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 ~~September 30, 2020~~March 31, 2021

☐ 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)

Delaware

27-0903295

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

600 W Chicago Avenue

60654

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 class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

GRPN

NASDAQ 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 ~~November 2, 2020,~~May 3, 2021, there were ~~28,812,655~~29,119,679 shares of the registrant's common stock outstanding.

TABLE OF CONTENTS


PART I. Financial Information			Page
Forward-Looking Statements			3
Item 1. Financial Statements and Supplementary Data			4
Condensed Consolidated Balance Sheets as of ~~September 30, 2020~~March 31, 2021 (unaudited) and December 31, ~~2019~~2020			4
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (unaudited)			5
Condensed Consolidated Statements of Stockholders' Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (unaudited)			6
Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (unaudited)			8
Notes to Condensed Consolidated Financial Statements (unaudited)			10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			3732
Item 3. Quantitative and Qualitative Disclosures about Market Risk			5950
Item 4. Controls and Procedures			6051
PART II. Other Information
Item 1. Legal Proceedings			6152
Item 1A. Risk Factors			6253
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			6354
Item 5. Other Information			6354
Item 6. Exhibits			6455
Signatures			6556

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 COVID-19 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 the phase down of the Goods category and transition to a third-party marketplace model; volatility in our operating results; effects of pandemics or disease outbreaks, including COVID-19, on our business;strategy; execution of our business and marketing strategies; ~~retaining existing customers and adding new customers;~~volatility in our operating results; challenges arising from our international operations, including fluctuations in currency exchange rates, legal and regulatory developments and any potential adverse impact from the United Kingdom's exit from the European Union; global economic uncertainty; retaining and adding high quality merchants; retaining existing customers and adding new customers; competing successfully in our industry; providing a compelling 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; ~~reliance on cloud-based computing platforms; competing successfully in our industry; providing a strong mobile experience for our customers;~~ maintaining and improving our information technology infrastructure; our voucherless offerings; claims related to product and service offerings; managing inventory and order fulfillment risks; litigation; managing refund risks; retaining and attracting members of our executive team and other qualified personnel;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; exposure to greater than anticipated tax liabilities; adoption of tax legislation; ~~protecting our intellectual property; maintaining a strong brand; customer and merchant fraud; payment-related risks;~~ our ability to raise capital if ~~necessary~~necessary; risks related to our access to capital and outstanding indebtedness, including our ~~outstanding indebtedness; global economic uncertainty;~~convertible senior notes; our common stock, including volatility in our stock price; ~~our convertible senior notes;~~ our ability to realize the anticipated benefits from the hedge and warrant or capped call transactions; and those risks and other factors discussed in Part I, Item ~~1A,~~1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020 and Part II, Item 1A. Risk Factors of our Quarterly ~~Reports~~Report on Form 10-Q for the ~~three months~~quarter ended March 31, ~~2020 and June 30, 2020,~~2021, 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.

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GROUPON, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(unaudited)					(unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	778,967	$	750,887	Cash and cash equivalents	$	676,799	$	850,587
Accounts receivable, net	Accounts receivable, net	45,451		54,953		Accounts receivable, net	45,402		42,998
Prepaid expenses and other current assets	Prepaid expenses and other current assets	51,958		82,073		Prepaid expenses and other current assets	41,261		40,441
Total current assets	Total current assets	876,376		887,913		Total current assets	763,462		934,026
Property, equipment and software, net	Property, equipment and software, net	88,488		124,950		Property, equipment and software, net	82,521		85,284
Right-of-use assets - operating leases, net	Right-of-use assets - operating leases, net	79,008		108,390		Right-of-use assets - operating leases, net	69,899		75,349
Goodwill	Goodwill	213,009		325,017		Goodwill	217,364		214,699
Intangible assets, net	Intangible assets, net	30,965		35,292		Intangible assets, net	28,684		30,151
Investments	Investments	35,911		76,576		Investments	36,008		37,671
Restricted cash						Restricted cash	169,785		0
Other non-current assets	Other non-current assets	26,061		28,605		Other non-current assets	34,314		34,327
Total Assets	Total Assets	$	1,349,818	$	1,586,743	Total Assets	$	1,402,037	$	1,411,507
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current liabilities:	Current liabilities:					Current liabilities:
Short-term borrowings	Short-term borrowings	$	200,000	$	0	Short-term borrowings	$	100,000	$	200,000
Accounts payable	Accounts payable	42,210		20,415		Accounts payable	38,609		33,026
Accrued merchant and supplier payables	Accrued merchant and supplier payables	381,856		540,940		Accrued merchant and supplier payables	329,000		410,963
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	257,298		260,192		Accrued expenses and other current liabilities	299,282		294,999
Total current liabilities	Total current liabilities	881,364		821,547		Total current liabilities	766,891		938,988
Convertible senior notes, net	Convertible senior notes, net	225,693		214,869		Convertible senior notes, net	441,996		229,490
Operating lease obligations	Operating lease obligations	94,142		110,294		Operating lease obligations	83,527		90,927
Other non-current liabilities	Other non-current liabilities	50,096		44,987		Other non-current liabilities	44,003		44,428
Total Liabilities	Total Liabilities	1,251,295		1,191,697		Total Liabilities	1,336,417		1,303,833
Commitments and contingencies (see Note 6)	Commitments and contingencies (see Note 6)					Commitments and contingencies (see Note 6)	0		0
Stockholders' Equity	Stockholders' Equity					Stockholders' Equity
Common stock, par value $0.0001 per share, 100,500,000 shares authorized; 39,084,960 shares issued and 28,790,843 shares outstanding at September 30, 2020; 38,584,854 shares issued and 28,290,737 shares outstanding at December 31, 2019 (1)		4		4
Additional paid-in capital (1)		2,338,432		2,310,393
Treasury stock, at cost, 10,294,117 and 10,294,117 shares at September 30, 2020 and December 31, 2019 (1)		(922,666)		(922,666)
Common stock, par value $0.0001 per share, 100,500,000 shares authorized; 39,352,337 shares issued and 29,058,220 shares outstanding at March 31, 2021; 39,142,896 shares issued and 28,848,779 shares outstanding at December 31, 2020						Common stock, par value $0.0001 per share, 100,500,000 shares authorized; 39,352,337 shares issued and 29,058,220 shares outstanding at March 31, 2021; 39,142,896 shares issued and 28,848,779 shares outstanding at December 31, 2020	4		4
Additional paid-in capital						Additional paid-in capital	2,261,095		2,348,114
Treasury stock, at cost, 10,294,117 shares at March 31, 2021 and December 31, 2020						Treasury stock, at cost, 10,294,117 shares at March 31, 2021 and December 31, 2020	(922,666)		(922,666)
Accumulated deficit	Accumulated deficit	(1,334,864)		(1,032,876)		Accumulated deficit	(1,258,283)		(1,320,886)
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	17,702		39,081		Accumulated other comprehensive income (loss)	(14,455)		3,109
Total Groupon, Inc. Stockholders' Equity	Total Groupon, Inc. Stockholders' Equity	98,608		393,936		Total Groupon, Inc. Stockholders' Equity	65,695		107,675
Noncontrolling interests	Noncontrolling interests	(85)		1,110		Noncontrolling interests	(75)		(1)
Total Equity	Total Equity	98,523		395,046		Total Equity	65,620		107,674
Total Liabilities and Equity	Total Liabilities and Equity	$	1,349,818	$	1,586,743	Total Liabilities and Equity	$	1,402,037	$	1,411,507

~~(1)Prior period share information and balances have been retroactively adjusted to reflect a reverse stock split. See Note 7,~~ ~~Stockholders' Equity and Compensation Arrangements~~ ~~for additional information.~~

See Notes to Condensed Consolidated Financial Statements.

GROUPON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share amounts)

(unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Revenue:	Revenue:									Revenue:
Service	Service	$	155,073	$	268,080	$	474,478	$	831,510	Service	$	172,624	$	207,028
Product	Product	148,946		227,532		599,337		775,089		Product	91,193		167,122
Total revenue	Total revenue	304,019		495,612		1,073,815		1,606,599		Total revenue	263,817		374,150
Cost of revenue:	Cost of revenue:									Cost of revenue:
Service	Service	17,005		28,947		60,162		86,169		Service	18,425		26,915
Product	Product	126,992		188,725		515,158		644,342		Product	78,409		145,988
Total cost of revenue	Total cost of revenue	143,997		217,672		575,320		730,511		Total cost of revenue	96,834		172,903
Gross profit	Gross profit	160,022		277,940		498,495		876,088		Gross profit	166,983		201,247
Operating expenses:	Operating expenses:									Operating expenses:
Marketing	Marketing	31,386		74,976		116,758		257,296		Marketing	33,666		60,130
Selling, general and administrative	Selling, general and administrative	124,257		198,388		475,017		619,274		Selling, general and administrative	127,143		207,135
Goodwill impairment	Goodwill impairment	0		0		109,486		0		Goodwill impairment	0		109,486
Long-lived asset impairment	Long-lived asset impairment	0		0		22,351		0		Long-lived asset impairment	0		22,351
Restructuring and related charges	Restructuring and related charges	20,559		(61)		61,037		(175)		Restructuring and related charges	7,422		6
Total operating expenses	Total operating expenses	176,202		273,303		784,649		876,395		Total operating expenses	168,231		399,108
Income (loss) from operations	Income (loss) from operations	(16,180)		4,637		(286,154)		(307)		Income (loss) from operations	(1,248)		(197,861)
Other income (expense), net	Other income (expense), net	(867)		(17,253)		(21,549)		(92,602)		Other income (expense), net	18,123		(18,987)
Income (loss) from continuing operations before provision (benefit) for income taxes	Income (loss) from continuing operations before provision (benefit) for income taxes	(17,047)		(12,616)		(307,703)		(92,909)		Income (loss) from continuing operations before provision (benefit) for income taxes	16,875		(216,848)
Provision (benefit) for income taxes	Provision (benefit) for income taxes	(486)		2,069		(7,170)		591		Provision (benefit) for income taxes	2,427		(5,988)
Income (loss) from continuing operations	Income (loss) from continuing operations	(16,561)		(14,685)		(300,533)		(93,500)		Income (loss) from continuing operations	14,448		(210,860)
Income (loss) from discontinued operations, net of tax	Income (loss) from discontinued operations, net of tax	0		0		382		2,162		Income (loss) from discontinued operations, net of tax	0		382
Net income (loss)	Net income (loss)	(16,561)		(14,685)		(300,151)		(91,338)		Net income (loss)	14,448		(210,478)
Net (income) loss attributable to noncontrolling interests	Net (income) loss attributable to noncontrolling interests	291		(2,000)		(1,758)		(8,080)		Net (income) loss attributable to noncontrolling interests	110		(3,044)
Net income (loss) attributable to Groupon, Inc.	Net income (loss) attributable to Groupon, Inc.	$	(16,270)	$	(16,685)	$	(301,909)	$	(99,418)	Net income (loss) attributable to Groupon, Inc.	$	14,558	$	(213,522)

Basic and diluted net income (loss) per share: (1)
Basic net income (loss) per share:										Basic net income (loss) per share:
Continuing operations	Continuing operations	$	(0.57)	$	(0.59)	$	(10.59)	$	(3.57)	Continuing operations	$	0.50	$	(7.54)
Discontinued operations	Discontinued operations	0		0		0.01		0.08		Discontinued operations	0		0.01
Basic and diluted net income (loss) per share		$	(0.57)	$	(0.59)	$	(10.58)	$	(3.49)
Basic net income (loss) per share										Basic net income (loss) per share	$	0.50	$	(7.53)

Weighted average number of shares outstanding (1)
Diluted net income (loss) per share:										Diluted net income (loss) per share:
Continuing operations										Continuing operations	$	0.48	$	(7.54)
Discontinued operations										Discontinued operations	0		0.01
Diluted net income (loss) per share)										Diluted net income (loss) per share)	$	0.48	$	(7.53)

Weighted average number of shares outstanding										Weighted average number of shares outstanding
Basic	Basic	28,751,520		28,348,561		28,535,393		28,416,966		Basic	29,028,489		28,365,216
Diluted	Diluted	28,751,520		28,348,561		28,535,393		28,416,966		Diluted	30,265,563		28,365,216

Comprehensive income (loss):	Comprehensive income (loss):									Comprehensive income (loss):
Net income (loss)	Net income (loss)	$	(16,561)	$	(14,685)	$	(300,151)	$	(91,338)	Net income (loss)	$	14,448	$	(210,478)
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Other comprehensive income (loss) from continuing operations:	Other comprehensive income (loss) from continuing operations:									Other comprehensive income (loss) from continuing operations:
Net change in unrealized gain (loss) on foreign currency translation adjustments	Net change in unrealized gain (loss) on foreign currency translation adjustments	(11,786)		4,439		(21,379)		4,426		Net change in unrealized gain (loss) on foreign currency translation adjustments	(49,792)		(1,961)
Net change in unrealized gain (loss) on available-for-sale securities (net of tax effect of $0 and $(16) for the three months ended September 30, 2020 and 2019 and $0 and $(51) for the nine months ended September 30, 2020 and 2019)		0		(47)		0		(151)
Reclassification of cumulative foreign currency translation adjustments										Reclassification of cumulative foreign currency translation adjustments	32,228		0
Other comprehensive income (loss) from continuing operations	Other comprehensive income (loss) from continuing operations	(11,786)		4,392		(21,379)		4,275		Other comprehensive income (loss) from continuing operations	(17,564)		(1,961)
Other comprehensive income (loss) from discontinued operations	Other comprehensive income (loss) from discontinued operations	0		0		0		0		Other comprehensive income (loss) from discontinued operations	0		0
Other comprehensive income (loss)	Other comprehensive income (loss)	(11,786)		4,392		(21,379)		4,275		Other comprehensive income (loss)	(17,564)		(1,961)

Comprehensive income (loss)	Comprehensive income (loss)	(28,347)		(10,293)		(321,530)		(87,063)		Comprehensive income (loss)	(3,116)		(212,439)
Comprehensive (income) loss attributable to noncontrolling interest	Comprehensive (income) loss attributable to noncontrolling interest	291		(2,000)		(1,758)		(8,080)		Comprehensive (income) loss attributable to noncontrolling interest	110		(3,044)
Comprehensive income (loss) attributable to Groupon, Inc.	Comprehensive income (loss) attributable to Groupon, Inc.	$	(28,056)	$	(12,293)	$	(323,288)	$	(95,143)	Comprehensive income (loss) attributable to Groupon, Inc.	$	(3,006)	$	(215,483)

~~(1)All share and per share information has been retroactively adjusted to reflect a reverse stock split. See Note 7,~~ ~~Stockholders' Equity and Compensation Arrangements~~ ~~for additional information.~~

See Notes to Condensed Consolidated Financial Statements.

GROUPON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share amounts)

(unaudited)


		Groupon, Inc. Stockholders' Equity																			Groupon, Inc. Stockholders' Equity
		Common Stock (1)			Additional Paid-In Capital (1)		Treasury Stock (1)			Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Groupon, Inc. Stockholders' Equity		Non-controlling Interests		Total Equity			Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Groupon, Inc. Stockholders' Equity		Non-controlling Interests		Total Equity
		Shares	Amount				Shares	Amount													Shares	Amount				Shares	Amount
Balance at December 31, 2019		38,584,854	$	4	$	2,310,393	(10,294,117)	$	(922,666)	$	(1,032,876)	$	39,081	$	393,936	$	1,110	$	395,046
Cumulative effect of change in accounting principle, net of tax		—	—		—		—	—		(79)		—		(79)		—		(79)
Balance at December 31, 2020																				Balance at December 31, 2020	39,142,896	$	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																				Cumulative effect of change in accounting principle due to adoption of ASU 2020-06, net of tax	—	—		(67,014)		—	—		48,045		—		(18,969)		—		(18,969)
Comprehensive income (loss)	Comprehensive income (loss)	—	—		—		—	—		(213,522)		(1,961)		(215,483)		3,044		(212,439)		Comprehensive income (loss)	—	—		—		—	—		14,558		(17,564)		(3,006)		(110)		(3,116)
Vesting of restricted stock units and performance share units	Vesting of restricted stock units and performance share units	165,705	—		—		—	—		—		—		—		—		0		Vesting of restricted stock units and performance share units	308,954	—		—		—	—		—		—		—		—		—
Shares issued under employee stock purchase plan	Shares issued under employee stock purchase plan	28,621	—		1,163		—	—		—		—		1,163		—		1,163		Shares issued under employee stock purchase plan	23,418	—		349		—	—		—		—		349		—		349
Tax withholdings related to net share settlements of stock-based compensation awards	Tax withholdings related to net share settlements of stock-based compensation awards	(67,135)	—		(3,684)		—	—		—		—		(3,684)		—		(3,684)		Tax withholdings related to net share settlements of stock-based compensation awards	(122,931)	—		(4,901)		—	—		—		—		(4,901)		—		(4,901)
Stock-based compensation on equity-classified awards		—	—		15,345		—	—		—		—		15,345		—		15,345
Distributions to noncontrolling interest holders		—	—		—		—	—		—		—		—		(3,845)		(3,845)
Balance at March 31, 2020		38,712,045	$	4	$	2,323,217	(10,294,117)	$	(922,666)	$	(1,246,477)	$	37,120	$	191,198	$	309	$	191,507
Comprehensive income (loss)		—	—		—		—	—		(72,117)		(7,632)		(79,749)		(995)		(80,744)
Vesting of restricted stock units and performance share units		430,100	—		—		—	—		—		—		—		—		0
Shares issued under employee stock purchase plan		—	—		—		—	—		—		—		—		—		0
Tax withholdings related to net share settlements of stock-based compensation awards		(164,468)	—		(4,554)		—	—		—		—		(4,554)		—		(4,554)
Purchase of convertible note hedges																				Purchase of convertible note hedges	—	—		(23,840)		—	—		—		—		(23,840)		—		(23,840)
Stock-based compensation on equity-classified awards	Stock-based compensation on equity-classified awards	—	—		10,936			—		—		—		10,936		—		10,936		Stock-based compensation on equity-classified awards	—	—		8,387		—	—		—		—		8,387		—		8,387
Receipts from noncontrolling interest holders	Receipts from noncontrolling interest holders	—	—		—		—	—		—		—		—		339		339		Receipts from noncontrolling interest holders	—	—		—		—	—		—		—		—		36		36
Balance at June 30, 2020		38,977,677	$	4	$	2,329,599	(10,294,117)	$	(922,666)	$	(1,318,594)	$	29,488	$	117,831	$	(347)	$	117,484
Comprehensive income (loss)		—	—		—		—	—		(16,270)		(11,786)		(28,056)		(291)		(28,347)
Vesting of restricted stock units and performance share units		104,819	—		—		—	—		—		—		—		—		0
Shares issued under employee stock purchase plan		40,750	—		628		—	—		—		—		628		—		628
Tax withholdings related to net share settlements of stock-based compensation awards		(38,286)	—		(1,016)		—	—		—		—		(1,016)		—		(1,016)
Stock-based compensation on equity-classified awards		—	—		9,221		—	—		—		—		9,221		—		9,221
Receipts from noncontrolling interest holders		—	—		—		—	—		—		—		—		553		553
Balance at September 30, 2020		39,084,960	$	4	$	2,338,432	(10,294,117)	$	(922,666)	$	(1,334,864)	$	17,702	$	98,608	$	(85)	$	98,523
Balance at March 31, 2021																				Balance at March 31, 2021	39,352,337	$	4	$	2,261,095	(10,294,117)	$	(922,666)	$	(1,258,283)	$	(14,455)	$	65,695	$	(75)	$	65,620

~~(1)All share information and balances have been retroactively adjusted to reflect a reverse stock split. See Note 7,~~ ~~Stockholders' Equity and Compensation Arrangements, for additional information.~~

See Notes to Condensed Consolidated Financial Statements.

GROUPON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share amounts)

(unaudited)

Groupon, Inc. Stockholders' Equity
Common Stock (1)
Additional Paid-In Capital (1)
Treasury Stock (1)
Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Groupon, Inc. Stockholders' Equity Non-controlling Interests Total Equity
Shares Amount Shares Amount
Balance at December 31, 2018 38,046,972 $ 4 $ 2,234,633 (9,592,756) $ (877,491) $ (1,010,499) $ 34,602 $ 381,249 $ 1,363 $ 382,612
Comprehensive income (loss) — — — — — (42,487) 3,313 (39,174) 3,479 (35,695)
Exercise of stock options 625 — 8 — — — — 8 — 8
Vesting of restricted stock units and performance share units 208,020 — — — — — — — — 0
Shares issued under employee stock purchase plan 35,964 — 1,998 — — — — 1,998 — 1,998
Tax withholdings related to net share settlements of stock-based compensation awards (79,286) — (5,681) — — — — (5,681) — (5,681)
Payments for repurchases of common stock — — — (220,399) (15,055) — — (15,055) (15,055)
Stock-based compensation on equity-classified awards — — 17,731 — — — — 17,731 — 17,731
Distributions to noncontrolling interest holders — — — — — — — — (3,521) (3,521)
Balance at March 31, 2019 38,212,295 4 $ 2,248,689 (9,813,155) $ (892,546) $ (1,052,986) $ 37,915 $ 341,076 $ 1,321 $ 342,397
Comprehensive income (loss) — — — — — (40,246) (3,430) (43,676) 2,601 (41,075)
Exercise of stock options 1,500 — 32 — — — — 32 — 32
Vesting of restricted stock units and performance share units 220,211 — — — — — — — — 0
Shares issued under employee stock purchase plan — — — — — — — — — 0
Tax withholdings related to net share settlements of stock-based compensation awards (76,220) — (5,387) — — — — (5,387) — (5,387)
Payments for repurchases of common stock — — — (211,407) (15,053) — — (15,053) — (15,053)
Stock-based compensation on equity-classified awards — — 28,339 — — — — 28,339 — 28,339
Distributions to noncontrolling interest holders — — — — — — — — (3,113) (3,113)
Balance at June 30, 2019 38,357,786 $ 4 $ 2,271,673 (10,024,562) $ (907,599) $ (1,093,232) $ 34,485 $ 305,331 $ 809 $ 306,140
Comprehensive income (loss) — — — — — (16,685) 4,392 (12,293) 2,000 (10,293)
Vesting of restricted stock units and performance share units 99,306 — — — — — — 0
Shares issued under employee stock purchase plan 38,335 — 2,085 — — — — 2,085 — 2,085
Tax withholdings related to net share settlements of stock-based compensation awards (36,663) — (2,049) — — — — (2,049) — (2,049)
Repurchases of common stock — — — (269,554) (15,067) (15,067) — (15,067)
Stock-based compensation on equity-classified awards — — 22,364 — — — — 22,364 — 22,364
Distributions to noncontrolling interest holders — — — — — — — — (2,053) (2,053)
Balance at September 30, 2019 38,458,764 $ 4 $ 2,294,073 (10,294,116) $ (922,666) $ (1,109,917) $ 38,877 $ 300,371 $ 756 $ 301,127


	Groupon, Inc. Stockholders' Equity
	Common Stock (1)			Additional Paid-In Capital (1)		Treasury Stock (1)			Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Groupon, Inc. Stockholders' Equity		Non-controlling Interests		Total Equity
	Shares	Amount				Shares	Amount
Balance at December 31, 2019	38,584,854	$	4	$	2,310,393	(10,294,117)	$	(922,666)	$	(1,032,876)	$	39,081	$	393,936	$	1,110	$	395,046
Cumulative effect of change in accounting principle due to adoption of ASC Topic 326, net of tax	—	—		—		—	—		(79)		—		(79)		—		(79)
Comprehensive income (loss)	—	—		—		—	—		(213,522)		(1,961)		(215,483)		3,044		(212,439)
Vesting of restricted stock units and performance share units	165,705	—		—		—	—		—		—		—		—		—
Shares issued under employee stock purchase plan	28,621	—		1,163		—	—		—		—		1,163		—		1,163
Tax withholdings related to net share settlements of stock-based compensation awards	(67,135)	—		(3,684)		—	—		—		—		(3,684)		—		(3,684)
Stock-based compensation on equity-classified awards	—	—		15,345		—	—		—		—		15,345		—		15,345
Distributions to noncontrolling interest holders	—	—		—		—	—		—		—		—		(3,845)		(3,845)
Balance at March 31, 2020	38,712,045	$	4	$	2,323,217	(10,294,117)	$	(922,666)	$	(1,246,477)	$	37,120	$	191,198	$	309	$	191,507

(1)All share information and balances have been retroactively adjusted to reflect a reverse stock split. See Note 7, Stockholders' Equity and Compensation Arrangements, for additional information.

