Groupon 2015 Annual Report Download

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2015 ANNUAL REPORT

Table of contents

  • Page 1
    2015 ANNUAL REPORT

  • Page 2
    ...massages or helping people discover the world around them. Even when they have the expertise, many lack the time and resources to effectively market their businesses. Groupon was built around connecting small businesses with consumers at scale. Combining our loyal and active customers with our local...

  • Page 3
    ... millions of consumers with whom we've yet to work, we see the opportunity as vast, our team talented and our competitive position strong. Building the Daily Habit in Local So what then does it mean to build the daily habit in this vast local commerce space? Our roots as the daily deal email company...

  • Page 4
    ... a market entirely, simply because winning there did not deliver long-term returns or justify the short term investment. In all cases, we focused and rationalized the business, creating regional shared service centers for our deal factory and customer service groups in order to generate operational...

  • Page 5
    ...we have made improvements, today's core Groupon experience isn't all that different than it was a few years back. Consumers and merchants still experience too much friction when redeeming a Groupon. Expirations still vex customers and pose a barrier to new purchases. Our customer service levels must...

  • Page 6
    ... a great customer experience -- are the key to faster progress. So far that focus has delivered a Groupon that is stronger, leaner and faster today than it has been in a very long time. We are steadily improving and our marketplace is developing faster than ever. We have the people, a strategy we...

  • Page 7
    ...600 West 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 Class A common stock, par value $0.0001...

  • Page 8
    ... in Rule 12b-2 of the Exchange Act). Yes No As of June 30, 2015, the aggregate market value of shares held by non-affiliates of the registrant was $2,418,665,812 based on the number of shares of class A common stock held by non-affiliates as of June 30, 2015 and based on the last reported sale price...

  • Page 9
    ... Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information PART III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 10
    ...operates online local commerce marketplaces throughout the world that connect merchants to consumers by offering goods and services, generally at a discount. Consumers access those marketplaces through our websites, primarily localized groupon.com sites in many countries, and our mobile applications...

  • Page 11
    ...dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds. Gross billings differs from our revenue, which is presented net of the merchant's share of the transaction price for transactions in which we act as a third party marketing agent. Gross...

  • Page 12
    ...every time they use our product whether finding, booking, buying or redeeming an offer. For merchants, this includes providing capabilities to manage demand for their goods and services and improving their ability to acquire customers. For consumers, this includes easily finding offers and accessing...

  • Page 13
    ... an email-based "push" model with a limited number of deals offered at any given time to more extensive online "pull" marketplaces, where customers can come to Groupon's websites and mobile applications to search and browse for deals on goods and services. We also publish ratings and helpful tips...

  • Page 14
    ... via phone, email and on public discussion boards regarding purchases, shipping status, returns and other areas of customer inquiry. Our technology team is focused on the design and development of new features and products, maintenance of our websites and development and maintenance of our internal...

  • Page 15
    ..., 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...

  • Page 16
    ... spend substantial resources and/or to reduce revenues 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. Employees As of December 31, 2015, there...

  • Page 17
    ...'s 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 the Company's website (www.groupon.com...

  • Page 18
    ... customers; attract new merchants and retain existing merchants who wish to offer deals through the sale of Groupons; effectively address and respond to challenges in international markets; expand the number, variety and relevance of products and deals we offer, particularly as we attempt to build...

  • Page 19
    ...; shorter payment cycles and greater problems in collecting accounts receivable; higher Internet service provider costs; seasonal reductions in business activity; expenses associated with localizing our products, including offering customers the ability to transact business in the local currency...

  • Page 20
    ... our business. 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. Because of our high profile and the number...

  • Page 21
    ...customer acquisition costs or to respond more quickly than we can to new or emerging technologies and changes in consumer habits. These competitors may engage in more extensive research and development efforts, undertake more farreaching marketing campaigns and adopt more aggressive pricing policies...

  • Page 22
    ... 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...

  • Page 23
    ...buying staff to purchase inventory at attractive prices relative to its resale value and our ability to manage customer returns and other costs. If we are unsuccessful in any of these areas, we may be forced to sell our inventory at a discount or loss. The integration of our international operations...

  • Page 24
    ...be subject to the application of U.S. tax rules to acquired international operations and local taxation of our fees or of transactions on our websites. We conduct portions of certain functions, including technology and product development, customer support and other operations, in regions outside of...

  • Page 25
    ... key employees, customers or suppliers, difficulties in integrating different computer 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 the Company's resources. If we pay...

  • Page 26
    ... 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...

  • Page 27
    ... on the use of expiration dates and the imposition of certain fees. For example, if our 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 Groupon, or the...

  • Page 28
    ... and, in particular, sales taxes, VAT and similar taxes would likely increase the cost of doing business online and decrease the attractiveness of advertising and selling goods and services over the Internet. New taxes could also create significant increases in internal costs necessary to capture...

  • Page 29
    ... quality offerings on our online marketplaces, which we may not do successfully. 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, could...

  • Page 30
    ... harm our business. Groupons are issued in the form of redeemable vouchers with unique identifiers. It is possible that consumers or other third parties will seek to create counterfeit vouchers in order to fraudulently purchase discounted goods and services from merchants. While we use advanced anti...

