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Groupon Announces Third Quarter 2012 Results

(2) Represents the increase or decrease in reported amounts resulting from changes in exchange rates from those in effect in the comparable period.

(3) Represents the outcome that would have resulted had average exchange rates in the reported period been the same as those in effect during the three and nine months ended June 30, 2012.

Reconciliation of Non-GAAP Financial Measures
(in thousands)
(unaudited)
       
Free Cash Flow
The following is a reconciliation of free cash flow to the most comparable U.S. GAAP measure, “Net cash provided by operating activities,” for the three and nine months ended September 30, 2011 and 2012:
 
Three Months Ended September 30, Nine Months Ended September 30,
2011 2012   2011 2012
Net cash provided by operating activities $ 64,411 $ 42,088 $ 121,370 $ 201,117
Purchases of property and equipment and software capitalization   (8,623 )   (16,010 )   (29,825 )   (55,802 )
Free cash flow $ 55,788   $ 26,078   $ 91,545   $ 145,315  
 
Net cash used in investing activities $ (43,048 ) $ (35,629 ) $ (112,526 ) $ (142,226 )
Net cash provided by financing activities $ 8,608 $ 2,707 $ 120,292 $ 18,590
Supplemental Financial Information and Business Metrics
(in thousands, except per share and headcount data and TTM
Gross Billings / Average Active Customer)
(unaudited)
   
Q1 2011 (6) Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
 
Segments
North America Segment:
Gross Billings (1) $ 315,152 $ 369,990 $ 400,978 $ 475,807 $ 553,557 $ 548,275 $ 552,369
Year-over-year growth 610 % 359 % 204 % 118 % 76 % 48 % 38 %
% of Consolidated Gross Billings 47 % 40 % 35 % 39 % 41 % 43 % 45 %
Gross Billings (1) Trailing Twelve Months (TTM) $ 745,772 $ 1,035,183 $ 1,304,128 $ 1,561,927 $ 1,800,332 $ 1,978,617 $ 2,130,008
 
Revenue:
Third Party and Other Revenue (2) $ 136,612 $ 157,205 $ 161,525 $ 179,638 $ 230,984 $ 207,119 $ 158,545
Direct Revenue (2)   -     -     -     -     7,581     53,062   133,058  
Total Revenue $ 136,612 $ 157,205 $ 161,525 $ 179,638 $ 238,565 $ 260,181 $ 291,603
Year-over-year growth 574 % 341 % 188 % 103 % 75 % 66 % 81 %

% of Consolidated Revenue

46 % 40 % 38 % 36 % 43 % 46 % 51 %
Revenue TTM $ 316,752 $ 438,305 $ 543,705 $ 634,980 $ 736,933 $ 839,909 $ 969,987
 
Cost of Revenue:
Third Party and Other Cost of Revenue (3) $ 25,050 $ 32,169 $ 31,316 $ 51,419 $ 62,580 $ 40,155 $ 15,475
Direct Cost of Revenue (3)   -     -     -     -     6,671     46,159   115,560  
Total Cost of Revenue $ 25,050 $ 32,169 $ 31,316 $ 51,419 $ 69,251 $ 86,314 $ 131,035

% of North America Total Revenue

18 % 20 % 19 % 29 % 29 % 33 % 45 %
 
Operating (Loss) Income Excl Stock-Based Compensation (SBC), Acquisition-Related Expenses $ (21,778 ) $ (10,501 ) $ 18,836 $ 18,239 $ 40,172 $ 43,429 $ 39,093
Year-over-year growth N/A (2,678 ) % 496 % N/A N/A N/A 108 %
% of Consolidated Operating (Loss) Income Excl SBC, Acq-Related 22 % 17 % 1,113 % 102 % 59 % 60 % 77 %
Operating Margin Excl SBC, Acq-Related (% of North America Total revenue) (15.9 ) % (6.7 ) % 11.7 % 10.2 % 16.8 % 16.7 % 13.4 %
Year-over-year growth (bps) (5,879 ) (562 ) 603 3,494 3,278 2,337 170
Operating (Loss) Income TTM Excl SBC, Acq-Related $ (40,901 ) $ (51,024 ) $ (35,348 ) $ 4,796 $ 66,746 $ 120,676 $ 140,933
Operating Margin TTM Excl SBC, Acq-Related (% of North America Total TTM revenue) (12.9 ) % (11.6 ) % (6.5 ) % 0.8 % 9.1 % 14.4 % 14.5 %
Year-over-year growth (bps) (3,604 ) (2,266 ) (1,467 ) 596 2,197 2,601 2,100
 
