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GROUPON, INC.
FORM 10-K
(Annual Report)
Filed 03/30/12 for the Period Ending 12/31/11
Address 600 WEST CHICAGO AVENUE, SUITE 830
CHICAGO, IL 60610
Telephone (312) 604-5515
CIK 0001490281
Symbol GRPN
SIC Code 7311 - Advertising Agencies
Industry Retail (Catalog & Mail Order)
Sector Services
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2012, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    .... FORM 10-K (Annual Report) Filed 03/30/12 for the Period Ending 12/31/11 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 600 WEST CHICAGO AVENUE, SUITE 830 CHICAGO, IL 60610 (312) 604-5515 0001490281 GRPN 7311 - Advertising Agencies Retail (Catalog & Mail Order) Services 12/31...

  • Page 2
    ... offices) 312-676-5773 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Class A Common Stock, par value $0.0001 Name of each exchange on which registered Nasdaq Global Select Market 27-0903295 (I.R.S. Employer...

  • Page 3
    ..., 2011, the aggregate market value of Class A and Class B shares of common stock held by non-affiliates of the registrant was $5,444,937,032 based on the number of shares held by non-affiliates as of December 31, 2011 and based on the last reported sale price of the registrant's Class A common stock...

  • Page 4
    ... 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...

  • Page 5
    ... in a gorilla suit. By bringing the brick and mortar world of local commerce onto the Internet, Groupon is creating a new way for local merchant partners to attract customers and sell goods and services. We provide consumers with savings and help them discover what to do, eat, see and buy in the...

  • Page 6
    Each day we email our subscribers discounted offers for goods and services that are targeted by location and personal preferences. Customers also access our deals directly through our websites and mobile applications. A Daily Deal might offer a $20 Groupon that can be redeemed for $40 in value at a ...

  • Page 7
    ... of consumers looking for a quick weekend getaway and living within four hours of the establishment. Pack estimates that 85 percent of the business they generated through Groupon was from first-time customers. In addition, the deals helped to spawn a number of positive online guest reviews. 5

  • Page 8
    ... our mobile applications and website can also target deals to current and potential customers based on proximity to the sponsoring merchant partner. Increased relevancy enables us to offer several daily deals, which we believe results in increasing purchases by targeted subscribers, thereby driving...

  • Page 9
    ... a variety of new products in the past 12 months and we plan to continue to launch new products to increase the number of customers and merchant partners that transact business through our marketplace. For example, we launched Groupon Now!, real-time deals that consumers can use in the moment...

  • Page 10
    ... Our Merchant Partners To drive merchant partner growth over the long term, we have expanded the number and variety of product offerings available through our marketplace and invested in our sales force. Our sales force includes over 5,000 inside and outside merchant sales representatives who build...

  • Page 11
    ... enables customers to purchase vouchers for products directly from our website. We email deals for Groupon Goods weekly to subscribers that have opted in to the Goods email list, and we display all Goods offers on our website and mobile applications, where non-subscribers can also access our offers...

  • Page 12
    ... downloaded over 26 million times since then. These applications enable consumers to browse, purchase, manage and redeem deals on their mobile devices as well as access Groupon Now! deals that are offered based on the location of the mobile user. Social Networks. We publish our daily deals through...

  • Page 13
    ...the merchant partner and accessed through our website. Customer Service Representatives. Our customer service representatives can be reached via phone or email 24 hours a day, seven days a week. Our Groupon Promise is core to our customer service philosophy. The customer service team also works with...

  • Page 14
    ... value and promotional value) until redeemed. Our terms of use and agreements with our merchant partners require merchant partners to continue to honor unredeemed Groupons that are past the stated expiration date of the promotional value of the Groupon to the extent required under the applicable...

  • Page 15
    price that the consumer paid, typically will never expire unless redeemed or refunded. The promotional value of the Groupon will expire on the date stated on the Groupon, unless applicable law prohibits expiration of the promotional value. While we are attempting to comply with exemptions for ...

  • Page 16
    ... 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, social media technology and other industries may own large numbers of patents, copyrights and trademarks...

  • Page 17
    ... Masters in Business Administration from the University of Chicago. Jeffrey Holden has served as our Senior Vice President-Product Management since April 2011. In 2006, Mr. Holden co-founded Pelago, Inc. and served as its Chief Executive Officer until Groupon acquired Pelago in April 2011. Prior to...