See Notes to Condensed Consolidated Financial Statements.

GROUPON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020
Operating activities	Operating activities					Operating activities
Net income (loss)	Net income (loss)	$	(300,151)	$	(91,338)	Net income (loss)	$	14,448	$	(210,478)
Less: Income (loss) from discontinued operations, net of tax	Less: Income (loss) from discontinued operations, net of tax	382		2,162		Less: Income (loss) from discontinued operations, net of tax	0		382
Income (loss) from continuing operations	Income (loss) from continuing operations	(300,533)		(93,500)		Income (loss) from continuing operations	14,448		(210,860)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:	Adjustments to reconcile net income (loss) to net cash provided by operating activities:					Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property, equipment and software	Depreciation and amortization of property, equipment and software	60,988		69,986		Depreciation and amortization of property, equipment and software	14,727		23,385
Amortization of acquired intangible assets	Amortization of acquired intangible assets	7,378		11,419		Amortization of acquired intangible assets	2,292		2,524
Impairment of goodwill	Impairment of goodwill	109,486		0		Impairment of goodwill	0		109,486
Impairment of long-lived assets	Impairment of long-lived assets	22,351		0		Impairment of long-lived assets	0		22,351
Restructuring-related impairment		17,199		0
Stock-based compensation	Stock-based compensation	30,937		62,517		Stock-based compensation	7,179		14,015
Impairment of investment		6,684		0
Deferred income taxes		0		816
(Gain) loss from changes in fair value of investments		1,405		68,971
Impairment and other changes in fair value of investments						Impairment and other changes in fair value of investments	0		8,089
Amortization of debt discount on convertible senior notes	Amortization of debt discount on convertible senior notes	10,824		9,772		Amortization of debt discount on convertible senior notes	303		3,516
Foreign currency translation adjustments reclassified into earnings						Foreign currency translation adjustments reclassified into earnings	(32,228)		0
Change in assets and liabilities, net of acquisitions and dispositions:	Change in assets and liabilities, net of acquisitions and dispositions:					Change in assets and liabilities, net of acquisitions and dispositions:
Accounts receivable	Accounts receivable	9,602		12,581		Accounts receivable	(2,812)		8,334
Prepaid expenses and other current assets	Prepaid expenses and other current assets	29,098		2,591		Prepaid expenses and other current assets	(1,640)		13,222
Right-of-use assets - operating leases	Right-of-use assets - operating leases	17,680		19,624		Right-of-use assets - operating leases	5,122		7,009
Accounts payable	Accounts payable	20,733		(16,892)		Accounts payable	5,896		5,860
Accrued merchant and supplier payables	Accrued merchant and supplier payables	(163,125)		(216,127)		Accrued merchant and supplier payables	(76,884)		(223,098)
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	2,496		(63,392)		Accrued expenses and other current liabilities	9,823		(11,970)
Operating lease obligations	Operating lease obligations	(29,709)		(18,960)		Operating lease obligations	(6,007)		(10,130)
Other, net	Other, net	2,002		20,476		Other, net	13,376		1,859
Net cash provided by (used in) operating activities from continuing operations	Net cash provided by (used in) operating activities from continuing operations	(144,504)		(130,118)		Net cash provided by (used in) operating activities from continuing operations	(46,405)		(236,408)
Net cash provided by (used in) operating activities from discontinued operations	Net cash provided by (used in) operating activities from discontinued operations	0		0		Net cash provided by (used in) operating activities from discontinued operations	0		0
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	(144,504)		(130,118)		Net cash provided by (used in) operating activities	(46,405)		(236,408)
Investing activities	Investing activities					Investing activities
Purchases of property and equipment and capitalized software	Purchases of property and equipment and capitalized software	(36,662)		(51,854)		Purchases of property and equipment and capitalized software	(12,040)		(10,596)
Proceeds from sale of investment	Proceeds from sale of investment	31,605		0		Proceeds from sale of investment	0		31,605
Acquisitions of intangible assets and other investing activities	Acquisitions of intangible assets and other investing activities	(3,416)		(3,037)		Acquisitions of intangible assets and other investing activities	(704)		(1,445)
Net cash provided by (used in) investing activities from continuing operations	Net cash provided by (used in) investing activities from continuing operations	(8,473)		(54,891)		Net cash provided by (used in) investing activities from continuing operations	(12,744)		19,564
Net cash provided by (used in) investing activities from discontinued operations	Net cash provided by (used in) investing activities from discontinued operations	1,224		0		Net cash provided by (used in) investing activities from discontinued operations	0		0
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(7,249)		(54,891)		Net cash provided by (used in) investing activities	(12,744)		19,564
Financing activities	Financing activities					Financing activities
Proceeds from borrowings under revolving credit agreement		200,000		0
Payment of contingent consideration related to acquisition		(908)		0
Issuance costs for revolving credit agreement		(1,148)		(2,384)
Payments for repurchases of common stock		0		(44,162)
Proceeds from issuance of 2026 convertible notes						Proceeds from issuance of 2026 convertible notes	200,000		0
Proceeds from (payments of) borrowings under revolving credit agreement						Proceeds from (payments of) borrowings under revolving credit agreement	(100,000)		150,000
Purchase of capped call transactions						Purchase of capped call transactions	(23,840)		0
Issuance costs for 2026 convertible notes and revolving credit agreement						Issuance costs for 2026 convertible notes and revolving credit agreement	(6,572)		0
Taxes paid related to net share settlements of stock-based compensation awards	Taxes paid related to net share settlements of stock-based compensation awards	(8,787)		(13,975)		Taxes paid related to net share settlements of stock-based compensation awards	(4,901)		(3,299)
Proceeds from stock option exercises and employee stock purchase plan		1,791		4,123
Distributions to noncontrolling interest holders		(2,953)		(8,687)
Payments of finance lease obligations	Payments of finance lease obligations	(7,438)		(16,868)		Payments of finance lease obligations	(2,061)		(2,707)
Other financing activities						Other financing activities	(8)		(2,682)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	180,557		(81,953)		Net cash provided by (used in) financing activities	62,618		141,312
Effect of exchange rate changes on cash, cash equivalents and restricted cash, including cash classified within current assets of discontinued operations	Effect of exchange rate changes on cash, cash equivalents and restricted cash, including cash classified within current assets of discontinued operations	(716)		(9,153)		Effect of exchange rate changes on cash, cash equivalents and restricted cash, including cash classified within current assets of discontinued operations	(7,466)		(9,174)
Net increase (decrease) in cash, cash equivalents and restricted cash, including cash classified within current assets of discontinued operations	Net increase (decrease) in cash, cash equivalents and restricted cash, including cash classified within current assets of discontinued operations	28,088		(276,115)		Net increase (decrease) in cash, cash equivalents and restricted cash, including cash classified within current assets of discontinued operations	(3,997)		(84,706)
Less: Net increase (decrease) in cash classified within current assets of discontinued operations	Less: Net increase (decrease) in cash classified within current assets of discontinued operations	1,224		0		Less: Net increase (decrease) in cash classified within current assets of discontinued operations	0		0
Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	26,864		(276,115)		Net increase (decrease) in cash, cash equivalents and restricted cash	(3,997)		(84,706)
Cash, cash equivalents and restricted cash, beginning of period (1)	Cash, cash equivalents and restricted cash, beginning of period (1)	752,657		844,728		Cash, cash equivalents and restricted cash, beginning of period (1)	851,085		752,657
Cash, cash equivalents and restricted cash, end of period (1)	Cash, cash equivalents and restricted cash, end of period (1)	$	779,521	$	568,613	Cash, cash equivalents and restricted cash, end of period (1)	$	847,088	$	667,951


Non-cash investing and financing activities
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	0	2,867

GROUPON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Non-cash investing and financing activities
Continuing operations:
Equipment acquired under finance lease arrangements $ 0 $ 3,865
Liability for repurchases of common stock 0 (1,469)
Increase (decrease) in liabilities related to purchases of property and equipment and capitalized software 261 (201)

(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 ~~September 30, 2020,~~March 31, 2021, December 31, ~~2019~~2020, March 31, 2020 and December 31, ~~2018 and amounts previously reported within the condensed consolidated balance sheet in our Quarterly Report on Form 10-Q for the quarterly period ended September 30,~~ 2019 (in thousands):


		September 30, 2020		December 31, 2019		September 30, 2019		December 31, 2018			March 31, 2021		December 31, 2020		March 31, 2020		December 31, 2019
Cash and cash equivalents	Cash and cash equivalents	$	778,967	$	750,887	$	567,285	$	841,021	Cash and cash equivalents	$	676,799	$	850,587	$	666,867	$	750,887
Restricted cash included in prepaid expenses and other current assets	Restricted cash included in prepaid expenses and other current assets	315		1,534		1,101		3,320		Restricted cash included in prepaid expenses and other current assets	504		498		878		1,534
Restricted cash - non-current										Restricted cash - non-current	169,785		0		—		—
Restricted cash included in other non-current assets	Restricted cash included in other non-current assets	239		236		227		387		Restricted cash included in other non-current assets	—		—		206		236
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	$	779,521	$	752,657	$	568,613	$	844,728	Cash, cash equivalents and restricted cash	$	847,088	$	851,085	$	667,951	$	752,657

See Notes to Condensed Consolidated Financial Statements.

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 ~~connect~~connects consumers to merchants ~~to consumers~~ by offering goods and services, generally at a discount. ~~Customers~~Consumers access those marketplaces through our mobile applications and our websites, primarily localized groupon.com sites in many countries.

Our operations are organized into 2 segments: North America and International. See Note 13, Segment Information.

Reverse Stock Split

OnIn June ~~10,~~ 2020, we effectuated a reverse stock split of our common stock at a ratio of 1-for-20. See Note 7, Stockholders' Equity and Compensation Arrangements, for additional information. As a result, the number of shares and income (loss) per share disclosed throughout this Quarterly Report on Form 10-Q have been retrospectively adjusted to reflect the reverse stock split.

COVID-19 Pandemic

Since March 2020, the COVID-19 pandemic has led to a significant ~~disruption~~decrease in ~~our~~consumer demand, a decrease in customer redemptions and elevated refund levels due to changes in consumer behavior and actions taken by governments to control the spread of COVID-19, including quarantines, travel restrictions, as well as business ~~as a result of the preventive and protective actions, such as consumer~~ restrictions and ~~merchant closures that governments, our merchants and consumers have implemented in response to the pandemic.~~shutdowns. The COVID-19 pandemic has had an adverse impact on our financial condition, results of operations and cash ~~flows. The negative impact~~flows, which included impairments of our goodwill and long-lived assets in 2020. Recovery from the COVID-19 ~~on our business is expected to continue at least as long as our performance is impacted by market conditions as we rely on customers' purchases~~pandemic could be volatile and prolonged given the unprecedented and continuously evolving nature of ~~vouchers for local experiences, including events and activities, beauty and wellness, travel and dining.~~the situation. We continue to monitor the impact of COVID-19 on our ~~business, including increases in government restrictions and the potential for colder weather in certain North America and International markets to further exacerbate negative trends.~~

In light of the impact of COVID-19 on our business, we expect a net loss and negative operating cash flows for the year ending December 31, 2020. 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. We have taken several steps to reduce costs, preserve cash in the near-term and improve liquidity, including, but not limited to: reducing our workforce and furloughing staff; continuing to sell Goods on our platform instead of quickly exiting the category; reducing marketing expense by significantly shortening payback thresholds and delaying brand marketing investments; transitioning merchants to redemption payment terms, instead of fixed payment terms; implementing a hiring freeze; eliminating broad-based merit increases for employees; replacing cash compensation with equity compensation in 2020 for all members of our Board of Directors (the "Board"); and amending our Credit Agreement (as defined below) to, among other things, provide covenant relief through the first quarter of 2021. The future impact of COVID-19 on our business, results of operations, financial condition and liquidity is highly uncertain and will ultimately depend on future developments, including the magnitude and duration of the pandemic and the protective measures associated with reducing its spread.

In the first quarter 2020, we determined the significant deterioration in our financial performance due to the disruption in our operations from COVID-19 and the sustained decrease in our stock price required us to evaluate our long-lived assets and goodwill for impairment, which resulted in the impairment of our long-lived assets and goodwill. See Note 2, ~~Goodwill and Long-Lived Assets. Additionally, the economic impacts of COVID-19 resulted in an impairment or a reduction in the fair value of certain of our investments during the first quarter 2020. See Note 3,~~ ~~Investments~~.

In April 2020, the Board approved multi-phase restructuring actions relating to our previously announced strategic shift and as part of the cost reduction measures we are implementing in response to the impact of

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~COVID-19. We expect to incur total pre-tax charges of $75.0 million to $105.0 million in connection with these multi-phase restructuring actions through the end of 2021. See Note 9,~~ ~~Restructuring and Related Charges,~~ for additional information about restructuring charges incurred during the nine months ended September 30, 2020, which included employee severance and compensation benefits expenses, facilities-related costs and impairment charges, professional advisory fees and a rationalization of our country footprint.business.

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, ~~2019.~~2020.

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. 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.

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,~~vouchers; income ~~taxes, leases,~~taxes; leases; initial valuation and subsequent impairment testing of goodwill, other intangible assets and long-lived ~~assets, investments, receivables,~~assets; investments; receivables; customer refunds and other ~~reserves,~~reserves; contingent ~~liabilities,~~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 adopted the guidance in ASU ~~2016-13,~~2019-12, ~~Financial Instruments~~Income Taxes (Topic 740) - ~~Credit Losses (Topic 326) - Measurement of Credit Losses of Financial Instruments~~ ~~("CECL")~~Simplifying the Accounting for Income Taxes, on January 1, 2020. This ASU requires entities to measure credit losses for financial assets measured at amortized cost based on expected losses over the lifetime of the asset rather than incurred losses. The adoption of ASU 2016-13 did not have a material impact on the condensed consolidated financial statements. See Note 8, ~~Revenue Recognition,~~ ~~for additional information.~~

~~We adopted the guidance in ASU 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment~~ ~~on January 1, 2020~~2021. This ASU ~~eliminates Step 2 of~~simplifies the ~~goodwill impairment test and requires a goodwill impairment to be measured as the amount~~accounting for income taxes by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. During the first quarter 2020, we determined a triggering event occurred that required us to evaluate our goodwill for impairment, and we recorded an impairment charge as a result of that assessment. See Note 2, ~~Goodwill and Long-Lived Assets, for additional information.~~

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~We adopted the guidance in ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820) - Disclosure Framework - Changes~~removing certain exceptions to the ~~Disclosure Requirements for Fair Value Measurement~~ ~~on January 1, 2020~~. ~~This ASU modifies the disclosure requirements~~general principles in Topic ~~820,~~ ~~Fair Value Measurements, by removing, modifying, or adding certain disclosures.~~ 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of ASU ~~2018-13~~2019-12 did not have a material impact on the condensed consolidated financial statements.

We adopted the guidance in ASU 2020-03, Codification Improvements to Financial Instruments, on January 1, 2021. This ASU amends a wide variety of Topics in the Codification, including revolving-debt arrangements and allowance for credit losses related to leases. The adoption of ASU 2020-03 did not have a material impact on the condensed consolidated financial statements.

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 earnings per share for convertible instruments and contracts in an entity’s own equity. As a result of adopting ASU 2020-06, we recorded a $67.0 million net reduction to additional paid-in capital, a $19.0 million increase to non-current liabilities and a $48.0 million reduction to our opening accumulated deficit as of January 1, 2021. See Note 5, Financing Arrangements, for additional information.

2. GOODWILL AND LONG-LIVED ASSETS

~~In accordance with ASC Topic 350,~~ ~~Intangibles — Goodwill and Other,~~ we evaluate goodwill for impairment annually on October 1 or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable. We also review our long-lived assets, such as property, equipment and software, right-of-use assets and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. During the first quarter 2020, ~~we determined~~ the significant deterioration in our financial performance due to the disruption in our operations from COVID-19 and the sustained decrease in our stock price required us to evaluate our goodwill and long-lived assets for impairment. During the second and third quarters 2020, we determined that the actions taken under our restructuring plan changed how we used certain long-lived assets such that the carrying amount of those long-lived assets may not be recoverable, which required us to evaluate those long-lived assets for impairment.

Future events and changing market conditions due to the impact of COVID-19 may require us to re-evaluate the estimates used in our fair value measurements, which could result in additional impairment of long-lived assets or goodwill in future periods that may have a material effect on our operating results.

~~Goodwill~~

~~In order to evaluate goodwill for impairment in the first quarter 2020, we compared the fair values of our 3 reporting units (North America, EMEA and Asia Pacific) to their carrying values.~~ In determining fair values for our reporting units, we used the discounted cash flow method and the market multiple valuation approach that use Level 3 inputs. The significant estimates used in the discounted cash flow models are the risk-adjusted discount rates; forecasted revenue, cost of revenue and operating expenses; forecasted capital expenditures and working capital needs; weighted average cost of capital; rates of long-term growth; and income tax rates. These estimates considered the recent deterioration in financial performance of the reporting units as well as the anticipated rate of recovery, and implied risk premiums based on the market prices of our equity and debt as of the assessment date. The significant estimates used in the market multiple valuation approach include identifying business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and earnings multiples. As a result of the interim quantitative assessment of goodwill in the first quarter 2020, we identified a partial impairment of goodwill in our EMEA reporting unit within the International segment and recognized goodwill impairment of $109.5 million. We did 0t recognize any goodwill impairment in our North America or Asia Pacific reporting units duringFor the three months ended March 31, ~~2020.~~

~~During the second quarter~~ 2020, we ~~determined that we did not have a triggering event that required~~recognized $109.5 million of goodwill impairment and $22.4 million of long-lived asset impairment within our International segment related to our EMEA operations.

Future events and changing market conditions due to the impact of COVID-19 could require us to ~~evaluate goodwill for impairment, and therefore we did 0t recognize goodwill impairment for any of our reporting units during~~re-evaluate the ~~second quarter 2020.~~

~~During the third quarter 2020, we exited our operations in Japan and New Zealand, which represent the majority of the countries~~estimates used in our ~~Asia Pacific reporting unit. As a result, we combined the remainder~~fair value measurements, potentially resulting in additional impairment of the Asia Pacific reporting unit and the EMEA reporting unit into a single International reporting unit, consistent with how management reviews the operating results of the business. As a result of the changelong-lived assets or goodwill in reporting units, we performed a qualitative assessment of potential goodwill impairment for the new International reporting unit and performed separate qualitative assessments of potential goodwill impairment for our Asia Pacific and EMEA reporting units immediately prior to the change. Based on those assessments, which considered current market conditions and recent business performance, we determined that the likelihood of a goodwill impairment did not reach the more-likely-than not threshold. Accordingly, we concluded that goodwill relating to those reporting units was not impaired and further quantitative testing was not required to be performed. We did not identify any other triggering events that required us to evaluate goodwill impairment in our North America or International reporting units during the third quarter 2020 and therefore did 0t recognize goodwill impairment for any of our reporting units during the third quarter 2020.future periods.

1211

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table summarizes ~~goodwill activity by segment~~impairment for ~~the nine months ended September 30, 2020 (in thousands):~~

North America
International (1)
Consolidated
Balance as of December 31, 2019 $ 178,685 $ 146,332 $ 325,017
Impairment loss 0 (109,486) (109,486)
Foreign currency translation 0 (2,522) (2,522)
Balance as of September 30, 2020 $ 178,685 $ 34,324 $ 213,009

~~(1)As of September 30, 2020, the International reporting unit had a negative carrying value.~~

~~Long-Lived Assets~~

~~Following our review of~~ long-lived assets ~~for impairment in the first quarter 2020, we recognized long-lived~~by asset ~~impairment of $22.4 million within our International segment related to our EMEA operations.~~

During the second quarter 2020, we recognized long-lived asset impairments of $13.5 million and $0.4 million within our North America and International segments for certain asset groups due to actions taken under our restructuring plan. During the third quarter 2020, we recognized long-lived asset impairments of $0.8 million and $2.5 million within our North America and International segments for certain asset groups due to actions taken under our restructuring plan. See Note 9, ~~Restructuring and Related Charges, for more information.~~

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

The assets that we deemed impaired were written down to fair value based on the discounted cash flow method that uses Level 3 inputs. The significant estimates used in the discounted cash flow models are the risk-adjusted discount rates; forecasted revenue, cost of revenue and operating expenses; forecasted capital expenditures and working capital needs; weighted average cost of capital; rates of long-term growth; and income tax rates.

