Groupon(GRPN) - 2025 Q2 - Quarterly Report

Glossary of Defined Terms and Abbreviations This section defines key terms and abbreviations used in the report, covering financial instruments, restructuring plans, and accounting standards - Defines key terms and abbreviations, including convertible senior notes (2026, 2027, 2030 Notes), restructuring plans (2020, 2022, Italy), and financial/accounting standards (GAAP, ASC, ASU)[10][11][12] - Covers specific agreements and parties like the Major Rocket Agreement and Backstop Party (Pale Fire Capital SICAV a.s.)[11][12] PART I. Financial Information Forward-Looking Statements Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are based on current expectations and projections, subject to risks and uncertainties that could cause actual results to differ materially[14] - Key risks include strategy execution, operating result volatility, international operation challenges, global economic uncertainty, competition, customer retention, cybersecurity, and legal compliance[14] - The company operates in a competitive and rapidly changing environment, with new risks emerging, and undertakes no obligation to publicly update forward-looking statements[14] Item 1. Financial Statements and Supplementary Data (unaudited) This section presents Groupon's unaudited condensed consolidated financial statements, highlighting financial position, performance, and cash movements Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :----------------------------------- | :-------------- | :---------------- | :----- | | Assets | | | | | Cash and cash equivalents | $262,575 | $228,843 | +$33,732 | | Total current assets | $343,782 | $315,361 | +$28,421 | | Total assets | $647,403 | $612,690 | +$34,713 | | Liabilities | | | | | Current portion of convertible senior notes, net | $33,473 | $— | +$33,473 | | Accrued merchant and supplier payables | $203,563 | $196,350 | +$7,213 | | Total current liabilities | $359,508 | $305,426 | +$54,082 | | Total liabilities | $596,082 | $571,639 | +$24,443 | | Equity | | | | | Total equity (deficit) | $51,321 | $41,051 | +$10,270 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :------------------------------------------------- | :----------------------------- | :----------------------------- | :-------------- | :----------------------------- | :----------------------------- | :-------------- | | Revenue | $125,702 | $124,615 | 0.9% | $242,889 | $247,699 | (2.0)% | | Gross profit | $114,426 | $112,667 | 1.6% | $220,724 | $223,224 | (1.1)% | | Income (loss) from operations | $13,054 | $4,358 | 199.5% | $14,938 | $11,728 | 27.4% | | Other income (expense), net | $18,466 | $(4,483) | N/A | $26,037 | $(17,165) | N/A | | Net income (loss) attributable to Groupon, Inc. | $20,337 | $(10,035) | N/A | $27,512 | $(22,306) | N/A | | Basic net income (loss) per share | $0.51 | $(0.25) | N/A | $0.69 | $(0.58) | N/A | | Diluted net income (loss) per share | $0.46 | $(0.25) | N/A | $0.64 | $(0.58) | N/A | - A significant gain on sale of business of $10.65 million was recognized for both the three and six months ended June 30, 2025[18] - Foreign currency translation adjustments resulted in a net change in unrealized loss of $(22.7) million for the three months and $(33.1) million for the six months ended June 30, 2025, compared to gains in the prior year[18] Condensed Consolidated Statements of Stockholders' Equity (Deficit) Key Changes in Stockholders' Equity (in thousands) | Metric | December 31, 2024 | June 30, 2025 | Change | | :------------------------------------------ | :---------------- | :-------------- | :----- | | Total Groupon, Inc. Stockholders' Equity (Deficit) | $40,815 | $51,196 | +$10,381 | | Net income (loss) attributable to Groupon, Inc. (6 months) | N/A | $27,512 | N/A | | Stock-based compensation on equity-classified awards (6 months) | N/A | $18,804 | N/A | | Accumulated other comprehensive income (loss) | $30,734 | $(2,335) | $(33,069) | - The company issued 7,079,646 shares of Common Stock through a Rights Offering in Q1 2024, generating $79.6 million in additional paid-in capital[20] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Activity (Six Months Ended June 30) | 2025 | 2024 | Change | | :---------------------------------- | :----- | :----- | :----- | | Net cash provided by (used in) operating activities | $28,397 | $5,189 | +$23,208 | | Net cash provided by (used in) investing activities | $7,024 | $372 | +$6,652 | | Net cash provided by (used in) financing activities | $(3,138) | $33,620 | $(36,758) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $34,125 | $38,816 | $(4,691) | | Cash, cash equivalents and restricted cash, end of period | $296,694 | $206,454 | +$90,240 | - The increase in operating cash flow in 2025 is primarily due to the timing of merchant payments and increased revenue/billings growth[229] - Investing cash flow increased due to proceeds from the sale of Giftcloud, partially offset by prior period intangible asset sales and