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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number: 1-35335
Groupon, Inc.
(Exact name of registrant as specified in its charter)
Delaware27-0903295
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
600 W Chicago Avenue60654
Suite 400(Zip Code)
Chicago
Illinois(312)334-1579
(Address of principal executive offices)(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0001 per shareGRPNNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  ☒         No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).        
Yes  ☒        No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒                            Accelerated filer     ☐    
Non-accelerated filer ☐                            Smaller reporting company ☐
                                     Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐        No  ☒ 
As of August 3, 2022, there were 30,274,399 shares of the registrant's common stock outstanding.


TABLE OF CONTENTS
PART I. Financial InformationPage
PART II. Other Information

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2


PART I. FINANCIAL INFORMATION
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations. The words "may," "will," "should," "could," "expect," "anticipate," "believe," "estimate," "intend," "continue" and other similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, but are not limited to, effects of the ongoing COVID-19 pandemic or other pandemics or disease outbreaks on our business; our ability to execute, and achieve the expected benefits of, our go-forward strategy; execution of our business and marketing strategies; volatility in our operating results; challenges arising from our international operations, including fluctuations in currency exchange rates, legal and regulatory developments in the jurisdictions in which we operate and geopolitical instability resulting from the conflict in Ukraine; global economic uncertainty, including as a result of the inflationary environment; retaining and adding high quality merchants and third-party business partners; retaining existing customers and adding new customers; competing successfully in our industry; providing a strong mobile experience for our customers; managing refund risks; retaining and attracting members of our executive team and other qualified personnel; customer and merchant fraud; payment-related risks; our reliance on email, internet search engines and mobile application marketplaces to drive traffic to our marketplace; cybersecurity breaches; maintaining and improving our information technology infrastructure; reliance on cloud-based computing platforms; completing and realizing the anticipated benefits from acquisitions, dispositions, joint ventures and strategic investments; lack of control over minority investments; managing inventory and order fulfillment risks; claims related to product and service offerings; protecting our intellectual property; maintaining a strong brand; the impact of future and pending litigation; compliance with domestic and foreign laws and regulations, including the CARD Act, GDPR and regulation of the Internet and e-commerce; classification of our independent contractors or employees; risks relating to information or content published or made available on our websites or service offerings we make available; exposure to greater than anticipated tax liabilities; adoption of tax legislation; impacts if we become subject to the Bank Secrecy Act or other anti-money laundering or money transmission laws or regulations; our ability to raise capital if necessary; risks related to our access to capital and outstanding indebtedness, including our convertible senior notes; our common stock, including volatility in our stock price; our ability to realize the anticipated benefits from the capped call transactions relating to our convertible senior notes; difficulties, delays or our inability to successfully complete all or part of the announced restructuring actions or to realize the operating efficiencies and other benefits of such restructuring actions; higher than anticipated restructuring charges or changes in the timing of such restructuring charges; and those risks and other factors discussed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021, Part II, Item 1A. Risk Factors of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, as well as in our Condensed Consolidated Financial Statements, related notes, and the other financial information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission (the "SEC"). Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
As used herein, "Groupon," "the Company," "we," "our," "us" and similar terms include Groupon, Inc. and its subsidiaries, unless the context indicates otherwise.
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ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GROUPON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
June 30, 2022December 31, 2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents$315,595 $498,726 
Accounts receivable, net44,924 36,755 
Prepaid expenses and other current assets 50,018 52,570 
Total current assets410,537 588,051 
Property, equipment and software, net63,663 73,581 
Right-of-use assets - operating leases, net32,709 47,958 
Goodwill178,685 216,393 
Intangible assets, net20,752 24,310 
Investments119,541 119,541 
Deferred income taxes60,915 62,945 
Other non-current assets29,648 25,102 
Total assets$916,450 $1,157,881 
Liabilities and equity
Current liabilities:
Short-term borrowings$60,000 $100,000 
Accounts payable27,904 22,165 
Accrued merchant and supplier payables208,460 269,509 
Accrued expenses and other current liabilities197,572 239,313 
Total current liabilities493,936 630,987 
Convertible senior notes, net224,160 223,403 
Operating lease obligations44,739 58,747 
Other non-current liabilities31,530 34,448 
Total liabilities794,365 947,585 
Commitments and contingencies (see Note 6)
Stockholders' equity
Common stock, par value $0.0001 per share, 100,500,000 shares authorized; 40,482,898 shares issued and 30,188,781 shares outstanding at June 30, 2022; 40,007,255 shares issued and 29,713,138 shares outstanding at December 31, 2021
4 4 
Additional paid-in capital2,308,176 2,294,215 
Treasury stock, at cost, 10,294,117 shares at June 30, 2022 and December 31, 2021
(922,666)(922,666)
Accumulated deficit(1,282,947)(1,156,868)
Accumulated other comprehensive income (loss)19,374 (4,813)
Total Groupon, Inc. stockholders' equity121,941 209,872 
Noncontrolling interests144 424 
Total equity122,085 210,296 
Total liabilities and equity$916,450 $1,157,881 
See Notes to Condensed Consolidated Financial Statements.
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GROUPON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Revenue:
Service$153,216 $206,161 $306,536 $378,785 
Product— 59,797 — 150,990 
Total revenue153,216 265,958 306,536 529,775 
Cost of revenue:
Service19,244 21,167 38,563 39,592 
Product— 50,848 — 129,257 
Total cost of revenue19,244 72,015 38,563 168,849 
Gross profit133,972 193,943 267,973 360,926 
Operating expenses:
Marketing29,372 43,720 68,788 77,386 
Selling, general and administrative123,938 137,969 250,358 265,112 
Goodwill impairment35,424 — 35,424 — 
Long-lived asset impairment8,811 — 8,811 — 
Restructuring and related charges2,939 14,245 3,251 21,667 
Total operating expenses200,484 195,934 366,632 364,165 
Income (loss) from operations(66,512)(1,991)(98,659)(3,239)
Other income (expense), net(21,340)(2,927)(26,220)15,196 
Income (loss) from operations before provision (benefit) for income taxes(87,852)(4,918)(124,879)11,957 
Provision (benefit) for income taxes2,398 (1,789)(277)638 
Net income (loss)(90,250)(3,129)(124,602)11,319 
Net (income) loss attributable to noncontrolling interests(977)(253)(1,477)(143)
Net income (loss) attributable to Groupon, Inc.$(91,227)$(3,382)$(126,079)$11,176 
Net income (loss) per share:
Basic$(3.04)$(0.12)$(4.21)$0.38 
Diluted$(3.04)$(0.12)$(4.21)$0.37 
Weighted average number of shares outstanding:
Basic30,039,233 29,273,806 29,952,018 29,139,930 
Diluted30,039,233 29,273,806 29,952,018 30,120,851 
Comprehensive income (loss):
Net income (loss)$(90,250)$(3,129)$(124,602)$11,319 
Other comprehensive income (loss):
Net change in unrealized gain (loss) on foreign currency translation adjustments20,818 (3,331)24,187 (53,123)
Reclassification of cumulative foreign currency translation adjustments (See Note 9)
— 56 — 32,284 
Other comprehensive income (loss)20,818 (3,275)24,187 (20,839)
Comprehensive income (loss)(69,432)(6,404)(100,415)(9,520)
Comprehensive (income) loss attributable to noncontrolling interest(977)(253)(1,477)(143)
Comprehensive income (loss) attributable to Groupon, Inc. $(70,409)$(6,657)$(101,892)$(9,663)
See Notes to Condensed Consolidated Financial Statements.
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GROUPON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
(unaudited)
Groupon, Inc. Stockholders' Equity
 Common StockAdditional Paid-In CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Groupon, Inc. Stockholders' EquityNon-controlling InterestsTotal Equity
 SharesAmountSharesAmount
Balance at December 31, 202140,007,255 $4 $2,294,215 (10,294,117)$(922,666)$(1,156,868)$(4,813)$209,872 $424 $210,296 
Comprehensive income (loss)— — — — — (34,852)3,369 (31,483)500 (30,983)
Vesting of restricted stock units and performance share units308,152 — — — — — — — — — 
Shares issued under employee stock purchase plan30,022 — 591 — — — — 591 — 591 
Tax withholdings related to net share settlements of stock-based compensation awards(118,589)— (2,597)— — — — (2,597)— (2,597)
Stock-based compensation on equity-classified awards— — 8,349 — — — — 8,349 — 8,349 
Distributions to noncontrolling interest holders— — — — — — — — (814)(814)
Balance at March 31, 202240,226,840 $4 $2,300,558 (10,294,117)$(922,666)$(1,191,720)$(1,444)$184,732 $110 $184,842 
Comprehensive income (loss)— — — — — (91,227)20,818 (70,409)977 (69,432)
Vesting of restricted stock units and performance share units407,426 — — — — — — — — — 
Tax withholdings related to net share settlements of stock-based compensation awards(151,368)— (2,166)— — — — (2,166)— (2,166)
Stock-based compensation on equity-classified awards— — 9,784 — — — — 9,784 — 9,784 
Distributions to noncontrolling interest holders— — — — — — — — (943)(943)
Balance at June 30, 202240,482,898 $4 $2,308,176 (10,294,117)$(922,666)$(1,282,947)$19,374 $121,941 $144 $122,085 
See Notes to Condensed Consolidated Financial Statements.
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GROUPON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
(unaudited)
Groupon, Inc. Stockholders' Equity
Common Stock Additional Paid-In CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Groupon, Inc. Stockholders' EquityNon-controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at December 31, 202039,142,896 $4 $2,348,114 (10,294,117)$(922,666)$(1,320,886)$3,109 $107,675 $(1)$107,674 
Cumulative effect of change in accounting principle due to adoption of ASU 2020-06, net of tax (see Note 1)— — (64,319)— — 45,350 — (18,969)— (18,969)
Comprehensive income (loss)— — — — — 14,558 (17,564)(3,006)(110)(3,116)
Vesting of restricted stock units and performance share units308,954 — — — — — — — — — 
Shares issued under employee stock purchase plan23,418 — 349 — — — — 349 — 349 
Tax withholdings related to net share settlements of stock-based compensation awards(122,931)— (4,901)— — — — (4,901)— (4,901)
Purchase of capped call transactions— — (23,840)— — — — (23,840)— (23,840)
Stock-based compensation on equity-classified awards— — 8,387 — — — — 8,387 — 8,387 
Receipts from noncontrolling interest holders— — — — — — — — 36 36 
Balance at March 31, 202139,352,337 $4 $2,263,790 (10,294,117)$(922,666)$(1,260,978)$(14,455)$65,695 $(75)$65,620 
Comprehensive income (loss)— — — — — (3,382)(3,275)(6,657)253 (6,404)
Vesting of restricted stock units and performance share units707,372 — — — — — — — — — 
Tax withholdings related to net share settlements of stock-based compensation awards(254,466)— (11,716)— — — — (11,716)— (11,716)
Settlement of convertible note hedges— — 3,061 — — — — 3,061 — 3,061 
Settlement of warrants— — (1,752)— — — — (1,752)— (1,752)
Purchase of capped call transactions— — (3,576)— — — — (3,576)— (3,576)
Stock-based compensation on equity-classified awards— — 10,501 — — — — 10,501 — 10,501 
Receipts from noncontrolling interest holders— — — — — — — — 102 102 
Balance at June 30, 202139,805,243 $4 $2,260,308 (10,294,117)$(922,666)$(1,264,360)$(17,730)$55,556 $280 $55,836 
See Notes to Condensed Consolidated Financial Statements.
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GROUPON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Six Months Ended June 30,
 20222021
Operating activities  
Net income (loss)$(124,602)$11,319 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of property, equipment and software29,558 31,430 
Amortization of acquired intangible assets4,305 4,560 
Impairment of goodwill35,424 — 
Impairment of long-lived assets8,811 — 
Restructuring-related impairment1,180 — 
Stock-based compensation16,078 16,917 
Foreign currency translation adjustments reclassified into earnings— (32,284)
Change in assets and liabilities:
Accounts receivable(10,233)5,404 
Prepaid expenses and other current assets590 (4,603)
Right-of-use assets - operating leases9,258 11,055 
Accounts payable6,073 7,121 
Accrued merchant and supplier payables(54,905)(117,549)
Accrued expenses and other current liabilities(36,067)(6,737)
Operating lease obligations(13,831)(16,177)
Other, net20,005 8,774 
Net cash provided by (used in) operating activities(108,356)(80,770)
Investing activities
Purchases of property and equipment and capitalized software(22,149)(24,460)
Proceeds from sale or divestment of investment— 4,245 
Acquisitions of intangible assets and other investing activities(1,546)(1,752)
Net cash provided by (used in) investing activities(23,695)(21,967)
Financing activities
Proceeds from issuance of 2026 convertible notes— 230,000 
Proceeds from (payments of) borrowings under revolving credit agreement(40,000)(100,000)
Issuance costs for 2026 convertible notes and revolving credit agreement— (7,914)
Purchase of capped call transactions— (27,416)
Payments for the repurchase of Atairos convertible notes— (254,000)
Proceeds from the settlement of convertible note hedges— 2,315 
Payments for the settlement of warrants— (1,345)
Taxes paid related to net share settlements of stock-based compensation awards(4,703)(16,147)
Payments of finance lease obligations(435)(4,008)
Other financing activities(1,166)94 
Net cash provided by (used in) financing activities(46,304)(178,421)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(4,708)(4,016)
Net increase (decrease) in cash, cash equivalents and restricted cash(183,063)(285,174)
Cash, cash equivalents and restricted cash, beginning of period (1)
499,483 851,085 
Cash, cash equivalents and restricted cash, end of period (1)
$316,420 $565,911 
        
Six Months Ended June 30,
20222021
Supplemental disclosure of cash flow information:
Cash paid for interest$2,428 $11,251 
Income tax payments3,611 6,446 
Supplemental cash flow information on our leasing obligations:
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases$1,706 $— 

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GROUPON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
(1)The following table provides a reconciliation of Cash, cash equivalents and restricted cash shown above to amounts reported within the Condensed Consolidated Balance Sheets as of June 30, 2022, December 31, 2021, June 30, 2021 and December 31, 2020 (in thousands):
June 30, 2022December 31, 2021June 30, 2021December 31, 2020
Cash and cash equivalents$315,595 $498,726 $565,033 $850,587 
Restricted cash included in prepaid expenses and other current assets825 757 878 498 
Cash, cash equivalents and restricted cash$316,420 $499,483 $565,911 $851,085 
See Notes to Condensed Consolidated Financial Statements.
