and
amortization, by reportable segment as of December 31, 2020 and 2019 (in thousands):
North America (1)
International (1)
Consolidated total
December 31,
2020
2019
$
$
19,427 $
7,802
27,229 $
35,798
17,719
53,517
(1)
Substantially all tangible property and equipment within North America is located in the United States. There were no other individual
countries located outside of the United States that represented more than 10% of consolidated tangible property and equipment, net as of
December 31, 2020 and 2019.
111
GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes depreciation and amortization of property, equipment and software and
intangible assets by reportable segment for the years ended December 31, 2020, 2019 and 2018 (in thousands):
North America
International
Consolidated total
Year Ended December 31,
2020
2019
2018
$
$
78,805 $
89,083 $
8,717
16,682
87,522 $
105,765 $
101,419
14,409
115,828
The following table summarizes expenditures for additions to tangible long-lived assets by reportable
segment for the years ended December 31, 2020, 2019 and 2018 (in thousands):
North America
International
Consolidated total
Year Ended December 31,
2020
2019
2018
$
$
2,000 $
2,707
4,707 $
6,791 $
6,103
12,894 $
6,194
10,393
16,587
112
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has
evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end
of the period covered by this Annual Report on Form 10-K.
Based on this evaluation, our management concluded that, as of December 31, 2020, our disclosure
controls and procedures are effective to provide reasonable assurance that information we are required to disclose
in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information
is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rule 13a-15(f) of the Exchange Act. Our management conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
Our internal control over financial reporting includes policies and procedures that provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external reporting
purposes in accordance with U.S. generally accepted accounting principles. Based on this evaluation, management
concluded that our internal control over financial reporting was effective as of December 31, 2020. Management
reviewed the results of its assessment with our Audit Committee. The effectiveness of our internal control over
financial reporting as of December 31, 2020 has been audited by Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in its report which is included below.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the
evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended
December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting. As a result of the COVID-19 pandemic, our employees have been working remotely. We have
not identified any material changes to our internal controls over financial reporting as a result of COVID-19 or
related changes to our working environment. We are continually monitoring and assessing the impact the COVID-19
pandemic and related restrictions have on our own internal controls to minimize the effect on their design and
operating effectiveness.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect
the fact that there are resource constraints and that management is required to apply its judgment in evaluating the
benefits of possible controls and procedures relative to their costs.
113
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Groupon, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Groupon, Inc. and subsidiaries (the “Company”) as
of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020,
based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the
Company and our report dated February 25, 2021, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 25, 2021
114
ITEM 9B. OTHER INFORMATION
On February 25, 2021, the Compensation Committee of the Board (the “Compensation Committee”), in
connection with its annual compensation review process, approved annual compensation for the Company’s named
executive officers (the “NEOs”). The Compensation Committee did not approve any changes to the NEOs’ base
salaries, and each NEO will be eligible for an annual performance bonus equal to 100% of annual base salary.
In addition, the Compensation Committee approved annual equity awards of restricted stock units (“RSUs”)
and performance stock units (“PSUs”) under the Groupon, Inc. 2011 Incentive Plan, as amended. Aaron Cooper,
Interim Chief Executive Officer, will receive RSUs with a value equal to $2,520,000 and PSUs with a value equal to
$1,680,000. Melissa Thomas, Chief Financial Officer, will receive RSUs with a value equal to $828,000 and PSUs
with a value equal to $552,000. Mr. Drobny, Chief Administrative Officer and General Counsel, will receive RSUs
with a value equal to $528,000 and PSUs with a value equal to $352,000. The RSUs and PSUs described above
will vest over a two year period. PSUs may be earned, if at all, in an amount ranging from 0% to 200% of the target
award depending on the achievement of applicable performance metrics in 2021. The number of units with respect
to the equity awards described above will be determined on a future date in connection with the Company’s regular
annual compensation process.
115
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
Information regarding our Directors is incorporated by reference from the information under the captions
"Board of Directors" and "Corporate Governance at Groupon" in our Proxy Statement for our 2021 Annual Meeting
of Stockholders, which will be filed with the SEC within 120 days of December 31, 2020 ("2021 Proxy
Statement"). Information regarding our Audit Committee and its Financial Experts is incorporated by reference from
the information under the captions "Board Committees" and "Audit Committee Report" in our 2021 Proxy Statement.
Pursuant to General Instruction G(3) on Form 10-K, information regarding our Executive Officers can be found in
Part I of this Annual Report on Form 10-K under the caption "Information About Our Executive Officers."
Code of Ethics
We have adopted a Code of Conduct, which is applicable to our chief executive officer, chief financial officer
and other principal executive and senior financial officers. Our Code of Conduct is available through our website
(www.groupon.com). Information about the Code of Conduct is incorporated by reference from the information
under the caption "Corporate Governance at Groupon" in our 2021 Proxy Statement. We will post any amendment
to or waiver from the provisions of the Code of Conduct that applies to the above executive officers on our investor
relations website (investor.groupon.com) under the caption "Corporate Governance."