decreased capital expenditures[230] - Financing activities shifted from providing cash in 2024 (due to Rights Offering proceeds) to using cash in 2025, reflecting the absence of similar large capital raises[231] Notes to Condensed Consolidated Financial Statements NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Groupon operates a global two-sided marketplace connecting consumers to merchants, offering discounted goods and services - Groupon operates a global two-sided marketplace connecting consumers to merchants, offering discounted goods and services via mobile applications and websites[28] - Operations are organized into two segments: North America and International[29] - Interim financial statements are unaudited and prepared in accordance with GAAP and SEC rules, including normal recurring adjustments[30] NOTE 2. BUSINESS DISPOSITIONS The company completed the sale of Giftcloud, a non-core UK-based business, recognizing a pre-tax gain - Completed the sale of Giftcloud on April 10, 2025, a non-core UK-based business specializing in digitizing gift cards[38] Giftcloud Sale Financials (in millions) | Metric | Amount | | :-------------------- | :----- | | Cash consideration | $17.1 | | Net proceeds received | $14.0 | | Pre-tax gain on sale | $10.7 | - The financial results of Giftcloud were presented within the International segment and were not material for the three and six months ended June 30, 2025[40] NOTE 3. GOODWILL AND LONG-LIVED ASSETS Goodwill remained stable, while intangible assets decreased due to amortization and a prior-year sale - Goodwill balance remained $178.7 million as of June 30, 2025, with no activity, and is entirely within the North America segment[41] Intangible Assets, Net (in thousands) | Asset Type | June 30, 2025 | December 31, 2024 | | :-------------------- | :-------------- | :---------------- | | Merchant relationships | $— | $— | | Trade names | $228 | $398 | | Patents | $150 | $242 | | Other intangible assets | $3,572 | $4,098 | | Total Intangible Assets, net | $3,950 | $4,738 | - Amortization expense for intangible assets was $0.8 million for the six months ended June 30, 2025, down from $2.2 million in the prior year[44] - In April 2024, the company completed the sale of rights to certain intangible assets in North America for $10.0 million cash, recognizing a pre-tax gain of $5.044 million (3 months) / $5.160 million (6 months)[42][18] NOTE 4. INVESTMENTS The carrying value of other equity investments, primarily in SumUp, remained unchanged - Carrying value of other equity investments, primarily in SumUp, was $74.8 million as of June 30, 2025, unchanged from December 31, 2024[45] - No changes in fair value of investments were recorded for the three and six months ended June 30, 2025 and 2024[45] NOTE 5. SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS INFORMATION This section provides detailed breakdowns of prepaid expenses, other non-current assets, accrued liabilities, and other income/expense Prepaid expenses and other current assets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------- | :---------------- | | Prepaid expenses | $9,082 | $11,319 | | Restricted cash | $34,119 | $33,726 | | Receivable for unwind of capped call transactions | $2,732 | $— | | Total prepaid expenses and other current assets | $55,793 | $52,365 | Other non-current assets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Provisional tax payments | $9,143 | $2,402 | | Total other non-current assets | $15,848 | $9,144 | Accrued expenses and other current liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------------------------- | :-------------- | :---------------- | | Customer credits | $24,240 | $22,349 | | Compensation and benefits | $14,745 | $11,436 | | Income taxes payable | $6,218 | $2,691 | | Total accrued expenses and other current liabilities | $111,865 | $97,765 | Other income (expense), net (in thousands) | Item | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Foreign currency gains (losses), net and other | $20,899 | $(3,855) | $31,076 | $(15,570) | | Other income (expense), net | $18,466 | $(4,483) | $26,037 | $(17,165) | NOTE 6. FINANCING ARRANGEMENTS The company issued new 2030 Notes in exchange for existing 2026 and 2027 Notes, altering its debt structure - Issued $244.1 million aggregate principal amount of 4.875% Convertible Senior Notes due June 2030 (2030 Notes) on July 2, 2025[52] - The 2030 Notes were issued in exchange for $20.0 million of 2026 Notes and $150.0 million of 2027 Notes[52] - A First Supplemental Indenture, dated July 2, 2025, released all liens on collateral securing the 2027 Notes[55] Convertible Senior Notes Outstanding (in thousands) | Note Type | Principal Amount (June 30, 2025) | Principal Amount (Post-July 2025 Exchange) | Interest Rate | Maturity | | :-------------------------- | :------------------------------- | :--------------------------------------- | :------------ | :--------- | | 2030 Notes | N/A (issued July 2025) | $244,100 | 4.875% | June 2030 | | 2027 Notes | $196,210 | $47,300 | 6.250% | March 2027 | | 2026 Notes | $53,740 | $33,700 | 1.125% | March 2026 | - In June 2025, the company unwound 196,200 capped call transactions related to the 2026 Notes, reclassifying $2.7 million from Additional paid-in-capital and receiving cash proceeds in July 2025[69] - The revolving credit agreement was terminated in February 2024 by prepaying $43.1 million using proceeds from the Rights Offering[71] NOTE 7. COMMITMENTS AND CONTINGENCIES This section details various tax assessments and indemnification liabilities, including a significant Italian tax settlement - Portugal VAT assessment for 2013-2015 of approximately $4.5 million (inclusive of penalties and interest) became final and due in Q4 2024, expected to be paid in 2025[76] - A contingent liability of $4.6 million is recorded for a Portugal VAT assessment for 2011-2012, with an appeal lodged to the second-level court[77] - Groupon S.r.l. is litigating a $134.4 million Italy 2012 Assessment and a $35.1 million Italy 2017 Assessment, with an agreement in principle reached in August 2025 to reduce the combined amount to $24.9 million, subject to approvals[78][138][139][140] - Indemnification liabilities related to Latin America dispositions were $2.8 million as of June 30, 2025, with an additional $0.5 million accrual in Q2 2025[83][84] NOTE 8. STOCKHOLDERS' EQUITY (DEFICIT) AND COMPENSATION ARRANGEMENTS This section details equity changes, stock-based compensation, and performance share unit vesting - As of June 30, 2025, 4,540,891 shares of Common Stock were available for future issuance under the 2011 Incentive Stock Plan[88] Unrecognized Compensation Costs (as of June 30, 2025) | Award Type | Unrecognized Compensation Costs (in millions) | Remaining Weighted-Average Period (years) | | :------------------------------------ | :------------------------------------------ | :---------------------------------------- | | RSUs | $9.5 | 1.5 | | 2025 PSUs | $37.4 | 1.85 | | Equity-classified 2024 Executive PSUs | $17.1 | 1.44 | - The first ($14.86) and second ($20.14) stock price hurdles for 2024 Executive PSUs were achieved in May and June 2025, respectively, leading to vesting of 556,980 equity-classified PSUs; the third hurdle ($31.01) was achieved on August 5, 2025[104][105][106] - A liability-classified 2024 Executive PSU award was modified to equity-classified in June 2025, resulting in $1.9 million of incremental stock-based compensation expense[109][112] - Major Rocket LLC is eligible to receive up to 954,000 shares of Common Stock (or cash equivalent) as incentive compensation for achieving certain financial benchmarks, with $0.5 million expense recognized as of June 30, 2025[116][117][118] - The $80.0 million fully backstopped Rights Offering closed on January 22, 2024, resulting in the purchase of 7,079,646 shares of Common Stock at $11.30 per share[119][120] NOTE 9. REVENUE RECOGNITION This section details customer credit activity, deferred contract acquisition costs, and expected credit losses Customer Credits Activity (Six Months Ended June 30, 2025, in thousands) | Item | Amount | | :-------------------------- | :----- | | Balance as of December 31, 2024 | $22,349 | | Credits issued | $47,780 | | Credits redeemed | $(41,882) | | Breakage revenue recognized | $(4,318) | | Balance as of June 30, 2025 | $24,240 | - Deferred contract acquisition costs were $4.8 million as of June 30, 2025, with $3.1 million amortized for the six months ended June 30, 2025[124][125] - Recognized $4.5 million in variable consideration from unredeemed vouchers for the six months ended June 30, 2025, down from $10.1 million in the prior year[128] Allowance for Expected Credit Losses on Accounts Receivable (Six Months Ended June 30, 2025, in thousands) | Item | Amount | | :-------------------------- | :----- | | Balance at December 31, 2024 | $2,673 | | Change in provision | $(581) | | Write-offs | $364 | | Balance as of June 30, 2025 | $2,460 | NOTE 10. RESTRUCTURING AND RELATED CHARGES The Italy Restructuring Plan was completed, resulting in immaterial charges for the current period - The Italy Restructuring Plan, approved in July 2024, involved exiting the local business in Italy and a reduction of 33 positions, completed by December 31, 2024[129] - Incurred $2.2 million in pre-tax charges since the inception of the Italy Restructuring Plan, mostly paid in cash by March 31, 2024[129] - Immaterial restructuring charges (credits) were recorded for the three and six months ended June 30, 2025, under the Italy, 2022, and 2020 Restructuring Plans[129][130] NOTE 11. INCOME TAXES This section details income tax provisions, effective tax rates, and the resolution of significant Italian tax assessments Income Tax Provision (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Provision (benefit) for income taxes | $10,927 | $9,287 | $12,355 | $15,481 | | Income (loss) from continuing operations before provision (benefit) for income taxes | $31,520 | $(125) | $40,975 | $(5,437) | | Effective tax rate | 34.7% | (7,429.6)% | 30.2% | (284.7)% | - The effective tax rate is significantly impacted by pretax losses in jurisdictions with valuation allowances against net deferred tax assets, with a full valuation allowance maintained against all U.S. federal and state deferred tax assets[131][132] - Groupon S.r.l. is litigating a $134.4 million Italy 2012 Assessment and a $35.1 million Italy 2017 Assessment[135][137] - An agreement in principle was reached on August 5, 2025, to resolve both Italian tax assessments, reducing the combined total owed to $24.9 million (€21.3 million), with $10.1 million already paid, leaving an additional $14.9 million (€12.7 million) to be paid, subject to approvals[138][139][140][141] - The 'One Big Beautiful Bill Act' was enacted on July 4, 2025, introducing significant changes to federal income tax code, which the company is currently evaluating for impact[144] NOTE 12. FAIR VALUE MEASUREMENTS Fair value option investments are classified as Level 3 due to unobservable market data, with no material activity reported - Fair value option investments and available-for-sale securities are classified as Level 3 measurements due to the lack of observable market data for inputs like cash flow projections and discount rates[146] - No material activity in recurring Level 3 fair value measurements or significant nonrecurring fair value remeasurements occurred for the three and six months ended June 30, 2025 and 2024[147][148] - Carrying values of short-term financial instruments (accounts receivable, restricted cash, accounts payable, etc.) approximate their fair values[149] NOTE 13. INCOME (LOSS) PER SHARE This section presents basic and diluted net income (loss) per share, along with weighted average shares outstanding Basic and Diluted Net Income (Loss) Per Share (Six Months Ended June 30, in thousands, except per share amounts) | Metric | 2025 | 2024 | | :------------------------------------------------- | :----- | :----- | | Basic net income (loss) attributable to common stockholders | $27,512 | $(22,306) | | Diluted net income (loss) attributable to common stockholders - continuing operations | $28,350 | $(22,306) | | Basic net income (loss) per share (Continuing operations) | $0.70 | $(0.58) | | Diluted net income (loss) per share (Continuing operations) | $0.65 | $(0.58) | | Weighted average basic shares outstanding | 39,922,318 | 38,570,401 | | Weighted average diluted shares outstanding | 43,357,429 | 38,570,401 | - Potentially dilutive instruments excluded from diluted EPS calculations due to their antidilutive effect for the six months ended June 30, 2025, included 7,371,079 shares (e.g., 2027 Notes, RSUs, PSUs)[152] - As of June 30, 2025, 1,853,066 shares from 2024 Executive PSUs, 1,647,841 shares from 2025 PSUs, and 954,000 shares from Major Rocket incentive shares were excluded from diluted EPS as performance conditions were not yet satisfied[154] NOTE 14. SEGMENT INFORMATION Operations are disaggregated into North America and International segments, with performance assessed by contribution profit - Operations are disaggregated into two reportable segments: North America and International, based on geographically distinct market dynamics[156] - The Chief Operating Decision Maker (CODM), the CEO, assesses segment performance and allocates resources based on contribution profit[156] Revenue by Segment and Category (Six Months Ended June 30, in thousands) | Category | North America 2025 | North America 2024 | International 2025 | International 2024 | Total 2025 | Total 2024 | | :------- | :----------------- | :----------------- | :----------------- | :----------------- | :--------- | :--------- | | Local | $180,428 | $178,167 | $44,614 | $47,151 | $225,042 | $225,318 | | Goods | $2,680 | $5,870 | $4,525 | $4,714 | $7,205 | $10,584 | | Travel | $8,001 | $8,454 | $2,641 | $3,343 | $10,642 | $11,797 | | Total Revenue | $191,109 | $192,491 | $51,780 | $55,208 | $242,889 | $247,699 | Contribution Profit by Segment (Six Months Ended June 30, in thousands) | Segment | 2025 | 2024 | % Change (YoY) | | :-------------- | :----- | :----- | :------------- | | North America | $114,669 | $121,748 | (5.8)% | | International | $30,219 | $36,147 | (16.4)% | | Total Contribution Profit | $144,888 | $157,895 | (8.3)% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Groupon's financial condition, operations, strategy, and key performance drivers Overview Groupon aims to be the trusted marketplace for local services and experiences, focusing on merchant relationships and customer experience - Groupon's strategy is to be the trusted marketplace for local services and experiences, focusing on building long-term merchant relationships and enhancing customer experience[162] - Revenue is primarily net commissions from selling goods or services on behalf of third-party merchants, reported as the purchase price collected less