  • Page 31
    ..., 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; any financial projections that we provide to the public, any changes in these projections or our...

  • Page 32
    ...our filings with the SEC and announcements relating to litigation; speculation about our business in the press or the investment community; future sales of our Class A common stock by our significant stockholders, officers and directors; announcements about our share repurchase program and purchases...

  • Page 33
    ... securities" under the Securities Act, if the holders comply with the applicable volume limits and other conditions prescribed in Rule 144 under the Securities Act, all of these restricted securities will be freely tradeable on October 31, 2016. Increased sales of our common stock in the market...

  • Page 34
    28

  • Page 35
    ...of December 31, 2015, the Company had leases for approximately 1.7 million 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...

  • Page 36
    ... year ended December 31, 2015, we did not issue any unregistered securities. Issuer Purchases of Equity Securities In 2015, our Board of Directors approved a new share repurchase program, under which we are authorized to repurchase up to $500.0 million of our Class A common stock through August 2017...

  • Page 37
    ....0 million (including fees and commissions). The following table provides information about purchases of shares of our Class A common stock during the three months ended December 31, 2015 related to shares withheld upon vesting of restricted stock units for minimum tax withholding obligations: Date...

  • Page 38
    ...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 class A common stock with...

  • Page 39
    ... and other Direct Total revenue Cost of revenue: Third party and other Direct Total cost of revenue Gross profit Operating expenses: Marketing Selling, general and administrative Restructuring charges Gain on disposition of business Acquisition-related expense (benefit), net Total operating expenses...

  • Page 40
    ...774,476 78,194 702,541 2014 2013 (in thousands) 2012 2011 We disposed of our Korean subsidiary Ticket Monster, Inc. in May 2015. The financial results of Ticket Monster, including the gain on disposition and related tax effects, are presented as discontinued operations for the years ended December...

  • Page 41
    ...operates online local commerce marketplaces throughout the world that connect merchants to consumers by offering goods and services, generally at a discount. Consumers access those marketplaces through our websites, primarily localized groupon.com sites in many countries, and our mobile applications...

  • Page 42
    ... value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds. For third party revenue transactions, gross billings differs from third party revenue reported in our consolidated statements of operations, which is presented net of the merchant's share...

  • Page 43
    ... product from us during the trailing twelve months. 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 deals is trending. Gross billings per average active customer. This metric represents...

  • Page 44
    ... of our international operations. Marketing activities. We must continue to acquire and retain customers in order to increase revenue and achieve profitability. If consumers do not perceive our Groupon offerings to be attractive, or if we fail to introduce new or more relevant deals, we may...

  • Page 45
    ... are acting as a marketing agent by selling vouchers through our online local commerce marketplaces that can be redeemed for goods or services with a third party merchant. Our third party revenue from those transactions is reported on a net basis as the purchase price received from the customer for...

  • Page 46
    ... of operations when incurred. From time to time, we offer deals with well-known national merchants for subscriber acquisition and customer 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...

  • Page 47
    ... and other Direct Total revenue Cost of revenue: Third party and other Direct Total cost of revenue Gross profit Operating expenses: Marketing Selling, general and administrative Restructuring charges Gain on disposition of business Acquisition-related expense (benefit), net Total operating expenses...

  • Page 48
    ... from those in effect in the prior year period. Gross Billings Gross billings represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds. Gross billings for the years ended December 31, 2015 and 2014 were as follows: 42

  • Page 49
    ....1 million decrease in gross billings from third party revenue transactions. The increase in other gross billings was primarily driven by an increase in commission revenue earned when customers make purchases with retailers using digital coupons accessed through our websites and mobile applications...

  • Page 50
    ...impact on gross billings from yearover-year changes in foreign exchange rates for the year ended December 31, 2015 as compared to the prior year, partially offset by an increase in active customers and units sold. Rest of World Rest of World segment gross billings decreased by $136.2 million to $751...

  • Page 51
    ...gross billings, before deducting the cost of the related inventory, while third party revenue is net of the merchant's share of the transaction price. Additionally, our Goods category has lower margins than our Local category, primarily as a result of shipping and fulfillment costs related to direct...

  • Page 52
    ... to accept lower deal margins in order to improve the quality and increase the number of deals offered to customers by offering more attractive terms to merchants. Revenue in our Travel category also increased by $12.8 million, which resulted from a $53.9 million increase in gross billings and...

  • Page 53
    ... growth. These marketing-related activities include order discounts, which are reported as a reduction of revenue. We have begun to focus more of our efforts on sourcing local deal offerings in sub-categories that provide the best opportunities for high frequency customer purchase behavior. These...

  • Page 54
    ... 31, 2015, as compared to $1,576.8 million for the year ended December 31, 2014, which was attributable to the growth in direct revenue from our Goods category. The increase in cost of revenue was primarily driven by the cost of inventory, partially offset by a decrease in related shipping and...

  • Page 55
    ... December 31, 2015 2014 Rest of World Year Ended December 31, 2015 2014 Consolidated Year Ended December 31, 2015 2014 Includes cost of revenue from deals with local and national merchants and through local events. North America North America cost of revenue increased by $153.7 million to $1,246...