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference
the captions "Named Executive Officer
Compensation," "Director Compensation," "Compensation Discussion and Analysis," "Compensation Committee
Interlocks and Insider Participation" and "Compensation Committee Report" in our 2021 Proxy Statement.
information under
from
the
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Incorporated by reference from the information under the captions "Information Regarding Beneficial
Ownership of Principal Stockholders, Directors and Management" and "Equity Compensation Plan Information" in
our 2021 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Incorporated by reference from the information under the captions "Corporate Governance at Groupon,"
"Board Independence and Expertise" and "Certain Relationships and Related Party Transactions" in our 2021 Proxy
Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated by reference from the information under the caption "Independent Registered Public
Accounting Firm" in our 2021 Proxy Statement.
116
ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(1) We have filed the following documents as part of the Annual Report on Form 10-K
Groupon, Inc.
Consolidated Financial Statements
As of December 31, 2020 and 2019 and for the Years Ended December 31, 2020, 2019 and 2018
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules - Groupon, Inc.
Schedule II-Valuation and Qualifying Accounts
Balance at
Beginning of Year
Net Increase
(Decrease) to
Expense (2)
Acquisitions and
Other
Balance at End of
Year
(in thousands)
TAX VALUATION ALLOWANCE:
Year ended December 31, 2020
$
206,394 $
5,749 $
Year ended December 31, 2019
Year ended December 31, 2018 (1)
216,468
238,703
(10,074)
(7,727)
— $
—
(14,508)
212,143
206,394
216,468
(1)
(2)
During the year ended December 31, 2019, we updated our net operating losses to remove deferred tax assets that could never be
utilized due to IRC Section 382 limitations. The amount of Net Increase (Decrease) to Expense, Acquisitions and Other and Balance at
End of Year for the year ended December 31, 2018 have been updated from $3.8 million, $14.5 million and $228.0 million previously
reported to reflect that change.
For the years ended December 31, 2020, 2019 and 2018, Net Increase (Decrease) to Expense includes foreign currency translation
gains (losses) of $10.2 million, $(1.5) million and $(2.3) million.
All other schedules have been omitted because they are either inapplicable or the required information has
been provided in the consolidated financial statements or in the notes thereto.
(3) Exhibits
Exhibit
Number
2.1
Investment Agreement, dated as of April 19, 2015, among Groupon Trailblazer, Inc., Monster Partners LP and Monster
Holdings LP (incorporated by reference to the Company's Current Report on Form 8-K filed April 20, 2015).
Description
3.1 Restated Certificate of Incorporation of the Company (incorporated by reference to the Company's Registration Statement
on Form 8-A/A filed on October 31, 2016).
3.2 Certificate of Amendment to the Restated Certificate of Incorporation of the Company, date June 9, 2020 (incorporated by
referenced to the Company's Current Report on Form 8-K filed June 11, 2020).
3.3* Amended and Restated By-Laws.
3.4 Amendment to the Amended and Restated By-Laws of the Company, dated as of June 10, 2016 (incorporated by reference
to the Company’s Current Report on Form 8-K filed on June 14, 2016).
3.5 Certificate of Designation of Series A Junior Preferred Stock of the Company (incorporated by reference to the Company's
Current Report on Form 8-K filed April 13, 2020),
117
4.1 Specimen Stock Certificate of Common Stock (incorporated by reference to the Company's Registration Statement on
Form 8-A/A filed on October 31, 2016).
4.2
Indenture, dates as of April 4, 2016, between the Company and U.S Bank, National Association, as trustee (incorporated by
reference to the Company's Current Report on Form 8-K filed on April 4, 2016).
4.3 Description of the Company's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
Rights Agreement, dated as of April 10, 2020 between the Company and Computershare Trust Company, N.A., as rights
agent (incorporated by reference to the Company's Current Report on Form 8-K filed on April 13, 2020).
4.4
Amendment No. 1 to Rights Agreement, dated as of November 4, 2020, between the Company and Computershare Trust
Company, N.A., as rights agent (incorporated by reference to the Company's Quarterly Report on Form 10-Q filed
4.5
November 5, 2020).
10.1* 2008 Stock Option Plan.**
10.2* Form of Notice of Grant of Stock Option under 2008 Stock Option Plan.**
10.3* 2010 Stock Plan.**
10.4* Form of Notice of Grant of Stock Option under 2010 Stock Plan.**
10.5* Form of Notice of Restricted Stock Unit Award under 2010 Stock Plan.**
10.6* Form of Indemnification Agreement.**
10.7 Form of Severance Benefit Agreement (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2019).**
10.8 2011 Incentive Plan, as amended and restated effective as of June 13, 2019 (incorporated by reference to the Company's
Definitive Proxy Statement on Schedule 14A filed on April 26, 2019 ).**
10.9 Non-Employee Directors’ Compensation Plan **[1]
10.10 Form of Notice of Restricted Stock Award under 2011 Incentive Plan (incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 2012).**
10.11 Form of Notice of Performance Share Unit Award and Form of Performance Share Unit Award Agreement under 2011
Incentive Plan (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31,
2015).