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GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Company Information
Groupon, Inc. and its subsidiaries, which commenced operations in October 2008, is a global scaled two-sided marketplace that connects consumers to merchants by offering goods and services, generally at a discount. Consumers access those marketplaces through our mobile applications and our websites.
Our operations are organized into two segments: North America and International. See Note 13, Segment Information.
COVID-19 Pandemic and Macroeconomic Conditions
The COVID-19 pandemic has changed the environment that our business operates in, which includes changes in consumer behavior and macroeconomic impacts affecting both us and our merchants. Although global economies have begun to recover from the COVID-19 pandemic as many health and safety restrictions have been lifted, certain adverse consequences of the pandemic continue to impact the macroeconomic environment and may persist for some time. Impacts to our operations may be caused by macroeconomic trends such as the ongoing COVID-19 pandemic, inflationary pressures, higher labor costs, labor shortages, supply chain challenges and resulting changes in consumer and merchant behavior. The full extent of the impact of both the COVID-19 pandemic and recent macroeconomic trends on our business, operations and financial results will depend on numerous evolving factors. We continue to monitor the pandemic and other macroeconomic trends and the potential impacts they may have on our future financial position, results of operations and cash flows. See Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information.
Unaudited Interim Financial Information
We have prepared the accompanying Condensed Consolidated Financial Statements pursuant to the rules and regulations of the SEC for interim financial reporting. These Condensed Consolidated Financial Statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals, necessary for a fair presentation of the Condensed Consolidated Balance Sheets, Statements of Operations and Comprehensive Income (Loss), Cash Flows and Stockholders' Equity for the periods presented. These Condensed Consolidated Financial Statements and notes should be read in conjunction with the audited Consolidated Financial Statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2021.
Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of Groupon, Inc. and its wholly-owned subsidiaries, majority-owned subsidiaries over which we exercise control and variable interest entities for which we are the primary beneficiary. In July 2022, we extended our arrangement through July 2025 with the strategic partner in the variable interest entity that we consolidate. All intercompany accounts and transactions have been eliminated in consolidation. Outside stockholders' interests in subsidiaries are shown on the Condensed Consolidated Financial Statements as Noncontrolling interests. Investments in entities in which we do not have a controlling financial interest are accounted for at fair value, as available-for-sale securities or at cost adjusted for observable price changes and impairments, as appropriate.
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GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Estimates in our financial statements include, but are not limited to, the following: variable consideration from unredeemed vouchers; income taxes; leases; initial valuation and subsequent impairment testing of goodwill, other intangible assets and long-lived assets; investments; receivables; customer refunds and other reserves; contingent liabilities; and the useful lives of property, equipment and software and intangible assets. Actual results could differ materially from those estimates.
Reclassifications
Certain reclassifications have been made to the Condensed Consolidated Financial Statements of prior periods to conform to the current period presentation.
Adoption of New Accounting Standards
We early adopted the guidance in ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, on January 1, 2021. The ASU removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. Additionally, the ASU removes certain conditions for equity classification related to contracts in an entity’s own equity (e.g., warrants) and amends certain guidance related to the computation of income (loss) per share for convertible instruments and contracts in an entity’s own equity.
Prior to the adoption of ASU 2020-06, we separated the convertible senior notes due 2022 (the "Atairos Notes") into their liability and equity components. Following the adoption of ASU 2020-06, the previously bifurcated equity component of the Atairos Notes was recombined with the liability component, resulting in a single liability-classified instrument. The carrying value of the Atairos Notes at transition was determined by recalculating the basis of the Atairos Notes as if the conversion option had not been bifurcated at issuance. Transaction costs related to the issuance of the Atairos Notes that were allocated to the equity component were reclassified out of Additional paid-in-capital and the amortization and the related debt discount associated with these costs was recalculated through the transition date. The transaction costs were recorded as a debt discount in the Condensed Consolidated Balance Sheets and amortized to interest expense over the remaining term of the Atairos Notes. Together with the cash interest, this resulted in an effective interest rate of 3.76%. As a result of adopting ASU 2020-06, in the first quarter of 2021, we recorded a $67.0 million net reduction to additional paid-in capital, a $19.0 million increase to Convertible senior notes, net and a $48.0 million reduction to our opening accumulated deficit as of January 1, 2021. In the fourth quarter of 2021, we recorded an additional $2.7 million adjustment to our opening accumulated deficit and additional paid-in capital related to tax impacts of our bond hedges.
NOTE 2. GOODWILL AND LONG-LIVED ASSETS
During the first quarter of 2022, we determined the impact to our business from the new variant of COVID-19 required us to evaluate our goodwill and long-lived assets for impairment and in the second quarter of 2022, we determined a downward revision of our forecast required us to evaluate our goodwill and long-lived assets for impairment. In order to evaluate goodwill and long-lived assets for impairment, we compared the fair values of our two reporting units, North America and International, and asset groups to their carrying values. In determining the fair values of our reporting units and asset groups, we used the discounted cash flow method under the income approach that uses Level 3 inputs. As a result of the interim quantitative assessments of goodwill and long-lived assets, we did not identify any goodwill or long-lived asset impairment for the three months ended March 31, 2022. For the three and six months ended June 30, 2022, we recognized $35.4 million of goodwill impairment within our International reporting unit, representing a full impairment of goodwill for that reporting unit. We also recognized $8.8 million of long-lived asset impairment related to certain asset groups within our International segment for the three and six months ended June 30, 2022, which is recorded in Long-lived asset impairment in the Condensed Consolidated Statements of Operations. We also determined that the
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GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
carrying amount of certain right-of-use assets related to our 2020 restructuring plan were not fully recoverable and recognized impairment of $1.2 million within our International segment for the three and six months ended June 30, 2022, which is recorded in Restructuring and related charges in the Condensed Consolidated Statements of Operations. See Note 9, Restructuring and Related Charges, for additional information.
Goodwill
The following table summarizes goodwill activity by segment for the six months ended June 30, 2022 (in thousands):
North America
International (1)
Consolidated
Balance as of December 31, 2021$178,685 $37,708 $216,393 
Impairment — (35,424)(35,424)
Foreign currency translation— (2,284)(2,284)
Balance as of June 30, 2022$178,685 $— $178,685 
(1)As of December 31, 2021 and June 30, 2022, the International reporting unit had a negative carrying value.
Long-Lived Assets
The following table summarizes long-lived asset impairment by asset type for the three and six months ended June 30, 2022 (in thousands):
Three and Six Months Ended June 30, 2022
Property, equipment and software, net
Leasehold improvements$1,632 
Computer hardware1,323 
Other property, equipment and software, net416 
Total Property, equipment and software, net3,371 
Right-of-use assets - operating leases, net (1)
6,620 
Total long-lived asset impairment$9,991 
(1)Includes right-of-use asset impairment of $1.2 million presented within Restructuring and related charges during the three and six months ended June 30, 2022. See Note 9, Restructuring and Related Charges, for more information.
The following table summarizes intangible assets as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Gross Carrying ValueAccumulated AmortizationNet Carrying ValueGross Carrying ValueAccumulated AmortizationNet Carrying Value
Merchant relationships$17,961 $12,827 $5,134 $19,976 $12,554 $7,422 
Trade names9,346 8,241 1,105 9,604 8,215 1,389 
Patents13,113 6,207 6,906 12,455 5,712 6,743 
Other intangible assets17,518 9,911 7,607 17,573 8,817 8,756 
Total$57,938 $37,186 $20,752 $59,608 $35,298 $24,310 
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GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Amortization of intangible assets is computed using the straight-line method over their estimated useful lives, which range from 1 to 10 years. Amortization expense related to intangible assets was $2.1 million and $2.3 million for the three months ended June 30, 2022 and 2021 and $4.3 million and $4.6 million for the six months ended June 30, 2022 and 2021. As of June 30, 2022, estimated future amortization expense related to intangible assets is as follows (in thousands):
Remaining amounts in 2022$4,191 
20237,330 
20243,850 
20252,373 
20261,511 
Thereafter1,497 
Total$20,752 
NOTE 3. INVESTMENTS
As of June 30, 2022 and December 31, 2021, our carrying value in other equity investments was $119.5 million and our available-for-sale securities and fair value option investments had a carrying value of zero. There were no changes in fair value of our investments for the three and six months ended June 30, 2022.
The following table summarizes our percentage ownership in our investments as of the dates noted below:
June 30, 2022 and December 31, 2021
Other equity investments 1%to19%
Available-for-sale securities - redeemable preferred shares1%to19%
Fair value option investments10%to19%
Other Equity Investments
In July 2022, our non-controlling equity interest in SumUp Holdings S.a.r.l. ("SumUp") changed from 2.40% to 2.29%.
During the three months ended June 30, 2021, we sold our shares in an other equity investment and recognized a gain and total cash consideration of $4.2 million, which is presented in Other income (expense), net in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2021.
NOTE 4. SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS INFORMATION
The following table summarizes Other income (expense), net for the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Interest income$1,458 $1,327 $2,773 $2,482 
Interest expense(3,206)(5,473)(6,089)(10,589)
Changes in fair value of investments— 4,245 — 4,245 
Loss on extinguishment of debt— (5,090)— (5,090)
Foreign currency gains (losses), net and other (1)
(19,592)2,064 (22,904)24,148 
Other income (expense), net$(21,340)$(2,927)$(26,220)$15,196 
(1)Includes a $32.3 million cumulative foreign currency translation adjustment gain for the six months ended June 30, 2021 that was reclassified into earnings as a result of the substantial liquidation of our subsidiary in Japan as part of our restructuring actions.
13
GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The following table summarizes Prepaid expenses and other current assets as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Prepaid expenses$22,437 $28,550 
Income taxes receivable12,571 7,711 
Deferred cloud implementation cost5,839 6,476 
Other9,171 9,833 
Total prepaid expenses and other current assets$50,018 $52,570 
The following table summarizes Other non-current assets as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Deferred contract acquisition costs$6,133 $7,080 
Deferred cloud implementation costs17,464 11,986 
Other6,051 6,036 
Total other non-current assets$29,648 $25,102 
The following table summarizes Accrued expenses and other current liabilities as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Refund reserve$11,604 $19,601 
Compensation and benefits18,471 30,367 
Accrued marketing12,954 37,900 
Restructuring-related liabilities6,396 11,349 
Customer credits49,850 56,558 
Deferred revenue2,339 3,523 
Operating and finance lease obligations32,115 32,663 
Other (1)
63,843 47,352 
Total accrued expenses and other current liabilities$197,572 $239,313 
(1)Includes certain payroll taxes deferred under the Coronavirus Aid, Relief and Economic Security ("CARES") Act of $2.7 million as of June 30, 2022 and December 31, 2021. This amount is due by December 31, 2022.
The following table summarizes Other non-current liabilities as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Contingent income tax liabilities$23,899 $24,213 
Deferred income taxes2,537 2,802 
Other5,094 7,433 
Total other non-current liabilities$31,530 $34,448 
14
GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE 5. FINANCING ARRANGEMENTS
3.25% Convertible Senior Notes due 2022
In April 2016, we issued $250.0 million in aggregate principal amount of convertible senior notes (the "Atairos Notes") in a private placement to A-G Holdings, L.P. In May 2021, we repurchased the Atairos Notes for an aggregate purchase price equal to $255.0 million, consisting of the $250.0 million outstanding principal amount, $1.0 million of accrued interest through the repurchase date and a $4.0 million prepayment penalty. In connection with the repurchase of the Atairos Notes, we recognized a $5.1 million loss on the early extinguishment, which is presented in Other income (expense), net in the Condensed Consolidated Statement of Operations.
Note Hedges and Warrants
In May 2016, we purchased convertible note hedges with respect to our common stock for a cost of $59.1 million from certain bank counterparties. The convertible note hedges were intended to reduce the potential economic dilution upon conversion of the Atairos Notes. In May 2016, we also sold warrants for total cash proceeds of $35.5 million to certain bank counterparties.
In connection with the repurchase of the Atairos Notes, we entered into agreements (collectively "the Unwind Agreements") with each of the bank counterparties in May 2021 to unwind the convertible note hedges and warrants. Pursuant to the terms of the Unwind Agreements, we received cash proceeds of $2.3 million for the settlement of the convertible note hedges and paid cash consideration of $1.3 million for the settlement of the warrants.
1.125% Convertible Senior Notes due 2026
In March and April 2021, we issued $230.0 million aggregate principal amount of convertible senior notes due 2026 (the "2026 Notes") in a private offering to qualified institutional buyers. The net proceeds from this offering were $222.1 million. The 2026 Notes bear interest at a rate of 1.125% per annum, payable semiannually in arrears on March 15 and September 15 of each year, which began on September 15, 2021. The 2026 Notes will mature on March 15, 2026, subject to earlier repurchase, redemption or conversion.
We used $27.4 million of the net proceeds from the offering to pay the cost of certain related capped call transactions and used the remaining net proceeds, together with cash on hand, to repurchase the Atairos Notes.
We account for the 2026 Notes as a single liability-classified instrument measured at amortized cost due to the adoption of ASU 2020-06. The carrying value of the 2026 Notes was determined by deducting transaction costs incurred in connection with the issuance of the 2026 Notes of $7.8 million from the principal amount. Those transaction costs were recorded as a debt discount in the Condensed Consolidated Balance Sheets and are amortized to interest expense. Together with the cash interest, this results in an effective interest rate of 1.83% over the term of the 2026 Notes. We have presented the 2026 Notes in Convertible senior notes, net in the accompanying Condensed Consolidated Balance Sheets.