  • Page 56
    ... driven by the cost of inventory related to direct revenue deals in our Goods category. The favorable impact on cost of revenue from year-over-year changes in foreign exchange rates for the year ended December 31, 2015 was $80.8 million. Rest of World Rest of World cost of revenue decreased by $14...

  • Page 57
    ... in our Local category and a $10.0 million increase in our Travel category. Gross profit margins on direct revenue transactions in our Goods category were 10.2% for the year ended December 31, 2015. This represents a year-over-year increase from 8.3% for the year ended December 31, 2014. EMEA EMEA...

  • Page 58
    ... exchange rates for the year ended December 31, 2015 was $77.1 million. Gross profit margins on direct revenue transactions in our Goods category were 15.7% for the year ended December 31, 2015. This represents a year-over-year decrease from 17.6% for the year ended December 31, 2014. Rest of World...

  • Page 59
    ...million for the year ended December 31, 2014. The decrease in marketing expense was primarily due to reduced spending on online marketing channels, such as search engine marketing and display advertising. The favorable impact on Rest of World marketing from year-over-year changes in foreign exchange...

  • Page 60
    ... to a decrease in segment gross profit, partially offset by a decrease in segment operating expenses. Rest of World Segment operating loss in our Rest of World segment, which excludes stock-based compensation and acquisition-related expense (benefit), net, decreased by $1.8 million to a loss of $24...

  • Page 61
    ... changes of up to $23.8 million in unrecognized tax benefits may occur within the next 12 months upon closing of income tax audits or the expiration of applicable statutes of limitations. Income (Loss) from Discontinued Operations On May 27, 2015, we sold a controlling stake in Ticket Monster...

  • Page 62
    ... Ticket Monster disposition, partially offset by (ii) a $26.8 million tax benefit that resulted from recognition of a deferred tax asset related to the excess of the tax basis over the financial reporting basis of the Company's investment in Ticket Monster upon meeting the criteria for held-for-sale...

  • Page 63
    ... 31, 2014 (in thousands) Revenue: Third party and other Direct Total revenue Cost of revenue: Third party and other Direct Total cost of revenue Gross profit Operating expenses: Marketing Selling, general and administrative Acquisition-related expense (benefit), net Total operating expenses Income...

  • Page 64
    ... from changes in exchange rates from those in effect in the prior year period. Gross Billings Gross billings represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds. Gross billings for the years ended December 31, 2014...

  • Page 65
    ...in active customers and the number of units sold, resulting from our global efforts to build our marketplaces and increase our offerings to customers. The unfavorable impact on gross billings from year-over-year changes in foreign exchange rates for the year ended December 31, 2014 was $89.9 million...

  • Page 66
    ... to increase consumer awareness of deals available through our marketplaces, which we believe contributed to the gross billings growth. These marketing activities include order discounts, which are reported as a reduction of gross billings. Order discounts increased to $69.5 million for the...

  • Page 67
    ... of gross billings that we retained after deducting the merchant's share primarily reflects the overall results of individual deal-by-deal negotiations with merchants and can vary significantly from period-to-period. Direct Revenue Direct revenue increased by $622.1 million to $1,541.1 million for...

  • Page 68
    ... primarily resulted from a $326.5 million increase in direct revenue from our Goods category. We began increasing the number of product deals offered in our EMEA segment for which we sell merchandise inventory directly to our customers through our online marketplaces beginning in September 2013. As...

  • Page 69
    ....3 million decrease in gross billings and a reduction in the percentage of gross billings that we retained after deducting the merchant's share to 21.2% for the year ended December 31, 2014, as compared to 23.8% in the prior year. In our Rest of World segment, revenue from transactions in our Goods...

  • Page 70
    ... of revenue was primarily driven by the cost of inventory and shipping costs related to direct revenue deals in our Goods category, due to the growth of that category as compared to the prior year. Cost of revenue for the year ended December 31, 2014 includes $70.4 million from the Ideel acquisition...

  • Page 71
    ... our Goods category, as we began increasing the number of product deals offered in our EMEA segment for which we sell merchandise inventory directly to our customers through our online marketplaces beginning in September 2013. Rest of World Rest of World cost of revenue decreased by $10.7 million to...

  • Page 72
    ... 1,119,854 (782) 1,119,072 2013 EMEA Year Ended December 31, 2014 2013 Rest of World Year Ended December 31, 2014 2013 Consolidated Year Ended December 31, 2014 2013 Travel: Third party Total services Goods: Third party Direct Total Total gross profit (1) 5,112 88,810 93,922 $ 731,983 15,319 66,753...

  • Page 73
    our Local category, partially offset by a $3.6 million increase in our Goods category and a $2.4 million increase in our Travel category. Rest of World Rest of World gross profit decreased by $42.2 million to $176.4 million for year ended December 31, 2014, as compared to $218.6 million for the year...

  • Page 74
    ... 31, 2014, the net acquisition-related expense included $3.7 million of external transaction costs, primarily related to the acquisitions of Ticket Monster and Ideel as described in Note 4, "Business Combinations," partially offset by $2.4 million related to changes in the fair value of contingent...

  • Page 75
    ...and due to expirations of applicable statutes of limitations. Income (Loss) from Discontinued Operations In January 2014, we acquired all of the outstanding equity interests of LivingSocial Korea, Inc., including its subsidiary Ticket Monster. On May 27, 2015, the Company sold a controlling stake in...

