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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number: 1-35335
Groupon, Inc.
(Exact name of registrant as specified in its charter)
Delaware27-0903295
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
600 W Chicago Avenue60654
Suite 400(Zip Code)
Chicago
Illinois(312)334-1579
(Address of principal executive offices)(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0001 per shareGRPNNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes           No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).        
Yes          No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer                             Accelerated filer         
Non-accelerated filer                             Smaller reporting company
                                     Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes         No   
As of May 4, 2022, there were 29,960,027 shares of the registrant's common stock outstanding.



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

______________________________________________________
2



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

3



ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GROUPON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
March 31, 2022December 31, 2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents$403,006 $498,726 
Accounts receivable, net52,229 36,755 
Prepaid expenses and other current assets 53,934 52,570 
Total current assets509,169 588,051 
Property, equipment and software, net70,575 73,581 
Right-of-use assets - operating leases, net43,037 47,958 
Goodwill215,755 216,393 
Intangible assets, net22,801 24,310 
Investments119,541 119,541 
Deferred income taxes62,677 62,945 
Other non-current assets25,598 25,102 
Total assets$1,069,153 $1,157,881 
Liabilities and equity
Current liabilities:
Short-term borrowings$100,000 $100,000 
Accounts payable29,155 22,165 
Accrued merchant and supplier payables232,217 269,509 
Accrued expenses and other current liabilities217,909 239,313 
Total current liabilities579,281 630,987 
Convertible senior notes, net223,781 223,403 
Operating lease obligations50,666 58,747 
Other non-current liabilities30,583 34,448 
Total liabilities884,311 947,585 
Commitments and contingencies (see Note 6)
Stockholders' equity
Common stock, par value $0.0001 per share, 100,500,000 shares authorized; 40,226,840 shares issued and 29,932,723 shares outstanding at March 31, 2022; 40,007,255 shares issued and 29,713,138 shares outstanding at December 31, 2021
4 4 
Additional paid-in capital2,300,558 2,294,215 
Treasury stock, at cost, 10,294,117 shares at March 31, 2022 and December 31, 2021
(922,666)(922,666)
Accumulated deficit(1,191,720)(1,156,868)
Accumulated other comprehensive income (loss)(1,444)(4,813)
Total Groupon, Inc. stockholders' equity184,732 209,872 
Noncontrolling interests110 424 
Total equity184,842 210,296 
Total liabilities and equity$1,069,153 $1,157,881 

See Notes to Condensed Consolidated Financial Statements.
4


GROUPON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended March 31,
20222021
Revenue:
Service$153,320 $172,624 
Product 91,193 
Total revenue153,320 263,817 
Cost of revenue:
Service19,319 18,425 
Product 78,409 
Total cost of revenue19,319 96,834 
Gross profit134,001 166,983 
Operating expenses:
Marketing39,416 33,666 
Selling, general and administrative126,420 127,143 
Restructuring and related charges312 7,422 
Total operating expenses166,148 168,231 
Income (loss) from operations(32,147)(1,248)
Other income (expense), net(4,880)18,123 
Income (loss) from operations before provision (benefit) for income taxes(37,027)16,875 
Provision (benefit) for income taxes(2,675)2,427 
Net income (loss)(34,352)14,448 
Net (income) loss attributable to noncontrolling interests(500)110 
Net income (loss) attributable to Groupon, Inc.$(34,852)$14,558 
Net income (loss) per share:
Basic$(1.17)$0.50 
Diluted$(1.17)$0.48 
Weighted average number of shares outstanding:
Basic29,862,879 29,028,489 
Diluted29,862,879 30,265,563 
Comprehensive income (loss):
Net income (loss)$(34,352)$14,448 
Other comprehensive income (loss):
Net change in unrealized gain (loss) on foreign currency translation adjustments3,369 (49,792)
Reclassification of cumulative foreign currency translation adjustments (See Note 9)
 32,228 
Other comprehensive income (loss)3,369 (17,564)
Comprehensive income (loss)(30,983)(3,116)
Comprehensive (income) loss attributable to noncontrolling interest(500)110 
Comprehensive income (loss) attributable to Groupon, Inc. $(31,483)$(3,006)
See Notes to Condensed Consolidated Financial Statements.
5


GROUPON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
(unaudited)
Groupon, Inc. Stockholders' Equity
 Common StockAdditional Paid-In CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Groupon, Inc. Stockholders' EquityNon-controlling InterestsTotal Equity
 SharesAmountSharesAmount
Balance at December 31, 202140,007,255 $4 $2,294,215 (10,294,117)$(922,666)$(1,156,868)$(4,813)$209,872 $424 $210,296 
Comprehensive income (loss)— — — — — (34,852)3,369 (31,483)500 (30,983)
Vesting of restricted stock units and performance share units308,152 — — — — — — — — — 
Shares issued under employee stock purchase plan30,022 — 591 — — — — 591 — 591 
Tax withholdings related to net share settlements of stock-based compensation awards(118,589)— (2,597)— — — — (2,597)— (2,597)
Stock-based compensation on equity-classified awards— — 8,349 — — — — 8,349 — 8,349 
Distributions to noncontrolling interest holders— — — — — — — — (814)(814)
Balance at March 31, 202240,226,840 $4 $2,300,558 (10,294,117)$(922,666)$(1,191,720)$(1,444)$184,732 $110 $184,842 