  • Page 18
    ... the University of Illinois at Urbana1Champaign, his Master of Public Administration from Harvard's Kennedy School and his Bachelor of Science from the Massachusetts Institute of Technology. Available Information The Company electronically files reports with the Securities and Exchange Commission...

  • Page 19
    ...attract new merchant partners and retain existing merchant partners who wish to offer deals through the sale of Groupons; expand the number, variety and relevance of products and deals we offer; increase the awareness of our brand domestically and internationally; provide a superior customer service...

  • Page 20
    ... of deals that offer attractive quality, value and variety to customers or favorable payment terms to us. We must continue to attract and retain merchant partners in order to increase revenue and achieve profitability. If new merchants do not find our marketing and promotional services effective...

  • Page 21
    ... promote products and services from our existing merchant partners are not successful, or if our existing merchant partners do not believe that utilizing our services provides them with a long-term increase in customers, revenues or profits, we may not be able to retain or attract merchant partners...

  • Page 22
    ... to $520.7 million as of December 31, 2011. We use the operating cash flow provided by our merchant payment terms and revenue growth to fund our working capital needs. If we offer our merchant partners more favorable or accelerated payment terms or our revenue does not continue to grow in the future...

  • Page 23
    ... our business, financial condition and results of operations. We are subject to inventory management and order fulfillment risk as a result of our Groupon Goods business. As we continue to expand our business model, we may purchase some of the merchandise that we offer for sale to our customers. The...

  • Page 24
    ... provide our customers with a refund of the purchase price of a Groupon if they believe that we have let them down. As we increase our revenue and expand our product offerings, our refund rates may exceed our historical levels. For example, as a result of the fourth quarter 2011 shift in our deal...

  • Page 25
    ... Chief Executive Officer, and Jason E. Child, our Chief Financial Officer. Mr. Mason is one of our founders and his leadership has played an integral role in our growth. The loss of key personnel, including key members of management as well as our marketing, sales, product development and technology...

  • Page 26
    ... 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 Groupons are subject to the...

  • Page 27
    ... or increase our customer base may be adversely affected and we may not be able to maintain or grow our revenue as anticipated. New tax treatment of companies engaged in Internet commerce may adversely affect the commercial use of our services and our financial results. Due to the global nature of...

  • Page 28
    ... us to negative publicity and litigation, and cause substantial harm to our business. Our business model requires us to obtain confidential information about our customers and merchant partners, including names, email addresses and credit card and other payment account information. Because of our...

  • Page 29
    ...of mobile devices, could adversely affect our business. The success of our services will depend largely on sufficient network availability for us, our customers and our merchant partners. The Internet has experienced, and is likely to continue to experience, significant growth in the number of users...

  • Page 30
    ... and costly than it has been in the past. In order to expand our customer base, we must appeal to and acquire customers who historically have used traditional means of commerce to purchase goods and services and may prefer Internet analogues to our offerings, such as the retailer's own website. If...

  • Page 31
    ...our business. Groupons are issued in the form of redeemable coupons with unique identifiers. It is possible that consumers or other third parties will seek to create counterfeit Groupons in order to fraudulently purchase discounted goods and services from our merchant partners. While we use advanced...

  • Page 32
    ... as new rules and regulations subsequently implemented by the Securities and Exchange Commission, or the SEC, the Public Company Accounting Oversight Board and the exchange on which our Class A common stock is listed, impose additional reporting and other obligations on public companies. We expect...

  • Page 33
    ... or the investment community; future sales of our Class A common stock by our significant stockholders, officers and directors; changes in our capital structure, such as future issuances of debt or equity securities; our entry into new markets; regulatory developments in the United States or foreign...

  • Page 34
    ... Chairman of the Board, our Chief Executive Officer, our board of directors or holders of not less than the majority of our issued and outstanding capital stock. This limits the ability of minority stockholders to take certain actions without an annual meeting of stockholders. Our stockholders...

  • Page 35
    ... seek additional space as needed to satisfy our growth. Description of Use Corporate office facilities Corporate office facilities Square Footage 550,000 30,000 Operating Segment North America International Lease Expiration From 2012 through 2018 From 2012 through 2022 ITEM 3: LEGAL PROCEEDINGS For...