  • Page 76
    ...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...

  • Page 77
    ... acquisitions, purchase capital assets, purchase stock under our share repurchase program and meet our other cash operating needs. Cash flow provided by operations, including discontinued operations, was $254.9 million, $288.8 million and $218.4 million for the years ended December 31, 2015, 2014...

  • Page 78
    ... A common stock for an aggregate purchase price of $446.6 million (including fees and commissions) under the share repurchase program. As of December 31, 2015, up to $156.8 million of Class A common stock remains available for repurchase under the share repurchase program. We currently plan to use...

  • Page 79
    ... paid until the customer redeems the voucher that has been purchased. If a customer does not redeem the voucher under this payment model, we retain all of the gross billings from the unredeemed voucher. The redemption model generally improves our overall cash flow because we do not pay our merchants...

  • Page 80
    ... from changes in the fair value of investments, partially offset by a $13.7 million gain on the disposition of a business and $7.6 million of excess tax benefits on stock-based compensation. For the year ended December 31, 2015, net cash used in operating activities from discontinued operations was...

  • Page 81
    ... stock option exercises and our employee stock purchase plan. For the year ended December 31, 2014, our net cash used in financing activities of $194.2 million was driven primarily by purchases of treasury stock under our share repurchase program of $153.3 million and taxes paid related to net share...

  • Page 82
    ... and renewal and expansion options. Operating lease obligations expire at various dates with the latest maturity in 2025. Purchase obligations primarily represent non-cancelable contractual obligations related to information technology products and services. (3) Off-Balance Sheet Arrangements...

  • Page 83
    ... model, merchants are not paid until the customer redeems the voucher that has been purchased. If a customer does not redeem the voucher under this payment model, we retain all of the gross billings. We recognize incremental revenue from unredeemed vouchers and derecognize the related accrued...

  • Page 84
    ... refund experience developed from millions of deals featured on our websites and mobile applications, the relative risk of refunds based on expiration date, deal value, deal category and other qualitative factors that could impact the level of future refunds, such as introductions of new deals...

  • Page 85
    ...the first quarter of 2015 for our APAC reporting unit excluding Ticket Monster, which was classified as held-for-sale effective March 30, 2015. Based on those assessments, which considered current market conditions, recent business performance, growth achieved since the related goodwill was acquired...

  • Page 86
    ...pre-tax gain resulting from the sale of a controlling stake in Ticket Monster in May 2015. However, due to our recent decision to increase marketing spending by up to $200.0 million in 2016 in connection with our efforts to accelerate customer growth, our operations in the United States are expected...

  • Page 87
    ... of acquiring those businesses. We have made irrevocable elections to account for our investments in Monster LP and GroupMax at fair value with changes in fair value reported in earnings. The aggregate fair value of those two investments was $130.7 million as of December 31, 2015, which represented...

  • Page 88
    ... are exposed to market risk relating to changes in interest rates if we draw down under the Credit Agreement. We also have $30.9 million of long-term capital lease obligations and investments in convertible debt securities issued by nonpublic entities that are classified as available-for-sale. We do...

  • Page 89
    ... of Contents Groupon, Inc. Consolidated Financial Statements As of December 31, 2015 and 2014 and for the Years Ended December 31, 2015, 2014 and 2013 Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of...

  • Page 90
    ... 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth...

  • Page 91
    ... at December 31, 2015 and December 31, 2014 Common stock, par value $0.0001 per share, 2,010,000,000 shares authorized, no shares issued and outstanding at December 31, 2015 and December 31, 2014 Additional paid-in capital Treasury stock, at cost, 128,468,165 shares at December 31, 2015 and 27,239...

  • Page 92
    ... 31, 2015 Revenue: Third party and other Direct Total revenue Cost of revenue: Third party and other Direct Total cost of revenue Gross profit Operating expenses: Marketing Selling, general and administrative Restructuring charges Gain on disposition of business Acquisition-related expense (benefit...

  • Page 93
    ...Defined benefit pension plan adjustment: Pension liability adjustment Amortization of pension net actuarial loss (gains) to earnings Net change in unrealized gain (loss) (net of tax effect of $3 and $285 for the years ended December 31, 2015 and 2014, respectively) Available-for-sale securities: Net...

  • Page 94
    ...Common stock issued in connection with acquisition of business, net of issuance costs Shares issued to settle liability-classified awards and contingent consideration Exercise of stock options Vesting of restricted stock units Shares issued under employee stock purchase plan Tax withholdings related...

  • Page 95
    ... available-for-sale securities, net of tax Issuance of unvested restricted stock Exercise of stock options Vesting of restricted stock units Shares issued under employee stock purchase plan Tax withholdings related to net share settlements of stock-based compensation awards Stock-based compensation...

  • Page 96
    ... paid related to net share settlements of stock-based compensation awards Debt issuance costs Common stock issuance costs in connection with acquisition of business Settlements of purchase price obligations related to acquisitions Proceeds from stock option exercises and employee stock purchase plan...

  • Page 97
    ... activities Continuing operations: Equipment acquired under capital lease obligations Leasehold improvements funded by lessor Issuance of common stock in connection with acquisition of business Shares issued to settle liability-classified awards and contingent consideration Liability for purchases...