Groupon, Inc. Stockholders' Equity
Common Stock Additional Paid-In CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Groupon, Inc. Stockholders' EquityNon-controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at December 31, 202039,142,896 $4 $2,348,114 (10,294,117)$(922,666)$(1,320,886)$3,109 $107,675 $(1)$107,674 
Cumulative effect of change in accounting principle due to adoption of ASU 2020-06, net of tax (see Note 1)— — (64,319)— — 45,350 — (18,969)— (18,969)
Comprehensive income (loss)— — — — — 14,558 (17,564)(3,006)(110)(3,116)
Vesting of restricted stock units and performance share units308,954 — — — — — — — — — 
Shares issued under employee stock purchase plan23,418 — 349 — — — — 349 — 349 
Tax withholdings related to net share settlements of stock-based compensation awards(122,931)— (4,901)— — — — (4,901)— (4,901)
Purchase of convertible note hedges— — (23,840)— — — — (23,840)— (23,840)
Stock-based compensation on equity-classified awards— — 8,387 — — — — 8,387 — 8,387 
Receipts from noncontrolling interest holders— — — — — — — — 36 36 
Balance at March 31, 202139,352,337 $4 $2,263,790 (10,294,117)$(922,666)$(1,260,978)$(14,455)$65,695 $(75)$65,620 
See Notes to Condensed Consolidated Financial Statements.
6


GROUPON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Three Months Ended March 31,
 20222021
Operating activities  
Net income (loss)$(34,352)$14,448 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of property, equipment and software15,200 14,727 
Amortization of acquired intangible assets2,169 2,292 
Stock-based compensation7,506 7,179 
Foreign currency translation adjustments reclassified into earnings (32,228)
Change in assets and liabilities:
Accounts receivable(15,963)(2,812)
Prepaid expenses and other current assets(2,092)(1,640)
Right-of-use assets - operating leases4,609 5,122 
Accounts payable7,088 5,896 
Accrued merchant and supplier payables(35,904)(76,884)
Accrued expenses and other current liabilities(18,366)9,823 
Operating lease obligations(7,648)(6,007)
Other, net(411)13,679 
Net cash provided by (used in) operating activities(78,164)(46,405)
Investing activities
Purchases of property and equipment and capitalized software(13,001)(12,040)
Acquisitions of intangible assets and other investing activities(915)(704)
Net cash provided by (used in) investing activities(13,916)(12,744)
Financing activities
Proceeds from issuance of 2026 convertible notes 200,000 
Proceeds from (payments of) borrowings under revolving credit agreement (100,000)
Issuance costs for 2026 convertible notes and revolving credit agreement (6,572)
Purchase of capped call transactions (23,840)
Taxes paid related to net share settlements of stock-based compensation awards(2,523)(4,901)
Payments of finance lease obligations(218)(2,061)
Other financing activities(223)(8)
Net cash provided by (used in) financing activities(2,964)62,618 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(771)(7,466)
Net increase (decrease) in cash, cash equivalents and restricted cash(95,815)(3,997)
Cash, cash equivalents and restricted cash, beginning of period (1)
499,483 851,085 
Cash, cash equivalents and restricted cash, end of period (1)
$403,668 $847,088 
Three Months Ended March 31,
20222021
Supplemental disclosure of cash flow information:
Cash paid for interest$1,721 $1,375 
Income tax payments1,597 1,099 

(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 March 31, 2022, December 31, 2021, March 31, 2021 and December 31, 2020 (in thousands):
March 31, 2022December 31, 2021March 31, 2021December 31, 2020
Cash and cash equivalents$403,006 $498,726 $676,799 $850,587 
Restricted cash included in prepaid expenses and other current assets662 757 504 498 
Restricted cash - non-current  169,785  
Cash, cash equivalents and restricted cash$403,668 $499,483 $847,088 $851,085 
See Notes to Condensed Consolidated Financial Statements.
7


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Company Information
Groupon, Inc. and its subsidiaries, which commenced operations in October 2008, is a global scaled two-sided marketplace that connects consumers to merchants by offering goods and services, generally at a discount. Consumers access those marketplaces through our mobile applications and our websites.
Our operations are organized into two segments: North America and International. See Note 13, Segment Information.
COVID-19 Pandemic
Since March 2020, the COVID-19 pandemic has led to a significant disruption in our business due to changes in consumer behavior and impacts on our merchants. Recovery from the COVID-19 pandemic has been and could continue to be volatile and prolonged given the unprecedented and continuously-evolving nature of the situation.
Unaudited Interim Financial Information
We have prepared the accompanying condensed consolidated financial statements pursuant to the rules and regulations of the SEC for interim financial reporting. These condensed consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals, necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations and comprehensive income (loss), cash flows and stockholders' equity for the periods presented. These condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2021.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Groupon, Inc. and its wholly-owned subsidiaries, majority-owned subsidiaries over which we exercise control and variable interest entities for which we are the primary beneficiary. 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.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates in our financial statements include, but are not limited to, the following: variable consideration from unredeemed vouchers; income taxes; leases; initial valuation and subsequent impairment testing of goodwill, other intangible assets and long-lived assets; investments; receivables; customer refunds and other reserves; contingent liabilities; and the useful lives of property, equipment and software and intangible assets. Actual results could differ materially from those estimates.
Reclassifications
Certain reclassifications have been made to the condensed consolidated financial statements of prior periods to conform to the current period presentation.
8