10.12 Form of Notice of Performance Share Unit Award and Form of performance Share Unit Award Agreement under 2011
Incentive Plan (incorporate by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
2018)
10.13 Form of Notice and Performance Share Unit Award Agreement under the Groupon, Inc. 2011 Incentive Plan, as Amended
(incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019).**
10.14
Investment Agreement, dated as of April 3, 2016, between the Company and A-G Holdings, L.P. (incorporated by reference
to the Company’s Current Report on Form 8-K filed on April 4, 2016).
10.15 Voting Agreement, dated as of April 4, 2016, among the Company, A-G Holdings, L.P. and the stockholders party thereto
(incorporated by reference to the Company’s Current Report on Form 8-K filed on April 4, 2016).
10.16 Amendment No. 1 to Voting Agreement, dated as of February 13, 2018, by and among Eric Lefkofsky, Green Media, LLC,
Bradley Keywell, Rugger Ventures LLC, A-G Holdings, L.P., and Groupon, Inc. (incorporated by reference to the Company’s
Annual Report on Form 10-K filed on February 14, 2018).
10.17 Form of Note Hedge Confirmation, dated as of May 9, 2016, between the Company and each of the counterparties thereto
(incorporated by reference to the Company’s Current Report on Form 8-K filed on May 9, 2016).
10.18 Form of Warrant Confirmation, dated as of May 9, 2016, between the Company and each of the counterparties thereto
(incorporated by reference to the Company’s Current Report on Form 8-K filed on May 9, 2016).
10.19
Second Amended and Restated Credit Agreement, dated as of May 14, 2019, among the Company, JPMorgan Chase
Bank, N.A., as Administrative Agent, and the lenders party thereto (incorporated by reference to the Company’s Current
Report on Form 8-K filed on May 20, 2019).
10.20 First Amendment, dated as of July 17, 2020, among the Company, the subsidiaries of the Company party thereto,
JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders party thereto, to the Second Amended and Restated
Credit Agreement, dated as of May 14, 2019, among the Company, JPMorgan Chase Bank, N.A., as Administrative Agent,
and the lenders party thereto (incorporated by reference to the Company's Current Report on Form 8-K filed on July 20,
2020).
21.1 Subsidiaries of Groupon, Inc.
23.1 Consent of Deloitte & Touche LLP
31.1 Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
118
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104*** Cover Page Interactive Data File
_____________________________________
*
**
***
Incorporated by reference to the Company's registration statement on Form S-1 (registration number 333-174661)
Management contract or compensatory plan or arrangement.
The XBRL Instance Document and Cover Page Interactive Data File do not appear in the Interactive Data File because their XBRL
tags are embedded within the Inline XBRL document
119
Item 16. Form 10-K Summary (optional)
None.
120
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 25th day of
February 2021.
SIGNATURES
GROUPON, INC.
By:
/s/ AARON COOPER
Name:
Title:
Aaron Cooper
Interim Chief Executive Officer
POWER OF ATTORNEY
KNOWN BY ALL PERSONS BY THESE PRESENTS, that the individuals whose signatures appear below
hereby constitute and appoint Aaron Cooper and Melissa Thomas, and each of them severally, as his or her true
and lawful attorneys-in-fact and agents with full power of substitution and resubstitution for him or her and in his or
her name, place and stead in any and all capacities to sign any and all amendments to this Annual Report on Form
10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do or
perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or of his substitute or substitutes, may lawfully do to cause to be done
by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed
below by the following persons on behalf of the registrant and in the capacities indicated as of February 25, 2021.
121
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 25th day of
February 2021.
Signature
Title
/s/ Aaron Cooper
Aaron Cooper
/s/ Melissa Thomas
Melissa Thomas
/s/ Manju Gangadharan
Manju Gangadharan
/s/ Theodore J. Leonsis
Theodore J. Leonsis
/s/ Michael Angelakis
Michael Angelakis
/s/ Peter J. Barris
Peter J. Barris
/s/ Robert J. Bass
Robert J. Bass
/s/ Eric Lefkofsky
Eric Lefkofsky
/s/ Valerie Mosley
Valerie Mosley
/s/ Deborah Wahl
Deborah Wahl
/s/ Helen Vaid
Helen Vaid
Interim Chief Executive Officer and Director (Principal Executive Officer)
Chief Financial Officer (Principal Financial Officer)
Chief Accounting Officer (Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
122