  • Page 98
    ...million of Class A common stock. Ticket Monster is an e-commerce company based in the Republic of Korea that connects merchants to consumers by offering goods and services at a discount. The operations of Ticket Monster were previously reported in the Company's Rest of World segment. On May 27, 2015...

  • Page 99
    ... the related inventory write-down represents a new cost basis. Restricted Cash Restricted cash primarily represents amounts that the Company is unable to access for operational purposes pursuant to contractual arrangements with certain financial institutions and with entities that process merchant...

  • Page 100
    ... fair value option has been elected are presented within "Other income (expense), net" on the consolidated statements of operations. Investments in convertible debt securities and convertible redeemable preferred shares issued by nonpublic entities are accounted for as available-for-sale securities...

  • Page 101
    ... options, rent holidays, and leasehold improvement or other incentives on certain lease agreements. The Company recognizes operating lease costs on a straight-line basis, taking into account adjustments for free or escalating rental payments and deferred payment terms. Additionally, lease incentives...

  • Page 102
    ..., merchants are not paid until the customer redeems the voucher that has been purchased. If a customer does not redeem the voucher under this payment model, the Company retains all of the gross billings. The Company recognizes incremental revenue from unredeemed vouchers and derecognizes the related...

  • Page 103
    ... to technology support personnel who are responsible for operating and maintaining the infrastructure of the Company's websites. Technology costs within cost of revenue also include amortization expense from customer-facing internal-use software, primarily related to website development. Refunds The...

  • Page 104
    ... Standards In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers. This ASU 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...

  • Page 105
    ... on its consolidated financial position or results of operations. 3. DISCONTINUED OPERATIONS AND OTHER DISPOSITIONS Discontinued Operations On May 27, 2015, the Company sold a controlling stake in Ticket Monster to an investor group. See Note 7, "Investments," for information about this transaction...

  • Page 106
    ... basis over the financial reporting basis of the Company's investment in Ticket Monster upon meeting the criteria for held-for-sale classification. No income tax benefits were recognized for the year ended December 31, 2014 because valuation allowances were provided against the related net deferred...

  • Page 107
    ...was to expand the Company's local offerings in the food ordering and delivery sector, acquire an assembled workforce and enhance related technology capabilities. The acquisition-date fair value of the consideration transferred for the OrderUp acquisition totaled $78.4 million, which consisted of the...

  • Page 108
    ... connects merchants to consumers by offering goods and services at a discount. The primary purpose of this acquisition was to grow the Company's merchant and customer base and expand its presence in the Korean e-commerce market. On May 27, 2015, the Company sold a controlling stake in Ticket Monster...

  • Page 109
    ... the acquired intangible assets are 5 years for subscriber relationships, 3 years for merchant relationships, 2 years for developed technology and 5 years for trade name. Pro forma results of operations for the Ticket Monster acquisition are not presented because Ticket Monster's financial results...

  • Page 110
    ... Acquisitions The Company acquired four other businesses during the year ended December 31, 2014. The primary purpose of these acquisitions was to acquire an experienced workforce, expand and advance product offerings and enhance technology capabilities. The aggregate acquisition-date fair value...

  • Page 111
    ...388 32,862 The fair value of the Class A common stock issued as consideration for one of the acquisitions was measured based on the stock price upon closing of the related transaction on November 13, 2014. The following table summarizes the allocation of the aggregate purchase price of these other...

  • Page 112
    ... aggregate acquisition price of acquisitions for the year ended December 31, 2013 (in thousands): Net working capital (including acquired cash of $2.1 million) Property and equipment Goodwill Intangible assets: (1) Subscriber relationships Merchant relationships Developed technology Other intangible...

  • Page 113
    GROUPON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year Ended December 31, 2015 2014 2013 Cost of revenue - third party and other Cost of revenue - direct Selling, general and administrative Total $ $ 16,299 9,273 87,476 113,048 $ $ 9,028 4,813 80,304 94,145 $ $ 5,887 2,...

  • Page 114
    ... FINANCIAL STATEMENTS (Continued) The following tables summarize the Company's intangible assets (in thousands): December 31, 2015 Asset Category Gross Carrying Value Accumulated Amortization Net Carrying Value Subscriber relationships Merchant relationships Trade names Developed technology...

  • Page 115
    ...12 months. Investment in Monster LP On May 27, 2015, the Company completed the sale of a controlling stake in Ticket Monster to an investor group, whereby (a) the investor group contributed $350.0 million in cash to Monster Holdings LP ("Monster LP"), a newly-formed limited partnership, in exchange...

  • Page 116
    ... CONSOLIDATED FINANCIAL STATEMENTS (Continued) The initial fair value was determined using the backsolve valuation method, which is a form of the market approach. Under this method, assumptions are made about the expected time to liquidity, volatility and risk-free rate such that the price paid by...

  • Page 117
    ... million from changes in the fair value of its investment in GroupMax from the acquisition date to December 31, 2015. The following table summarizes the condensed financial information for GroupMax (in thousands): Period from August 7, 2015 through December 31, 2015 (1) Revenue Gross profit Loss...