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Adoption of New Accounting Standards
We early adopted the guidance in ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, on January 1, 2021. The ASU removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. Additionally, the ASU removes certain conditions for equity classification related to contracts in an entity’s own equity (e.g., warrants) and amends certain guidance related to the computation of income (loss) per share for convertible instruments and contracts in an entity’s own equity.
Prior to the adoption of ASU 2020-06, we separated the convertible senior notes due 2022 (the "Atairos Notes") into their liability and equity components. Following the adoption of ASU 2020-06, the previously bifurcated equity component of the Atairos Notes was recombined with the liability component, resulting in a single liability-classified instrument. The carrying value of the Atairos Notes at transition was determined by recalculating the basis of the Atairos Notes as if the conversion option had not been bifurcated at issuance. Transaction costs related to the issuance of the Atairos Notes that were allocated to the equity component were reclassified out of Additional paid-in-capital and the amortization and the related debt discount associated with these costs was recalculated through the transition date. The transaction costs were recorded as a debt discount in the condensed consolidated balance sheets and amortized to interest expense over the remaining term of the Atairos Notes. Together with the cash interest, this resulted in an effective interest rate of 3.76%. As a result of adopting ASU 2020-06, in the first quarter of 2021, we recorded a $67.0 million net reduction to additional paid-in capital, a $19.0 million increase to Convertible senior notes, net and a $48.0 million reduction to our opening accumulated deficit as of January 1, 2021. In the fourth quarter of 2021, we recorded an additional $2.7 million adjustment to our opening accumulated deficit and additional paid-in capital related to tax impacts of our bond hedges.
NOTE 2. GOODWILL AND LONG-LIVED ASSETS
The following table summarizes goodwill activity by segment for the three months ended March 31, 2022 (in thousands):
North America
International (1)
Consolidated
Balance as of December 31, 2021$178,685 $37,708 $216,393 
Foreign currency translation (638)(638)
Balance as of March 31, 2022$178,685 $37,070 $215,755 
(1)As of December 31, 2021, the International reporting unit had a negative carrying value.
During the first quarter 2022, we determined the impact to our business from the new variant of COVID-19 required us to evaluate our goodwill and long-lived assets for impairment. In order to evaluate goodwill and long-lived assets for impairment in the first quarter 2022, we compared the fair values of our two reporting units, North America and International, and asset groups to their carrying values. In determining the fair values of our reporting units and asset groups, we used the discounted cash flow method under the income approach that uses Level 3 inputs. The fair value of the reporting units and asset groups exceeded the carrying value; therefore, we concluded that goodwill and long-lived assets were not impaired for either of our reporting units during the first quarter 2022.
9


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The following table summarizes intangible assets as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022December 31, 2021
Gross Carrying ValueAccumulated AmortizationNet Carrying ValueGross Carrying ValueAccumulated AmortizationNet Carrying Value
Merchant relationships$19,420 $13,037 $6,383 $19,976 $12,554 $7,422 
Trade names9,533 8,260 1,273 9,604 8,215 1,389 
Patents12,856 5,893 6,963 12,455 5,712 6,743 
Other intangible assets17,558 9,376 8,182 17,573 8,817 8,756 
Total$59,367 $36,566 $22,801 $59,608 $35,298 $24,310 
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 $2.2 million and $2.3 million for the three months ended March 31, 2022 and 2021. As of March 31, 2022, estimated future amortization expense related to intangible assets is as follows (in thousands):
Remaining amounts in 2022$6,427 
20237,449 
20243,817 
20252,270 
20261,392 
Thereafter1,446 
Total$22,801 
    

NOTE 3. INVESTMENTS
As of March 31, 2022 and December 31, 2021, our carrying value in other equity investments was $119.5 million and our available-for-sale securities and fair value option investments had a carrying value of zero. There were no changes in fair value of our investments for the three months ended March 31, 2022 and 2021.

The following table summarizes our percentage ownership in our investments as of the dates noted below:
March 31, 2022 and December 31, 2021
Other equity investments 1%to19%
Available-for-sale securities - redeemable preferred shares1%to19%
Fair value option investments10%to19%

10


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE 4. SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS INFORMATION
The following table summarizes other income (expense), net for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31,
20222021
Interest income$1,315 $1,155 
Interest expense(2,883)(5,116)
Foreign currency gains (losses), net and other (1)
(3,312)22,084 
Other income (expense), net$(4,880)$18,123 
(1)Includes a $32.2 million cumulative foreign currency translation adjustment gain for the three months ended March 31, 2021 that was reclassified into earnings as a result of the substantial liquidation of our subsidiary in Japan as part of our restructuring actions. See Note 9, Restructuring and Related Charges, for additional information.

The following table summarizes prepaid expenses and other current assets as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022December 31, 2021
Prepaid expenses$25,978 $28,550 
Income taxes receivable12,069 7,711 
Deferred cloud implementation cost6,476 6,476 
Other9,411 9,833 
Total prepaid expenses and other current assets$53,934 $52,570 
The following table summarizes other non-current assets as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022December 31, 2021
Deferred contract acquisition costs6,215 7,080 
Deferred cloud implementation costs13,058 11,986 
Other6,325 6,036 
Total other non-current assets$25,598 $25,102 
The following table summarizes accrued expenses and other current liabilities as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022December 31, 2021
Refund reserve$16,512 $19,601 
Compensation and benefits25,678 30,367 
Accrued marketing18,580 37,900 
Restructuring-related liabilities7,860 11,349 
Customer credits52,814 56,558 
Deferred revenue4,560 3,523 
Operating and finance lease obligations32,320 32,663 
Deferred cloud computing contract incentive3,000 3,000 
Other (1)
56,585 44,352 
Total accrued expenses and other current liabilities$217,909 $239,313 
(1)Includes certain payroll taxes deferred under the Coronavirus Aid, Relief and Economic Security ("CARES") Act of $2.7 million as of March 31, 2022 and December 31, 2021.
11