~~Impairment charges are presented within the following line items of the condensed consolidated statements of operations~~type for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 (in thousands):

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
Long-lived asset impairment $ 0 $ 22,351
Restructuring and related charges 3,296 17,199
Total impairment $ 3,296 $ 39,550

~~The following table summarizes impairment for long-lived assets and restructuring and related charges by asset type through September 30, 2020 (in thousands):~~


~~Long-Lived Asset Category~~	Impairment
Property, equipment and software, net
Furniture and fixtures	$	413
Leasehold improvements~~(1)~~	~~7,749~~2,806
Office equipment	198
Purchased software	14
Computer hardware	2,842
Right-of-use assets - finance leases, net	~~1,388~~1,318
Capitalized software	304
Internally-developed software	2,988
Total Property, equipment and software, net	$	~~15,896~~10,883
Right-of-use assets - operating leases, net~~(2)~~	~~22,680~~10,494
Intangible assets, net	103
Other non-current assets	871
Total long-lived assets	$	~~39,550~~22,351

~~(1)~~
~~Includes long-lived asset impairment of $5.0 million presented within Restructuring and related charges during~~

The following table summarizes goodwill activity by segment for the ~~nine~~three months ended ~~September 30, 2020. See Note 9,~~ ~~Restructuring and Related Charges, for more information~~.March 31, 2021 (in thousands):


	North America		International		Consolidated
Balance as of December 31, 2020	$	178,685	$	36,014	$	214,699
Other (1)	0		3,776		3,776
Foreign currency translation	0		(1,111)		(1,111)
Balance as of March 31, 2021	$	178,685	$	38,679	$	217,364

~~(2)~~(1)~~Includes right-of-use asset impairment~~Represents the reclassification between Right-of-use assets - operating leases, net and Goodwill due to an adjustment in the allocation of ~~$12.2 million during the nine months ended September 30, 2020. See Note 9,~~ ~~Restructuring and Related Charges, for more information~~.impairments recorded in 2020 between those two accounts.

The following table summarizes intangible assets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (in thousands):

September 30, 2020 December 31, 2019
Intangible Asset Category Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value
Customer relationships $ 16,200 $ 16,200 $ 0 $ 16,200 $ 16,200 $ 0
Merchant relationships 21,668 10,557 11,111 22,193 8,268 13,925
Trade names 9,491 7,771 1,720 9,558 7,369 2,189
Developed technology 2,319 1,906 413 3,651 2,685 966
Patents 25,809 19,850 5,959 23,021 18,167 4,854
Other intangible assets 26,736 14,974 11,762 26,115 12,757 13,358
Total $ 102,223 $ 71,258 $ 30,965 $ 100,738 $ 65,446 $ 35,292

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~


	March 31, 2021						December 31, 2020
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Merchant relationships	$	20,378	$	10,187	$	10,191	$	20,208	$	9,236	$	10,972
Trade names	9,671		8,009		1,662		9,651		7,921		1,730
Developed technology	1,688		1,585		103		2,121		1,863		258
Patents	11,104		4,859		6,245		10,813		4,697		6,116
Other intangible assets	17,829		7,346		10,483		17,823		6,748		11,075
Total	$	60,670	$	31,986	$	28,684	$	60,616	$	30,465	$	30,151

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 ~~$2.5~~$2.3 million and ~~$3.7~~$2.5 million for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019 and $7.4 million and $11.4 million for the nine months ended September 30, 2020 and 2019.~~2020. As of ~~September 30, 2020,~~March 31, 2021, estimated future amortization expense related to intangible assets is as follows (in thousands):

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)


Remaining amounts in 2020		$	2,312
2021		8,173
Remaining amounts in 2021				Remaining amounts in 2021	$	6,412
2022	2022	7,577		2022	8,130
2023	2023	6,426		2023	6,952
2024	2024	2,840		2024	3,219
2025				2025	1,627
Thereafter	Thereafter	3,637		Thereafter	2,344
Total	Total	$	30,965	Total	$	28,684

3. INVESTMENTS

The following table summarizes investments as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in thousands):


		September 30, 2020		Percent Ownership of Voting Stock			December 31, 2019		Percent Ownership of Voting Stock				March 31, 2021		Percent Ownership of Voting Stock			December 31, 2020		Percent Ownership of Voting Stock
Available-for-sale securities - redeemable preferred shares		$	0	19%	to	25%	$	0	19%	to	25%
Fair value option investments		0		10%	to	19%	1,405		10%	to	19%
Other equity investments	Other equity investments	35,911		1%	to	19%	75,171		1%	to	19%	Other equity investments	$	36,008	1%	to	19%	$	37,671	1%	to	19%
Available-for-sale securities - redeemable preferred shares (1)												Available-for-sale securities - redeemable preferred shares (1)	0		19%	to	25%	0		19%	to	25%
Fair value option investments (1)												Fair value option investments (1)	0		10%	to	19%	0		10%	to	19%
Total investments	Total investments	$	35,911				$	76,576				Total investments	$	36,008				$	37,671

~~Fair Value Option Investments~~

~~In connection with the dispositions of controlling stakes in TMON Inc. ("TMON"), an entity based in the Republic of Korea~~(1)We hold available-for-sale securities and ~~Groupon India in prior periods, we obtained minority~~fair value option investments in ~~Monster Holdings LP ("Monster LP") and in Nearbuy Pte Ltd. ("Nearbuy"). We have made an irrevocable election~~various entities that were written down to ~~account for both of those investments at fair value with changes in fair value reported in earnings. We elected~~0 prior to apply fair value accounting to those investments because we believe that fair value is the most relevant measurement attribute for those investments, as well as to reduce operational and accounting complexity. Our election to apply fair value accounting to those investments has and may continue to cause fluctuations in our earnings from period to period.

There were no material changes in fair value of those investments for the three months ended September 30, 2020 and 2019. The following table summarizes gains and losses due to changes in fair value of those investments for the nine months ended September 30, 2020 and 2019 (in thousands):

Nine Months Ended September 30,
2020 2019
Monster LP $ 0 $ (69,408)
Nearbuy (1,405) 437
Total $ (1,405) $ (68,971)

~~We determined that the fair value of our investment in Nearbuy was $0.0 million as of September 30, 2020 and $1.4 million as of~~ December 31, ~~2019.~~2020. During the first quarter 2020, we recognized a $1.4 million loss from changes in the fair value of our investment in Nearbuy due to revised cash flow projections and an increase in the discount rate applied to those forecasts, which increased to 30% as of March 31, 2020, as compared with 20% as of December 31, 2019. The revisions to the financial projections and the increase in the discount rate applied as of March 31, 2020 were due to the deterioration in the financial condition of Nearbuy as a result of COVID-19, which resulted in underperformance as compared with prior projections and an increase to financial projection risk.

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~We determined that the~~ fair value of our investment in Monster LP was $0.0 million as of September 30, 2020 and December 31, 2019. During the first quarter 2019, we recognized a $41.5 million loss from changes in the fair value of our investment in Monster LP due to the revised cash flow projections provided by TMON in March 2019 and an increase in the discount rate applied to those forecasts, which increased to 26.0% as of March 31, 2019, as compared with 21.0% as of December 31, 2018. The increase in the discount rate applied as of March 31, 2019 was due to the deterioration in the financial condition of TMON and the competitive environment in the Korean e-commerce industry, which resulted in an increase to financial projection risk. During the second quarter 2019, we recognized an additional loss of $27.9 million from changes in the fair value of our investment in Monster LP due to revised financial projections provided by TMON in June 2019. The revisions to the financial projections were made as a result of TMON’s continued underperformance as compared with prior projections along with adjustments to their business model.option investments.

Other Equity Investments

Other equity investments represent equity investments without readily determinable fair values recorded at cost adjusted for observable price changes and impairments. During the first quarter 2020, we sold 50% of our shares in an other equity investment for total cash consideration of $34.0 ~~million, which approximated cost adjusted for observable price changes as of December 31, 2019.~~million.

In addition, we recorded a $6.7 million impairment during the first quarter 2020 to an other equity ~~method~~ investment as a result of revised cash flow projections and a deterioration in financial condition due to COVID-19. We did ~~not~~0t recognize any ~~other~~ impairments during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021.

4. SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS INFORMATION

The following table summarizes other income (expense), net for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Interest income	Interest income	$	1,268	$	1,959	$	5,254	$	5,810	Interest income	$	1,155	$	2,556
Interest expense	Interest expense	(9,408)		(6,029)		(24,375)		(17,162)		Interest expense	(5,116)		(6,958)
Changes in fair value of investments		0		14		(1,405)		(68,971)
Foreign currency gains (losses), net		7,273		(13,197)		5,661		(12,279)
Impairment of investment		0		0		(6,684)		0
Foreign currency gains (losses), net (1)										Foreign currency gains (losses), net (1)	22,084		(6,496)
Impairment and other changes in fair value of investments										Impairment and other changes in fair value of investments	0		(8,089)
Other income (expense), net	Other income (expense), net	$	(867)	$	(17,253)	$	(21,549)	$	(92,602)	Other income (expense), net	$	18,123	$	(18,987)

~~The following table summarizes prepaid expenses~~(1)Foreign currency gains (losses), net for the three months ended March 31, 2021 includes a $32.2 million cumulative foreign currency translation adjustment gain that was reclassified into earnings as a result of the substantial liquidation of our subsidiary in Japan as part of our restructuring actions. Refer to Note 9, Restructuring and ~~other current assets as of September 30, 2020 and December 31, 2019 (in thousands):~~Related Charges, for additional information.

September 30, 2020 December 31, 2019
Merchandise inventories $ 4,944 $ 25,426
Prepaid expenses 16,069 27,077
Income taxes receivable 13,585 4,791
Other 17,360 24,779
Total prepaid expenses and other current assets $ 51,958 $ 82,073

1613

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table summarizes prepaid expenses and other current assets as of March 31, 2021 and December 31, 2020 (in thousands):


	March 31, 2021		December 31, 2020
Prepaid expenses	$	20,588	$	18,038
Income taxes receivable	5,282		5,437
Other	15,391		16,966
Total prepaid expenses and other current assets	$	41,261	$	40,441

The following table summarizes other non-current assets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (in thousands):


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Deferred income tax	Deferred income tax	$	4,932	$	4,829	Deferred income tax	$	11,438	$	11,593
Debt issue costs, net	Debt issue costs, net	2,342		2,156		Debt issue costs, net	1,489		1,852
Deferred commissions expense		4,856		10,133
Deferred contract acquisition costs						Deferred contract acquisition costs	5,957		5,315
Deferred cloud implementation costs	Deferred cloud implementation costs	10,175		7,372		Deferred cloud implementation costs	10,494		10,402
Other	Other	3,756		4,115		Other	4,936		5,165
Total other non-current assets	Total other non-current assets	$	26,061	$	28,605	Total other non-current assets	$	34,314	$	34,327

The following table summarizes accrued merchant and supplier payables as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (in thousands):


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Accrued merchant payables	Accrued merchant payables	$	297,018	$	366,573	Accrued merchant payables	$	280,298	$	303,260
Accrued supplier payables (1)	Accrued supplier payables (1)	84,838		174,367		Accrued supplier payables (1)	48,702		107,703
Total accrued merchant and supplier payables	Total accrued merchant and supplier payables	$	381,856	$	540,940	Total accrued merchant and supplier payables	$	329,000	$	410,963

(1)Amounts include payables to suppliers of inventories and providers of shipping and fulfillment services.

The following table summarizes accrued expenses and other current liabilities as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (in thousands):

September 30, 2020 December 31, 2019
Refund reserve $ 29,566 $ 22,002
Compensation and benefits 37,711 49,009
Accrued marketing 10,256 41,110
Restructuring-related liabilities 19,753 0
Customer credits 50,830 13,764
Income taxes payable 1,221 5,044
Deferred revenue 10,635 17,951
Operating and finance lease obligations 38,055 40,768
Deferred cloud computing contract incentive 3,000 0
Other 56,271 70,544
Total accrued expenses and other current liabilities $ 257,298 $ 260,192

~~The following table summarizes other non-current liabilities as of September 30, 2020 and December 31, 2019 (in thousands):~~


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Contingent income tax liabilities		$	28,725	$	30,121
Finance lease obligations		1,126		5,831
Refund reserve						Refund reserve	$	35,740	$	33,173
Compensation and benefits						Compensation and benefits	60,685		54,958
Accrued marketing						Accrued marketing	14,589		15,299
Restructuring-related liabilities	Restructuring-related liabilities	714		0		Restructuring-related liabilities	17,620		13,746
Deferred income taxes		3,832		3,903
Customer credits						Customer credits	62,824		61,006
Income taxes payable						Income taxes payable	6,975		7,862
Deferred revenue						Deferred revenue	8,857		11,223
Deferred payroll taxes (1)	Deferred payroll taxes (1)	5,024		0		Deferred payroll taxes (1)	2,922		2,922
Operating and finance lease obligations						Operating and finance lease obligations	36,652		37,755
Deferred cloud computing contract incentive	Deferred cloud computing contract incentive	5,000		0		Deferred cloud computing contract incentive	3,000		3,000
Other	Other	5,675		5,132		Other	49,418		54,055
Total other non-current liabilities		$	50,096	$	44,987
Total accrued expenses and other current liabilities						Total accrued expenses and other current liabilities	$	299,282	$	294,999

(1)We have elected to defer certain payroll taxes under the Coronavirus Aid, Relief and Economic Security ("CARES") Act. These amounts are due ~~beginning~~by December 31, 2021.

1714

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table summarizes other non-current liabilities as of March 31, 2021 and December 31, 2020 (in thousands):


	March 31, 2021		December 31, 2020
Contingent income tax liabilities	$	27,105	$	25,593
Finance lease obligations	468		730
Restructuring-related liabilities	385		385
Deferred income taxes	3,474		3,170
Deferred payroll taxes (1)	2,922		2,922
Deferred cloud computing contract incentive	3,500		4,250
Other	6,149		7,378
Total other non-current liabilities	$	44,003	$	44,428

(1)We have elected to defer certain payroll taxes under the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. These amounts are due by December 31, 2022.

5. FINANCING ARRANGEMENTS

Adoption of ASU 2020-06

On January 1, 2021, we early adopted ASU 2020-06 using the modified retrospective method. The ASU eliminates the requirement to separately recognize an equity component when accounting for convertible debt that may be cash-settled upon conversion 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 earnings per share for convertible instruments and contracts in an entity’s own equity.

Beginning January 1, 2021, our condensed consolidated financials are presented in accordance with ASU 2020-06, while prior period amounts are not adjusted and continue to be reported in accordance with our historical policies. The new guidance changes the accounting for our 3.25% Convertible Senior Notes, due 2022, as discussed below.

On3.25% Convertible Senior Notes due 2022

In April 4, 2016, we issued $250.0 million in aggregate principal amount of convertible senior notes (the ~~"Notes"~~"Atairos Notes") in a private placement to A-G Holdings, L.P. ("AGH"). Michael Angelakis, the chairman and chief executive officer of Atairos Group, Inc. ("Atairos"), joined our Board of Directors (the "Board") in connection with the issuance of the Atairos Notes. Atairos controls the voting power of AGH. The net proceeds from this offering were $243.2 ~~million after deducting issuance costs.~~million. The Atairos Notes bear interest at a rate of 3.25% per annum, payable annually in arrears on April 1 of each ~~year, beginning on April 1, 2017. The Notes will mature on April 1, 2022, subject to earlier conversion or redemption.~~

year. Each $1,000 of principal amount of the Atairos Notes initially is convertible into 9.25926 shares of common stock, which is equivalent to an initial conversion price of $108.00 per share, subject to adjustment upon the occurrence of specified events. Upon conversion, we can elect to settle the conversion value in cash, shares of our common stock, or any combination of cash and shares of our common stock. ~~Holders of~~In May 2021, we entered into an agreement with AGH pursuant to which we will repurchase the Atairos Notes ~~may convert their Notes at their option at any time until the close of business~~ on ~~the scheduled trading day immediately preceding the maturity date. In addition, if specified corporate events occur prior~~or before May 14, 2021. For additional information, see Part II, Item 5. Other Information.

Prior to the ~~maturity date,~~adoption of ASU 2020-06, we ~~may be required to increase~~separated the conversion rate for holders who elect to convert based on the effective date of such event and the applicable stock price attributable to the event, as set forth in a table contained in the indenture governing the Notes (the "Indenture"). Based on the closing price of the common stock of $20.40 as of September 30, 2020, the if-converted value of the Notes was less than the principal amount.

With certain exceptions, upon a fundamental change (as defined in the Indenture), the holders of the Notes may require us to repurchase all or a portion of their Notes for cash at a purchase price equal to the principal amount plus accrued and unpaid interest. In addition, we may redeem the Notes, at our option, at a purchase price equal to the principal amount plus accrued and unpaid interest on or after April 1, 2020, if the closing sale price of the common stock exceeds 150% of the then-current conversion price for 20 or more trading days in the 30 consecutive trading-day period preceding the exercise of this redemption right.

The Notes are senior unsecured obligations that rank equal in right of payment to all senior unsecured indebtedness and rank senior in right of payment to any indebtedness that is contractually subordinated to the Notes.

The Indenture includes customary events of default. If an event of default, as defined in the Indenture, occurs and is continuing, the principal amount of the Notes and any accrued and unpaid interest may be declared immediately due and payable. In the case of bankruptcy or insolvency, the principal amount of the Notes and any accrued and unpaid interest would automatically become immediately due and payable.

~~We have separated the~~Atairos Notes into their liability and equity ~~components in the accompanying condensed consolidated balance sheets.~~components. The ~~carrying amount of the~~ liability ~~component~~ was initially calculated by measuring the fair value of a similar liability ~~that does not have~~without an associated conversion feature. ~~The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the principal amount of the Notes.~~ The difference between the principal amount of the Atairos Notes and the liability component ~~(the "debt discount") is amortized to interest expense at an effective interest rate of 9.75% over the term of the Notes. The~~was recognized in equity, ~~component of the Notes is included~~effectively resulting in ~~additional paid-in capital in the condensed consolidated balance sheets and is not remeasured as long as it continues to meet the conditions for equity classification.~~

a debt discount. We incurred transaction costs of ~~approximately~~ $6.8 million related to the issuance of the ~~Notes. Those transaction costs were allocated to the liability and equity components in the same manner as the allocation of the proceeds from the~~Atairos Notes. Transaction costs attributable to the liability component of $4.8 million were also recorded as a debt discount in the condensed consolidated balance ~~sheet and are being~~sheets. The debt discount was amortized to interest expense over the term of the Atairos Notes. Together with the cash interest, this resulted in an effective interest rate of 9.75%. Transaction costs attributable to the equity component of $2.0 million were recorded in stockholders' equity as a reduction of the equity component.

Following the adoption of ASU 2020-06, the previously bifurcated equity component of our 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 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 continue to be recorded as a debt discount in the condensed consolidated balance sheets and are amortized to interest expense over the remaining term of the Atairos Notes. Together with the cash interest, this results in an effective interest rate of 3.76%. As a result of adopting ASU 2020-06, we recorded a $67.0 million net reduction to additional paid-in capital, $19.0 million increase to non-current liabilities and a $48.0 million reduction to our opening accumulated deficit as of January 1, 2021 related to the Atairos Notes. See Note 12, Income (Loss) Per Share, for additional information on the effect on diluted per-share amounts.

The carrying amount of the Atairos Notes consisted of the following as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (in thousands):


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Liability component:	Liability component:					Liability component:
Principal amount	Principal amount	$	250,000	$	250,000	Principal amount	$	250,000	$	250,000
Less: debt discount		(24,307)		(35,131)
Less: debt discount - transaction costs						Less: debt discount - transaction costs	(1,239)		(1,459)
Less: debt discount - equity						Less: debt discount - equity	0		(19,051)
Net carrying amount of liability component	Net carrying amount of liability component	$	225,693	$	214,869	Net carrying amount of liability component	$	248,761	$	229,490

Net carrying amount of equity component	Net carrying amount of equity component	$	67,014	$	67,014	Net carrying amount of equity component	$	0	$	67,014

~~The estimated fair value of the Notes as of September 30, 2020 and December 31, 2019 was $251.8 million and $262.7 million, and was determined using a lattice model.~~

We classified the fair value of the Atairos 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 Atairos Notes and our cost of debt. The estimated fair value of the Atairos Notes as of March 31, 2021 and December 31, 2020 was $262.2 million and $263.3 million, and was determined using a lattice model.

As of ~~September 30, 2020,~~March 31, 2021, the remaining term of the Atairos Notes is approximately 1 ~~years and 6 months.~~year. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ we recognized interest costs on the Atairos Notes as follows (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Contractual interest (3.25% of the principal amount per annum)	Contractual interest (3.25% of the principal amount per annum)	$	2,032	$	2,032	$	6,096	$	6,096	Contractual interest (3.25% of the principal amount per annum)	$	2,032	$	2,032
Amortization of debt discount	Amortization of debt discount	3,701		3,341		10,824		9,772		Amortization of debt discount	303		3,516
Total	Total	$	5,733	$	5,373	$	16,920	$	15,868	Total	$	2,335	$	5,548

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 provide us with the right to purchase up to 2.3 million shares of our common stock at an initial strike price of $108.00 per share, which corresponds to the initial conversion price of the Atairos Notes, and are exercisable upon conversion of the Atairos Notes. The convertible note hedges are intended to reduce the potential economic dilution upon conversion of the Atairos Notes. The convertible note hedges are separate transactions and are not part of the terms of the Atairos Notes. Holders of the Atairos Notes do not have any rights with respect to the convertible note hedges.

In May 2016, we also sold warrants for total cash proceeds of $35.5 million to certain bank counterparties. The warrants provide the counterparties with the right to purchase up to 2.3 million shares of our common stock at a strike price of $170.00 per share. The warrants expire on various dates between July 1, 2022 and August 26, 2022 and are exercisable on their expiration dates. The warrants are separate transactions and are not part of the

terms of the Atairos Notes or convertible note hedges. Holders of the Atairos Notes and convertible note hedges do not have any rights with respect to the warrants.

The amounts paid and received for the convertible note hedges and warrants were recorded in additional paid-in capital in the condensed consolidated balance sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. The convertible note hedges and warrants are not remeasured as long as they continue to meet the conditions for equity classification. The amounts paid for the convertible note hedges are tax deductible over the term of the Atairos Notes, while the proceeds received from the warrants are not taxable. In connection with the repurchase of the Atairos Notes, we intend to unwind the related note hedge and warrants.

Under the if-converted method, the shares of common stock underlying the conversion option in the Atairos Notes are included in the diluted earnings per share denominator and the interest expense and amortization of the transaction costs on the Atairos Notes, net of tax, is added to the numerator. However, upon conversion, there will be no economic dilution from the Notes, as exercise of the convertible note hedges eliminates any dilution from the Notes that would have otherwise occurred when the price of our common stock exceeds the conversion price. Taken together, the purchase of the

convertible note hedges and sale of warrants are intended to offset any actual dilution from the conversion of the Atairos Notes and to effectively increase the overall conversion price from $108.00 to $170.00 per share.

1.125% Convertible Senior Notes due 2026

In March 2021, we issued $200.0 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 $193.0 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, beginning on September 15, 2021. The 2026 Notes will mature on March 15, 2026, subject to earlier repurchase, redemption or conversion.