  • Page 118
    ... 2015, the Company acquired convertible redeemable preferred shares in an entity that operates an online local commerce marketplace specializing in live events for $18.4 million. In connection with this investment, the Company acquired the option to purchase the remaining outstanding equity shares...

  • Page 119
    GROUPON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS INFORMATION The following table summarizes the Company's other income (expense), net for the years ended December 31, 2015, 2014 and 2013 (in thousands): ...

  • Page 120
    ... and providers of shipping and fulfillment services. The following table summarizes the Company's accrued expenses and other current liabilities as of December 31, 2015 and 2014 (in thousands): December 31, 2015 2014 Refunds reserve Payroll and benefits Customer credits Restructuring-related...

  • Page 121
    ...Selling, general and administrative Provision (benefit) for income taxes $ 9. REVOLVING CREDIT AGREEMENT In August 2014, the Company entered into a three-year senior secured revolving credit agreement (the "Credit Agreement") that provides for aggregate principal borrowings of up to $250.0 million...

  • Page 122
    ... non-cancelable operating lease agreements for its offices and data centers throughout the world with lease expirations between 2016 and 2025. The Company leases its headquarters located in Chicago, Illinois ("600 West Chicago"). In July 2015, the Company entered into a new lease agreement for 600...

  • Page 123
    ... federal securities laws, the Credit Card Accountability, Responsibility and Disclosure Act and state laws governing gift cards, stored value cards and coupons. The following is a brief description of significant legal proceedings. On February 8, 2012, the Company issued a press release announcing...

  • Page 124
    ... Company's financial controls in the registration statement and prospectus for the Company's initial public offering of Class A common stock and in the Company's subsequently-issued earnings release dated February 8, 2012. The lawsuit seeks monetary damages, reimbursement for fees and costs incurred...

  • Page 125
    ... or trademark laws will be filed against it. Intellectual property claims, whether meritorious or not, are time consuming and costly to resolve, could require expensive changes in the Company's methods of doing business, or could require it to enter into costly royalty or licensing agreements. The...

  • Page 126
    ...classes of common stock: Class A common stock, Class B common stock and common stock. No shares of common stock will be issued or outstanding until October 31, 2016, at which time all outstanding shares of Class A common stock and Class B common stock will automatically convert into shares of common...

  • Page 127
    ...,061 shares for an aggregate purchase price of $446.6 million (including fees and commissions) under its share repurchase programs. As of December 31, 2015, up to $156.8 million of Class A common stock remains available for purchase under its current share repurchase program. The timing and amount...

  • Page 128
    ... the years ended December 31, 2015, 2014 and 2013, respectively, related to stock awards issued under the Plans, acquisition-related awards and subsidiary awards. The Company recognized stock-based compensation expense from discontinued operations of $5.3 million and $6.7 million for the years ended...

  • Page 129
    ... to certain key employees of that subsidiary. The vesting of these awards into shares of the Company's Class A common stock was contingent upon the subsidiary's achievement of specified financial targets over three annual performance periods for the years ending December 31, 2014, 2015 and 2016 and...

  • Page 130
    ... cost for the years ended December 31, 2015 and 2014 was $1.2 million and $0.6 million, respectively. 13. RESTRUCTURING In the third quarter of 2015, the Company's Board of Directors approved a restructuring plan relating primarily to workforce reductions in the Company's international operations...

  • Page 131
    ... December 31, 2015 2014 2013 Continuing Operations Discontinued Operations Total $ $ (19,145) $ 48,028 28,883 $ 15,724 - 15,724 $ $ 70,037 - 70,037 The pre-tax gain resulting from the sale of a controlling stake in Ticket Monster, which is reported within discontinued operations for the year...

  • Page 132
    GROUPON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The provision (benefit) for income taxes from continuing operations for the years ended December 31, 2015, 2014 and 2013 consisted of the following components (in thousands): Year Ended December 31, 2015 2014 2013 Current taxes: ...

  • Page 133
    ...-tax gain resulting from the sale of a controlling stake in Ticket Monster in May 2015. However, due to the Company's recent decision to increase marketing spending by up to $200.0 million in 2016 in connection with its efforts to accelerate customer growth, its operations in the United States are...

  • Page 134
    ... building, maintaining, customizing, managing and operating the website, contributing intellectual property, identifying deals and promoting the sale of deal vouchers, coordinating the distribution of deal vouchers in certain instances and providing the record keeping. Under the LLC agreement...

  • Page 135
    ... office support (i.e. website, contracts, personnel resources, accounting, etc.), presents the LLC's deal offerings via the Company's websites and mobile applications and provides the editorial resources that create the verbiage included on the websites for the related deal offers. 16. FAIR VALUE...

  • Page 136
    ... value option investments Available-for-sale securities: Convertible debt securities Redeemable preferred shares Liabilities: Contingent consideration December 31, 2015 $ 305,179 130,725 10,116 22,834 10,781 - 10,781 Fair Value Measurement at Reporting Date Using Quoted Prices in Active Markets...

  • Page 137
    ... December 31, 2015 and an other-than-temporary-impairment for the year ended December 31, 2014. Changes in the fair value of contingent consideration liabilities are classified within "Acquisition-related expense (benefit), net" on the consolidated statements of operations. (2) (3) Assets and...