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The following table summarizes other non-current liabilities as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022December 31, 2021
Contingent income tax liabilities$23,977 $24,213 
Deferred income taxes2,736 2,802 
Other3,870 7,433 
Total other non-current liabilities$30,583 $34,448 
NOTE 5. FINANCING ARRANGEMENTS
3.25% Convertible Senior Notes due 2022
In April 2016, we issued $250.0 million in aggregate principal amount of convertible senior notes (the "Atairos Notes") in a private placement to A-G Holdings, L.P. In May 2021, we repurchased the Atairos Notes for an aggregate purchase price equal to $255.0 million, consisting of the $250.0 million outstanding principal amount, $1.0 million of accrued interest through the repurchase date and a $4.0 million prepayment penalty. In connection with the repurchase of the Atairos Notes, we recognized a $5.1 million loss on the early extinguishment.
Note Hedges and Warrants
In May 2016, we purchased convertible note hedges with respect to our common stock for a cost of $59.1 million from certain bank counterparties. The convertible note hedges were intended to reduce the potential economic dilution upon conversion of the Atairos Notes. In May 2016, we also sold warrants for total cash proceeds of $35.5 million to certain bank counterparties.
In connection with the repurchase of the Atairos Notes, we entered into agreements (collectively "the Unwind Agreements") with each of the bank counterparties in May 2021 to unwind the convertible note hedges and warrants. Pursuant to the terms of the Unwind Agreements, we received cash proceeds of $2.3 million for the settlement of the convertible note hedges and paid cash consideration of $1.3 million for the settlement of the warrants.
1.125% Convertible Senior Notes due 2026
In March and April 2021, we issued $200.0 million and an additional $30.0 million for a total $230.0 million aggregate principal amount of convertible senior notes due 2026 (the "2026 Notes") in a private offering to qualified institutional buyers. The net proceeds from this offering were $222.1 million. The 2026 Notes bear interest at a rate of 1.125% per annum, payable semiannually in arrears on March 15 and September 15 of each year, which began on September 15, 2021. The 2026 Notes will mature on March 15, 2026, subject to earlier repurchase, redemption or conversion.
We used $23.8 million in the first quarter 2021 and an additional $3.6 million in the second quarter 2021 for a total of $27.4 million of the net proceeds from the offering to pay the cost of certain related capped call transactions and used the remaining net proceeds, together with cash on hand, to repurchase the Atairos Notes.
We account for the 2026 Notes as a single liability-classified instrument measured at amortized cost due to the adoption of ASU 2020-06. The carrying value of the 2026 Notes was determined by deducting transaction costs incurred in connection with the issuance of the 2026 Notes of $6.8 million in the first quarter 2021 and $1.0 million in the second quarter 2021 for a total of $7.8 million from the principal amount. Those transaction costs were recorded as a debt discount in the condensed consolidated balance sheets and are amortized to interest expense. Together with the cash interest, this results in an effective interest rate of 1.83% over the term of the 2026 Notes. We have presented the 2026 Notes in 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, 2022 and December 31, 2021 (in thousands):
March 31, 2022December 31, 2021
Principal amount$230,000 $230,000 
Less: debt discount(6,219)(6,597)
Net carrying amount of liability$223,781 $223,403 
We classified the fair value of the 2026 Notes as a Level 3 measurement due to the lack of observable market data over fair value inputs such as our stock price volatility over the term of the 2026 Notes and our cost of debt. The estimated fair value of the 2026 Notes as of March 31, 2022 and December 31, 2021 was $182.9 million and $183.3 million and was determined using a lattice model.
During the three months ended March 31, 2022 and 2021, we recognized interest costs on the 2026 Notes and the Atairos Notes as follows (in thousands):
Three Months Ended March 31,
20222021
Contractual interest$647 $2,032 
Amortization of debt discount378 303 
Total $1,025 $2,335 
Capped Call Transactions
In March and April 2021, in connection with the offering of the 2026 Notes, we entered into privately-negotiated capped call transactions with each of Barclays Bank PLC, BNP Paribas and Mizuho Markets Americas LLC. The capped call transactions cover, subject to customary adjustments, the number of shares of common stock initially underlying the 2026 Notes. The capped call transactions are expected generally to reduce potential dilution to our common stock upon any conversion of the 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, with such reduction and/or offset subject to a cap initially equal to $104.80 (which represents a premium of 100% over the last reported sale price of our common stock on The Nasdaq Global Select Market on March 22, 2021), subject to certain adjustments under the terms of the capped call transactions.
The capped call transactions are accounted for as freestanding derivatives and recorded at the initial fair value in Additional paid-in-capital in the condensed consolidated balance sheets with no recorded subsequent change to fair value as long as they meet the criteria for equity classification.
Under the if-converted method, the shares of common stock underlying the conversion option in the 2026 Notes are included in the diluted income (loss) per share denominator and the interest expense and amortization of the debt discount on the 2026 Notes, net of tax, are added to the numerator. However, upon conversion, there will be minimized economic dilution from the 2026 Notes, as exercise of the capped call transactions reduces dilution from the 2026 Notes that would have otherwise occurred when the price of our common stock exceeds the conversion price. The capped call transactions are intended to offset actual dilution from the conversion of the 2026 Notes and to effectively increase the overall conversion price from $68.12 to $104.80 per share.
Revolving Credit Agreement
In May 2019, we entered into a second amended and restated senior secured revolving credit agreement which provided for aggregate principal borrowings of up to $400.0 million (prior to the amendments described below) and matures in May 2024. In July 2020, we entered into an amendment to the revolving credit agreement (the "First Amendment") which permanently reduces borrowing capacity under our senior secured revolving credit facility from $400.0 million to $225.0 million. In March 2021, we entered into a second amendment to the revolving credit agreement (the "Second Amendment" and the revolving credit agreement as amended, the "Amended Credit Agreement") to, amongst other things, permit the issuance of the 2026 Notes and related capped call transactions.
We deferred debt issuance costs of $3.5 million as a result of entering into the Amended Credit Agreement. Deferred debt issuance costs are included within Other non-current assets on the condensed consolidated balance sheet as of March 31, 2022 and are amortized to interest expense over the term of the respective agreement.
The Second Amendment permanently removed requirements that we maintain (i) a maximum senior secured indebtedness to Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") ratio and (ii) unrestricted cash of not less than $250.0 million. The Second Amendment also changes the requirement to maintain a minimum fixed charge coverage ratio to a requirement to maintain a minimum interest coverage ratio. Access to our full borrowing capacity under the Amended Credit Agreement may be restricted based on certain of our financial covenants. In particular, our borrowing capacity is a function of our Funded Indebtedness to EBITDA Ratio as defined in the Amended Credit Agreement.
In addition, under the Amended Credit Agreement, we are subject to various covenants, including customary restrictive covenants that limit our ability to, among other things: incur additional indebtedness; make dividend and other restricted payments, including limiting the amount of our share repurchases; enter into sale and leaseback transactions; make investments, loans or advances; grant or incur liens on assets; sell assets; engage in mergers, consolidations, liquidations or dissolutions; and engage in transactions with related parties and other affiliates.
As of March 31, 2022, we were in compliance with the applicable covenants under our Amended Credit Agreement based on the borrowings outstanding under our Amended Credit Agreement. 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.
Borrowings under the Amended Credit Agreement bear (a) interest at a rate per annum equal to (i) an adjusted LIBO rate or (ii) a customary base rate (with loans denominated in certain currencies bearing interest at rates specific to such currencies) plus an additional margin ranging between 0.50% and 2.00% and (b) commitment fees ranging from 0.25% to 0.35% on the daily amount of unused commitments. The Amended Credit Agreement also includes a replacement mechanism for the discontinuation of the adjusted LIBO rate. In addition, the Amended Credit Agreement provides for the issuance of up to $75.0 million in letters of credit, provided that the sum of outstanding borrowings and letters of credit do not exceed the maximum funding commitment of $225.0 million.
The Amended Credit Agreement is secured by substantially all of our tangible and intangible assets, including a pledge of 100% of the outstanding capital stock of substantially all of our direct and indirect domestic subsidiaries and 65% of the shares or equity interests of first-tier foreign subsidiaries and each U.S. entity whose assets substantially consist of capital stock and/or intercompany debt of one or more foreign subsidiaries, subject to certain exceptions. Certain of our domestic and foreign subsidiaries are guarantors under the Amended Credit Agreement.
We had $100.0 million of outstanding borrowings and $25.0 million of outstanding letters of credit as of March 31, 2022, and $100.0 million of outstanding borrowings and $25.8 million of outstanding letters of credit as of December 31, 2021 under the Amended Credit Agreement.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Our contractual obligations and commitments and future operating income under our operating subleases as of March 31, 2022 and through the date of this report, did not materially change from the amounts set forth in our 2021 Annual Report on Form 10-K.
Legal Matters and Other Contingencies
From time to time, we are party to various legal proceedings incident to the operation of our business. For example, we currently are involved in proceedings brought by merchants, employment and related matters, intellectual property infringement suits, customer lawsuits, stockholder claims relating to U.S. securities law,
12