the portion payable to the merchant[163] - Significant resources are being invested in platform efficiency, stability, and agility to innovate faster, serve merchants better, and create more engaging customer experiences[164] How We Measure Our Business The company uses a combination of operating and financial metrics to assess business performance and liquidity - The company uses operating metrics (gross billings, units, active customers) and financial metrics (revenue, gross profit, contribution profit, Adjusted EBITDA, free cash flow) to measure business performance[165][166][169] Operating Metrics (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | TTM June 30, 2025 | TTM June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :---------------- | :---------------- | | Gross billings | $416,697 | $373,607 | $803,173 | $754,753 | N/A | N/A | | Units | 9,117 | 8,561 | 17,655 | 17,687 | N/A | N/A | | Active customers | N/A | N/A | N/A | N/A | 15,829 | 15,825 | Financial Metrics (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Revenue | $125,702 | $124,615 | $242,889 | $247,699 | | Gross profit | $114,426 | $112,667 | $220,724 | $223,224 | | Contribution profit | $73,027 | $76,147 | $144,888 | $157,895 | | Adjusted EBITDA | $15,563 | $16,479 | $30,889 | $35,996 | | Free cash flow | $25,189 | $10,826 | $21,430 | $(2,994) | Operating Expenses Operating expenses include marketing, selling, general and administrative, and restructuring charges - Marketing expense includes online marketing (search engine, social media, affiliate programs), offline marketing (television), and compensation for marketing employees[173] - SG&A expenses cover sales commissions, compensation for customer service, operations, technology, product development, and general corporate functions, along with depreciation, rent, professional fees, and litigation costs[173] - Restructuring and related charges primarily represent severance and benefit costs for workforce reductions, impairments, and other facilities-related costs[174] Factors Affecting Our Performance Performance is influenced by the ability to attract and retain merchants and customers, alongside macroeconomic conditions - Performance is affected by the ability to attract and retain local merchants, requiring improved marketplace offerings and merchant value propositions[175] - Acquiring and retaining customers is crucial, driven by strengthening product offerings, improving attractiveness, and enhancing marketing campaigns[176] - Macroeconomic conditions (inflation, labor costs, supply chain) impact the business, with the company focusing on long-term merchant relationships and customer experience to mitigate these effects[177] Results of Operations North America North America saw growth in local gross billings, partially offset by declines in other categories and increased marketing spend North America Operating Metrics (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :----------------------------- | :----------------------------- | :-------------- | :----------------------------- | :----------------------------- | :-------------- | | Total gross billings | $324,758 | $278,969 | 16.4% | $611,277 | $551,901 | 10.8% | | Local gross billings | $292,381 | $243,587 | 20.0% | $548,037 | $474,640 | 15.5% | | Total units | 6,346 | 5,882 | 7.9% | 12,060 | 11,667 | 3.4% | | TTM active customers | 10,782 (2025) | 10,235 (2024) | 5.3% | N/A | N/A | N/A | North America Financial Metrics (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :----------------------------- | :----------------------------- | :-------------- | :----------------------------- | :----------------------------- | :-------------- | | Total revenue | $99,996 | $98,357 | 1.7% | $191,109 | $192,491 | (0.7)% | | Total cost of revenue | $8,564 | $9,478 | (9.6)% | $16,805 | $19,484 | (13.7)% | | Total gross profit | $91,432 | $88,879 | 2.9% | $174,304 | $173,007 | 0.7% | | Marketing | $33,160 | $29,477 | 12.5% | $59,635 | $51,259 | 16.3% | | Contribution profit | $58,272 | $59,402 | (1.9)% | $114,669 | $121,748 | (5.8)% | - Local category growth in gross billings was driven by transformation efforts, while the Goods category saw declines due to de-emphasis[179][180] - The decrease in cost of revenue was primarily due to a decrease in amortization of internally-developed software[182][183] International International gross billings and revenue declined, primarily due to divestitures, partially offset by favorable foreign currency impacts International Operating Metrics (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :----------------------------- | :----------------------------- | :-------------- | :----------------------------- | :----------------------------- | :-------------- | | Total gross billings | $91,939 | $94,638 | (2.9)% | $191,896 | $202,852 | (5.4)% | | Local gross billings | $72,997 | $72,932 | 0.1% | $153,475 | $157,965 | (2.8)% | | Total units | 2,771 | 2,679 | 3.4% | 5,595 | 6,020 | (7.1)% | | TTM