The carrying amount of the 2026 Notes consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Principal amount$230,000 $230,000 
Less: debt discount(5,840)(6,597)
Net carrying amount of liability$224,160 $223,403 
We classified the fair value of the 2026 Notes as a Level 3 measurement due to the lack of observable market data over fair value inputs such as our stock price volatility over the term of the 2026 Notes and our cost of debt. The estimated fair value of the 2026 Notes as of June 30, 2022 and December 31, 2021 was $156.2 million and $183.3 million and was determined using a lattice model.
During the three and six months ended June 30, 2022 and 2021, we recognized interest costs on the 2026 Notes and the Atairos Notes as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Contractual interest$647 $1,700 $1,294 $3,732 
Amortization of debt discount379 549 757 852 
Total $1,026 $2,249 $2,051 $4,584 
Capped Call Transactions
In March and April 2021, in connection with the offering of the 2026 Notes, we entered into privately-negotiated capped call transactions with each of Barclays Bank PLC, BNP Paribas and Mizuho Markets Americas LLC. The capped call transactions cover, subject to customary adjustments, the number of shares of common stock initially underlying the 2026 Notes. The capped call transactions are expected generally to reduce potential dilution to our common stock upon any conversion of the 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, with such reduction and/or offset subject to a cap initially equal to $104.80 (which represents a premium of 100% over the last reported sale price of our common stock on The Nasdaq Global Select Market on March 22, 2021), subject to certain adjustments under the terms of the capped call transactions.
The capped call transactions are accounted for as freestanding derivatives and recorded at the initial fair value in Additional paid-in-capital in the Condensed Consolidated Balance Sheets with no recorded subsequent change to fair value as long as they meet the criteria for equity classification.
Under the if-converted method, the shares of common stock underlying the conversion option in the 2026 Notes are included in the diluted income (loss) per share denominator and the interest expense and amortization of the debt discount on the 2026 Notes, net of tax, are added to the numerator. However, upon conversion, there will be minimized economic dilution from the 2026 Notes, as exercise of the capped call transactions reduces dilution from the 2026 Notes that would have otherwise occurred when the price of our common stock exceeds the conversion price. The capped call transactions are intended to offset actual dilution from the conversion of the 2026 Notes and to effectively increase the overall conversion price from $68.12 to $104.80 per share.
Revolving Credit Agreement
In May 2019, we entered into a second amended and restated senior secured revolving credit agreement which provided for aggregate principal borrowings of up to $400.0 million (prior to the amendments described below) and matures in May 2024. In July 2020, we entered into an amendment to the revolving credit agreement (the "First Amendment") which permanently reduces borrowing capacity under our senior secured revolving credit facility from $400.0 million to $225.0 million. In March 2021, we entered into a second amendment to the revolving credit agreement (the "Second Amendment" and the revolving credit agreement as amended, the "Amended Credit Agreement") to, among other things, permit the issuance of the 2026 Notes and related capped call transactions.
We deferred debt issuance costs of $3.5 million as a result of entering into the Amended Credit Agreement. Deferred debt issuance costs are included within Other non-current assets on the Condensed Consolidated Balance Sheet as of June 30, 2022 and are amortized to interest expense over the term of the respective agreement.
The Second Amendment permanently removed requirements that we maintain (i) a maximum senior secured indebtedness to Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") ratio and (ii) unrestricted cash of not less than $250.0 million. The Second Amendment also changed the requirement to maintain a minimum fixed charge coverage ratio to a requirement to maintain a minimum interest coverage ratio. Access to our full borrowing capacity under the Amended Credit Agreement is partially restricted as of June 30, 2022 based on certain of our financial covenants. In particular, our borrowing capacity is a function of our Funded Indebtedness to EBITDA Ratio as defined in the Amended Credit Agreement.
In addition, under the Amended Credit Agreement, we are subject to various covenants, including
customary restrictive covenants that limit our ability to, among other things: incur additional indebtedness; make dividend and other restricted payments, including limiting the amount of our share repurchases; enter into sale and leaseback transactions; make investments, loans or advances; grant or incur liens on assets; sell assets; engage in mergers, consolidations, liquidations or dissolutions; and engage in transactions with related parties and other affiliates.
As of June 30, 2022, we were in compliance with the covenants under our Amended Credit Agreement. Non-compliance with the covenants under the Amended Credit Agreement may result in termination of the commitments thereunder and then any outstanding borrowings may be declared due and payable immediately. We have the right to terminate the Amended Credit Agreement or reduce the available commitments at any time.
Borrowings under the Amended Credit Agreement bear (a) interest at a rate per annum equal to (i) an adjusted LIBO rate or (ii) a customary base rate (with loans denominated in certain currencies bearing interest at rates specific to such currencies) plus an additional margin ranging between 0.50% and 2.00% and (b) commitment fees ranging from 0.25% to 0.35% on the daily amount of unused commitments. The Amended Credit Agreement also includes a replacement mechanism for the discontinuation of the adjusted LIBO rate. In addition, the Amended Credit Agreement provides for the issuance of up to $75.0 million in letters of credit, provided that the sum of outstanding borrowings and letters of credit do not exceed the maximum funding commitment of $225.0 million.
The Amended Credit Agreement is secured by substantially all of our tangible and intangible assets, including a pledge of 100% of the outstanding capital stock of substantially all of our direct and indirect domestic subsidiaries and 65% of the shares or equity interests of first-tier foreign subsidiaries and each U.S. entity whose assets substantially consist of capital stock and/or intercompany debt of one or more foreign subsidiaries, subject to certain exceptions. Certain of our domestic and foreign subsidiaries are guarantors under the Amended Credit Agreement.
We repaid $40.0 million of outstanding borrowings under our revolving credit facility during the second quarter 2022. As of June 30, 2022, we had $60.0 million of outstanding borrowings and $23.4 million of outstanding letters of credit and $100.0 million of outstanding borrowings and $25.8 million of outstanding letters of credit as of December 31, 2021 under the Amended Credit Agreement.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Our contractual obligations and commitments and future operating income under our operating subleases as of June 30, 2022 and through the date of this report, did not materially change from the amounts set forth in our 2021 Annual Report on Form 10-K.
Legal Matters and Other Contingencies
From time to time, we are party to various legal proceedings incident to the operation of our business. For example, we currently are involved in proceedings brought by merchants, employment and related matters, intellectual property infringement suits, customer lawsuits, stockholder claims relating to U.S. securities law, consumer class actions and suits alleging, among other things, violations of state consumer protection or privacy laws.
On April 28, 2020, an individual plaintiff filed a securities fraud class action complaint in the United States District Court for the Northern District of Illinois, and in July 2020, another individual was appointed as lead plaintiff (the "Securities Lawsuit"). The lawsuit covers the time period from July 30, 2019 through February 18, 2020. The lead plaintiff alleges that Groupon and certain of its officers made materially false and/or misleading statements or omissions regarding its business, operations and prospects, specifically as it relates to reiterating its full year guidance on November 4, 2019 and the Groupon Select program. On May 6, 2022, the parties reached an agreement to settle this matter in its entirety for $13.5 million and signed a term sheet memorializing preliminary terms. On June 27, 2022, the Court granted preliminary approval of the settlement and set a final settlement hearing on October 13, 2022. If the settlement receives final approval, the Court will certify a class for the purposes of settlement and all class members will be barred from filing future claims unless they opt out of the class settlement through a court-established opt-out procedure. The full amount of the $13.5 million settlement is covered under Groupon's insurance policies and was paid into an escrow fund by Groupon’s insurance carriers on
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GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
July 26, 2022. The settlement accrual and insurance receivable are recorded in Accrued expenses and other current liabilities and Accounts receivable, net on the Condensed Consolidated Balance Sheets.
In addition, four shareholders have filed separate shareholder derivative lawsuits in relation to the same events that are subject to the securities litigation described above (collectively, the "Derivative Lawsuits"). First, on September 9, 2021, a shareholder named Jonathan Frankel filed a federal derivative lawsuit in the United States District Court for District of Delaware. Second, on January 19, 2022, a shareholder named Alyssa Estreen filed a derivative lawsuit in the Court of Chancery in the State of Delaware. Third, on January 24, 2022, a shareholder named Saman Khoury filed a derivative lawsuit, also in the Court of Chancery in the State of Delaware. Finally, on May 9, 2022, a shareholder named Moriah Anders filed a lawsuit, also in the Court of Chancery in the State of Delaware. All four lawsuits name Groupon and certain of the Company's former and current officers and directors. The allegations in all four Derivative Lawsuits relate to the same time period and events that are the subject of the Securities Lawsuit and allege that the Company and its shareholders have sustained damages as a result of the conduct of certain current and former officers and directors. The Plaintiffs in each of these Derivative Lawsuits seek unspecified damages they allege were sustained by the Company, injunctive and equitable relief and attorneys’ fees. All four matters are stayed pending the outcome of the securities litigation. We intend to vigorously defend these matters, which we believe to be without merit.
In addition, third parties have from time to time claimed, and others may claim in the future, that we have infringed their intellectual property rights. We are subject to intellectual property disputes, including patent infringement claims, and expect that we will continue to be subject to intellectual property infringement claims as our services expand in scope and complexity. In the past, we have litigated such claims, and we are presently involved in several patent infringement and other intellectual property-related claims, including pending litigation or trademark disputes relating to, for example, our Goods category, some of which could involve potentially substantial claims for damages or injunctive relief. We may also become more vulnerable to third-party claims as laws such as the Digital Millennium Copyright Act are interpreted by the courts, and we become subject to laws in jurisdictions where the underlying laws with respect to the potential liability of online intermediaries are either unclear or less favorable. We believe that additional lawsuits alleging that we have violated patent, copyright or trademark laws may be filed against us. Intellectual property claims, whether meritorious or not, are time consuming and often costly to resolve, could require expensive changes in our methods of doing business or the goods we sell, or could require us to enter into costly royalty or licensing agreements.
We also are subject to consumer claims or lawsuits relating to alleged violations of consumer protection or privacy rights and statutes, some of which could involve potentially substantial claims for damages, including statutory or punitive damages. Consumer and privacy-related claims or lawsuits, whether meritorious or not, could be time consuming, result in costly litigation, damage awards, fines and penalties, injunctive relief or increased costs of doing business through adverse judgment or settlement, or require us to change our business practices, sometimes in expensive ways.
We are also subject to, or in the future may become subject to, a variety of regulatory inquiries, audits, and investigations across the jurisdictions where we conduct our business, including, for example, inquiries related to consumer protection, employment matters and/or hiring practices, marketing practices, tax, unclaimed property and privacy rules and regulations. Any regulatory actions against us, whether meritorious or not, could be time consuming, result in costly litigation, damage awards, fines and penalties, injunctive relief or increased costs of doing business through adverse judgment or settlement, require us to change our business practices in expensive ways, require significant amounts of management time, result in the diversion of significant operational resources, materially damage our brand or reputation, or otherwise harm our business.
We establish an accrued liability for loss contingencies related to legal and regulatory matters when the loss is both probable and reasonably estimable. Those accruals represent management's best estimate of probable losses and, in such cases, there may be an exposure to loss in excess of the amounts accrued. For certain of the matters described above, there are inherent and significant uncertainties based on, among other factors, the stage of the proceedings, developments in the applicable facts of law, or the lack of a specific damage claim. However, we believe that the amount of reasonably possible losses in excess of the amounts accrued for those matters would not have a material adverse effect on our business, Condensed Consolidated Financial Statements, results of operations or cash flows. Our accrued liabilities for loss contingencies related to legal and
16
GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
regulatory matters may change in the future as a result of new developments, including, but not limited to, the occurrence of new legal matters, changes in the law or regulatory environment, adverse or favorable rulings, newly discovered facts relevant to the matter, or changes in the strategy for the matter. Regardless of the outcome, litigation and other regulatory matters can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Indemnifications
In connection with the disposition of our operations in Latin America in 2017, we recorded $5.4 million in indemnification liabilities for certain tax and other matters upon the closing of the transactions as an adjustment to the net loss on the dispositions within discontinued operations at their fair value. We estimated the indemnification liabilities using a probability-weighted expected cash flow approach. Our remaining indemnification liabilities were $2.8 million as of June 30, 2022. We estimate that the total amount of obligations that are reasonably possible to arise under the indemnifications in excess of amounts accrued as of June 30, 2022 is approximately $11.7 million.
In the normal course of business to facilitate transactions related to our operations, we indemnify certain parties, including employees, lessors, service providers, merchants, and counterparties to investment agreements and asset and stock purchase agreements with respect to various matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations or covenants, or other claims made against those parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. We are also subject to increased exposure to various claims as a result of our divestitures and acquisitions, particularly in cases where we are entering into new businesses in connection with such acquisitions. We may also become more vulnerable to claims as we expand the range and scope of our services and are subject to laws in jurisdictions where the underlying laws with respect to potential liability are either unclear or less favorable. In addition, we have entered into indemnification agreements with our officers, directors and underwriters, and our bylaws contain similar indemnification obligations that cover officers, directors, employees and other agents. 
Except as noted above, it is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, any payments that we have made under these agreements have not had a material impact on our operating results, financial position or cash flows.
NOTE 7. STOCKHOLDERS' EQUITY AND COMPENSATION ARRANGEMENTS
Groupon, Inc. Incentive Plan
In August 2011, we established the Groupon, Inc. 2011 Incentive Plan, as amended and restated (the "2011 Plan"), under which options, RSUs and performance stock units for up to 11,875,000 shares of common stock are authorized for future issuance to employees, consultants and directors. The 2011 Plan is administered by the Compensation Committee of the Board. As of June 30, 2022, 3,175,925 shares of common stock were available for future issuance under the 2011 Plan.
Restricted Stock Units
The restricted stock units granted under the Groupon, Inc. Stock Plans (the "Plans") generally have vesting periods between one and four years and are amortized on a straight-line basis over their requisite service period.