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
consumer class actions and suits alleging, among other things, violations of state consumer protection or privacy laws.
On April 28, 2020, an individual plaintiff filed a securities fraud class action complaint in the United States District Court for the Northern District of Illinois, and in July 2020, another individual was appointed as lead plaintiff (the "Securities Lawsuit"). The lawsuit covers the time period from July 30, 2019 through February 18, 2020. The lead plaintiff alleges that Groupon and certain of its officers made materially false and/or misleading statements or omissions regarding its business, operations and prospects, specifically as it relates to reiterating its full year guidance on November 4, 2019 and the Groupon Select program. On May 6, 2022, the parties reached an agreement to settle this matter in its entirety for $13.5 million and signed a term sheet memorializing preliminary terms. The settlement is subject to further agreement on full terms and court approval. If the settlement is approved, the Court will certify a class for the purposes of settlement and all class members will be barred from filing future claims unless they opt out of the class settlement through a court-established opt-out procedure. The full amount of the $13.5 million settlement is covered under Groupon's insurance policies and, under the preliminary terms, the settlement payment will be made directly by Groupon's insurance carriers. The settlement accrual and insurance receivable are recorded in Accrued expenses and other current liabilities and Accounts receivable, net on the condensed consolidated balance sheets.
In addition, three shareholders have filed separate shareholder derivative lawsuits in relation to the same events that are subject to the securities litigation described above (collectively, the "Derivative Lawsuits"). First, on September 9, 2021, a shareholder named Jonathan Frankel filed a federal derivative lawsuit in the United States District Court for District of Delaware. Second, on January 19, 2022, a shareholder named Alyssa Estreen filed a derivative lawsuit in the Court of Chancery in the State of Delaware. Finally, on January 24, 2022, a shareholder named Saman Khoury filed a derivative lawsuit, also in the Court of Chancery in the State of Delaware. All three lawsuits name Groupon and certain of the Company's former and current officers and directors. The allegations in all three Derivative Lawsuits relate to the same time period and events that are the subject of the Securities Lawsuit and allege that the Company and its shareholders have sustained damages as a result of the conduct of certain current and former officers and directors. The Plaintiffs in each of these Derivative Lawsuits seek unspecified damages they allege were sustained by the Company, injunctive and equitable relief and attorneys’ fees. We intend to vigorously defend this matter, 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
13