  • Page 36
    ... ISSUER PURCHASES OF EQUITY SECURITIES Our Class A common stock has been listed on the NASDAQ Global Select Market under the symbol "GRPN" since November 4, 2011. Prior to that time, there was no public market for our Class A common stock. The following table sets forth the high and low sales price...

  • Page 37
    ...XIII Limited Partnership Series E Preferred Stock (1) Series F Preferred Stock (2) Voting Common Stock (3) Non-Voting Common Stock (4) 3,600,000 Series G Preferred Stock (5) Class A Common Stock Date of Purchase 11/1/2009 $ 11/17/2009 $ 11/17/2009 $ Total Purchase Price 144,000 20,000,005 10...

  • Page 38
    ...four shares of Class A common stock on October 31, 2011. These shares were issued as partial consideration in connection with the merger of Goodrec, Inc. d/b/a Mobly with and into Groupon Mobly, Inc. These shares were issued as consideration in connection with acquisition the of CityDeal Europe GmbH...

  • Page 39
    ... the Securities and Exchange Commission on November 3, 2011. The underwriters in offering were Morgan Stanley & Co. LLC, Goldman, Sachs & Co., Credit Suisse Securities (USA) LLC, Allen & Company LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital Inc., Citigroup Global Markets...

  • Page 40
    ... 2009 2010 2011 (dollars in thousands, except share data) Consolidated Statements of Operations Data: Revenue (gross billings of $94, $34,082, $745,348 and $3,985,501 respectively) Costs and expenses: Cost of revenue Marketing Selling, general and administrative Acquisition-related Total operating...

  • Page 41
    ... Balance Sheet Data: Cash and cash equivalents Working capital (deficit) Total assets Total long-term liabilities Redeemable preferred stock Cash dividends per common share Total Groupon, Inc. stockholders' (deficit) equity _____ 2010 2011 (1) 2,966 2,643 3,006 - 4,747 - (2,091) 12,313...

  • Page 42
    ...they live and work. Each day we email our subscribers discounted offers for goods and services that are targeted by location and personal preferences. Current and potential customers access our deals directly through our websites and mobile applications. Our revenue is the purchase price paid by the...

  • Page 43
    ... able to retain after payments to our merchant partners. Gross billings are not equivalent to revenues or any other financial metric presented in our consolidated financial statements. Active Customers. We define active customers as unique individuals that have purchased Groupons during the trailing...

  • Page 44
    ... Customer acquisition costs. We must continue to acquire and retain customers who purchase Groupons in order to increase revenue and achieve profitability. If consumers do not perceive our Groupon offerings to be of high value and quality, or if we fail to introduce new or more relevant deals...

  • Page 45
    ... acquired CityDeal, a European1based collective buying power business launched in January 2010 that provided daily deals and online marketing services substantially similar to the Company. As part of the overall consideration paid, we were obligated to issue additional shares of our common stock in...

  • Page 46
    ... with and without stock-based compensation are follows (in thousands): Year Ended December 31, 2009 As reported Stock-based compensation Net As reported 2010 Stock-based compensation (in thousands) Cost of revenue Marketing Selling, general and administrative Acquisition-related Total operating...

  • Page 47
    ...to expanding the scale of our business domestically and internationally through acquiring businesses and entering new markets, several other initiatives have driven revenue growth over the last year. We increased our total marketing spend significantly, focusing on acquiring customers through online...

  • Page 48
    ... in credit card processing fees, refunds and internet processing fess are driven by higher merchant partner transaction volumes. Cost of revenue also increased due to significant additions to our editorial staff and increased email distribution costs as a result of our larger subscriber base. 2010...

  • Page 49
    ... portion of our marketing spend. Through the course of the year an increasing portion of marketing was incurred for customer acquisition which includes conversion of subscribers that were not previously paying customers and customer acquisitions outside of our email subscriber base. North America...

  • Page 50
    ...of revenue has decreased from the prior year as the productivity of our sales force continues to improve. We are continuously refining our sales management and selling processes and additionally we are introducing new products and services facilitating deeper customer and merchant partner engagement...

  • Page 51
    ... from 2010 to 2011 as the Company was able to continue to generate revenue on subscribers and customers acquired in prior periods using upfront marketing, sales and infrastructure investments. Additionally, we have consistently seen that once a customer is active, his or her purchasing behavior is...

