Groupon(GRPN) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION FORWARD-LOOKING STATEMENTS This section cautions readers about forward-looking statements and the inherent risks that could cause actual results to differ from projections - The report contains forward-looking statements based on current expectations and projections, which involve risks and uncertainties that could cause actual results to differ materially[5] - Key risks include the ability to execute the go-forward strategy, volatility in operating results, challenges from international operations, global economic uncertainty, and the ability to retain merchants, customers, and key personnel[5] - The company operates in a highly competitive and rapidly changing environment, with new risks emerging over time, and does not undertake to update forward-looking statements[5] ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents Groupon's unaudited condensed consolidated financial statements and detailed notes for the quarter ended March 31, 2023 Condensed Consolidated Balance Sheets Metric (in thousands) | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------- | :------------- | :---------------- | | Total Assets | $650,643 | $793,117 | | Total Liabilities | $675,121 | $784,259 | | Total Equity (Deficit)| $(24,478) | $8,858 | - Total assets decreased from $793.1 million at December 31, 2022, to $650.6 million at March 31, 2023[7] - Total equity shifted from a positive $8.9 million at December 31, 2022, to a deficit of $(24.5) million at March 31, 2023[8] Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Metric (in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Revenue | $121,611 | $153,320 | | Gross Profit | $104,711 | $134,001 | | Income (loss) from operations | $(30,565) | $(32,147) | | Net income (loss) | $(28,613) | $(34,352) | | Net income (loss) attributable to Groupon, Inc. | $(29,147) | $(34,852) | | Basic and diluted income (loss) per share | $(0.95) | $(1.17) | - Revenue decreased by 20.7% from $153.3 million in Q1 2022 to $121.6 million in Q1 2023[12] - Net loss attributable to Groupon, Inc. improved from $(34.9) million in Q1 2022 to $(29.1) million in Q1 2023[12] Condensed Consolidated Statements of Stockholders' Equity (Deficit) Metric (in thousands) | Metric (in thousands) | Balance at Dec 31, 2022 | Balance at Mar 31, 2023 | | :-------------------- | :---------------------- | :---------------------- | | Total Groupon, Inc. Stockholders' Equity (Deficit) | $8,475 | $(24,758) | | Total Equity (Deficit)| $8,858 | $(24,478) | - Total Groupon, Inc. stockholders' equity (deficit) decreased from $8.5 million at December 31, 2022, to $(24.8) million at March 31, 2023, primarily due to comprehensive loss of $(35.0) million[16] - The company issued 33,803 shares under its employee stock purchase plan and recognized $2.5 million in stock-based compensation on equity-classified awards during Q1 2023[16] Condensed Consolidated Statements of Cash Flows Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(76,320) | $(78,164) | | Net cash used in investing activities | $(9,013) | $(13,916) | | Net cash used in financing activities | $(29,197) | $(2,964) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(114,678) | $(95,815) | | Cash, cash equivalents and restricted cash, end of period | $167,018 | $403,668 | - Net cash used in operating activities slightly decreased from $(78.2) million in Q1 2022 to $(76.3) million in Q1 2023[21] - Net cash used in financing activities significantly increased from $(3.0) million in Q1 2022 to $(29.2) million in Q1 2023, primarily due to payments of borrowings under the revolving credit agreement[21] Notes to Condensed Consolidated Financial Statements (unaudited) NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Groupon operates a global marketplace and faces substantial doubt about its ability to continue as a going concern despite restructuring plans - Groupon operates a global two-sided marketplace connecting consumers to merchants, with operations organized into North America and International segments[25] - The company's continued cash outflows ($76.3 million in Q1 2023) and operating losses raise substantial doubt about its ability to continue as a going concern within the next twelve months[29][183] - Management's plans to alleviate going concern doubt include the second phase of the 2022 Restructuring Plan, aiming for $100.0 million in annualized cost savings and approximately 1,000 global position reductions[30][32][184][186] - Additional strategies to enhance liquidity include further cost savings, seeking additional financing (equity or debt), and monetizing certain assets[32][186] NOTE 2. GOODWILL AND LONG-LIVED ASSETS Goodwill remains at $178.7 million, while net intangible assets decreased to $16.2 million with $5.6 million in future amortization for 2023 - Goodwill balance was $178.7 million as of March 31, 2023, with no activity during Q1 2023, and is entirely within the North America segment[38] Intangible Asset (in thousands) | Intangible Asset (in thousands) | Net Carrying Value (March 31, 2023) | Net Carrying Value (December 31, 2022) | | :------------------------------ | :---------------------------------- | :------------------------------------- | | Merchant relationships | $2,879 | $3,585 | | Trade names | $906 | $958 | | Patents | $6,567 | $6,640 | | Other intangible assets | $5,885 | $6,458 | | Total | $16,237 | $17,641 | Estimated Future Amortization Expense (in thousands) | Estimated Future Amortization Expense (in thousands) | | :----------------------------------- | | Remaining amounts in 2023: $5,587 | | 2024: $4,226 | | 2025: $2,733 | | 2026: $1,867 | | 2027: $1,191 | | Thereafter: $633 | | Total: $16,237 | NOTE 3. INVESTMENTS The carrying value of other equity investments remained unchanged at $119.5 million as of March 31, 2023 - The carrying value of other equity investments was $119.5 million as of March 31, 2023, with no changes in fair value during the quarter[42] - Groupon's percentage ownership in other equity investments, available-for-sale securities, and fair value option investments ranges from 1% to 19%[43] NOTE 4. SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS INFORMATION This note details supplemental balance sheet and income statement items, highlighting changes in interest income and accrued expenses Metric (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Interest income | $4,471 | $1,315 | | Interest expense | $(5,621) | $(2,883) | | Foreign currency gains (losses), net and other | $4,220 | $(3,312) | | Other income (expense), net | $3,070 | $(4,880) | Balance Sheet Item (in thousands) | Balance Sheet Item (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Prepaid expenses and other current assets | $40,717 | $41,101 | | Other non-current assets | $23,157 | $27,491 | | Accrued expenses and other current liabilities | $153,678 | $171,452 | | Other non-current liabilities | $17,482 | $18,586 | - Accrued marketing decreased from $19.6 million at December 31, 2022, to $11.4 million at March 31, 2023[50] - Operating lease obligations within current liabilities decreased from $37.5 million to $22.5 million[50] NOTE 5. FINANCING ARRANGEMENTS The company has $230.0 million in convertible notes and amended its credit agreement, reducing borrowing capacity to $75.0 million - The 2026 Convertible Senior Notes have a principal amount of $230.0 million, bearing interest at 1.125% per annum, maturing on March 15, 2026[54][55] - The estimated fair value of the 2026 Notes was $94.0 million as of March 31, 2023, determined using a Level 3 lattice model[55] - In March 2023, the revolving credit agreement was amended, reducing borrowing capacity from $150.0 million to $75.0 million and modifying financial covenants[58] Metric (in thousands) | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------- | :------------- | :---------------- | | Borrowings | $47,700 | $75,000 | | Letters of credit | $24,809 | $24,900 | NOTE 6. COMMITMENTS AND CONTINGENCIES Groupon is involved in various legal proceedings and settled derivative lawsuits in February 2023, with remaining indemnification liabilities of $2.8 million - Groupon is party to various legal proceedings, including shareholder derivative lawsuits, intellectual property infringement claims, and consumer class actions[62][63][64][65] - A Stipulation of Settlement for four derivative lawsuits was executed in February 2023, requiring Groupon to undertake certain corporate reforms, with attorneys' fees covered by D&O insurance[63] - Remaining indemnification liabilities were $2.8 million as of March 31, 2023, with reasonably possible losses in excess of accrued amounts estimated at approximately $11.7 million[70] NOTE 7. STOCKHOLDERS' EQUITY (DEFICIT) AND COMPENSATION ARRANGEMENTS The company has 464,968 shares available for issuance, $22.6 million in unrecognized RSU costs, and granted 3.5 million stock options in March 2023 - As of March 31, 2023, 464,968 shares of common stock were available for future issuance under the 2011 Incentive Plan[74] - Unrecognized compensation costs related to unvested restricted stock units totaled $22.6 million, expected to be recognized over a weighted-average period of 0.91 years[76] - On March 30, 2023, Groupon issued 3.5 million stock options with a per share value of $0.95, a strike price of $6.00, and a two-year vesting period[77] NOTE 8. REVENUE RECOGNITION This note details revenue recognition