We used $23.8 million of the net proceeds from the offering to pay the cost of certain related capped call transactions, and intend to use the remaining net proceeds, together with cash on hand, to repay or repurchase, the Atairos Notes. As of March 31, 2021, the remaining net proceeds from this offering and related transactions of $169.8 million is presented in Restricted cash in our condensed consolidated balance sheets. The use of the net proceeds from the offering is subject to the terms of our second amendment to the revolving credit agreement, as described in the Revolving Credit Agreement section below.

In April 2021, we issued an additional $30.0 million aggregate principal amount of 2026 Notes following the exercise by the initial purchasers of their option to purchase additional 2026 Notes, and we entered into additional capped call transactions in connection therewith. The net proceeds from the sale of the additional 2026 Notes were $29.1 million. We used $3.6 million of the net proceeds to pay the cost of the additional capped call transactions and intend to use the remainder of the net proceeds from the over-allotment option to repay or repurchase the Atairos Notes.

Each $1,000 of principal amount of the 2026 Notes initially is convertible into 14.6800 shares of common stock, which is equivalent to an initial conversion price of $68.12 per share, subject to adjustment upon the occurrence of specified events. In addition, upon the occurrence of a make-whole fundamental change (as defined in the Indenture governing the 2026 Notes) or if we issue a notice of redemption, we will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2026 Notes in connection with such make-whole fundamental change or redemption.

Upon conversion, we can elect to settle the conversion value in cash, shares of our common stock, or any combination of cash and shares of our common stock. Subject to certain conditions, holders of the 2026 Notes may convert the 2026 Notes at their option at any time until the close of business on the scheduled trading day immediately preceding the maturity date. In addition, if specified corporate events occur prior to the maturity date, we may be required to increase the conversion rate for holders who elect to convert based on the effective date of such event and the applicable stock price attributable to the event. Based on the closing price of the common stock of $50.55 as of March 31, 2021, the if-converted value of the 2026 Notes was less than the principal amount.

Certain conditions apply to the conversion by holders and redemption by us of the 2026 Notes, which are set forth in the Indenture governing the 2026 Notes. In addition, upon the occurrence of a fundamental change (as defined in the Indenture) prior to the maturity date, holders may require us to repurchase all or a portion of the 2026 Notes for cash.

The 2026 Notes are our senior unsecured obligations and will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2026 Notes; equal in right of payment to any of our unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities of current or future subsidiaries (including trade payables).

The Indenture includes customary events of default. If an event of default, as defined in the Indenture, occurs and is continuing, the principal amount of the 2026 Notes and any accrued and unpaid interest may be declared immediately due and payable. In the case of bankruptcy or insolvency, the principal amount of the 2026 Notes and any accrued and unpaid interest would automatically become immediately due and payable.

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 $6.8 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 1.84% over the term of the 2026 Notes. We have presented the 2026 Notes in non-current liabilities in the accompanying condensed consolidated balance sheets.

The carrying amount of the 2026 Notes consisted of the following as of March 31, 2021 (in thousands):


	March 31, 2021
Principal amount	$	200,000
Less: debt discount	(6,765)
Net carrying amount of liability	$	193,235

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 March 31, 2021 was $205.4 million and was determined using a lattice model.

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 earnings per share denominator and the interest expense and amortization of the debt discount on the 2026 Notes, net of tax, is 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 ~~Amendment~~Amendments described below) and matures in May 2024.

OnIn July ~~17,~~ 2020, we entered into an amendment to the revolving credit agreement (the ~~"Amendment" and the revolving credit agreement as amended, the "Amended Credit Agreement"~~"First Amendment") in order to provide us with, among other things, operational flexibility and covenant relief through the end of the first quarter of 2021 ~~(the "Suspension Period")~~ in light of the ongoing impacts of COVID-19 on our business. In addition to the covenant relief described below, the First Amendment 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 extend the suspension period provided by the First Amendment through the fourth quarter 2021 (the "Suspension Period"), amend and remove certain financial covenants applicable after the amended Suspension Period ends and permit the issuance of the 2026 Notes and related capped call transactions. The Second Amendment requires that the net proceeds from the 2026 Notes be used to repay or repurchase the Atairos Notes.

We deferred debt issuance costs of ~~$3.2~~$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~~sheets as of ~~September 30, 2020~~March 31, 2021 and are amortized to interest expense over the term of the respective agreement.

Pursuant to the ~~Amendment,~~Amendments, during the Suspension Period, ~~the Company~~we will be exempt from certain covenant restrictions, namely the requirements to maintain a maximum funded indebtedness to EBITDA ratio, ~~a maximum senior secured indebtedness to EBITDA ratio, a minimum fixed charge coverage ratio, unrestricted cash of not less than$250.0 million~~ and a minimum liquidity balance (including any undrawn amounts under the credit facility) of at least 70% of our accrued merchant and supplier payables balance ~~(collectively,~~(which covenant will apply again upon termination of the ~~"Existing Financial Covenants")~~Suspension Period). Additionally, the ~~Amendment provides~~Amendments provide that, during the Suspension Period, we will be required to maintain specified minimum quarterly EBITDA levels and to maintain a monthly minimum liquidity balance (including any undrawn amounts under the credit facility) of at least 100% of our accrued merchant and supplier payables balance for such month plus $50.0 million. ~~Following~~The Second Amendment also permanently removes requirements (which previously only applied after the Suspension Period) that we maintain (i) a maximum senior secured indebtedness to EBITDA ratio and (ii) unrestricted cash of not less than $250 million. Finally, the Second Amendment changes the requirement to maintain a minimum fixed charge coverage ratio (which requirement applies only after the Suspension Period ~~we will be subject~~ends) to ~~the Existing Financial Covenants.~~a requirement to maintain a minimum interest coverage ratio.

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. The ~~Amendment~~Amendments further ~~restricts~~restrict certain of these negative covenants during the Suspension Period, including our ability to make share repurchases, acquisitions, investments and to incur additional indebtedness and liens.

Non-compliance with the covenants under the Amended Credit Agreement may result in termination of the commitments thereunder and any then 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.

The ~~Amendment~~Amendments also ~~increases~~increased interest rates through the end of the ~~first quarter of 2021,~~Suspension Period, raising the alternative base rate and Canadian prime spreads to 1.50%, the fixed rate spreads to 2.50% and the commitment fee to 0.4% on the daily amount of the unused commitments under the Amended Credit Agreement. Following the Suspension Period, the applicable spread and commitment fee will revert to pre-Amendment levels, which provides for (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 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 had $100.0 million of outstanding borrowings and $23.1 million of outstanding letters of credit as of March 31, 2021, and $200.0 million of outstanding borrowings and $20.6 million of outstanding letters of credit as of December 31, 2020 under the Amended Credit ~~Agreement as of September 30, 2020. We had $18.1 million of outstanding letters of credit under the credit agreement as of December 31, 2019. See Item 2.~~ ~~Management's Discussion of Financial Condition and Results of Operations - Liquidity and Capital Resources, for additional information.~~Agreement.

6. COMMITMENTS AND CONTINGENCIES

Our contractual obligations and commitments and future operating income under our operating subleases as of ~~September 30, 2020~~March 31, 2021 and through the date of this report, did not materially change from the amounts set forth in our ~~2019~~2020 Annual Report on Form ~~10-K, except as disclosed below.~~

~~Purchase Obligations~~

During the nine months ended September 30, 2020, we entered into non-cancellable arrangements for cloud computing services and software. Future payments under these new contractual obligations are as follows (in thousands):

2020 $ 5,810
2021 17,672
2022 17,118
2023 (1)
22,753
Total $ 63,353

~~(1)Includes $8.0 million in cloud computing arrangement costs for which the timing of settlement is based on usage. We expect to incur those costs over the three-year contract period ending in 2023.~~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 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. Groupon filed a motion to dismiss the complaint and, on April 28, 2021, the Court granted this motion and dismissed the complaint without prejudice. The Court provided the plaintiff with the opportunity to file a motion to seek leave to file an amended complaint. It set a deadline of May 19, 2021 for plaintiff to file this motion. We intend to continue to vigorously defend ~~against these allegations,~~the case, 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 position, results of operations or cash flows. Our accrued liabilities for loss contingencies related to legal and 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. During the first quarter of 2020, we decreased our indemnification liabilities due to the expiration of certain indemnification obligations. The resulting benefit of $0.4 million is recorded within Income (loss) from discontinued operations on the condensed consolidated statement of operations for the nine months ended September 30, 2020. Our remaining indemnification liabilities were $2.8 million as of ~~September 30, 2020.~~March 31, 2021. We estimate that the total amount of obligations that are reasonably possible to arise under the indemnifications in excess of amounts accrued as of ~~September 30, 2020~~March 31, 2021 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.

7. STOCKHOLDERS' EQUITY AND COMPENSATION ARRANGEMENTS

Reverse Stock Split

On June 9, 2020, our stockholders approved amendments to our Restated Certificate of Incorporation to effect a reverse stock split of our shares of common stock, and our Board approved a final reverse stock split ratio of 1-for-20 and a corresponding reduction in the number of authorized shares of our common stock. The reverse stock split became effective on June 10, 2020. OnAccordingly, the effective date, every 20 shares of issued and outstanding common stock were combined and converted into one issued and outstanding share of common stock. The number of authorized shares of Common Stock was reduced proportionately. Fractional shares were cancelled and stockholders received cash in lieu thereof and the par value per share of common stock remains unchanged. A proportionate adjustment was also made to the maximum number of shares, ~~of common stock issuable under the Groupon, Inc. Stock Plans (the "Plans"), and the Groupon, Inc. 2012 Employee Stock Purchase Plan, as amended ("ESPP").~~

~~As a result, the number of shares~~equity awards, and income (loss) per share disclosed throughout this Quarterly Report on Form 10-Q have been retrospectively adjusted to reflect the reverse stock ~~split.~~split for all prior periods presented.

Common Stock

Pursuant to our restated certificate of incorporation, as of ~~September 30, 2020,~~March 31, 2021, the Board had the authority to issue up to a total of 100,500,000 shares of common stock. Each holder of common stock is entitled to ~~one~~1 vote per share on any matter that is submitted to a vote of stockholders. In addition, holders of our common stock will vote as a single class of stock on any matter that is submitted to a vote of stockholders.

Share Repurchase Program

In May 2018, the Board authorized us to repurchase up to $300.0 million of our common stock under our share repurchase program. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, we did ~~not~~0t purchase any shares under the program. As of ~~September 30, 2020,~~March 31, 2021, up to $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.

Groupon, Inc. Stock Plans

The Groupon, Inc. Stock Plans (the "Plans") are administered by the Compensation Committee of the Board (the "Compensation Committee"). As of ~~September 30, 2020, 2,899,062~~March 31, 2021, 3,212,132 shares of common stock were available for future issuance under the Plans.

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

The stock-based compensation expense related to stock awards issued under the Plans are presented within the following line items of the condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Cost of revenue	Cost of revenue	$	156	$	405	$	496	$	1,163	Cost of revenue	$	171	$	259
Marketing	Marketing	377		1,671		1,218		4,586		Marketing	135		874
Selling, general and administrative	Selling, general and administrative	7,846		17,467		29,223		56,768		Selling, general and administrative	6,873		12,882
Restructuring and related charges		311		0		1,735		0
Total stock-based compensation expense	Total stock-based compensation expense	$	8,690	$	19,543	$	32,672	$	62,517	Total stock-based compensation expense	$	7,179	$	14,015

We capitalized ~~$1.1~~$0.9 million and ~~$2.0~~$1.1 million of stock-based compensation for the three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019, and $3.4 million and $5.5 million for the nine months ended September 30, 2020 and 2019~~ in connection with internally-developed software and cloud computing arrangements.

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Employee Stock Purchase Plan

The ~~ESPP~~Groupon, Inc. 2012 Employee Stock Purchase Plan, as amended, ("ESPP") authorizes us to grant up to 1,000,000 shares of common stock under that plan as of ~~September 30, 2020.~~March 31, 2021. For the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, 23,418 and ~~2019, 69,371 and 74,300~~28,621 shares of common stock were issued under the ESPP.

Restricted Stock Units

The restricted stock units granted under the Plans generally have vesting periods between one and four years and are amortized on a straight-line basis over their requisite service period.

The table below summarizes restricted stock unit activity under the Plans for the ~~nine~~three months ended ~~September 30, 2020:~~March 31, 2021:


		Restricted Stock Units	Weighted-Average Grant Date Fair Value (per unit)			Restricted Stock Units	Weighted-Average Grant Date Fair Value (per unit)
Unvested at December 31, 2019		1,527,014	$	74.80
Unvested at December 31, 2020					Unvested at December 31, 2020	1,853,007	$	31.91
Granted	Granted	1,744,782	24.59		Granted	129,827	32.87
Vested	Vested	(596,183)	74.86		Vested	(222,244)	27.60
Forfeited	Forfeited	(720,949)	65.70		Forfeited	(125,053)	32.39
Unvested at September 30, 2020		1,954,664	33.41
Unvested at March 31, 2021					Unvested at March 31, 2021	1,635,537	$	32.37

As of ~~September 30, 2020, $49.7~~March 31, 2021, $31.4 million of unrecognized compensation costs related to unvested restricted stock units are expected to be recognized over a remaining weighted-average period of ~~1.09~~0.94 years.

Performance Share Units

We grant 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"). During the ~~nine months~~year ended ~~September 30,~~December 31, 2019, we also granted performance share units subject to a market condition ("Market-based Performance Share Units").

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

The Market-based Performance Share Units will vest if our average daily closing stock price is equal to or greater than $120.00 per share over a period of 30 consecutive trading days prior to December 31, 2022 or if a change in control occurs during the performance period at the specified stock price (and on a proportional basis for a change in control price between the grant date price and the specified stock price). We used a Monte Carlo simulation to calculate the grant date fair value of the awards and the related derived service period over which we recognized the expense. The key inputs used in the Monte Carlo simulation were the risk-free rate, our volatility of 49.8% and our cost of equity of 12.8%. We did 0t recognize any compensation costs related to our Market-based Performance Share Units during the three months ended September 30, 2020 as the derived service period ended during the first quarter 2020, at which time these awards were fully expensed.

Our 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 that the specified performance conditions have been achieved.

The table below summarizes Performance Share Unit activity under the Plans for the ~~nine~~three months ended ~~September 30, 2020:~~March 31, 2021:


		Performance Share Units	Weighted-Average Grant Date Fair Value (per unit)		Market-based Performance Share Units	Weighted-Average Grant Date Fair Value (per unit)			Performance Share Units	Weighted-Average Grant Date Fair Value (per unit)		Market-based Performance Share Units	Weighted-Average Grant Date Fair Value (per unit)
Unvested at December 31, 2019		203,853	$	79.76	341,002	$	60.60
Unvested at December 31, 2020								Unvested at December 31, 2020	124,709	$	29.73	57,668	$	60.60
Granted(1)	Granted(1)	96,598	15.44		0	0		Granted(1)	41,729	15.44		0	0
Vested	Vested	(104,441)	80.77		0	0		Vested	(86,710)	24.36		0	0
Forfeited	Forfeited	(71,128)	79.94		(91,668)	60.60		Forfeited	(282)	69.00		0	0
Unvested at September 30, 2020		124,882	29.78		249,334	60.60
Unvested at March 31, 2021								Unvested at March 31, 2021	79,446	27.95		57,668	60.60

Maximum shares issuable upon vesting at September 30, 2020		173,181			249,334
Maximum shares issuable upon vesting at March 31, 2021								Maximum shares issuable upon vesting at March 31, 2021	79,446			57,668

(1)Performance Share Units granted during the three months ended March 31, 2021 relate to the issuance of incremental shares upon the Compensation Committee's certification of the achievement of the 2020 performance metrics.

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

As of ~~September 30, 2020, $1.5~~March 31, 2021, $1.0 million of unrecognized compensation costs related to unvested Performance Share Units are expected to be recognized over a remaining weighted-average period of ~~1.44~~1.35 years. We have recognized all compensation costs related to our unvested Market-Based Performance Share Units.

8. REVENUE RECOGNITION

Refer to Note 13, Segment Information, for revenue summarized by reportable segment and category for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

Contract Balances

A substantial majority of our deferred revenue relates to product sales for which revenue will be recognized as the products are delivered to customers, generally within one week following the balance sheet date. Our deferred revenue was ~~$10.6~~$8.9 million as of ~~September 30, 2020.~~March 31, 2021. As of December 31, ~~2019,~~2020, our deferred revenue was ~~$18.0~~$11.2 million, ~~all of~~ which was substantially recognized during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 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

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

relationship purposes. The following table summarizes the activity in the liability for customer credits for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 (in thousands):


	Customer Credits
Balance as of December 31, ~~2019~~2020	$	~~13,764~~61,006
Credits issued	~~153,638~~50,051
Credits redeemed (1)	~~(102,373)~~(41,283)
Breakage revenue recognized	~~(15,055)~~(6,205)
Foreign currency translation	~~856~~ (745)
Balance as of ~~September 30, 2020~~March 31, 2021	$	~~50,830~~62,824

(1)Customer credits can be redeemed through our online marketplaces for goods or services provided by a third-party merchant or for merchandise inventory sold by us. When customer credits are redeemed for goods or services provided by a third-party merchant, 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. When customer credits are redeemed for merchandise inventory sold by us, product revenue is recognized on a gross basis equal to the amount of the customer credit liability derecognized. ~~Customer~~Historically, customer credits ~~are~~have primarily been used within one year of ~~issuance.~~issuance; however, usage patterns have been impacted from changes in customer behavior due to COVID-19.

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 within the following line items of the condensed consolidated balance sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (in thousands):


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Prepaid expenses and other current assets	Prepaid expenses and other current assets	$	1,132	$	2,501	Prepaid expenses and other current assets	$	973	$	1,009
Other non-current assets	Other non-current assets	4,856		10,133		Other non-current assets	5,957		5,315

The amortization of deferred contract acquisition costs is classified within Selling, general and administrative expense in the condensed consolidated statements of operations. We amortized ~~$3.6~~$2.6 million and ~~$5.0~~$4.7 million of deferred contract acquisition costs during the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019, and $12.3 million and $15.5 million during the nine months ended September 30, 2020 and 2019.~~2020. We did not recognize any impairments in relation to the deferred contract acquisition costs during the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Allowance for Expected Credit Losses on Accounts Receivable

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 receivables for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 (in thousands):


	Allowance for Expected Credit Losses
Balance as of ~~January 1,~~December 31, 2020	$	~~3,693~~9,756
Change in ~~Provision~~provision	~~8,683~~ (244)
Write-offs	~~(2,330)~~(292)
Foreign currency translation	~~187~~ (3)
Balance as of ~~September 30, 2020~~March 31, 2021	$	~~10,233~~9,217

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

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 ~~only recognize amounts in variable consideration when we believe~~apply a constraint to ensure it is probable that a significant reversal of revenue will not occur in future ~~periods, which requires us~~periods. Beginning in 2020, we increased our constraint on revenue from unredeemed vouchers to ~~make significant estimates~~reflect ongoing uncertainty in future customer redemption behavior due to the impacts of ~~future redemptions.~~COVID-19. If actual redemptions differ from our estimates, the effects could be material to the condensed consolidated financial statements. AsDuring the three months ended March 31, 2021, we recognized an immaterial amount of ~~September 30, 2020 and December 31, 2019, we constrained $41.0 million and $14.6 million in revenue~~variable consideration from unredeemed vouchers that ~~we may recognize~~were sold in ~~future periods when we determine it is probable that~~ a significant amount of that revenue will not be subsequently reversed. We have increased our constraint on revenue from unredeemed vouchers due to variability in customer redemption behavior due to the impacts of COVID-19. In addition, the revenue we have constrained on unredeemed vouchers has increased in connection with our increased use of pay on redemption terms for our North America merchants.prior period.

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

9. RESTRUCTURING AND RELATED CHARGES

In April 2020, the Board approved a multi-phase restructuring plan of up to $105.0 million of total pretax charges 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 expect to incur total pretax charges of $75.0 million to $105.0 million in connection with the ~~multi-phase~~ restructuring actions through the end of 2021. ~~The first phase of the~~Our restructuring ~~actions~~plan includes ~~an overall reduction~~workforce reductions of approximately ~~1,300~~1,200 positions globally, ~~and~~ the exit or discontinuation of the use of certain leases and other assets, ~~by the end of 2020. The majority of the first phase of workforce reductions and~~ impairments of our right-of-use and other long-lived assets, ~~occurred during the second quarter 2020. In the third quarter 2020, we initiated the second phase of our restructuring plan, which included additional workforce reductions~~ and the exit of our operations in Japan and New ~~Zealand~~Zealand. In the first quarter 2021, we substantially liquidated our subsidiary in Japan and ~~Japan.~~ reclassified $32.2 million of cumulative foreign currency translation gains into earnings, which is presented in Other income (expense), net on the condensed consolidated statement of operations for the three months ended March 31, 2021.

The majority of our restructuring charges are expected to be paid in cash and primarily relate to employee severance and benefits expenses, facilities-related costs ~~and impairment charges~~ and professional advisory fees. We will continue to evaluate our cost structure, including additional workforce reductions, as part of our restructuring plan. Costs incurred related to the restructuring plan are classified as Restructuring and related charges on the condensed consolidated statements of operations.

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table summarizes costs incurred by segment related to the restructuring plans for ~~both the three and nine months ended September 30, 2020 (in thousands):~~

Three Months Ended September 30, 2020
Employee Severance and Benefit Costs (1)
Legal and Advisory Costs Property, Equipment and Software Impairments Right-of-Use Asset Impairments and Lease-related Charges (Credits) Total Restructuring Charges (Credits)
North America $ 1,489 $ 435 $ 70 $ 736 $ 2,730
International 14,400 18 195 3,216 17,829
Consolidated $ 15,889 $ 453 $ 265 $ 3,952 $ 20,559

~~(1)The employee severance and benefits costs for~~ the three months ended September 30, 2020 are related to the termination of and planned termination of approximately 500 employees. Additional severance and benefits costs may be incurred in future periods. Substantially all of the remaining cash payments for the costs accrued as of September 30, 2020 are expected to be disbursed by the end of 2020.March 31, 2021 (in thousands):


		Nine Months Ended September 30, 2020											Three Months Ended March 31, 2021
		Employee Severance and Benefit Costs (1)		Legal and Advisory Costs		Property, Equipment and Software Impairments		Right-of-Use Asset Impairments and Lease-related Charges (Credits)		Total Restructuring Charges (Credits)			Employee Severance and Benefit Costs		Legal and Advisory Costs		Lease-related Charges (Credits)		Total Restructuring Charges (Credits)
North America	North America	$	17,548	$	443	$	4,790	$	10,047	$	32,828	North America	$	442	$	807	$	741	$	1,990
International	International	23,041		759		227		4,182		28,209		International	6,460		(22)		(1,006)		5,432
Consolidated	Consolidated	$	40,589	$	1,202	$	5,017	$	14,229	$	61,037	Consolidated	$	6,902	$	785	$	(265)	$	7,422

~~(1)~~The employee severance and benefits costs for the nine months ended September 30, 2020 are related to the termination and planned termination of approximately 1,200 employees. Additional severance and benefits costs may be incurred in future periods. Substantially all of the remaining cash payments for the costs accrued as of September 30, 2020 are expected to be disbursed by the end of 2020.