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
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. Our remaining indemnification liabilities were $2.8 million as of March 31, 2022. We estimate that the total amount of obligations that are reasonably possible to arise under the indemnifications in excess of amounts accrued as of March 31, 2022 is approximately $11.7 million.
In the normal course of business to facilitate transactions related to our operations, we indemnify certain parties, including employees, lessors, service providers, merchants, and counterparties to investment agreements and asset and stock purchase agreements with respect to various matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations or covenants, or other claims made against those parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. We are also subject to increased exposure to various claims as a result of our divestitures and acquisitions, particularly in cases where we are entering into new businesses in connection with such acquisitions. We may also become more vulnerable to claims as we expand the range and scope of our services and are subject to laws in jurisdictions where the underlying laws with respect to potential liability are either unclear or less favorable. In addition, we have entered into indemnification agreements with our officers, directors and underwriters, and our bylaws contain similar indemnification obligations that cover officers, directors, employees and other agents. 
Except as noted above, it is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, any payments that we have made under these agreements have not had a material impact on our operating results, financial position or cash flows.
NOTE 7. STOCKHOLDERS' EQUITY AND COMPENSATION ARRANGEMENTS
Restricted Stock Units
The restricted stock units granted under the Groupon, Inc. Stock Plans (the "Plans") generally have vesting periods between one and four years and are amortized on a straight-line basis over their requisite service period.
14


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The table below summarizes restricted stock unit activity under the Plans for the three months ended March 31, 2022:
Restricted Stock UnitsWeighted-Average Grant Date Fair Value (per unit)
Unvested at December 31, 20212,205,235 $31.06 
Granted172,072 30.34 
Vested(287,658)27.84 
Forfeited(73,686)38.81 
Unvested at March 31, 20222,015,963 $31.10 
As of March 31, 2022, $44.0 million of unrecognized compensation costs related to unvested restricted stock units are expected to be recognized over a remaining weighted-average period of 1.1 years.
Performance Share Units
We have previously granted performance share units under the Plans that vest in shares of our common stock upon the achievement of financial and operational targets specified in the respective award agreement ("Performance Share Units"). We have also granted performance share units subject to a market condition ("Market-based Performance Share Units"). Our existing Performance Share Units and Market-based Performance Share Units are subject to continued employment through the performance period dictated by the award and certification by the Compensation Committee of the Board that the specified performance conditions have been achieved.
During the three months ended March 31, 2022, 20,494 shares of our common stock were issued upon vesting of Performance Share Units granted in 2020 and prior based on the Board's certification of our financial and operational metrics for the year ended December 31, 2021. The weighted average grant date fair value of those shares was $31.97 per share. As of March 31, 2022, we have recognized substantially all expense related to the 17,269 unvested Performance Share Units and the 33,333 unvested Market-based Performance Share Units.
NOTE 8. REVENUE RECOGNITION
Refer to Note 13, Segment Information, for revenue summarized by reportable segment and category for the three months ended March 31, 2022 and 2021.
Customer Credits
We issue credits to customers that can be applied to future purchases through our online marketplaces. Credits are primarily issued as consideration for refunds. To a lesser extent, credits are issued for customer relationship purposes. The following table summarizes the activity in the liability for customer credits for the three months ended March 31, 2022 (in thousands):
Customer Credits
Balance as of December 31, 2021$56,558 
Credits issued40,502 
Credits redeemed (1)
(36,305)
Breakage revenue recognized(7,745)
Foreign currency translation(196)
Balance as of March 31, 2022$52,814 
(1)Customer credits can be redeemed through our online marketplaces for goods or services provided by a third-party merchant and service revenue is recognized on a net basis as the difference between the carrying amount of the customer credit liability derecognized and the amount due to the merchant for the related transaction. Historically, customer credits have primarily been used within one year of issuance; however, usage patterns have been impacted from changes in customer behavior due to COVID-19.
15


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Costs of Obtaining Contracts
Incremental costs to obtain contracts with third-party merchants, such as sales commissions, are deferred and recognized over the expected period of the merchant arrangement, generally from 12 to 18 months. Deferred contract acquisition costs are presented in Prepaid expenses and other current assets and Other non-current assets on the condensed consolidated balance sheets. As of March 31, 2022 and December 31, 2021, deferred contract acquisition costs were $7.0 million and $8.0 million.
The amortization of deferred contract acquisition costs is classified within Selling, general and administrative expense in the condensed consolidated statements of operations. For the three months ended March 31, 2022 and 2021, we amortized $2.9 million and $2.6 million of deferred contract acquisition costs and did not recognize any impairments in relation to the deferred costs.
Allowance for Expected Credit Losses on Accounts Receivable
Accounts receivable primarily represents the net cash due from credit card and other payment processors and from merchants and performance marketing networks for commissions earned on consumer purchases. We establish an allowance for expected credit losses on accounts receivables based on identifying the following customer risk characteristics: size, type of customer, and payment terms offered in the normal course of business. Receivables with similar risk characteristics are grouped into pools. For each pool, we consider the historical credit loss experience, current economic conditions, bankruptcy filings, published or estimated credit default rates, age of the receivable and any recoveries in assessing the lifetime expected credit losses.
The following table summarizes the activity in the allowance for expected credit losses on accounts receivable for the three months ended March 31, 2022 (in thousands):
Allowance for Expected Credit Losses
Balance as of December 31, 2021$7,974 
Change in provision343 
Write-offs(584)
Foreign currency translation(125)
Balance as of March 31, 2022$7,608 
Variable Consideration for Unredeemed Vouchers
For merchant agreements with redemption payment terms, the merchant is not paid its share of the sale price for a voucher sold through one of our online marketplaces until the customer redeems the related voucher. If the customer does not redeem a voucher with such merchant payment terms, we retain all of the gross billings for that voucher, rather than retaining only our net commission. We estimate the variable consideration from vouchers that will not ultimately be redeemed using our historical voucher redemption experience and recognize that amount as revenue at the time of sale. We apply a constraint to ensure it is probable that a significant reversal of revenue will not occur in future periods. We have also observed redemption rates lower than our historical estimates for vouchers sold at the onset of the COVID-19 pandemic, the substantial majority of which reached expiration during the year ended December 31, 2021. Although redemption rates for vouchers sold in more recent periods have improved, the impact of COVID-19 on redemption behavior in future periods is still uncertain. When actual redemptions differ from our estimates, the effects could be material to the condensed consolidated financial statements.
NOTE 9. RESTRUCTURING AND RELATED CHARGES
In April 2020, the Board approved a multi-phase restructuring plan related to our previously announced strategic shift and as part of the cost cutting measures implemented in response to the impact of COVID-19 on our business. We have incurred total pretax charges of $107.0 million since the inception of the restructuring plan. Our actions under the plan were substantially completed by December 31, 2021, and our current and future charges or credits will be from changes in estimates. Our restructuring plan included workforce reductions of
16