International Segment:
Gross Billings (1) $ 353,022 $ 559,259 $ 756,232 $ 755,061 $ 801,243 $ 738,401 $ 665,887
Year-over-year growth N/A 5,057 % 1,115 % 283 % 127 % 32 % (12 ) %
Year-over-year growth, excluding FX (4) N/A 4,587 % 1,021 % 287 % 138 % 45 % (4 ) %
% of Consolidated Gross Billings 53 % 60 % 65 % 61 % 59 % 57 % 55 %
Gross Billings (1) TTM $ 623,367 $ 1,171,781 $ 1,865,774 $ 2,423,574 $ 2,871,795 $ 3,050,937 $ 2,960,592
 
Revenue:
Third Party and Other Revenue (2) $ 158,911 $ 235,377 $ 261,464 $ 298,872 $ 309,069 $ 295,866 $ 265,019
Direct Revenue (2)   -     -     7,172     13,654     11,649     12,288   11,930  
Total Revenue $ 158,911 $ 235,377 $ 268,636 $ 312,526 $ 320,718 $ 308,154 $ 276,949
Year-over-year growth N/A 7,709 % 947 % 273 % 102 % 31 % 3 %
Year-over-year growth, excluding FX (4) N/A 7,013 % 868 % 276 % 112 % 44 % 13 %
% of Consolidated Revenue 54 % 60 % 62 % 64 % 57 % 54 % 49 %
Revenue TTM $ 271,440 $ 503,803 $ 746,785 $ 975,450 $ 1,137,257 $ 1,210,034 $ 1,218,347
 
Cost of Revenue:
Third Party and Other Cost of Revenue (3) $ 14,715 $ 22,634 $ 31,023 $ 35,463 $ 40,049 $ 36,877 $ 38,698
Direct Cost of Revenue (3)   -     -     5,707     9,383     10,198     11,993   12,053  
Total Cost of Revenue $ 14,715 $ 22,634 $ 36,730 $ 44,846 $ 50,247 $ 48,870 $ 50,751
% of International Total Revenue 9 % 10 % 14 % 14 % 16 % 16 % 18 %
 
Operating (Loss) Income Excl SBC, Acq-Related $ (76,506 ) $ (51,808 ) $ (20,528 ) $ (287 ) $ 27,418 $ 28,505 $ 11,395
Year-over-year growth N/A (125 ) % 21 % 100 % N/A 155 N/A
% of Consolidated Operating (Loss) Income Excl SBC, Acq-Related 78 % 83 % (1,213 ) % (2 ) % 41 % 40 % 23 %
Operating Margin Excl SBC, Acq-Related (% of International Total revenue) (48.1 ) % (22.0 ) % (7.6 ) % (0.1 ) % 8.5 % 9.3 % 4.1 %
Year-over-year growth (bps) N/A 74,265 9,392 14,474 5,669 3,126 1,170
Operating (Loss) Income TTM Excl SBC, Acq-Related $ (247,063 ) $ (275,824 ) $ (270,298 ) $ (149,129 ) $ (45,205 ) $ 35,108 $ 67,031
Operating Margin TTM Excl SBC, Acq-Related (% of International Total TTM revenue) (91.0 ) % (54.7 ) % (36.2 ) % (15.3 ) % (4.0 ) % 2.9 % 5.5 %
Year-over-year growth (bps) N/A 70,992 13,508 13,628 8,704 5,765 4,170
 
Consolidated Results of Operations
Gross Billings (1) $ 668,174 $ 929,249 $ 1,157,210 $ 1,230,868 $ 1,354,800 $ 1,286,676 $ 1,218,256
Year-over-year growth 1,405 % 916 % 496 % 196 % 103 % 38 % 5 %
Year-over-year growth, excluding FX (4) 1,378 % 859 % 465 % 198 % 108 % 47 % 11 %
Gross Billings (1) (TTM) $ 1,369,139 $ 2,206,964 $ 3,169,902 $ 3,985,501 $ 4,672,127 $ 5,029,554 $ 5,090,600
Year-over-year growth 1,651 % 1,227 % 804 % 435 % 241 % 128 % 61 %
 
Revenue:
Third Party and Other Revenue (2) $ 295,523 $ 392,582 $ 422,989 $ 478,510 $ 540,053 $ 502,985 $ 423,564
Direct Revenue (2)   -     -     7,172     13,654     19,230     65,350   144,988  
Total Consolidated Revenue $ 295,523 $ 392,582 $ 430,161 $ 492,164 $ 559,283 $ 568,335 $ 568,552
Year-over-year growth 1,358 % 915 % 426 % 186 % 89 % 45 % 32 %
Year-over-year growth, excluding FX (4) 1,332 % 858 % 401 % 188 % 95 % 53 % 38 %
Total Consolidated Revenue TTM

 

$ 588,192 $ 942,108 $ 1,290,490 $ 1,610,430 $ 1,874,190 $ 2,049,943 $ 2,188,334
Year-over-year growth 1,594 % 1,205 % 761 % 415 % 219 % 118 % 70 %
 