policies, customer credit activity, deferred costs, and the allowance for expected credit losses Customer Credits Activity (in thousands) | Customer Credits Activity (in thousands) | Amount | | :------------------------------------- | :----- | | Balance as of December 31, 2022 | $36,220| | Credits issued | $26,921| | Credits redeemed | $(25,856)| | Breakage revenue recognized | $(2,995)| | Foreign currency translation | $80 | | Balance as of March 31, 2023 | $34,370| - Deferred contract acquisition costs were $5.3 million as of March 31, 2023, with $2.3 million amortized in Q1 2023[86] - The allowance for expected credit losses on accounts receivable was $3.8 million as of March 31, 2023, a decrease from $4.5 million at December 31, 2022[89] NOTE 9. RESTRUCTURING AND RELATED CHARGES The 2022 Restructuring Plan targets $100.0 million in annualized savings through workforce reductions, incurring $18.6 million in charges to date - The 2022 Restructuring Plan, including its second phase initiated in January 2023, is expected to result in approximately $100.0 million in annualized cost savings and an overall reduction of about 1,000 global positions[30][92][124][184] - Total pre-tax charges of $18.6 million have been incurred since the inception of the 2022 Restructuring Plan, with $8.9 million incurred in Q1 2023[92][94][124] - The 2020 Restructuring Plan has incurred total pre-tax charges of $109.2 million since its inception, with actions substantially completed by December 31, 2021[94] - In January 2023, Groupon exercised an option to early terminate its lease at 600 West Chicago, incurring a $9.6 million penalty[99] NOTE 10. INCOME TAXES The effective tax rate was impacted by pretax losses in jurisdictions with valuation allowances, and the company faces a proposed $115.3 million tax assessment Metric (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Provision (benefit) for income taxes | $1,118 | $(2,675) | | Income (loss) before provision (benefit) for income taxes | $(27,495) | $(37,027) | - The effective tax rate for Q1 2023 was impacted by pretax losses in jurisdictions with valuation allowances against net deferred tax assets; a full valuation allowance is maintained against all U.S. federal and state deferred tax assets[102][164] - Groupon is subject to a proposed tax assessment of $115.3 million, including estimated interest, primarily related to transfer pricing in 2011, which it intends to vigorously defend[103][104] NOTE 11. FAIR VALUE MEASUREMENTS Fair value measurements for certain investments are classified as Level 3, with no material activity or significant nonrecurring measurements in Q1 2023 - Fair value option investments and available-for-sale securities are measured using the income approach and classified as Level 3 due to the lack of observable market data[106] - There was no material activity in recurring Level 3 fair value measurements or significant nonrecurring fair value measurements for the three months ended March 31, 2023[106][108] - The carrying values of financial instruments not carried at fair value (e.g., accounts receivable, short-term borrowings) approximate their fair values due to their short-term nature[108] NOTE 12. INCOME (LOSS) PER SHARE Groupon reported a net loss per share of $(0.95) for Q1 2023, an improvement from $(1.17) in Q1 2022 Metric (in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income (loss) attributable to common stockholders | $(29,147) | $(34,852) | | Weighted-average common shares outstanding | 30,676,145 | 29,862,879 | | Basic and diluted net income (loss) per share | $(0.95) | $(1.17) | - Potentially dilutive securities, including restricted stock units, other stock-based compensation awards, convertible senior notes, and capped call transactions, totaled 9.2 million for Q1 2023[112] NOTE 13. SEGMENT INFORMATION Both North America and International segments experienced declines in revenue and contribution profit in Q1 2023 compared to the prior year - Groupon operates in two segments: North America and International, with segment profitability assessed by contribution profit (gross profit less marketing expense)[114] Segment Revenue (in thousands) | Segment Revenue (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----------------------------- | :-------------------------------- | :-------------------------------- | | North America | $89,259 | $110,164 | | International | $32,352 | $43,156 | | Total Consolidated Revenue | $121,611 | $153,320 | Segment Contribution Profit (in thousands) | Segment Contribution Profit (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | North America | $60,639 | $66,256 | | International | $19,224 | $28,329 | | Total Consolidated Contribution Profit | $79,863 | $94,585 | - North America's total assets were $527.0 million and International's were $123.7 million as of March 31, 2023[119] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management provides its perspective on financial condition, results of operations, key performance metrics, and segment performance Overview - Groupon's strategy is to be the trusted marketplace for local services and experiences, focusing on building merchant relationships, enhancing inventory selection, and improving customer experience to drive demand[122] - Revenue is primarily generated from net commissions earned by selling goods or services on behalf of third-party merchants[123] - The 2022 Cost Savings Plan aims to reduce the expense structure by $250.0 million through restructuring and other actions, including a reduction of approximately 1,000 global positions[124] How We Measure Our Business Operating Metric (in thousands) | Operating Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------ | :-------------------------------- | :-------------------------------- | | Gross billings | $396,425 | $460,684 | | Units | 10,459 | 12,666 | | TTM Active Customers | 18,225 | 22,159 | Financial Metric (in thousands) | Financial Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------ | :-------------------------------- | :-------------------------------- | | Revenue | $121,611 | $153,320 | | Gross profit | $104,711 | $134,001 | | Adjusted EBITDA | $(4,903) | $(6,960) | | Free cash flow | $(85,864) | $(91,165) | - Key operating metrics include Gross billings (total dollar value of customer purchases), Units (number of purchases), and Active customers (unique users making a purchase in the trailing twelve months)[127] - Key financial metrics include Revenue, Gross profit, Adjusted EBITDA (non-GAAP), and Free cash flow (non-GAAP)[130] Factors Affecting Our Performance - Performance is affected by the ability to attract and retain local merchants, re-engage and retain customers to drive purchase frequency, and the impact of macroeconomic conditions such as inflation and labor shortages[136][137] - The company is focused on improving its marketplace offering and merchant value proposition, and differentiating inventory to strengthen the core marketplace[136][137] Results of Operations North America The North America segment saw declines in key metrics due to decreased demand, with revenue falling 19.0% and contribution profit down 8.5% North America Operating Metrics (in thousands) | North America Operating Metrics (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | % Change | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Total gross billings | $266,154 | $309,912 | (14.1)% | | Total units | 6,161 | 7,754 | (20.5)% | | TTM Active customers | 10,928 | 13,991 | (21.9)% | North America Financial Metrics (in thousands) | North America Financial Metrics (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | % Change | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Total revenue | $89,259 | $110,164 | (19.0)% | | Total cost of revenue | $13,317 | $15,917 | (16.3)% | | Total gross profit | $75,942 | $94,247 | (19.4)% | | Marketing | $15,303 | $27,991 | (45.3)% | | Contribution profit | $60,639 | $66,256 | (8.5)% | - The declines in North America were primarily due to decreased demand in Goods and Local categories and an overall decline in platform engagement[141][144] International The International segment experienced declines due to lower demand and unfavorable currency rates, with revenue down 25.0% and contribution profit down 32.1% International Operating Metrics (in thousands) | International Operating Metrics (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | % Change | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Total gross billings | $130,271 | $150,772 | (13.6)% | | Total units | 4,298 | 4,912 | (12.5)% | | TTM Active customers | 7,297 | 8,168 | (10.7)% | International Financial Metrics (in thousands) | International Financial Metrics (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | % Change | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Total revenue | $32,352 | $43,156 | (25.0)% | | Total cost of revenue | $3,583 | $3,402 | 5.3% | | Total gross profit | $28,769 | $39,754 | (27.6)% | | Marketing | $9,545 | $11,425 | (16.5)% | | Contribution profit | $19,224 | $28,329 | (32.1)% | - International gross billings were unfavorably impacted by $7.6 million from foreign currency exchange rates[150] - International revenue and gross profit were unfavorably impacted by $1.9 million and $1.8 million, respectively, from foreign currency exchange rates[153] Consolidated Operating Expenses Consolidated operating expenses decreased 18.6%, driven by lower marketing