  • Page 52
    .... For example, free cash flow does not include the 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 merchant partners. Therefore, we believe it is important to view free cash...

  • Page 53
    ...cash stock-based compensation expense recorded within selling, general and administrative expense, cost of revenue and marketing expense. Primarily represents non-cash charges for remeasurement of the fair value of contingent consideration related to acquisitions made by the Company in 2010 and 2011...

  • Page 54
    ... Groupon, Inc. Net income (loss) per share Basic Diluted Weighted average number of shares outstanding Basic Diluted Stock-based compensation income statement presentation Cost of revenue Marketing Selling, general and administrative Total stock-based compensation _____ Mar. 31, 2011 June 30, 2011...

  • Page 55
    ... incremental technology. In order to support our overall global expansion, we expect to make significant investments in our corporate facilities and information technology infrastructure throughout 2012. In the first two months of 2012, we acquired six businesses for an aggregate purchase price of...

  • Page 56
    ... our international operations in conformity with local market practice, merchant partners are not paid until the customer redeems the Groupon that has been purchased. If a customer does not redeem the Groupon under this payment model, we retain all of the gross billings for the Groupon purchase. The...

  • Page 57
    ... from acquisitions. The capital expenditures reflect the significant growth of the business domestically and internationally. We received net cash from our acquisitions in 2010, as a significant portion of the purchase price paid consisted of stock and contingent consideration. For the year ended...

  • Page 58
    ... days for all Groupons purchased. Under this payment model, merchants are paid regardless of whether the Groupon is redeemed. Customer Loyalty and Reward Programs We use various subscriber and customer loyalty and reward programs to build brand loyalty, generate traffic to the website and provide...

  • Page 59
    ... public offering in November 2011, our stock had not been publicly traded and we estimated the fair value of common stock as discussed in "Common Stock Valuations" below. Expected Term. The expected term represents the period of time the stock options are expected to be outstanding and is based...

  • Page 60
    ... to recognize a lack of marketability for our common stock; the market performance of comparable publicly-traded companies; and the U.S. and global capital market conditions. • • • We granted stock options with the following exercise price ranges each quarter since the beginning of 2008...

  • Page 61
    ... our services in 13 new markets across the United States. In addition, we launched our official Groupon application for the Apple iPhone and iPod touch, which provides at no additional cost a more convenient buying and redemption process for both consumers and merchants. We generated revenue of...

  • Page 62
    ... the issuance of preferred stock in December 2010. In addition, we expanded our presence in the Asia-Pacific region, and we also acquired Ludic Labs, Inc., a company that designs and develops local marketing services, in November 2010. The total number of subscribers increased to approximately 50...

  • Page 63
    Recent Accounting Pronouncements See Item 8 of Part II, "Notes to Consolidated Financial Statements-Note 2-Summary of Significant Accounting Policies." 61

  • Page 64
    ...-term maturity and are used primarily for working capital purposes. 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...

  • Page 65
    ... DATA Table of Contents Groupon, Inc. Consolidated Financial Statements As of December 31, 2010 and 2011 and for the Years Ended December 31, 2009, 2010 and 2011 Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated...

  • Page 66
    ... loss, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2011. Our audits also included the financial statement schedule listed in the index at Item 15(b). These financial statements and schedule are the responsibility of the Company's management. Our...

  • Page 67
    ... Note 8) Redeemable noncontrolling interests Groupon, Inc. Stockholders' Equity Series B, convertible preferred stock, $.0001 par value, 199,998 shares authorized, issued and outstanding at December 31, 2010 and no shares outstanding at December 31, 2011 Series D, convertible preferred stock, $.0001...

  • Page 68
    65

  • Page 69
    GROUPON, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) Year Ended December 31, 2009 2010 2011 Revenue (gross billings of $34,082, $745,348 and $3,985,501 respectively) Costs and expenses: Cost of revenue Marketing Selling, general and administrative ...