17
GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The table below summarizes restricted stock unit activity under the Plans for the six months ended June 30, 2022:
Restricted Stock UnitsWeighted-Average Grant Date Fair Value (per unit)
Unvested at December 31, 20212,205,235 $31.06 
Granted1,949,064 20.17 
Vested(695,084)35.85 
Forfeited(275,517)30.70 
Unvested at June 30, 20223,183,698 $23.33 
As of June 30, 2022, $63.3 million of unrecognized compensation costs related to unvested restricted stock units are expected to be recognized over a remaining weighted-average period of 1.35 years.
Performance Share Units
We have previously granted performance share units under the Plans that vest in shares of our common stock upon the achievement of financial and operational targets specified in the respective award agreement ("Performance Share Units"). We have also granted performance share units subject to a market condition ("Market-based Performance Share Units"). Our existing Performance Share Units and Market-based Performance Share Units are subject to continued employment through the performance period dictated by the award and certification by the Compensation Committee of the Board that the specified performance conditions have been achieved.
During the six months ended June 30, 2022, 20,494 shares of our common stock were issued upon vesting of Performance Share Units granted in 2020 and prior based on the Board's certification of our financial and operational metrics for the year ended December 31, 2020. The weighted average grant date fair value of those shares was $31.97 per share. As of June 30, 2022, we have recognized substantially all expense related to the 17,269 unvested Performance Share Units and the 33,333 unvested Market-based Performance Share Units.
NOTE 8. REVENUE RECOGNITION
Refer to Note 13, Segment Information, for revenue summarized by reportable segment and category for the three and six months ended June 30, 2022 and 2021.
Customer Credits
We issue credits to customers that can be applied to future purchases through our online marketplaces. Credits are primarily issued as consideration for refunds. To a lesser extent, credits are issued for customer relationship purposes. The following table summarizes the activity in the liability for customer credits for the six months ended June 30, 2022 (in thousands):
Customer Credits
Balance as of December 31, 2021$56,558 
Credits issued75,502 
Credits redeemed (1)
(69,616)
Breakage revenue recognized(11,821)
Foreign currency translation(773)
Balance as of June 30, 2022$49,850 
(1)Customer credits can be redeemed through our online marketplaces for goods or services provided by a third-party merchant and service revenue is recognized on a net basis as the difference between the carrying amount of the customer credit liability derecognized and the amount due to the merchant for the related transaction. Historically, customer credits have primarily been used within one year of issuance; however, usage patterns have been impacted from changes in customer behavior due to COVID-19.
18
GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Costs of Obtaining Contracts
Incremental costs to obtain contracts with third-party merchants, such as sales commissions, are deferred and recognized over the expected period of the merchant arrangement, generally from 12 to 18 months. Deferred contract acquisition costs are presented in Prepaid expenses and other current assets and Other non-current assets on the Condensed Consolidated Balance Sheets. As of June 30, 2022 and December 31, 2021, deferred contract acquisition costs were $6.9 million and $8.0 million.
The amortization of deferred contract acquisition costs is classified within Selling, general and administrative expense in the Condensed Consolidated Statements of Operations. We amortized $2.7 million and $2.6 million of deferred contract acquisition costs for the three months ended June 30, 2022 and 2021, and $5.6 million and $5.2 million for the six months ended June 30, 2022 and 2021.
Allowance for Expected Credit Losses on Accounts Receivable
Accounts receivable primarily represents the net cash due from credit card and other payment processors and from merchants and performance marketing networks for commissions earned on consumer purchases. We establish an allowance for expected credit losses on accounts receivables based on identifying the following customer risk characteristics: size, type of customer, and payment terms offered in the normal course of business. Receivables with similar risk characteristics are grouped into pools. For each pool, we consider the historical credit loss experience, current economic conditions, bankruptcy filings, published or estimated credit default rates, age of the receivable and any recoveries in assessing the lifetime expected credit losses.
The following table summarizes the activity in the allowance for expected credit losses on accounts receivable for the six months ended June 30, 2022 (in thousands):
Allowance for Expected Credit Losses
Balance as of December 31, 2021$7,974 
Change in provision(1,114)
Write-offs(934)
Foreign currency translation(478)
Balance as of June 30, 2022$5,448 
Variable Consideration for Unredeemed Vouchers
For merchant agreements with redemption payment terms, the merchant is not paid its share of the sale price for a voucher sold through one of our online marketplaces until the customer redeems the related voucher. If the customer does not redeem a voucher with such merchant payment terms, we retain all of the gross billings for that voucher, rather than retaining only our net commission. We estimate the variable consideration from vouchers that will not ultimately be redeemed using our historical voucher redemption experience and recognize that amount as revenue at the time of sale. We apply a constraint to ensure it is probable that a significant reversal of revenue will not occur in future periods. We recognized variable consideration from unredeemed vouchers that were sold in a prior period of $4.3 million and $10.2 million for the three months ended June 30, 2022 and 2021, and $3.0 million and $13.0 million for the six months ended June 30, 2022 and 2021. We have also observed redemption rates lower than our historical estimates for vouchers sold at the onset of the COVID-19 pandemic, the substantial majority of which reached expiration during the year ended December 31, 2021. Although redemption rates for vouchers sold in more recent periods have improved, the impact of COVID-19 on redemption behavior in future periods is still uncertain. When actual redemptions differ from our estimates, the effects could be material to the Condensed Consolidated Financial Statements.
NOTE 9. RESTRUCTURING AND RELATED CHARGES
In April 2020, the Board approved a multi-phase restructuring plan related to our previously announced strategic shift and as part of the cost cutting measures implemented in response to the impact of COVID-19 on our business. We have incurred total pretax charges of $110.0 million since the inception of the restructuring plan.
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GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Our actions under the plan were substantially completed by December 31, 2021, and our current and future charges or credits will be from changes in estimates. Our restructuring plan included workforce reductions of approximately 1,600 positions globally, the exit or discontinuation of the use of certain leases and other assets, impairments of our right-of-use and other long-lived assets, and the exit of our operations in New Zealand and Japan. In the first quarter 2021, we substantially liquidated our subsidiary in Japan and reclassified $32.3 million of cumulative foreign currency translation gains into earnings, which is presented in Other income (expense), net on the Condensed Consolidated Statements of Operations for the six months ended June 30, 2021. Costs incurred related to the restructuring plan are classified as Restructuring and related charges on the Condensed Consolidated Statements of Operations.
The following tables summarize costs incurred by segment related to the restructuring plan for the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended June 30, 2022
Employee Severance and Benefit Costs (Credits)Legal and Advisory CostsRight-of-Use Asset Impairments and Lease-related Charges (Credits)Total Restructuring Charges (Credits)
North America$— $86 $818 $904 
International473 24 1,538 2,035 
Consolidated$473 $110 $2,356 $2,939 
Three Months Ended June 30, 2021
Employee Severance and Benefit Costs (Credits)Legal and Advisory CostsLease-related Charges (Credits)Total Restructuring Charges (Credits)
North America$(10)$424 $623 $1,037 
International12,605 50 553 13,208 
Consolidated$12,595 $474 $1,176 $14,245 
Six Months Ended June 30, 2022
Employee Severance and Benefit Costs (Credits)Legal and Advisory CostsRight-of-Use Asset Impairments and Lease-related Charges (Credits)Total Restructuring Charges (Credits)
North America$1 $130 $1,174 $1,305 
International184 61 1,701 1,946 
Consolidated$185 $191 $2,875 $3,251 
Six Months Ended June 30, 2021
Employee Severance and Benefit Costs (Credits)Legal and Advisory CostsLease-related Charges (Credits)Total Restructuring Charges (Credits)
North America$432 $1,231 $1,364 $3,027 
International19,065 28 (453)18,640 
Consolidated$19,497 $1,259 $911 $21,667 
As a part of our restructuring plan, we terminated or modified several of our leases. In other cases we vacated our leased facilities, and some of those facilities are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases. We recognized $1.2 million in impairment related to those leases during the three and six months ended June 30, 2022. See Note 2, Goodwill and Long-Lived Assets, for additional information. Rent expense, including amortization of the right-of-use asset and accretion of the operating lease liability, sublease income, termination and modification gains and losses, and other variable lease costs related to the leased facilities vacated as part of our restructuring plan are presented within Restructuring and related charges in the Condensed Consolidated Statements of Operations. The current
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GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
and non-current liabilities associated with these leases continue to be presented within Other current liabilities and Operating lease obligations in the Condensed Consolidated Balance Sheets.
The following table summarizes restructuring liability activity (in thousands):
Employee Severance and Benefit CostsOther Exit CostsTotal
Balance as of December 31, 2021
11,038 311 11,349 
Charges payable in cash 185 191 376 
Cash payments(4,534)(145)(4,679)
Foreign currency translation(591)(59)(650)
Balance as of June 30, 2022 (1)
$6,098 $298 $6,396 
(1)Substantially all of the remaining cash payments for these costs are expected to be disbursed through 2022.
In August 2022, we initiated a multi-phase cost savings plan designed to reduce our expense structure to align with our go-forward business and financial objectives (the “2022 Cost Savings Plan”). The 2022 Cost Savings Plan included a restructuring plan, approved by our Board on August 5, 2022 (the “2022 Restructuring Plan”). The first phase of the 2022 Restructuring Plan is expected to include an overall reduction of approximately 500 positions globally, with the majority of these reductions expected to occur by the end of 2022 and the remainder in early 2023. In connection with these actions, we expect to record total pre-tax charges of $10.0 million to $20.0 million. Substantially all of the pre-tax charges are expected to be paid in cash and will relate to employee severance and compensation benefits, with an immaterial amount of charges related to other exit costs. We expect to begin the next phase of our restructuring actions under this plan in 2023, and we anticipate these actions will include a focus on reducing our technology platform costs following the completion of our transition to the cloud.
NOTE 10. INCOME TAXES
Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items.
Provision (benefit) for income taxes and income (loss) from operations before provision (benefit) for income taxes for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Provision (benefit) for income taxes$2,398 $(1,789)$(277)$638 
Income (loss) from operations before provision (benefit) for income taxes(87,852)(4,918)(124,879)11,957 
Our U.S. Federal income tax rate is 21%. The primary factor impacting the effective tax rate for the three and six months ended June 30, 2022 and 2021 was the pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets. The three and six months ended June 30, 2022 were also impacted by the reduction to our estimated annual tax rate due to an increase in expected annual losses. The three and six months ended June 30, 2021 were also impacted by the benefit of non-taxable items and the U.S. research and development tax credit. For the three and six months ended June 30, 2021, we had a full valuation recorded against the U.S. federal and state deferred tax assets. We recorded a partial valuation allowance release in Q4 2021. For the three and six months ended June 30, 2022, we continue to maintain a valuation allowance in the U.S. against capital losses, deferred tax assets that will convert into capital losses upon reversal, and state credits that we are not expecting to be able to realize. We expect that our consolidated effective tax rate in future periods will continue to differ significantly from the U.S. federal income tax rate as a result of our tax obligations in jurisdictions with profits and valuation allowances in jurisdictions with losses.
We are currently undergoing income tax audits in multiple jurisdictions. It is likely that the examination phase of some of those audits will conclude in the next 12 months. There are many factors, including factors outside of our control, which influence the progress and completion of those audits. We are subject to claims for tax assessments by foreign jurisdictions, including a proposed assessment for $112.0 million, inclusive of
estimated incremental interest from the original assessment. We believe that the assessment, which primarily relates to transfer pricing on transactions occurring in 2011, is without merit and we intend to vigorously defend ourselves in that matter. There could be potential increases in our liabilities for uncertain tax positions from the ultimate resolution of that assessment. We believe it is reasonably possible that reductions of up to $26.2 million in unrecognized tax benefits may occur within the 12 months following June 30, 2022 upon closing of income tax audits or the expiration of applicable statutes of limitations.
In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations. An actual repatriation from our non-U.S. subsidiaries could be subject to foreign and U.S. state income taxes. Aside from limited exceptions for which the related deferred tax liabilities recognized as of June 30, 2022 and December 31, 2021 are immaterial, we do not intend to distribute earnings of foreign subsidiaries for which we have an excess of the financial reporting basis over the tax basis of our investments and therefore have not recorded any deferred taxes related to such amounts. The actual tax cost resulting from a distribution would depend on income tax laws and circumstances at the time of distribution. Determination of the amount of unrecognized deferred tax liability related to the excess of the financial reporting basis over the tax basis of our foreign subsidiaries is not practical due to the complexities associated with the calculation.
NOTE 11. FAIR VALUE MEASUREMENTS
Fair value is defined under U.S. GAAP as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability.
In determining fair value, we use various valuation approaches within the fair value measurement framework. The valuation methodologies used for our assets and liabilities measured at fair value and their classification in the valuation hierarchy are summarized below:
Fair value option investments and available-for-sale securities. We have fair value option investments and available-for-sale securities that we measure using the income approach. We have classified these investments as Level 3 due to the lack of observable market data over fair value inputs such as cash flow projections and discount rates.

Contingent consideration. During the first quarter 2021, we settled a contingent consideration arrangement to the former owners of a business previously acquired in 2018. We use the income approach to value contingent consideration obligations based on future financial performance. We have previously classified our contingent consideration as Level 3 due to the lack of relevant observable market data over fair value inputs such as probability-weighting of payment outcomes.
There was no material activity in the fair value of recurring Level 3 fair value measurements for the three and six months ended June 30, 2022 and 2021.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis, including assets that are written down to fair value as a result of an impairment or increased due to an observable price change in an orderly transaction.
We recognized $35.4 million in non-cash impairment charges related to goodwill and $10.0 million in non-cash impairment charges related to long-lived assets, of which $1.2 million is included in Restructuring and related charges on our Condensed Consolidated Statements of Operations, for the three and six months ended June 30, 2022. See Note 2, Goodwill and Long-Lived Assets, and Note 9, Restructuring and Related Charges, for additional information.