As a part of our restructuring plan, we vacated several of our leased facilities, and many of those facilities are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases. During the nine months ended September 30, 2020, we recognized $17.2 million in restructuring charges related to the impairment of right-of-use assets and leasehold improvements related to those leases as we reduced the carrying value of the those assets to their respective fair value. See Note 2, ~~Goodwill and Long-Lived Assets~~ ~~for more information.~~ Rent expense, including amortization of the right-of-use asset and accretion of the operating lease liability, sublease income 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 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.

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

The following table summarizes restructuring liability activity for ~~the nine months ended September 30, 2020~~each period (in thousands):


		Employee Severance and Benefit Costs		Legal and Advisory Costs		Total			Employee Severance and Benefit Costs		Other Exit Costs		Total
Balance as of December 31, 2019 (1)	Balance as of December 31, 2019 (1)	$	699	$	0	$	699	Balance as of December 31, 2019 (1)	$	699	$	0	$	699
Charges payable in cash (2)	Charges payable in cash (2)	38,854		1,202		40,056		Charges payable in cash (2)	36,266		2,137		38,403
Cash payments	Cash payments	(20,319)		(753)		(21,072)		Cash payments	(25,328)		(1,289)		(26,617)
Foreign currency translation	Foreign currency translation	722		62		784		Foreign currency translation	1,660		(14)		1,646
Balance as of September 30, 2020		$	19,956	$	511	$	20,467
Balance as of December 31, 2020								Balance as of December 31, 2020	13,297		834		14,131
Charges payable in cash								Charges payable in cash	6,902		785		7,687
Cash payments								Cash payments	(2,431)		(812)		(3,243)
Foreign currency translation								Foreign currency translation	(570)		0		(570)
Balance as of March 31, 2021								Balance as of March 31, 2021	$	17,198	$	807	$	18,005

(1)Amounts included in the ~~beginning balance~~year ended December 31, 2019 are related to prior restructuring plans and the liabilities under those plans have been substantially settled.

(2)Excludes stock-based compensation of $1.7 million related to accelerated vesting of stock-based compensation awards for certain employees terminated as a result of our restructuring ~~activities during the nine months ended September 30, 2020.~~activities.

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

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 continuing operations before provision (benefit) for income taxes for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ was as follows (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Provision (benefit) for income taxes	Provision (benefit) for income taxes	$	(486)	$	2,069	$	(7,170)	$	591	Provision (benefit) for income taxes	$	2,427	$	(5,988)
Income (loss) from continuing operations before provision (benefit) for income taxes	Income (loss) from continuing operations before provision (benefit) for income taxes	(17,047)		(12,616)		(307,703)		(92,909)		Income (loss) from continuing operations before provision (benefit) for income taxes	16,875		(216,848)

Our U.S. Federal income tax rate is 21%. The ~~primary factors impacting the~~ effective tax rate for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 was lower than the U.S. statutory federal income tax rate due to the benefit of non-taxable items and the U.S. research and development tax credit. The three months ended March 31, 2021 and 2020 ~~and 2019~~ were also impacted

by the pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets. The ~~nine~~three months ended ~~September 30,~~March 31, 2020 ~~and 2019 were~~was impacted by the reversals of reserves for uncertain tax positions due to the closure of tax ~~audits. The nine months ended September 30, 2020 were also impacted~~audits and by the carryback of federal net operating losses due to the income tax relief provided by the CARES Act. 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 ~~$119.1~~$122.4 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. In addition to any potential increases in our liabilities for uncertain tax positions from the ultimate resolution of that assessment, we believe that it is reasonably possible that reductions of up to ~~$5.8~~$3.4 million in unrecognized tax benefits may occur within the 12 months following ~~September 30, 2020~~March 31, 2021 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. Additionally, while we did not incur the deemed repatriation tax, 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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 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.

Groupon uses a cost-sharing arrangement under which controlled members agree to share the costs and risks of developing intangible properties in accordance with their reasonably anticipated share of benefits from the intangibles. In 2019, the Ninth Circuit Court of Appeals entered a decision in Altera Corp. v. Commissioner requiring related parties in an intercompany cost-sharing arrangement to share expenses related to stock-based compensation. Altera then petitioned the United States Supreme Court to review the Ninth Circuit's decision. In June 2020, the Supreme Court denied this petition, and accordingly, the Ninth Circuit's Altera decision stands. The Altera decision did not have a material impact on our provision for income taxes for the year ended December 31, 2019, and is not expected to have an impact for the year ended December 31, 2020.

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

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.

~~To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs in valuation methodologies used to measure fair value:~~

~~Level 1 - Measurements that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.~~

~~Level 2 - Measurements that include other inputs that are directly or indirectly observable in the marketplace.~~

Level 3 - Measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. These fair value measurements require significant judgment.

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 use the discounted cash flow method, which is an income approach, to estimate the fair value of the investees. The key inputs to determining fair values under that approach are cash flow forecasts and discount rates. We also use a market approach valuation technique, which is based on market multiples of guideline companies, to determine the fair value of each entity.

~~We also have investments in redeemable preferred shares. We measure the fair value of those available-for-sale securities using the discounted cash flow method.~~

We have ~~classified our~~ fair value option investments and ~~our investments in~~ 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. Increases in projected cash flows and decreases in discount rates contribute to increases in the estimated fair values of the fair value option investments and available-for-sale securities, whereas decreases in projected cash flows and increases in discount rates contribute to decreases in their fair values. Our fair value option investments were $0.0 million and $1.4 million as of September 30, 2020 and December 31, 2019.

Contingent consideration. ~~We are subject to~~During the three months ended March 31, 2021, we settled a contingent consideration arrangement ~~to transfer a maximum payout in cash of $2.5 million~~ to the former owners of a business acquired ~~on April 30,~~in 2018.

Liabilities for contingent consideration are measured at fair value each reporting period, with the acquisition-date fair value included as part of the consideration transferred in the related business combination and subsequent changes in fair value recorded in earnings within Selling, general and administrative expense on the condensed consolidated statements of operations.

We use anthe income approach to value contingent consideration obligations based on ~~the present value of probability-weighted~~ future ~~cash flows.~~financial performance. We ~~classify the~~have classified our contingent consideration ~~liabilities~~ as Level 3 due to the lack of relevant observable market data over fair value inputs such as probability-weighting of payment outcomes. ~~We determined that the fair value of our contingent consideration was $0.3 million and $1.3 million as of September 30, 2020 and December 31, 2019.~~

2619

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table provides a roll forward of the fair value of recurring Level 3 fair value measurements for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Assets	Assets									Assets
Fair value option investments:	Fair value option investments:									Fair value option investments:
Beginning Balance	Beginning Balance	$	0	$	4,917	$	1,405	$	73,902	Beginning Balance	$	0	$	1,405
Total gains (losses) included in earnings	Total gains (losses) included in earnings	0		14		(1,405)		(68,971)		Total gains (losses) included in earnings	0		(1,405)
Ending Balance		$	0	$	4,931	$	0	$	4,931
Unrealized gains (losses) still held (1)		$	0	$	14	$	(1,405)	$	(68,971)
Available-for-sale securities - Redeemable preferred shares:
Beginning Balance		$	0	$	10,201	$	0	$	10,340
Total gains (losses) included in other comprehensive income (loss)		0		(63)		0		(202)
Ending Balance	Ending Balance	$	0	$	10,138	$	0	$	10,138	Ending Balance	$	0	$	0
Unrealized gains (losses) still held (1)	Unrealized gains (losses) still held (1)	$	0	$	(63)	$	0	$	(202)	Unrealized gains (losses) still held (1)	$	0	$	(1,405)
Liabilities	Liabilities									Liabilities
Contingent Consideration:	Contingent Consideration:									Contingent Consideration:
Beginning Balance	Beginning Balance	$	278	$	1,239	$	1,298	$	1,529	Beginning Balance	$	326	$	1,298
Settlements of contingent consideration liabilities	Settlements of contingent consideration liabilities	0		0		(908)		(312)		Settlements of contingent consideration liabilities	(393)		0
Total losses (gains) included in earnings	Total losses (gains) included in earnings	0		6		6		33		Total losses (gains) included in earnings	0		4
Foreign currency translation	Foreign currency translation	13		(38)		(105)		(43)		Foreign currency translation	67		(83)
Ending Balance	Ending Balance	$	291	$	1,207	$	291	$	1,207	Ending Balance	$	0	$	1,219
Unrealized gains (losses) still held (1)	Unrealized gains (losses) still held (1)	$	0	$	6	$	6	$	33	Unrealized gains (losses) still held (1)	$	0	$	4

(1)Represents the unrealized gains or losses recorded in earnings and/or other comprehensive income (loss) during the period for assets and liabilities classified as Level 3 that are still held (or outstanding) at the end of the period.

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 $109.5 million in non-cash impairment charges related to goodwill and ~~$39.6~~$22.4 million in non-cash impairment charges related to long-lived assets during the ~~nine~~three months ended ~~September 30, 2020, of which $17.2 million is included in Restructuring and related charges on our condensed consolidated statement of operations.~~March 31, 2020. See Note 2, Goodwill and Long-Lived Assets,~~, and Note 9,~~ ~~Restructuring and Related Charges~~, for additional information.

We recognized $6.7 million in impairment charges related to an other equity method investment during the ~~nine~~three months ended ~~September 30,~~March 31, 2020. See Note 3, Investments, for additional information.

We did not record any other significant nonrecurring fair value measurements after initial recognition for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 due to their short-term nature.

~~GROUPON, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

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 stock options, restricted stock units, performance share units, performance bonus awards, ESPP shares, warrants 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

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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 nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands, except share amounts and per share amounts):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Basic and diluted net income (loss) per share:	Basic and diluted net income (loss) per share:									Basic and diluted net income (loss) per share:

Numerator	Numerator									Numerator
Net income (loss) - continuing operations	Net income (loss) - continuing operations	$	(16,561)	$	(14,685)	$	(300,533)	$	(93,500)	Net income (loss) - continuing operations	$	14,448	$	(210,860)
Less: Net income (loss) attributable to noncontrolling interests	Less: Net income (loss) attributable to noncontrolling interests	(291)		2,000		1,758		8,080		Less: Net income (loss) attributable to noncontrolling interests	(110)		3,044
Net income (loss) attributable to common stockholders - continuing operations		(16,270)		(16,685)		(302,291)		(101,580)
Basic net income (loss) attributable to common stockholders - continuing operations										Basic net income (loss) attributable to common stockholders - continuing operations	14,558		(213,904)
Net income (loss) attributable to common stockholders - discontinued operations	Net income (loss) attributable to common stockholders - discontinued operations	0		0		382		2,162		Net income (loss) attributable to common stockholders - discontinued operations	0		382
Net income (loss) attributable to common stockholders		$	(16,270)	$	(16,685)	$	(301,909)	$	(99,418)
Basic net income (loss) attributable to common stockholders										Basic net income (loss) attributable to common stockholders	$	14,558	$	(213,522)

Add: Effect of assumed conversion of convertible senior notes due 2026, net of tax (1)										Add: Effect of assumed conversion of convertible senior notes due 2026, net of tax (1)	$	72	$	0

Diluted net income (loss) attributable to common stockholders - continuing operations										Diluted net income (loss) attributable to common stockholders - continuing operations	14,630		(213,904)
Net income (loss) attributable to common stockholders - discontinued operations										Net income (loss) attributable to common stockholders - discontinued operations	0		382
Diluted net income (loss) attributable to common stockholders										Diluted net income (loss) attributable to common stockholders	$	14,630	$	(213,522)

Denominator	Denominator									Denominator
Weighted-average common shares outstanding		28,751,520		28,348,561		28,535,393		28,416,966
Shares used in computation of basic net income (loss) per share										Shares used in computation of basic net income (loss) per share	29,028,489		28,365,216
Weighted-average effect of diluted securities										Weighted-average effect of diluted securities
Restricted stock units										Restricted stock units	931,922		0
Performance share units and other stock-based compensation awards										Performance share units and other stock-based compensation awards	109,419		0
Convertible senior notes due 2026 (1)										Convertible senior notes due 2026 (1)	195,733		0
Shares used in computation of diluted net income (loss) per share										Shares used in computation of diluted net income (loss) per share	30,265,563		28,365,216

Basic and diluted net income (loss) per share:
Basic net income (loss) per share:										Basic net income (loss) per share:
Continuing operations	Continuing operations	$	(0.57)	$	(0.59)	$	(10.59)	$	(3.57)	Continuing operations	$	0.50	$	(7.54)
Discontinued operations	Discontinued operations	0		0		0.01		0.08		Discontinued operations	0		0.01
Basic and diluted net income (loss) per share		$	(0.57)	$	(0.59)	$	(10.58)	$	(3.49)
Basic net income (loss) per share										Basic net income (loss) per share	$	0.50	$	(7.53)

Diluted net income (loss) per share:										Diluted net income (loss) per share:
Continuing operations										Continuing operations	$	0.48	$	(7.54)
Discontinued operations										Discontinued operations	0		0.01
Diluted net income (loss) per share										Diluted net income (loss) per share	$	0.48	$	(7.53)

(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 are 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 earnings per share for those instruments for which it would reduce earnings per share. Beginning January 1, 2021, the interest expense, net of tax, included in the numerator adjustment is calculated in accordance with ASU 2020-06, while prior period interest expense, net of tax, included in the numerator adjustment continues to be calculated in accordance with the historical policies and remains unchanged. See Note 5, Financing Arrangements, for additional information.

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 from continuing operations:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2020	2019	2020	2019		2021	2020
Restricted stock units	Restricted stock units	1,907,396	1,768,908	1,879,752	1,657,446	Restricted stock units	172,015	1,657,810
Performance share units and other stock-based compensation awards	Performance share units and other stock-based compensation awards	151,110	78,055	199,849	81,545	Performance share units and other stock-based compensation awards	0	279,243
Convertible senior notes		2,314,815	2,314,815	2,314,815	2,314,815
Convertible senior notes due 2022 (1)						Convertible senior notes due 2022 (1)	2,314,815	2,314,815
Warrants	Warrants	2,314,815	2,314,815	2,314,815	2,314,815	Warrants	2,314,815	2,314,815
Capped call transactions						Capped call transactions	195,733	0
Total	Total	6,688,136	6,476,593	6,709,231	6,368,621	Total	4,997,378	6,566,683

We had outstanding ~~performance~~Market-based Performance share units as of ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ 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 earnings 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 ~~September 30, 2020,~~March 31, 2021, there were up to ~~268,654~~57,668 shares of common stock issuable upon vesting of outstanding ~~performance share units~~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.

2822

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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 2 segments: North America and International. ~~During the third quarter 2020, we changed our~~Our measure of segment profitability ~~from operating income (loss) to~~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. ~~Prior period segment information has been retrospectively adjusted to reflect the change.~~

The following table summarizes revenue by reportable segment and category for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
North America	North America									North America
Service revenue:	Service revenue:									Service revenue:
Local	Local	$	98,561	$	175,140	$	322,945	$	532,599	Local	$	125,374	$	142,660
Goods	Goods	8,787		3,000		18,401		9,841		Goods	15,285		3,745
Travel	Travel	4,748		13,680		13,722		48,746		Travel	5,959		6,449
Total service revenue	Total service revenue	112,096		191,820		355,068		591,186		Total service revenue	146,618		152,854
Product revenue - Goods	Product revenue - Goods	68,215		111,776		293,729		394,235		Product revenue - Goods	626		82,275
Total North America revenue (1)	Total North America revenue (1)	180,311		303,596		648,797		985,421		Total North America revenue (1)	147,244		235,129

International	International									International
Service revenue:	Service revenue:									Service revenue:
Local	Local	36,528		65,440		103,221		208,625		Local	23,189		48,668
Goods	Goods	3,309		2,817		8,821		6,882		Goods	1,970		2,233
Travel	Travel	3,140		8,003		7,368		24,817		Travel	847		3,273
Total service revenue	Total service revenue	42,977		76,260		119,410		240,324		Total service revenue	26,006		54,174
Product revenue - Goods	Product revenue - Goods	80,731		115,756		305,608		380,854		Product revenue - Goods	90,567		84,847
Total International revenue (1)	Total International revenue (1)	$	123,708	$	192,016	$	425,018	$	621,178	Total International revenue (1)	$	116,573	$	139,021

(1)North America includes revenue from the United States of ~~$177.3~~$145.0 million and ~~$297.9~~$230.9 million for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019, and $640.4 million and $965.9 million for the nine months ended September 30, 2020 and 2019.~~2020. International includes revenue from the United Kingdom and France of ~~$42.9~~$42.1 million and ~~$69.4~~$28.5 million for the three months ended ~~September 30, 2020~~March 31, 2021, and ~~2019, and $151.1 million and $221.8~~United Kingdom of $49.5 million for the ~~nine~~three months ended ~~September 30, 2020 and 2019.~~March 31, 2020. There were no other individual countries that represented more than 10% of consolidated total revenue for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019~~.2020. Revenue is attributed to individual countries based on the location of the customer.

2923

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table summarizes gross profit by reportable segment and category for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
North America	North America									North America
Service gross profit:	Service gross profit:									Service gross profit:
Local	Local	$	87,507	$	155,032	$	283,004	$	473,787	Local	$	112,426	$	123,859
Goods	Goods	7,440		2,280		14,851		7,838		Goods	13,056		3,008
Travel	Travel	3,874		10,717		9,726		38,791		Travel	4,718		3,962
Total service gross profit	Total service gross profit	98,821		168,029		307,581		520,416		Total service gross profit	130,200		130,829
Product gross profit - Goods	Product gross profit - Goods	10,896		24,046		47,599		80,045		Product gross profit - Goods	168		12,942
Total North America gross profit	Total North America gross profit	109,717		192,075		355,180		600,461		Total North America gross profit	130,368		143,771

International	International									International
Service gross profit:	Service gross profit:									Service gross profit:
Local	Local	33,687		61,183		93,054		195,941		Local	21,427		44,524
Goods	Goods	2,849		2,589		7,422		6,241		Goods	1,859		2,016
Travel	Travel	2,711		7,332		6,259		22,743		Travel	713		2,744
Total service gross profit	Total service gross profit	39,247		71,104		106,735		224,925		Total service gross profit	23,999		49,284
Product gross profit - Goods	Product gross profit - Goods	11,058		14,761		36,580		50,702		Product gross profit - Goods	12,616		8,192
Total International gross profit	Total International gross profit	$	50,305	$	85,865	$	143,315	$	275,627	Total International gross profit	$	36,615	$	57,476

3024

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table summarizes contribution profit by reportable segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
North America	North America									North America
Gross profit	Gross profit	$	109,717	$	192,075	$	355,180	$	600,461	Gross profit	$	130,368	$	143,771
Marketing	Marketing	19,718		45,223		73,203		162,132		Marketing	22,768		39,409
Contribution profit	Contribution profit	89,999		146,852		281,977		438,329		Contribution profit	107,600		104,362

International	International									International
Gross profit	Gross profit	50,305		85,865		143,315		275,627		Gross profit	36,615		57,476
Marketing	Marketing	11,668		29,753		43,555		95,164		Marketing	10,898		20,721
Contribution profit	Contribution profit	38,637		56,112		99,760		180,463		Contribution profit	25,717		36,755

Consolidated	Consolidated									Consolidated
Gross profit	Gross profit	160,022		277,940		498,495		876,088		Gross profit	166,983		201,247
Marketing	Marketing	31,386		74,976		116,758		257,296		Marketing	33,666		60,130
Contribution profit	Contribution profit	128,636		202,964		381,737		618,792		Contribution profit	133,317		141,117
Selling, general and administrative	Selling, general and administrative	124,257		198,388		475,017		619,274		Selling, general and administrative	127,143		207,135
Goodwill impairment	Goodwill impairment	0		0		109,486		0		Goodwill impairment	0		109,486
Long-lived asset impairment	Long-lived asset impairment	0		0		22,351		0		Long-lived asset impairment	0		22,351
Restructuring and related charges	Restructuring and related charges	20,559		(61)		61,037		(175)		Restructuring and related charges	7,422		6
Income (loss) from operations	Income (loss) from operations	$	(16,180)	$	4,637	$	(286,154)	$	(307)	Income (loss) from operations	$	(1,248)	$	(197,861)

The following table summarizes total assets by reportable segment as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (in thousands):


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Total assets:	Total assets:					Total assets:
North America (1)	North America (1)	$	1,071,325	$	1,045,500	North America (1)	$	1,056,466	$	971,110
International (1)	International (1)	278,493		541,243		International (1)	345,571		440,397
Consolidated total assets	Consolidated total assets	$	1,349,818	$	1,586,743	Consolidated total assets	$	1,402,037	$	1,411,507

(1)North America contains assets from the United States of ~~$1,047.9~~$1,032.9 million and ~~$1,020.0~~$948.1 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. International ~~contains~~contained assets from Switzerland of ~~$128.5 million and $175.2~~$151.7 million as of ~~September 30, 2020 and~~ December 31, ~~2019.~~2020. There were no other individual countries that represented more than 10% of consolidated total assets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

GROUPON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

14. SUBSEQUENT EVENTS

In May 2021, we entered into an agreement with AGH to repurchase the Atairos Notes on or before May 14, 2021 for a purchase price equal to the $250.0 million outstanding principal amount of the Atairos Notes, any accrued and unpaid interest through the repurchase date, and $4.0 million of cash consideration. Funds for the repurchase, excluding any interest, are expected to come from the following (in millions):


Restricted cash held as of March 31, 2021	$	169.8
Additional net proceeds from 2026 Notes issued in April 2021	25.5
Unrestricted cash	58.7

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, Financial Information, 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, primarily localized groupon.com sites in many countries. We operate in two ~~segments:~~segments, North America and ~~International. For the nine months ended September 30, 2020, we derived 60.4% of our revenue from our North America segment~~International, and ~~39.6% of our revenue from our International segment.~~operate in three categories, Local, Goods and Travel. See Item 1, Note 13, Segment Information, for additional information. ~~We operate in three categories: Local, Goods and Travel.~~

WeCurrently, we generate product and service revenue from ~~our current~~the following business operations. ~~We earn service~~

Service Revenue from Local, Travel, and Goods Categories: Service revenue ~~from transactions in which we earn~~primarily represents the net commissions byearned from selling goods or services ~~in our Local, Travel and Goods Categories~~ on behalf of third-party merchants. Service revenue ~~from those transactions~~ is reported on a net basis ~~and equals~~as the purchase price ~~received~~collected from the customer ~~for~~less the ~~offering less an agreed upon~~ portion of the purchase price ~~paid~~that is payable to the third-party merchant. ~~Service revenue~~We also ~~includes~~earn commissions ~~that we earn~~ when customers make purchases with retailers using digital coupons ~~accessed through~~listed on our ~~digital properties.~~localized groupon.com sites.