  • Page 70
    ...income attributable to the noncontrolling interest Comprehensive loss attributable to Groupon Inc. $ - - (1,341) 9,875 9,875 (379,765) 23,746 $ (356,019) $ 3,053 3,053 (276,374) 18,335 (258,039) $ (1,341) $ 2010 (389,640) $ 2011 (279,427) - (1,341) See Notes to Consolidated Financial Statements 67

  • Page 71
    ... stock options, net of tax benefits Vesting of restricted stock units Stock-based compensation expense Common stock dividends Preferred stock dividends Balance at December 31, 2009 Amount Class A and Class B Common Stock Shares Amount Total Groupon Inc. Stockholders' (Deficit) Equity Treasury Stock...

  • Page 72
    ... and equity method investment - Restricted stock issued in connection with business combinations - Proceeds from issuance of stock, net of issuance costs 15,827,796 Exercise of stock options, net of tax benefits - Vesting of restricted stock units - Tax withholding related to net share settlements...

  • Page 73
    ...) (4,916) 12,051 Return of common stock Excess tax benefit from stock-based compensation - Recapitalization of outstanding shares to Class A and Class B common stock (44,491,019) Reclassification of dividends paid on redemption of common stock - Forfeiture of dividends Balance at December 31, 2011...

  • Page 74
    GROUPON, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

  • Page 75
    ... provided by (used in) operating activities: Depreciation and amortization Stock-based compensation Deferred income taxes Excess tax benefit on stock-based compensation Losses in equity interests Non-cash interest expense Acquisition-related expense (benefit) Gain on return of common stock Change...

  • Page 76

  • Page 77
    ... live and work. Each day, the Company emails its subscribers with discounted offers for goods and services that are targeted by location and personal preferences. Consumers also access deals directly through the Company's website and mobile application. The Company, based in Chicago, Illinois, was...

  • Page 78
    .... At December 31, 2011, the net book value of internal use software costs was $4.6 million. No amounts were capitalized in 2010. Lease Obligations The Company categorizes leases at their inception as either operating or capital leases, and may receive renewal or expansion options, rent holidays, and...

  • Page 79
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Assets ." Customer Loyalty and Rewards Programs The Company uses various subscriber loyalty and reward programs to build brand loyalty, generate traffic to the website and provide subscribers with incentives to buy Groupons. When subscriber perform...

  • Page 80
    ...Groupons purchased. Under this payment model, merchants are paid regardless of whether the Groupon is redeemed. Cost of Revenue Cost of revenue is composed of direct and indirect costs incurred to generate revenue, including costs related to credit card processing fees, refunds provided to customers...

  • Page 81
    ...acquired approximately 55.1% of the total issued and outstanding capital stock of Qpod.inc ("Qpod"), a collective buying power business launched in July 2010 that provides daily deals and online marketing services in Japan substantially similar to the Company. The acquisition was accounted for using...

  • Page 82
    ...new and expanding markets in India, Malaysia, South Africa, Indonesia and the Middle East. In addition, the Company acquired certain businesses that specialize in developing mobile technology and marketing services to expand and advance the Company's product offerings. The aggregate acquisition-date...

  • Page 83
    ...to the fair value of the consideration to be transferred. In addition, $6.7 million of the purchase price will be recognized as compensation expense over a service vesting period of two years payable in $3.7 million of cash and $3.0 million of common stock. In November 2011, the Company entered into...

  • Page 84
    ...1,659 1,110 $ 40,775 Asset Category Subscriber relationships Merchant relationships Trade names Developed technology Other intangible assets $ $ WeightedAverage Remaining Useful Life (in years) 4.5 0.5 0.4 1.6 3.8 3.8 $ $ As of December 31, 2011 Gross Carrying Value $ 41,272 6,600 5,801 5,583...

  • Page 85
    ... Ownership of Common Stock 50% 49% 2011 Restaurantdiary.com GaoPeng.com Total $ $ 1,209 49,395 50,604 Equity Investment in Restaurantdiary.com Limited In January 2011, the Company acquired 50.0% of the ordinary shares of Restaurantdiary.com Limited ("Restaurantdiary") in exchange for $1.3 million...

  • Page 86
    ... operating company headquartered in Beijing, China ("GaoPeng.com"), which operates a group-buying site offering discounts for products and services to individual consumers and businesses via internet websites and social and interactive media. GaoPeng.com began offering daily deals in March 2011 in...