During the three months ended June 30, 2021, we sold our shares in an other equity investment and recognized a gain of $4.2 million. See Note 3, Investments, for additional information.
21
GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
We did not record any other significant nonrecurring fair value measurements for the three and six months ended June 30, 2022 and 2021.
Estimated Fair Value of Financial Assets and Liabilities Not Measured at Fair Value
Our financial instruments not carried at fair value consist primarily of accounts receivable, restricted cash, short-term borrowings, accounts payable, accrued merchant and supplier payables and accrued expenses. The carrying values of those assets and liabilities approximate their respective fair values as of June 30, 2022 and December 31, 2021 due to their short-term nature.
NOTE 12. INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of common shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities include restricted stock units, performance share units, ESPP shares, warrants, capped call transactions and convertible senior notes. If dilutive, those potentially dilutive securities are reflected in diluted net income (loss) per share using the treasury stock method, except for the convertible senior notes, which are subject to the if-converted method.
The following table sets forth the computation of basic and diluted net income (loss) per share of common stock for the three and six months ended June 30, 2022 and 2021 (in thousands, except share amounts and per share amounts):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Basic and diluted net income (loss) per share:
Numerator
Net income (loss) $(90,250)$(3,129)$(124,602)$11,319 
Less: Net income (loss) attributable to noncontrolling interests977 253 1,477 143 
Basic net income (loss) attributable to common stockholders(91,227)(3,382)(126,079)11,176 
Diluted net income (loss) attributable to common stockholders(91,227)(3,382)(126,079)11,176 
Denominator
Shares used in computation of basic net income (loss) per share30,039,233 29,273,806 29,952,018 29,139,930 
Weighted-average effect of diluted securities
Restricted stock units
— — — 893,440 
Performance share units and other stock-based compensation awards
— — — 87,481 
Shares used in computation of diluted net income (loss) per share30,039,233 29,273,806 29,952,018 30,120,851 
Basic net income (loss) per share:$(3.04)$(0.12)$(4.21)$0.38 
Diluted net income (loss) per share:$(3.04)$(0.12)$(4.21)$0.37 
22
GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The following weighted-average potentially dilutive instruments are not included in the diluted net income (loss) per share calculations above because they would have had an antidilutive effect on the net income (loss) per share:
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Restricted stock units3,073,435 1,871,251 2,560,609 189,132 
Performance share units and other stock-based compensation awards158,344 104,393 106,263 — 
Convertible Senior notes due 2022 (1)
— 1,119,251 — 1,717,033 
Convertible Senior notes due 2026 (1)
3,376,400 3,352,202 3,376,400 1,676,101 
Warrants— 1,195,564 — 1,755,189 
Capped call transactions3,376,400 3,352,202 3,376,400 1,773,968 
Total9,984,579 10,994,863 9,419,672 7,111,423 
(1)We apply the if-converted method in computing the effect of our convertible senior notes on diluted net income (loss) per share, whereby the numerator of our diluted net income (loss) per share computations is adjusted for interest expense, net of tax, and the denominator is adjusted for the number shares into which the convertible senior notes could be converted. The effect is only included in the calculation of income (loss) per share for those instruments for which it would reduce income (loss) per share. See Note 5, Financing Arrangements, for additional information.
We had outstanding Market-based Performance Share Units as of June 30, 2022 and 2021 that were eligible to vest into shares of common stock subject to the achievement of specified performance or market conditions. Contingently-issuable shares are excluded from the computation of diluted income (loss) per share if, based on current period results, the shares would not be issuable if the end of the reporting period were the end of the contingency period. As of June 30, 2022, there were up to 33,333 shares of common stock issuable upon vesting of outstanding Market-based Performance Share Units that were excluded from the table above as the performance or market conditions were not satisfied as of the end of the period.
23
GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE 13. SEGMENT INFORMATION
The segment information reported in the tables below reflects the operating results that are regularly reviewed by our chief operating decision maker to assess performance and make resource allocation decisions. Our operations are organized into two segments: North America and International. Our measure of segment profitability is contribution profit, defined as gross profit less marketing expense, which is consistent with how management reviews the operating results of the segments. Contribution profit measures the amount of marketing investment needed to generate gross profit. Other operating expenses are excluded from contribution profit as management does not review those expenses by segment. We completed a transition to a third-party goods marketplace in International in 2021, and therefore we no longer generate product revenue in our Goods category. For the three and six months ended June 30, 2022, adjustments to accruals previously established in our Goods category related to product are presented within service.
The following table summarizes revenue by reportable segment and category for the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
North America
Service revenue:
Local$101,469 $139,853 $198,390 $265,227 
Goods6,204 12,792 14,498 28,077 
Travel4,451 8,143 9,400 14,102 
Total service revenue112,124 160,788 222,288 307,406 
Product revenue - Goods— — — 626 
Total North America revenue (1)
112,124 160,788 222,288 308,032 
International
Service revenue:
Local32,111 40,329 65,261 63,518 
Goods5,748 1,580 12,527 3,550 
Travel3,233 3,464 6,460 4,311 
Total service revenue41,092 45,373 84,248 71,379 
Product revenue - Goods— 59,797 — 150,364 
Total International revenue (1)
$41,092 $105,170 $84,248 $221,743 
(1)North America includes revenue from the United States of $110.1 million and $159.0 million for the three months ended June 30, 2022 and 2021, and $218.9 million and $304.0 million for the six months ended June 30, 2022 and 2021. International includes revenue from the United Kingdom of $36.9 million for the three months ended June 30, 2021. International includes revenue from the United Kingdom and France of $79.0 million and $48.8 million for the six months ended June 30, 2021. There were no other individual countries that represented more than 10% of consolidated total revenue for the three and six months ended June 30, 2022 and 2021. Revenue is attributed to individual countries based on the location of the customer.
24
GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The following table summarizes cost of revenue by reportable segment and category for the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
North America
Service cost of revenue:
Local$13,877 $15,032 $27,040 $27,980 
Goods1,248 2,023 2,707 4,252 
Travel1,096 1,531 2,391 2,772 
Total service cost of revenue16,221 18,586 32,138 35,004 
Product cost of revenue - Goods— — — 458 
Total North America cost of revenue16,221 18,586 32,138 35,462 
International
Service cost of revenue:
Local2,676 2,137 5,272 3,899 
Goods— 134 396 245 
Travel347 310 757 444 
Total service cost of revenue3,023 2,581 6,425 4,588 
Product cost of revenue - Goods— 50,848 — 128,799 
Total International cost of revenue$3,023 $53,429 $6,425 $133,387 
25
GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The following table summarizes contribution profit by reportable segment for the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
North America
Revenue$112,124 $160,788 $222,288 $308,032 
Cost of revenue16,221 18,586 32,138 35,462 
Marketing19,629 33,177 47,620 55,945 
Contribution profit76,274 109,025 142,530 216,625 
International
Revenue41,092 105,170 84,248 221,743 
Cost of revenue3,023 53,429 6,425 133,387 
Marketing9,743 10,543 21,168 21,441 
Contribution profit28,326 41,198 56,655 66,915 
Consolidated
Revenue153,216 265,958 306,536 529,775 
Cost of revenue19,244 72,015 38,563 168,849 
Marketing29,372 43,720 68,788 77,386 
Contribution profit104,600 150,223 199,185 283,540 
Selling, general and administrative123,938 137,969 250,358 265,112 
Goodwill impairment35,424 — 35,424 — 
Long-lived asset impairment8,811 — 8,811 — 
Restructuring and related charges2,939 14,245 3,251 21,667 
Income (loss) from operations$(66,512)$(1,991)$(98,659)$(3,239)
The following table summarizes total assets by reportable segment as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Total assets:
North America (1)
$795,544 $964,523 
International (1)
120,906 193,358 
Consolidated total assets$916,450 $1,157,881 
(1)North America contains assets from the United States of $782.3 million and $951.8 million as of June 30, 2022 and December 31, 2021. International contained assets from the United Kingdom of $101.3 million and $126.0 million as of June 30, 2022 and December 31, 2021. There were no other individual countries that represented more than 10% of consolidated total assets as of June 30, 2022 and December 31, 2021.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our Condensed Consolidated Financial Statements and related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under Part II, Item 1A, Risk Factors, and elsewhere in this Quarterly Report. See Part I, Forward-Looking Statements, for additional information.
Overview
Groupon is a global scaled two-sided marketplace that connects consumers to merchants. Consumers access our marketplace through our mobile applications and our websites. We operate in two segments, North America and International, and operate in three categories, Local, Goods and Travel. See Item 1, Note 13, Segment Information, for additional information.
Our strategy is to be the trusted marketplace where customers go to buy local services and experiences. We plan to unlock value by improving our expense structure and offering more differentiated inventory to stimulate customer engagement and demand.
Currently, we generate service revenue from Local, Travel, and Goods categories. Service revenue primarily represents the net commissions earned from selling goods or services on behalf of third-party merchants. Service revenue is reported on a net basis as the purchase price collected from the customer less the portion of the purchase price that is payable to the third-party merchant. We also earn commissions when customers make purchases with retailers using digital coupons accessed through our websites and mobile applications.
In prior periods, we also generated product revenue from sales of our first-party Goods merchandise inventory. For product revenue transactions, we were the primary party responsible for providing the merchandise to the customer, we had inventory risk and we had discretion in establishing prices. As such, product revenue was reported on a gross basis as the purchase price received from the customer. Product revenue, including associated shipping revenue, was recognized when the merchandise was delivered to the customer. We completed the transition to a third-party marketplace in North America in 2020, and in International in 2021.
COVID-19 Pandemic and Macroeconomic Conditions
The COVID-19 pandemic has changed the environment that our business operates in, which includes changes in consumer behavior and macroeconomic impacts affecting both us and our merchants. Although global economies have begun to recover from the COVID-19 pandemic as many health and safety restrictions have been lifted, certain adverse consequences of the pandemic continue to impact the macroeconomic environment and may persist for some time. Impacts to our operations may be caused by macroeconomic trends such as the ongoing COVID-19 pandemic, inflationary pressures, higher labor costs, labor shortages, supply chain challenges and resulting changes in consumer and merchant behavior.
2022 Cost Savings Plan
In August 2022, we initiated a multi-phase cost savings plan designed to reduce our expense structure to align with our go-forward business and financial objectives (the “2022 Cost Savings Plan”). The 2022 Cost Savings Plan included a restructuring plan, approved by our Board on August 5, 2022 (the “2022 Restructuring Plan”), as well as other planned savings to be achieved through other actions, such as future reductions in our facilities footprint at natural lease terminations (or by exercising existing options in leases) and elective decisions to eliminate vacant positions rather than rehire. We estimate that the first phase of the 2022 Cost Savings Plan could result in approximately $150 million in run-rate cost savings by the end of 2023.
The first phase of the 2022 Restructuring Plan is expected to include an overall reduction of approximately 500 positions globally, with the majority of these reductions expected to occur by the end of 2022
and the remainder in early 2023. In connection with these actions, we expect to record total pre-tax charges of $10.0 million to $20.0 million. Substantially all of the pre-tax charges are expected to be paid in cash and will relate to employee severance and compensation benefits, with an immaterial amount of charges related to other exit costs. We expect to begin the next phase of our restructuring actions under this plan in 2023, and we anticipate these actions will include a focus on reducing our technology platform costs following the completion of our transition to the cloud.
27

How We Measure Our Business
We use several operating and financial metrics to assess the progress of our business and make decisions on where to allocate capital, time and technology investments. Certain of the financial metrics are reported in accordance with U.S. GAAP and certain of those metrics are considered non-GAAP financial measures. As our business evolves, we may make changes to the key financial and operating metrics that we use to measure our business. For further information and reconciliations to the most applicable financial measures under U.S. GAAP, refer to our discussion under Non-GAAP Financial Measures in the Results of Operations section.
Operating Metrics
•Gross billings is the total dollar value of customer purchases of goods and services. Gross billings is presented net of customer refunds, order discounts and sales and related taxes. The substantial majority of our service revenue transactions are comprised of sales of vouchers and similar transactions in which we collect the transaction price from the customer and remit a portion of the transaction price to the third-party merchant who will provide the related goods or services. For these transactions, gross billings differs from revenue reported in our Condensed Consolidated Statements of Operations, which is presented net of the merchant's share of the transaction price. As noted above in Overview, beginning in 2021 for our North America segment and 2022 for our International segment, gross billings from our Goods category is primarily reported on a net basis within service revenue. Gross billings is an indicator of our growth and business performance as it measures the dollar volume of transactions generated through our marketplaces. Tracking gross billings on service revenue transactions also allows us to monitor the percentage of gross billings that we are able to retain after payments to merchants. However, we are focused on achieving long-term gross profit and Adjusted EBITDA growth.
•Units are the number of purchases during the reporting period, before refunds and cancellations, made either through one of our online marketplaces, a third-party marketplace, or directly with a merchant for which we earn a commission. We do not include purchases with retailers using digital coupons accessed through our websites or mobile applications in our units metric. We consider units to be an important indicator of the total volume of business conducted through our marketplaces. We report units on a gross basis prior to the consideration of customer refunds and therefore units are not always a good proxy for gross billings.
•Active customers are unique user accounts that have made a purchase during the trailing twelve months ("TTM") either through one of our online marketplaces or directly with a merchant for which we earned a commission. 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 offerings is trending. Some customers could establish and make purchases from more than one account, so it is possible that our active customer metric may count certain customers more than once in a given period. We do not include consumers who solely make purchases with retailers using digital coupons accessed through our websites or mobile applications in our active customer metric, nor do we include consumers who solely make purchases of our inventory through third-party marketplaces with which we partner.