Product Revenue from Goods Category: We ~~earn~~generate product revenue from ~~direct~~ sales of our first-party Goods merchandise ~~inventory through our Goods category. Our~~inventory. For product revenue ~~from those direct sales~~ transactions, we are the primary party responsible for providing the merchandise to the customer, we have inventory risk and we have discretion in establishing prices. As such, product revenue is reported on a gross basis as the purchase price received from the customer.

~~Strategy~~

~~In February~~ Product revenue, including associated shipping revenue, is recognized when the merchandise is delivered to the customer. During 2020, we announced a strategic plan to focus on our local experiences marketplace, which included exiting our Goods category. However, since March 2020, the COVID-19 pandemic has led to significant disruption in our business as a result of the preventative or protective actions, such as consumer restrictions and merchant closures that governments, our merchants and consumers have implemented in response to the pandemic. The negative impact of COVID-19 on our business is expected to continue at least as long as our performance is impacted by market conditions as we rely on customers' purchases of vouchers for local experiences, including events and activities, beauty and wellness, travel and dining. Recovery from the COVID-19 pandemic could be volatile given the unprecedented and continuously evolving nature of the situation. We continue to monitor the impact of COVID-19 on our business, including increases in government restrictions and the potential for colder weather in certain North America and International markets to further exacerbate negative trends.

~~In light of COVID-19, we continued to sell Goods on our platform instead of quickly exiting the category. We are shifting~~transitioned to a third-party marketplace in ~~the Goods category~~North America and ~~expect this~~we plan to begin the transition to ~~be substantially completed~~a third-party marketplace in ~~North America by~~International in the ~~end of 2020 and on a global basis in~~second quarter 2021. In a third-party marketplace model, our merchants generally assume ~~the responsibility for fulfillment~~inventory and ~~returns. Following this transition, we~~refund risk, and as such our Goods category will primarily generate ~~service~~ revenue ~~from our Goods category, and Goods revenue is expected to be presented~~ on a net basis ~~consistent with~~following our transition.

Strategy

Our mission is to be the ~~Local~~destination for experiences where consumers discover fun things to do and ~~Travel categories. The change in presentation of revenue~~local businesses thrive. Our strategic priorities are to ~~a net basis does not impact gross profit or income generated from operations.~~

~~In August 2020, we announced our updated strategy and plan to prioritize expanding~~expand our Local inventory and ~~modernizing~~modernize our marketplace by improving the merchant and customer experiences. While both of these are important to building a successful marketplace, in the immediate term, we believe the most critical of these is expanding Local inventory.

To validate our strategic priority to expand Local inventory, in mid-2020, we launched a test in four markets in North America to determine if growing inventory would result in improved gross billings and inunit performance. To grow Local supply, we are focused on leveraging three types of inventory: Deals with fewer restrictions, a new lower discount inventory product called Offers, and Market Rate supply. At the ~~near term,~~conclusion of our test we determined that we reached our test goals, and we intend to ~~dedicate a majority~~scale elements of our ~~efforts~~inventory strategy more broadly throughout our marketplace in 2021. In North America, we have begun scaling the removal of Deal repeat purchase restrictions to all merchants and ~~resources~~the launch of Offers to ~~inventory growth. As~~ Beauty & Wellness merchants.

To support our strategic priority of improving the merchant and customer experience, we are reducing friction and making it easier for our customers to find, buy, and redeem a Groupon. In April 2021, we started to roll out a new customer experience to North America app and mobile web users, which we believe will drive engagement, conversion, and customer purchase frequency. On the merchant side, we are continuing to build out tools that will help us be a better partner to our merchants, including our self-service tool, advertising products and booking tool features.

COVID-19, ~~evolves, we will adjust accordingly, if needed.~~

Restructuring and Cost Reduction

~~During~~Since March 2020, the ~~nine months ended September 30, 2020 we took~~COVID-19 pandemic has led to a significant decrease in consumer demand, a decrease in customer redemptions and elevated refund levels due to changes in consumer behavior and actions taken by governments to ~~improve~~control the spread of COVID-19, including quarantines, travel restrictions, as well as business restrictions and shutdowns. The COVID-19 pandemic has had an adverse impact on our financial condition, results of operations and cash ~~position~~flows, which included impairments of our goodwill and ~~materially reduce our cost structure.~~ long-lived assets in 2020.

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.

The first phase of our restructuring actions included an overall reduction of approximately 1,300 positions globally and the exit or discontinuation of the use of certain leases and other assets by the end of 2020. The majority of the first phase of workforce reductions and impairments of our right-of-use and other long-lived assets occurred during the second quarter 2020. In the third quarter 2020, we initiated the second phase of our restructuring plan, which included additional workforce reductions and the exit of our operations in New Zealand and Japan. We expect to incur total pre-tax charges of $75.0 million to $105.0 million in connection with our ~~multi-phase~~ restructuring plan through the end of 2021. Once fully implemented, we expect our ~~multi-phase~~ restructuring plan to result in $225.0 million in annualized cost savings. During the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, we recorded ~~$20.6 million and $61.0~~$7.4 million in pre-tax charges in connection with our restructuring actions. See Note 9, Restructuring and Related Charges, for ~~more~~additional information.

In ~~addition to~~March 2021, we entered into the actions described above, we have taken several steps to reduce costs, preserve cash in the near-term and improve liquidity, including, but not limited to: furloughing staff; continuing to sell Goods on our platform instead of quickly exiting the category; reducing marketing expense by significantly shortening payback thresholds and delaying brand marketing investments; transitioning merchants to redemption payment terms, instead of fixed payment terms; implementing a hiring freeze; eliminating broad-based merit increases for employees; replacing cash compensation with equity compensation in 2020 for Board members; and amending ourAmended Credit Agreement to ~~among other things, provide~~extend covenant relief through the ~~first~~fourth quarter 2021 and we issued $200.0 million of ~~2021.~~convertible notes. See Note 5, Financing Arrangements, for additional information. 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.

Recovery from the COVID-19 pandemic could be volatile and prolonged given the unprecedented and continuously evolving nature of the situation. The future impact of COVID-19 on our business, results of operations, financial condition and liquidity is highly uncertain and will ultimately depend on future developments, including the magnitude and duration of the pandemic, the protective measures taken to reduce its spread, and the vaccine supply and demand. We continue to monitor the impact of COVID-19 on our business, including the developing situation in India, where we operate a shared service center.

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. For product revenue transactions, gross billings are equivalent to product revenue reported in our condensed consolidated statements of operations. 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 and 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. For entities that we have acquired in a business combination, this metric includes active customers of the acquired entity,

including customers who made purchases prior to the acquisition. We do not include consumers who solely make purchases with retailers using digital coupons accessed through our websites and 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.

•~~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 and 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.

•~~Gross billings per unit~~ ~~are the gross billings generated per unit. We use this metric to evaluate trends in units and in the average contribution to gross billings on a per-unit basis.~~

Our gross billings, units, and ~~gross billings per unit for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands, except gross billings per unit amounts):~~

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Gross billings $ 597,123 $ 1,093,378 $ 1,986,245 $ 3,390,331
Units 21,410 35,754 74,208 108,270
Gross billings per unit $ 27.89 $ 30.58 $ 26.77 $ 31.31

~~Our~~TTM active customers for the ~~TTM period~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows (in thousands):

Trailing Twelve Months Ended September 30,
2020 2019
TTM Active Customers (in thousands) 34,154 45,258


	Three Months Ended March 31,
	2021		2020
Gross billings	$	553,972	$	806,399
Units	17,803		29,766
TTM Active Customers	25,754		41,837

Financial Metrics

•Revenue is currently earned through product and service revenue transactions. We earn service revenue from transactions in 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. We ~~earn~~generate product revenue from our sales of first-party Goods inventory. Our product revenue from these first-party transactions, which are direct sales of merchandise inventory, ~~in our Goods category and report product revenue on a gross basis as~~is the purchase price received from the customer. ~~Following our shift~~During 2020, we transitioned to a third-party marketplace ~~model~~in North America and we plan to begin to transition to a third-party marketplace in International in the second quarter 2021. Following the International transition, we expect our Goods category ~~we will~~to primarily generate revenue on a net basis within service ~~revenue from our Goods category.~~revenue.

•Gross profit reflects the net margin we earn after deducting our cost of revenue from our revenue. Due to the 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, 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 continuing 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) from continuing operations, 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 continuing 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 from continuing operations, refer to our discussion in the Liquidity and Capital Resources section.

The following table presents the above financial metrics for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
		2020		2019		2020		2019		2021		2020
Revenue	Revenue	$	304,019	$	495,612	$	1,073,815	1,606,599	Revenue	$	263,817	$	374,150
Gross profit	Gross profit	160,022		277,940		498,495		876,088	Gross profit	166,983		201,247
Adjusted EBITDA	Adjusted EBITDA	30,781		49,997		9,655		143,473	Adjusted EBITDA	30,372		(22,464)
Free cash flow	Free cash flow	(6,953)		891		(181,166)		(181,972)	Free cash flow	(58,445)		(247,004)

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, legal and human resources. Additional costs included 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 ~~of long-lived assets~~ and other ~~exit~~facilities-related costs ~~resulting from our restructuring activities.~~and professional advisory fees. See Note 9, Restructuring and Related Charges, for additional information about our restructuring plan.

Factors Affecting Our Performance

Impact of COVID-19.During the COVID-19 pandemic, actions taken by governments to control the spread of COVID-19, and changes in consumer behavior have had a negative impact on our business, which relies on customers' purchases of local experiences, including events and activities, beauty and wellness, travel and dining. Recovery from the COVID-19 pandemic could be volatile and prolonged given the unprecedented and continuously evolving nature of the situation. We continue to monitor the impact of COVID-19 on our business, particularly in our International segment where restrictions have been more prolonged and stricter than in North America, surges in virus cases continue to occur and the vaccination rollout has been slower. We also continue to monitor the developing situation in India, where we operate a shared service center.

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 generally 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 marketing and promotional services. Since the widespread economic impacts of COVID-19 began in March 2020, we are prioritizing opportunities to help drive demand for our merchants and highlighting offers that customers can enjoy right now. ~~In addition to offerings that we can highlight during COVID-19, we have been able to drive demand to certain local merchants that are staying open.~~ As we continue to navigate through the volatility of the COVID-19 recovery period, we intend to take a ~~market by market~~market-by-market approach to attracting and retaining local merchants.

Driving purchase frequency and re-engaging and retaining customers. In light of significant declines in consumer demand for local and travel services due to COVID-19, we must highlight offers that customers can enjoy right now in order to drive purchase frequency and retain customers. This includes surfacing the relevant Local inventory in each market depending on the government restrictions currently in place and continuing to leverage our Goods category in the near-term. We also must ~~also~~continue to focus on expanding inventory through our three inventory products - Deals with fewer restrictions, Offers, and Market Rate. On the customer experience side, we must continue to improve ~~the customer experience on~~ our websites and

mobile ~~applications,~~applications; launch innovative products that remove friction from the customer journey and drive awareness to our supply; and grow our high-quality, bookable inventory.

~~Increasing traffic to our websites and mobile applications.~~ The traffic to our websites and mobile applications, including from consumers responding to our emails and search engine optimization ("SEO"), has declined in recent years, and we have experienced further declines in traffic due to the impacts of COVID-19. As such, we must focus on improving the effectiveness of our emails, as well as developing sources of traffic in addition to email and SEO and optimizing the efficiency of our marketing spending, which historically was guided by return on investment thresholds based on expected months-to-payback targets ranging from 12 to 18 months. In light of COVID-19, we significantly shortened our payback thresholds.

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Results of Operations

North America

Operating Metrics

North America segment gross billings, ~~and~~ units, ~~for the three~~ and ~~nine months ended September 30, 2020 and 2019 were as follows (in thousands, except percentages and gross billings per unit):~~

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 % Change 2020 2019 % Change
Gross billings
Service gross billings:
Local $ 230,422 $ 511,173 (54.9) % 790,486 $ 1,517,312 (47.9) %
Goods 40,299 21,300 89.2 88,713 60,833 45.8
Travel 23,373 71,144 (67.1) 68,557 247,256 (72.3)
Total service gross billings 294,094 603,617 (51.3) 947,756 1,825,401 (48.1)
Product gross billings - Goods 68,215 111,776 (39.0) 293,729 394,235 (25.5)
Total gross billings $ 362,309 $ 715,393 (49.4) 1,241,485 $ 2,219,636 (44.1)
Units
Local 8,148 16,332 (50.1) % 28,151 48,773 (42.3) %
Goods 4,428 5,080 (12.8) 15,166 16,847 (10.0)
Travel 151 355 (57.5) 542 1,187 (54.3)
Total units 12,727 21,767 (41.5) 43,859 66,807 (34.3)
Gross billings per unit $28.47 $32.87 (13.4) % $28.31 $33.22 (14.8) %

~~North America~~ TTM active customers for the ~~trailing twelve~~three months ended ~~September 30,~~March 31, 2021 and 2020 were as follows (in thousands):

Trailing Twelve Months Ended September 30,
2020 2019 % Change
TTM Active customers 20,246 27,747 (27) %


	Three Months Ended March 31,
	2021		2020		% Change
Gross billings
Service gross billings:
Local	$	281,296	$	392,609	(28.4)	%
Goods	69,142		18,119		281.6
Travel	31,460		33,660		(6.5)
Total service gross billings	381,898		444,388		(14.1)
Product gross billings - Goods	626		82,275		(99.2)
Total gross billings	$	382,524	$	526,663	(27.4)

Units
Local	8,266		14,132		(41.5)	%
Goods	3,081		3,742		(17.7)
Travel	193		312		(38.1)
Total units	11,540		18,186		(36.5)

TTM Active customers	15,204		25,340		(40.0)	%

Comparison of the Three Months Ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

North America gross billings and units declined by ~~$353.1~~$144.1 million and ~~9.0~~6.6 million for the three months ended ~~September 30, 2020.~~March 31, 2021. TTM active customers declined by ~~7.5~~10.1 million for the three months ended ~~September 30, 2020.~~March 31, 2021. These declines were primarily due to the significant decrease in consumer demand ~~as governmental measures were~~due to changes in ~~place~~consumer behavior and actions taken by governments to control the spread of COVID-19, including quarantines and travel restrictions, as well as business restrictions and shutdowns. ~~Gross billings per unit were adversely impacted by an increase in Local customer refunds.~~

~~Comparison of the Nine Months Ended September 30, 2020 and 2019:~~

~~North America gross billings and units declined by $978.2 million and 22.9 million for the nine months ended September 30, 2020.~~ These declines were primarily due to the significant decrease in consumer demand as governmental measures were implemented to control the spread of COVID-19, including quarantines, travel restrictions, as well as business restrictions and shutdowns. Gross billings per unit were adversely impactedpartially offset by a shift in mix to higher-priced offerings.

North America units and gross billings declined in January and February 2021 compared with the prior year, and increased in March 2021 due to the timing of ~~offerings sold and increase~~the onset of the pandemic in ~~Local customer refunds.~~March 2020.

3631

Financial Metrics

North America segment revenue, cost of revenue and gross profit for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows (dollars in thousands):


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
		2020			2019			% Change		2020			2019			% Change			2021			2020			% Change
Revenue	Revenue																	Revenue
Service revenue	Service revenue																	Service revenue
Local	Local	$	98,561		$	175,140		(43.7)	%	$	322,945		$	532,599		(39.4)	%	Local	$	125,374		$	142,660		(12.1)	%
Goods	Goods	8,787			3,000			192.9		18,401			9,841			87.0		Goods	15,285			3,745			308.1
Travel	Travel	4,748			13,680			(65.3)		13,722			48,746			(71.8)		Travel	5,959			6,449			(7.6)
Total service revenue	Total service revenue	112,096			191,820			(41.6)		355,068			591,186			(39.9)		Total service revenue	146,618			152,854			(4.1)
Product revenue - Goods	Product revenue - Goods	68,215			111,776			(39.0)		293,729			394,235			(25.5)		Product revenue - Goods	626			82,275			(99.2)
Total revenue	Total revenue	$	180,311		$	303,596		(40.6)		$	648,797		$	985,421		(34.2)		Total revenue	$	147,244		$	235,129		(37.4)

Cost of revenue	Cost of revenue																	Cost of revenue
Service cost of revenue	Service cost of revenue																	Service cost of revenue
Local	Local	$	11,054		$	20,108		(45.0)	%	$	39,941		$	58,812		(32.1)	%	Local	$	12,948		$	18,801		(31.1)	%
Goods	Goods	1,347			720			87.1		3,550			2,003			77.2		Goods	2,229			737			202.4
Travel	Travel	874			2,963			(70.5)		3,996			9,955			(59.9)		Travel	1,241			2,487			(50.1)
Total service cost of revenue	Total service cost of revenue	13,275			23,791			(44.2)		47,487			70,770			(32.9)		Total service cost of revenue	16,418			22,025			(25.5)
Product cost of revenue - Goods	Product cost of revenue - Goods	57,319			87,730			(34.7)		246,130			314,190			(21.7)		Product cost of revenue - Goods	458			69,333			(99.3)
Total cost of revenue	Total cost of revenue	$	70,594		$	111,521		(36.7)		$	293,617		$	384,960		(23.7)		Total cost of revenue	$	16,876		$	91,358		(81.5)

Gross profit	Gross profit																	Gross profit
Service gross profit	Service gross profit																	Service gross profit
Local	Local	$	87,507		$	155,032		(43.6)	%	$	283,004		$	473,787		(40.3)	%	Local	$	112,426		$	123,859		(9.2)	%
Goods	Goods	7,440			2,280			226.3		14,851			7,838			89.5		Goods	13,056			3,008			334.0
Travel	Travel	3,874			10,717			(63.9)		9,726			38,791			(74.9)		Travel	4,718			3,962			19.1
Total service gross profit	Total service gross profit	98,821			168,029			(41.2)		307,581			520,416			(40.9)		Total service gross profit	130,200			130,829			(0.5)
Product gross profit - Goods	Product gross profit - Goods	10,896			24,046			(54.7)		47,599			80,045			(40.5)		Product gross profit - Goods	168			12,942			(98.7)
Total gross profit	Total gross profit	$	109,717		$	192,075		(42.9)		$	355,180		$	600,461		(40.8)		Total gross profit	$	130,368		$	143,771		(9.3)

Service margin (1)	Service margin (1)	38.1		%	31.8		%			37.5		%	32.4		%			Service margin (1)	38.4		%	34.4		%

% of Consolidated revenue	% of Consolidated revenue	59.3		%	61.3		%			60.4		%	61.3		%			% of Consolidated revenue	55.8		%	62.8		%
% of Consolidated cost of revenue	% of Consolidated cost of revenue	49.0			51.2					51.0			52.7					% of Consolidated cost of revenue	17.4			52.8
% of Consolidated gross profit	% of Consolidated gross profit	68.6			69.1					71.3			68.5					% of Consolidated gross profit	78.1			71.4

(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 ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

North America revenue and gross profit decreased by ~~$123.3~~$87.9 million and ~~$82.4~~$13.4 million for the three months ended ~~September 30, 2020.~~March 31, 2021. Those decreases were primarily driven by a decline in gross billings and transaction volume due to the impacts of COVID-19. Revenue also declined due to the ~~ongoing~~ transition of Goods to a third party marketplace model. In a third party marketplace model, we generate service revenue which is presented on a net basis. The increase in service margin was due to a shift in mix of offerings sold and higher variable consideration from unredeemed vouchers due to our shift towards payment on redemption terms in North America.

Cost of revenue decreased by $40.9 million for the three months ended September 30, 2020 primarily due to the decrease in transaction volume and gross billings and the impacts of the ongoing transition of Goods to a third party marketplace model.

~~Comparison of the Nine Months Ended September 30, 2020 and 2019:~~

North America revenue and gross profit decreased by $336.6 million and $245.3 million for the nine months ended September 30, 2020. Those decreases were primarily driven by a decline in gross billings and transaction volume due to the impacts of COVID-19. The increase in service margin was due to a shift in mix of offerings sold and higher variable consideration from unredeemed vouchers due to our shift towards payment on redemption terms in North America. Revenue also declined due to the ongoing transition of Goods to a third party marketplace model. In a third partythird-party marketplace model, we generate service revenue which is presented on a net basis.

Cost of revenue decreased by ~~$91.3~~$74.5 million for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 primarily due to the ~~decrease in transaction volume and gross billings and the~~ impacts of the ~~ongoing~~ transition of Goods to a ~~third party~~third-party marketplace model.

3832

Marketing and Contribution Profit

We define contribution profit as gross profit less marketing expense. North America contribution profit for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ was as follows (dollars in thousands):


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
		2020			2019			% Change		2020			2019			% Change			2021			2020			% Change
Marketing	Marketing	$	19,718		$	45,223		(56.4)	%	$	73,203		$	162,132		(54.8)	%	Marketing	$	22,768		$	39,409		(42.2)	%
% of Gross profit:	% of Gross profit:	18.0		%	23.5		%			20.6		%	27.0		%			% of Gross profit:	17.5		%	27.4		%

Contribution profit	Contribution profit	$	89,999		$	146,852		(38.7)%		$	281,977		$	438,329		(35.7)%		Contribution profit	$	107,600		$	104,362		3.1%

Comparison of the Three Months Ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

North America marketing expense and marketing expense as a percentage of gross profit declined for the three months ended ~~September 30, 2020~~March 31, 2021 due to accelerated traffic declines, significantly shortened payback thresholds and lower investment in our offline marketing and brand spend in light of COVID-19.

The ~~decline~~increase in our North America contribution profit for the three months ended ~~September 30, 2020~~March 31, 2021 was primarily attributable to a ~~$82.4~~$16.6 million decrease in ~~gross profit, as discussed above,~~marketing, partially offset by a ~~$25.5 million decrease in marketing.~~

~~Comparison of the Nine Months Ended September 30, 2020 and 2019:~~

North America marketing expense and marketing expense as a percentage of gross profit declined for the nine months ended September 30, 2020 due to accelerated traffic declines, significantly shortened payback thresholds and lower investment in our offline marketing and brand spend in light of COVID-19.

~~The decline in our North America contribution profit for the nine months ended September 30, 2020 was primarily attributable to a $245.3 million~~ decrease in gross ~~profit, as discussed above, partially offset by a $88.9 million decrease in marketing.~~profit.