  • Page 87
    ... million and $25.6 million for the year ended December 31, 2009, 2010 and 2011, respectively. Certain of these arrangements have renewal or expansion options and adjustments for market provisions, such as free or escalating base monthly rental payments. The Company recognizes rent expense under such...

  • Page 88
    ... CONSOLIDATED FINANCIAL STATEMENTS (Continued) Purchase Obligations The Company entered into non-cancelable service contracts primarily covering sales force and information technology services which expire beginning in the year ended December 31, 2012. As of December 31, 2011, future payments under...

  • Page 89
    ... EQUITY (DEFICIT) Initial Public Offering In November 2011, the Company issued 40,250,000 shares of Class A common stock and received approximately $744.2 million, net of underwriter fees and other issuance costs, in proceeds from the closing of an initial public offering of its Class A common stock...

  • Page 90
    GROUPON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) prevent dilution on a weighted1average basis in the event that the Company issues additional shares of common stock or securities convertible or exercisable for common stock at a purchase price less than the then effective ...

  • Page 91
    ... gross proceeds (or $449.7 million, net of issuance costs), and used $438.3 million of the proceeds from the sale to redeem shares of its outstanding common stock and preferred stock held by certain shareholders and the remainder for working capital and general corporate purposes. All issued shares...

  • Page 92
    ...January 2011, the Company authorized the sale and additional issuance of 15,827,796 shares of Series G Preferred for $496.0 million in gross proceeds (or $492.5 million, net of issuance costs), and used $371.5 million of the proceeds from the sale to redeem shares of its outstanding common stock and...

  • Page 93
    ...or the voting securities issued with respect to our voting securities outstanding immediately prior to the transaction) representing less than a majority of the combined voting power and outstanding capital stock of the voting securities of the Company or the surviving or acquiring entity, (iii) the...

  • Page 94
    ...holders of a majority of the outstanding shares of Class A common stock and Class B common stock, each voting separately as a class. The Company issues stock-based awards to its employees in the form of stock options, restricted stock units and restricted stock. See Note 10 " StockBased Compensation...

  • Page 95
    ... 31, 2011, no shares of common stock have been issued under the ESPP. Stock Options The exercise price of stock options granted is equal to the fair market value of the underlying stock on the date of grant. The contractual term for stock options expires ten years from the grant date. Stock options...

  • Page 96
    ... option-pricing model. Expected volatility is based on historical volatilities for publicly-traded options of comparable companies over the estimated expected life of the stock options. The expected term represents the period of time the stock options are expected to be outstanding and is based...

  • Page 97
    ... issued in conjunction with the acquisitions as a way to retain and incentivize key employees. They generally vest on a quarterly basis for a period of three or four years, and dilute the Company's ownership percentage of the corresponding subsidiaries as they vest over time. The fair market value...

  • Page 98
    ...during the years ended December 31, 2010 and 2011, respectively, related to subsidiary awards, none of which provided the Company with a tax benefit. The Company also settled certain liability-based awards by paying $11.1 million in cash and issuing 628,171 shares of Groupon Class A common stock. As...

  • Page 99
    ... more significant inputs or significant value drivers are unobservable, such as pricing models, discounted cash flow models and similar techniques not based on market, exchange, dealer or broker-traded transactions. In determining fair value, the Company uses various valuation approaches within the...

  • Page 100
    ...shares of common stock, the Company used the most recent Groupon stock price as reported on the NASDAQ to determine the fair value of the shares as of year end. The Company classified the financial liabilities to be settled in a variable number of shares of common stock as Level 2 as the fair market...

  • Page 101
    .... There was a change in the Company's method to value the common shares issued as contingent consideration to be settled in a variable number of shares in the fourth quarter of 2011. As Groupon is now a public company, the actual stock price was used to value the liability versus private market data...

  • Page 102
    GROUPON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2009 2010 2011 Current taxes: U.S. federal State International Total current taxes Deferred taxes: U.S. federal State International Total deferred taxes Provision (benefit) for income taxes $ $ $ 226 22 - 248 - - - - 248 $...

  • Page 103
    GROUPON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2010 2011 Deferred tax assets: Reserves and allowances Foreign exchange loss Deferred rent Net operating loss and tax credit carryforwards Stock1based compensation Other Total deferred tax assets Less valuation allowance ...