  • Page 138
    ... accounts payable, accrued merchant and supplier payables and accrued expenses. The carrying values of these assets and liabilities approximate their respective fair values as of December 31, 2015 and 2014 due to their shortterm nature. 17. INCOME (LOSS) PER SHARE OF CLASS A AND CLASS B COMMON STOCK...

  • Page 139
    GROUPON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table sets forth the computation of basic and diluted loss per share of Class A and Class B common stock for the years ended December 31, 2015, 2014 and 2013 (in thousands, except share amounts and per share amounts...

  • Page 140
    ...'s international operations ("Rest of World"). Segment operating results reflect earnings before stock-based compensation, acquisition-related expense (benefit), net, other income (expense), net and provision (benefit) for income taxes. Segment information reported in the tables below represents the...

  • Page 141
    ... FINANCIAL STATEMENTS (Continued) Year Ended December 31, 2015 2014 2013 North America Revenue (1) Segment cost of revenue and operating expenses Segment operating income (loss) (3) EMEA Revenue (1) Segment cost of revenue and operating expenses Segment operating income (loss) (3) Rest of World...

  • Page 142
    ... operating decision-maker uses in assessing segment performance and making resource allocation decisions. The following table summarizes the Company's stock-based compensation expense and acquisition-related expense (benefit), net by reportable segment for the years ended December 31, 2015, 2014...

  • Page 143
    ... Local Deals ("Local"), Groupon Goods ("Goods") and Groupon Getaways ("Travel"). Collectively, Local and Travel comprise the Company's "Services" offerings and Goods, which it also refers to as "Shopping," reflects its product offerings. The Company also earns advertising revenue, payment processing...

  • Page 144
    The following table summarizes the Company's third party and other and direct revenue by category for its three reportable segments for the years ended December 31, 2015, 2014 and 2013 (in thousands): North America Year Ended December 31, 2015 Local (1) EMEA Year Ended December 31, 2013 $ 671,846 ...

  • Page 145
    ...,406 2015 $ 975,958 - 975,958 Consolidated Year Ended December 31, 2014 $ 1,070,955 - 1,070,955 2013 $ 1,119,854 (782) 1,119,072 2014 $ 581,067 - 581,067 : $ 600,893 - 600,893 Third party and other Direct Total Travel: Third party Total services Goods: Third party Direct Total Total gross profit...

  • Page 146
    .... Income (loss) from discontinued operations, net of tax, for the three months ended June 30, 2015 includes a $154.1 million gain, net of tax, from the sale of a controlling stake in Ticket Monster. The sum of per share amounts for quarterly periods may not equal year-to-date amounts due to rounding...

  • Page 147
    ... 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...

  • Page 148
    ... over financial reporting as of December 31, 2015, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Groupon, Inc. as of December 31, 2015 and 2014, and the related...

  • Page 149
    ... 9B: OTHER INFORMATION On February 9, 2016, in connection with its annual compensation review process, the Compensation Committee of the Board approved the awards of restricted stock units ("RSUs") and performance share units ("PSUs") to certain of the Company's named executive officers and approved...

  • Page 150
    ...Corporate Governance at Groupon," "Board Independence" and "Certain Relationships and Related Party Transactions" in our Proxy Statement for our 2016 Annual Meeting of Stockholders, which will be filed with the SEC within 120 days of December 31, 2015. ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES...

  • Page 151
    ..., 2014 have been adjusted to exclude balances related to Ticket Monster, which has been reported as discontinued operations in the accompanying consolidated financial statements. All other schedules have been omitted because they are either inapplicable or the required information has been provided...

  • Page 152
    ...(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 11th day of February 2016. GROUPON, INC. By: /s/ RICH WILLIAMS Name: Rich Williams Title: Chief Executive Officer POWER OF ATTORNEY...

  • Page 153
    ... 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 11th day of February 2016. Signature Title /s/ Rich Williams Rich Williams /s/ Brian A. Kayman...

  • Page 154
    ... Report on Form 8-K filed on November 3, 2015.)** Form of Indemnification Agreement** 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).** Form of Severance Benefit Agreement...

  • Page 155
    ... 600 West Chicago Avenue, Suite 400 Chicago, Illinois (Address of principal executive offices) 312-334-1579 (Registrant's telephone number, including area code) 60654 (Zip Code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Class A Common Stock, par value $0.0001...

  • Page 156
    ... in Rule 12b-2 of the Exchange Act). Yes No As of June 30, 2015, the aggregate market value of shares held by non-affiliates of the registrant was $2,418,665,812 based on the number of shares of Class A common stock held by non-affiliates as of June 30, 2015 and based on the last reported sale price...

  • Page 157
    ... in Item 8 of the Original 10-K. The consolidated financial statements of Monster LP required by Rule 3-09 of Regulation S-X are provided as Exhibit 99.1 to this Amendment. (2) Financial Statement Schedules: The financial statement schedule of Groupon is included in Item 15 of the Original 10...

  • Page 158
    ... 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 2016. GROUPON, INC. By: Name: Title: /s/ Brian A. Kayman Brian A. Kayman Interim Chief Financial Officer

  • Page 159
    ...Young. Certificate of Chief Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14 (a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated March 30, 2016. Certificate of Interim Chief Financial Officer Pursuant to Securities Exchange Act Rules 13a-14...