International

Operating Metrics

International segment gross billings, ~~and~~ units, ~~for the three~~ and ~~nine months ended September 30, 2020 and 2019 were as follows (in thousands, except percentages and gross billings per unit):~~

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 % Change 2020 2019 % Change
Gross billings
Service gross billings:
Local $ 113,105 $ 204,823 (44.8) % $ 332,403 $ 615,669 (46.0) %
Goods 15,151 13,308 13.8 45,322 34,787 30.3
Travel 25,827 44,098 (41.4) 61,427 139,385 (55.9)
Total service gross billings 154,083 262,229 (41.2) 439,152 789,841 (44.4)
Product gross billings - Goods 80,731 115,756 (30.3) 305,608 380,854 (19.8)
Total gross billings $ 234,814 $ 377,985 (37.9) $ 744,760 $ 1,170,695 (36.4)
Units
Local 4,171 8,241 (49.4) % 13,217 23,814 (44.5) %
Goods 4,320 5,415 (20.2) 16,627 16,616 0.1
Travel 192 331 (42.0) 505 1,033 (51.1)
Total units 8,683 13,987 (37.9) 30,349 41,463 (26.8)
Gross billings per unit $27.04 $27.02 0.1 % $24.54 $28.23 (13.1) %

~~International~~ TTM active customers for the ~~trailing twelve~~three months ended ~~September 30,~~March 31, 2021 and 2020 were as ~~followings~~follows (in thousands):

Trailing Twelve Months Ended September 30,
2020 2019 % Change
TTM Active customers 13,908 17,511 (20.6) %


	Three Months Ended March 31,
	2021		2020		% Change
Gross billings
Service gross billings:
Local	$	69,674	$	157,401	(55.7)	%
Goods	7,748		10,657		(27.3)
Travel	3,459		26,831		(87.1)
Total service gross billings	80,881		194,889		(58.5)
Product gross billings - Goods	90,567		84,847		6.7
Total gross billings	$	171,448	$	279,736	(38.7)

Units
Local	2,091		6,844		(69.4)	%
Goods	4,121		4,487		(8.2)
Travel	51		249		(79.5)
Total units	6,263		11,580		(45.9)

TTM Active customers	10,550		16,497		(36.0)	%

Comparison of the Three Months Ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

International gross billings and units decreased by ~~$143.2~~$108.3 million and 5.3 million for the three months ended ~~September 30, 2020.~~March 31, 2021. TTM active customers declined by ~~3.6~~5.9 million for the three months ended ~~September 30, 2020.~~March 31, 2021. These declines were primarily due to the significant decrease in consumer demand ~~as governmental measures were implemented~~due to changes in consumer behavior and actions taken by governments to control the spread of COVID-19, including quarantines and travel restrictions, as well as business restrictions and shutdowns. The decline in gross billings was partially offset by a ~~$13.2 million favorable impact from year-over-year changes in foreign currency exchange rates.~~

~~Comparison of the Nine Months Ended September 30, 2020 and 2019:~~

International gross billings and units decreased by $425.9 million and 11.1 million for the nine months ended September 30, 2020. These declines were primarily due to the significant decrease in consumer demand as governmental measures were implemented to control the spread of COVID-19, including quarantines, travel restrictions, as well as business restrictions and shutdowns, and a decline in gross billings per unit due to a shift in mix of offerings sold and an increase in Local customer refunds. The decline in gross billings was partially offset by an $11.2$15.1 million favorable impact from year-over-year changes in foreign currency exchange rates.

4033

Financial Metrics

International segment revenue, cost of revenue and gross profit for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows (dollars in thousands):


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
		2020			2019			% Change		2020			2019			% Change			2021			2020			% Change
Revenue	Revenue																	Revenue
Service revenue:	Service revenue:																	Service revenue:
Local	Local	$	36,528		$	65,440		(44.2)	%	$	103,221		$	208,625		(50.5)	%	Local	$	23,189		$	48,668		(52.4)	%
Goods	Goods	3,309			2,817			17.5		8,821			6,882			28.2		Goods	1,970			2,233			(11.8)
Travel	Travel	3,140			8,003			(60.8)		7,368			24,817			(70.3)		Travel	847			3,273			(74.1)
Total service revenue	Total service revenue	42,977			76,260			(43.6)		119,410			240,324			(50.3)		Total service revenue	26,006			54,174			(52.0)
Product revenue - Goods	Product revenue - Goods	80,731			115,756			(30.3)		305,608			380,854			(19.8)		Product revenue - Goods	90,567			84,847			6.7
Total revenue	Total revenue	$	123,708		$	192,016		(35.6)		$	425,018		$	621,178		(31.6)		Total revenue	$	116,573		$	139,021		(16.1)

Cost of revenue	Cost of revenue																	Cost of revenue
Service cost of revenue:	Service cost of revenue:																	Service cost of revenue:
Local	Local	$	2,841		$	4,257		(33.3)	%	$	10,167		$	12,684		(19.8)	%	Local	$	1,762		$	4,144		(57.5)	%
Goods	Goods	460			228			101.8		1,399			641			118.3		Goods	111			217			(48.8)
Travel	Travel	429			671			(36.1)		1,109			2,074			(46.5)		Travel	134			529			(74.7)
Total service revenue	Total service revenue	3,730			5,156			(27.7)		12,675			15,399			(17.7)		Total service revenue	2,007			4,890			(59.0)
Product cost of revenue - Goods	Product cost of revenue - Goods	69,673			100,995			(31.0)		269,028			330,152			(18.5)		Product cost of revenue - Goods	77,951			76,655			1.7
Total cost of revenue	Total cost of revenue	$	73,403		$	106,151		(30.9)		$	281,703		$	345,551		(18.5)		Total cost of revenue	$	79,958		$	81,545		(1.9)

Gross profit	Gross profit																	Gross profit
Service gross profit:	Service gross profit:																	Service gross profit:
Local	Local	$	33,687		$	61,183		(44.9)	%	$	93,054		$	195,941		(52.5)	%	Local	$	21,427		$	44,524		(51.9)	%
Goods	Goods	2,849			2,589			10.0		7,422			6,241			18.9		Goods	1,859			2,016			(7.8)
Travel	Travel	2,711			7,332			(63.0)		6,259			22,743			(72.5)		Travel	713			2,744			(74.0)
Total service gross profit	Total service gross profit	39,247			71,104			(44.8)		106,735			224,925			(52.5)		Total service gross profit	23,999			49,284			(51.3)
Product gross profit - Goods	Product gross profit - Goods	11,058			14,761			(25.1)		36,580			50,702			(27.9)		Product gross profit - Goods	12,616			8,192			54.0
Total gross profit	Total gross profit	$	50,305		$	85,865		(41.4)		$	143,315		$	275,627		(48.0)		Total gross profit	$	36,615		$	57,476		(36.3)

Service margin (1)	Service margin (1)	27.9		%	29.1		%			27.2		%	30.4		%			Service margin (1)	32.2		%	27.8		%

% of Consolidated revenue	% of Consolidated revenue	40.7		%	38.7		%			39.6		%	38.7		%			% of Consolidated revenue	44.2		%	37.2		%
% of Consolidated cost of revenue	% of Consolidated cost of revenue	51.0			48.8					49.0			47.3					% of Consolidated cost of revenue	82.6			47.2
% of Consolidated gross profit	% of Consolidated gross profit	31.4			30.9					28.7			31.5					% of Consolidated gross profit	21.9			28.6

(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 ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~

International revenue and gross profit decreased by ~~$68.3~~$22.4 million and ~~$35.6~~$20.9 million for the three months ended ~~September 30, 2020.~~March 31, 2021. Those decreases were primarily driven by a decline in gross billings due to the impacts of COVID-19 as discussed ~~above and the decline in International revenue was also impacted by a decline in Goods product revenue, which is presented on a gross basis.~~above. The decreases in revenue and gross profit were partially offset by favorable impacts of ~~$7.0~~$10.0 million and ~~$2.8~~$3.2 million from year-over-year changes in foreign currency exchange rates.

Cost of revenue decreased by ~~$32.7~~$1.6 million for the three months ended ~~September 30, 2020~~March 31, 2021 primarily due to the decrease in transaction volume and gross billings, partially offset by a ~~$4.2~~$6.8 million unfavorable impact from year-over-year changes in foreign currency exchange rates.

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~~Comparison of the Nine Months Ended September 30, 2020 and 2019:~~

International revenue and gross profit decreased by $196.2 million and $132.3 million for the nine months ended September 30, 2020. Those decreases were primarily driven by a decline in gross billings due to the impacts of COVID-19 as discussed above and the decline in International revenue was also impacted by a decline in Goods product revenue, which is presented on a gross basis. The decreases in revenue and gross profit were partially offset by favorable impacts of $5.8 million and $2.6 million from year-over-year changes in foreign currency exchange rates.

Cost of revenue decreased by $63.8 million for the nine months ended September 30, 2020 primarily due to the decrease in transaction volume and gross billings, partially offset by a $3.2 million unfavorable impact from year-over-year changes in foreign currency exchange rates.

Marketing and Contribution Profit

International marketing and contribution profit for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ was as follows (dollars in thousands):


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
		2020			2019			% Change		2020			2019			% Change			2021			2020			% Change
Marketing	Marketing	$	11,668		$	29,753		(60.8)	%	$	43,555		$	95,164		(54.2)	%	Marketing	$	10,898		$	20,721		(47.4)	%
% of Gross profit:	% of Gross profit:	23.2		%	34.7		%			30.4		%	34.5		%			% of Gross profit:	29.8		%	36.1		%

Contribution profit	Contribution profit	$	38,637		$	56,112		(31.1)	%	$	99,760		$	180,463		(44.7)	%	Contribution profit	$	25,717		$	36,755		(30.0)	%

Comparison of the Three Months Ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

International marketing expense and marketing expense as a percentage of gross profit declined for the three months ended ~~September 30,~~March 31, 2021 due to accelerated traffic declines, significantly shortened payback thresholds and lower investment in our offline marketing and brand spend in light of COVID-19.

The decrease in International contribution profit for the three months ended March 31, 2021 was primarily attributable to a $20.9 million decrease in gross profit, partially offset by a $9.8 million decrease in marketing expense.

Operating Expenses

Operating expenses for the three months ended March 31, 2021 and 2020 were as follows (dollars in thousands):


	Three Months Ended March 31,
	2021			2020			% Change
Marketing	$	33,666		$	60,130		(44.0)	%
Selling, general and administrative	127,143			207,135			(38.6)
Goodwill impairment	—			109,486			(100.0)
Long-lived asset impairment	—			22,351			(100.0)
Restructuring and related charges	7,422			6			NM
Total Operating expenses	$	168,231		$	399,108		(57.8)

% of Gross profit:
Marketing	20.2		%	29.9		%
Selling, general and administrative	76.1		%	102.9		%

Comparison of the Three Months Ended March 31, 2021 and 2020:

Marketing expense and marketing expense as a percentage of gross profit declined for the three months ended March 31, 2021 due to accelerated traffic declines, significantly shortened payback thresholds and lower investment in our offline marketing and brand spend in light of COVID-19, partially offset by a ~~$0.6 million unfavorable impact from year-over-year changes in foreign currency exchange rates.~~

The decrease in International contribution profit for the three months ended September 30, 2020 was primarily attributable to a $35.6 million decrease in gross profit, partially offset by a $18.1 million decrease in marketing.

~~Comparison of the Nine Months Ended September 30, 2020 and 2019:~~

International marketing expense and marketing expense as a percentage of gross profit declined for the nine months ended September 30, 2020 due to accelerated traffic declines, significantly shortened payback thresholds and lower investment in our offline marketing and brand spend in light of COVID-19, partially offset by a $0.4 million unfavorable impact from year-over-year change in foreign currency exchange rates.

The decrease in International contribution profit for the nine months ended September 30, 2020 was primarily attributable to a $132.3 million decrease in gross profit, partially offset by a $51.6 million decrease in marketing.

~~Operating Expenses~~

~~Operating expenses for the three and nine months ended September 30, 2020 and 2019 were as follows (dollars in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 % Change 2020 2019 % Change
Marketing $ 31,386 $ 74,976 (58.1) % $ 116,758 $ 257,296 (54.6) %
Selling, general and administrative 124,257 198,388 (37.4) 475,017 619,274 (23.3)
Goodwill impairment — — — 109,486 — —
Long-lived asset impairment — — — 22,351 — —
Restructuring and related charges 20,559 (61) NM 61,037 (175) NM
Total Operating expenses $ 176,202 $ 273,303 (35.5) % $ 784,649 $ 876,395 (10.5) %
% of Gross profit:
Marketing 19.6 % 27.0 % 23.4 % 29.4 %
Selling, general and administrative 77.6 % 71.4 % 95.3 % 70.7 %

~~Comparison of the Three Months Ended September 30, 2020 and 2019:~~

Marketing expense and marketing expense as a percentage of gross profit declined for the three months ended September 30, 2020 due to accelerated traffic declines, significantly shortened payback thresholds and lower investment in our offline marketing and brand spend in light of COVID-19, partially offset by a $0.6$0.9 million unfavorable impact from year-over-year change in foreign currency exchange rates.

SG&A decreased for the three months ended ~~September 30, 2020~~March 31, 2021 primarily due to lower payroll-related expenses due to ~~furloughs~~restructuring actions and ~~restructuring actions,~~lower consulting and facilities-related expenses, partially offset by a ~~$2.2~~$4.4 million unfavorable impact from year-over-year changes in foreign currency exchange rates. SG&A as a percentage of gross profit ~~increased~~decreased for the three months ended ~~September 30, 2020~~March 31, 2021 due to the decline in ~~demand and traffic~~fixed costs as a result of ~~COVID-19.~~

Restructuring and related charges for the three months ended September 30, 2020 represent severance and benefit costs for workforce reductions, impairments of long-lived assets and lease terminations and other exit costs resulting from our restructuring ~~activities. See Note 9,~~ ~~Restructuring and Related Charges, for more information.~~

~~Comparison of the Nine Months Ended September 30, 2020 and 2019:~~

Marketing expense and marketing expense as a percentage of gross profit declined for the nine months ended September 30, 2020 due to accelerated traffic declines, significantly shortened payback thresholds and lower investment in our offline marketing and brand spend in light of COVID-19, partially offset by a $0.4 million unfavorable impact from year-over-year change in foreign currency rates.

SG&A decreased for the nine months ended September 30, 2020 primarily due to lower payroll-related expenses due to furloughs and restructuring actions, partially offset by a $1.2 million unfavorable impact from year-over-year changes in foreign currency exchange rates. SG&A as a percentage of gross profit increased for the nine months ended September 30, 2020 due to the decline in demand and traffic as a result of COVID-19.actions.

During the first quarter 2020, we performed an interim quantitative assessment of goodwill and long-lived assets as a result of significant deterioration in our financial performance due to the impact of COVID-19. As a result, we recognized goodwill impairment of $109.5 million, that represented the excess of the EMEA reporting unit's carrying value over its fair value, and long-lived asset impairment of $22.4 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2020. See Note 2, Goodwill and Long-Lived Assets, for additional ~~information about goodwill and long-lived asset impairments.~~information.

Restructuring and related charges for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 primarily represent severance and benefit costs for workforce reductions ~~impairments of long-lived assets and lease terminations and other exit costs resulting from our restructuring activities.~~ See Note 9, Restructuring and Related Charges, for ~~more~~additional information.

Other Income (Expense), Net

Other income (expense), net includes interest income, interest expense, gains and losses on fair value option ~~investments, adjustments for observable price changes of~~ investments, impairments of investments 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 nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ was as follows (dollars in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Interest income	Interest income	$	1,268	$	1,959	$	5,254	$	5,810	Interest income	$	1,155	$	2,556
Interest expense	Interest expense	(9,408)		(6,029)		(24,375)		(17,162)		Interest expense	(5,116)		(6,958)
Changes in fair value of investments		—		14		(1,405)		(68,971)
Foreign currency gains (losses), net	Foreign currency gains (losses), net	7,273		(13,197)		5,661		(12,279)		Foreign currency gains (losses), net	22,084		(6,496)
Impairment of investment		—		—		(6,684)		—
Impairment and other changes in fair value of investments										Impairment and other changes in fair value of investments	—		(8,089)
Other income (expense), net	Other income (expense), net	$	(867)	$	(17,253)	$	(21,549)	$	(92,602)	Other income (expense), net	$	18,123	$	(18,987)

Comparison of the Three Months Ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

The change in Other income (expense), net for the three months ended ~~September 30, 2020~~March 31, 2021 as compared with the prior year period is primarily related to a change in foreign currency gains and losses of ~~$20.5~~$28.6 million ~~partially offset by~~due to a ~~$3.4~~$32.2 million ~~increase in interest expense.~~

~~Comparison~~cumulative foreign currency translation adjustment gain that was reclassified into earnings as a result of the ~~Nine Months Ended September 30, 2020~~substantial liquidation of our subsidiary in Japan as part of our restructuring actions, as well as a $8.1 million impairment and ~~2019:~~

~~The change in Other income (expense), net for the nine months ended September 30, 2020 as compared with the prior year period is primarily related to a $67.6 million decrease in losses from~~other changes in ~~our~~ fair value of investments and a change in foreign currency gains and losses of $17.9 million, partially offset by a $6.7 million impairment of an other equity investment and a $7.2 million increase in interest expense.investments.

Provision (Benefit) for Income Taxes

Provision (benefit) for income taxes for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ was as follows (dollars in thousands):


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
		2020			2019			% Change		2020			2019			% Change			2021			2020			% Change
Provision (benefit) for income taxes	Provision (benefit) for income taxes	$	(486)		$	2,069		(123.5)	%	$	(7,170)		$	591		(1,313.2)	%	Provision (benefit) for income taxes	$	2,427		$	(5,988)		(140.5)	%
Effective tax rate	Effective tax rate	2.9		%	(16.4)		%			2.3		%	(0.6)		%			Effective tax rate	14.4		%	2.8		%

Comparison of the Three Months Ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

~~Our U.S. federal income tax rate is 21%.~~ The ~~primary factors impacting the~~ effective tax rate for the three months ended ~~September 30,~~March 31, 2021 was lower than the U.S. statutory federal income tax rate due to the benefit of non-taxable items and the U.S. research and development tax credit. The three months ended March 31, 2021 and 2020 ~~and 2019~~ were also impacted by the pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets. The three months ended March 31, 2020 was impacted by the reversals of reserves for uncertain tax positions due to the closure of tax audits and by the carryback of federal net operating losses due to the income tax relief provided by the CARES Act. 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 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 Nine Months Ended September 30, 2020 and 2019:~~

The primary factors impacting the effective tax rate for the nine months ended September 30, 2020 and 2019 were the pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets and the reversals of reserves for uncertain tax positions due to the closure of tax audits. The nine months ended September 30, 2020 were also impacted by the carryback of federal net operating losses due to the

income tax relief provided by the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). We expect that our consolidated effective tax rate in future periods will continue to differ significantly from the U.S. federal income tax rates as a result of our tax obligations in jurisdictions with profits and valuation allowances in jurisdictions with losses. See Note 10, ~~Income Taxes, for additional information relating to tax audits and assessments and regulatory and legal developments that may impact our business and result of operations in the~~ future.

4537

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, which are presented on a continuing operations basis, 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) from continuing 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. 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 income (loss) from continuing operations.

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. Acquisition-related expense (benefit), net is comprised of the change in the fair value of contingent consideration arrangements and external transaction costs related to business combinations, primarily consisting of legal and advisory fees. The composition of our contingent consideration arrangements and the impact of those arrangements on our operating results vary over time based on a number of factors, including the terms of our business combinations and the timing of those transactions. For the three ~~and nine~~ months ended ~~September 30, 2020 and 2019,~~March 31, 2021, special charges and credits included charges related to our restructuring ~~plan,~~plan. For the three months ended March 31, 2020, special charges and credits included goodwill and long-lived asset impairments and strategic advisor costs. 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.

4638

The following is a reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure, Income (loss) from continuing operations, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Income (loss) from continuing operations	Income (loss) from continuing operations	$	(16,561)	$	(14,685)	$	(300,533)	$	(93,500)	Income (loss) from continuing operations	$	14,448	$	(210,860)
Adjustments:	Adjustments:									Adjustments:
Stock-based compensation	Stock-based compensation	8,379		19,543		30,937		62,517		Stock-based compensation	7,179		14,015
Depreciation and amortization	Depreciation and amortization	18,023		25,873		68,366		81,405		Depreciation and amortization	17,019		25,909
Acquisition-related expense (benefit), net	Acquisition-related expense (benefit), net	—		5		6		33		Acquisition-related expense (benefit), net	—		4
Restructuring and related charges ~~(1)~~	Restructuring and related charges ~~(1)~~	20,559		(61)		61,037		(175)		Restructuring and related charges ~~(1)~~	7,422		6
Goodwill impairment	Goodwill impairment	—		—		109,486		—		Goodwill impairment	—		109,486
Long-lived asset impairment	Long-lived asset impairment	—		—		22,351		—		Long-lived asset impairment	—		22,351
Strategic advisor costs	Strategic advisor costs	—		—		3,626		—		Strategic advisor costs	—		3,626
Other (income) expense, net(1)	Other (income) expense, net(1)	867		17,253		21,549		92,602		Other (income) expense, net(1)	(18,123)		18,987
Provision (benefit) for income taxes	Provision (benefit) for income taxes	(486)		2,069		(7,170)		591		Provision (benefit) for income taxes	2,427		(5,988)
Total adjustments	Total adjustments	47,342		64,682		310,188		236,973		Total adjustments	15,924		188,396
Adjusted EBITDA	Adjusted EBITDA	$	30,781	$	49,997	$	9,655	$	143,473	Adjusted EBITDA	$	30,372	$	(22,464)

(1)~~Restructuring and related charges includes $3.3 million and $17.2 million of long-lived asset impairments~~Other (income) expense, net for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 includes a $32.2 million cumulative foreign currency translation adjustment gain that was reclassified into earnings as a result of the substantial liquidation of our subsidiary in Japan as part of our restructuring actions. Refer to Note 9, Restructuring and ~~$0.3 million and $1.7 million of~~Related Charges, for additional ~~stock-based compensation for the three and nine months ended September 30, 2020.~~information.

Free cash flow. Free cash flow is a non-GAAP liquidity measure that comprises net cash provided by operating activities from continuing operations less purchases of property and equipment and capitalized software. We use free cash flow to conduct and evaluate our business because, although it is similar to cash flow from continuing operations, 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. For example, free cash flow does not include cash payments for business acquisitions. 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 ~~entire~~ 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.