Cost of Revenue:
Third Party and Other Cost of Revenue (3) $ 39,765 $ 54,803 $ 62,339 $ 86,882 $ 102,629 $ 77,032 $ 54,173
Direct Cost of Revenue (3)   -     -     5,707     9,383     16,869     58,152   127,613  
Total Consolidated Cost of Revenue $ 39,765 $ 54,803 $ 68,046 $ 96,265 $ 119,498 $ 135,184 $ 181,786
% of Total Consolidated Revenue 13 % 14 % 16 % 20 % 21 % 24 % 32 %
 
Operating (Loss) Income Excl SBC, Acq-Related $ (98,284 ) $ (62,309 ) $ (1,692 ) $ 17,952 $ 67,590 $ 71,934 $ 50,488
Year-over-year growth N/A (166 ) % 93. % N/A N/A N/A N/A
Operating Margin Excl SBC, Acq-Related (% of Total Consolidated revenue) (33.3 ) % (15.9 ) % (0.4 ) % 3.6 % 12.1 % 12.7 % 8.9 %
Year-over-year growth (bps) (7,611 ) 4,471 2,760 8,689 4,534 2,853 930
Operating (Loss) Income TTM Excl SBC, Acq-Related $ (287,964 ) $ (326,848 ) $ (305,646 ) $ (144,333 ) $ 21,541 $ 155,784 $ 207,964
Operating Margin TTM Excl SBC, Acq-Related (% of Total Consolidated TTM revenue) (49.0 ) % (34.7 ) % (23.7 ) % (9.0 ) % 1.1 % 7.6 % 9.5 %
Year-over-year growth (bps) (7,208 ) (1,333 ) 245 4,887 5,011 4,229 3,320
 
Operating (Loss) Income $ (117,148 ) $ (101,027 ) $ (239 ) $ (14,972 ) $ 39,639 $ 46,485 $ 25,438
Year-over-year growth N/A (174 ) % 100 % 96. % N/A N/A N/A
Operating Margin (% of Total Consolidated revenue) (39.6 ) % (25.7 ) % (0.1 ) % (3.0 ) % 7.1 % 8.2 % 4.5 %
Year-over-year growth (bps) (8,192 ) 6,949 6,838 19,213 4,673 3,391 457
Operating (Loss) Income TTM $ (546,064 ) $ (610,272 ) $ (554,543 ) $ (233,386 ) $ (76,599 ) $ 70,913 $ 96,590
Operating Margin TTM (% of Total Consolidated TTM revenue) (92.8 ) % (64.8 ) % (43.0 ) % (14.5 ) % (4.1 ) % 3.5 % 4.4 %
Year-over-year growth (bps) (11,533 ) (2,457 ) 1,427 11,983 8,875 6,824 4,740
 
Net (Loss) Income Attributable to Common Stockholders (146,480 ) (107,406 ) (54,229 ) (65,379 ) (11,695 ) 28,386 (2,979 )
Weighted Average Basic Shares Outstanding 307,849 303,415 307,605 528,422 644,097 647,150 653,224
Weighted Average Diluted Shares Outstanding (5) 307,849 303,415 307,605 528,422 644,097 663,123 653,224
Net (Loss) Earnings per Share
Basic $ (0.48 ) $ (0.35 ) $ (0.18 ) $ (0.12 ) $ (0.02 ) $ 0.04 $ (0.00 )
Diluted $ (0.48 ) $ (0.35 ) $ (0.18 ) $ (0.12 ) $ (0.02 ) $ 0.04 $ (0.00 )
Supplemental Financial Information and Business Metrics
(in thousands, except per share and headcount data and TTM
Gross Billings / Average Active Customer)
(unaudited)
               
Q1 2011 (6) Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
 
Cash Flow
Operating cash flow (TTM) $ 91,928 $ 128,316 $ 173,291 $ 290,447 $ 356,221 $ 392,517 $ 370,194
Purchases of Property and Equipment and Software Capitalization (TTM)   (24,780 )   (31,949 )   (38,414 )   (43,811 )   (45,932 )   (62,401 )   (69,788 )
Free cash flow (TTM) (7) $ 67,148 $ 96,367 $ 134,877 $ 246,636 $ 310,289 $ 330,116 $ 300,406
 
Other Metrics:
Active Customers (8) 15,376 23,037 28,906 33,742 36,850 38,046 39,525
TTM Gross Billings / Average Active Customer (9) $ 169 $ 174 $ 189 $ 187 $ 179 $ 165 $ 149
Headcount
Sales (10) 3,556 4,850 4,853 5,196 5,735 5,587 5,087
% North America 19 % 20 % 21 % 20 % 21 % 20 % 24 %
% International 81 % 80 % 79 % 80 % 79 % 80 % 76 %
Other   3,551     4,775     5,565     6,275     6,813     7,233     6,779  
Total Headcount 7,107 9,625 10,418 11,471 12,548 12,820 11,866

(1) Represents the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds.

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