Our gross billings and units for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Gross billings$460,165 $607,589 $920,849 $1,161,561 
Units 12,052 16,678 24,718 34,481 
Our active customers for the trailing twelve months ended June 30, 2022 and 2021 were as follows (in thousands):
Trailing Twelve Months Ended June 30,
20222021
TTM Active Customers (in thousands)21,068 24,946 
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Financial Metrics
•Revenue is currently earned through service revenue transactions which we generate commissions by selling goods or services on behalf of third-party merchants. Service revenue from those transactions is reported on a net basis as the purchase price collected from the customer for the offering less an agreed upon portion of the purchase price paid to the third-party merchant. Service revenue also includes commissions we earn when customers make purchases with retailers using digital coupons accessed through our digital properties. In prior periods, we generated product revenue from our sales of first-party Goods inventory. Our product revenue from these first-party transactions, which were direct sales of merchandise inventory, was the purchase price received from the customer. As noted above in Overview, beginning in 2021 for our North America segment and 2022 for our International segment, revenue from our Goods category is primarily reported on a net basis within service revenue.
•Gross profit reflects the net margin we earn after deducting our cost of revenue from our revenue. In prior periods for our International segment, there is a lack of comparability between product revenue, which is reported on a gross basis, and service revenue, which primarily consists of transactions reported on a net basis. Due to the lack of comparability of revenue generated from our Goods category in prior periods, we believe that gross profit is an important measure for evaluating our performance.
•Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) from operations excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation, acquisition-related expense (benefit), net and other special charges and credits, including items that are unusual in nature or infrequently occurring. For further information and a reconciliation to net income (loss), refer to our discussion under Non-GAAP Financial Measures in the Results of Operations section.
•Free cash flow is a non-GAAP financial measure that comprises net cash provided by (used in) operating activities from operations less purchases of property and equipment and capitalized software. For further information and a reconciliation to Net cash provided by (used in) operating activities, refer to our discussion in the Liquidity and Capital Resources section.
The following table presents the above financial metrics for the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Revenue$153,216 $265,958 $306,536 $529,775 
Gross profit133,972 193,943 267,973 360,926 
Adjusted EBITDA5,728 40,963 (1,232)71,335 
Free cash flow(39,340)(46,785)(130,505)(105,230)
Operating Expenses
•Marketing expense consists primarily of online marketing costs, such as search engine marketing, advertising on social networking sites and affiliate programs, and offline marketing costs, such as television and radio advertising. Additionally, compensation expense for marketing employees is classified within marketing expense. We record these costs within Marketing on the Condensed Consolidated Statements of Operations when incurred. From time to time, we have offerings from well-known national merchants for customer acquisition and 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 those transactions generate no service revenue and our net cost (i.e., the excess of the amount owed to the merchant over the amount paid by the customer) is classified as marketing expense. We evaluate marketing expense as a percentage of gross profit because it gives us an indication of how well our marketing spend is driving gross profit performance.
•Selling, general and administrative ("SG&A") expenses include selling expenses such as sales commissions and other compensation expenses for sales representatives, as well as costs associated with supporting the sales function such as technology, telecommunications and travel. General and administrative expenses include compensation expense for employees involved in customer service, operations, technology and product development, as well as general corporate functions, such as finance,
29

legal and human resources. Additional costs in general and administrative include depreciation and amortization, rent, professional fees, litigation costs, travel and entertainment, recruiting, office supplies, maintenance, certain technology costs and other general corporate costs. We evaluate SG&A expense as a percentage of gross profit because it gives us an indication of our operating efficiency.
•Restructuring and related charges represent severance and benefit costs for workforce reductions, impairments and other facilities-related costs and professional advisory fees. See Item 1, Note 9, Restructuring and Related Charges, for additional information about our restructuring plan.
Factors Affecting Our Performance
Impact of COVID-19 pandemic and macroeconomic conditions. We have been, and may continue to be, impacted by adverse consequences of the macroeconomic environment, including but not limited to, the ongoing COVID-19 pandemic, inflationary pressures, higher labor costs, labor shortages, supply chain challenges and resulting changes in consumer and merchant behavior. We will continue to monitor the impact of COVID-19 and macroeconomic conditions on our business.
Attracting and retaining local merchants. As we focus on our local experiences marketplace, we depend on our ability to attract and retain merchants who are willing to offer their experiences on our platform. Merchants can withdraw their offerings from our marketplace at any time, and their willingness to continue offering services through our marketplace depends on the effectiveness of our marketplace offering.
Re-engaging and retaining customers to drive purchase frequency. To re-engage and retain customers to drive purchase frequency, we are focused on strengthening our core marketplace by improving inventory density, the customer experience and trust. In addition to our efforts to improve our inventory density we are exploring opportunities to differentiate our inventory. Our efforts in this area include testing of curated collections and our intention to launch a test of concept for a new Beauty & Wellness marketplace.
30

Results of Operations
North America
Operating Metrics
North America segment gross billings and units for the three and six months ended June 30, 2022 and 2021 were as follows (dollars in thousands):
Three Months Ended June 30, Six Months Ended June 30,
20222021% Change20222021% Change
Gross billings
Service gross billings:
Local$265,114 $337,192 (21.4)%$514,404 $618,488 (16.8)%
Goods30,462 56,643 (46.2)67,070 125,785 (46.7)
Travel21,692 39,232 (44.7)45,706 70,692 (35.3)
Total service gross billings317,268 433,067 (26.7)627,180 814,965 (23.0)
Product gross billings - Goods— — — — 626 (100.0)
Total gross billings$317,268 $433,067 (26.7)$627,180 $815,591 (23.1)
Units
Local6,355 8,873 (28.4)%12,536 17,139 (26.9)%
Goods1,141 2,330 (51.0)2,591 5,411 (52.1)
Travel91 191 (52.4)214 384 (44.3)
Total units7,587 11,394 (33.4)15,341 22,934 (33.1)
North America TTM active customers for the trailing twelve months ended June 30, 2022 and 2021 were as follows (in thousands):
Trailing Twelve Months Ended June 30,
20222021% Change
TTM Active customers13,089 15,202 (13.9)%
Comparison of the Three Months Ended June 30, 2022 and 2021:
North America gross billings, units, and TTM active customers decreased by $115.8 million, 3.8 million and 2.1 million for the three months ended June 30, 2022 compared with the prior year period. These decreases were primarily attributable to a decline in engagement on our platform that resulted in fewer unit sales and lower gross billings.
Comparison of the Six Months Ended June 30, 2022 and 2021:
North America gross billings and units decreased by $188.4 million and 7.6 million for the six months ended June 30, 2022 compared with the prior year period. These decreases were primarily attributable to a decline in engagement on our platform and the new variant of COVID-19 in the first quarter that resulted in fewer unit sales and lower gross billings.
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Financial Metrics
North America segment revenue, cost of revenue and gross profit for the three and six months ended June 30, 2022 and 2021 were as follows (dollars in thousands):
Three Months Ended June 30, Six Months Ended June 30,
20222021% Change20222021% Change
Revenue
Service revenue
Local$101,469 $139,853 (27.4)%$198,390 $265,227 (25.2)%
Goods6,204 12,792 (51.5)14,498 28,077 (48.4)
Travel4,451 8,143 (45.3)9,400 14,102 (33.3)
Total service revenue112,124 160,788 (30.3)222,288 307,406 (27.7)
Product revenue - Goods— — — — 626 (100.0)
Total revenue$112,124 $160,788 (30.3)$222,288 $308,032 (27.8)
Cost of revenue
Service cost of revenue
Local$13,877 $15,032 (7.7)%$27,040 $27,980 (3.4)%
Goods1,248 2,023 (38.3)2,707 4,252 (36.3)
Travel1,096 1,531 (28.4)2,391 2,772 (13.7)
Total service cost of revenue16,221 18,586 (12.7)32,138 35,004 (8.2)
Product cost of revenue - Goods— — — — 458 (100.0)
Total cost of revenue$16,221 $18,586 (12.7)$32,138 $35,462 (9.4)
Gross profit
Service gross profit
Local$87,592 $124,821 (29.8)%$171,350 $237,247 (27.8)%
Goods4,956 10,769 (54.0)11,791 23,825 (50.5)
Travel3,355 6,612 (49.3)7,009 11,330 (38.1)
Total service gross profit95,903 142,202 (32.6)190,150 272,402 (30.2)
Product gross profit - Goods— — — — 168 (100.0)
Total gross profit$95,903 $142,202 (32.6)$190,150 $272,570 (30.2)
Service margin (1)
35.3 %37.1 %35.4 %37.7 %
% of Consolidated revenue73.2 %60.5 %72.5 %58.1 %
% of Consolidated cost of revenue84.3 25.8 83.3 21.0 
% of Consolidated gross profit71.6 73.3 71.0 75.5 
(1)Represents the percentage of service gross billings that we retained after deducting the merchant's share from revenue.
Comparison of the Three Months Ended June 30, 2022 and 2021:
North America revenue, cost of revenue and gross profit decreased by $48.7 million, $2.4 million and $46.3 million for the three months ended June 30, 2022 compared with the prior year period. The revenue and gross profit declines were primarily attributable to a decline in engagement on our platform that resulted in fewer unit sales and lower gross billings.
Comparison of the Six Months Ended June 30, 2022 and 2021:
North America revenue, cost of revenue and gross profit decreased by $85.7 million, $3.3 million and $82.4 million for the six months ended June 30, 2022 compared with the prior year period. The revenue and gross profit declines were primarily attributable to a decline in engagement on our platform and the new variant of COVID-19 in the first quarter that resulted in fewer unit sales and lower gross billings.
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Marketing and Contribution Profit
We define contribution profit as gross profit less marketing expense. North America contribution profit for the three and six months ended June 30, 2022 and 2021 was as follows (dollars in thousands):
Three Months Ended June 30, Six Months Ended June 30,
20222021% Change20222021% Change
Marketing$19,629 $33,177 (40.8)%$47,620 $55,945 (14.9)%
% of Gross profit20.5 %23.3 %25.0 %20.5 %
Contribution profit$76,274 $109,025 (30.0)%$142,530 $216,625 (34.2)%
Comparison of the Three Months Ended June 30, 2022 and 2021:
North America marketing expense and marketing expense as a percentage of gross profit decreased for the three months ended June 30, 2022 compared with the prior year period driven primarily by accelerated traffic declines and a lower investment in our online marketing spend.
North America contribution profit decreased for the three months ended June 30, 2022 compared with the prior year period primarily due to a decrease in gross profit.
Comparison of the Six Months Ended June 30, 2022 and 2021:
North America marketing expense decreased for the six months ended June 30, 2022 compared with the prior year period driven primarily by accelerated traffic declines and a lower investment in our online marketing spend. North America marketing expense as a percentage of gross profit increased for the six months ended June 30, 2022 compared with the prior year period driven primarily by a decrease in gross profit.
North America contribution profit decreased for the six months ended June 30, 2022 compared with the prior year period primarily due to a decrease in gross profit.
International
Operating Metrics
International segment gross billings and units for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
20222021% Change20222021% Change
Gross billings
Service gross billings:
Local$96,784 $89,877 7.7 %$196,444 $159,551 23.1 %
Goods30,861 8,453 NM66,211 16,201 NM
Travel15,252 16,395 (7.0)31,014 19,854 56.2 
Total service gross billings142,897 114,725 24.6 293,669 195,606 50.1 
Product gross billings - Goods— 59,797 (100.0)— 150,364 (100.0)
Total gross billings$142,897 $174,522 (18.1)$293,669 $345,970 (15.1)
Units
Local3,181 2,583 23.2 %6,510 4,674 39.3 %
Goods1,205 2,598 (53.6)2,676 6,719 (60.2)
Travel79 103 (23.3)191 154 24.0 
Total units4,465 5,284 (15.5)9,377 11,547 (18.8)
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International TTM active customers for the trailing twelve months ended June 30, 2022 and 2021 were as follows (in thousands):
Trailing Twelve Months Ended June 30,
20222021% Change
TTM Active customers7,979 9,744 (18.1)%
Comparison of the Three Months Ended June 30, 2022 and 2021:
International gross billings, units and TTM active customers decreased by $31.6 million, 0.8 million and 1.8 million for the three months ended June 30, 2022 compared with the prior year period. These declines were primarily attributable to a de-emphasis on our Goods category and a decline in engagement in our Goods category on our platform, partially offset by higher demand in our Local category and improved customer refund levels. In addition, there was a $16.9 million unfavorable impact from year-over-year changes in foreign currency exchange rates.
Comparison of the Six Months Ended June 30, 2022 and 2021:
International gross billings and units decreased by $52.3 million and 2.2 million for the six months ended June 30, 2022 compared with the prior year period. These declines were primarily attributable to a de-emphasis on our Goods category and a decline in engagement in our Goods category on our platform, partially offset by higher demand in our Local category and improved customer refund levels. In addition, there was a $26.2 million unfavorable impact from year-over-year changes in foreign currency exchange rates.
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Financial Metrics
International segment revenue, cost of revenue and gross profit for the three and six months ended June 30, 2022 and 2021 were as follows (dollars in thousands):
Three Months Ended June 30, Six Months Ended June 30,
20222021% Change20222021% Change
Revenue
Service revenue:
Local$32,111 $40,329 (20.4)%$65,261 $63,518 2.7 %
Goods5,748 1,580 NM12,527 3,550 NM
Travel3,233 3,464 (6.7)6,460 4,311 49.8 
Total service revenue41,092 45,373 (9.4)84,248 71,379 18.0 
Product revenue - Goods— 59,797 (100.0)— 150,364 (100.0)
Total revenue$41,092 $105,170 (60.9)$84,248 $221,743 (62.0)
Cost of revenue
Service cost of revenue:
Local$2,676 $2,137 25.2 %$5,272 $3,899 35.2 %
Goods— 134 (100.0)396 245 61.6 
Travel347 310 11.9 757 444 70.5 
Total service cost of revenue3,023 2,581 17.1 6,425 4,588 40.0 
Product cost of revenue - Goods— 50,848 (100.0)— 128,799 (100.0)
Total cost of revenue$3,023 $53,429 (94.3)$6,425 $133,387 (95.2)
Gross profit
Service gross profit:
Local$29,435 $38,192 (22.9)%$59,989 $59,619 0.6 %
Goods5,748 1,446 NM12,131 3,305 NM
Travel2,886 3,154 (8.5)5,703 3,867 47.5 
Total service gross profit38,069 42,792 (11.0)77,823 66,791 16.5 
Product gross profit - Goods— 8,949 (100.0)— 21,565 (100.0)
Total gross profit$38,069 $51,741 (26.4)$77,823 $88,356 (11.9)
Service margin (1)
28.8 %39.5 %28.7 %36.5 %
% of Consolidated revenue26.8 %39.5 %27.5 %41.9 %
% of Consolidated cost of revenue15.7 74.2 16.7 79.0 
% of Consolidated gross profit28.4 26.7 29.0 24.5 
(1)Represents the percentage of service gross billings that we retained after deducting the merchant's share from revenue.