active customers | 5,047 (2025) | 5,590 (2024) | (9.7)% | N/A | N/A | N/A | International Financial Metrics (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :----------------------------- | :----------------------------- | :-------------- | :----------------------------- | :----------------------------- | :-------------- | | Total revenue | $25,706 | $26,258 | (2.1)% | $51,780 | $55,208 | (6.2)% | | Total cost of revenue | $2,712 | $2,470 | 9.8% | $5,360 | $4,991 | 7.4% | | Total gross profit | $22,994 | $23,788 | (3.3)% | $46,420 | $50,217 | (7.6)% | | Marketing | $8,239 | $7,043 | 17.0% | $16,201 | $14,070 | 15.1% | | Contribution profit | $14,755 | $16,745 | (11.9)% | $30,219 | $36,147 | (16.4)% | - Decline in Local category gross billings and revenue was mainly due to the divestiture of Giftcloud and withdrawal from the Italian market; excluding these, International Local gross billings increased 15% (3 months) and 9% (6 months)[188][189][191][193] - Foreign currency exchange rates had a favorable impact of $4.2 million on gross billings (3 months) and $1.8 million (6 months), partially offsetting declines[188][189] Consolidated Operating Expenses Consolidated operating expenses decreased due to lower SG&A, despite increased marketing investment and a gain on business sale Consolidated Operating Expenses (in thousands) | Expense | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :------------------------------------ | :----------------------------- | :----------------------------- | :-------------- | :----------------------------- | :----------------------------- | :-------------- | | Marketing | $41,399 | $36,520 | 13.4% | $75,836 | $65,329 | 16.1% | | Selling, general and administrative | $70,669 | $77,212 | (8.5)% | $140,509 | $151,610 | (7.3)% | | (Gain) on sale of business | $(10,650) | $— | 100.0% | $(10,650) | $— | 100.0% | | Total operating expenses | $101,372 | $108,309 | (6.4)% | $205,786 | $211,496 | (2.7)% | - Marketing expense increased due to higher investment in performance marketing campaigns[200][202] - SG&A decreased due to lower technology expenses from revised cloud migration timing, partially offset by higher payroll costs[201][203] Consolidated Other Income (Expense), Net Other income (expense), net, significantly improved due to foreign currency gains, partially offset by increased interest expense Other Income (Expense), Net (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Other income (expense), net | $18,466 | $(4,483) | $26,037 | $(17,165) | - The favorable change was primarily due to a $24.8 million (3 months) and $46.6 million (6 months) increase in net foreign currency gains, driven by Euro appreciation against the U.S. dollar[205][206] - This favorable impact was partially offset by an increase in interest expense due to the issuance of the 2027 Notes[205][206] Consolidated Provision (Benefit) for Income Taxes Effective tax rates are significantly impacted by pretax losses in jurisdictions with valuation allowances against deferred tax assets Provision (Benefit) for Income Taxes (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Provision (benefit) for income taxes | $10,927 | $9,287 | $12,355 | $15,481 | | Effective tax rate | 34.7% | (7,429.6)% | 30.2% | (284.7)% | - Effective tax rates are significantly impacted by pretax losses in jurisdictions with valuation allowances against net deferred tax assets, with a full valuation allowance maintained against all U.S. federal and state deferred tax assets[208] Non-GAAP Financial Measures Non-GAAP measures like Adjusted EBITDA and free cash flow are provided to supplement GAAP results and aid investor understanding - Non-GAAP measures (Adjusted EBITDA, free cash flow, foreign currency exchange rate neutral operating results) are provided to help investors understand financial performance and liquidity, complementing GAAP results[211] - Adjusted EBITDA excludes income taxes, interest, depreciation, amortization, stock-based compensation, and special charges/credits (e.g., restructuring, asset/business sales, foreign VAT assessments)[212][213] Adjusted EBITDA Reconciliation (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Income (loss) from continuing operations | $20,593 | $(9,412) | $28,620 | $(20,918) | | Total adjustments | $(5,030) | $25,891 | $2,269 | $56,914 | | Adjusted EBITDA | $15,563 | $16,479 | $30,889 | $35,996 | - Free cash flow is defined as net cash provided by (used in) operating activities from continuing operations less purchases of property and equipment and capitalized software[216] Liquidity and Capital Resources The company maintains sufficient liquidity, primarily from cash balances, to meet operational needs and debt obligations - Principal source of liquidity is cash balance of $262.6 million as of June 30, 2025[220] - Believes it has sufficient liquidity for ongoing operational needs and repayment of remaining $33.7 million of 2026 Notes due March 2026[220] Cash Flows from Continuing Operations (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change | | :-------------------- | :----- | :----- | :----- | | Operating activities | $28,397 | $5,189 | +$23,208 | | Investing activities | $7,024 | $372 | +$6,652 | | Financing activities | $(3,138) | $33,620 | $(36,758) | Free Cash Flow (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities from continuing operations | $28,419 | $15,300 | $28,397 | $5,189 | | Purchases of property and equipment and capitalized software | $(3,230) | $(4,474) | $(6,967) | $(8,183) | | Free cash flow | $25,189 | $10,826 | $21,430 | $(2,994) | - The increase in operating cash flow in 2025 is primarily attributed to the timing of merchant payments and increased revenue/billings growth[229] - International subsidiaries hold $83.1 million in cash, generally intended for reinvestment or tax-efficient remittance, with no current plans to repatriate funds to the U.S. for domestic liquidity needs[240] Contractual Obligations and Commitments Contractual obligations and commitments did not materially change from the prior annual report - Contractual obligations and commitments as of June 30, 2025, did not materially change from the 2024 Annual Report on Form 10-K[242] Off-Balance Sheet Arrangements No off-balance sheet arrangements existed as of June 30, 2025 - No off-balance sheet arrangements existed as of June 30, 2025[243] Significant Accounting Policies and Critical Accounting Estimates Financial statements rely on management estimates and assumptions, which may differ from actual results - Financial statements require management estimates and assumptions for asset/liability amounts, revenue, expenses, and contingent liabilities[244] - Estimates are based on historical experience and reasonable assumptions, but actual results may differ materially[244] - Significant accounting policies and critical accounting estimates are detailed in the 2024 Annual Report on Form 10-K[245] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses Groupon's exposure to foreign currency, interest rate, and inflation risks Foreign Currency Exchange Risk Groupon is exposed to foreign currency risk from international operations, primarily in Europe and Canada - Exposed to foreign currency risk from international operations, primarily in Euro, British Pound Sterling, Canadian dollar, Indian Rupee, Polish Zloty, and Czech Koruna[247] - International segment generated 20.4% and 21.3% of revenue for the three and six months ended June 30, 2025, respectively[247] - A hypothetical 10% adverse change in foreign currency exchange rates would have a de minimis impact on net working capital deficit as of June 30, 2025, compared to an $0.8 million potential increase in working capital surplus as of December 31, 2024[249] Interest Rate Risk The company has limited exposure to interest rate risk due to fixed-rate debt and bank deposits - Limited exposure to interest rate risk due to cash balance consisting of bank deposits[250] - 2026 Notes ($53.7 million principal) and 2027 Notes ($196.2 million principal) bear fixed interest rates, so changes in market interest rates do not directly impact financial statements[250] Inflation Risk Inflation could negatively impact operating costs and discretionary spending, affecting business performance - Business is affected by changes in merchants' and customers' discretionary spend[251] - Increased inflation could negatively impact operating costs, and the inability to offset these costs through price increases or efficiency measures could harm the business[251] Item 4. Controls and Procedures This section addresses the effectiveness of disclosure controls and internal control over financial reporting, including remediation efforts Evaluation of Disclosure Controls and Procedures Disclosure controls were not effective due to previously identified material weaknesses in internal control over financial reporting - Disclosure controls and procedures were not effective as of June 30, 2025, due to previously reported material weaknesses in internal control over financial reporting[253] - Despite material weaknesses, the CEO and CFO concluded that the Condensed Consolidated Financial Statements fairly present the financial position, results of operations, and cash flows in accordance with GAAP[254] Remediation Plan and Status Management is actively implementing a remediation plan to address material weaknesses in internal controls - Management is dedicating resources to improve internal controls over financial reporting to remediate material weakness related to complex manual calculations[255] - Remediation actions include new/enhanced controls for manual processes, automated reporting for complex calculations, formalized process for new initiatives' accounting implications, and added detective analytic management review controls[259] - Material weakness will be remediated only after controls are tested and concluded to be designed and operating effectively for a sufficient