and SG&A costs, while restructuring charges increased significantly Consolidated Operating Expenses (in thousands) | Consolidated Operating Expenses (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | % Change | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Marketing | $24,848 | $39,416 | (37.0)% | | Selling, general and administrative | $101,634 | $126,420 | (19.6)% | | Restructuring and related charges | $8,794 | $312 | NM | | Total operating expenses | $135,276 | $166,148 | (18.6)% | - Marketing expense decreased due to traffic declines and lower investment in online marketing spend[158] - SG&A decreased primarily due to lower payroll costs, but increased as a percentage of gross profit (97.1% in Q1 2023 vs. 94.3% in Q1 2022) due to a decrease in gross profit[158][159] - Restructuring and related charges increased significantly due to severance and benefit costs from the 2022 Restructuring Plan[159] Consolidated Other Income (Expense), Net Other income improved to $3.1 million from a loss of $(4.9) million, primarily due to favorable foreign currency changes Metric (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Other income (expense), net | $3,070 | $(4,880) | - The change in other income (expense), net, was primarily related to a $7.5 million change in foreign currency gains and losses[160] Consolidated Provision (Benefit) for Income Taxes The company reported a $1.1 million tax provision in Q1 2023, a shift from a $(2.7) million benefit in Q1 2022, due to valuation allowances Metric (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | % Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------- | | Provision (benefit) for income taxes | $1,118 | $(2,675) | (141.8)% | | Effective tax rate | (4.1)% | 7.2% | | - The effective tax rates were 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[164] Non-GAAP Financial Measures - Non-GAAP financial measures, including Adjusted EBITDA, free cash flow, and foreign currency exchange rate neutral operating results, are provided to help investors understand current financial performance and prospects[166] - Adjusted EBITDA is defined as Net income (loss) from operations excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation, and other special charges and credits[167] Adjusted EBITDA Reconciliation (in thousands) | Adjusted EBITDA Reconciliation (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $(28,613) | $(34,352) | | Total adjustments | $23,710 | $27,392 | | Adjusted EBITDA | $(4,903) | $(6,960) | - Foreign currency exchange rate neutral operating results show current period results as if exchange rates remained constant from the prior year, indicating a $7.7 million unfavorable impact on gross billings and $1.9 million on revenue in Q1 2023[172][173] Liquidity and Capital Resources - Groupon's principal source of liquidity is its cash balance, which was $163.8 million as of March 31, 2023[174] Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Operating activities | $(76,320) | $(78,164) | | Investing activities | $(9,013) | $(13,916) | | Financing activities | $(29,197) | $(2,964) | Free Cash Flow Reconciliation (in thousands) | Free Cash Flow Reconciliation (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $(76,320) | $(78,164) | | Purchases of property and equipment and capitalized software | $(9,544) | $(13,001) | | Free cash flow | $(85,864) | $(91,165) | - Continued cash outflows and operating losses raise substantial doubt about the company's ability to continue as a going concern, despite management's plans for cost savings and liquidity enhancement[183][186] - As of March 31, 2023, $51.5 million in cash was held by international subsidiaries, primarily in Euros, British Pounds Sterling, Canadian dollars, and Australian dollars, with no anticipated need to repatriate funds for domestic liquidity[187] Contractual Obligations and Commitments - Contractual obligations and commitments as of March 31, 2023, did not materially change from the amounts reported in the 2022 Annual Report on Form 10-K[189] Off-Balance Sheet Arrangements - Groupon did not have any off-balance sheet arrangements as of March 31, 2023[189] Significant Accounting Policies and Critical Accounting Estimates - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, with actual results potentially differing materially from these estimates[189] - Significant accounting policies and critical accounting estimates are discussed in the Annual Report on Form 10-K for the year ended December 31, 2022[190] Recently Issued Accounting Standards - There are no recently issued accounting standards that are expected to have a material impact on Groupon's Condensed Consolidated Financial Statements[192] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Groupon