Comparison of the Three Months Ended June 30, 2022 and 2021
International revenue, cost of revenue and gross profit decreased by $64.1 million, $50.4 million and $13.7 million for the three months ended June 30, 2022 compared with the prior year period. Those decreases were primarily due to the transition of Goods to a third-party marketplace model, a decline in engagement on our platform in our Goods category and lower variable consideration from unredeemed vouchers, partially offset by an increase in Local gross billings and improved customer refund levels. Revenue and gross profit also had an unfavorable impact of $4.9 million and $4.5 million from year-over-year changes in foreign currency exchange rates.
Comparison of the Six Months Ended June 30, 2022 and 2021
International revenue, cost of revenue and gross profit decreased by $137.5 million, $127.0 million and $10.5 million for the six months ended June 30, 2022 compared with the prior year period. Those decreases were primarily due to the transition of Goods to a third-party marketplace model, a decline in engagement on our platform in our Goods category and lower variable consideration from unredeemed vouchers, partially offset by an
35

increase in Local gross billings and improved customer refund levels. Revenue and gross profit also had unfavorable impacts of $7.5 million and $7.0 million from year-over-year changes in foreign currency exchange rates.
Marketing and Contribution Profit
International marketing and contribution profit for the three and six months ended June 30, 2022 and 2021 were as follows (dollars in thousands):
Three Months Ended June 30, Six Months Ended June 30,
20222021% Change20222021% Change
Marketing$9,743 $10,543 (7.6)%$21,168 $21,441 (1.3)%
% of Gross profit25.6 %20.4 %27.2 %24.3 %
Contribution profit$28,326 $41,198 (31.2)%$56,655 $66,915 (15.3)%
Comparison of the Three Months Ended June 30, 2022 and 2021:
International marketing expense decreased for the three months ended June 30, 2022 compared with the prior year period primarily due to accelerated traffic declines and a lower investment in our online marketing spend. Marketing expense as a percentage of gross profit increased due to a decrease in gross profit.
The decrease in International contribution profit for the three months ended June 30, 2022 compared with the prior year period was primarily attributable to a decrease in gross profit.
Comparison of the Six Months Ended June 30, 2022 and 2021:
International marketing expense remained largely flat for the six months ended June 30, 2022 compared with the prior year period. Marketing expense as a percentage of gross profit increased for the three months ended June 30, 2022 compared with the prior year period due to a decrease in gross profit.
The decrease in International contribution profit for the six months ended June 30, 2022 compared with the prior year period was primarily attributable to a decrease in gross profit.
Consolidated Operating Expenses
Operating expenses for the three and six months ended June 30, 2022 and 2021 were as follows (dollars in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
% Change20222021% Change
Marketing$29,372 $43,720 (32.8)%$68,788 $77,386 (11.1)%
Selling, general and administrative123,938 137,969 (10.2)250,358 265,112 (5.6)
Goodwill impairment35,424 — NM35,424 — NM
Long-lived asset impairment8,811 — NM8,811 — NM
Restructuring and related charges2,939 14,245 (79.4)3,251 21,667 (85.0)
Total operating expenses$200,484 $195,934 2.3 $366,632 $364,165 0.7 
% of Gross profit:
Marketing21.9 %22.5 %25.7 %21.4 %
Selling, general and administrative92.5 %71.1 %93.4 %73.5 %
Comparison of the Three Months Ended June 30, 2022 and 2021:
Marketing expense and marketing expense as a percentage of gross profit decreased for the three months ended June 30, 2022 compared with the prior year period due to accelerated traffic declines and a lower investment in our online marketing spend.
SG&A decreased for the three months ended June 30, 2022 compared with the prior year period primarily due to lower payroll and consulting fees. SG&A as a percentage of gross profit increased compared with the prior year period primarily due to consolidated gross profit decreasing, as discussed above.
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As a result of the downward revision of our forecast and subsequent interim quantitative assessment of goodwill and long-lived assets, we recognized goodwill impairment of $35.4 million and long-lived asset impairment of $8.8 million during the second quarter 2022. See Item 1, Note 2, Goodwill and Long-Lived Assets, for additional information. We had no similar activity in the prior year period.
Restructuring and related charges decreased for the three months ended June 30, 2022 compared with the prior year period as the actions from our 2020 restructuring plan were substantially completed by December 31, 2021. See Item 1, Note 9, Restructuring and Related Charges, for additional information.
Comparison of the Six Months Ended June 30, 2022 and 2021:
Marketing expense decreased for the six months ended June 30, 2022 compared with the prior year period due to accelerated traffic declines and a lower investment in our online marketing spend. Marketing expense as a percentage of gross profit increased for the six months ended June 30, 2022 compared to the prior year period due to a decrease in gross profit.
SG&A decreased for the six months ended June 30, 2022 compared with the prior year period due to lower payroll, partially offset by higher cloud migration costs. SG&A as a percentage of gross profit increased for the six months ended June 30, 2022 compared with the prior year period primarily due to consolidated gross profit decreasing, as discussed above.
We recognized goodwill impairment of $35.4 million and long-lived asset impairment of $8.8 million for the six months ended June 30, 2022, as described above. See Item 1, Note 2, Goodwill and Long-Lived Assets, for additional information. We had no similar activity in the prior year period.
Restructuring and related charges decreased for the six months ended June 30, 2022 compared with the prior year period as the actions from our 2020 restructuring plan were substantially completed by December 31, 2021. See Item 1, Note 9, Restructuring and Related Charges, for additional information.
Consolidated Other Income (Expense), Net
Other income (expense), net includes interest income, interest expense, gains and losses on fair value option investments, impairments of investments, loss on extinguishment of debt and foreign currency gains and losses, primarily resulting from intercompany balances with our subsidiaries that are denominated in foreign currencies.
Other income (expense), net for the three and six months ended June 30, 2022 and 2021 was as follows (dollars in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Other income (expense), net$(21,340)$(2,927)$(26,220)$15,196 
Comparison of the Three Months Ended June 30, 2022 and 2021:
The change in Other income (expense), net for the three months ended June 30, 2022 as compared with the prior year period is primarily related to a $21.7 million change in foreign currency gains and losses.
Comparison of the Six Months Ended June 30, 2022 and 2021:
The change in Other income (expense), net for the six months ended June 30, 2022 as compared with the prior year period is primarily related to a $47.1 million change in foreign currency gains and losses.
37

Consolidated Provision (Benefit) for Income Taxes
Provision (benefit) for income taxes for the three and six months ended June 30, 2022 and 2021 were as follows (dollars in thousands):
Three Months Ended June 30, Six Months Ended June 30,
20222021% Change20222021% Change
Provision (benefit) for income taxes$2,398 $(1,789)NM$(277)$638 (143.4)%
Effective tax rate(2.7)%36.4 %0.2 %5.3 %
Comparison of the Three Months Ended June 30, 2022 and 2021:
The effective tax rates for the three months ended June 30, 2022 and 2021 were impacted by pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets. The three months ended June 30, 2022 were also impacted by the reduction to our estimated annual tax rate due to an increase in expected annual losses. The three months ended June 30, 2021 were also impacted by the benefit of non-taxable items and the U.S. research and development tax credit. For the three months ended June 30, 2021, we had a full valuation recorded against the U.S. federal and state deferred tax assets. We recorded a partial valuation allowance release in Q4 2021. For the three months ended June 30, 2022, we continue to maintain a valuation allowance in the U.S. against capital losses, deferred tax assets that will convert into capital losses upon reversal, and state credits that we are not expecting to be able to realize. We expect that our consolidated effective tax rate in future periods will continue to differ significantly from the U.S. federal income tax rate as a result of our tax obligations in jurisdictions with profits and valuation allowances in jurisdictions with losses. See Item 1, Note 10, Income Taxes, for additional information relating to tax audits and assessments and regulatory and legal developments that may impact our business and results of operations in the future.
Comparison of the Six Months Ended June 30, 2022 and 2021:
The effective tax rates for the six months ended June 30, 2022 and 2021 were impacted by pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets. The six months ended June 30, 2022 were also impacted by the reduction to our estimated annual tax rate due to an increase in expected annual losses. The six months ended June 30, 2021 were also impacted by the benefit of non-taxable items and the U.S. research and development tax credit. For the six months ended June 30, 2021, we had a full valuation recorded against the U.S. federal and state deferred tax assets. We recorded a partial valuation allowance release in Q4 2021. For the six months ended June 30, 2022, we continue to maintain a valuation allowance in the U.S. against capital losses, deferred tax assets that will convert into capital losses upon reversal, and state credits that we are not expecting to be able to realize. We expect that our consolidated effective tax rate in future periods will continue to differ significantly from the U.S. federal income tax rate as a result of our tax obligations in jurisdictions with profits and valuation allowances in jurisdictions with losses. See Item 1, Note 10, Income Taxes, for additional information relating to tax audits and assessments and regulatory and legal developments that may impact our business and results of operations in the future.
38

Non-GAAP Financial Measures
In addition to financial results reported in accordance with U.S. GAAP, we have provided the following non-GAAP financial measures: Adjusted EBITDA, free cash flow and foreign currency exchange rate neutral operating results. Those non-GAAP financial measures are intended to aid investors in better understanding our current financial performance and prospects for the future as seen through the eyes of management. We believe that those non-GAAP financial measures facilitate comparisons with our historical results and with the results of peer companies who present similar measures (although other companies may define non-GAAP measures differently than we define them, even when similar terms are used to identify such measures). However, those non-GAAP financial measures are not intended to be a substitute for those reported in accordance with U.S. GAAP.
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP performance measure that we define as Net income (loss) excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation and other special charges and credits, including items that are unusual in nature or infrequently occurring. Our definition of Adjusted EBITDA may differ from similar measures used by other companies, even when similar terms are used to identify such measures. Adjusted EBITDA is a key measure used by our management and Board of Directors to evaluate operating performance, generate future operating plans and make strategic decisions for the allocation of capital. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors. However, Adjusted EBITDA is not intended to be a substitute for Net income (loss).
We exclude stock-based compensation expense and depreciation and amortization because they are primarily non-cash in nature and we believe that non-GAAP financial measures excluding those items provide meaningful supplemental information about our operating performance and liquidity. For the three and six months ended June 30, 2022, special charges and credits included impairment of goodwill and long-lived assets and charges related to our restructuring plan. We exclude special charges and credits from Adjusted EBITDA because we believe that excluding those items provides meaningful supplemental information about our core operating performance and facilitates comparisons with our historical results.
The following is a reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure, Net income (loss), for the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Net income (loss)$(90,250)$(3,129)$(124,602)$11,319 
Adjustments:
Stock-based compensation8,572 9,738 16,078 16,917 
Depreciation and amortization16,494 18,971 33,863 35,990 
Goodwill impairment35,424 — 35,424 — 
Long-lived asset impairment8,811 — 8,811 — 
Restructuring and related charges (1)
2,939 14,245 3,251 21,667 
Other (income) expense, net (2)
21,340 2,927 26,220 (15,196)
Provision (benefit) for income taxes2,398 (1,789)(277)638 
Total adjustments95,978 44,092 123,370 60,016 
Adjusted EBITDA$5,728 $40,963 $(1,232)$71,335 
(1)Includes right-of-use asset impairment of $1.2 million presented within Restructuring and related charges during the three and six months ended June 30, 2022. See Note 9, Restructuring and Related Charges, for more information.
(2)Includes a $32.3 million cumulative foreign currency translation adjustment gain that was reclassified into earnings for the six months ended June 30, 2021 as a result of the substantial liquidation of our subsidiary in Japan as part of our restructuring actions. Refer to Item 1, Note 9, Restructuring and Related Charges.
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Free cash flow. Free cash flow is a non-GAAP liquidity measure that comprises net cash provided by operating activities less purchases of property and equipment and capitalized software. We use free cash flow to conduct and evaluate our business because we believe that it typically represents a more useful measure of cash flows because purchases of fixed assets, software developed for internal use and website development costs are necessary components of our ongoing operations. Free cash flow is not intended to represent the total increase or decrease in our cash balance for the applicable period.
Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. In addition, free cash flow reflects the impact of the timing difference between when we are paid by customers and when we pay merchants and suppliers. Therefore, we believe it is important to view free cash flow as a complement to our Condensed Consolidated Statements of Cash Flows. For a reconciliation of free cash flow to the most comparable U.S. GAAP financial measure, see Liquidity and Capital Resources below.
Foreign currency exchange rate neutral operating results. Foreign currency exchange rate neutral operating results show current period operating results as if foreign currency exchange rates had remained the same as those in effect in the prior year period. Those measures are intended to facilitate comparisons to our historical performance.