period[256] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting were identified, other than enhancements to address existing weaknesses - No material changes in internal control over financial reporting were identified during the six months ended June 30, 2025, other than enhancements to address the material weakness[257] Limitations on Effectiveness of Controls and Procedures Controls and procedures provide reasonable, not absolute, assurance, considering resource constraints and management judgment - Controls and procedures provide only reasonable assurance of achieving control objectives, not absolute assurance[258] - Design of controls must consider resource constraints and the need for management judgment in evaluating benefits versus costs[258] PART II. Other Information Item 1. Legal Proceedings Material pending legal proceedings are detailed in Note 7, Commitments and Contingencies, within the financial statements - Material pending legal proceedings are described in Item 1, Note 7, Commitments and Contingencies[261] Item 1A. Risk Factors This section highlights new or updated risks related to capital access, outstanding indebtedness, and potential impacts on liquidity - No material changes to risk factors were reported, except for supplements related to capital access and outstanding indebtedness[262] - Risks include limited access to capital, potential failure to manage/raise capital, and the inability to settle conversions of 2026, 2027, and 2030 Notes in cash or repurchase them upon fundamental change[263][266][267] - The terms of the convertible notes could delay or prevent a company takeover, and conditional conversion features, if triggered, could adversely affect financial condition and operating results by requiring cash settlement or reclassification of debt to current liability[270][271] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered equity security sales and details issuer purchases for tax withholding obligations Recent Sales of Unregistered Securities No unregistered equity securities were issued during the three months ended June 30, 2025 - No unregistered equity securities were issued during the three months ended June 30, 2025[272] Issuer Purchases of Equity Securities The company purchased shares to satisfy tax withholding requirements for stock-based compensation awards - No changes to the Board-authorized share repurchase program as of June 30, 2025[273] Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Date | Total Number of Shares Purchased | Average Price Paid Per Share | | :---------------- | :----------------------------- | :--------------------------- | | April 1-30, 2025 | 2,054 | $18.90 | | May 1-31, 2025 | 122,156 | $26.31 | | June 1-30, 2025 | 46,514 | $36.90 | | Total | 170,724 | $29.11 | - Shares were purchased to satisfy mandatory tax withholding requirements upon vesting of stock-based compensation awards[274] Item 5. Other Information This section provides updates on executive appointments, Italian tax assessment agreements, and PSU hurdle achievements Appointment of Chief Operating Officer & Chief Financial Officer Jiri Ponrt will transition to Chief Operating Officer, and Rana Kashyap will become the new Chief Financial Officer - Jiri Ponrt appointed Chief Operating Officer, effective September 1, 2025, transitioning from his role as CFO[276] - Rana Kashyap appointed Chief Financial Officer, effective September 1, 2025, previously serving as Senior Vice President of Finance[278][279] Italy Tax Assessment Agreements An agreement in principle was reached to significantly reduce Italian tax liabilities, subject to regulatory approvals - Agreement in principle reached on August 5, 2025, to resolve Italy 2012 Assessment ($134.4 million) and Italy 2017 Assessment ($35.1 million)[282][283] - Combined total owed reduced to $24.9 million (€21.3 million), with $10.1 million already paid, leaving an additional $14.9 million (€12.7 million) to be paid[283][284] - The agreement is non-binding and subject to approvals from the Administrative Review Committee and the Central Directorate on Tax Audit for the Italian Internal Revenue Service[285] Third PSU Hurdle Achievement The third stock price hurdle for 2024 Executive PSUs was achieved, making additional shares eligible to vest - The third stock price hurdle ($31.01) for 2024 Executive PSUs was achieved on August 5, 2025[287] - Up to 299,335 equity-classified 2024 Executive PSUs are now eligible to vest, pending Compensation Committee determinations[287] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including indentures, exchange agreements, and certifications - Lists exhibits such as Indenture for 2030 Notes, First Supplemental Indenture, Form of Exchange Agreement, CEO/CFO Grant and Performance Share Agreements, and various certifications[290] Signatures The report was officially signed by Jiri Ponrt, Chief Financial Officer, on August 6, 2025 - Report signed by Jiri Ponrt, Chief Financial Officer, on August 6, 2025[294]