Groupon(US:GRPN)2024-05-09 20:06PART I. Financial Information Financial Statements and Supplementary Data (unaudited) Groupon's unaudited Q1 2024 financial statements show improved revenue, a narrowed net loss, and strengthened equity from a recent Rights Offering Condensed Consolidated Statements of Operations (Q1 2024 vs Q1 2023) | Financial Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :--- | :--- | :--- | | Revenue | $123,084 | $121,611 | | Gross profit | $110,557 | $104,711 | | Income (loss) from operations | $7,370 | $(30,565) | | Net income (loss) attributable to Groupon, Inc. | $(12,271) | $(29,147) | | Basic and diluted net income (loss) per share | $(0.33) | $(0.95) | Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $158,717 | $141,563 | | Total current assets | $276,896 | $255,583 | | Total liabilities | $539,101 | $611,268 | | Total equity (deficit) | $41,425 | $(40,312) | Condensed Consolidated Statements of Cash Flows Highlights | Cash Flow Activity | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,111) | $(76,320) | | Net cash used in investing activities | $(3,931) | $(9,013) | | Net cash provided by (used in) financing activities | $35,341 | $(29,197) | - The company completed an $80.0 million Rights Offering in January 2024, significantly improving its equity position and providing cash for debt repayment178788 Notes to Condensed Consolidated Financial Statements These notes detail asset sales, debt termination, a significant $119.3 million Italian tax assessment, restructuring charges, and segment performance - In March 2024, the company agreed to sell certain intangible assets for $10.0 million, classified as held-for-sale as of March 31, 2024, with the sale completed in April 202436 - In February 2024, the company prepaid $43.1 million to terminate its Credit Agreement using Rights Offering proceeds, eliminating $42.8 million in outstanding borrowings5557 - A subsidiary in Italy is litigating a $119.3 million tax assessment, with an appeal hearing set for July 9, 2024, despite the company believing it is without merit62112 - The 2022 Restructuring Plan is expected to cost $22.0 million to $24.1 million, with $21.2 million in pre-tax charges incurred since inception, involving approximately 1,150 position reductions99 Contribution Profit by Segment (Q1 2024 vs Q1 2023) | Segment | Q1 2024 Contribution Profit (in thousands) | Q1 2023 Contribution Profit (in thousands) | | :--- | :--- | :--- | | North America | $62,346 | $60,639 | | International | $19,402 | $19,224 | | Consolidated | $81,748 | $79,863 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strategy, operating metrics, and financial performance, highlighting improved Adjusted EBITDA and bolstered liquidity despite customer declines - The company's strategy focuses on becoming the trusted marketplace for local services and experiences by strengthening merchant inventory and enhancing customer experience135 Key Operating Metrics (Q1 2024 vs Q1 2023) | Operating Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Gross billings (in thousands) | $381,146 | $396,425 | | Units (in thousands) | 9,125 | 10,459 | | TTM active customers (in thousands) | 16,130 | 18,225 | Key Financial Metrics (Q1 2024 vs Q1 2023) | Financial Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | Revenue | $123,084 | $121,611 | | Gross profit | $110,557 | $104,711 | | Adjusted EBITDA | $19,517 | $(4,903) | | Free cash flow | $(13,820) | $(85,864) | - SG&A expenses decreased 26.9% year-over-year to $74.3 million, primarily due to lower payroll costs from restructuring efforts173174 - The company believes it has sufficient liquidity for the next 12 months, bolstered by the Rights Offering and debt prepayment, despite a pending tax assessment in Italy188 Quantitative and Qualitative Disclosures about Market Risk This section details market risks, including foreign currency exposure, limited interest rate risk from fixed-rate debt, and potential impacts of inflation - 23.5% of revenue from the International segment exposes the company to foreign currency risk, with a hypothetical 10% adverse FX change impacting working capital deficit by $0.3 million205207 - Interest rate risk is limited as the $230.0 million 2026 Notes have a fixed interest rate208 - Inflation risk could impact consumer and merchant discretionary spending and increase operating costs209 Controls and Procedures Management concluded disclosure controls were ineffective due to a material weakness, but financial statements are fairly presented, with remediation ongoing - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2024, due to an unremediated material weakness210 - A remediation plan is in progress to address the material weakness through automation, enhanced review controls, and improved reconciliation procedures211 - Despite the material weakness, management concluded that the financial statements are fairly presented in all material respects in accordance with GAAP210 PART II. Other Information Legal Proceedings This section refers to Note 6 for material legal proceedings, primarily a $119.3 million tax dispute in Italy - The report refers to Note 6 of the Condensed Consolidated Financial Statements for details on material legal proceedings216 - The key legal matter is a $119.3 million tax assessment being litigated by a subsidiary in Italy62 Risk Factors No material changes to risk factors were reported from the Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes were reported from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023218 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were issued, nor were shares repurchased, though shares were withheld for employee tax obligations - No unregistered equity securities were issued during the three months ended March 31, 2024220 - 15,130 shares were withheld from employees to satisfy mandatory tax withholding requirements upon the vesting of stock-based awards222 Other Information No officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No officers or directors adopted or terminated a Rule 10b5-1 trading arrangement during the quarter ended March 31, 2024223 Exhibits This section lists exhibits filed with the Form 10-Q, including employment agreements, officer certifications, and XBRL data files - The report includes various exhibits, such as CEO and CFO employment and compensation agreements, Sarbanes-Oxley certifications, and a report on the Italy Income Tax Assessment Matter225