4739

The following table represents the effect on our condensed consolidated statements of operations from changes in exchange rates versus the U.S. dollar for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 (in thousands):

Three Months Ended September 30, 2020
At Avg. Q3 2019 Rates (1)
Exchange Rate Effect (2)
As Reported
Gross billings $ 583,887 $ 13,236 $ 597,123
Revenue 296,982 7,037 304,019
Cost of revenue 139,811 4,186 143,997
Gross profit 157,171 2,851 160,022
Marketing 30,767 619 31,386
Selling, general and administrative 122,017 2,240 124,257
Income (loss) from operations (15,317) (863) (16,180)


		Nine Months Ended September 30, 2020							Three Months Ended March 31, 2021
		At Avg. Q3 2019 Rates (1)		Exchange Rate Effect (2)		As Reported			At Avg. Q1 2020 Rates (1)		Exchange Rate Effect (2)		As Reported
Gross billings	Gross billings	$	1,975,069	$	11,176	$	1,986,245	Gross billings	$	538,882	$	15,090	$	553,972
Revenue	Revenue	1,068,009		5,806		1,073,815		Revenue	253,798		10,019		263,817
Cost of revenue	Cost of revenue	572,083		3,237		575,320		Cost of revenue	89,994		6,840		96,834
Gross profit	Gross profit	495,926		2,569		498,495		Gross profit	163,804		3,179		166,983
Marketing	Marketing	116,319		439		116,758		Marketing	32,790		876		33,666
Selling, general and administrative	Selling, general and administrative	473,860		1,157		475,017		Selling, general and administrative	122,773		4,370		127,143
Restructuring and related charges								Restructuring and related charges	6,897		525		7,422
Income (loss) from operations	Income (loss) from operations	(288,989)		2,835		(286,154)		Income (loss) from operations	1,344		(2,592)		(1,248)

(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.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flows from operations and cash balances, which primarily ~~consisted~~consist of bank deposits and government money market funds. As of ~~September 30, 2020,~~March 31, 2021, cash balances, including outstanding borrowings under the Amended Credit Agreement, were ~~$779.0~~$676.8 million. We also have $169.8 million in restricted cash as of March 31, 2021 (which is a portion of the net proceeds from the 2026 Notes offering) that will be used to repurchase the Atairos Notes in May 2021.

Our net cash flows from operating, investing and financing activities from continuing operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Cash provided by (used in):
Operating activities $ 4,792 $ 18,584 $ (144,504) $ (130,118)
Investing activities (12,469) (19,541) (8,473) (54,891)
Financing activities (3,617) (22,595) 180,557 (81,953)


	Three Months Ended March 31,
	2021		2020
Cash provided by (used in):
Operating activities	$	(46,405)	$	(236,408)
Investing activities	(12,744)		19,564
Financing activities	62,618		141,312

Our free cash flow for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ and a reconciliation to the most comparable U.S. GAAP financial measure, Net cash provided by (used in) operating activities from continuing operations, for those periods are as follows (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Net cash provided by (used in) operating activities from continuing operations	Net cash provided by (used in) operating activities from continuing operations	$	4,792	$	18,584	$	(144,504)	$	(130,118)	Net cash provided by (used in) operating activities from continuing operations	$	(46,405)	$	(236,408)
Purchases of property and equipment and capitalized software from continuing operations		(11,745)		(17,693)		(36,662)		(51,854)
Purchases of property and equipment and capitalized software										Purchases of property and equipment and capitalized software	(12,040)		(10,596)
Free cash flow	Free cash flow	$	(6,953)	$	891	$	(181,166)	$	(181,972)	Free cash flow	$	(58,445)	$	(247,004)

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 ~~on a fixed payment schedule or~~ upon the customer's redemption of the related ~~voucher. For merchants on~~voucher or fixed payment terms, ~~we remit payments on an ongoing basis,~~which are generally ~~bi-weekly,~~biweekly throughout the term of the merchant's offering. ~~For purchases of merchandise inventory, our supplier payment terms generally range from net 30 to net 60 days. We~~Historically, we have ~~historically~~ primarily paid merchants on fixed payment terms in North America and upon voucher redemption internationally. In ~~prior periods, we began to increase our use of redemption payment terms with our North America merchants, and in~~ the third quarter 2020, we ~~accelerated these efforts and~~ largely completed ~~the~~a transition to redemption payment ~~terms.~~terms in North America.

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, seasonality and the mix of transactions between Goods and Local. For example, we have historically generated strong cash inflows during the fourth quarter holiday season, followed by significant cash outflows in the following period when payments are made to merchants and suppliers.

For the ~~nine~~three months ended ~~September 30,~~March 31, 2021, our net cash used in operating activities from continuing operations was $46.4 million, as compared with $14.4 million net income from continuing operations. That difference is primarily due to a $53.1 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 from continuing operations is also due to $7.7 million of non-cash items, including a $32.2 million foreign currency translation gain that was reclassified into earnings due to our substantial liquidation of Japan, depreciation and amortization and stock-based compensation.

For the three months ended March 31, 2020, our net cash used in operating activities from continuing operations was ~~$144.5~~$236.4 million, as compared with a ~~$300.5~~$210.9 million net loss from continuing operations. That difference is primarily due to $267.3 million of non-cash items, including $109.5 million of goodwill impairment, $22.4 million of long-lived asset impairments, $17.2 million of restructuring-related impairments, depreciation and amortization and stock-based compensation, partially offset by a ~~$111.2~~$208.9 million net decrease from changes in working capital and other assets and liabilities. The working capital impact was related to the seasonal timing of payments to inventory suppliers and the impact of COVID-19.

~~For the nine months ended September 30, 2019,~~ The difference between our net cash used in operating activities ~~from continuing operations was $130.1 million, as compared with a $93.5 million~~and our net loss from continuing ~~operations. That difference was primarily~~operations due to ~~$223.5~~changes in working capital was partially offset by $183.4 million of non-cash items, including $109.5 million of goodwill impairment, $22.4 million of long-lived asset impairments, depreciation and amortization and stock-based compensation and a $69.4 million loss from changes in fair value of our investment in Monster LP, partially offset by a $260.1 million decrease from changes in working capital and other assets and liabilities. The working capital impact was primarily related to the seasonal timing of payments to inventory suppliers and to a lesser extent a reduction in gross billings.compensation.

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, our net cash used in investing activities from continuing operations was ~~$8.5 million. Our net cash used in investing activities from continuing operations~~$12.7 million, which included purchases of property and equipment and capitalized software of ~~$36.7 million, which~~$12.0 million.

For the three months ended March 31, 2020, our net cash provided by investing activities from continuing operations was ~~partially offset~~$19.6 million. Our net cash provided by investing activities from continuing operations included the proceeds from the sale of an investment of $31.6 ~~million.~~

~~For the nine months ended September 30, 2019, our net cash used in investing activities from continuing operations~~million, which was ~~$54.9 million. Our net cash used in investing activities included~~partially offset by purchases of property and equipment and capitalized software of ~~$51.9~~$10.6 million.

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, our net cash provided by financing activities was ~~$180.6~~$62.6 million. Our net cash provided by financing activities included $200.0 million of proceeds received from the issuance of the 2026 Notes, partially offset by $6.6 million in cash paid for issuance costs for the 2026 Notes and the revolving credit agreement, $23.8 million related to the purchase of capped call transactions, and $100.0 million in payments under our revolving credit agreement. As noted above, we have classified $169.8 million of the proceeds of the 2026 Notes that will be used to repurchase the Atairos Notes in restricted cash.

For the three months ended March 31, 2020, our net cash provided by financing activities was $141.3 million. Our net cash provided by financing activities included $150.0 million of borrowings under our revolving credit facility, partially offset by ~~$8.8 million in taxes paid related to net share settlements of stock-based compensation awards, $7.4 million in payments of finance lease obligations and $3.0~~$3.8 million of distributions to noncontrolling interest ~~holders.~~

For the nine months ended September 30, 2019, our net cash used in financing activities was $82.0 million. Our net cash used in financing activities included $44.2 million in repurchases of common stock under our share repurchase program, $16.9 million in payments of finance lease obligationsholders and ~~$14.0~~$3.3 million in taxes paid related to net share settlements of stock-based compensation awards.

OnIn July ~~17,~~ 2020, we entered into ~~an amendment~~the First Amendment of our Credit Agreement in order to, among other things, provide us operational flexibility and covenant relief ~~through the end of the first quarter 2021~~ in light of the ongoing impacts of COVID-19 on our business. ~~The Amended Credit Agreement provides for aggregate principal borrowings~~In March 2021, we entered into the Second Amendment to, among other things, extend the covenant relief through the fourth quarter 2021. In March and April 2021, we also issued the 2026 Notes and used a portion of upthe net proceeds from the 2026 Notes offering to ~~$225.0 million and matures~~purchase the capped call transactions. We intend to use the remaining net proceeds, together with cash on hand, to repurchase the Atairos Notes in May ~~2024. As of September 30, 2020, we had $200.0 million of borrowings and $20.6 million of letters of credit outstanding under the Credit Agreement.~~2021. See 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. ~~However, we expect a net loss and negative operating cash flows for the year ended December 31, 2020.~~ 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. ~~We have taken several steps to reduce costs and preserve cash in the near-term as described above in~~

~~Overview~~
.

As of ~~September 30, 2020,~~March 31, 2021, we had ~~$112.2~~$176.8 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 and Japanese yen.~~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 ~~September 30, 2020,~~March 31, 2021, up to ~~$245.0~~$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.

5042

Contractual Obligations and Commitments

Our contractual obligations and commitments as of ~~September 30, 2020~~March 31, 2021 did not materially change from the amounts set forth in our ~~2019~~2020 Annual Report on Form 10-K, except as disclosed in Note 6, Commitments and Contingencies.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of ~~September 30, 2020.~~March 31, 2021.

Critical Accounting Policies and 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 Item 2, Note 2, Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. In addition, refer to the critical accounting policies and 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, ~~2019.~~2020.

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Recently Issued Accounting Standards

In ~~December 2019,~~October 2020, the FASB issued ASU ~~2019-12,~~ ~~Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes.~~2020-10, Codification Improvements. This ASU ~~simplifies the~~amends a variety of Topics, including presentation and disclosures of financial statements, interim reporting, accounting ~~for income taxes by removing certain exceptions to the general principles in Topic 740~~changes and ~~also clarifies and amends existing guidance to improve consistent application. The~~error corrections. This ASU will be effective for annual reporting periods beginning after December 15, ~~2020~~2021 and interim periods within those annual periods ~~and early adoption is permitted. We believe that the adoption of this guidance will not have a material impact on our condensed consolidated financial statements.~~

~~In March 2020, the FASB issued ASU 2020-03,~~ ~~Codification Improvements to Financial Instruments~~. This ASU amends a wide variety of Topics in the Codification, including Fair Value Option measurement and disclosures, revolving-debt arrangements and allowance for credit losses related to leases. The ASU will be effective for annual reporting periods beginning after December 15, ~~2020 and interim periods within those annual periods~~2022 and early adoption is permitted. We are still assessing the impact of ASU ~~2020-03~~2020-10 on our condensed consolidated financial statements.

~~In August 2020, the FASB issued 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. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity, and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2021 and interim periods within those annual periods and early adoption is permitted. We are still assessing the impact of ASU 2020-06 on our condensed consolidated financial statements.

There are no other 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,~~Euro, British pound sterling, Canadian dollar and Australian dollar, which exposes us to foreign currency risk. For the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, we derived approximately ~~40.7% and 39.6%~~44.2% 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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

As of ~~September 30, 2020,~~March 31, 2021, our net working capital deficit (defined as current assets less current liabilities) from subsidiaries that are subject to foreign currency translation risk was ~~$104.9~~$27.2 million. The potential increase in this working capital deficit from a hypothetical 10% adverse change in quoted foreign currency exchange rates would be ~~$10.5~~$2.7 million. This compares with ~~a $69.2~~an $11.4 million working capital ~~deficit~~surplus subject to foreign currency exposure as of December 31, ~~2019,~~2020, for which a 10% adverse change would have resulted in a potential increase in this working capital ~~deficit~~surplus of ~~$6.9~~$1.1 million.

Interest Rate Risk

Our cash balance as of ~~September 30, 2020~~March 31, 2021 consists of bank deposits and government money market funds, so exposure to market risk for changes in interest rates is limited. In April 2016, we issued convertible notes with an aggregate principal amount of $250.0 million ~~(see~~and in March 2021, we issued convertible notes with an aggregate principal amount of $200.0 million. See Item 1, Note 5, Financing Arrangements). The convertible 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 convertible notes along with other variables such as our credit spreads and the market price and volatility of our common stock. ~~In June 2020, we entered into the~~Our Amended Credit Agreement ~~which~~ provides for aggregate principal borrowings of up to $225.0 million. As of ~~September 30, 2020,~~March 31, 2021, we had ~~$200.0~~$100.0 million of borrowings outstanding and ~~$20.6~~$23.1 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 ~~also had $133.3~~have $120.6 million of lease obligations as of ~~September 30, 2020.~~March 31, 2021. 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.

Impact of Inflation

We believe that our results of operations are not materially impacted by moderate changes in the inflation rate. Inflation and changing prices did not have a material effect on our business, financial condition or results of operations for the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021.

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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 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 ~~September 30, 2020,~~March 31, 2021, 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 Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There ~~were~~was no ~~changes~~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 ~~period covered by this Quarterly Report on Form 10-Q~~quarter ended March 31, 2021 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting. As a result of the COVID-19 pandemic, our employees have been working remotely. We have not ~~experienced~~identified any material ~~impact~~changes to our internal controls over financial reporting as a result of COVID-19 ~~and~~or related ~~restrictions.~~changes to our working environment. We are continually monitoring and assessing the impact the COVID-19 pandemic and related restrictions ~~has~~have on our own internal controls to minimize the effect on their design and operating effectiveness.

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, ~~2019,~~2020 except as supplemented and updated below:

COVID-19 pandemic has, and is expected to continue to, materially affect our business, financial condition and results of operations, and any future outbreaks of contagious diseases and other adverse public health developments could materially affect our business.

The COVID-19 pandemic has had a material impact on our business and results of operations. COVID-19 has resulted in significant governmental measures being implemented to control the spread of the virus, including quarantines, travel restrictions, business shutdowns and restrictions on the movement and gathering of people in the United States and abroad. Our business has been adversely affected in jurisdictions that have imposed mandatory closures of our merchants, sought voluntary closures or imposed restrictions on operations of our merchants and activities of consumers, and the continued implementation of such measures may further adversely affect our business. Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business. Further, the timing of global vaccination distribution and administration and the long-term effectiveness of any vaccines against COVID-19 and any variants is not certain. The outbreak and the preventive or protective actions that governments or our merchants and consumers have taken and may take in the future in response to COVID-19 has resulted, and may continue to result, in a period of business disruption, reduced voucher and travel sales and increased refunds. Further, any future outbreaks of contagious diseases and other adverse public health developments could materially affect our business.

Such risks could also adversely affect consumers’ financial condition, resulting in reduced spending on our offerings and increased refunds, even after restrictions to everyday activities are lifted. COVID-19 may also adversely affect our ability to implement our strategy to focus on growing our local marketplace.

The impact of COVID-19 as well as our cost-saving actions, remote working environment, and other actions we have taken to attempt to address and mitigate the effects of COVID-19 on our business may lead to disruptions in our business or workforce, inability to grow and evolve our brand, reduced employee morale, engagement and productivity, increased attrition, problems retaining existing and recruiting future employees, limited resources to complete projects efficiently or on anticipated timelines, and increased workload for employees all of which could negatively impact our business, results of operations, financial condition and create risks to the effectiveness of our internal controls. Such disruption also could negatively impact our ability to realize the full benefits of our strategy.

These and other potential impacts of COVID-19 have and are expected to continue to adversely affect our business, financial condition and results of operations. The ultimate extent of the impact of COVID-19 (or any epidemic, pandemic or other health crisis) will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19, emerging virus variants and the actions taken to contain COVID-19 and address its impact. Further, we may continue to experience different or more prolonged impacts in certain locations where we operate, particularly in our International segment where restrictions have been more prolonged and stricter than in North America, surges in virus cases continue to occur and the vaccination rollout has been slower.

The potential effects of COVID-19 also could intensify or otherwise affect many of our other risk factors that are included in our Annual Report and this Quarterly ~~Reports~~Report, including, but not limited to, risks related to the execution of our strategy, customer and merchant acquisition and retention, macroeconomic factors beyond our control, risks of doing business outside of the United States, including risks relating to the staffing and effectiveness of our centralized shared service centers in locations such as India, and risks related to our indebtedness. Because the COVID-19 situation is unprecedented and continuously evolving, the other potential impacts to our risk factors that are further described in our Annual Report and this Quarterly Report are uncertain.

Furthermore, because the COVID-19 pandemic did not impact our results until late in the first quarter of 2020, such impact may not be directly comparable to any historical period and is not necessarily indicative of any future impact that the COVID-19 pandemic may have on ~~Form 10-Q~~our results for ~~the quarters ended March 31, 2020 and June 30, 2020.~~subsequent periods.

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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 ~~September 30, 2020,~~March 31, 2021, we did not issue any unregistered equity securities.

Issuer Purchases of Equity Securities

OnIn May 7, 2018, the Board authorized us to repurchase up to $300.0 million of our common stock under our share repurchase program. As of ~~September 30, 2020,~~March 31, 2021, up to $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. We will fund the repurchases, if any, through cash on hand, future cash flows and borrowings under our credit facility. 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. See Item 1, Note 7, Stockholders' Equity and Compensation Arrangements, for information regarding our share repurchase program.

The following table provides information about purchases of shares of our common stock during the three months ended ~~September 30, 2020~~March 31, 2021 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 Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under Program
July 1-31, 2020 4,533 $ 16.99 — —
August 1-31, 2020 16,235 23.59 — —
September 1-30, 2020 17,518 31.74 — —
Total 38,286 $ 26.54 — —


Date	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under Program
January 1-31, 2021	70,152	$	37.49	—	—
February 1-28, 2021	39,962	38.29		—	—
March 1-31, 2021	12,817	57.81		—	—
Total	122,931	$	39.87	—	—

(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

Atairos Note Repurchase

On ~~November 4, 2020, Groupon, Inc. (the “Company”)~~May 5, 2021, the Company entered into ~~an amendment~~a Note Repurchase Agreement (the ~~“Amendment”~~“Note Repurchase Agreement”) with AGH to repurchase all of the outstanding $250.0 million aggregate principal amount of the Company’s 3.25% Convertible Senior Notes due 2022. Pursuant to the ~~Rights~~Note Repurchase Agreement, ~~(the “Rights Agreement”) dated as of April 10, 2020, between~~ the Company will pay AGH an amount equal to $254.0 million (i.e., principal and ~~Computershare Trust Company, N.A.~~a prepayment fee of $4.0 million), plus accrued and unpaid interest to, and including, the repurchase date. The closing of the repurchase transaction is expected to occur on or before May 14, 2021. In connection with the repurchase of the Atairos Notes, we intend to unwind the related note hedge and warrants.

Pursuant to the terms of the Note Repurchase Agreement, Michael Angelakis, who serves on the Company’s Board of Directors (the “Board”) as ~~rights agent. The Amendment removes~~ the ~~provisions pertaining to persons “acting in concert”~~designee of AGH, has tendered his resignation from the ~~Rights Agreement.~~ Board to be effective concurrent with the closing of the repurchase transaction.

The foregoing description ~~of the Amendment~~ is qualified in its entirety by reference to the ~~Amendment, a copy~~text of the Note Repurchase Agreement, which is attached ~~hereto~~ as Exhibit ~~4.1~~10.2 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

5749

2021 Executive Compensation Update

As previously disclosed, in February 2021, the Compensation Committee of the Board of Directors of the Company approved annual performance share unit (“PSU”) awards under the Groupon, Inc. 2011 Incentive Plan, as amended, including PSUs with a value equal to $1,680,000 for Aaron Cooper, Interim Chief Executive Officer, $552,000 for Melissa Thomas, Chief Financial Officer, and $352,000 for Dane Drobny, Chief Administrative Officer and General Counsel (collectively, the “2021 PSU Awards”). The performance metrics for the 2021 PSU awards were not determined at that time and were to be set by the Compensation Committee at a later date.

On May 5, 2021, the Compensation Committee approved the conversion of the 2021 PSU Awards at their target levels into RSUs with a two-year vesting schedule (consistent with the existing vesting schedule of the 2021 PSU Awards). The Compensation Committee took this action in response to continued challenges in establishing meaningful and measurable long-term performance metrics (different from the metric already approved for the 2021 annual cash incentive plan) due to the unprecedented and continuously evolving circumstances created by the COVID-19 pandemic and resulting volatility. This represents a one-time conversion of PSUs for our named executive officers, and the Compensation Committee currently intends to again award performance-based equity awards as part of the Company’s executive compensation program in 2022.

ITEM 6. EXHIBITS


Exhibit Number						Description
4.1						~~Amendment No. 1 to Rights Agreement,~~Indenture, dated ~~as ofNovember~~ 4 ~~, 2020,~~March 25, 2021, between Groupon, Inc. and ~~Computershare Trust Company, N.A. as Rights Agent.~~U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on March 25, 2021)
4.2						Form of 1.125% Convertible Senior Note due 2026 (included in Exhibit 4.1 and incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on March 25, 2021)
10.1						Form of Capped Call Confirmation (incorporated by reference to Exhibit 10.1 to the Current Report on For m 8-K filed on March 25, 2021)
10.2						Note Repurchase Agreement, dated May 5, 2021, between Groupon, Inc. and A-G Holdings, L.P.
31.1						Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1						Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS **						XBRL Instance Document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104 **						Cover Page Interactive Data File

** The XBRL Instance Document and Cover Page Interactive Data File do not appear in the Interactive Data File because their XBRL tags are embedded within the Inline XBRL document

5850

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 ~~5th~~6th day of ~~November 2020.~~May 2021.


GROUPON, INC.
By:	/s/ Melissa Thomas
	Name:	Melissa Thomas
	Title:	Chief Financial Officer

5951


Non-cash investing and financing activities
Continuing operations:
Equipment acquired under finance lease arrangements	$	0	$	3,865
Liability for repurchases of common stock	0		(1,469)
Increase (decrease) in liabilities related to purchases of property and equipment and capitalized software	261		(201)


	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Long-lived asset impairment	$	0	$	22,351
Restructuring and related charges	3,296		17,199
Total impairment	$	3,296	$	39,550


	September 30, 2020						December 31, 2019
Intangible Asset Category	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Customer relationships	$	16,200	$	16,200	$	0	$	16,200	$	16,200	$	0
Merchant relationships	21,668		10,557		11,111		22,193		8,268		13,925
Trade names	9,491		7,771		1,720		9,558		7,369		2,189
Developed technology	2,319		1,906		413		3,651		2,685		966
Patents	25,809		19,850		5,959		23,021		18,167		4,854
Other intangible assets	26,736		14,974		11,762		26,115		12,757		13,358
Total	$	102,223	$	71,258	$	30,965	$	100,738	$	65,446	$	35,292


	September 30, 2020		December 31, 2019
Merchandise inventories	$	4,944	$	25,426
Prepaid expenses	16,069		27,077
Income taxes receivable	13,585		4,791
Other	17,360		24,779
Total prepaid expenses and other current assets	$	51,958	$	82,073