The following tables represent the effect on our Condensed Consolidated Statements of Operations from changes in exchange rates versus the U.S. dollar for the three and six months ended June 30, 2022 (in thousands):
Three Months Ended June 30, 2022
At Avg. Q2 2021 Rates (1)
Exchange Rate Effect (2)
As Reported
Gross billings$477,094 $(16,929)$460,165 
Revenue158,113 (4,897)153,216 
Cost of revenue19,598 (354)19,244 
Gross profit138,515 (4,543)133,972 
Marketing30,624 (1,252)29,372 
Selling, general and administrative128,694 (4,756)123,938 
Goodwill impairment39,518 (4,094)35,424 
Long-lived asset impairment10,066 (1,255)8,811 
Restructuring and related charges3,210 (271)2,939 
Income (loss) from operations(73,597)7,085 (66,512)
Six Months Ended June 30, 2022
At Avg. Q2 2021 Rates (1)
Exchange Rate Effect (2)
As Reported
Gross billings$947,108 $(26,259)$920,849 
Revenue314,078 (7,542)306,536 
Cost of revenue39,130 (567)38,563 
Gross profit274,948 (6,975)267,973 
Marketing70,814 (2,026)68,788 
Selling, general and administrative258,136 (7,778)250,358 
Goodwill impairment39,518 (4,094)35,424 
Long-lived asset impairment10,066 (1,255)8,811 
Restructuring and related charges3,500 (249)3,251 
Income (loss) from operations(107,086)8,427 (98,659)
(1)     Represents the financial statement balances that would have resulted had exchange rates in the reporting period been the same as those in effect in the prior year period.
(2)     Represents the increase or decrease in the reported amount resulting from changes in exchange rates from those in effect in the prior year period.
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Liquidity and Capital Resources
Our principal sources of liquidity are cash flows from operations and cash balances, which includes outstanding borrowings under the Amended Credit Agreement, totaling $315.6 million as of June 30, 2022.
Our net cash flows from operating, investing and financing activities for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30, 2022
2022202120222021
Cash provided by (used in):
Operating activities$(30,192)$(34,365)$(108,356)$(80,770)
Investing activities(9,779)(9,223)(23,695)(21,967)
Financing activities(43,340)(241,039)(46,304)(178,421)
Our free cash flow for the three and six months ended June 30, 2022 and 2021 and a reconciliation to the most comparable U.S. GAAP financial measure, Net cash provided by (used in) operating activities, for those periods were as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Net cash provided by (used in) operating activities$(30,192)$(34,365)$(108,356)$(80,770)
Purchases of property and equipment and capitalized software (9,148)(12,420)(22,149)(24,460)
Free cash flow$(39,340)$(46,785)$(130,505)$(105,230)
Our revenue-generating transactions are primarily structured such that we collect cash up-front from customers and pay third-party merchants at a later date, either based upon the customer's redemption of the related voucher or fixed payment terms, which are generally biweekly throughout the term of the merchant's offering.
Our cash balances fluctuate significantly throughout the year based on many variables, including gross billings growth rates, the timing of payments to merchants and suppliers and the mix of transactions between Goods and Local.
Net cash provided by (used in) operating activities
For the six months ended June 30, 2022, our net cash used in operating activities was $108.4 million, as compared with $124.6 million net loss. That difference is primarily attributable to a $79.1 million net decrease from changes in working capital, which was primarily related to lower cash inflows from bookings and timing of payments to merchants, partially offset by non-cash items, including goodwill and long-lived asset impairment, depreciation and amortization and stock-based compensation.
For the six months ended June 30, 2021, our net cash used in operating activities was $80.8 million, as compared with a $11.3 million net income. That difference is primarily due to a $113.6 million net decrease from changes in working capital and other assets and liabilities. The working capital impact was related to seasonal timing of payments to inventory suppliers and the impact of COVID-19. The difference between our net cash used in operating activities and our net income is also due to $21.5 million of non-cash items, including a $32.3 million foreign currency translation gain that was reclassified into earnings due to our substantial liquidation of Japan, depreciation and amortization and stock-based compensation.
Net cash provided by (used in) investing activities
For the six months ended June 30, 2022, our net cash used in investing activities was $23.7 million, which included purchases of property and equipment and capitalized software of $22.1 million.
For the six months ended June 30, 2021, our net cash used in investing activities was $22.0 million, which included purchases of property and equipment and capitalized software of $24.5 million.
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Net cash provided by (used in) financing activities
For the six months ended June 30, 2022, our net cash used in financing activities was $46.3 million, which included $40.0 million in payments under our revolving credit agreement and $4.7 million in taxes paid related to net share settlements of stock-based compensation awards.
For the six months ended June 30, 2021, our net cash used in financing activities was $178.4 million. Our net cash used in financing activities included payments of $254.0 million for the repurchase of the Atairos Notes, $100.0 million in payments under our revolving credit agreement, $27.4 million related to the purchase of capped call transactions, $16.1 million in taxes paid related to net share settlements of stock based compensation awards and $7.9 million in cash paid for issuance costs for the 2026 Notes and the Amended Credit Agreement, partially offset by $230.0 million of proceeds received from the issuance of the 2026 Notes.
In July 2020, we entered into an amendment to the revolving credit agreement (the "First Amendment") which permanently reduces borrowing capacity under our senior secured revolving credit facility from $400.0 million to $225.0 million. In March 2021, we entered into a second amendment to the revolving credit agreement (the "Second Amendment" and the revolving credit agreement as amended, the "Amended Credit Agreement") to, among other things, permit the issuance of the 2026 Notes and related capped call transactions. We repaid $40.0 million of the outstanding borrowings under our revolving credit facility during the second quarter 2022. We remained in compliance with the applicable covenants as of June 30, 2022 under our Amended Credit Agreement. However, our access to the full capacity of our Amended Credit Agreement is partially restricted and our liquidity is impacted accordingly. We plan to seek covenant relief in the second half of 2022, although there can be no assurances given that we will be able to obtain such relief. See Item 1, Note 5, Financing Arrangements for additional information.
We believe that our cash balances, excluding borrowings under the Amended Credit Agreement, and cash generated from operations will be sufficient to meet our working capital requirements and capital expenditures for at least the next 12 months. We plan to continue to actively manage and optimize our cash balances and liquidity, working capital and operating expenses, although there can be no assurances that we will be able to do so.
As of June 30, 2022, we had $48.7 million in cash held by our international subsidiaries, which is primarily denominated in Euros, British Pounds Sterling, Canadian dollars, and, to a lesser extent, Australian dollars. In general, it is our practice and intention to re-invest the earnings of our non-U.S. subsidiaries in those operations. We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business.
In May 2018, the Board authorized us to repurchase up to $300.0 million of our common stock under our share repurchase program. As of June 30, 2022, $245.0 million of common stock remained available for purchase under our program. The timing and amount of share repurchases, if any, will be determined based on market conditions, limitations under the Amended Credit Agreement, share price, available cash and other factors, and the share repurchase program may be terminated at any time. Repurchases will be made in compliance with SEC rules and other legal requirements and may be made, in part, under a Rule 10b5-1 plan, which permits share repurchases when we might otherwise be precluded from doing so.
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Contractual Obligations and Commitments
Our contractual obligations and commitments as of June 30, 2022 did not materially change from the amounts set forth in our 2021 Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2022.
Significant Accounting Policies and Critical Accounting Estimates
The preparation of Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts and classifications of assets and liabilities, revenue and expenses, and related disclosure of contingent liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. Our significant accounting policies are discussed in Part II, Item 8, Note 2, Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, 2021. In addition, refer to the critical accounting estimates under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021.
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Recently Issued Accounting Standards
There are no accounting standards that have been issued but not yet adopted that are expected to have a material impact on our Condensed Consolidated Financial Statements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business, including the effect of foreign currency fluctuations, interest rate changes and inflation. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.
Foreign Currency Exchange Risk
We transact business in various foreign currencies other than the U.S. dollar, principally the Euro, British pound sterling, Canadian dollar and Australian dollar, which exposes us to foreign currency risk. For the three and six months ended June 30, 2022, we derived approximately 26.8% and 27.5% of our revenue from our International segment. Revenue and related expenses generated from our international operations are generally denominated in the local currencies of the corresponding countries. The functional currencies of our subsidiaries that either operate or support these markets are generally the same as the corresponding local currencies. However, the results of operations of, and certain of our intercompany balances associated with, our international operations are exposed to foreign currency exchange rate fluctuations. Upon consolidation, as exchange rates vary, our revenue and other operating results may differ materially from expectations, and we may record significant gains or losses on the re-measurement of intercompany balances.
We assess our foreign currency exchange risk based on hypothetical changes in rates utilizing a sensitivity analysis that measures the potential impact on working capital based on a 10% change (increase and decrease) in currency rates. We use a current market pricing model to assess the changes in the value of the U.S. dollar on foreign currency denominated monetary assets and liabilities. The primary assumption used in this model is a hypothetical 10% weakening or strengthening of the U.S. dollar against those currency exposures as of June 30, 2022 and December 31, 2021.
As of June 30, 2022, our net working capital deficit (defined as current assets less current liabilities) from subsidiaries that are subject to foreign currency translation risk was $40.9 million. The potential increase in this working capital deficit from a hypothetical 10% adverse change in quoted foreign currency exchange rates would be $4.1 million. This compares with a $69.2 million working capital deficit subject to foreign currency exposure as of December 31, 2021, for which a 10% adverse change would have resulted in a potential increase in this working capital deficit of $6.9 million.
Interest Rate Risk
Our cash balance as of June 30, 2022 consists of bank deposits so exposure to market risk for changes in interest rates is limited. In March and April 2021, we issued the 2026 Notes with an aggregate principal amount of $230.0 million (see Item 1, Note 5, Financing Arrangements). The 2026 Notes bear interest at a fixed rate, so we have no financial statement impact from changes in interest rates. However, changes in market interest rates impact the fair value of the 2026 Notes along with other variables such as our credit spreads and the market price and volatility of our common stock. Our Amended Credit Agreement provides for aggregate principal borrowings of up to $225.0 million. As of June 30, 2022, we had $60.0 million of borrowings outstanding and $23.4 million of outstanding letters of credit under the Amended Credit Agreement. See Item 2, Liquidity and Capital Resources, for additional information. Because borrowings under the Amended Credit Agreement bear interest at a variable rate, we are exposed to market risk relating to changes in interest rates if we borrow under the Amended Credit Agreement. We have $76.9 million of lease obligations as of June 30, 2022. Interest rates on existing leases typically do not change unless there is a modification to a lease agreement and as such, we do not believe that the interest rate risk on the lease obligations is significant.
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Inflation Risk
In light of the current inflationary environment, our business is being affected by changes to our merchants' and customers' discretionary spend. We expect such discretionary spend limitations to continue, and if we do not see increased overall demand for discounted goods and services to help offset these limitations on individual merchants and customers, our business, financial condition and results of operations could be adversely impacted. Additionally, increased inflation could negatively impact our business by driving up our operating costs. Our costs are subject to inflationary pressures, and if those pressures become significant, we may not be able to offset such higher costs through price increases or other cost efficiency measures. Our inability or failure to do so could harm our business, financial condition and results of operations.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Interim Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q.
Based on this evaluation, our management concluded that, as of June 30, 2022, our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the 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 Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of our material pending legal proceedings, please see Item 1, Note 6, Commitments and Contingencies, to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021, and Part II, Item 1A, Risk Factors of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, except as supplemented below:
Our ability to use our tax attributes to reduce future U.S. income taxes could be subject to certain limitations
Under Sections 382 and 383 of the United States Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” (as defined by the Code) may be subject to limitations on its ability to utilize its pre-change NOLs and other tax attributes such as research tax credits to offset future income taxes. If we undergo one or more ownership changes as a result of transactions in our stock, then our ability to utilize NOLs and other pre-change tax attributes could be limited by Sections 382 and 383 of the Code, and similar U.S. state provisions. Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Section 382 or 383 of the Code. For these reasons, we might not be able to utilize our NOLs and other tax attributes, even if we maintain profitability.
Our restructuring plan could be disruptive to our operations and adversely affect our results of operations and financial condition, and we may not realize some or all of the anticipated benefits of this plan in the time frame anticipated or at all.
In August 2022, we initiated a multi-phase cost savings plan designed to reduce our expense structure and align with our go-forward business and financial objectives. The cost savings plan included a restructuring plan, approved by our Board of Directors on August 5, 2022. The implementation of the restructuring plan, including the impact of workforce reductions, could be disruptive to our operations, make it difficult to attract or retain employees, result in higher than anticipated charges, and otherwise adversely affect our results of operations and financial condition. In addition, our ability to complete the restructuring plan and achieve the anticipated benefits from the plan within the expected time frame or at all is subject to estimates and assumptions and may vary materially from our expectations, including as a result of factors that are beyond our control. Furthermore, following completion of the restructuring plan, our business may not be more efficient or effective than prior to implementation of the restructuring plan.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
During the three months ended June 30, 2022, we did not issue any unregistered equity securities.
Issuer Purchases of Equity Securities
As of June 30, 2022, there have been no changes to our Board authorized share repurchase program. For additional information, please refer to Part II, Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in our Annual Report on Form 10-K for the year ended December 31, 2021.
The following table provides information about purchases of shares of our common stock during the three months ended June 30, 2022 related to shares withheld upon vesting of restricted stock units for minimum tax withholding obligations:
Date
Total Number of Shares Purchased (1)
Average Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramMaximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under Program
April 1-30, 202222,332 $19.57 — — 
May 1-31, 202278,504 12.11 — — 
June 1-30, 202250,532 15.40 — — 
Total151,368 $14.31 — — 
(1)Total number of shares delivered to us by employees to satisfy the mandatory tax withholding requirement upon vesting of stock-based compensation awards.
ITEM 5. OTHER INFORMATION
On August 5, 2022, Peter Barris and Valerie Mosley notified the Company of their intention to resign as directors, effective August 26, 2022. The departures of Mr. Barris and Ms. Mosley were not the result of any disagreement with the Company on any matter relating to its operations, policies or practices, and we thank them for their dedicated service to Groupon.
ITEM 6. EXHIBITS
Exhibit
Number
Description
10.1
10.2
31.1
31.2
32.1
101.INS **XBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104 **Cover Page Interactive Data File
_____________________________________
* Management contract or compensatory plan or arrangement
** The XBRL Instance Document and Cover Page Interactive Data File do not appear in the Interactive Data File because their XBRL tags are
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embedded within the Inline XBRL document
51

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 8th day of August 2022.
GROUPON, INC.
By: /s/ Damien Schmitz
  Name:Damien Schmitz
  Title:Interim Chief Financial Officer

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