is exposed to market risks from foreign currency fluctuations, interest rate changes, and inflation Foreign Currency Exchange Risk - Groupon is exposed to foreign currency risk from transacting in various foreign currencies, with 26.6% of Q1 2023 revenue derived from its International segment[195] - A hypothetical 10% adverse change in foreign currency exchange rates would increase the net working capital deficit by $9.2 million as of March 31, 2023[197] Interest Rate Risk - The 2026 Notes bear a fixed interest rate, limiting direct financial statement impact from interest rate changes, though fair value is affected by market rates[198] - Borrowings under the Existing Credit Agreement bear a variable interest rate, exposing the company to market risk from interest rate changes[198] Inflation Risk - Inflationary pressures affect merchant and customer discretionary spending, and could negatively impact operating costs if not offset by price increases or efficiency measures[199] ITEM 4. CONTROLS AND PROCEDURES Management concluded disclosure controls were not effective as of March 31, 2023, due to material weaknesses, with remediation efforts ongoing Evaluation of Disclosure Controls and Procedures - Management concluded that disclosure controls and procedures were not effective as of March 31, 2023, due to previously reported material weaknesses in internal control over financial reporting[201] - Despite the material weakness, the Condensed Consolidated Financial Statements fairly present the financial position, results of operations, and cash flows in accordance with U.S. GAAP[202] Remediation Plan and Status - The material weakness in internal control over financial reporting has not yet been fully remediated as of March 31, 2023[203] - Management has designed and implemented control activities related to complex manual calculations and will continue efforts towards full remediation[203] Changes in Internal Control over Financial Reporting - There were no changes in internal control over financial reporting during Q1 2023 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[204] Limitations on Effectiveness of Controls and Procedures - Management acknowledges that any controls and procedures can only provide reasonable assurance of achieving desired control objectives, subject to resource constraints and judgment[205] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS This section refers to Note 6 for a description of material pending legal proceedings, including shareholder and consumer claims - For a description of material pending legal proceedings, refer to Item 1, Note 6, Commitments and Contingencies, in Part I of this report[207] ITEM 1A. RISK FACTORS This section highlights the significant risk posed by the loss of key executives and challenges in retaining qualified personnel - There have been no material changes to risk factors previously disclosed in the 2022 Annual Report on Form 10-K, except as supplemented and updated regarding the loss of key executives and employees[209] - The company faces significant risk from the loss of key executives and employees, and challenges in attracting and retaining qualified personnel, exacerbated by recent leadership changes and workforce reductions[210][211] - Executive leadership transitions, workforce reductions, and significant employee turnover can cause instability, disrupt operations, impede strategy implementation, and lead to loss of institutional knowledge[210][211] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Groupon repurchased 140,819 shares in Q1 2023 to satisfy tax withholding obligations and issued no unregistered equity securities - No unregistered equity securities were issued during the three months ended March 31, 2023[213] Date | Date | Shares Purchased | Per Share | | :---------------- | :--------------- | :-------- | | January 1-31, 2023| 48,767 | $8.24 | | February 1-28, 2023| 49,387 | $7.51 | | March 1-31, 2023 | 42,665 | $6.05 | | Total | 140,819 | $7.32 | - Shares were purchased to satisfy mandatory tax withholding requirements upon vesting of stock-based compensation awards[215] ITEM 5. OTHER INFORMATION This section states that there is no other information to report for the period - No other information is reported in this section[216] ITEM 6. EXHIBITS This section lists the exhibits filed with the report, including employment agreements, certifications, and XBRL-related documents - The exhibits include various employment agreements, severance benefit agreements, and certifications, such as those for the Interim Chief Executive Officer and Chief Financial Officer[217] - XBRL Instance Document and Taxonomy Extension documents are also listed as exhibits[217]