  • Page 160
    Exhibit 99.1 Monster Holdings LP Consolidated Financial Statements For the Period from May 27, 2015 through December 31, 2015

  • Page 161
    ... from May 27, 2015 through December 31, 2015 _____ Audited Consolidated Financial Statements Independent Auditor's Report Consolidated Balance Sheet Consolidated Statement of Operations Consolidated Statement of Comprehensive Loss Consolidated Statement of Changes in Partners' Capital Consolidated...

  • Page 162
    ... 31, 2015, and the related notes to the consolidated financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles...

  • Page 163
    ...and Partners' Capital Current liabilities: Accounts payable Accrued merchant and supplier payables Accrued expenses ...issued and outstanding at December 31, 2015) Class C units (20,321,839 units authorized and no units issued and outstanding at December 31, 2015)...consolidated financial statements. 2

  • Page 164
    ... and other Direct Total revenue Cost of revenue: Third party and other Direct Total cost of revenue Gross profit (loss) Operating expenses: Marketing Selling, general and administrative Total operating expenses Loss from operations Other income, net Net loss before provision (benefit) for income...

  • Page 165
    Monster Holdings LP Consolidated Statement of Comprehensive Loss For the Period from May 27, 2015 through December 31, 2015 (USD in thousands) _____ Net loss Other comprehensive loss: Foreign currency translation adjustments Comprehensive loss Period from May 27, 2015 through December 31, 2015 $ (...

  • Page 166
    ... Consolidated Statement of Changes in Partners' Capital For the Period from May 27, 2015 through December 31, 2015 (USD in thousands, except unit amounts) _____ Partners' capital Class A Balance at May 27, 2015 Cash contributions for Class A units Class B units issued in connection with acquisition...

  • Page 167
    ... activities Purchases of property and equipment and capitalized software Acquisition of business, net of acquired cash Net cash used in investing activities Financing activities Contributions from Class A limited partners Net cash provided by financing activities Effect of exchange rate changes...

  • Page 168
    ...which Groupon sold LSK to the Partnership and recognized its minority interest in that entity. Ticket Monster is an e-commerce company based in the Republic of Korea that connects merchants to consumers by offering goods and services at a discount. Ticket Monster acts as a marketing agent by selling...

  • Page 169
    ... improvements. Internal-Use Software The Partnership incurs 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...

  • Page 170
    ... or expansion options, rent holidays, and leasehold improvement or other incentives on certain lease agreements. The Partnership recognizes operating lease costs on a straight-line basis, taking into account adjustments for free or escalating rental payments and deferred payment terms. Additionally...

  • Page 171
    ...revenue, where it acts as a marketing agent, by selling vouchers through its online local commerce marketplaces that can be redeemed for goods or services with third party merchants. For transactions involving the sale of vouchers, the revenue recognition criteria are met when the customer purchases...

  • Page 172
    ... include credit card processing fees, editorial costs, certain technology costs, web hosting and other processing fees, are attributed to cost of third party revenue, direct revenue and other revenue in proportion to gross billings during the period. Technology costs within cost of revenue consist...

  • Page 173
    ... Standards In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers. This ASU 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...

  • Page 174
    ...May 27, 2015. The initial fair value was determined using the backsolve valuation method, which is a form of the market approach. Under this method, assumptions are made about the expected time to liquidity, volatility and risk-free rate such that the price paid by a third-party investor in a recent...

  • Page 175
    ...amounts of definite lived intangible assets consist of the following: (in thousands) Gross Carrying Value December 31, 2015 Accumulated Amortization Net Carrying Value Customer relationships Merchant relationships Developed technology Trade name Total intangible assets $ $ 14 54,782 22,168 934...

  • Page 176
    Monster Holdings LP Notes to Consolidated Financial Statements For the Period from May 27, 2015 through December 31, 2015 _____ Amortization of intangible assets is computed using the straight-line method over their estimated useful lives, which range from 2 to 12 years. Amortization expense related...

  • Page 177
    ... founder and current chief executive officer of Ticket Monster, contributed an additional $10.0 million in cash consideration to the Partnership in exchange for 2,000,000 Class A units of the Partnership. The Partnership is authorized to issue 20,321,839 Class C units to its management that will be...

  • Page 178
    Monster Holdings LP Notes to Consolidated Financial Statements For the Period from May 27, 2015 through December 31, 2015 _____ holders of Class B units. Distributions in excess of $680.0 million and up to $703.0 million will be paid to holders of any outstanding Class C units. Unit holders will be ...

  • Page 179
    ... had $274.4 million of net operating loss carryforwards, which begin expiring in 2021. 11. RELATED PARTY TRANSACTIONS Certain Ticket Monster employees continue to vest in share-based awards granted by Groupon as a result of their employment with Ticket Monster. These restricted stock units are...

  • Page 180
    .... During 2015, Groupon sold 2,529,998 Class B units for $4.8 million to an entity affiliated with Mr. Daniel Shin and other employees of Ticket Monster. 12. SUBSEQUENT EVENTS On January 4, 2016, the Partnership granted 20,321,839 Class C restricted units to employees of Ticket Monster. Those Class...

  • Page 181