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
approximately 1,600 positions globally, the exit or discontinuation of the use of certain leases and other assets, impairments of our right-of-use and other long-lived assets, and the exit of our operations in New Zealand and Japan. In the first quarter 2021, we substantially liquidated our subsidiary in Japan and reclassified $32.2 million of cumulative foreign currency translation gains into earnings, which is presented in Other income (expense), net on the condensed consolidated statements of operations for the three months ended March 31, 2021. Costs incurred related to the restructuring plan are classified as Restructuring and related charges on the condensed consolidated statements of operations.
The following tables summarize costs incurred by segment related to the restructuring plan for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31, 2022
Employee Severance and Benefit Costs (Credits)Legal and Advisory CostsLease-related Charges (Credits)Total Restructuring Charges (Credits)
North America$1 $44 $356 $401 
International(289)37 163 (89)
Consolidated$(288)$81 $519 $312 

Three Months Ended March 31, 2021
Employee Severance and Benefit Costs (Credits)Legal and Advisory CostsLease-related Charges (Credits)Total Restructuring Charges (Credits)
North America$442 $807 $741 $1,990 
International6,460 (22)(1,006)5,432 
Consolidated$6,902 $785 $(265)$7,422 

As a part of our restructuring plan, we terminated or modified several of our leases. In other cases we vacated our leased facilities, and some of those facilities are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases. Rent expense, including amortization of the right-of-use asset and accretion of the operating lease liability, sublease income, termination and modification gains and losses, and other variable lease costs related to the leased facilities vacated as part of our restructuring plan are presented within Restructuring and related charges in the condensed consolidated statements of operations. The current and non-current liabilities associated with these leases continue to be presented within Other current liabilities and Operating lease obligations in the condensed consolidated balance sheets.
The following table summarizes restructuring liability activity (in thousands):
Employee Severance and Benefit CostsOther Exit CostsTotal
Balance as of December 31, 2021
$11,038 $311 $11,349 
Charges payable in cash (288)81 (207)
Cash payments(2,952)(117)(3,069)
Foreign currency translation(167)(46)(213)
Balance as of March 31, 2022 (1)
$7,631 $229 $7,860 
(1)Substantially all of the remaining cash payments for those costs are expected to be disbursed through 2022.
NOTE 10. INCOME TAXES
Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items.
Provision (benefit) for income taxes and income (loss) from continuing operations before provision (benefit) for income taxes for the three months ended March 31, 2022 and 2021 was as follows (in thousands):
Three Months Ended March 31,
20222021
Provision (benefit) for income taxes$(2,675)$2,427 
Income (loss) before provision (benefit) for income taxes(37,027)16,875 
Our U.S. Federal income tax rate is 21%. The primary factor impacting the effective tax rate for the three months ended March 31, 2022 and 2021 was the pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets. The three months ended March 31, 2021 were also impacted by the benefit of non-taxable items and the U.S. research and development tax credit. For the three months ended March 31, 2021, we had a full valuation recorded against the U.S. federal and state deferred tax assets. We recorded a partial valuation allowance release in Q4 2021. For the three months ended March 31, 2022, we continue to maintain a valuation allowance in the U.S. against capital losses, deferred tax assets that will convert into capital losses upon reversal, and state credits that we are not expecting to be able to realize. We expect that our consolidated effective tax rate in future periods will continue to differ significantly from the U.S. federal income tax rate as a result of our tax obligations in jurisdictions with profits and valuation allowances in jurisdictions with losses.
We are currently undergoing income tax audits in multiple jurisdictions. It is likely that the examination phase of some of those audits will conclude in the next 12 months. There are many factors, including factors outside of our control, which influence the progress and completion of those audits. We are subject to claims for tax assessments by foreign jurisdictions, including a proposed assessment for $116.0 million, inclusive of estimated incremental interest from the original assessment. We believe that the assessment, which primarily relates to transfer pricing on transactions occurring in 2011, is without merit and we intend to vigorously defend ourselves in that matter. 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 $25.8 million in unrecognized tax benefits may occur within the 12 months following March 31, 2022, upon closing of income tax audits or the expiration of applicable statutes of limitations.
In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations. An actual repatriation from our non-U.S. subsidiaries could be subject to foreign and U.S. state income taxes. Aside from limited exceptions for which the related deferred tax liabilities recognized as of March 31, 2022 and December 31, 2021 are immaterial, we do not intend to distribute earnings of foreign subsidiaries for which we have an excess of the financial reporting basis over the tax basis of our investments and therefore have not recorded any deferred taxes related to such amounts. The actual tax cost resulting from a distribution would depend on income tax laws and circumstances at the time of distribution. Determination of the amount of unrecognized deferred tax liability related to the excess of the financial reporting basis over the tax basis of our foreign subsidiaries is not practical due to the complexities associated with the calculation.
NOTE 11. FAIR VALUE MEASUREMENTS
Fair value is defined under U.S. GAAP as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability.
In determining fair value, we use various valuation approaches within the fair value measurement framework. The valuation methodologies used for our assets and liabilities measured at fair value and their classification in the valuation hierarchy are summarized below:
Fair value option investments and available-for-sale securities. We have fair value option investments and available-for-sale securities that we measure using the income approach. We have classified these investments as Level 3 due to the lack of observable market data over fair value inputs such as cash flow projections and discount rates.