  • Page 104
    ... chief executive officer) in assessing performance and allocating resources. Revenues for each segment are based on the geographic market that sells the Groupons. Revenue and profit or loss information by reportable segment reconciled to consolidated net loss for the years ended 2009, 2010 and 2011...

  • Page 105
    ... and 2011, respectively. Represents operating expenses, excluding stock-based compensation, acquisition-related expense and interest and other income (expense), net, which are not allocated to segments. No single customer or individual foreign country accounted for more than 10% of revenue during...

  • Page 106
    ...in gross proceeds. Included in the stock issuance of non-voting common stock were a total of 1,899,336 shares sold to Howard Schultz and to several partnerships of Maveron LLC, a venture capital firm co-founded by Mr. Schultz, for an aggregate purchase price of $15.0 million. Mr. Schultz is a member...

  • Page 107
    ...908,856 shares of non-voting common stock. The investment increased the Company's ownership from 40.0% to 49.0%. See Note 6 " Investments in Equity Interests ." 16. SUBSEQUENT EVENTS Acquisitions In the first two months of 2012, the Company acquired six companies for an aggregate purchase price of...

  • Page 108
    ... 2012, the Company acquired additional interests of two majority-owned subsidiary for an aggregate purchase price of $9.5 million, including $8.7 million in cash and $0.8 million of Class A common stock. Of these amounts, $1.3 million of cash and $0.3 million of Class A common stock will be paid...

  • Page 109
    GROUPON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 17. QUARTERLY RESULTS (UNAUDITED) The following table represents data from our unaudited statements of operations and our key operating metrics for our most recent eight quarters. This quarterly information has been prepared on ...

  • Page 110
    ..., or that our registered public accounting firm will be able to attest that such internal controls are effective. Notwithstanding the identified material weakness, management believes the consolidated financial statements included in this Annual Report on Form 10-K fairly represent in all material...

  • Page 111
    ...a report of management's assessment regarding internal control over financial reporting or an attestation report of the company's registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. ITEM 9B: OTHER INFORMATION Not applicable. PART...

  • Page 112
    .... ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Incorporated by reference from the information under the captions "Ownership of GRPN Stock" and "Equity Compensation Plan Information" in our Proxy Statement for our 2012 Annual Meeting of...

  • Page 113
    ... ACCOUNTANT FEES AND SERVICES Incorporated by reference from from the information under the caption "Ratification of the Appointment of Independent Registered Public Accounting Firm" in our Proxy Statement for our 2012 Annual Meeting of Stockholders. PART IV ITEM 15: FINANCIAL STATEMENT SCHEDULES...

  • Page 114
    ... 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 30th day of March 2012. GROUPON, INC. By: /s/ ANDREW D. MASON Name: Andrew D. Mason Title: Chief Executive Officer POWER OF ATTORNEY...

  • Page 115
    ... 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 30th day of March, 2012. Signature Title /s/ Andrew D. Mason Andrew D. Mason /s/ Jason...

  • Page 116
    ... Class A common stock certificate of the Registrant. Third Amended and Restated Investors Rights Agreement, dated as of December 10, 2010, between Groupon, Inc. and certain investors 4.2* named therein. 10.1* 2008 Stock Option Plan.** 10.2* Form of Notice of Grant of Stock Option under 2008 Stock...

  • Page 117
    ... of Ernst & Young LLP for Groupon, Inc. 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 Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14...

  • Page 118
    * Incorporated by reference to the Company's registration statement on Form S-1 (registration number 333-174661) ** Management contract or compensatory plan or arrangement.

  • Page 119
    Exhibit 21.1 The following is a list of subsidiaries of Groupon Inc., omitting subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of December 31, 2011: Subsidiary U.S. Entities Needish, Inc. Jurisdiction Delaware Foreign ...

  • Page 120
    ..., 2010 Stock Plan, and 2008 Stock Plan of Groupon, Inc. of our report dated March 30, 2012, with respect to the consolidated financial statements and schedule of Groupon, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2011. /s/ Ernst & Young LLP Chicago, Illinois...

  • Page 121
    ... by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has...

  • Page 122
    ... by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has...

  • Page 123
    ... the Annual Report of Groupon, Inc. (the "Company") on Form 10-K for the period ending December 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we Andrew D. Mason, Chief Executive Officer of the Company, and Jason E. Child, Chief Financial Officer of...