17


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Contingent consideration. During the first quarter 2021, we settled a contingent consideration arrangement to the former owners of a business previously acquired in 2018. We use the income approach to value contingent consideration obligations based on future financial performance. We have previously classified our contingent consideration as Level 3 due to the lack of relevant observable market data over fair value inputs such as probability-weighting of payment outcomes.
There was no material activity in the fair value of recurring Level 3 fair value measurements for the three months ended March 31, 2022 and 2021.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis, including assets that are written down to fair value as a result of an impairment or increased due to an observable price change in an orderly transaction.
We did not record any significant nonrecurring fair value measurements for the three months ended March 31, 2022 and 2021.
Estimated Fair Value of Financial Assets and Liabilities Not Measured at Fair Value
Our financial instruments not carried at fair value consist primarily of accounts receivable, restricted cash, short-term borrowings, accounts payable, accrued merchant and supplier payables and accrued expenses. The carrying values of those assets and liabilities approximate their respective fair values as of March 31, 2022 and December 31, 2021 due to their short-term nature.
NOTE 12. INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of common shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities include restricted stock units, performance share units, ESPP shares, warrants, capped call transactions and convertible senior notes. If dilutive, those potentially dilutive securities are reflected in diluted net income (loss) per share using the treasury stock method, except for the convertible senior notes, which are subject to the if-converted method.
18


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The following table sets forth the computation of basic and diluted net income (loss) per share of common stock for the three months ended March 31, 2022 and 2021 (in thousands, except share amounts and per share amounts):
Three Months Ended March 31,
20222021
Basic and diluted net income (loss) per share:
Numerator
Net income (loss) $(34,352)$14,448 
Less: Net income (loss) attributable to noncontrolling interests500 (110)
Basic net income (loss) attributable to common stockholders(34,852)14,558 
Diluted net income (loss) attributable to common stockholders(34,852)14,558 
Plus: Interest expense from assumed conversion of convertible senior notes  72 
Net income (loss) attributable to common stockholders plus assumed conversions$(34,852)$14,630 
Denominator
Shares used in computation of basic net income (loss) per share29,862,879 29,028,489 
Weighted-average effect of diluted securities
Restricted stock units
 931,922 
Performance share units and other stock-based compensation awards
 109,419 
Convertible senior notes due 2026 195,733 
Shares used in computation of diluted net income (loss) per share29,862,879 30,265,563 
Basic net income (loss) per share:$(1.17)$0.50 
Diluted net income (loss) per share:$(1.17)$0.48 
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 March 31,
20222021
Restricted stock units2,047,783 172,015 
Performance share units and other stock-based compensation awards54,182  
Convertible Senior notes due 2022 (1)
 2,314,815 
Convertible Senior notes due 2026 (1)
3,376,400  
Warrants 2,314,815 
Capped call transactions3,376,400 195,733 
Total8,854,765 4,997,378 
(1)We apply the if-converted method in computing the effect of our convertible senior notes on diluted net income (loss) per share, whereby the numerator of our diluted net income (loss) per share computations is adjusted for interest expense, net of tax, and the denominator is adjusted for the number shares into which the convertible senior notes could be converted. The effect is only included in the calculation of income (loss) per share for those instruments for which it would reduce income (loss) per share. See Note 5, Financing Arrangements, for additional information.
19


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
We had outstanding Market-based Performance Share Units as of March 31, 2022 and 2021 that were eligible to vest into shares of common stock subject to the achievement of specified performance or market conditions. Contingently-issuable shares are excluded from the computation of diluted income (loss) per share if, based on current period results, the shares would not be issuable if the end of the reporting period were the end of the contingency period. As of March 31, 2022, there were up to 33,333 shares of common stock issuable upon vesting of outstanding Market-based Performance Share Units that were excluded from the table above as the performance or market conditions were not satisfied as of the end of the period.
20


GROUPON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE 13. SEGMENT INFORMATION
The segment information reported in the tables below reflects the operating results that are regularly reviewed by our chief operating decision maker to assess performance and make resource allocation decisions. Our operations are organized into two segments: North America and International. Our measure of segment profitability is contribution profit, defined as gross profit less marketing expense, which is consistent with how management reviews the operating results of the segments. Contribution profit measures the amount of marketing investment needed to generate gross profit. Other operating expenses are excluded from contribution profit as management does not review those expenses by segment.
The following table summarizes revenue by reportable segment and category for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31,
20222021
North America
Service revenue:
Local$96,921 $125,374 
Goods8,294 15,285 
Travel4,949 5,959 
Total service revenue